Business Arithmetic Entrepreneurship - Business Arithmetic

What is meant by ‘Usage-Rate’ in Inventory Control?

What is meant by ‘Inventory Control’?

What is meant by ‘Re-order Point’?

Differentiate between ‘Sales Budget’ and ‘Marketing Budget’.

Give the two forms of budgeting process.

'Ayush Generic Medicines,' a chemist shop sells generic medicines. On 15.2.2016 medicines as per the details given below were sold:

No. of customers	Per customer billed amount ₹
15	370
20	430
45	500
25	1,000
95	1,200

Calculate the average amount of medicines sold per customer.

'Janata Foods Ltd.' is a restaurant situated on a national highway near Hyderabad. The following figures have been extracted from the books of Janata Foods Ltd.:

	₹
Stock of Raw Material	1,50,000
Short-Term Loans	1,83,000
Trade Creditors	96,000
Trade Debtors	2,25,000
Dividend Payable	1,50,000
Tax Payable	1,32,000
Short-Term Investments	2,28,000

From the above information, calculate the following:

1. Gross Working Capital.
2. Net Working Capital.

Harsha started her herbal beauty products shop in Chandigarh with a capital of ₹ 9,00,000. She took a loan of ₹ 5,00,000 from the State Bank of India at 9% p.a. interest. During the year ended 31st March 2016, her sales were ₹ 20,90,000 and the cost of goods sold was ₹ 15,30,000. She paid a monthly rent of the shop ₹ 11,000 and a monthly salary of ₹ 25,000 to the employees. The tax rate is 30%. Calculate the Return on Equity.

Pankaj an entrepreneur started a new website 'Save Electricity' to sell LED bulbs. In the first year, he sold 2400 bulbs at the rate of 100 each. His cost of placing an order and receiving the bulbs is 500 per order. If the Economic Order Quantity is 200 buIbs, find out the inventory holding cost per year.

Following information is related to sales - mix of Pen. Sketch Pen and Geometry box.

Product	Pen	Sketch Pen	Geometry box
Sales Price Per Unit(in Rs.)	40	45	75
Variable Cost Per Unit (in Rs.)	22	30	40
Sales - Mix Percentage	20%	20%	60%

Total Fixed cost is - Rs.90,000.
Calculate the weighted-average-contribution per unit for the sales mix.

'Good Wash Ltd.' are the manufacturers of different sizes of fully automatic washing machines marked as 'small', 'medium', 'large' and 'industrial'. From the information given below, calculate the 'Break-Even Quantity' of the machines manufactured per month.
Information:

Machine	Unit Selling	Unit Variable	Fixed Expenditure
Small	10,000	3,000	35,000
Medium	15,000	8,000	35,000
Large	20,000	13,000	70,000
Industrial	35,000	20,000	1,50,000

Illustrate how an entrepreneur assesses the working capital requirements of an enterprise taking into consideration the operating cycle.

A factory is engaged in manufacturing shirts. The following information is available to you:
Sales - Rs. 4,00,000
Direct Labour Cost (2,000 units) - ₹ 40,000
Direct Material Cost (2,000 units) - ₹ 1,00,000
Direct Expenses (2,000 units) - ₹ 20,000
Fixed Cost - ₹ 1,20,000
Find out:

1. Variable cost per unit.
2. Total cost.
3. Quantity to be sold at Break-Even Point.

Manohar and Manav were running a partnership firm. The firm is engaged in the production and marketing of edible oils. Manohar was looking after the production and Manav used to look after the remaining operations of the business. The firm was doing good business and earning profits more than the rate of profit of the industry. They used to be fair in their dealings with the customers and other stakeholders of the business. They used to do their quantitative planning meticulously. The edible oil produced by the firm is as per the fssai Standards.

1. Explain any one type of plan prepared each by Manohar and Manav with quantitative expressions.
2. Identify any two values observed by Manohar and Manav.

'Nomy India Ltd.' are the producers of different sizes of televisions. From the information given below, calculate the 'Break-Even Quantity' of the T.V. sets manufactured per month.
Informations:
Size of T.V. sets Unit selling price Unit variable cost Fixed expenses per month:

Size	Rs.	Rs.	Rs.
24"	5,000	2,000	4,000
32"	10,000	7,000	6,000
36"	15,000	12,000	8,000
42"	20,000	14,000	9,000

Karan has started a restaurant on National Highway No.1 in the name of 'Apana Dhaba' by spending Rs. 20,00,000. He invested Rs. 8,00,000 of his own and took a loan of Rs. 12,00,000 from SBI at the rate of 6% per annum. His monthly sales revenue is Rs. 12,00,000 and the cost of goods sold is Rs. 7,00,000. He pays monthly salaries of Rs. 2,00,000 to his employees. The rate of tax is 25%.
You are required to calculate the following for Karan:

1. Return on Investment.
2. Return on Equity.

Explain the steps for the development of the tool of cash management that helps an entrepreneur in knowing how much cash generation and expenditure is anticipated over a chosen period of time in future.

Raj Singh has started a restaurant on a National Highway in the name of 'Desi Dhaba' by spending Rs. 25,00,000. He invested Rs. 10,00,000 of his own and took a loan of Rs.15,00,000 from Dena Bank, @ 6% per annum. His monthly sales revenue is Rs. 17,00,000 and cost of goods sold is Rs. 9,00,000. He pays monthly salary of Rs. 3,00,000 to his employees. The tax rate is 25%.
You are required to calculate:

1. Return on Investment and,
2. Return on Equity for Raj Singh.

Raman is a potential investor who wishes to be a part of Equity Linked Saving Scheme (ELSS). He has given the particulars of two companies to seek your advice for investment. Compare the Return on Equity of the two companies and suggest to Raman where he should invest.

Particulars	Alpha Ltd. ₹	Beta Ltd. ₹
Total Capital Invested	20,00,000	20,00,000
Owned Funds	10,00,000	10,00,000
Interest on Borrowings from Bank	60,000	50,000
Cost of Goods Sold per month	7,00,000	8,50,000
Monthly Sales Revenue	10,00,000	15,00,000
Salaries	2,40,000	3,60,000
Utilities	75,000	1,00,000
Depreciation	5,500	6,000
Tax Rate	20%	25%

Parvesh has started a restaurant in a small town by the name of ‘Spices of India’ by spending ₹ 50,00,000. He invested ₹ 10,00,000 of his own and took a loan of ₹ 40,00,000 from State Bank of India @ 6% per annum. His monthly sales revenue is ₹ 20,00,000 and monthly cost of goods sold is ₹ 10,00,000. He pays a monthly salary of ₹ 2,00,000 to his employees. The GST rate is 18%.
Calculate (a) Return on Investment, and (b) Return on Equity.

Gross working capital means: