Marginal Costing:

CVP Problems
1. Find the amount of variable cost from the following information:
Particulars Amount in Rs.
Sales 265,000
Fixed Cost 50,000
Profit 60,000

2. Determine the Fixed Component in the semi-variable cost of M/s. Model House limited.
Semi fixed costs on producing 5,000 units Rs. 25,000. Semi variable expenses on
producing an additional units of 1000 units is Rs. 1,800.

3. A plant produces a product in the quantity of 10,000 units at a cost of Rs. 3 per unit. If
20,000 units are produced, the cost per unit is Rs. 2.50. what the variable cost per unit?

4. Given that Fixed cost is Rs. 7,000, profit Rs. 3,000 and sales Rs. 50,000, Find P/v. ratio?

5. The following figures are extracted from the books of Vijay Irons Limited for the years
2018 and 2019, whose capacity is 10,000 irons per year.
Particulars Amount in Rs.
Direct Materials Rs. 3,50 per unit
Direct Labout Rs. 0.50 per unit
Fixed overhead Rs. 2.00 per unit
Selling price Rs. 8.00 per unit
Particulars Year 2018 Year 2019
Production in Units 10,000 10,000
Sales in units 8,000 12,000
Prepare Cost Statements assuming that the company uses Marginal Costing.

6. Calculate Break Even Point from the following figures:

Particulars Amount in Rs.
Sales 300,000
Fixed Expenses 75,000
Direct Materials 100,000
Direct Labour 60,000
Direct Expenses 40,000

7. A company’s turnover in a year was Rs. 50 Lakhs, and its profit Rs. 5 Lakhs. It’s Profit
Volume ratio was 40%. What was the BEP?
8. Calculate Break Even Point from the following particulars:
 Particulars Amount in Rs.
Fixed Expenses 300,000
Variable cost per unit 16
Selling Price 21

9. From the following figures, calculate the sales required to earn a profit of Rs. 120,000;
Particulars Amount in Rs.
Sales 600,000
Variable Cost 375,000
Fixed Cost 180,000

10. What would be the volume of sales to derive a profit of Rs. 20,000 if the Profit Volume
ratio is 66 2/3% and Fixed Overhead for the period is Rs. 40,000.

11. The following data is given:

Particulars Amount in Rs.
Fixed Expenses 10,00,000
Variable Expenses 10 per unit
Selling Price 15 per unit
Indicate the number of units to be manufactured and sold (1) to break even and (2) to earn
a profit of Rs. 10,000 and (3) what additional units would be necessary to increase the
above profit by Rs. 5,000?

12. From the following data calculate the break-even point:

Particulars Amount in Rs.
Selling Price per unit 20
Direct Material cost per unit 8
Direct Labour cost per unit 2
Direct Expenses per unit 2
Variable Overhead per unit 3
Fixed Overheads (total) 20,000
If sales are 20% above break even point, determine net profit.

13. a) A company makes Rs. 5000 profit from Rs. 60,000 sales. Fixed Costs are Rs. 15,000
What the Break Even Point?
b) A company’s sales are Rs. 100,000. Fixed Costs are Rs. 20,000 and the break even point
Rs. 80,000. What profit has it made?
c) A company has a profit of Rs. 5,000 and Fixed cost of Rs. 10,000 and Break even point
of Rs. 20,000. What are it’s sales?
14. From the following information, calculate the break even point and the turnover required
to earn a profit of Rs. 36,000;
Particulars Amount in Rs.
Fixed Overhead 180,000
Variable cost per unit 2
Selling price per unit 20
If the company is earning a profit of Rs. 36,000, express the margin of safety for the firm.

15. You are given with the following data for a company limited.
Particulars Amount in Rs. %
Variable Costs 600,000 60%
Fixed Costs 300,000 30%
Net Profit 100,000 10%
Find out (a) Break Even Point (b) P/v Ratio and (c) Margin of Safety Ratio.

16. Suppose the break-even sale is Rs. 10 Lakhs. Fixed Costs are Rs. 4 Lakhs:
Compute: a) Contribution Sales Ratio; b) Sales Price per unit if variable costs are Rs. 12
per unit c) Margin of safety if 80,000 units are sold.

17. The contribution sales ratio of A Limited is 50% and margin of safety is 40%. You are
required to calculate the net profit if sales volume is Rs. 10 Lakhs.

18. Find P/v. ratio and margin of safety when sales, variable costs and fixed costs are Rs. Ten
lakhs, four lakhs and four lakhs respectively?

19. Given Margin of safety Rs. 20,000 (which represents 20% of sales) and P/v ratio 50%, find
the break even sales, fixed costs and profit?

20. From the following particulars, find (a) fixed costs (b) break even sales (c) total sales and
(d) profit.
Margin of safety Rs. 10,000 (which represents 40% of sales) p/v. ratio 50%.

21. From the following, calculate (i) p/v ratio (ii) profit, when sales are Rs. 20,000, Fixed
expenses Rs. 4000 and Break Even Sales Rs. 10,000;

22. In a recent period, Zack company Limited had the following experience:
Sales: (10,000 units @ Rs. 200 per unit = Rs. 20,00,000
Costs Fixed Rs. Variable Rs Total
Direct Materials 200,000 200,000
Direct Labour 400,000 400,000
Factory Overhead 160,000 600,000 760,000
Administrative OHs 180,000 80,000 260,000
 Other expenses 200,000 120,000 320,000
Total 540,000 14,00,000 19,40,000
Net Earnings 60,000
Required:
(a) Calculate break-even point for Zack in units and in rupees. Show your calculations
and use the contribution margin ratio to find the rupee break even.
(b) What sales rupees would be required to generate a net income of Rs. 96,000
(c) What will be the break-even point in units if fixed costs are increased by Rs. 18,000;

23. From the following data, ascertain break even point, if selling price per unit is Rs. 10,
Trade Discount is 5%; Direct materials cost per unit is Rs.3, Direct Labour cost per unit
is Rs. 2, and the fixed overheads Rs. 10,000;

24. A company’s turnover in 2018 was Rs. 3.20 crore. Its contribution margin ratio is 0.4 and
fixed costs were Rs. 80 Lakhs. What will be the company’s profit in 2019 if sales were
Rs. 3.80 crores, assuming the fixed costs will rise by 10%.

25. The sales of a company is Rs. 100,000; variable costs 60,000; Fixed costs Rs. 20,000;
you are required to calculate p/v. ratio, break-even point and margin of safety. Also study
the impact of change in the following variables on p/v ratio, BEP and MoS i.e. (a) an
increase in the selling price by 10% and Decrease in fixed costs by Rs. 5000;

26. Ram Agencies sold during 2017 – 18 and 2018 – 19 7,000 units and 9,000 units at Rs.
100 each. In 2017 – 18 the firm incurred a loss of Rs. 10,000 whereas in 2018 – 19, they
earned a profit of Rs. 10,000. Calculate p/v. ratio, fixed expenses for the both periods, the
number of units to be sold where there is neither profit nor loss and number of units to be
sold to earn a profit of Rs. 40,000;

27. The sales turnover and profit of a company during two years was as follows:
Particulars Year Sales Profit
2018 150,000 20,000
2019 170,000 25,000
Calculate p/v. ratio, Break-even point, sales required to earn a profit of Rs. 40,000, the
profit made when sales are Rs. 250,000, Margin of safety at a profit of Rs. 50,000 and
variable costs of the two periods;

28. An automobile manufacturing company finds that while the cost of making in its own
workshop part no. 0028 is Rs. 6.00 each, the same available in the market at Rs. 5.60 with
an assurance of continuous supply. Write a report to the Managing Director giving your
views whether to make or buy this part. Give also your views in case the suppliers reduce
the price from 5.60 to 4.60. the cost data is as follows:
Materials Rs. 2.00, Direct Labour Rs. 2.50; other variable overheads Rs. 0.50
Depreciation and other fixed costs Rs. 1.00;
29. Auto parts limited has an annual production of 90,000 units for a motor component. The
component’s cost structure per unit is given below:
Materials Rs. 2.70; labour (25% fixed) Rs. 180; Variable Expenses Rs. 90; Fixed
Expenses Rs. 135; Total Rs. 675;
The purchase manager has an offer from a supplier who is willing to supply the
component at Rs. 540. Should the component be purchased?
Assuming that the resources now used for the purpose of this components manufacture
can be used to produce a new product for which the selling price is Rs. 485, is it
advisable to divert the resources for producing the new product, if it uses materials of Rs.
2.00 per unit and has the same cost for labour and expenses.

30. The Managing Director of a company seeks your advise in arriving at a decision whether
to continue manufacturing a component or to buy it from outside. The component is used
in several of company’s products. The following information is available.
i. The annual requirement is 40,000 units;
ii. The lower price quotation from a supplier was Rs. 27.50 per unit.
iii. The costs incurred last year when 40,000 components were produced is as under:
Materials Rs. 12,00,000; Labour (Direct) Rs. 15,00,000; Indirect Labour Rs.
4,00,000; Light and Heat Rs. 80,000; Power Rs. 120,000; Depreciation Rs.
7,00,000; Property Taxes and Insurance Rs. 70,000; Miscellaneous Rs. 150,000;
iv. The following proportions of the variable costs could be avoided if production of
the component is discontinued. Materials 35%; Direct Labour 40%; Power 25%;
v. If the component is purchased from an outside supplier, average freight cost will
be Re 0.50 per unit. Also indirect labour would increase by Rs. 30,000 on account
of receiving, handling and inspecting the purchased parts.

31. From the following figures, find the break-even volume:

Selling Price Per ton Rs. 69.50; Variable Cost per ton Rs. 35.50; Fixed Expenses Rs.
18.02 lakhs.
If this volume represents 40% capacity, what is the additional profit for an added
production of 40% capacity, the selling price of which is 10% lower for 20% capacity
production and 15% lower, that the existing price for another 20% capacity;

32. From the following particulars, find the minimum number of units required to be sold so
that no cash loss is incurred;
Selling price per unit Rs. 20; variable cost per unit Rs. 10; Administrative Expenses Rs.
10,000; Depreciation Rs. 6,000;

33. Find the cost break even points between each pair of plants whose cost functions are:
Plant A – Rs. 600,000 + Rs. 12 x
Plant B – Rs. 900,000 + Rs. 10 x
Plant C – Rs. 1500,000 + Rs. 8 x
Where x is the number of units produced.
34. Component “X” is manufactured in the machine shop. The annual requirement of the
component is 10,000 units. If it is bought out, the lowest quotation from an outside
supplier is Rs. 8.00 per unit.
The following expenses of the Machine shop apply to manufacturing of component “X”:
Materials Rs. 35,000; Labour Rs. 56,000; Indirect Labour Rs. 12,000; Power and Fuel Rs.
600; Repairs and Maintenance Rs. 1,000; the sale of Machinery used for manufacture of
the component “X” would reduce depreciation by Rs. 4,000 and Insurance by Rs. 2,000;
If component X is bought out the following additional expenses are incurred:
Freight Rs. 1.00 per unit, Inspection Rs. 10,000 per annum;
You are required to prepare a report to the Managing Director showing the comparison of
expenses to Machine shop when (i) component X is made and (ii) when bought out.

35. A radio manufacturing company finds that while it costs Rs. 6.25 each to make
component Z, the same is available in the market at Rs. 5.75 each, with an assurance of
continued supply. The break-down of costs is as follows:
Materials – 2.75 each; Labour 1.75 each; other variable costs Rs. 0.50 each; Depreciation
and other Fixed costs Rs. 1.25 each;
a) Should the company make or buy?
b) What would be your decision if the supplier offered the component at Rs. 4.85 each?

36. The cost of manufacturing of 8,000 units of X product is given below:

Direct Materials Rs. 8,000; Direct Labour Rs. 64,000; Variable Overheads Rs. 32,000,
Fixed Overheads Rs. 40,000; Fixed Overhead is inclusive of Rs. 24,000 that continues
regardless of the decision. The same product is available in the market for Rs. 16 per unit.
Should the company make of buy the product?