Q1.

a) A company annually manufactures and sells

50,000 units of a product. The selling price of which is
Rs 80 and profit earned is Rs 25 per Unit.

The analysis of cost of 50,000 Units is:

Material Cost Rs 6,50,000,
Labour Cost Rs 6,00,000,
Overheads Rs 15,00,000 (50% variable)

You are required to compute:

i) Break even Sales in Units and in Rupees,
Sales per unit= Rs 80
Variable cost
Material Cost= Rs 650000/50000=Rs 13
Labour Cost= Rs 6,00,000/50,000= Rs 12
Variable over head= Rs 7,50,000/50,000= Rs 15
Contribution per unit= Rs 80-40= Rs 40
Profit=Total Contribution-Fixed Cost
At Break Even Profit=0
0=No. of units*Contribution per unit-7,50,000
No. of units*40=7,50,000
No of units at Break even= 7,50,000/40= 18750
Break even in rs= Break even unit*S.p per unit
= 18750*80= Rs 15,00,000
ii) Sales to earn Profit of Rs 2,00,000
Profit= Total contribution- Fixed Cost
2,00,000=no. of units*contribution per unit-7,50,000
9,50,000=no. of units*40
No. of units= 9,50,000/40= 23750
iii) Profit when 65,000 units are sold
Profit= Total contribution-Fixed Cost
=65000*40-7,50,000= Rs 18,50,000

(Sales units-break even unit)*contribution per unit

(65000-18750)*40= 18,50,000

iv) Margin of Safety when 30,000 units are sold

Margin of Safety= Sale units-Break even units
= 30,000-18750= 11250
MoS %= MoS/Sale units *100=
11250*100/30000=37.5%
v) PV Ratio
PV Ratio= Contribution*100/ Sales
=40*100/80= 50%
Q2. XYZ co ltd manufactured and sold 1,200 School
Bags last year at a price of Rs 800 each. The cost
structure per unit Bag is as follows: Material Cost is Rs
200, Labour Cost Rs 150, Variable Overhead Rs 75,
Fixed Over head Rs 200, Profit Rs 175
Due to heavy competition, the price has to be reduced
to Rs 725 for the coming year. Assuming that there will
be no changes in cost, find out how many school bags
shall be sold to ensure the same amount of total profit
as last year.
Profit =175*1200= 210,000
Profit= Total contribution-FC
210,000=300*no of units-2,40,000
No of units=4,50,000/300= 1500
New Contrubution= 725-425=300

Q3. During the current year, AB Ltd showed a profit of

Rs 180,000 on sale of Rs 30,00,000. The variable
expenses were Rs 21,00,000. You are required to
calculate:
1. Break even sales if variable cost increase by 5 per
cent
2. Desired sales to maintain the profit as at present , if
selling price is reduced by 5 per cent
Q4. XYZ co ltd produced and sold 1,000 toys last year
at a price of Rs 500 each. The cost structure per toy is
as follows:
Material = Rs 100
Labour= Rs 50
Variable Overhead = Rs 25
Fixed Over head = Rs 200
Profit = Rs 125
Due to heavy competition, the price has to be reduced
to Rs 425 for the coming year. Assuming that there will
be no changes in cost, find out how many toys shall be
sold to ensure the same amount of total profit as last
year.
 _____________________________________________
_____________________________________________
_______________
Q5. A company annually manufactures and sells 20,000
units of a product. The selling price of which is Rs 50
and profit earned is Rs 10 per Unit.
The analysis of cost of 20,000 Units is:
Material Cost Rs 3,00,000
Labour Cost Rs 1,00,000
Overheads Rs 4,00,000 (50% variable)
You are required to compute:
i. Break even Sales in Units and in Rupees
ii. Sales to earn Profit of Rs 3,00,000
iii. Profit when 15,000 units are sold
_________________________________________
_________________________________________
_______________
Q6. Following information are given for the
manufacturing of a product:
Fixed Rs 4,00,000
Expenses
Materials Rs 10 per
unit
Labour Rs 5 per Unit
Direct
Expenses
 Fuel Rs 3 per unit
Carriage Rs 2 per unit
Inward
Selling Price Rs 40 per
unit

Calculate Break-even point in terms of units. Also find

out new B.E.P if selling is reduced by 10% per unit.