Class Discussion 2019
1. Altd is planning to setup a water bottling company. Following table shows cost for an estimated
sales of 40,000 bottles of water:
variable
TC Cost
Material 193000 100%
Labour 90000 70%
MO 80000 64%
AO 30000 30%
The sales agent to receive a commission of 8% of selling price
Required
Sale price to earn a profit of 10% on sale proceeds
Break even sales with an assumption of sale price asRs.11 per bottle
2. Following table shows cost data for three alternative ways of processing the clerical work in a
lower court
Semi Fully
Manual Automatic Automatic
Fixed cost
Rent 15000 15000 15000
maintenance 0 3000 10000
equipment lease 0 25000 100000
15000 43000 125000
Variable cost per case
Supplies 40 80 20
Labour hours 5 hours 1 hour 0.25 hour
Labour cost 200 60 20
240 140 40
Required
a) Calculate cost Indifference points.
b) Present load is 600 cases and is expected to increase up to 850 cases. Recommend the suitable
method.
3. A produces three product from the same manufacturing facilities. Cost and other details are
given here under
Class Discussion 2019
A B C
Selling Price 200 160 100
Variable cost per unit 120 120 40
Fixed cost for the year 3,312,000
Maximum production unit 5,000 8,000 6,000
Total hours available per month 200
maximum demand units 2,000 4,000 2,400
Required
Most Profitable Mix
Breakeven point
4. Following are the three departments and the related information
Cost and Sales information
A B C
Sales 150000 250000 400000
Total Cost 100000 300000 300000
50000 -50000 100000
60% of the total cost is fixed in nature.
Should B be closed? (with out the additional information)
Additional information
Fixed cost is fully traceable
Not traceable but the released resource has alternative uses: Can be transferred to
other divisions.
2. Loss = 10,000; Fixed Cost = 30000; CSR = 20% Units produced = 10000.,
Find BEP, BES,
Sales to make profit of 10,000
Profit, if the selling price is increased by 10%
Change in profit, if the variable cost is reduced by 20%
3. Opening Stock =5000 @ 5, Production = 10,000 @ 4 (Varaible Cost); Fixed cost =
30,000; Sales price =10. find BEP
4. Altd operates at 60% capacity and its out put = 6000 units; MC = 5, Fixed cost = 30,000;
CSR = 40%. Find profit it output = 8000 units.
5. Sales in the month of January = 50000, Profit = 20,000; Sales and profit in the month of
February are 70,000 and 25000. Find the following:
BES
Class Discussion 2019
Profit, when sales = 90,000
Sales, if expected profit = 30000
6. VC = 4; SP = 10. Expected profit = 300,000; Fixed cost = 60,000. Price volume relationship is as
follows:
Reduce 5% price: increase 10% in volume
Reduce 7% price: increase 20% in volume
Reduce 7% price: increase 20% in volume
Which one to be selected
7. Relevant cost data of A
Existing sales = 5000 (50% capacity) @ 10
Cost = 8 (of which Rs 6 is fixed cost)
Company received a new order of 3000 units at 4
Should the order be accepted?
8. Following table shows relevant cost data
Find Product Mix
A B C
Selling Price 20 25 40
VC 10 8 25
Units produced 10000 20000 5000
Number of hours 20000 60000 20000
Maximum Demand 30000 25000 8000
Maximum time available 100,000 hours
Required: Product mix
9. TTC manufactures a line of electronic garden tools that are sold in general hardware
stores. The company’s controller, Will Fulton has just received the sales forecast for the
coming year for TTC’s three products: Hedge clippers, Line trimmers and Leaf Blowers.
TTC has experienced considerable variations in sales volume and variable costs over the
past two years and Fulton believes the forecast should be carefully evaluated from CVP
point of view. The Preliminary budget information are as follows.
Hedge Clippers Line Trimmers Leaf Blowers
Unit Sales 50000 50000 100000
Unit Selling Price 84 108 144
Class Discussion 2019
Variable Manuf. Cost 39 36 75
Variable Selling Cost 15 12 18
For the year TTC fixed manufacturing overhead is budgeted at 6000000 and the companies fixed
selling and admin expenses are forecasted to be 1800000. TTC has a tax rate of 40%.
1. Assuming the sales mix remains the same, how many units of each product TTC must
sell in order to breakeven
2. After preparing the original estimates, management determined that its variable
manufacturing cost of leaf blowers would increase by 20% and the variable selling cost
of the line trimmers were expected to increase by 3. However the management has
decided not to change the selling price of either product. In addition, management has
learnt that its leaf blowers have been perceived as the best value on the market, and it can
expect to sell three times as many leaf blowers as each of its other products. Under these
circumstances, determine how many units of each product TTC would have to sell in
order to break even in the year.
