spending for import.
Shifting of funds to desired location.
Joint Ventures \u2013 May enforce the specific TP.
Transaction, Operation and Economic exposure to
ABC Co Ltd has received an enquiry for the supply of 1000 units steel
chairs. Company\u2019s division A has got capacity to produce these many
chairs, but it has to incur fixed investment of Rs 400000 and working
capacity to the extent of 25% of the sale value will be required if the
job is undertaken. The costs are estimated as follows \u2013
Raw material 11000 Kg @ Rs20 per Kg
Direct wages 1000 hours @ Rs 10 per hour
Variable Overheads -
Selling & Distribution Rs 45000
Prepare a statement showing the price to be fixed under \u2013
\u2022Total cost method using i. 30% on the total cost and ii. 20% on S. Price
\u2022b. Conversion cost method \u2013 200% conversion cost as profit
c. Marginal cost method assuming a P/V ratio of 35%
d. Return on investment method with an expected return of 20% on the
i. When the profit is 30% on the total cost, price will be Rs 416 per unit
ii. When profit is 20% on sales, i.e. profit is 25 of cost, hence
Selling Price = 320 + (320 * 25%)
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