1. Explain the terms: (a) escalation clause and (b) cost plus contract.
2. The cost of sales of product A is made up as follows:
|
|
Rs |
|
Materials used in manufacturing |
5,500 |
|
Materials used in packing materials |
1,000 |
|
Materials used in selling the product |
150 |
|
Materials used in the factory |
75 |
|
Materials used in office |
125 |
|
Labour required in production |
1,000 |
|
Labour required for supervision of the management of factory |
200 |
|
Expenses direct, factory |
500 |
|
Expenses indirect, factory |
100 |
|
Expenses office |
125 |
|
Depreciation office building and equipment |
75 |
|
Depreciation factory |
175 |
|
Selling expenses |
350 |
|
Freight |
500 |
|
Advertising |
125 |
Assuming that all the products manufactured are sold, what should be the selling price to obtain a profit of 25% on selling price?
Illustrate in a chart form for presentation to your manager, the division of costs for Product 