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Cost and Managerial Accounting: Assignment 2

The document contains sample accounting questions and solutions related to cost and managerial accounting concepts like breakeven point, contribution margin, fixed and variable costs, and margin of safety. Question 1 calculates breakeven point in units. Question 2 proves a given breakeven point using revenue and expenses. Question 3 calculates fixed expenses, sales, variable expenses, and margin of safety ratio from financial data. Question 4 computes breakeven sales, margin of safety in rupees and percentage, and minimum units to breakeven for a company.

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haseeb shaikh
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445 views5 pages

Cost and Managerial Accounting: Assignment 2

The document contains sample accounting questions and solutions related to cost and managerial accounting concepts like breakeven point, contribution margin, fixed and variable costs, and margin of safety. Question 1 calculates breakeven point in units. Question 2 proves a given breakeven point using revenue and expenses. Question 3 calculates fixed expenses, sales, variable expenses, and margin of safety ratio from financial data. Question 4 computes breakeven sales, margin of safety in rupees and percentage, and minimum units to breakeven for a company.

Uploaded by

haseeb shaikh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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30 –MAR 2020

COST AND MANAGERIAL


ACCOUNTING
Assignment 2
Q: 1
Calculate the breakeven point in units when:

Sales price Rs.1 each


Sales Rs.60,000
Variable cost (0.5 per unit) Rs.30,000
Fixed cost Rs.20,000

SOLUTION:
FIRST WE FIND CM PER UNIT TO CALCULATE BREAKEVEN SALES IN UNIT
FORMULAE:
CM per unit = Sale per unit - Variable cost per unit
CM per unit = 1 – 0.5
CM per unit = 0.5

NOW WE FIND BREAKEVEN SALES IN UNIT


FORMULAE:
Breakeven Sales in unit = Fixed cost
CM per unit
Breakeven Sales in unit = 20,000
0.5
Breakeven point in unit = 40,000

Q:2
By matching Revenue & Expenses prove that 7,000 units are
breakeven point

Variable cost Rs.10 per unit


Fixed cost Rs.42,000
Sales price Rs.16 per unit
Breakeven point 7,000 units

SOLUTION:
FIRST WE FIND CM PER UNIT TO CALCULATE BREAKEVEN
SALES IN UNIT
FORMULAE:
CM per unit = Sale per unit - Variable cost per unit
CM per unit = 16 – 10
CM per unit = 6

NOW WE PROVE THAT 7000 IS BREAKEVEN POINT


FORMULAE:
Breakeven Sales in unit = Fixed cost
CM per unit
Breakeven Sales in unit = Fixed cost
CM per unit
Breakeven Sales in unit = 42,000
6
Breakeven point in unit = 7,000 PROVED

Q;3
The following data has been taken out from the record of Osman
Bros., based on the financial result for the year ending 30th June
2008:
Breakeven sales Rs.20,00,000
Contribution margin ratio 40%
th
Profit for the year ending 30 June 2008 Rs.3,20,000

Required:
Calculate the following:
 Fixed expenses for the year.
 Sales for the year
 Variable expenses for the year
 Margin of safety ratio.

SOLUTION:

1. Find Fixed expenses for the year by using Breakeven sale in


amount
FORMULA:
Breakeven Sales in amount = Fixed Cost
CM%
2,000,000 = Fixed Cost
40%
2,000,000 x 40% = Fixed Cost
Fixed Cost = 8,00,000
2. Find Sale for the year by using Sales
FORMULA:
Sales are required to earn profit (Rs.) = Fixed Cost + Profit
CM%
Sales are required to earn profit (Rs.) = 8,00,000 + 3,20,000
40%
Sales are required to earn profit (Rs.) = 2,800,000

3. Find Variable expenses for the year by using CM ratio


FORMULA:

Contribution margin ratio (CM%) = Sales – variable cost x 100


Sales
40% = 2,800,000– variable cost x 100
2,800,0000
40% x 2,800,000 = 2,800,000– variable cost x 100
1,120,000 = 2,800,000– variable cost x 100
1,120,000 – 2,800,000 = – variable cost x 100
-1,680,000 x 100 = – variable cost
Variable cost = 168,000,000

Q;4
R Company has prepared the following projections for the coming
year 2008:
Rs.
Sales 150,000
Variable cost 112,500
Contribution margin 37,500
Fixed cost 20,000
Net income 17,500

Required:
Compute the following:
Breakeven sales in rupees.
Margin of safety in rupee and in percentage.
A minimum unit to be sold to breakeven, if the sale price is
Rs.15/unit
SOLUTION:

1. Find breakeven sales in rupees by using Breakeven sale in amount


FORMULA:
FIRST WE FIND CM%
Contribution margin ratio (CM%) = Contribution margin x 100
Sales
Contribution margin ratio (CM%) = 37,500 x 100
1,50,000
Contribution margin ratio (CM%) = 25

NOW WE FIND BREAK EVENSALES IN AMOUNT


Breakeven Sales in amount = Fixed Cost
CM%
Breakeven Sales in amount = 20,000
25%
Breakeven Sales in amount = 80,000

2. Find Margin of safety in rupee and in percentage by using Margin


of safety or ration
FORMULAE;
Margin of safety = Budgeted sales revenue – Breakeven sales revenue
Margin of safety = 1,50,000 – 80,000
Margin of safety = 70,000
Margin of safety ratio (%) = Budgeted sales revenue – Breakeven sales revenue x 100
Budgeted sales revenue
Margin of safety ratio (%) = 1,50,000 –80,000 x 100
1,50,000
Margin of safety ratio (%) = 46.66%

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