l

:'-."*,

Q. No. 10

Vimal Enterprises
Before Expansion
:

PAT

39

Return

on

Equity
Equity 300

=

13%o

Return on Capital

Employed

PBIT

80

TotalCapital

Employed

=
400

ZOTo

= Equity + Debt
After Expansion
:

Equity 15% Debt

400 200

Fixed Asset

Net W.C.

400 200

profit and Loss A/C Sales 1.4 x 500
VC .95 x 0.7 x 700

=

700

456.5
234.5
42.O

contribution

Cost 1.O5 x 40 Depr 40.0
Fixed 10

lnterest 15 x 2OO
PBT

40.0 152.5 30.0
722.5

T

CW

40;/"

49.0

?35
Return on

Equity-

73.5
=

18.38%

400
152.5

Return on CapitalEmployed =

=25.42%

Total Asset Turnover 500 Before Expansion

-

600

= 1.25

The company stand to gain Rs. Sell it capacity to outsider.5 lacs. Admn O/H = Rs. 920.000/.000 = Rs' 5. 30. We need to separate the variable and fixed factory OH is 40% fixed.Rs.5 lacs .AfterExpansion= 600 =1'167 Q.00. 20/Unit and 50% in fixed so fixed Admn O/H = 50 x 20 = Rs. 14.000. 1.30 lnternal VC at Div B Saving per unit 950-920 = lf company buys at Rs.000/lf division A decides to buy it from outside the capacity at Division B as well as company will incur a out of pocket loss of Rs. Admn o/H is Rs. 10 per unit. Labout = Rs. No. Fixed component of factory O/H is. 11 Shubham EnterPrises {a) Contribution earned by Division B = TP 1000 . . 18 per Unit.000. 80. Buy from outside when Market Price is lower than Variable Cost" {c) When we utilize the full capacity of Division B contribution earned by the company is Rs 5. 80 Rs.5 lacs. 10. 14.00.12 0 At S0% of capacity SP = Rs 200 Matl Cost Rs 100. 20.Rs. 1000 Reduction in Revised MP MP Rs. Total fixed Admn O/H = 10 x 10.20. 12 per unit there for annual fixed factory O/H t2 x 10. The variable component of factory OH is Rs.000.per year (b) Current Market Price Rs. Q. 1.000. Total Cost/ Unit Rs.VC = - 950 = Rs 50 Per unit Total Contribution earned = 50 x 10.00. Sincer factory O/H and Adm OH are semi variable. 40 x 30 = Rs. 3.000 = Rs. 30.000 = Rs. 9. 5 = Rs. lf this capacity could be sold for Rs. 5.00.00. Variable Admn O/H is Rs. lt will save 30 x 1000 = Rs. Factory O/H . 920 Rs.

20.000 Capacity in No.20.000 1.Budget at Different Capacity <Aol oVTo 80% 12. 102 12. 100 196 x 12.00. we could also capture higher market share which benefits us in the long run.16.40.80. 1.0O0 3.92 137. c after repair and service and therefore the price given by Business Magzine Profit after allocated overheads and service commission.00.500 235/2.000 28.730 47A/4.000 r6.00.000 19O x 16.000 Total 18.08 2.000 1.O0.O0.88.56 o *we assume BW sells old iS w taken as cost..OO0 23.44 36s.000 x 1OOOO = 20.000 1. 105 Variable Cost Material Cost per Unit Total Matl Cost Labour Cost Var Fact O/H Var Adm O/H Fixed Factory O/H Fixed Admn O/H 10.000 Profit 2.OO0 16.40.000 1. But we recommend that the company would better off if it works at 80% as we would produce more and keep our men and machine utilized better.000 21.08 32 Allocated Overheads Service 356.000 Rs.000 1. Q.000 2.TV BTV SP SG Gross Profit 2730 835 150& 665 250 137.000 4. 13 Veena Television Color TV (CTV) Black & White (8 TV) Spare Park (SP) 235 Service 470 SG Market Price Cost Gross Profit 14.28.000 2.s6 . of Units Sales Sales 2OO 10.20.OOO 30.24.5 = 704.00.000 1.60.52.r2.0000 Rs.12.000 Rs.000 We find that profit at 6o% and 80% of the capacity is same.08 251.20. C.000 1.00.4 = 97.000 Rs.80.000 3.000 1.420 5000 3500* 1.000 r.000 2.20.80.00.000 1.150 I'J.00.56 r14 Commission Net Profit 1895 585 105.

This will bring down lnventory Turhover to ration and Accounts Receivable Turnover to Ratios.1 5ales Budget Q. we should be concerned about achieving only 34/40 = 85% of Budgeted sales. 2 .spare Parts and sG cannot survive as independent division as they are fully dependent as BW BW May survive as independent profit center besides CTV. 3 Cr. 7Cr. 7q )n )9 48 7 o.3 36 19 6 3 Factory Cost Marketing Cost Freight 1A Admn Exp Profit FA CA (Cash+AR+tnv) 0.5/48 = 15. Budget Q. the actual spending only Rs.16% . Out sales is lower as well as our lnventory to and A/R to is lower. Thus we have not given sufficient effort to Market.9 3 )(. Soniya Ltd. we find against budgeted Marketing cost of Rs.2 40 21 7 1 Actual Q. There was a printing mistake fixed Assets are showing as Rs.63 70/52 = 1928% Though Actual Rol of Quarter 1 is higher than budgeted.8 3. second Quarter Budget is quite ok. 20.2 10 8 20 30 20 32 52 Total Asset ROr 50 8/so -. instead of Rs.

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