Problems:

1. A company has three branches and their summarised accounting particulars for a period
are given below:
Branches Bombay Calcutta Madras
Rs. Rs. Rs.
Sales 4,50,000 4,00,000 7,00,000
Branch Expenses:
Salaries,commissions
& travelling expenses
41,000 40,000 60,000
Advertisement 9,000 10,000 11,000
Other Expenses 10,000 11,000 12,000

Central Office expenses:
Rs.1,55,000 apportioned to branches on the basis of sales. 25 percent of sales is taken as gross
profit.
Based on the above information, prepare a comparative Profit and Loss Statement for the
different branches. Offer your views on the contemplated closure of the branch which shows a
loss, assuming that in the event of closure of a branch , central office expenses:
a. Will remain unaffected:
b. Can be reduced by 30%.


2. Mr. Reddy, Sales Manager of the Red Star Engineering Company, has been asked by his
superior what seemed to be a relatively simple question: Who is the companys best
salesman? He replied off handedly that Kashyap was his top sales producer. However,
the more he got to thinking about the question, the more he wondered if Kashyap really
was his best salesman: after all Kashyap did have the Bombay territory.
Mr. Reddy decided to ask one of his assistants to make an evaluation of best performer. A week
later Mr. Reddys assistant submitted the following information:
Kashyap(Bombay) Hari ( Madras) Basu ( Calcutta) Singh (Delhi)
Sales,000 Rs. 1250 840 720 380
Order Nos. 340 280 320 275
Call Nos. 430 520 405 310
Days Worked 210 205 260 270
New Accounts 86 53 45 21
Accounts Lost 15 26 11 20
Expenses,000 Rs. 48 22 50 42
Area
Potential,000 Rs.
14000 8000 5000 2600


3. A district sales manager collects the following information about his five salesmen to
help him select his best salesman to receive a company award:
Salesman Total
Ravi Bharat Krishnan Naik George District
Territorial Sales
Potential Rs.250000 300000 325000 225000 200000 1300000
Sales Rs.170000 190000 195000 180000 160000 895000
Number of Orders 200 250 275 190 350 1265
Batting Average .667 .750 .3755 .500 .875
Total
Compensation
Rs.9200 10000 10200 9600 8800 47800
Sales Expense
Ratio
3.4% 4.2% 4.5% 3.8% 4.2%
Customer
Complaints 22 14 7 21 12 76
Personal
Evaluation of
Supervisor
(best=100) 82 76 86 85 90
From this information, devise an evaluation plan using only what you think is pertinent for the
purpose indicated. Which salesman should receive the award? Indicated how you arrived at your
decision, and state any assumption you felt were necessary.
Evaluate the relative performance of the four salesmen. If you were Mr. Reddy, what advice would
you give to each of the salesmen?
4. A one product company shows the following operating performance during 2012.
Sales 1,00,000 units @ Rs. 100 each.
Variable Cost per unit Rs. 60
Fixed Cost (Total) Rs. 25 Lakhs
The Company intends to increase selling price by 20% in 2013. It is expected that unit
sales will come down by 5% and to prevent it from further coming down a substantial
amount has to be spent on advertisement during the first year (2013). It is also
estimated that fixed cost will rise by 10% and variable cost will increase by 2% in 2013.

Estimate the amount that company can afford to spend in 2013 on advertisement,
maintaining the profit at the same quantum as in 2012.









5. The porter manufacturing company has been accused of discriminating against its small
order customers (25 to 30 cases) in territory I as compared with the same class of
customers in territory 2,3 and 4. The Company has broken down its selling and
distribution cost by territories and now desires to pro-rate the territorial class between
classes of customers with each inventorial costs between classes of customers with
each territory. The following is a tabulation of the average selling and distribution cost
per year in territory I.
Expenses Amount Rs.
Advertising
Direct-to-customer 3,600
Radio and newspapers 9,800
Salesmens salaries 36,000
Salesmens commission 48,000
Delivery Expenses 28,000
Travelling cost of salesmen 10,800
-----------
1,36,200
-----------
The cost department has tabulated the following information to assist in pro-rating
costs in territory I between small order, medium order and large order customers:
Small Order Medium Order Large Order
Net Sales (Rs.) 1,50,000 2,00,000 3,50,000
No. Of sales order taken 2,500 2,000 1,500
Number of cases of + product sold 1,00,000 1,50,000 2,50,000
Relative shipping cost (per order)
Rs.
1 2 3
Number of Customers 1,500 1,500 2,000
Relative number of miles travelled
per day
4 10 16
Number of salesmen 13 6 5
All salesmen are paid the same salary. Each salesmen works within a single class of
customer.
Prepare a statement showing the pro-ration of the selling & distribution costs of
territory I to the classes of customers. Indicate the base or bases on which you made
pro-ration.







6. A Company is supplying its products to the ultimate consumers through the wholesalers
to retailers. The Managing Director thinks that if they sell through the retailers or to the
consumer direct, they can increase their sales, earn better prices and make profit. As a
Cost Accountant of the Company you are required to advice the Managing Director in
selecting the channels of distribution from the following information:

Channels of Distribution I II III
To Consumer To Retailer To Wholesaler
Direct Direct
Sales price per unit (Rs) 9.50 8.50 7.25
Estimated sales per year
(Nos) 6,00,000 5,70,000 5,40,000
Selling & Distribution
Cost Per unit (Rs.) 3.00 1.60 0.90
Cost of Production:
Variable cost @ Rs. 4 per unit
Fixed cost Rs. 5,00,000

In selecting the channels of distribution what factors besides cost would you consider?