Name: Thoka Rahul Rao

Section: H
Roll No. 2018PGPH015

MANAGERIAL ACCOUNTING AND CONTROL

Case Title: Davey Brothers Watch Co. 

Fixed
costs Variable
(per costs (per Direct/Indirec Fixed/Variabl Relevant/Irrelevan
S.No. Particulars annum) copy) t e t
1 Machine (Old) 7000 Direct Fixed Relevant
2 Machine (New) 5000 Direct Fixed Relevant
3 Financing cost 3500 Direct Fixed Relevant
4 Manufacturing
Manufacturi ng cost (Provision) 1000 Direct Fixed Relevant
5 Drum and film 1400 Direct Fixed Relevant
6 Shop rent 1200 Indirect Fixed Irrelevant
7 Shop Electricity 3000 Indirect Fixed Irrelevant
8 Toner 0.032 Direct Variable Relevant
9 Paper 0.2 Direct Variable Relevant
10 Power Consumption 0.04 Direct Variable Relevant
1500 (per
11 Total Delivery cost year) Direct Fixed Relevant
12 Salary of Office boy 18000 Direct Fixed Relevant
13 Forgone Salary Opportunity cost 30000 OPPORTUNITY COST

Total Direct fixed costs (Old machine) 42900

Total Direct fixed costs (New machine) 40900
Total Direct fixed costs (Includes delivery
New machine) 42400
Total Direct fixed costs (Includes delivery +
Salary + New machine) 60400
  Name: Thoka Rahul Rao
Section: H
Roll No. 2018PGPH015

Selling price 1 0.75 0.5

Variable cost 0.272 0.272 0.272
Contribution per unit 0.728 0.478 0.228
a, b,
c Breakeven units (Old machine) 58929 89749 188158
d Breakeven units (New machine) 56181 85565 179386
e Breakeven if Profit = 2000 (Old machine) 61676 93933 196930
e Breakeven if Profit = 2000 (New machine) 58929 89749 188158

Revenue Profit (Old Profit (New

f 60 units a day at 0.75 rupees per year machine) machine)
13500 -29400 -27400

Breakeven
Average Contributio (New
g 50% at Rs 1 and 50% at 0.75 price n per unit machine)

0.875 0.603 67828

h Breakeven units (Price 0.875 with delivery) 70315

Breakeven units (Price 0.875 with salary for

i delivery boy) 100166

 j Since the breakeven units are more than the estimated figure of business, he
should probably not enter the business snce it would be difficult to generate
 business at required
required sca
scale
le
  Name: Thoka Rahul Rao
Section: H
Roll No. 2018PGPH015