Solve please(ipcc)

Particular                                           Existing         option 1          option 2

Credit period  ( wn 1)                          1.71 m            2.28 m          2.85 m                                   

sales in units                                          -                        -                      -

( amt in lac)

Sales in Rs.                                            87.5                  105                 118

less:Variable cost(bal fig)                  (61.25)               (73.5)            (82.6)

=contribution( wn 2)                            26.25                  31.5              35.4

less:Fixed cost                                       -                           -                       -

         Bad debts                                     ( 2.63)                  ( 5.25)           (7.88)

         discount                                           -                          -                      - 

         opportunity cost(wn 3)                (2.62)                     (4.2)              (6)  

= Net Profit                                             21                           22.05        21.52

The management should opt for Option 1 as the profit 22.05 lac is maximum in option 1.

Working Notes:

1. Credit period .

Avg. collection period of debtors=12/debtors turnover ratio.

therefore , for existing=12/7 =    1.71 months

                    option 1    =12/5.25=2.28 months

                    option 2    =12/4.2=  2.85 months

2. contribution= credit sales*pv ratio

   existing           option 1            option 2

   26.25               31.5                   35.4          (amt in lakhs)

3. Statement showing computation of opportunity cost:

Particular                               existiing          option 1          option 2

Credit period                         1.71 m             2.28 m            2.85 m

(amt in lac)

Variable cost                         61.25                73.5                82.6 

add:fixed cost                         -                             -                      -

Total cost                                61.25                73.5               82.6

debtors at cost                       8.73                   14                    19.7

=(total cost*credit period)/12

opportunity cost @ 30%        2.62                    4.2                     6

=debtors at cost*30%

thankeww ankit..i did the same .. but in the buk the answr is diffrent .. thanks

Hey in which book this sum is given , Practice manual or Padhuka ??

Actually i did not find this sum , so i gave it a try and did it myself, and its good that the ans. tally..

And Ritika do u have scanner of 1st grp. accounts, i just wanted to know the mark distribution(though all chapters are to be done), but just wanted to know the imp. ones..

this is nt from padhuka or study mate...

this is bhagwan lal sir's buk ..(topper's institute)

and i think u can find the scanner .just google it...and u wanted to knw the imp. chapters???

amalgmation,hire purchase,cash flow  and AS are most important..

Thanks ..