A sale manager of Nepa Co. Ltd has been approached by a overseas company to purchase 10,000 units of output @ Rs.75 per unit. Nepa Co. at present is on 60% capacity to meet the local demand and producing 12,000 units of output. It is selling at Rs. 150 per unit. The overseas company has made it clear that it will not accept less than 10,000 units, therefore, If its offer is accepted it will be necessary for the Nepa company to give up some portion of local sale. The cost data for producing 12,000 units at present are as under: Direct Material per Unit Direct Labour per Unit Variable Overhead per Unit Rs.50 Rs.30 Rs. 10 Fixed Overhead per Unit Rs.50 The alternative available to management are Alt 1 Continue the domestic sale and reject the order. Alt 2 Accept the order and curtail the local sale for excess demand of export order. Required: 1. Statement showing the cost and profit to decide whether the company should or should not accept the order. 2. For earning the same amount of profit equal to current local sale, what should be the selling price per unit of special order? [Ans.: (1) Reject offer, reduced profit by Rs. 2,70,000 (2) Rs. 102 per unit]
A sale manager of Nepa Co. Ltd has been approached by a overseas company to purchase 10,000 units of output @ Rs.75 per unit. Nepa Co. at present is on 60% capacity to meet the local demand and producing 12,000 units of output. It is selling at Rs. 150 per unit. The overseas company has made it clear that it will not accept less than 10,000 units, therefore, If its offer is accepted it will be necessary for the Nepa company to give up some portion of local sale. The cost data for producing 12,000 units at present are as under: Direct Material per Unit Direct Labour per Unit Variable Overhead per Unit Rs.50 Rs.30 Rs. 10 Fixed Overhead per Unit Rs.50 The alternative available to management are Alt 1 Continue the domestic sale and reject the order. Alt 2 Accept the order and curtail the local sale for excess demand of export order. Required: 1. Statement showing the cost and profit to decide whether the company should or should not accept the order. 2. For earning the same amount of profit equal to current local sale, what should be the selling price per unit of special order? [Ans.: (1) Reject offer, reduced profit by Rs. 2,70,000 (2) Rs. 102 per unit]
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![PROBLEM 18 (SPECIAL ORDER)
A sale manager of Nepa Co. Ltd has been approached by a overseas company to purchase 10,000 units of output @
Rs.75 per unit. Nepa Co. at present is on 60% capacity to meet the local demand and producing 12,000 units of output. It is
selling at Rs. 150 per unit. The overseas company has made it clear that it will not accept less than 10,000 units, therefore, If
its offer is accepted it will be necessary for the Nepa company to give up some portion of local sale.
The cost data for producing 12,000 units at present are as under:
Direct Material per Unit
Rs.50
Direct Labour per Unit
Rs.30
Variable Overhead per Unit
Rs. 10
Fixed Overhead per Unit
Rs.50
The alternative available to management are
Alt 1 Continue the domestic sale and reject the order.
Alt 2 Accept the order and curtail the local sale for excess demand of export order.
Required: 1. Statement showing the cost and profit to decide whether the company should or should not accept the order.
2. For earning the same amount of profit equal to current local sale, what should be the selling price per unit of
special order?
[Ans.: (1) Reject offer, reduced profit by Rs. 2,70,000 (2) Rs. 102 per unit]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbcfe9fca-fbe2-44c5-a4fc-66656f884796%2Fd914c1b3-855d-4a5f-b2f7-228bfe4cba7b%2F2xllav_processed.jpeg&w=3840&q=75)
Transcribed Image Text:PROBLEM 18 (SPECIAL ORDER)
A sale manager of Nepa Co. Ltd has been approached by a overseas company to purchase 10,000 units of output @
Rs.75 per unit. Nepa Co. at present is on 60% capacity to meet the local demand and producing 12,000 units of output. It is
selling at Rs. 150 per unit. The overseas company has made it clear that it will not accept less than 10,000 units, therefore, If
its offer is accepted it will be necessary for the Nepa company to give up some portion of local sale.
The cost data for producing 12,000 units at present are as under:
Direct Material per Unit
Rs.50
Direct Labour per Unit
Rs.30
Variable Overhead per Unit
Rs. 10
Fixed Overhead per Unit
Rs.50
The alternative available to management are
Alt 1 Continue the domestic sale and reject the order.
Alt 2 Accept the order and curtail the local sale for excess demand of export order.
Required: 1. Statement showing the cost and profit to decide whether the company should or should not accept the order.
2. For earning the same amount of profit equal to current local sale, what should be the selling price per unit of
special order?
[Ans.: (1) Reject offer, reduced profit by Rs. 2,70,000 (2) Rs. 102 per unit]
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