Problems on Marginal Costing 1] Find P/V ratio & sales to earn profit of rs 1,0 00. Fixed cost –rs 4,000 Break-even sales – rs 20,000 Selling price per unit – rs 20. [itnal page 693 prob 3] 2] Find out P/V ratio & fixed cost from the following information. [itnal page 698 prob 6] Selling price per unit –rs 10 Year Sales (in units) Total cost (rs) 2004 15,000 1,30,000 2005 17,000 1,45,000
3] X Co Ltd has the P/V ratio 30% & its MOS is 40%. Find out the net profit & the BEP if sales are at rs 2, 00000. 4] The sales turnover & the profits during the periods were as follows: Year Sales les (in units) Total cost (r (rss) 2005 1,50,000 20,000 2006 1,70,000 25,000 Calculate A] P/V ratio ratio b] BEP sales c] Sales to earn a profit of rs 40,000 d] Profit when sales are rs 2,50,000. 5] The following information relates to the product of a company. Selling price per unit rs 30 Variable manufacturing cost per unit rs 17 Variable selling cost per unit rs 3 Fixed factory overhead rs 1, 50,000
Fixed selling cost rs 30,000 Calculate: 1] BEP in amount & in unit 2] Sales to earn a profit of rs 60,000 in value & in units. 3] Profit or loss of sales are @ 15000 units. [itnal page 694 prob 4] 6] Delta Ltd provides the following details relating to the manufacturer of delta tooth brush. Rs Selling price per piece 15 Direct materials cost per piece 4.50 Direct wages per piece 3 Fixed overheads 11,250 Variable overheads per piece 3 Find out BEP & P/V ratio it trade commission allowed is 5%. What will be the profits if sales price are 10% & 15% above the BEP calculated above? [itnal page 696 prob 5] 7] Akashwani Tape- recorder Company sold 5,000 tape-recorder last year at a price of rs 1,000 each. The cost structure is as follows: Material 200 Wages 100 Variable overheads 50
Marginal cost 350 Fixed overheads 400 Total cost 750 Profit 250 Selling price 1,000 Due to heavy competition, the price will have to be reduced to rs 850 in the coming year. Assuming no changes in costs, calculate the number of taperecorders that should be sold at the new price to get the same total profit as earned last year. [itnal page 703 prob 9] 8] The following information relates to Poornima ltd: Sales 2, 00000 Variable cost 1, 20,000 Fixed cost 60,000 Find out the P/V ratio & BEP. Calculate the new P/V ratio & BEP by considering the following changes: a] 205 increase in sale price accompanied by an increase of fixed cost by rs 20,000. B] 20% increase in sale price accompanied by 10% decrease in variable cost & 10% increase in fixed cost. [itnal page 705 prob 10] 9] The following figures are obtained from the accounts of “Gold star Ltd”: Year 2002 2003
Sales (in units) 4,000 6,000
The selling price per unit can be assumed to be rs 20. Calculate: A] P/V ratio B] Fixed cost C] Break –even sales D] Profit at sales of rs. 2, 00000 D] Sales to earn a profit of rs 30,000. [itnal page 708 prob 11]
Profit/Loss (rs) 5,000 Loss 5,000 Profit
10] Following details pertain to a company:
Particulars Number of units sold Selling price per unit (rs) Profit or loss made (rs)
Period-I 10,000 50 1,00000 (Loss)
Period -II 30,000 50 1,00000 (Profit)
Calculate: 1] The amount of fixed cost. 2] The number of units to break-even 3] The number of units to be sold to earn a profit of rs 4,00000. [itnal page 709 prob 12] 11] From the following figures find out the break even volume. Selling price per tonne Rs 69.50 Variable cost per tonne Rs 35.50 Fixed expenses Rs 18, 02,000 If this volume represents 40% capacity, what is the additional profit for an added production of 40% capacity, the selling price of which is 10% lower for 20% capacity production & 15% lower , than the existing price, for the other 20% capacity.[cama page 438 prob 3] [ICWA Inter- june 88] 12] The quality product ltd. Manufacture & markets a single product. Following data is available. Particulars Rs per unit Material 16 Conversion (variable) 12 Dealers margin 4 Selling price 40 Fixed cost – rs 5,00000 Present sales – 90,000 units Capacity utilization - 60% There is acute competition. Extra efforts are necessary to sell. Suggestions have been made for increasing sales. A] By reducing sales price by 5%. B] By increasing dealers margin by 25% over the existing rate. Which of these two suggestions would you recommend if the company desires to maintain present profits. Give reasons. [cama page 439 prob 4] [MBA II-MAY 85]
13] Garden Products Ltd manufacture the “Rainpour” garden pour.
The accounts of the company for the year 2004 are expected to reveal a profit of rs 14,00000 from the manufacture of “Rainpour” after charging fixed costs of rs 10,00000. The “Rainpour” is sold for rs 50 per unit & has a variable unit cost of rs 20. market sensitivity tests suggest the following responses to price changes. Alternatives Selling price reduced by Quantity sold increased by A 5% 10% B 7% 20% C 10% 25% Evaluate these alternatives & state which, on profitability consideration, should be adopted for the forthcoming year, assuming cost structure unchanged from 2004. [cama page 441 prob 5] [CA Final May 82] 14] shri kiran manufactures lighters. He sells his product at rs 20 each & makes profit of rs 5 on each lighter. He worked 50% of his machinery capacity at 50,000 lighters. The cost of each lighter is as under. Particulars Rs Direct material 6 Wages 2 Works overheads 5 (50% fixed) Sales expenses 2 (25% variable) His anticipation for the next year is that the cost will go up as under. Fixed charges 10% Direct labour 20% Material 5% There will not be any change in selling price. There is an additional order for 20,000 lighters in the next year. What is the lowest rate he can quote so that he can earn the same profit as the current year? [cama page 442 prob 6] [CA Final- Nov 84] 15] a ltd manufactures three different products & the following information has been collected from the books of account. Particulars S T Y Sales mix 35% 35% 30% Selling price Rs 30 Rs 40 Rs 20 Variable cost Rs 15 Rs 20 Rs 12 Total fixed costs Rs 1,80,000 Total sales Rs 6,00000 The company has currently under discussion a proposal to discontinue the manufacture of product Y & replace it with product M when the following results are anticipated. Particulars S T Y Sales mix 50% 25% 25% Selling price Rs 30 Rs 40 Rs 30
Variable cost Rs 15 Rs 20 Rs 15 Total fixed costs Rs 1,80,000 Total sales Rs 6,40,000 WILL YOU ADVISE the company to changeove r to production of M? Give reasons for your answer. [ Cama page 446 prob 8] [CA Final – May 83]
