LS2476: A Japanese soft drink company is planning to establish a subsidiary company in India to produce mineral water. Based on the estimated annual sales of 40,000 bottles of the mineral water, cost studies produced the following for the Indian subsidiary:

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Question: A Japanese soft drink company is planning to establish a subsidiary company in India to produce mineral water. Based on the estimated annual sales of 40,000 bottles of the mineral water, cost studies produced the following for the Indian subsidiary:

The Indian production will be sold by manufacturer’s representatives who will receive a commission of 8% of the sale price. No portion of the Japanese office expenses is to be allocated to the Indian Subsidiary.

You are required to

(a)Compute the sale price per bottle to enable the management to realise an estimated 10% profit on the sales proceeds in India.

(b)Calculate the break even point-in rupees as also in number of bottles, assuming that the sale price is Rs. 14 per bottle.(Dec., 2006)

 


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