b) PST Limited is a cement block production company. It has developed a new cementblock having higher strength, better appearance, and less self-weight. PST Limitedrequires a return on invested capital of 25% per annum.Budgeted sales volume (in units) -100,000 units.Variable production cost per unit - Rs. 65Fixed production cost per unit -Rs. 55Other annual fixed costs (overheads etc.) - Rs. 2,500,000Investment in machinery to produce the new block - Rs. 1,200,000Period over which investment in new machinery is to be written off - 05 years.Research and development costs for the new block - Rs. 800,000i) Calculate the unit price of the new cement block based on the above data.(05 marks)

The objective of the question is to calculate the unit price of the new cement block developed by…

Answered: b) PST Limited is a cement block…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mehmet Group wants to produce the M machines used in the casting industry in the Big Industry. The planned annual production and sales amount is 20,000 units and the sales price is calculated as "cost x 1.35". Information about this investment and production is given below. What is the sales price per unit of this project? What is the present and future value of the project's profit? TABLE: Workshop building and outbuildings 1.000.000 Usd Machine facilities 4,000,000 usd Staff is 380,000 usd and increasing by 40,000 usd every year Energy 180,000 usd and increasing by 15% every year Financing expenses 750,000 usd and decreasing by 10% each year Management and sales expenses decrease by 280,000 usd and 10,000 usd every year Raw material and auxiliary material 1.700 usd per unit Operation cost is 200,000 usd each year Major repair-maintenance is 150,000 usd in the 10th year Scrap value 8,000,000 usd in the 20th year Economic life 20 years Capital cost 25%
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
Suppose that a company expects the fo llowing financial resuJts from a project during its first year ope ration:• Sales revenue: $250.000• Variable costs: $80.000• Fixed costs: $50.000• Total unit produced and so ld: 1,000 units(a) Compute the contribution ma rgin pe rcentage.(b) Compute the brcakcven point in units sold.
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KrishnaGems Ltd has just installed Equip.-R at a cost of Rs 2,00,000. Themachine has a five yearlife with no residual value. The annual volume ofproduction is estimated at 1,50,000 units, which can be sold at Rs 6 per unit.Annual operating costs are estimated at Rs 2,00,000 (excludingdepreciation) at this output level. Fixed costs are estimated at Rs 3 per unitfor the same level of production. KrishnaGems Ltd has just come acrossanother model called Equip.-S capable of giving the same output at anannual operating cost of Rs 1,80,000 (exclusive of depreciation). There willbe no change in fixed costs. Capital cost of this machine is Rs 2,50,000 andthe estimated life is for 5 years with no residual value.The company has anoffer for sale of Equip.-R at Rs 1,00,000. The cost of dismantling andremoval will be Rs 30,000. As the company has not yet commencedoperations, it wants to sell Machine-R and purchase Equip.-S. Nine GemsLtd will be a zero-tax company, for seven years in view of several…
A project has unit raw material costs of R$20.00, sales commissions of 5% and sales tax of 10%. Monthly rental costs are R$6,000.00, salaries are R$9,000.00, condominium costs R$2,000.00 and concessionaires (electricity, gas, etc.) R$4000.00. The unit price of the products is estimated at R$100.00. The operating break-even point is: a) 314 b) 418 c) 324 d) 516
Krishna Gems Ltd has just installed Equip.-R at a cost of Rs 2,00,000. The machine has a five year life with no residual value. The annual volume of production is estimated at 1,50,000 units, which can be sold at Rs 6 per unit. Annual operating costs are estimated at Rs 2,00,000 (excluding depreciation) at this output level. Fixed costs are estimated at Rs 3 per unit for the same level of production.Krishna Gems Ltd has just come across another model called Equip.-S capable of giving the same output at an annual operating cost of Rs 1,80,000 (exclusive of depreciation). There will be no change in fixed costs. Capital cost of this machine is Rs 2,50,000 and the estimated life is for 5 years with no residual value.The company has an offer for sale of Equip.-R at Rs 1,00,000. The cost of dismantling and removal will be Rs 30,000. As the company has not yet commenced operations, it wants to sell Machine-R and purchase Equip.-S. Nine Gems Ltd will be a zero-tax company, for seven years in…
Krishna Gems Ltd has just installed Equip.-R at a cost of Rs 2,00,000. The machine has a five year life with no residual value. The annual volume of production is estimated at 1,50,000 units, which can be sold at Rs 6 per unit. Annual operating costs are estimated at Rs 2,00,000 (excluding depreciation) at this output level. Fixed costs are estimated at Rs 3 per unit for the same level of production. Krishna Gems Ltd has just come across another model called Equip.-S capable of giving the same output at an annual operating cost of Rs 1,80,000 (exclusive of depreciation). There will be no change in fixed costs. Capital cost of this machine is Rs 2,50,000 and the estimated life is for 5 years with no residual value. The company has an offer for sale of Equip.-R at Rs 1,00,000. The cost of dismantling and removal will be Rs 30,000. As the company has not yet commencedoperations, it wants to sell Machine-R and purchase Equip.-S. Nine Gems Ltd will be a zero-tax company, for seven years in…
A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies have produced the following estimates: Total annual costs (in rupees) Variable cost percentage Material 193,600 100 Labour 90,000 70 Overhead 80,000 64 Administration 30,000 30 The production will be sold through dealers who would receive a commission of 8% of sale price. Management to realize a profit of 10 percent of sales. Required: Calculate Selling Price

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