Problem 13.26 (Computation of price based on profit as a % of S.P.) Megatron Ltd. has entered into a collaboration agreement with Kozuki of Japan for import of TV Kit in completely knocked down (CKD) condition. The terms of agreement are as under. (a) Megatron will import 40% items by value (in terms of FOB price of complete T.V. set) and balance 60% will be locally manufactured/purchased. (b) For all non-standard items which are to be produced locally, Kozuki will provide drawings. (c) Megatron will pay a lump sum of Rs. 30 lakh for supply of technical know-how and drawing. (d) Megatron will also pay a royalty at 10% of selling price fixed by it for sale in the local market less landed cost of imported kit, less cost of standard items purchased locally. (e) Megatron will send a six monthly return to Kozuki showing number of sets sold, sale value, standard components costs, landed cost of CKD, etc. Considering the above terms and additional information given below, calculate the selling price that should be fixed for local sale so as to get 20% profit on selling price. (Round off the answer to nearest rupee). (i) Agreement expires on production of 3 lakh sets. (ii) FOB price quoted is 1,20,000 yen. (iii) Insurance and freight Rs. 200 per CKD (iv) Customs duty at 140% of CIF price. However, effective rate of duty is only 40% as per Government notification. (v) Estimated cost of 60% items to be manufactured/procured locally, will be 1.5 items as compared to cost of manufacture by Kozuki. The quoted price by Kozuki contains 20% margin on cost. (vi) The ratio of standard and non-standard parts is 3:3 (in terms of (vii) Assembling and other overhead costs will be Rs. 1,000 per set. rupee value). (viii) Exchange rate is Rs. 5 per 100 yen