Practice Questions 19-22

Question No.1

Evaluate the sum of the years digits depreciation of an asset having the cost of Rs.8,000
for a period of 5 years such that salvage value after 7 years is Rs.5000.

Solution:

Cost = Rs. 8,000

Salvage = Rs. 5,000
Life = 7 years
Period = 5 years

 Cost  Slavage    Life  Period  1  2

SYD 
Life   Life  1
8, 000  5, 000   (7  5  1)  2

7  (7  1)
 321.4285

Question No.2

An asset has a cost of Rs. 20000. After 8 years, its salvage value is Rs. 7000. What is the
sum-of-years' digits depreciation of the asset for one year?

Solution:

Initial cost = Rs 20000

Salvage Value = 7000

Lifespan = 8 years

Period = 1

( 20000  7000 )  (8 1  1)  2

8  (8  1)
(13000 )  (8 )  2
=
8 (9)
 2888.89
Question No.3
Cost analysis provides the following information:
Fixed Costs (FC) per period = Rs. 20000
Variable Costs (VC) = Rs. 25 per unit.
Selling price per unit = S = 50 Rs
Calculate Contribution Margin per unit and BEP in units

Solution:
Contribution Margin per unit = CM = Sale price per unit – Variable cost per unit = 25Rs
BEP in units = FC/CM
= 20000/ 25
= 800Units

Question No.4

FC=Rs.3150, VC=Rs.155, S=Rs.185, capacity=320 units

Calculate break even point in terms of rupees and units.

Solution:

Firstly we calculate (CM)

CM = S-VC
= 185 -155
= 30
BEP(in units) = FC/CM
= 3150/30
= 105 units.
BEP(in rupees) = (FC/CM) * S
= 3150/30 * 185
= Rs.19425

Question No.5
Mr. Aslam is running a school, he put an order for chairs and stools and get 6 stools and 4
chairs cost $58, in an other transaction 5 stools and 2 chairs cost $35. Find the cost of
each stool and chair by using linear equations.
Solution:

Let $x be the cost of one stool and $y be the cost of one chair. Then by given condition
we have
6x + 4y = 57 ------------- (1)
5x + 2y = 34 ------------- (2)
Multiplying equation (2) by 2, we have
10x + 4y = 68 ------------ (3)
Subtracting equation(3) from equation(1), we get
4x = 11
X = 11/4
Find y by using value of x.

Question No.6

Solve the following system of equations by substitution method.

2x – 3y = –2, 4x + y = 25

Solution:

2x – 3y = –2-------1
4x + y = 24--------2

From equation

4x + y = 25
y = –4x + 25

Put in equation 1

2x – 3(–4x + 25) = –2
2x + 12x – 75 = –2
14x = 73
x = 5.214 2opyright © Reserved

Find y by using value of x.

Question No.7
Cost analysis provides the following information:
Variable Costs (VC) = Rs. 30 per unit.
Selling price per unit = S = 40 Rs
Production Capacity per period = 800 units
Contribution Margin per unit =Rs 20 . Calculate Contribution rate.

Solution:
Contribution rate = Contribution Margin per unit × 100%= 50%
Sale price per unit

Question No.8
A manufacturing company sells its new item at Rs. 220 per unit. If the variable cost is Rs
200 and fixed cost is Rs 4500, find the BEP in units.

Solution:
Sale = S = Rs 220

Variable Cost = VC = Rs 200

Fixed cost = FC = Rs 4500

Contribution Margin = CM = S - VC

= 220 - 200

= 20

BEP in units = FC / CM

= 4500 / 20

= 225

Question No.9

Cost analysis provides the following information

FC = Rs.224, VC = Rs.100 per unit, S = Rs.150 per unit, PC = 320 units per period.
Determine the BEP in units if FC is increased to Rs.5490 and VC is 10% reduced.
Solution:

New FC = Rs.5490
10% of VC = 10% *100 = Rs.10
New VC = Rs.100 – Rs.10 = Rs.90
CM = S – VC
= 150 – 90 = Rs.60
BEP in unit = FC / CM
= 5490 / 60 = 91.5 Units

Question No.10

Cost analysis provides the following information:

FC per period = Rs.3150, VC = Rs.157 per unit, S = Rs.185 per unit
Production Capacity per period = 320 units. Calculate the BEP in rupees and as a percent
of capacity.

Solution:
Contribution margin = CM = S – VC = 185 – 155 = Rs.30
BEP in rupees = (FC / CM) *S

= (3150 / 30) *185 = Rs.19425

BEP in unit = FC / CM = 3150 / 30 = 105 Units
BEP as a percent of capacity = BEP in units / PC *100%
= 105 / 320 *100%
= 32.81%

Question No.11

Given FC = Rs. 7000 , VC = Rs.200, S= Rs.190 , CM =Rs. 10

What unit sales will generate NI of Rs 5000.

Solution:
Formula for Net Income
Number of Units sold above BEP in units = NI / CM

Step 1… Find BEP in units

BEP in units = FC/CM
= Rs. 7000/ Rs. 10
= 700 Units

Step 2… Find units over BEP

Number of units above BEP = NI / CM
= Rs. 5000/Rs. 10
= 500 Units
Total units sold = 500 Units above BEP + 700 BEP Units = 1200 units

Question No.12

Given FC = Rs. 7000 , VC = Rs.200, S= Rs.190 , CM =Rs. 10 , NI = Rs 8000.

Find units over BEP
Solution:

Number of units above BEP = NI / CM

= Rs. 7000/Rs. 10
= 700 Units