NORTH SOUTH UNIVERSITY

“DECORATED JEWELRY BOX”

Group Name: “Entrepreneur’s Design Shop”

Submitted to
Nabila Nisha
Lecturer,
Department of Accounting & Finance

Submitted by,
Group: “Entrepreneur’s Design Shop”
Section: 02
Name ID
Md. Raihan Hasan Chowdhury 133 0136 030
Md. Rokibul Islam Anik 142 1410 030
Rehana Akter Rumi 142 0808 030
Nusrat Jahan 143 0675 630
Tanzida Akter Urmi 132 0336 030
Umme Rozline Srabony 122 0254 030
Md. Rezaul Islam Reain 141 0191 030
April 2nd 2017
Nabila Nisha
Lecturer,
Dept. of Accounting & Finance (BBA)
North South University, Dhaka, Bangladesh
Subject: Permission for submitting the Group Project Report

Dear Madam,
Thank you for giving us the opportunity to make this project report which is the most important part
of our “ACT 333” course. As per your project guideline form, we have prepared our report about the
accountings of our product “DECORATED JEWELRY BOX”. In this report, we will be focusing
on the costing and pricing methods and strategies, budgeting, CVP analysis etc. for our assigned
product. Through the whole project we can gather lots of practical experience of using different
costing and pricing methods as well as different practical forecasting and assumption. As well as, it
also helps us to strengthen our communication skill and team management skill and interpersonal
skills in terms of various accounting tactics and estimations.

We enjoyed working on this, hope you will find it innovative. Have a good day.

Yours Sincerely,

Md. Raihan Hasan Chowdhury

Md. Rokibul Islam Anik
Rehana Akter Rumi
Nusrat Jahan
Tanzida Akter Urmi
Umme Rozline Srabony
Md. Rezaul Islam Reain
 Abstract

In this part, we would like to give the idea of overall report in a summarized way. Our company name
is “Entrepreneur’s Design Shop” and we are making jewelry box and then decorate it with many
different way, based on our own design. Basically our purpose is to provide delightful decorated
ornament box to customers with a reasonable price, also provide it to customers lowered price than
others competitor. Our materials are popsicle-stick (ice-cream stick), golden thread, ribbon, glue,
kundan, flat and round pearl, small leaf and mirror, dollar. In this report, we are basically, identify the
direct cost and indirect costs and few manufacturing overheads just like rent and utility cost. On the
other hand, we also provide support cost and selling cost. Besides, we identify variable and fixed cost
and arranging our materials cost in prime and conversion cost. We have already using simple costing
system and for ensuring the accuracy we have also done the ABC costing method for determine the
product cost. We have also made profitability report for both simple costing and activity based costing
system and comparing the costs and strategies. We have also prepared different budget just like the
revenue budget, production budget, direct material usage budget, direct material purchase budget,
manufacturing overhead cost budget, ending inventory budget and cost of goods sold budget. Then
we already discussed about traditional income statement and budgeted contribution format income
statement and also break-even in unit s and sales, breakeven margin, margin of safety and lastly we
are done with Sensitivity analysis for making better decision.
 Table of Content

Name of Topics Pages

Introduction 5
Industry Analysis 5
Manufacturing Process 5-6
Maximum we can Produce 6
Production Cost 6-8
Support Cost and Selling Cost 8
Analysis of Cost 9-11
Simple Costing System 12
Cost Strategy of Allocating Sup- 13
port Cost
Activity Based Costing 14-16
Unit Cost Under ABC 16
Pricing Strategy 17
Product Line Probability Report 17-18
Budget 19-24
Determining Break-Even Point 24-25
Determining the Degree of 26-27
Operating Leverage
 Introduction
We all know that the demand of jewelry now a day, every maturity level of people has demand for it.
But teenager of beginning new generation wants to use different kind of jewelry, and they want it
with a decorated casket. Not only that they use it as just a jewelry box also they use it as an ornament
of their room, showcase or dressing table. Whatever jewelry they bought for gift or for own their first
priority is to take a good decorated casket. Even a well decorated jewelry box is one of the best classy
gift now a days and they using it as spontaneously. And we providing it. We do not focus on mass
amount rather we focus on customer desire and quality. We try to make the design according to
customer perception and concept and it helps us to organize interactive manufacturing process. It
increases customer satisfaction and also strengthen the customer relationship. We are making the
product at a very reasonable price in comparison to our competitor. These are the main issue for
choosing this assigned product.

Industry analysis
Jewelry box is mostly under the home décor industry. Our competitors are Arong, BD Jeffries, Kaymu
Wooden Jewelry Box, Alibaba, Tedfo and Hallmark. Whereas it’s a sort of wooden decorated jewelry
box so our main competitors are Arong and BD Jeffries. Mainly Arong because of demand increasing
they trying to provide box with a very reasonable price, but other hand BD Jeffries products are good
but with the extensive range.

Manufacturing Process
Our company is a manufacturing and selling company. The materials we have used to make the
jewelry box are 180 pieces of popsicle-stick, 10 pieces of pearl, 20 pieces of small mirror, glue, three
different colors of kundan, dollar, ribbon, golden color thread for decorate. We also used anti cutter
and scissor for cutting sticks and used. At first we to need to make a frame through our sticks, I mean
the length and width, then we use stock pile one by one over the sticks, that gives us a real shape of
middle part, here we used 70 pieces of sticks. Then we need to make the bottom part of the box, here
we need 22 pieces of sticks. Then we need to make the Lid of the box, here we use 76 pieces of sticks.
For better attach to sticks each other we use Fevicol glue and then we dried it. After making the Lid
we are done with the build, then we have to decorate it. Here we used 12 pieces of cutting sticks and
design it, we used kundan, dollar, small leaf, 10 pieces of pearl and 20 pieces of mirror for decorating.
Here we used PVC glue for better attaching. After that we dried the wet glue. After the glue dried, we
used ribbon and thread for tied up with middle part and lid part. For best decoration we use various
kind of jewel accessories. After manufacturing the box then sells those.

Maximum we can produce

According to our presumption, we have 7 labors. We need 60 minutes to produce a single unit of
product working together. So, in an hour we can produce 1 unit of jewelry box.
We assume,
Direct labor hours per day = 10 hours
Working days per week = 6 days per week
Total working days per month =24 days
Total labor hour in a month = 10hours*24days=240 hours
So, Maximum units can be produced per month= 240 hour * 1 unit = 240units. We produce 200 units.

Direct Material Cost

Items Cost per unit

Popsicle-sticks (180*0.75) Tk. 135

Thread (one part of thread) Tk. 4

Ribbon (1piece golden Tk. 6

color)
Glue (one tube) Tk. 41

Direct material per unit Tk. 186

Direct Manufacturing Labor Cost

Monthly direct labor cost will be = 7 labors*Tk. 4000 per month

= Tk. 28000
So, direct labor cost per unit = Tk. 28000/200units
= Tk. 140

Manufacturing Overhead Cost

Items Calculation Cost

Indirect Materials

Pearl (assume per unit) 10pieces*tk. 0.525per Tk. 1050

pearl=tk. 5.25
Kundan Three different color Tk. 4640

Small Mirror (assume 20pieces*tk. 0.275per Tk. 1100

per unit) =tk. 5.5
Per Unit Indirect Cost Tk. 34

Other MOH

Rent Tk. 12 per s.f.*850 s.f. Tk. 10200

Utility Tk. 950

MOH Cost Per Unit Tk. 90

 Production Cost
The summation of direct materials, direct labor, and manufacturing overhead is production cost.
Following table shows the production cost per unit of box.

Inputs Cost Per Unit

Direct Materials Tk. 186

Direct Manufacturing Labor Tk. 140

Manufacturing Overhead Tk. 90

Production Cost Tk. 416

Support cost and selling cost

Support cost
Support costs are mainly the supporting department’s cost. These costs are incurred for supporting
the production of product. Our supporting costs are mainly different types of communication medium
cost for example Telephone bill, Internet bill. These incurred indirectly.

Support cost Total cost

Internet bill (Information department) Tk. 1000

Telephone bill (Communication department) Tk. 900

Total support cost Tk. 1900

Selling Cost
These costs are related to sell the product and marketing related activity just like delivery cost or
transportation cost.

Selling cost Total cost

Delivery cost/ transportation cost Tk. 1500

Total selling cost Tk. 1500

 Analysis of costs

Fixed cost
This type of cost is remaining unchanged in total for a given period of time and within the relevant
range. On the other hand, per unit fixed cost is changing inversely on the basis of production volume.

Fixed cost Total cost

Rent Tk. 10200
Utility Tk. 950
Telephone Tk. 900
Internet Tk. 1000
Delivery/ Transportation Tk. 1500
Total cost per unit (14550/200) Tk.72 (Approx.)

Variable cost
A cost that changes in total in proportion to a change in the level of activity but per unit variable cost
remains the same within the relevant range.
Variable cost Total Cost
Popsicle-stick Tk. 135
Pearl Tk. 5.25
Small Mirror Tk. 5.5
Glue Tk. 41
Kundan Tk. 23.2
Thread Tk. 4
Ribbon Tk. 6
Direct Labor cost Tk. 140
Total Variable cost Per Unit Tk. 360

***We assumed the cost of Pearl, Small mirror and Kundan as indirect material, because those are
for decoration purposes and we didn’t know the exact amount of these materials for making one unit
of product. We just assumed 10 pieces of pearls, 20 pieces of mirror for one unit. Basically the costs
we incurred for one unit of product are 5.25 tk. of Pearl, 5.5 tk. of Mirror and 23.2 tk. of Kundan.
*** we have assumed that we have no mixed cost.
Direct cost
Costs which we can trace in a product in an economically feasible way and its related to a particular
cost object.
Direct cost Total
Direct materials:
Popsicle-stick Tk. 135
Thread Tk. 4
Ribbon Tk. 6
Glue Tk. 41
Direct labor Tk. 140
Total Direct Cost Per Unit Tk. 326

Indirect cost
Costs that are not traced in an economically feasible way and these types of costs are indirectly
related to product, and we allocate these cost based on cost object.

Indirect cost Cost per unit

Indirect materials:
Pearl Tk. 5.25
Small Mirror Tk. 5.5
Kundan Tk. 23.2
Other Indirect Cost
Rent (tk10200/200units) Tk. 51
Utility (tk950/units200) Tk. 4.75
Telephone bill (tk900/200units) Tk. 4.5
Internet bill (tk1000/200units) Tk. 5
Transportation (tk1500/200units) Tk. 7.75
Total Indirect cost Per unit Tk. 107
Prime cost
This cost is consisting of all direct cost. Our direct costs are basically direct material and direct labor
cost.
Prime cost Cost per unit

Direct materials Tk. 186

Direct labor Tk. 140

Prime Cost Per Unit Tk. 326

Conversion cost
Basically, it represents all manufacturing costs that are incurred to convert direct material into finished
goods. In a word, all manufacturing cost other than direct materials is conversion cost.
Conversion Cost Cost per unit

Direct Labor Tk. 140

MOH Tk. 90

Conversion cost per unit Tk. 230

Full Cost
Full cost is basically the mixture of all variable and fixed cost. We need this to determine the selling
price of a product.

Full cost = Variable cost per unit + Fixed cost per unit
= Tk. 360+ Tk. 72
= Tk. 432
 Simple Costing System

We will use Direct Manufacturing labor hour as the cost allocation base to allocate indirect cost to
each jewelry box under simple costing system.

Total MOH = Produce Unit*MOH per unit

= 200 unit* 90 tk.
= tk. 18000

MOH Rate = Total MOH/ Total Direct Labor Hour

= tk. 18000/240 labor hour
= tk. 75 per direct labor hour

Under simple costing system companies use a broad average rate for assigning the cost of resources
to cost object when individual product uses those resources in non-uniform way. Under this system
company allocates its total indirect cost using a single cost allocation base.

Unit product cost under simple costing:

Inputs Cost Per Unit

Direct Material Tk. 186

Direct Labor Tk. 140

MOH Tk. 75

Unit Cost Tk. 401

 Cost strategy of allocating support cost
Direct method is simple and involves less calculation to do. It is also less time consuming and easy
to perform. On the other hand, we have less support department and cost. As a result of these factors
we have decided to use direct method to allocate costs of support department to operating department.

Details Support Departments Operational Departments

Information Communication
department department
(Internet
bill) (Telephone bill) Testing Decoration Sales
Cost Incurred Tk. 1000 Tk. 900
Allocation of Information
department cost
(1000*10/90;50/90;30/9
0) (tk. 1000) - Tk. 111 Tk. 556 Tk. 333
Allocation of Communication
Department cost
(900*20/90;15/90,55/90) - (tk. 900) Tk. 200 Tk. 150 Tk. 550
Total 0 0 Tk. 311 Tk. 706 Tk. 883

Our company has one support department, Communication department, which has two cost internet
bill and telephone bill. And has three operating departments, Testing, Decoration and Sales.
Most of our internet cost occurs in decorating jewelry box because we need get different idea from
different sources online about how to make our product more lucrative. As a result, we have assigned
50% of our internet bill on Decoration department. 30% of our internet bill has been assigned to sales
department, only 10% of the internet cost has been assigned to Testing department. We also assumed
that internet bill 10% provide on its own support department of telephone bill.
65% of the telephone bill incurred on sales department to get to know from customers which type of
product they want. 20% of telephone bill has been assigned to Testing department. 15% of the
telephone cost incurred on Decoration department. Here we assigned 10% telephone bill on internet
bill.
 Activity Based Costing

ABC system is a costing system in which each individual activity is identified as a cost object and
there is separate cost driver for each of the activity.

The table in the next page shows all the indirect costs and cost drivers for each of them:

Cost
Alloca-
Cost Items Unit of Cost per
tion
unit
Bases allocation bases of allocation base

Number of units
Pearl 200 Units tk. 1050 tk. 5.25 per unit
produced
Number of units
Small Mirror 200 Units tk. 1100 tk. 5.5 per unit
produced
Number of units
Kundan 200 Units tk. 4640 tk. 23.2 per unit
produced
Number of square
Rent 850 tk. 10200 tk. 12 per sq. feet
square feet feet
Number of direct
Utility 240 hour tk. 950 tk. 3.95 per direct labor hour
labor hours

Number of per phone

Telephone Bill 450 calls tk. 900 tk. 2
phone call call

Number of unit
Internet Bill 200 Calls tk. 1000 tk. 5 per unit
produced
Transportation Number of unit per units to
174 Units tk. 1500 tk. 8.62
Bill sold be sold
We purchased Pearl on the basis of number of unit produced. So allocation base will be on number
of unit to be produced. Small Mirror and Kundan also be allocated on the basis of number of unit.
Room is rented on the basis of square feet and total cost varies with respect to a change in the size of
the room. So, number of square feet is the best cost driver for rent. Our utility costs include electricity,
water bill. And these costs tend to vary over different level of direct labor hour. So, Number of direct
labor hour is the best cost allocation base for utility. Telephone bill depends on the number of phone
calls. Cost will be less if number of call is less and cost will be more if number of call is more. So,
number of phone call has the best cause and effect relationship with telephone bill cost. Total internet
bill changes if there is a changes in the unit produced. So, number of unit produced is the best cost
drivers for Internet and telephone bill. Transportation cost will change on the basis of unit to be sold.

Overhead rate for Pearl = Total Pearl Cost / No. of units produced
= TK. 1050 / 200
= TK. 5.25 per unit

Overhead rate for Small Mirror = Total Small Mirror Cost / No. of units produced
= TK. 1100 / 200
= Tk. 5.5 per unit

Overhead rate for Kundan = Total Kundan Cost / No. of units produced
= TK. 4640 / 200
= Tk. 23.2 per unit

Overhead rate for Rent = Total Rent Cost/ No. of Sq. Feet
= TK. 10200 / 850
=Tk. 12 per Sq. Feet

Overhead rate for Utility = Total Utility cost / No. of direct labor hours
= TK. 950/ 240
= Tk. 3.95 per DLH

Overhead rate for Telephone bill = Total Telephone Bill / No. of phone calls
= TK. 900 / 450
= Tk. 2 per phone call

Overhead rate for Internet bill = Total Internet Bill / No. unit produced
= TK. 1000 / 200
= Tk. 5 per unit

Overhead rate for Transportation bill = Total Transportation Bill / No. unit sold
= TK. 1500 / 174
= Tk. 8.62 per Unit sold
 Unit Cost under ABC

Cost Items Calculation Cost Per Unit

Direct Material Tk. 186

Direct Manufacturing Labor Tk. 140

Indirect Cost

Pearl 10pieces*tk. 0.525per Tk. 5.25

Kundan Tk. 23.2

Small Mirror 20pieces*tk. 0.275per Tk. 5.5

Rent 4.25sf.* tk. 12 per sf. Tk. 51

(tk51per unit rent/tk12per sf.)

Utility Tk. 950/200 units Tk. 4.75

Telephone Bill Tk. 900/200 units Tk. 4.5

Internet Bill Tk. 1000/200 units Tk. 5

Transportation Bill Tk. 1500/174 units Tk. 8.62

Total Tk. 429

 Pricing strategy
We have used cost based pricing strategy. We want 40% return on our investment. Our price per
unit will be 700 tk. (cost based) and mark up is 75%.
Cash Tk. 95000

Computer Tk. 25000

Mobile Tk. 8500

Anti-Cutter Tk. 700

Scissor Tk. 800

Total Invested Capital Tk. 130000

Calculation:
Estimated unit to be sold =174
Cost = tk. 401
Invested capital = tk. 130000

Estimated percentage of return on investment = 40%

Estimated operating income = tk.130000*.40 = tk. 52000
The estimated income per unit = tk. 52000/174 = 299 tk. (rounded up)
So the price will be = 401+299 = tk. 700
Mark up = 75%

Product Line Profitability Report

Under Simple Costing

Items Calculation Amount
Revenue Tk.700*174units Tk. 121800
Less: COGS Tk.401*174 units Tk. 69774
Operating Income Tk. 52026
Profit Margin 42.7%
Activity Based Costing

Items Calculation Amount

Revenue Tk. 700*174 units Tk. 121800

Less. COGS Tk. 429*174 units Tk. 74646

Gross Margin Tk. 47154

Less. Operating Expenses

Telephone Bill Tk. 900

Utility Bill Tk. 950

Internet Bill Tk. 1000

Transportation Tk. 1500

Total Activity Cost (tk. 4350)

Operating Income Tk. 42804

Profit Margin 35%

Our profit margin under simple costing is approximately 42.2% of sales revenue. On the other hand,
our profit margin under activity based costing is approximately 35% of Sales Revenue. Simple costing
does not take into account the indirect costs whereas activity based costing considers all indirect costs.
Indirect costs are allocated by activity based costing by determining and applying different allocation
base to each cost. Therefore, activity based costing gives a more accurate measure of cost. That is
why, our profit margin is lower under activity based costing than under simple costing.
 Budget

Budget is basically the quantitative expression of a proposed plan of action by management for a
specified period. For different type of Budget Schedule, we are assuming something-
 Our target Ending finished goods inventory is 13% of Budgeted unit sales
 Our Target Ending Direct material inventory is 13% of total material used in production
 We have no beginning finished goods and direct material inventory
 Our target budgeted sales is 174 units

Schedule 1: Sales Budget

Product Unit Selling Total

price/unit

Jewelry Box 174 700 Tk. 121800

Schedule 2: Production Budget

Total Units
Budgeted Sales Unit 174
(+)Target Ending Finished Goods 26
Inventory
(-)Beginning Finished Goods Inventory 0

Units to Be Produced 200 units

Schedule 3 (A): Direct Material Usage Budget

Pop- Thread Ribbon Glue Total

Sticks (tk.)
Physical Unit Budget:

Pop-Sticks (180*200) 36000

Thread (1*200) 200

Ribbon(1*200) 200

Glue(1*200) 200

Total quantity of Direct material to 36000 200 200 200

be used
Cost Budget:

Available Form Beginning

Inventory (0)

Available from Purchase

Pop-Sticks (36000*0.75) 27000

Thread(200*4) 800

Ribbon(200*6) 1200

Glue(200*41) 8200

Total Cost of Direct Material 27000 800 1200 8200 37200

Schedule 3 (B): Direct Material Purchased Budget

Pop-Sticks Thread Ribbon Glue Total(tk.)

Physical Unit Budget:

production usage 36000 200 200 200

(+) target ending inventory 4680 26 26 26

total needs 40680 226 226 226

(-) beginning Inventory 0 0 0 0

units DM to be purchased 40680 226 226 226

Cost Budget:

Pop-Sticks(40680*0.75) 30510

Thread(226*4) 904

Ribbon(226*6) 1356

Glue(226*41) 9266

Total Cost of Direct Materials to Be 30510 904 1356 9266 Tk. 42036
Purchased
Schedule 4: Direct Labor Budget

Product Unite DLH Per Total DLHs Wage Rate Total DL

Unit Per hour Cost

Jewelry Box 200 1 Hour (200*1) = 174 Tk 140 (200*140) =

Tk 28000

Schedule 5: Manufacturing Overhead Budget

Variable MOH Cost
Pearl(200*5.25) 1050
Kundan(200*23.2) 4640
Small mirror(200*5.5) 1100

Fixed MOH
Rent 10200
Utility 950
TOTAL Tk. 17940

Schedule 6: Ending Inventory Budget

Units Cost per Unit Total Cost (tk.)
Direct Materials
Pop-stick 4680 .75 3510
Thread 26 4 104
Ribbon 26 6 156
Glue 26 41 1066
Finished goods
Jewelry box 26 401 10426
Total cost of Tk. 15262
ending inventory
Schedule 7: Cost of Goods Sold Budget
From Schedule Total

Beginning Finished Goods 0

Inventory

Add: COGS Manufactured:

Direct material(usage) 3A 37200
Direct Labor 4 28000
Manufacturing Overhead 5 17940
83140 tk
Total cogs available for sale 83140 tk

Less: Ending Finished 10426tk

Goods Inventory

Cost of Goods Sold 72714 tk

Budgeted Income Statement

Items From Schedule Taka

Revenue Schedule 1 TK 121800
Cost of Goods sold Schedule 7 TK 83140
Gross Margin TK 204940
Operating cost:
Telephone Bill TK 900
Utility Bill TK 950
Internet Bill TK 1000
Transportation Bill TK 1500
Total Operating Cost TK 4350

Total Operating TK 200590

Income
Contribution Format Income Statement

Items From Schedule Taka

Sales Revenue Schedule 1 TK 121800
Less: Variable Cost (VC) [ TK (62640)
TK360*174 Unit]

Contribution Margin (CM) TK 59160

Less: Fixed Cost (FC) TK(14550)
Net Operation Income TK 44610

Determining Break-even point

Break-even in unit = Fixed cost

Unit CM

= (14550)
59160
174

= 43 units
 Fixed cost
Break-even sales = CM ratio

For this, we need CM ratio first

CMu
CM ratio = Selling price per unit

= 340/700 (CM 59160/unit to be sold 174= 340)

=49% (approx.)

So, Break-even sales = Fixed cost

CM ratio

14550
= .49

= 29694 (around)

Determining the margin of safety

MOS in units = Budgeted sales – Break-even sale(unit)

= 174-43

= 131 units

𝑀𝑂𝑆
MOS percentage = 𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑠𝑎𝑙𝑒𝑠

= 131
174

= 75.28%
 Determining the degree of operating leverage
It is the risk return trade-off. The formula is under below,

Degree of operating leverage = Contribution margin

Operating income

59160
= 44610
= 1.32 times

Our Margin of Safety ratio is 75.28%. This means that we are in a safe position. We will be able to
cover our Fixed Cost and reach Break-even. As a result of having a lower Fixed Cost, in terms of
MOS we have lower risk on our production.
Through our data we know our Operating Leverage is 1.32. So, our Contribution margin is 1.32 times
of Operating income as result we can say very less amount of contribution margin is offset by fixed
cost and fixed is lower. So, if the sales are decrease by small amount, the operating income will
decrease by very lower amount.

Case 1: 13%increase of direct material cost

Items Calculation Old cost New cost

Sales Revenue Tk. 700*174 units Tk. 121800 Tk. 121800

Less: Variable cost Tk. 360*174 units Tk. 62640

Tk. 407*174 units Tk. 70818

Contribution margin Tk. 59160 Tk. 50982

Less: Fixed cost Tk. 14550 Tk. 14550

Operating income Tk. 44610 Tk. 36432

Case 2: 13% decrease in demand on our product:

13% decrease in units sold and decreasing unit is 23 units,

Items Calculation Total

Decrease in Sales Tk. 700 *23units Tk. 16100
Revenue
Less: Variable cost Tk. 360*23 units Tk. 8280
Contribution margin Tk. 7820
Less: Fixed cost Tk. 0
Operating income Tk. 7820

Old Operating Income – Decrease of new Operating Income

= tk. 44610 – tk. 7820
=tk. 36790

Case 3: 13% increase in demand on our product:

13% increase in units sold and increasing unit is 23 units,

Items Calculation Total

Increase in Sales Tk. 700 *23units Tk. 16100
Revenue
Less: Variable cost Tk. 360*23 units Tk. 8280
Contribution margin Tk. 7820
Less: Fixed cost Tk. 0
Operating income Tk. 7820

Old Operating Income + Decrease of new Operating Income

= tk. 44610 + tk. 7820
=tk. 52430.

N.B: As a results of case 2, decreasing 13% demand on our product, our sales and Operating
Income decreasing respectively by 23 units and tk. 7820. On the other hand, as a results of case 3,
increasing 13% demand on our product, sales and Operating Income increasing respectively by 23
units and tk. 7820. Both the cases there is no impact on Fixed Cost.