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

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

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 4PB: Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%....

See similar textbooks

Similar questions

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%
Suppose that a company expects the following financial results from a project during its first-year operation: Sales revenue: $300,000 Variable costs: $100,000 Fixed costs: $50,000 Total unit produced and sold: 10,000 units a. Draw and label a break-even point graph. b. Compute the contribution per unit. c. Compute the break-even point in units sold. d. Compute the profit be if only 7500 units are sold
21) The initial cost for a factory is $ 6M. The major product of the factory has revenue of $100 per unit and $55 per unit as a variable cost. Based on the given, find the following: (a) QBE per year. (b) the annual profit if the expected sales between 100,000 and 200,000.
Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%. Division A has a weighted average cost of Capital of 9.5% and is looking at a new project that will generate a profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs $5,000.000. A. Calculate the EVA for each of Banyans divisions. B. Calculate the RI for each of Banyans division. C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much? D. If Banyan uses RI, which division has the better project and by how much? E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus RI?
The directors of Pelta Co are considering a planned investment project costing $25m, payable at the start of the first year of operation. The following information relates to the investment project: Year 1 Year 2 Year 3 Year 4 Sales volume (units/year) 520,000 624,000 717,000 788,000 Selling price ($/unit) 30.00 30.00 30.00 30.00 Variable costs ($/unit) 10.00 10.20 10.61 10.93 Fixed costs ($/year) 700, 00 735, 00 779,000 841,000 This information needs adjusting to take account of selling price inflation of 4% per year and variable cost inflation of 3% per year. The fixed costs, which are incremental and related to the investment project, are in nominal terms.…
Marmalade Berhad projects unit sales with a new machine as follows: Year Unit Sales 1 20,000 2 30,000 3 40,000 4 50,000 5 60,000 The new machine will cost RM300,000 plus RM5,000 for transportation. It also requires an increase in net working capital of RM40,000 to start. Total fixed costs are RM200,000 per year, variable production costs are RM15 per unit, and the units are priced at RM40 each. The machine has an installation cost of RMIO,OOO and will depreciate using straight line method over the next five years. In the fifth year, this machine can be sold for about 20% of its acquisition cost. The company tax rate is 24% and has a required rate on all its projects of 10%. Required: a) Calculate the Net Present Value (NPV) if Marmalade Berhad decided to buy the new machine. Should the firm buy the new machine? b) Explain sunk cost in the context of capital budgeting. (20 Marks) (5 Marks)
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 Net Profit
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 Total Variable Cost
16. Smirnoff Corp. invested P31,250,000 in a cabinet-making business. It expects to earn a 25% return on its investment in equipment used in the manufacturing the cabinets. Its consultants estimate that 10,000 units of cabinets next year. Estimated costs per unit of cabinet at this level follows: Variable manufacturing costs = P1,562.50; Fixed selling and administrative costs = P625.00; %3D Fixed manufacturing costs = P312.50. To accomplish the company objective, one cabinet should be priced at:
16. Smirnoff Corp. invested P31,250,000 in a cabinet-making business. It expects to earn a 25% return on its investment in equipment used in the manufacturing the cabinets. Its consultants estimate that 10,000 units of cabinets next year. Estimated costs per unit of cabinet at this level follows: Variable manufacturing costs = P1,562.50; Fixed selling and administrative costs = P625.00; Fixed manufacturing costs = P312.50. To accomplish the company objective, one cabinet should be priced at: Your answer
Suppose that a company expects the following financial results from a project during its first year operation: Sales revenue: $500,000 Total variable costs: $150,000 Fixed costs: $105,000 Total unit produced and sold: 10,000 units a. Draw and label a break-even point graph. b. Compute the contribution per unit. c. Compute the break-even point in units sold. d. Compute the profit if only 6000 units are sold.
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