The Kathmandu Soap and Chemical Company produces and sale toilet soap. The income statement at two different level of activities are summarised below: Sales in Boxes 50,000 Boxes 1,00,000 Boxes Sales Revenue Rs. 50,00,000 Rs. 1,00,00,000 Less: Cost Rs. 10,00,000 Rs. 5,00,000 Direct Materials Rs. 20,00,000 Direct Wages Manufacturing Overhead Depreciation Rs. 10,00,000 Rs. 25,00,000 Rs. 5,00,000 Rs. 5,00,000 Rs. 35,00,000 Rs. 5,00,000 Rs. 10,00,000 Sales Commission Administration and Others Rs. 1,00,000 Rs. 1,00,000 The sales for 1983 was 75,000 boxes and which was only 75% of the capacity available. On January1, 1984 the Kathmandu Hotel P. Ltd. approach the company with the special offer to supply 20,000 boxes of special brand toilet soap at Rs. 65 per box. The soap was to bear special hotel monogram and was to have appellant fragrance to the taste of hotel guest. No sales commission is required to pay for special offer. The special device to print hotel monogram will cost additional Rs. 2,00,000 and special fragrance will increase the material cost by Rs. 1 per box. All other fixed cost and material cost remain unchanged. Required: Should the company accept this special offer?
The Kathmandu Soap and Chemical Company produces and sale toilet soap. The income statement at two different level of activities are summarised below: Sales in Boxes 50,000 Boxes 1,00,000 Boxes Sales Revenue Rs. 50,00,000 Rs. 1,00,00,000 Less: Cost Rs. 10,00,000 Rs. 5,00,000 Direct Materials Rs. 20,00,000 Direct Wages Manufacturing Overhead Depreciation Rs. 10,00,000 Rs. 25,00,000 Rs. 5,00,000 Rs. 5,00,000 Rs. 35,00,000 Rs. 5,00,000 Rs. 10,00,000 Sales Commission Administration and Others Rs. 1,00,000 Rs. 1,00,000 The sales for 1983 was 75,000 boxes and which was only 75% of the capacity available. On January1, 1984 the Kathmandu Hotel P. Ltd. approach the company with the special offer to supply 20,000 boxes of special brand toilet soap at Rs. 65 per box. The soap was to bear special hotel monogram and was to have appellant fragrance to the taste of hotel guest. No sales commission is required to pay for special offer. The special device to print hotel monogram will cost additional Rs. 2,00,000 and special fragrance will increase the material cost by Rs. 1 per box. All other fixed cost and material cost remain unchanged. Required: Should the company accept this special offer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![The Kathmandu Soap and Chemical Company produces and sale toilet soap. The income statement at two different
level of activities are summarised below:
50,000 Boxes
Rs. 50,00,000
1,00,000 Boxes
Rs. 1,00,00,000
Sales in Boxes
Sales Revenue
Less: Cost
Rs. 10,00,000
Rs. 5,00,000
Direct Materials
Rs. 20,00,000
Rs. 10,00,000
Direct Wages
Manufacturing Overhead
Depreciation
Rs. 25,00,000
Rs. 35,00,000
Rs. 5,00,000
Rs. 5,00,000
Rs. 5,00,000
Rs. 10,00,000
Rs. 1,00,000
Sales Commission
Administration and Others
Rs. 1,00,000
The sales for 1983 was 75,000 boxes and which was only 75% of the capacity available. On January1, 1984 the
Kathmandu Hotel P. Ltd. approach the company with the special offer to supply 20,000 boxes of special brand toilet soap at
Rs. 65 per box. The soap was to bear special hotel monogram and was to have appellant fragrance to the taste of hotel
guest. No sales commission is required to pay for special offer.
The special device to print hotel monogram will cost additional Rs. 2,00,000 and special fragrance will increase the
material cost by Rs. 1 per box. All other fixed cost and material cost remain unchanged.
Required: Should the company accept this special offer?
[Ans: Accept special offer, profit increase by Rs. 80,000]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2ead506a-c0c2-4646-8b0c-532d357e6b8a%2Fabb8c5ac-1cbd-4d77-a421-ffc1f8d5ab7b%2Fazatn8k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Kathmandu Soap and Chemical Company produces and sale toilet soap. The income statement at two different
level of activities are summarised below:
50,000 Boxes
Rs. 50,00,000
1,00,000 Boxes
Rs. 1,00,00,000
Sales in Boxes
Sales Revenue
Less: Cost
Rs. 10,00,000
Rs. 5,00,000
Direct Materials
Rs. 20,00,000
Rs. 10,00,000
Direct Wages
Manufacturing Overhead
Depreciation
Rs. 25,00,000
Rs. 35,00,000
Rs. 5,00,000
Rs. 5,00,000
Rs. 5,00,000
Rs. 10,00,000
Rs. 1,00,000
Sales Commission
Administration and Others
Rs. 1,00,000
The sales for 1983 was 75,000 boxes and which was only 75% of the capacity available. On January1, 1984 the
Kathmandu Hotel P. Ltd. approach the company with the special offer to supply 20,000 boxes of special brand toilet soap at
Rs. 65 per box. The soap was to bear special hotel monogram and was to have appellant fragrance to the taste of hotel
guest. No sales commission is required to pay for special offer.
The special device to print hotel monogram will cost additional Rs. 2,00,000 and special fragrance will increase the
material cost by Rs. 1 per box. All other fixed cost and material cost remain unchanged.
Required: Should the company accept this special offer?
[Ans: Accept special offer, profit increase by Rs. 80,000]
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