Required no.

a)
L limited:
i) Monthly profit - at Present Level:

Sales (10,000 drums at Rs. 20 per drum) 200,000

Less: Cost of Sales:
a) Direct material (10,000 drums x Rs. 9) 90,000
b) Other Cost (10,000 drums x Rs. 3) 30,000

Total variable cost (120,000)

Contribution Margin 80,000

Less: Fixed cost (40,000)
Net Profit 40,000

Calculation of Sales - Drum by L ltd.:

M Ltd. Sales 750,000 ltrs during the month. L ltd purchase 1/3 of M ltd. Sales

Therefore L ltd. Purchase = 750,000 x 1/3

250,000 ltrs

Packing of material in 25 ltrs drum, therefore, L ltd purchase

Drum = 250,000 ltrs / 25 ltrs per drum

Drum = 10,000 drums.

There is no ending Finished goods and WIP therefore the purchase drum 10,000 drum
is sold by L ltd. During the month.

M limited:
i) Monthly profit - at Present Level:

Sales (750,000 ltrs x 0.36) 270,000

Less: Cost of Sales:
a) Variable cost (750,000 ltrs x 0.2) (150,000)
Contribution Margin 120,000
Less: Fixed cost (60,000)
Net Profit 60,000
Calculation of Sales price per unit: Calculation of Variable cost per unit:

Sales Price = Rs. 9 per 25 ltrs Variable cost = Rs. 200 per 1,000 ltrs
Sales Price = 0.36 Variable cost = 0.20

L limited:
i) Monthly profit - at REVISED Level:
Sales (18,000 drums at Rs. 16 per drum) 288,000
Less: Cost of Sales:
a) Direct material (18,000 drums x Rs. 9) 162,000
b) Other Cost (18,000 drums x Rs. 3) 54,000

Total variable cost (216,000)

Contribution Margin 72,000

Less: Fixed cost (40,000)
Net Profit 32,000

Calculation of Sales - Drum by L ltd.:

Drum = 10,000 drums.
Plus: Extra Drum = 8,000 drums
TOTAL DRUM PURCHASE = 18,000 drum.

M limited:
i) Monthly profit - at Present Level:

Sales (950,000 ltrs x 0.36) 342,000

Less: Cost of Sales:
a) Variable cost (950,000 ltrs x 0.2) (190,000)
Contribution Margin 152,000
Less: Fixed cost (60,000)
Net Profit 92,000
COMPARATIVE ANALYSIS:
L limited M Limited Group

Profit - at present level 40,000 60,000 100,000

Profit - at revised level 32,000 92,000 124,000

10,000 drum