From the records a company distributing petrol the fetlowing nfrmations avaabe for ‘the month of March 2018: Sales forthe month + Tk 7910000 COpeningstockar on 13.2019 :1250001itres © Tk 30.00 pertve March 180000 ees @ 1131.10 March 27 + 200000 Fees @ Tk. 31.20, losing stock son 31" Marh,2019: 130000 tres {General Administration Expenses for From te information given above, workout he following {wing FIFO and IFO methods of inventory valuation, assuming ping of sue being done a the end a the (o) Voli of clsing stock as on 313.2019 (0) Cont of sales for maren2019 (el Profit roe for Marc, 2019‘You are asked to show the price ina statement at which the ‘company earn 10% profit on sales. ‘vw company manufctured anc sold 1656 Table Fan ring the year 018 with the folowing information 1% Direct Materials 90000 Direct Wages 120000 Manufacturing Expenses 50000 Selares 60000 General Expenses 20000 Rent, Rates and insurance 10000 Selling Expenses 30000 Seles ‘400000 ‘The company plans to manufacture 1200 Table inthe year 2019.The following addtional Information are available: (2) Price of materials wil ise by 20% on the previous years" level (b) Wage rates will go up by 5% (0. Manufacturing expenses wil risen proportion to the combined cost of materials and wages. eet Peseta a]Problem 6 ‘A manufacturing company provides you with a summary ofits production costs a three production levels: Costitem 1000 units 2000units—_-3000units Rs. Re Re. A ‘sooo 000 000 8 1200 1800 2200 c 3000 6000 9000 Indicate the cast behavior forthe cost items. 1. What would be the total cost f the company produces 2500 units? ga 888 ae3 faye abeProblem 7 The cost of a scooter for the year 2017,the selling price being Rs.24000 each,, is given below: Direct materials 50% of total cost Wages 30% of total cost Overhead charges 20% of total cost Profit 20% on selling price In 2028, the price of materials and labour rate shall increase by 20% and 10% respectively. i. What will be the rate of profit if the selling price remains unchanged? i. What will be the selling price if the rate of profit remains unchanged? Problem 8: [tsetse] fey nreom 0 fas 50 o Ses [isso mot aes ot ec, [ios [id ovens tos en libre aoereueer So ct ‘oo —_——_— 7 [treet arom 138 fia wees tornoe os fe st cn steerer yea fetes ers aaa] {oe ret tea TRS) 18 fas weston ncn ee {is ate ott ate = [irre Es [ise Eybln: A campaign erties Care ‘er ears ese an uno no Te ba ee su am overtop henge bros Te ‘pmo need the pasar nd sec earners E ae te andar oe eleblancs Abc te pcin parma P,P. ans? ane ‘recast efonwg awe cenceo ton eee — Samaeealatameiapaeie Thecanpe rapes en oes .——— = =e a senate 7:0 etn 30 ——— Sa ee ee Snags anette ODD oe aT EEETTDIEEw TIRE DEERE ee <= ape pew pw tow ‘sme SrDepaent spr owDeaton nt tonrgprc ong onan mire Foe ersumghn fe acteurs to poms. occcsuperine sepa wt eros on onli ftheshp permet. “itp onmsstenee peep er 0 rine Scones sah pon 1 ‘Snr tend cant bee A 8 pa ham nfs nent atin shop. Tessprsee dece cectne ea = [ipeocencomcnevonsematvenngtaceProblem : 4. Alpha Ltd. furnished the following information : Selling price —Rs. 10 per unit Variable cost —Rs. 6 per unit Itisexpected that variable cost will ncrease by 20%. What will be the selling price per unit ifthe company wishes to maintain the same P/V ratio. [C.U. B. Com. (Hons.), 2004) Solution : __ Constribution(C) _ Rs.10-Rs.6 _ Present P/V Ratio= gress) x100=—ReTo «100 = 40% Itis expected that Variable cost per unit = Rs. 6 + 20% of Rs. 6 =Rs. 7-20 and, P/V Ratio = 40% J. PIV Ratio = £x 100 or, PV Ratio = S=* x 100 or 40= S79 100 40xS or Tyg = $7.20 scanned with Camsc ~y 78 wa CK 8 COST AND MANAGEMENT ACCOUNTING PROBLEMS AND SOLUTIONS in present P/V Ratio,Problem :7 Followingare the information availablein respect of a productat an activity level of 10,059 units :-— Direct Materials per unit Direct Labour per unit Variable Overheads per unit Fixed Overheads per unit Total Cost per unit Selling price per unit Profit per unit How many units must be sold for break-even? Solution : Rs. Rs, Selling Price per unit 20 Less: Variable Cost per unit : Direct Materials 6 Direct Labour ki Variable Overhead 2 — Rp Contribution per unit 8 Total Fixed Cost atan activity level of 16,000 units = Rs. 30,000 —_ (10,000 units x Rs. 3) Break-even Siles (in units) = vole Fixed Cost_ Contribution per unit Rs.30, 000 | = ase = 3-750 units. Denhlom + &Problem : 8 Selling price per unit Rs, 10.00 Trade discount 5% Direct material cost per unit Rs, 3.00 Direct labour cost per unit Rs. 2.00 Fixed overheads Rs. 10,000 Variable overheads on direct labour cost 100% If sales are 10% and 15% above the break-even, determine the net profits? Solution : Rs, Rs Selling price per unit 10.00 Less: Trade discount (5% of Rs. 10) 0.50 Net selling price per unit 950 Less: Variable cost per unit: 3.00 2.00 Variable overhead (100% of Rs. 2) 2.00 7.00 Contribution per unit 2.50 \ Total Fixed Cost = Rs. 10.000 scanned with Camscanner MARGINAL COSTING AND SHORT-TERM DECISION il 731 . " e _, Fixed Cost J Breakeeven Sales (in units) = RTE Rs.10,000 a = a = 4000 units Break-even Sales (in value) = 4,000 units x Rs. 9.50 = Rs. 38,000 units, ‘When sales are 10% above break-even— * Sales (in units) = 4,000 units + 10% = 4,400 units : Rs. Total contribution at this level of sales (4,400 units x Rs. 2.50) 11,000 Less : Fixed cost 10,000 Profit 1,000 When sales are 15% above break-even— Sales (in units) = 4,000 units + 15% = 4,600 units Rs. ‘Total contribution at this level of sales (4,600 units x Rs. 2.50) 11,500 Less : Fixed cost 10,000 Profit 1,500Problem ¢ particukus furnished below, compute the Machine Hour Rate : From Rs. Cost of machine 90,000 Cost of snstallati 10,000 value at the end of 5,000 Indirect wages cnnd m 500. per year Supervision cost for fo aachines 16,000. per year Insurance premium for the machine 200 per quarter Rent of the machine shop 400. per month Electricity cost for the machine shop 100. per month Power consumption of the machine is 20 units per actual working hour. Power cost is 50 paige per unit, The total area of the machine shop is 600 sq. metres of which this machine scupies only 150 sq. met ‘There are 200 light p utilises only 40 points. It is estimated that the m apprehended that the Solution STATEMENT SHOWING COMPUTATION OF MACHINE HOUR RATE in the machine shop of equal wattage of which this machine will normally work for 2,700 hours in a year, but it is idle for 200 hours. (C.U.B.Com. (Hons.), 1985] Per Year| Per Hour] Rs. Fixed Expenses : Insurance (Rs, 200 x 4 quarters) 800 Rent {ens.4000%12 months) x an 1200 Electricity [ers.100 x12months) x al 240 Supervision (1>Rs.16, 000) 4,000 For 2,500 hours (see working) 6,240 2-496 Variable Expenses : Indirect wages and materials (5) 0200 Da [fies 00 R5.5,000), ail To years 3500 hours a Power (20 units x Re. 0-50) 10000 Machine Hour RateSolution : ta) Calculation of Total Variable costs & Variable costs xed costs - Rs. Rs. Rs. Rs. Materials (100% of 30,000 Nil Labour (50% of 8 10,000 | (50% of Rs. 20000) | 10,000 tory overloads (759% of Rs. 4000) | 3,000 | (25%of Rs. 4000) | 1,000 Administrative overhead (100% of Rs. 5754) | 5,754 & Distribution (40% of Rs.1500) (60% of Rs. 1500)| 900 17,654 selling price for 200 units of output Rs. Rs. (200 units x Rs, 400) 80,000 variable cost for 200 units of output 43,600 scertained in (a) above} = Total Contribution for 200 units of output 36,400 < Contribution per unit = Total Contribution No.of units produced _ Rs.36,400 ~ 200 = Rs, 182, (© PIV Ratio = © x 100 _ _ Rs.36,400 182 _ + Here, PIV Ratio = Ey Tay™ x 100. or, 182 x 100 = 45.50%. (d) We know— . . _. Total Fixed costs i F BEP sales (in value) = “SEPT x 100 (ie. pry x 100) Here, BEP sales (in value) = 42554 x 100 [' As ascertained in (a) above, Fixed cost = Rs.17654] «. Break-even sales (in value) = Rs. 38,800 Again, BEP sales (in units) = ‘Contribution per unit ales (in units) = 17654 = Here, BEP sales (in units) = “795 . Break-even sales (in units) = 97 units. 97 units [".” Contribution/unit = Rs.182]Problem : 9, X Lid. sells 8000 units of its products at a loss of Rs. 16,000. Variable cost per unit is Rs.12 and Total fixed cost is Rs, 48,000. Caleulate :— (i) Profit-volume Ratio, i (ii) The number of units to be sold to eam a profit of Rs.10,000. (iii) The amount of profit from a sale of 20,000 units. [C.U. B.Com. (Hons.), 1999] Solution : @ Working Notes : We know, S =F + V+ Por-L Here, as loss has been incurred, S=F4+V-L Rs. Total Fixed cost 48,000 Total Variable costs for 8000 units: 96,000 (8000 units * Rs.12) Total costs for 8000 units 144,000 Less : Loss 16,000 Total selling price for 8000 units 1,28,000 Rs.1,28,000 ", Selling Price per unit = =_oGjunats ~ R16.(WV Ratio ELOY S09 1 eV Ratio PSE x 100 [56 Loss has beer ineured) An this oa ISN 16,000 jg iaxooy TH on PV Ratio or PV Ratio, t Wott ~ volume AWD This part of the problem may be solved by two ways. @ First Alternative : Rs, price per unit = 16 ed le cast por unit Contribution per unit 4 i P ales (in units) = CS Tapuomperimie Here, Sales (in units) = 0004 10.000 14.509 units ©. Te cara a profit of Rs. 10,000, 14,500 units are to be sold. @ Second Alternative + Again, P/V Ratio Raease 48.000 + 10.000 x 100 or, $= S800 109 = Rs, 2.32,000, © Sales (in value) to earn a profit of Rs, 10,000 = Rs. 2,32,000 Sales (in value) t0 earn a profit of Rs. 10,000 Total sales price perunit (iii) Here, Given Sales (in units) = 20,000 units ~*, Sales (in value) = 20000 units x Rs.16 = Rs, 3,20,000. “We know— = 14,500 units. PW Ratio= Ee? x 109 48,000 +P. 0, 000 or, 25 = * 100 3,20,000 x or, $8000 + P = 320.000 «25 or, 48000 + P = 80000 . P= 80000 - 48000 = Rs. 32000. ©. Ata sale of 20,000 units, profit earned is Rs. 32,000.problem + 10- Rainbow Ltd sale ponds for «one ane Kinet Co Py Find out (i) PV Ratio. (il) Break mae edling, price was reduced by 10% nnd fixed Costs were Git) Broak-even sales if welling, pri [Ct B.Coia (Plans, 2000] by Rs.1,00,000. Solution + (i) PIV Ratio = SY x 100 price Where, § = Here, PIV Ratio = “PIN Ratio = 80%, Gi) Again, at Breakeeven point— PIV Ratio = pe x 100 Where, F = Fixed cost BEP sales = Break-even point sales 8,00,000., sales 100 . Here, 80 or, BEP sales = £:00:000 , 19 .. Break-eyen sales = Rs.10,00,000. PIN Ratio remains the same as it was, because neither the selling price per unit nor the variable cost per unit changes. In this case, PIV Ratio = 80%, (iii) In this case, selling price per unit decreases by 10%. Consequently P/V ratio will be changed and now new P/V Ratio is to be computed: .’, New Total Selling Price = Rs, 30,00,000 - 10% of Rs, 30,00,000 Rs. 27,00,000. New Total Fixed Cost = Rs, 8,00,000 + Rs. 1,00,000 = Rs, 9,00,000 New PIV Ratio = S=¥ x 100 . i 27,00,000 - 6,00,000 - 1 0e ‘or, New P/V Ratio = "57,00, 000 x 100 «, New P/V Ratio = 77.7777%. Note: As the number of units produced remains the same and variable cost per unit also remains the same, total variable cost also remains the same, i.e. Rs. 6,00,000.IS AND SOLUTIONS 734 ML COST AND MANAGEMENT ACCOUNTING : PROBE! We know at BEP— ¥ Ratio = = PV Ratio = B or, 77,7777 = 8.000 x 100 = Rs.11,57,144. THRITT ven sales 11,57,144. ©. BEP sales = 2. New Breaolution + cia 1 PVRatio= ES" 100 Sales ‘Total fixed cost for the month 100 = 20% 600 ixed Cost P/V Ratio 2,600 20 Break-even point (in rupees)= 100 x 100 = Rs.13, 000 ‘ r Fixed Cost Break- = = . reak-even point (in units) = Goaahion per oa = a = 260 units. 2. Fixed cost for the year = Rs. 2,600 x 12 = Rs. 31,200 Sales value for 20,000 units = 20,000 units x Rs. 50 = Rs, 10,00,000 Weknow, PIV Ratio = 5 x10 . bs 31,200 + P Here, 20 = 799-00,000 * 109 __ 20 10,00, 000 Or, 31,200+P= Too P= 2,00,000 - 31,200 = Rs. 1,68,800. ‘Company's net income for the year = Rs. 1,68,800. Alternatively = Contribution for 20,000 units of sales = 20,000 x Rs. 10 5.2,00,000 Less : Fixed cost for the year (Rs. 2,600 * 12) =Rs._ 31,200 Net income for the year 1,68,800 3, New fixed cost for the month : Rs. Existing fixed cost for the month 2,600 ‘Add: Increase in room rent 288 New monthly fixed cost 2,888 " Fixed . 888, Break-even point for the month (in rupees) = Rae x 100 = 2A 100 = Rs. 14,440 ; _. ___BEPSales Break-even point for the month (in Units) = Seping Price per unit Rs.14.440 _ 989 sini : = Say 2289 us (approx) 4. New Variable cost perunit: Be Existing Variable cost per unit 40 Add: — Additional payment to machine manufacturer 0:50 New Variable cost per unit 108 Selling price per unit 9,50 New Contribution per unit