Management accounting
This query is : Resolved
01 October 2011
There is problem in the question paper of MBA.
Variable cost per unit is given as 12
Sales in units is given as 50,000 units
Return on capital employed is 20%
Capital employed is 12 lakh on fixed assets and 50% on sales value.Fixed cost is given as Rs.5,10,000
Has been asked to determine the selling price per unit for a desired profit of 20% on capital employed?
Would i have the solution please?
Variable cost per unit is given as 12
Sales in units is given as 50,000 units
Return on capital employed is 20%
Capital employed is 12 lakh on fixed assets and 50% on sales value.Fixed cost is given as Rs.5,10,000
Has been asked to determine the selling price per unit for a desired profit of 20% on capital employed?
Would i have the solution please?
01 October 2011
well
let the sales price be x
Capital employed = 12,00,000 + 50 % of (50,000*x)
let the sales price be x
Capital employed = 12,00,000 + 50 % of (50,000*x)
01 October 2011
Return on capital employed = 20 % of {12,00,000 + 25,000 x)
01 October 2011
well the profit must be equal to return on capital employed
profit = 2,40,000 + 5,000 x
profit = 2,40,000 + 5,000 x
01 October 2011
there fore
the price of one unit = (variable cost + fixed cost + profit)/50,000
the price of one unit = (variable cost + fixed cost + profit)/50,000
01 October 2011
price per unit = [{12*50000units} + 12,00,000+2,40,000+ 5,000 x]/50,000
price per unit = [6,00,000+12,00,000+2,40,000+ 5,000x]/50,000
=[20,40,000 + 5,000 x]/50,000
x = 40.80 + .1 x
.9 x =40.8
x = 45.33
price per unit = [6,00,000+12,00,000+2,40,000+ 5,000x]/50,000
=[20,40,000 + 5,000 x]/50,000
x = 40.80 + .1 x
.9 x =40.8
x = 45.33
01 October 2011
The correcttion of the solution is justified as
The Sales value will be
50,000 units * 45.33 = 22,66,500
The Sales value will be
50,000 units * 45.33 = 22,66,500
01 October 2011
the capital employed will be = Rs 12,00,000 + 50 % of sales value i.e. 22,66,500
= 12,00,000+ 11,33,250
=23,33,250
= 12,00,000+ 11,33,250
=23,33,250
01 October 2011
the desired return in this case will be
= 20 % of 23,33,250
i.e. 4,66,650
= 20 % of 23,33,250
i.e. 4,66,650
01 October 2011
so lets check the profit
profit = sales value -variable cost - fixed cost
=22,66,500- (12* 50,000) - 12,00,000
= 4,66,500
hence checked any doubt plzz aSK
profit = sales value -variable cost - fixed cost
=22,66,500- (12* 50,000) - 12,00,000
= 4,66,500
hence checked any doubt plzz aSK
01 October 2011
thank you very much really it was very much useful
01 October 2011
it's my pleasure dear, post any other doubt relating to studies, you will get an early response
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