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(0) Tender you advice to the sales manager of Snowhite Ltd. (ii) Suppose that the order was for 2,500 instead of 1,000 shirts, what would be your advice? Assuming the same facts as in part lid, what is the lowest price that the firm would accept and still earn Tk. 1,10,000.00 (iii)

(0) Tender you advice to the sales manager of Snowhite Ltd. (ii) Suppose that the order was for 2,500 instead of 1,000 shirts, what would be your advice? Assuming the same facts as in part lid, what is the lowest price that the firm would accept and still earn Tk. 1,10,000.00 (iii)

FINANCIAL ACCOUNTING
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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PROBLEM-01 Snowhite Ltd makes readymade shirts (of one male size). Revenue and cost data relating to the coming years are given below: Sales (9,000 shirts @ Tk. 100.00 per shirt) Tk. 9,00,000.00 Cost of sales 6.40,000.00 2,60,000.00 Gross profit Selling and administrative expenses 1.50,000.00 1,10,000.00 Income The firm has a capacity to make 10,000 shirts per year. The fixed costs included in the cost of goods sold are Tk. 1,00.000.00 The only variable selling, general and administrative expenses are: 4 per cent sales commission and Tk. 2.00 per shirt paid to the designer. A chain store manager has approached the sales manager of Snowhite Ltd offering to purchase 1,000 shirts at Tk. 70.00 pr shirt. The sales manager believes that accepting this offer would result in a loss because the average cost of a shirt is higher than Tk. 70.00. He feels that a loss would still result, even if sales commission would not be paid on the sales order. The designer has agreed to waive 50 per cent of his fee on any number of shirts sold to such a store. Tender you advice to the sales manager of Snowhite Ltd. Suppose that the order was for 2,500 instead of 1,000 shirts, what would be your advice? (iii) Assuming the same facts as in part lid, what is the lowest price that the firm would accept and still earn Tk. 1,10,000.00
Transcribed Image Text:PROBLEM-01 Snowhite Ltd makes readymade shirts (of one male size). Revenue and cost data relating to the coming years are given below: Sales (9,000 shirts @ Tk. 100.00 per shirt) Tk. 9,00,000.00 Cost of sales 6.40,000.00 2,60,000.00 Gross profit Selling and administrative expenses 1.50,000.00 1,10,000.00 Income The firm has a capacity to make 10,000 shirts per year. The fixed costs included in the cost of goods sold are Tk. 1,00.000.00 The only variable selling, general and administrative expenses are: 4 per cent sales commission and Tk. 2.00 per shirt paid to the designer. A chain store manager has approached the sales manager of Snowhite Ltd offering to purchase 1,000 shirts at Tk. 70.00 pr shirt. The sales manager believes that accepting this offer would result in a loss because the average cost of a shirt is higher than Tk. 70.00. He feels that a loss would still result, even if sales commission would not be paid on the sales order. The designer has agreed to waive 50 per cent of his fee on any number of shirts sold to such a store. Tender you advice to the sales manager of Snowhite Ltd. Suppose that the order was for 2,500 instead of 1,000 shirts, what would be your advice? (iii) Assuming the same facts as in part lid, what is the lowest price that the firm would accept and still earn Tk. 1,10,000.00
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