UNIT 6 Numericals

1. A company is to determine the most desired capital structure, following is the estimate of
Debt and equity at various levels of debt equity mix.

Debt as % of total capital Cost of Debt Cost of equity

employed
0 6 13
10 6 13
20 6 13.5
30 6.5 14
40 7 15
50 7.5 17

2. Raja Ltd manufactures and sells 4 types of products under the brand names A, B, C and D.
The sales mix in value comprises 33(1/3), 41(2/3), 16(2/3), 8(1/3) of A, B, C and D
respectively. The total budget sales at 100% capacity are Rs 60,000 pm.
Operating costs are: Product A=60% of SP, B=68% of SP, C=80% of SP, D=40% of SP. FC= Rs
14,700pm. Calculate BEP for the products on an overall basis.
(b) It has been proposed to change the sales mix as follows. The total sales per month
remaining Rs 60,000, Product A,B,C and D= 25%, 40%, 30% and 5%. Assume the proposal is
implemented. Calculate BEP.

3. Assuming that cost structure and selling price remains the same in Period1 and 2, find out:
(i) P/V ratio (ii) Break Even sales (iii) Profit when sales are 1 lakh (iv) Sales required to
earn a profit of 20,000. (v) Margin of safety in period II.

Period Sales (Rs) Profit (Rs)

I 120,000 9,000
II 140,000 13,000

4. The following information has been made available from the cost records of United
Automobile Ltd. Manufacturing spare parts