School of Management

Forman Christian College

(A Chartered University)

(Spring 2018)

Management Control System

Muscat and Pakistan production cost comparison

SUBMITTED TO:

Sir Wasif M Khan

SUBMITTED BY:

Muhammad Adeel Rana

Zain Khalid
 COMPARISON OF PRODUCTION COSTS IN PAKISTAN AND MUSCAT

Pakistan

No of shirts = 65000

1 kg of fabric produces 3.2 shirts

1997 cost

Price = 5.41

Exchange rate = 50

In 1998

Price= 5.70

VC= 180 per kg of fabric

Average production for 1998 is expected to be 160,000

So to produce 6500 shirts we require 20,312 kg

Direct fibre to division for 160,000 costs

160,000/8.1m= 20,312/x

X=1,028,295

Quota cost if we take average 800 per dozen

65000/12*800= 4,333,333

Total cost= 180*20,312 + 406,240 + 1028295

= 5,090,615

TC= 18*5.7*6500 -5,090,695

=1,575,305 (TC in Pakistan)

 Muscat

VC including the quota $2.01

Total VC in rupees= 18*6500*2.01

=2,351,700

Total cost will be same as Pakistan but we will take the other costs as half as they were both of
fabric garment decision

5,090,695 – 406,240 + 1,028,295/2

=6,011,082

TC = 6.5*18*35000 – 6,011,082

=1,593,918

Tax= 25% of 1593918

So the after tax amount = 1,195,438