Unit – 03

Marginal Costing
B.E.P. Illustrations:

1. Star Ltd. Manufactures and sells a standard product at fixed selling price. The budgeted figures for the year
2017 are as under:
Produced and sold 2,00,000 Units
Variable Cost Rs. 56.00 Per Unit.
Fixed Cost Rs. 48,00,000 Per annum
Profit Margin 33.33% of Selling Price.
You are required to determine selling price per unit and sales at break-even point in terms of quantity
and value at the above selling price for the budgeted year.

2. Calculate the B.E.P in the units and sales volume from the following date:
Variable Cost – Rs. 20 per unit.
Fixed Cost – Rs. 10,000.
Selling price per unit – Rs. 30/-

3. From the following information of the books of company A, calculate P.V. Ratio, B.E.P. & M.O.S.
Sales – Rs. 1,00,000.
Variable cost – Rs. 60,000.
Fixed cost – Rs. 30,000.

4. Following information is provided:

Fixed cost – Rs. 90,000.
Contribution – Rs. 30 per unit.
B.E.P. (Units) – 3,000
Selling Price per unit – Rs. 90.
Sales – 8,000 units.
You are required to calculate Variable cost and profit.
5. Following information is provided:
Sales- Rs. 1,00,000/-
Profit – 10,000/-
Variable cost - 70%
Find out;
A. P/V ratio.
B. Fixed cost.
C. Sales to earn a desired profit of Rs. 40,000/-

6. From the following calculate P.V. Ratio, B.E.P (Units) and B.E.P. (Rs.):
Fixed cost – Rs. 1,50,000.
Variable cost – Rs. 10 per unit.
Selling price – Rs. 15 per unit.
What will be the selling price if B.E.P. is brought down to 25,000 units?

7. From the following data relating to company A. Find out:

A. P.V. Ratio,
B. Profit when sales is Rs. 1,80,000,
C. Sales required to earn a profit of Rs. 12,000,
D. Margin of safety.
Year Sales Profit
2005 Rs. 1,20,000 Rs. 8,000
2006 Rs. 1,40,000 Rs. 13,000

8. You have been given the following data for the year ending 2017.
Budgeted output – 8,000 units.
Fixed cost – Rs. 4,50,000.
Variable Cost – Rs. 10 per unit.
Selling price – Rs. 20 per unit.
Find out;
 i. B.E.P.
ii. Selling price reduced to Rs. 18/- per unit, what will be the new B.E.P.

9. A Company producing an Article selling at Rs. 100/- . The marginal cost of production is Rs. 60. Fixed
Cost Rs. 40,000 per annum.
Compute:
A. P/V Ratio.
B. B.E.P. Sales volume.
C. Sales to earn a profit of Rs. 50,000.
D. Profit is Sales is Rs. 3,00,000/-
E. New B.E.P. if selling price reduced by 10%.

10. The following figures are related to BLM Ltd.

Fixed Cost – Rs. 1,20,000.
Variable Cost – Rs. 2,00,000.
Direct Material – Rs. 3,60,000.
Direct Labour – Rs. 2,00,000.
Sales – Rs. 10,00,000.
You are required to calculate B.E.P. and P/V ratio in terms of sales.

11. From the following data calculate B.E.P. in units and sales:
Direct material cost – Rs. 8 per unit.
Direct Labour - Rs. 5 per unit.
Fixed Cost – Rs. 24,000.
Variable Overhead – 60% of direct labour.
Selling price per unit – Rs. 25.
Trade Discount – 4% of selling price.

12. Following information is given:

Fixed Cost Rs. 8,000
 Profit earned Rs. 2,000
Break-even sales Rs. 40,000
What is the actual Sales?

13. from the details provided find out:

A. P/V Ratio.
B. B.E.P.
C. Margin of safety.
Information provided is as follows:
Sales – Rs. 1,00,000.
Total cost – Rs. 80,000.
Fixed cost – Rs. 20,000.
Net profit – Rs. 20,000.

14. Selling price Rs. 150 per unit

Variable cost Rs. 90 per unit
Fixed Cost Rs. 6,00,000 (total)
A. What is the break-even point?
B. What is the selling price per unit if break-even point is 12,000 Units?

15. The following information is provided to you for the coming year of a factory:
Budgeted output – 80,000 units.
Fixed expenses – Rs. 4,00,000.
Variable expenses per unit – Rs. 10.
Selling price per unit Rs. 20.
You are required to:
a) Draw a breakeven chart showing the BEP.
b) Find out the new B.E.P if selling price is reduced to Rs.18 per unit.

16. A Company sells its product at Rs. 15 per unit. In a particular period, it produces and sells 8000 units. It
Incurs a loss of Rs. 5 per unit.
If the value is raised to 20,000 units it earns a profit of Rs. 4 per unit. Calculate B.E.P. in terms of rupees as
well as units.

17. B Company has recorded following data in two most recent period:
Period Total Cost of Volume of
production (Rs) Production (Units)
1. 14,600 800
2. 19,400 1,000
What is the best estimate of firms fixed cost per period?

18. ABC Ltd. maintains M.O.S. of 37.5%. Its overall contribution to sales is 40%. Its Fixed cost amounted
Rs. 5,00,000.
Calculate the following:
A. Breakeven sales.
B. Total Sales.
C. Total Variable cost & current profit.
D. New M.O.S. if the sales volume is increased by 7.5%

19. A Manufacturing company provides the following information:

Fixed Expenses – Rs. 1,20,000.
Selling price per unit Rs. 60/-.
Variable expenses:
Material – Rs. 21 per unit.
Wages – Rs. 15 per unit.
Output = 20,000 units.
You are required to:
a) Draw a breakeven chart showing the BEP.
b) Find out the new B.E.P if selling price is reduced by 20%.

20. The sales turnover and profit of ABC Company during past 2 years were as follows:
Year Sales Profit
(Rs.) (Rs.)
2016 1,40,000 15,000
 2017 1,60,000 20,000
You are required to:
i. Find out the P.V. Ratio.
ii. Find out the sales required to earn a profit of Rs. 40,000.
iii. Find out the profit when sales is Rs. 1,20,000.

21. The P.V. Ratio of a company is 50% and its margin of safety is 40%. You are required to work out the
B.E.P. and the net profit, if the actual sales volume is Rs. 50,00,000.

22. The P/V ratio of X Ltd. is 50% and margin of safety is 40%. The company sold 500 Units for Rs. 5,00,000/-
you are required to calculate.
a) Break Even Point, and
b) Sales in Units to earn a profit of 10% on sales.

23. Suppose Selling price per unit is reduced from Rs. 75/- to Rs. 60/-, Variable cost Rs. 50 per unit, Fixed
cost is Rs. 10,000/-. Calculate the Contribution, P/V ratio, Break Even Point and Margin of Safety in both the
situation (i.e., when Selling price is Rs. 75/- and Rs. 60/- per unit). Assume that the total sales value is Rs.
75,000/- in both the situation.

24. Calculate margin of safety in each of the following independent situations:

I. Break-even point is 40%, Actual sales is Rs.40,000
II. Actual Sales is 40,000 units, Break – even point 25,000 Units.
III. Break-even point 75%
IV. P/V Ratio 40%, profit Rs.35,000
V. Contribution per unit Rs. 20, Profit Rs.15,000

25. Two competing companies Giny Ltd. and Johnny Ltd. Produce and sell same type of product in the
market. For the year ended March,2018, their forecasted profit and loss account are as follows:
Particulars Gini Ltd. Johnny Ltd.
Sales (Rs.) 2,50,000 2,50,000
Less: - Variable cost of sales 2,00,000 1,50,000
Fixed Costs 25,000 2,25,000 75,000 2,25,000
Forecasted net profit before tax 25,000 25,000
You are required to find out:
 A. P.V. Ratio.
B. Break-even sales volume
C. Also state which company will earn greater profits under low demand and high demand.

26. The following data were obtained from the record of Bushan Ltd.
Particular Rs. Rs.
Sales (4,000 units at Rs. 25/- unit) 1,00,000
Material consumed 40,000
Variable overhead 20,000
Labour charges 10,000
Fixed overhead 18,000 88,000
12,000

Calculate:
a) Number of units by selling which company will neither lose or gain.
b) Sales needed to earn a profit of 20% on sales.
c) How many extra units to be sold to obtain the present profit, if it is proposed to reduce the selling
price by 20% and 25%.
d) What is the selling price to be fixed to bring down its B.E.P. to 500 units under present conditions?

27. SCEM Limited. A retailer in garments, currently selling 24,000 shirts annually. They supply the
following details for he year ended 31-03-2018.
Selling price per shirt – Rs. 40.
Variable cost per shirt – Rs. 25.
Fixed Cost:
Staff salary for the year – Rs. 1,20,000.
General office cost for the year – Rs. 80,000.
Advertisement cost for the year – Rs. 40,000.
As a cost accountant of the organisation, you are required to calculate the following:
A. B.E.P. & M.O.S. in sales volume.
B. Assume that 20,000 shirts were sold during the year then find out the net profit of the firm.
C. If it is desired to introduce selling commission of Rs. 3 per shirt how many shirts have to `
be sold in a year to earn a net income of Rs. 15,000.
D. Assuming that for the year 2001 an additional staff salary of Rs. 33,000 is anticipated &
price of the shirt is likely to be increased by 15% . Then what should be the B.E.P. in number
of shirts & sales volume.