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Rs. 4,000
Break-even point
10,000
Rs. 20
Fixed cost
Capacity
Rs. 70
Required:
i. Find the break-even point
ii. Find the number of buckets to be sold to get a profit of Rs. 30,000
iii.If the company can manufacture 600 buckets more per year with an additional fixed cost of Rs. 2000,
what should be the selling price to maintain the profit per bucket as at (ii) above.
S.N Maheswori Q. N 16.16 page no A. 450
3. The profit/volume ratio of X Ltd. is 50% and the margin of safety is 40%. You are required to calculate the
net profit if sales volume is Rs. 100,000.
Basistha Q. N 13.41 Page No. T.13.43
4. A company budgets for a production of 150,000 units. The variable cost per unit is Rs. 14 and fixed cost is
Rs. 2 per unit. The company fixes its selling price to fetch a profit of 15% on cost.
(a) What is the break-even point?
(b) What is the profit volume ratio?
(c) If it reduces its selling price by 5%, how the revised selling price affect the break even point and the
profit-volume ratio?
(d) If a profit increase of 10% is desired more than the budget, what should be the sales at the reduced
prices?
S.N Maheswori Q.N 16.22 Page No. A 455
5. From the following data, you are required to calculate the break even point and sales value at this point:
Selling price per unit
Rs. 25
Fixed overheads
Rs. 24,000
Trade discount
4%
If sales are 15% and 20% above the break-even volume, determine the net profits.
S.N Maheswori Q.N 16.31 Page No. A 462
6. S Ltd., a multi-product company, finished the following data relating to the year 2008.
Sales
Sales
Rs. 45,000
Rs. 50,000
Total Cost
Rs. 40,000
Rs. 43,000
Assuming that there is no change in prices and variable costs and that the fixed expense are incurred
equally in the two half year periods, calculate for the year 2008.
(i) P/V ration
Rs. 200,000
Product B
Rs. 500,000
Product C
Rs. 300,000
Variable expenses:
Cost of goods sold
90,000
270,000
150,000
Selling
30,000
90,000
45,000
Overhead
36,000
90,000
54,000
Administrative
16,000
40,000
24,000
28,000
10,000
27,000
11,200
4,000
10,800
Net Income
16,800
6,000
16,200
Fixed expenses:
All products are manufactured in the same facilities under common administrative control. Fixed expenses
are allocated among the products in proportion of their budgeted sales volume.
(a) Compute the budgeted break-even point of the company as a whole, from the data provided.
(b) What would be the effect on Budgeted income if half of the budgeted sales volume of product B were
shifted to product A and C in equal rupee amounts, so that the total budgeted sales in rupees remain
the same.
(c) What would be the effect of the shift in the product mix suggested in (b) above on the budgeted breakeven point of the whole company?
S. N Maheswori Q. N 16.36 Page No. A 466
Fixed Cost
Direct Material
32.80
Direct Labour
28.40
Factory Overhead
12.60
189,000
Distribution Overhead
4.10
58,400
1.10
66,700
9. The Laila Shoe Company sells five different styles of ladies chappals with identical purchase costs and
selling prices. The company is trying to find out the profitability of opening another store , which will have
the following expenses and revenues:
Per Pair
Selling Price
Rs. 30.00
Rent
Rs. 60,00
Variable Cost
19.50
Salaries
200,000
Salesmens Commission
1.50
Advertising
80,000
21.00
Required:
(a) Calculate the annual break-even point in units and in values. Also determine the profit or loss if
35,000 pairs of chappals are sold.
(b) The sales commission are proposed to be discontinued but instead a fixed amount of Rs. 90,000 is to
be incurred in fixed salaries. A reduction in selling price of 5% is also proposed. What will be the
break-even point in units?
(c) It is proposed to pay the store manager 50 paisa per pair as further commission. The selling price is
also proposed to be increased by 5%. What would be the break-even point in units?
(d) Refer to the original data, if the store manager were to be paid 30 paisa commission on each pair of
chappal sold in excess of the break-even point, what would be the stores net profit if 50, 000 pairs
were sold?
Note: Consider each part of the question separately.
S. N Maheswori Q. N 16.43 Page No. A 473
10. IP Ltd. manufactures and sells a product, the selling price and raw material cost of which have remained
unchanged during the past two years. The following are the relevant data:
Particulars
Year 1
Year 2
100
150
Rs
Rs
Sales Value
20,000
Raw Materials
10,000
Direct Wages
3,000
Factory Overhead
5,000
5,700
Profit
2,000
2,550
During the year 2, direct wages rates increased by 50% but there was saving of Rs. 300 in fixed factory
overheads.
Required:
What quantity (in kgs) the company should have produced and sold in year 2 in order to maintain the same
amount of net profit per kg. as it earned during year 1?
S.N Maheswori Q. N 16.46 Page No. A 476
11. Zenial University conducts a special course on Computer Application for a month during summer. For
this purpose, it invites application from graduates. An entrance test is given to the candidates and based on
the same, a final selection of a hundred candidates is made. The Entrance Test consists of four objective
type examinations and is spread over four days, one examination per day. Each candidate is charged a fee
of Rs. 50 for taking up the entrance test. The following data was gathered for the past two years.
Zenial University
2008 (Rs)
100,000
150,000
Valuation
40,000
60,000
Question Booklets
20,000
30,000
8,000
8,000
6,000
6,000
6,000
6,000
4,000
6,000
Total Cost
84,000
116,000
Net Revenue
16,000
34,000
__________________________________________________________________________
You are require to compute:
a. The budgeted net revenue if 4,000 candidates take up the entrance test in 2009.
b. The break-even numbers of candidates.
c. The number of candidates to be enrolled if the net income desired is Rs. 20,000.
S. N Maheswori Q. N 16.47 Page No. A.477
12. A company present the following cost estimates for three prospective plant A, B and C.
Plant A
Plant B
Plant C
60,000
108,000
120,000
2.50
2.20
2.10
75,000
120,000
150,000
(i) Calculate the range of output over which each of the plants would be most economical.
(ii) If the sales are steady at 100,000 units per year and the unit selling price is Rs. 4 per unit, what will
be the profits earned with each of the plants? Assume that Plant A can be worked double shift with an
additional expense of 10% in fixed costs and 5% in variable costs of all units.
Basistha Q.N 13.43 Page No. T.13.44
13. A company manufactures and sells a product, the price of which is controlled by the Government. Raw
material required for this product is also made available at a fixed controlled price. The following figures
have been called for the previous two accounting years of the company:
Year I
Year II
126,000
144,000
Rs. 185
Rs. 185
(Rs. In thousands)
Sales Value
23,310
26,640
Raw Materials
11,340
12,960
Direct Labour
1,152
1,872
9,702
11,232
Profit
756
572
During the year II direct labour rates increased by 8-1/3%. Increases in factory, administration and selling
expenses during the year were Rs. 810,000 on account of factors other than the increased quantities
produced and sold. The managing director desires to know, what quantity if they had produced and sold
would have given the company the same net profit per tonne in Year II as it earned during the year I.
Advise him.
S. N Maheswori Q. N 16.33 Page No. A 464
14. A