# Illustration 1: A Factory uses a job costing system.

The following cost data are available from the books for the year ended 31st March, !!3 "s. #irect material #irect %ages (rofit *elling + #stbn overhead Administrative overhead Factory -verhead "e.uired/ (re0are a cost sheet indicating the 0rime cost, works cost, 0roduction cost, sales and sales value. 1n !!32!,, the factory has received an order for a number of jobs. 1t is estimated that the direct materials would be "s1 ,!!,!!! and direct labour would cost "s.&,'!,!!!.%hat would be the 0rice for these jobs if the factory intends to earn the same rate of 0rofit on sales, assuming that the selling and distribution overhead has gone u0 by 1'3. The factory recovers factory overhead as 0ercentage of direct wages and administrative and selling distribution overheads as a 0ercentage of works cost, based on the cost rates 0revalent in the 0revious year. Illustration: 2 A Firm 0roduces '!! units. The selling 0rice is "s., and variable cost is "s. 0er unit. Fi4ed e40enses amount to "s.5!!. Find out the 0rofit. \$,!!,!!! &,'!,!!! ),!\$,!!! ', ',!!! ,, !,!!! ,,'!,!!!

!!! *elling 0rice 0er 7ariable cost 0. (roducts : . < 9nits 1. *ales re. calculate com0osite (67 ratio8 com0osite contribution 0er unit of mi4 and com0osite break2even 0oint by using (67 ratio. !!! *ales re. 1! 5 1' 1 Fi4ed cost = "s. First 0eriod *econd 0eriod . ' .u unit "s "s.Illustration : 3 From the following data.uired to earn a 0rofit of "s !!!..!!! Illustration: 4 From the under mentioned figures calculate/ a> b> c> d> (67 ratio and the total fi4ed e40enses.!!! .33 15. !3 (rofit "s 35' 113\$.uired to break2even *ales "s 1..!!! 3.'!. (rofit and loss arising from the sales of "s.

from a certain material. @c> (roduction ca0acity is the limiting factor. Find the ca0acity sales when fi4ed costs are "s. it earns a 0rofit of "s. find the 0roduct mi4 to yield ma4imum 0rofits.!!. 0er unit.\$!. ' 0er unit .!!! units.Illustration: 5 The following 0articulars are taken from the records of a com0any engaged in manufacturing two 0roducts. 1n a 0eriod. '! 1.!!! units. if it 0roduces and sells 5. A and ?.'!! Material Aost@"s.!!!.!!! kg and ma4imum sales 0otential of each 0roduct is 1. @d> Total availability of raw materials is . Aalculate break2even 0oint both in terms of ru0ees as well as in units.!!! (roduct A @0er unit> "s '.!!! units. (roduct A @0er unit> "s *ales . it incurs a loss of "s. Illustration: 7 The ratio of variable cost to sales is &!3. @b> "aw materials is in short su00ly.'!6kg> '!! 7ariable -verhead &'! Total Fi4ed -verheads/ "s.!!! 1. if the volume is raised to !. Illustration: 6 A com0any sells its 0roduct at "s.1' 0er unit. . The break even 0oint occurs at )!3 of the ca0acity sales. 1!. Also com0ute 0rofit at &'3 of the ca0acity sales.'!! Aomment on the 0rofitability of each 0roduct when / @a> Total sales in value is limited..

!.!!!.'!. Illustration: 9 A com0any had incurred fi4ed e40enses of "s. 1n !!3 it is estimated that the variable cost will go u0 by 1!3 and fi4ed costs will increase by '3. Illustration:10 A single 0roduct com0any sells its 0roduct at "s.!3 of sales > and (67 ratio is 3!3 calculate its @i> ?reak2even sales @ii> Amount of 0rofit on sales of "s. it suffered a loss of "s.\$.Illustration: 8 1f margin of safety of A? Btd..!!! and earned a 0rofit of "s.3.!!! with sales of "s.1..1n !! the com0any o0erated at a margin of safety of .. The fi4ed costs amounted to "s.!!.!!!. .1'. . Aalculate/ i> The 0rofit2volume ratio. is "s.'!.3. break2even 0oint and margin of safety for the first half year ii> C40ected sales Dvolume for the second half year assuming that the selling 0rice and fi4ed e40enses remained unchanged during the second half of the year.!!.!!! during the first half year.!!! @.)!.!3.)! 0er unit . Find the selling 0rice re.uired to be fi4ed in !!3 to earn the same (67 as in !! .!!! and the variable cost ratio of sales was 5!3. iii> The break2even 0oint and margin of safety for the whole year. 1n the second half..!!.

FF > Fi4ed cost for !! 2!3 "s.uantity level of !!12! in !! 2!3 by reducing selling 0rice.' 0er unit. lacs 0er month as under/ "aw material < \$.. from an in0ut of \$.!!! There is an offer to 0urchase )!!!! kgs of .!!! kgs of raw material <.!!.!!. -n the same machine another 0roduct G?H can be made at two hours at a marginal cost of "s.uired to calculate the following/ 1> *ales for !! 2!3 in "s.!!.!!! kgs of : and ).) 0er kg.3'.'. The selling 0rice is of : is "s.15. ?ut the 0rice of : is likely to be decreased uniformly on all sales.!!.!!! kgs at "s. (rocessing costs amount to "s.!!.Illustration: 11 (E" Btd has furnished the following data for the two years/ !!12! *ales (rofit67olume "atio @(67> Margin of safety sales as a 3 of total sales "s. 0er kg. additionally at a 0rice of "s.FF 3> ?reak2even sales for !! 2!3 in "s.H is "s.5!!.1! 0er unit.!!! kgs of . Illustration: 13 A Btd 0roduces 3. *u00liers 0rice of 0roduct G?H is "s. &. Assuming that the machine hour is the key factor.!3 !! 2!3 F 3&.5 0er kg and that of G. will not be affected by acce0ting the offer. The e4isting market of .ou are re. \$. The com0any could maintain its sales .!!! "s.!!. .'3 1.3 0er kg 7ariable 0rocessing costs Fi4ed 0rocessing costs "s.'! and a marginal cost of "s.!!! '!3 .!!! "s. .FF Illustration: 12 (roduct GAH takes five hours to 0roduce on a 0articular machine and it has a selling 0rice of "s. advise whether 0roduct G?H could be bought out or manufactured.!!. Find the minimum reduced average 0rice for : to sustain the increased sales.5&'3 There has been a substantial savings in the fi4ed cost in the year !! 2!3 due to the restructuring 0rocess.

1f the 0art is 0urchased from the market. .15 is variable. of which "s.Illustration: 14 A machine manufactures 1!!!! units of a 0art at a total cost of "s. 0er unit or it can be hired out at "s. then the machine can be either used to manufacture a com0onent in same . 162 "ecommend which of the alternatives is 0rofitable.uantity contributing "s.1\$ 0er unit. This 0art is readily available at the market at "s. 1.