8/2/2019 Exercise on Marginal Costing and Cost GVolume Profit Analysis

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8/2/2019 Exercise on Marginal Costing and Cost GVolume Profit Analysis

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Particulars A Co. B Co.

Sales 3, 00,000 3, 00,000

Variable cost 2, 40,000 2, 00,000

Fixed cost 30,000 70,000

Profit 30,000 30,000

You are required to calculate.

1) Profit volume ratio of each.

2) Break even point of each.

3) Margin of safety of each.

4) The sales volume at which each of the two companies will make a profit of Rs. 10,000.

5) Which company makes more profit in case of a) Heavy demand for products.

b) Low demand for products.

Exercise4

The sales and profit during two years were as follows:

Year Sales Profit

1997 1, 50,000 20,000

1998 1, 70,000 25,000

You are required to calculate

1) P/v ratio

2) Fixed cost

3) BEP

4) The sales required to earn a profit of Rs. 40,0005) The profit made when sales are Rs. 2,50,000

6) Margin of safety at a profit of Rs. 50,000

7) Variable cost of the two periodsExercise5

From the following particulars calculate BEP.

Sales Rs. 2, 00,000

Variable cost Rs. 1, 20,000

Fixed overheads Rs. 30,000

also calculate:

1) New BEP if selling price is reduced by 10%.

2) New BEP if variable cost is increased by 10%.

3) New BEP if fixed cost is increased by 10%.

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Exercise6

From the following particulars calculate

1) P/v ratio

2) BEP

3) Margin of safety4) Sales required to earn a profit of Rs. 1, 50,000

5) Profit when sales amounts to Rs. 10, 00,000

6) Margin of safety if the company is earning a profit of Rs. 20, 00,000

Fixed Cost = Rs. 1, 50,000

Profit = Rs. 1, 00,000

Sales = Rs. 5, 00,000

Exercise7

Raj Corporation has prepared the following budget estimate for the year 1999 - 2000.

Sales (units) 15,000

Fixed cost Rs. 34,000

Sales value Rs. 1, 50,000

Variable cost per unit Rs. 6

You are required to calculate

1) P/v ratio

2) BEP

3) Margin of safety4) Calculate the revised P/v ratio, BEP and Margin of safety in each of the following cases:

a) Decrease of 10% in selling price.

b) Increase of 10% in variable cost.

c) Increase of sales unit by 2000.

d) Increase of Rs. 6000 in fixed cost.

Exercise8

From the following particulars, calculate

i) BEP in terms of sales value and in units.ii) No. of units that must be sold to earn a profit of Rs. 90,000.

Fixed factory overheads - Rs. 60,000

Fixed selling overheads - Rs. 12,000

Variable manufacturing cost per unit - Rs. 12

Variable selling cost per unit - Rs. 3

Selling price per unit - Rs. 24

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Exercise9

From the following information calculate(i) Contribution / Sales ratio

(ii) Break even point

(iii) Margin of safety

Total sales Rs. 3, 60,000

Selling price per unit Rs. 100

Variable cost per unit Rs. 50

Fixed cost Rs. 1, 00,000

(iv) If the selling price is reduced to Rs. 90 by how much margin of safety reduced.

Exercise 10

Shri Shakti Appliance Ltd., an home appliance manufacturer has always sold its product throughwholesalers. Last year its sales were Rs. 20, 00,000 yielding a net profit of 10% of Sales.

As a result of increase in appliance sales through departmental stores and mail order

business establishments, the company is considering the elimination of wholesalers and sellingdirectly to retailers. It is estimated that it would result in 40% drop in sales.

But net profit will be Rs. 1, 80,000. Fixed expenses would increase from Rs. 2, 00,000 toRs. 3, 00,000 owing to additional warehouses and distribution facilities.

You are required to find out

(i) Whether the proposed change would rise or lower the break even point in rupees by howmuch

(ii) What would be the sales volume in rupees which would enable Shri Shakti Appliance Ltd.,to obtain as much profit as it made last year.