need CMA report

CVP Analysis and Decision-Making 8. Purchase and Inventory Decisions 31 Supplier and Customer Selection - Analysis of alternatives RTP KARTHIK Company is organised into two processes. Raw material is introduced into Process A and its output becomes the raw material for Process 8. The finished goods of Process B is sold in the market. Process A has a capacity to process an input of 200.000 kg of raw material per annum. The normal scrap is 10% and 5% of input in Process A and Process B respectively. The realizable value of serap is Re. 1 and 2 per kg respectively for Processes A and B. The operating data for a year are as under - Supplier P Q Process A Process B Direct Wages *22,00,000 21,00,000 Overheads 9,56,000 13,45,800 There are three suppliers of raw material whose price quotations and terms are as under- Price /Kg. Terms 10.00 Maximum quantity offered is 1,20,000 kg. 11.20 Maximum quantity offered is 1,60,000 kg. R 11.00 11 only when the entire quantity of 2,00,000 kg. is ordered. For any quantity less than 2,00,000 kg, the price charged is 11.60 per kg. sach case, the Raw Material is to be collected from the Supplier's Factory. The variable transport cost for bringing the raw Shaterials is 1.20 per kg, 21.00 per kg and 1.00 per kg for P, Q and R respectively. The annual fixed transport cost will be 2,00.000 irrespective of the Supplier from whom the material is purchased. The output emerging from Process B can be sold to three customers at the prices and terms given below Price/Kg. Discount 65.00 2% Maximum quantity acceptable to K is 80,000 Kg. 64.00 2% Maximum quantity acceptable to L is 1,60,000 Kg. Na 61.80 Provided the entire production of the Company is sold to M. h the case of customers K and L, Fixed Delivery Costs of 5,000 in total per month will be incurred. The Variable Delivery costs in respect of Customers K and L respectively are * 2.60 and 1.44 per Kg. However, Customer M will collect the output rom the Company's Factory at his own cost. Customer K L Condition Required: 1. Indicate with supporting calculations the choice of - (a) Suppliers, and (b) Customers. Based on your recommendation above, prepare a statement showing the process-wise costs and profit of the Company for the year. Solution: Less: 1. Quantity Analysis Input in Process A = Total Capacity (given) Loss in Process A = 10% of Input (Note: NRV at 1 per kg = 320,000) Balance transferred to Process B Loss in Process B = 5% of Input (Note: NRV at *2 per kg = 18,000) Balance Good Output available for Sale 2,00,000 kg 20,000 kg 1,80,000 kg 9,000 kg 1,71,000 kg Less: R Supplier Condition Purchase Price Transport Total 2. Supplier Evaluation and Decision P. Q Max.1,20,000 kg Max.1,60,000 kg 10.00 per kg 11.20 per kg 1.20 per kg 1.00 per kg 11.20 per kg 12.20 per kg R