Khalid is a salt merchant who supplies salt to general merchants in Lahore city. In the year of 2020 he sold 35,000 bags of salt. One bag consists of 50kg salt. He purchases slat in raw form and then grinds it, fills it in bags and then sold it, Sale price per bag is RM 45. He purchases the raw salt @ RM 400 per ton (1 ton consist of 1000 kg). Grinding cost is RM7 per bag, carriage outward cost is RM 5 per bag, he also purchases empty bags @ RM400 per 100 bags. Rent of shop RM1500 per month. Electricity and phone expense is RM16,000 per year (assume fixed). Depreciation of plant is RM3,680 per year. In the year 2021 it is expected that sale price and demand will remain the same but all the variable costs will increased by 15%. All the fixed costs will also increase by 10%. Required: Assume that demand in 2021 will remain the same he wants to keep same contribution margin ratio as in year 2020 what will be the new selling price per bag.
Khalid is a salt merchant who supplies salt to general merchants in Lahore city. In the year of 2020 he sold 35,000 bags of salt. One bag consists of 50kg salt. He purchases slat in raw form and then grinds it, fills it in bags and then sold it, Sale price per bag is RM 45.
He purchases the raw salt @ RM 400 per ton (1 ton consist of 1000 kg). Grinding cost is RM7 per bag, carriage outward cost is RM 5 per bag, he also purchases empty bags @ RM400 per 100 bags. Rent of shop RM1500 per month. Electricity and phone expense is RM16,000 per year (assume fixed).
In the year 2021 it is expected that sale price and demand will remain the same but all the variable costs will increased by 15%. All the fixed costs will also increase by 10%.
Required:
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Assume that demand in 2021 will remain the same he wants to keep same contribution margin ratio as in year 2020 what will be the new selling price per bag.
other requirements have been answered here: https://www.bartleby.com/questions-and-answers/khalid-is-a-salt-merchant-who-supplies-salt-to-general-merchants-in-lahore-city.-in-the-year-of-2020/a89b67a5-bc3a-4b30-b6b1-20fadfec7c20
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