Amount (i) CURRENT PROFITS
Selling price per unit (₹) ₹ 20.25 Sales Revenue 4000000
Variable cost per unit (₹) 15 Less: Total variable Cost 3000000
Total Fixed Cost (₹) 630,000 Total Contribution 1000000
Number of units sold 138,000 Less: Total Fixed Cost 630000
Profit 370000
PROFIT COMPUTATION
Sales Revenue 2,794,500 (ii) Units to be sold to increase profit by 20%
Less: Total variable Cost 2,070,000 Set Cell B12
Total Contribution 724,500 To value 444000
Less: Total Fixed Cost 630,000 By changing cell B5
Profit 94,500
Answer: 138,000
Profit as % of sales 3
(iii) Sales value needed to earn a profit of 10% of sales
Margin of safety 17999.99976 Set Cell B14
To value 10
BEP 120000 By changing cell B5
Answer: 2,794,500
(iv) Margin of safety if profit is ₹ 60,000
Set Cell B12
To value 60000
By changing cell B5
10% of sales
Answer: 18000
(v) Selling price per unit to bring down the break-even point to 1,20,000 units
Set Cell B18
To value 120000
By changing cell B2
Answer: ₹ 20.25
A B
Selling price per unit (₹) 50 50
Variable cost per unit (₹) 30 12
Machine hours required per unit 10 2
Annual demand (units) 300 1,000
Total Fixed Cost (₹) 10,000
Maximum machine running capacity (in hours) 4,000
LINEAR PROGRAMMING MODEL
DECISION VARIABLES A B
Number of units 200 1000
Contribution per unit 20 38
OBJECTIVE FUNCTION
Maximum Contribution 42000
CONSTRAINTS Constraint Value
Machine hours used 4000 ≤ 4,000
Units of A 200 ≤ 300
Units of B 1000 ≤ 1,000
PROFIT 32,000
QUESTION) A producer installed a machine which can produce Product A
as well as Product B. Annual maximum machine running capacity is 4,000 hours.
Cost and other details about the products are as follows:
Particulars Product A Product B
Selling price per unit (₹) 50 50
Variable cost per unit (₹) 30 12
Machine hours required per unit 10 hours 2 hours
Annual demand (units) 300 1,000
Total Fixed Cost (₹) 10,000
Find the optimum product mix showing annual contribution and profit.
Amount QUESTION) While preparing the estimate of profi
Selling price per unit (₹) 60 of a company indicated sale of the single product m
Variable cost per unit (₹) 20 At that price, profit is expected to be Rs 25,00,000.
Total Fixed Cost (₹) 1,500,000 and the total fixed cost for the year was estimated at
indicated that if there is a reduction in price, the qua
Units sold
When selling price reduced by
Profit (i) 10%
(ii) 5%
Selling price Units Sold (iii) 2.50%
i As a Cost Accountant, you have been asked to evalu
ii and suggest the best alternative to be adopted in the
iii
preparing the estimate of profitability for the coming year, the sales manager
ed sale of the single product manufactured at a selling of of Rs 60 per unit.
s expected to be Rs 25,00,000. The variable cost of the product is Rs20 per unit
st for the year was estimated at Rs 15,00,000. The sales manager further
e is a reduction in price, the quantity of sales will rise in the following manner:
ing price reduced by Quantity of sale to increase by
10% 20%
5% 15%
2.50% 8%
t, you have been asked to evaluate the effect of alternative selling prices as above
alternative to be adopted in the coming year.
Difference in the level of activity
Volume of Production 2800 3600
Costs ₹ ₹ Difference in cost Variable Cost per unit
Repairs and maintenance 500 560
Power 1,800 2,000
Shop labour 700 900
Consumable stores 1,400 1,800
Salaries 1,000 1,000
Inspection 200 240
Depreciation 1,400 1,400
(in ₹)
Production (units) 4000 Capacity
A. Variable cost: 100%
Direct material 80%
Direct wages 60%
Shop labour 40%
Consumable stores
Total Variable Cost (A)
B. Semi-variable cost:
Repairs and maintenance
Variable
Fixed
Power
Variable
Fixed
Inspection
Variable
Fixed
Total Semi-Variable Cost (B)
[Link] Costs
Salaries
Depreciation
Total Fixed Cost (C)
Total Cost (A + B + C)
QUESTION) RK Enterprises produces 4,000 units per month of
a certain product at 100% capacity. The following information is obtained :
TFC August September
Units Produced 2,800 3,600
₹ ₹
Repairs and Maintenance 500 560
Power 1,800 2,000
Shop labour 700 900
Consumable stores 1,400 1,800
Salaries 1,000 1,000
Inspection 200 240
Depreciation 1,400 1,400
Units Rate of production per hour is 10 units.
Direct material cost per unit is ₹1 and direct wages per hour is ₹4.
You are required to compute the cost of production at 100%, 80%, 60% and 40% capacity.
Clearly show the variable, fixed and semi-variable items under the flexible budget
tion is obtained :
%, 80%, 60% and 40% capacity.
nder the flexible budget
Full in-house production Sub-contracting
Selling price per unit (₹)
Variable cost per unit (₹)
Total Fixed Cost (₹)
COST INDIFFERENCE
POINT (units)
(Difference in fixed cost)÷(Difference in variable cost per unit)
Full in-house production Sub-contracting
TOTAL
UNITS PRODUCED TOTAL VARIABLE TOTAL FIXED TOTAL COST VARIABLE
COST COST (A) COST
QUESTION) Alloy Ltd. plans to manufacture a single product Z.
It's selling price and variable manufacturing cost will be Rs 100 per unit and Rs 40 per unit respectively.
If the complete production is done at its own factory, fixed machining cost will be Rs 5,70,000
and fixed administration and selling overheads will be Rs 30,000 for the production period.
Alternatively, the product can be finished outside by sub-contracting the machining operations
at Rs 20 per unit, but this will entail an increase in the fixed administartion overheads by
Rs 2,70,000 while fully avoiding the machining cost of Rs 5,70,000.
Based on the above figures and assuming a production capacity of 30,000 units for the period,
advise with relevant supporting figures, for what volumes of market demand will:
(i) manufacturing be recommended at all?
(ii) a full in-house production be recommended?
(iii) the sub-contracting option be recommended?
Sub-contracting
TOTAL FIXED TOTAL COST
COST (B)
espectively.
A B Supreme Limited manufactures two types of product
Machine time per unit (in minutes) 10 2 They are processed on the same machine. A takes 10
Raw material required per unit (in kg) 1 0.5 Machine can run for a maximum of 2100 minutes in a
Maximum number of units required 800 Product A requires 1 kg and Product B requires 0.5 Kg
Contribution per unit (₹) 5 3 Not more than 800 units of product B are required pe
Contribution per unit of product A is ₹ 5 and of B is ₹
Machine time available (in minutes) 2100 Calculate the number of units of Product A and B to b
Raw material available (in kg) 600
LINEAR PROGRAMMING MODEL
DECISION VARIABLES A B
Number of units
Contribution per unit
OBJECTIVE FUNCTION
Maximum Contribution
CONSTRAINTS Constraint Value
Raw Material Consumed ≤
Machine hours used ≤
Units of B ≤
nufactures two types of products: A and B.
on the same machine. A takes 10 minutes per unit and B takes 2 minutes per unit on machine.
a maximum of 2100 minutes in a week.
kg and Product B requires 0.5 Kg of raw material per unit, the supply of which is 600 kg per week.
units of product B are required per week.
t of product A is ₹ 5 and of B is ₹ 3.
r of units of Product A and B to be produced per week in order to maximise profit.