Scribd
Upload
62 views6 pages

LVC Session - 3 (Illustrations)

The document provides information on the production mix, costs, and profitability of Products A, B, and C. It determines the optimal production quantities to maximize total contribution. It then calculates break-even point and profit/volume ratio under the original and revised selling prices. Finally, it allocates overhead costs to different cost pools using activity-based costing rates and driver levels to determine the total cost per batch.

Uploaded by

Srinivasan Narasimman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
62 views6 pages

LVC Session - 3 (Illustrations)

The document provides information on the production mix, costs, and profitability of Products A, B, and C. It determines the optimal production quantities to maximize total contribution. It then calculates break-even point and profit/volume ratio under the original and revised selling prices. Finally, it allocates overhead costs to different cost pools using activity-based costing rates and driver levels to determine the total cost per batch.

Uploaded by

Srinivasan Narasimman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 6

Limitation of Raw Material in Kg

Priority Matrix Product A Product B Product C


Selling Price Per Unit 100 140 90
Variable Cost Per Unit 75 110 65
Contribution per Unit 25 30 25

Raw Material Required Unit in Kg 5 8 6


Contribution per Kg of Raw Material 5.0 3.8 4.2
RANK I III II
Optimum Production Mix Units RM in Kgs Contribution per unit Total Contribution
Product A 5000 25,000 25 125,000
Product C 4000 24,000 25 100,000
Product B 1500 12,000 30 45,000
Total Contribution 61,000 270,000
Less: Fixed Cost 150,000
Net Profit 120,000
Production in Units 150,000
Variable Cost per Unit 14
Fixed Cost per Unit 2
Profit 15%
Selling Price 18.4

A BEP = FC / Contribution per Unit


Fixed Cost 300,000
Contribution 4.40
BEP in Units 68,182

Profit/Volume Ratio = Contribution per Unit / SP per unit x100


B P/V Ratio 23.9%

C Revised Selling Price 17.48


Revised Contribution 3.48
Revised BEP in Units 86,207
Revised P/V Ratio 19.9%

D Budgeted Profit per Unit 2.4


Desired Profit per Unit 2.64
Total Desired Profit 396,000
Fixed Cost 300,000
Total Contribution 696,000
Quantity to be sold at Revised Price 200,000
Sales Value 3,496,000
chk
SV 3,496,000
VC 2,800,000
FC 300,000
Profit 396,000
Cost Pool Budgeted Overheads Cost Driver
Material Procurement 580,000 No. of Orders
Material Handling 250,000 No. of Movements
Set-up 415,000 No. of Set-ups
Maintenance 970,000 Maintenance Hours
Quality Control 176,000 No. of Inspection
Machinery 720,000 No. of Machine-Hours

Cost Driver Rates


Material Procurement 527
Material Handling 368
Set-up 798
Maintenance 115
Quality Control 196
Machinery 30

Overheads apportionment using ABC Method


Material Procurement 26 13,709
Material Handling 18 6,618
Set-up 25 19,952
Maintenance 690 79,679
Quality Control 28 5,476
Machinery 1800 54,000
Total Overheads 179,433

Total Cost using ABC Method


Direct Materials 130,000
Direct Labour 245,000
Prime Cost 375,000
Overheads 179,433
Total Batch Cost 929,433
Budgeted Volume
1,100
680
520
8,400
900
24,000

You might also like