Supreme Ltd. Which manufactures the component EXCEL, has achieved a turnover of $ 6,00,000 for the calendar year 2018. The manager of the company has informed that the company has worked at a profit ratio of 25% and margin of safety of 20%. But he feels due to severe competition, the selling price is to be reduced to maintain the same volume of sales for the year 2019. He does not expect any change in variable costs. He expects that due to cost reduction programme, the profit volume ratio and margin of safety will be 20% and 30% respectively and considerable saving in fixed cost for 2019. Even if the company prefers to shut down its operations for 2019, it expects to incur a minimum fixed cost of $ 60,000. You are expected to: (a) Present the comparative statement for the year 2018 and 2019 showing under marginal Costing. (b) What will minimum sales be required, if it decides to shut down its unit in 2019?
Supreme Ltd. Which manufactures the component EXCEL, has achieved a turnover of $ 6,00,000 for the calendar year 2018. The manager of the company has informed that the company has worked at a profit ratio of 25% and margin of safety of 20%. But he feels due to severe competition, the selling price is to be reduced to maintain the same volume of sales for the year 2019. He does not expect any change in variable costs. He expects that due to cost reduction programme, the profit volume ratio and margin of safety will be 20% and 30% respectively and considerable saving in fixed cost for 2019. Even if the company prefers to shut down its operations for 2019, it expects to incur a minimum fixed cost of $ 60,000. You are expected to: (a) Present the comparative statement for the year 2018 and 2019 showing under marginal Costing. (b) What will minimum sales be required, if it decides to shut down its unit in 2019?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Supreme Ltd. Which manufactures the component EXCEL, has achieved a turnover of $ 6,00,000 for the calendar year 2018. The manager of the company has informed that the company has worked at a profit ratio of 25% and margin of safety of 20%. But he feels due to severe competition, the selling price is to be reduced to maintain the same volume of sales for the year 2019. He does not expect any change in variable costs. He expects that due to cost reduction programme, the profit volume ratio and margin of safety will be 20% and 30% respectively and considerable saving in fixed cost for 2019.
Even if the company prefers to shut down its operations for 2019, it expects to incur a minimum fixed cost of $ 60,000.
You are expected to:
(a) Present the comparative statement for the year 2018 and 2019 showing under marginal Costing.
(b) What will minimum sales be required, if it decides to shut down its unit in 2019?
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