Product Name

Wooden Photo Frame

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 Course Title:
Advanced Managerial Accounting
Course Code: ACT 360
Sec: 03

Prepared For
Sheikh Mohammad Rabby,
Lecturer and Assistant Proctor,
Department of Accounting and Finance,
School of Business & Economics,
North South University.

Prepared By

Serial number Member’s name Id number

1 Md. Azizul azim 1531200030
2 Syed Sakib Hossain 1610839030
3 Kuhelika Angela Gomes 1711353030
4 Shaikat Hossain 1520259030
5 Li Jia Han 1712889030

Date of Submission
April 13, 2020

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 Letter of transmittal

13th April, 2020.

Mr. Sheikh Mohammad Rabby (RBY)
Lecturer and Assistant Proctor,
Department of Accounting and Finance,
School of Business, North South University

Hello Sir,
With due respect, it is a great pleasure for us to submit the final report of ACT 360 (Managerial
Accounting). Here, in this report we have tried to execute all the necessary knowledge and
information that we have gathered from this course and tried to give our project a good layout.
This report includes - estimations of cost, budget, break-even-point and all the requirements
according to your guideline. We have tried our best to go as practical as possible to complete this
project. However, due to limitations of information we had assumed some cost based on market.

We will be extremely pleased to clarify if you have any sort of enquiry regarding our report on
wooden photo frame.
Thank you, Sir.

Sincerely,
Md. Azizul azim
Syed Sakib Hossain
Kuhelika Angela Gomes
Shaikat Hossain
Li Jia Han

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 Executive Summary
This project is based on our business product named “Wooden photo frame”. In this report we
have tried to include all the necessary information starting from the manufacturing cost to price
setting strategy of our product. Firstly, we have identified our direct material and the cost of the
direct material. After that we have calculated all the necessary cost that are directly and
indirectly related with our product. Then, separated the cost based on variable, fixed and mixed.
Then, we have calculated the prime cost, conversion cost and the full cost. After that we have
calculated the total manufacturing cost of our product by both the simple costing and activity
base costing and we have shown the profitability analysis in both the process. And then we have
shown how we distribute our support cost to operating cost through direct method. After that we
have done the budget of our product. Budget part includes – sales budget, production budget etc.
and calculated forecasted income statement in both traditional and contribution format. After, all
this we have calculated the BEP in unit and TK for our product.

Table of Contents
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Introduction:....................................................................................................................................................................6
Reason behind selecting this product:.............................................................................................................................6
Industry:..........................................................................................................................................................................6
Competitors:....................................................................................................................................................................6
Manufacturing process:...................................................................................................................................................7
Estimations and necessary calculation:...........................................................................................................................9
Direct Materials:........................................................................................................................................................9
Direct Labor:.............................................................................................................................................................9
Manufacturing Overhead:........................................................................................................................................10
Product cost:............................................................................................................................................................11
Selling and Support cost:.........................................................................................................................................12
Analysis of cost:.......................................................................................................................................................12
Prime cost:...............................................................................................................................................................13
Full cost:..................................................................................................................................................................13
Conversion cost:.......................................................................................................................................................13
Types of cost:............................................................................................................................................................14
Simple costing:.........................................................................................................................................................15
Breakdown of supportive department cost:..............................................................................................................15
Product line profitability report:.............................................................................................................................19
Pricing strategy:.......................................................................................................................................................20
Budget:......................................................................................................................................................22
Sales Budget.............................................................................................................................................................22
Production Budget...................................................................................................................................................22
Direct Material Usage Budget.................................................................................................................................22
Direct material purchase Budget.............................................................................................................................23
Direct manufacturing labor budget.........................................................................................................................23
Manufacturing Overhead Cost Budget....................................................................................................................23
Manufacturing Budget.............................................................................................................................................24
Ending Inventory Budget..........................................................................................................................................24
Cost of Goods sold Budget.......................................................................................................................................24
Budgeted Income Statement.....................................................................................................................................25
Budgeted Contribution Format Income Statement..................................................................................................25
Break Even analysis:.....................................................................................................................................................26
References.....................................................................................................................................................................30
Appendix:......................................................................................................................................................................30

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Introduction:
Earlier people use to take photos and preserved this photos in a photo fame or in an album. But,
everything has changed a lot. Today, people captures photos through their mobile phones and
preserves this pictures in their mobile phones. As a result, the demand for traditional photo frame
has decreased. But, we are thinking of doing a business where we will make photo frame and
give this a modernize touch as people like things which are unique and attractive. Our photo
frame is quite different than the traditional photo frame. In our business, we are planning to make
wooden photo frame where the picture will be engraved in the wood. And, this would be a great
opportunity for us as this type of wooden frame are new in our country.

Reason behind selecting this product:

We have decided to produce this wooden photo frame mainly for two reasons. This are:
 Firstly, the product is new in Bangladesh.
 Secondly, this type of photo frame are unique and attractive. Besides, this type of photo
frame last for a longer period. So, we can say that customers will be easily attracted by
our product and purchase it.
 Lastly, the only direct material we need is a Mahogony wood which can be found easily
in our country.

Industry:
Our business is a small business which falls under manufacturing and service industry as we
producing our own products and then delivering the products by ourselves.

Competitors:
This type of wooden photo frame are new in our Bangladesh and the only competitor that we
have is an online based business named “Woodpecker”. They brought this type of photo frame
first in Bangladesh. So, we will try to provide better or similar products like “Woodpecker” to
get trust of the consumers. Moreover, as we are planning to set our business in Bashundhara
R/A, so, this would be a great opportunity as there are 3 big private universities are situated here
because this type of frame will attract the students of this universities.

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Manufacturing process:
The manufacturing process of our product are given below:
Step 1: We will collect a good quality picture from our customers.

Step 2: Then we will convert this colorful pictures to greyscale pictures through our computer.

Step 3: After converting this pictures to greyscale pictures then we will remove the background
of the picture or blur the background through our computer.

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Step 4: After that we will insert the picture inside our wood engraving machine.

Step 5: Then we will take the 9/6 inch wood and place that in the wood for engraving the
pictures

Step 6: Then machine will start engraving the wood as the given pictures.
Step 7: Then after that we will apply the necessary spray on the engraved wood so that the
picture on the wood become visible. At last the picture will look like the picture given below.

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Estimations and necessary calculation:
Direct Materials:
We will collect 9/6 inch Mahogony wood from our supplier and the cost of each 9/6 inch
Mahogony wood is Tk300. (The name and the visiting card of the supplier are given in
appendix)
Direct Materials Quantity (unit) Per unit (Tk) Total (Tk)
Mahogony wood 520 unit Tk300 Tk156000
We need 30min. or .5hrs to produce 1 wooden photo frame.

Direct Labor:
Maximum production in a month:
 Number of workers = 5 workers
 Manufacturing sector = 1 worker
 Supervising sector = 2 workers (Indirect)
 Sales and Supportive = 2 workers (Indirect)
 Per day 1 worker together produces 20 unit.
 We can manufacture in a month (20unit*26days) = 520unit. (Assumed we will work for
26days)
Working hours:
 Working hour per day = 10hours
 Working days in a month = 26days(excluding government holidays)
 1 worker can produce 20unit in 10hours
 Time required to make 1 wooden frame by 1 worker (10hours/20units) =.50hours or 30
min.
 Total working hour in a month (10hours*26days) = 260hours
So, Direct Labor hours = 260hours
Wage rate:
 A worker will get Tk50 per hour.
 An employee will get as per unit (Tk50*.50hours) = Tk25 per unit
Direct labor No. of Workers Monthly wages Total (Tk)
Worker 1 Tk13000 Tk13000

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Manufacturing Overhead:
 Factory Electricity: Through research and estimation, we had set our factory electricity
usage for our machine and computer is 20 kilo-watt per day for 10hours. We had
estimated kilo-watt hour usage based on assumption.
From Global petrol prices website, we have found out per unit Kilo-watt price of
electricity is Tk8.67.[ CITATION glo20 \l 1033 ]
So, factory electricity cost in a month = (20kilo-watt*Tk8.67*26days) = Tk4508

 Depreciation: For calculating depreciation, we had used “Straight line method”.

 Wood engraving machine: We had bought this for Tk580000 with estimated life
time of 20 years. [ CITATION cli \l 1033 ]
Asset Amount (Tk) Est. Life time Yearly Monthly
Depreciation Depreciation
Wood engraving Tk580000 20years Tk29000 Tk2417
machine
Computer Tk25000 6years Tk4167 Tk347
Total Tk2764
 Computer: We had bought computer that cost use Tk25000. And, estimated life
time is 6 years.
 Factory Rent: Estimated based on assumption
 Other utility and transportation: Estimated based on assumption
 Total Machine hours are 260hours in a month.
Total Factory overhead:
Factory Overhead Fixed Variable Total (Tk)
Factory rent Tk20000 Tk20000
Factory electricity Tk1000 Tk3508 Tk4508
Other Factory utility Tk1500 Tk1500
Depreciation Tk2764 Tk2764
Transportation Tk2000 Tk2000
Total Tk30772

 Indirect Materials:

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  Rust oleum spray: We will collect spray from the shop and each spray’s cost is
Tk946. We can use each spray for 26units. So, we need 20sprays in a month.
 Packaging: Per unit packaging cost is Tk5.
Indirect Materials Per unit cost Unit Total (Tk)
Rust oleum spray Tk946 20sprays Tk18920
Packaging Tk5 520packaging unit Tk2600
Total Tk21520

 Indirect Labor:
Indirect Labor No. of workers Wages Total (Tk)
Supervising sector 2 Tk13000 Tk26000
Total Tk26000

Total manufacturing overhead:

Total manufacturing overhead is consist of factory overhead and indirect materials:
Manufacturing overhead Total (Tk)
Factory overhead Tk30772
Indirect Materials Tk21520
Indirect Labor Tk26000
Total Tk78292

Product cost:
Product cost is the summation of direct materials, direct labor and total manufacturing overhead:
Product cost Total (Tk)
Direct Materials Tk156000
Direct Labor Tk13000
Manufacturing overhead Tk78292
Total Tk247292

Selling and Support cost:

 Support cost:
Item Total (Tk)
Accountant salary Tk15000
Transportation Tk5000

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 Total Tk20000

 Selling cost:
Item Total (Tk)
Shop rent Tk15000
Telephone bill Tk1000
Marketing and Advertisement Tk5000
Shop keeper salary Tk10000
Electricity Tk2000
Total Tk33000

Analysis of cost:
 Fixed cost:
Item Total (Tk)
Depreciation Tk2764
Indirect labor Tk26000
Factory Electricity Tk1000
Factory rent Tk20000
Accountant salary Tk15000
Shop rent Tk15000
Shop Electricity Tk500
Marketing and Advertisement Tk5000
Shop keeper salary Tk10000
Total Tk95264

 Variable cost:
Item Total (Tk)
Direct Labor Tk13000
Direct Materials Tk156000
Transportation (Factory) Tk2000
Factory electricity Tk3508
Shop Electricity Tk1500
Transportation (Supportive Department) Tk5000

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 Other Factory utility Tk1500
Telephone bill Tk1000
Indirect Materials Tk21520
Total Tk205028

 Mixed cost:
Item Total (Tk)
Factory electricity Tk4508
Shop Electricity Tk2000
Total Tk6008

Prime cost:
Prime cost = Direct Material + Direct
Labor
= Tk156000+Tk13000
= Tk169000

Conversion cost: Full cost:

Conversion cost = Direct Labor + Manufacturing Full cost = Variable cost + Fixed cost
overhead = Tk205028 + Tk95264
= Tk13000+Tk78292 = Tk300292
= Tk91292

Types of cost:
Detail of cost Direct Indirect Variable Fixed Mixed
Direct Materials
Mahogoni wood √ √
Direct labor √ √
Total Manufacturing overhead
Factory rent √ √
Factory electricity √ √
Other Factory utility √ √
Depreciation √ √
Transportation √ √

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Rust oleum spray √ √
Packaging √ √
Supervising labors √ √
Support cost
Accountant salary √ √
Transportation √ √
Selling cost
Shop rent √ √
Telephone bill √ √
Marketing and Advertisement √ √
Shop keeper salary √ √
Electricity √ √

Simple costing:
In simple costing we have chosen direct labor hour as our allocation base to calculate MOH per
unit:
 Per hour production = 2 unit of wooden frame
 Monthly working hours = 260 hours
Tk 78292
 Monthly MOH allocation =
260 hours
= Tk301per direct labor hour
 So, per unit MOH allocation (Tk301/2 unit per hour) = Tk150.56
Simple costing Total (Tk)
Direct Material per unit Tk300
Direct Labor per unit Tk25
MOH allocation per unit Tk150.56
Product cost Tk475.56

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Breakdown of supportive department cost:
As we know, there are 3 ways through which supporting department cost are distributed
among the operating departments. These are:
 Direct method
 Step-down method
 Reciprocal method

Detail Supporting Department Operating Department

Accountant Transportation Manufacturing Selling
Salary Cost Cost
Budgets cost incurred
before any inter Tk15000 Tk5000 Tk78292 Tk33000
department allocation
Support work in 70% 30%
Accountant Salary
Support work in 70% 30%
Transportation
Here, for our product we are using direct method for allocating our support costs to our
operating department. This method simple and easy to execute. Moreover, less time needed
for calculation. Besides, our support and operating department are not related or the relation is
less. So, for that we have decided to use direct method.

Direct Method:
Detail Supporting Department Operating Department

Accountant Transportation Manufacturing Selling

Salary Cost Cost
Budgets cost incurred Tk15000 Tk5000 Tk78292 Tk33000
before any inter
department allocation
Support work in (Tk15000) Tk10500 Tk4500
Accountant Salary
Support work in (Tk5000) Tk3500 Tk1500
Transportation

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Activity Base costing:
Cost Unit of A/B Total Cost Cost and Effect relation
Activities Drivers (Tk) /unit
Factory rent Square feet 1500sq.ft. Tk20000 Tk13.33 Rent expense increases if
the space increases
Factory KW usage 520KW Tk4508 Tk8.67 Electricity expense
electricity increases if KW usage
increases
Other Factory No. of unit 520unit Tk1500 Tk2.88 Other utility expense
utility produced increases if the number
of unit produced
increases.
Depreciation Machine 260hrs Tk2764 Tk10.63 Depreciation expense
hours increases if the machine
is used for extra hours
Transportatio No. of unit 520unit Tk2000 Tk3.85 Transportation increases
n delivered if more products are
delivered
Rust oleum No. of unit 520unit Tk18920 Tk36.38 More spray are needed if
spray produced more products are
produced
Packaging No. of unit 520unit Tk2600 Tk5 Packaging cost increases
produced as the production
increases
Supervising Labor 260hrs Tk26000 Tk100 Increases if works more
Labor hours than the actual time
Accountant Labor 260hrs Tk15000 Tk57.69 Increases if works more
salary Hours than the actual time
Transportatio No. of unit 520unit Tk5000 Tk9.62 Transportation increases
n delivered if more products are
delivered
Shop rent Square feet 1200sq.ft Tk15000 Tk12.5 Rent expense increases
with the increase in space
Telephone bill No. of unit 520unit Tk1000 Tk1.92 Telephone bill increases
delivered if the number of delivery

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 increases
Marketing and No. of unit 520unit Tk5000 Tk9.62 Increases if the number
Advertisemen sold of sales increases
t
Shop keeper Labor 260hrs Tk10000 Tk38.46 Increases if works more
salary Hours than the actual time
Electricity KW usage 200KW Tk2000 Tk10 Increases if KW usage
increases
Following table shows all the indirect cost and the respective cost drivers:

Calculation of cost per unit under Activity Based Costing System:

Activities Actual activities Activity rates Total (Tk)

Direct Material Tk156000
Direct Labor Tk13000
Activity Base costing
Factory rent 1500sq.ft. Tk13.33 Tk20000
Factory electricity 520KW Tk8.67 Tk4508
Other Factory utility 520unit Tk2.88 Tk1500
Depreciation 260hrs Tk10.63 Tk2764
Transportation 520unit Tk3.85 Tk2000
Rust oleum spray 520unit Tk36.38 Tk18920
Packaging 520unit Tk5 Tk2600
Supervising labor 260hrs Tk100 Tk26000
Accountant salary 260hrs Tk57.69 Tk15000
Transportation 520unit Tk9.62 Tk5000
Shop rent 1200sq.ft Tk12.5 Tk15000
Telephone bill 520unit Tk1.92 Tk1000
Marketing and Advertisement 520unit Tk9.62 Tk5000
Shop keeper salary 260hrs Tk38.46 Tk10000
Electricity 200KW Tk10 Tk2000
Total ABC costing Tk131292
Total cost Tk300292

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Cost per unit (Tk300292/520unit) Tk577.484

Product line profitability report:

Simple costing:

Detail Total (Tk) Total (Tk)

Direct Material per unit Tk300
Direct Labor per unit Tk25
MOH per unit Tk150.56
Product cost per unit Tk475.56

Revenue (Tk700*520) Tk364000

Less: Cost of goods sold (Tk475.56*520unit) Tk247292
Gross profit Tk116708
Less: Operating expense Tk53000
Net Income Tk63708
Net Income ratio 17.50%

Activity base costing:

Detail Total (Tk)

Revenue Tk364000
Less: Total cost (Tk577.484*520unit) Tk300292
Net Income Tk63708

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 Net Income ratio 17.50%

Pricing strategy:
For pricing strategy we will be using cost plus approach, here, through this technique, we will
get the selling price of our wooden photo frame by adding necessary markup with the cost of the
per unit of our product. The necessary steps of calculating the selling price, markup amount and
the markup percentage are given below:

Initial Investment
Invested Capital Total (Tk)
Cash in hand Tk50000
Factory Rent in advance Tk20000
Shop Rent in advance Tk15000
Wood engraving machine Tk580000
Computer Tk25000
Furniture and other equipment Tk30000
Banners and Leaflets Tk20000
Total Tk740000

As our Product is new in our Bangladesh, so currently the number of direct competitors are less.
As a result, we will not face any kind of problem if we use this pricing approach to set the selling
price of our wooden photo frame. Our estimated initial investments will be around Tk740000

Target operating income = Invested capital*rate of return on invested capital.

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 = Tk740000 * 8.6092% (Tk63708/Tk740000)
= Tk63708
So our 1st month targeted operating profit is Tk63708

For determining the selling price we need to calculate the mark up and cost.
[Full cost is our cost base to calculate markup]
Selling price = Cost base (full cost) + Markup
= Tk577.56 + Tk122.5
= Tk700 per unit

Detail Total (Tk)

Total cost Tk300292
Number of unit 520unit
Cost per unit (Tk300292/520unit) Tk577.56

Detail Total (Tk)

Operating profit Tk63708
Number of unit 520unit
Markup (Tk63708/520unit) Tk122.5

Detail Total (Tk)

Markup Tk122.5
Cost per unit Tk577.56
Markup (Tk22.5/Tk577.5) 21.21%

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Budget:
The Budgeted unit sales are 520units. And the targeted ending inventory is assumed would be
10% of the budgeted sales unit and no beginning inventory.

Total Ending Inventory 520*10% = 52 Units

Total Budgeted Sales unit {520-(520*10% )} = 468 Units

Sales Budget
Detail Number of unit Price per unit Total revenue (Tk)
Wooden Photo Frame 468 Tk700 Tk327600

Production Budget
Detail Total unit

Sales requirement 468 unit

(+) Target Ending Finished Goods 52 unit

Total needs of finished goods 520 unit

(-) Beginning Finished Goods 0 unit

Units need to production 520unit

Direct Material Usage Budget

Detail Unit Total (Tk)

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Mehegony wood ( 520 unit*1pc) 520unit

Total Direct materials need to production 520unit

Cost:
Mehegony wood (520 unit *300) Tk156000
Total Tk156000

Direct material purchase Budget

Detail Mahogoni wood Total (Tk)
Production needed 520unit
(+) Targeted Ending Inventory(DM) 52unit
(-) Beginning Inventory(DM) 0unit
Actual requirement 572unit
Cost: Mahogony wood (572unit*Tk300) Tk171600
Total Tk171600

Product Unit DLH Total Wages Total

per unit DLHs Rate DL cost
Wooden Photo Frame 520 0.5 260 50 Tk13000
Total direct manufacturing labor Tk13000
budget
Direct manufacturing labor budget

Manufacturing Overhead Cost Budget

Variable MOH Total (Tk)
Rust oleum spray (520unit*Tk946) Tk18,920
Packaging (520unit*Tk5) Tk2,600
Transportation Tk2000
Fixed MOH
Factory rent Tk20,000
Depreciation Tk2,764
Supervising labors Tk26000

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 Mixed MOH
Factory electricity Tk4508
Other factory utility Tk1500
Total Tk78292

Budgeted MOH Rate = Total Budgeted MOH cost / Cost base

[Allocation base for our product is direct labor hour]
=Tk78292/260hrs
=Tk301 per direct labor hour
MOH per Unit= MOH per DLH/ unit to be produced in an hour
= Tk301/2unit per labor hour
= Tk150.56 per unit

Manufacturing Budget
Detail Input per unit of Cost per unit of Total cost (Tk)
output input
Direct Material
Mahogony Wood 1unit Tk300 Tk300
Direct Labor 0.5 DLHS Tk50 per DLH Tk25
MOH 0.5 DLHS Tk301 Per DLH Tk150.56
Manufacturing cost per
Wooden photo frame Tk475.56

Ending Inventory Budget

Detail Unit Cost per unit Total cost (Tk)
Ending finished goods 52unit Tk475.56 Tk24730
Ending inventory budget Tk24730

Cost of Goods sold Budget

Detail Total (Tk) Total (Tk)
Beginning finished goods 0
(+) Cost of goods manufactured
Direct Material Tk156000
Direct Labors Tk13000

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Manufacturing Overhead Tk78292
Total goods available for sale Tk247292
(-) Ending inventory Tk24730
Cost of goods sold Tk222562

Budgeted Income Statement

Detail Total (Tk) Total (Tk)
Sales Revenues (468unit*Tk700) Tk327600
(-) Cost of goods sold Tk222562
Gross Profit Tk105038
(-) Operating Expenses
Supportive Cost Tk20000
Selling Cost Tk33000
Total operating cost Tk53000
Net Operating Income Tk52038

Budgeted Contribution Format Income Statement

Detail Total (Tk)
Sales Revenues (468unit*Tk700) Tk327600
Variable cost {468unit*(Tk205028/520unit)} Tk184525
Contribution margin Tk143075
Fixed cost Tk95264
Net Operating profit Tk47811

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Break Even analysis:
1. Break-even point in unit sales and in revenue:
Break-Even Point in Unit = Fixed cost/ Cost of Margin in unit
= Tk95264/ 305unit
=312unit
We should needs to sell 312unit per month to cover the expenses for our business.

Contribution margin per unit = (Selling Price – Variable cost per unit)/468unit
= Tk(Tk327600- Tk184525)/468unit
= Tk305

2. Break-Even Sales (in taka) = Fixed Cost ÷ Cost of margin ratio

= Tk95264/ .4357
= Tk218646
We should sell at least Tk218646 of product to match all the expenses.

Cost of margin ratio = CM per unit/Selling Price

= (305 per unit/Tk700)
= 0.4357 or 43.57%

Break event point graph (Tk and unit):

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 Break Even point (Tk and unit)
450000
400000
350000 BEP (Tk) = Tk218646

300000 BEP (unit) = 312unit

250000
200000
FC = Tk95264
150000
100000
50000
0
0 100 200 300 400 500 600 700

Fixed cost Sales Total Cost

3. Margin of safety =Total budgeted sales-Break-even sales.

= Tk327600 - Tk218646
=Tk108954
MOS (in percentage) =MOS/ Budgeted Sales
= Tk108954/Tk327600
= .3326 or 33.26%
Comment: The risk level of our business can be estimated by using Margin of Safety of our
product. High margin of safety indicates that the risk will be low and lower margin of safety
indicates that the risk will be higher for our product. The margin of safety of our product is
Tk108954 and margin of safety percentage is 33.26% which means that if the sales of our
business declines by 33.26% from our budgeted sale, then still we will be in our Break-even
point.
So in spite of being a new product we are optimistic about ‘Wooden photo frame’ since it seems
to be in a good position.

4. Operating Leverage (OL)

Operating leverage = contribution Margin/operating income
= Tk143075/ Tk47811
= 2.99 times

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Operating leverage is high for the business where fixed cost is high. The result of operating
leverage = 2.99 times means that if there is 1% changes in sales and contribution margin will
result only 2.99% changes in operating profit.
After seeing our operating leverage we can say that the influences of variable cost is more than
fixed cost on the operating profit of our business

5. Sensitivity Analysis
The sensitivity analysis is done based on scenarios given below:
A) 12% increase in the price of the Direct Material
B) 10% decrease in the demand of the product.
C) 15% increase in the demand of the product

Scenario: (A)
12% increase in the price of the Direct Material
Direct Material = {(Tk156000*468unit)/520unit}*1.12
=Tk157248
Detail BDT BDT
Selling Price (468unit*Tk700) Tk327600
Less: DM Tk157248
DL (Tk25*468unit) Tk11700
MOH {(Tk78292*468unit)/520unit} Tk70463
Non-Manufacturing cost
Support cost Tk20000
Selling cost Tk33000
Total cost Tk292411
Net Operating Revenue Tk35189
So, Net operating profit decreases to Tk35189, if direct material cost increases by 12%.

Scenario: (B)
10% decrease in the demand of our product (budgeted sales units)
Budgeted sales unit = {468unit – (468unit*.10)
= 468unit – 47unit
= 421unit

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 Detail BDT BDT
Selling Price (421*700) Tk294700
Less: DM Tk157248
DL (Tk25*468unit) Tk11700
MOH {(Tk78292*468unit)/520unit} Tk70463
Non-Manufacturing cost
Support cost Tk20000
Selling cost Tk33000
Total cost Tk292411
Net Operating Revenue Tk2289
So, Net operating profit decreases to Tk2289, if our budgeted sales falls by 10%.

Scenario: (C)
15% decrease in the demand of our product (budgeted sales units)
Budgeted sales unit = {468unit + (468unit*.15)
= 468unit + 70unit
= 538unit

Detail BDT BDT

Selling Price (538*700) Tk376600
Less: DM Tk157248
DL (Tk25*468unit) Tk11700
MOH {(Tk78292*468unit)/520unit} Tk70463
Non-Manufacturing cost
Support cost Tk20000
Selling cost Tk33000
Total cost Tk292411
Net Operating Revenue Tk84189
So, Net operating profit decreases to Tk2289, if our budgeted sales falls by 10%.

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References

clickbd. (n.d.). Retrieved from double-head-laser-cutting-and-engraving-machine:

http://www.clickbd.com/bangladesh/2002817-double-head-laser-cutting-and-engraving-
machine.html

globalpetrolprices. (2020). Retrieved from electricity_prices:

https://www.globalpetrolprices.com/Bangladesh/electricity_prices/

Appendix:

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