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Problems For Marginal Costing

1. The document contains 15 multi-part accounting problems related to marginal costing, break-even analysis, and profit/volume ratios. 2. Information provided includes sales volumes, revenues, fixed and variable costs, contribution margins, and profit/loss figures. Students are asked to calculate values like break-even point, profit/volume ratios, and sales or profits under different scenarios. 3. The problems cover concepts like calculating break-even sales, profits at different sales volumes, impacts of price and cost changes, and recommendations regarding product mix or pricing decisions.

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Pramod Bhardwaj
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© Attribution Non-Commercial (BY-NC)
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Download as DOC, PDF, TXT or read online on Scribd
4K views

Problems For Marginal Costing

1. The document contains 15 multi-part accounting problems related to marginal costing, break-even analysis, and profit/volume ratios. 2. Information provided includes sales volumes, revenues, fixed and variable costs, contribution margins, and profit/loss figures. Students are asked to calculate values like break-even point, profit/volume ratios, and sales or profits under different scenarios. 3. The problems cover concepts like calculating break-even sales, profits at different sales volumes, impacts of price and cost changes, and recommendations regarding product mix or pricing decisions.

Uploaded by

Pramod Bhardwaj
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Problems on Marginal Costing

1] Find P/V ratio & sales to earn profit of rs 1,000.


Fixed cost –rs 4,000
Break-even sales – rs 20,000
Selling price per unit – rs 20. [itnal page 693 prob 3]

2] Find out P/V ratio & fixed cost from the following information. [itnal page 698 prob 6]
Selling price per unit –rs 10
Year Sales (in units) Total cost (rs)
2004 15,000 1,30,000
2005 17,000 1,45,000

3] X Co Ltd has the P/V ratio 30% & its MOS is


40%. Find out the net profit & the BEP if sales are at
rs 2, 00000.

4] The sales turnover & the profits during the periods


were as follows:
Year Sales (in units) Total cost (rs)
2005 1,50,000 20,000
2006 1,70,000 25,000

Calculate
A] P/V ratio b] BEP sales c] Sales to earn a profit of
rs 40,000 d] Profit when sales are rs 2,50,000.

5] The following information relates to the product of


a company.
Selling price per unit rs 30
Variable manufacturing cost per unit rs 17
Variable selling cost per unit rs 3
Fixed factory overhead rs 1, 50,000
Fixed selling cost rs 30,000
Calculate:
1] BEP in amount & in unit
2] Sales to earn a profit of rs 60,000 in value & in
units.
3] Profit or loss of sales are @ 15000 units. [itnal
page 694 prob 4]

6] Delta Ltd provides the following details relating


to the manufacturer of delta tooth brush.
Rs
Selling price per piece 15
Direct materials cost per piece 4.50
Direct wages per piece 3
Fixed overheads 11,250
Variable overheads per piece 3
Find out BEP & P/V ratio it trade commission
allowed is 5%.
What will be the profits if sales price are 10% & 15%
above the BEP calculated above?
[itnal page 696 prob 5]

7] Akashwani Tape- recorder Company sold 5,000


tape-recorder last year at a price of rs 1,000 each.
The cost structure is as follows:
Material 200
Wages 100
Variable overheads 50
Marginal cost 350
Fixed overheads 400
Total cost 750
Profit 250
Selling price 1,000
Due to heavy competition, the price will have to
be reduced to rs 850 in the coming year. Assuming
no changes in costs, calculate the number of tape-
recorders that should be sold at the new price to get
the same total profit as earned last year.
[itnal page 703 prob 9]
8] The following information relates to Poornima ltd:
Sales 2, 00000
Variable cost 1, 20,000
Fixed cost 60,000
Find out the P/V ratio & BEP. Calculate the new P/V ratio & BEP by considering the
following changes:
a] 205 increase in sale price accompanied by an increase of fixed cost by rs 20,000.
B] 20% increase in sale price accompanied by 10% decrease in variable cost & 10%
increase in fixed cost. [itnal page 705 prob 10]

9] The following figures are obtained from the accounts of “Gold star Ltd”:

Year Sales (in units) Profit/Loss (rs)


2002 4,000 5,000 Loss
2003 6,000 5,000 Profit

The selling price per unit can be assumed to be rs 20.


Calculate:
A] P/V ratio
B] Fixed cost
C] Break –even sales
D] Profit at sales of rs. 2, 00000
D] Sales to earn a profit of rs 30,000.
[itnal page 708 prob 11]
10] Following details pertain to a company:

Particulars Period-I Period -II


Number of units sold 10,000 30,000
Selling price per unit (rs) 50 50
Profit or loss made (rs) 1,00000 (Loss) 1,00000 (Profit)

Calculate:
1] The amount of fixed cost.
2] The number of units to break-even
3] The number of units to be sold to earn a profit of rs 4,00000.
[itnal page 709 prob 12]

11] From the following figures find out the break even volume.
Selling price per tonne Rs 69.50
Variable cost per tonne Rs 35.50
Fixed expenses Rs 18, 02,000
If this volume represents 40% capacity, what is the additional profit for an added
production of 40% capacity, the selling price of which is 10% lower for 20% capacity
production & 15% lower , than the existing price, for the other 20% capacity.[cama page
438 prob 3]
[ICWA Inter- june 88]

12] The quality product ltd. Manufacture & markets a single product. Following data is
available.
Particulars Rs per unit
Material 16
Conversion (variable) 12
Dealers margin 4
Selling price 40
Fixed cost – rs 5,00000
Present sales – 90,000 units
Capacity utilization - 60%

There is acute competition. Extra efforts are necessary to sell. Suggestions have been
made for increasing sales.
A] By reducing sales price by 5%.
B] By increasing dealers margin by 25% over the existing rate.
Which of these two suggestions would you recommend if the company desires to
maintain present profits. Give reasons. [cama page 439 prob 4]
[MBA II-MAY 85]

13] Garden Products Ltd manufacture the “Rainpour” garden pour.


The accounts of the company for the year 2004 are expected to reveal a profit of rs
14,00000 from the manufacture of “Rainpour” after charging fixed costs of rs 10,00000.
The “Rainpour” is sold for rs 50 per unit & has a variable unit cost of rs 20. market
sensitivity tests suggest the following responses to price changes.
Alternatives Selling price reduced by Quantity sold increased by
A 5% 10%
B 7% 20%
C 10% 25%

Evaluate these alternatives & state which, on profitability consideration, should be


adopted for the forthcoming year, assuming cost structure unchanged from 2004. [cama
page 441 prob 5]
[CA Final May 82]

14] shri kiran manufactures lighters. He sells his product at rs 20 each & makes profit of
rs 5 on each lighter. He worked 50% of his machinery capacity at 50,000 lighters. The
cost of each lighter is as under.
Particulars Rs
Direct material 6
Wages 2
Works overheads 5 (50% fixed)
Sales expenses 2 (25% variable)

His anticipation for the next year is that the cost will go up as under.
Fixed charges 10%
Direct labour 20%
Material 5%
There will not be any change in selling price. There is an additional order for 20,000
lighters in the next year.
What is the lowest rate he can quote so that he can earn the same profit as the current
year? [cama page 442 prob 6]
[CA Final- Nov 84]

15] a ltd manufactures three different products & the following information has been
collected from the books of account.
Particulars S T Y
Sales mix 35% 35% 30%
Selling price Rs 30 Rs 40 Rs 20
Variable cost Rs 15 Rs 20 Rs 12
Total fixed costs Rs 1,80,000
Total sales Rs 6,00000
The company has currently under discussion a proposal to discontinue the manufacture
of product Y & replace it with product M when the following results are anticipated.
Particulars S T Y
Sales mix 50% 25% 25%
Selling price Rs 30 Rs 40 Rs 30
Variable cost Rs 15 Rs 20 Rs 15
Total fixed costs Rs 1,80,000
Total sales Rs 6,40,000
WILL YOU ADVISE the company to changeover to production of M? Give reasons for
your answer. [ Cama page 446 prob 8]
[CA Final – May 83]

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