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 A Japanese Soft Drink Company is planning to establish a subsidiary company in India to produce Mineral Water

Accounting

 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 estimates for the Indian subsidiary. % of Variable cost Material Rs. 1,20,000 100% Labour Rs. 1,50,000 80% Factory Overhead Rs. 92,000 60% Administration O/H Rs. 40,000 35% 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 is to be allocated to the Indian Subsidiary. Required to a) Compute the sale price per bottle enable the management to realise an estimated 10% profit on sale proceeds in India. b) Calculate the BEP in rupees and also in number of bottles for the Indian subsidiary on the assumption that the sale price is Rs. 14/- per bottle. c) Prepare break even chart and comment on the profitability of the firm. d) Discuss the relevance of CVP analysis in this context.

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