Scribd
Upload
27 views

Cost Accounting

This document contains information about the costs, sales, and production capacity of two factories, X and Y. It asks to calculate the break-even point for each factory individually and for the combined company based on their current sales ratio. It then asks to determine the consequences on profit and break-even point if the sales ratio is changed to 2:3 while keeping total demand the same. The solution shows the calculations for the individual and combined break-even points under both sales mix scenarios and determines that profit would increase by Rs. 50,000 and the break-even point would be reduced by 3,205 units under the new 2:3 sales mix.

Uploaded by

ravariyagautam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
27 views

Cost Accounting

This document contains information about the costs, sales, and production capacity of two factories, X and Y. It asks to calculate the break-even point for each factory individually and for the combined company based on their current sales ratio. It then asks to determine the consequences on profit and break-even point if the sales ratio is changed to 2:3 while keeping total demand the same. The solution shows the calculations for the individual and combined break-even points under both sales mix scenarios and determines that profit would increase by Rs. 50,000 and the break-even point would be reduced by 3,205 units under the new 2:3 sales mix.

Uploaded by

ravariyagautam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

ILLUSTRATION 36

The following figures relate to Amit Ltd


Selling price per unit ₹ 40
Direct material per unit. ₹ 12
Direct labor per unit. ₹9
Other variable overheads per unit ₹7
Fixed factory overheads ₹ 3,20,000
Fixed office overheads ₹ 4,30,000
Calculate :
(1) P/V Ratio
(2) Break even sales in units and ₹
(3) Sales to earn profit of ₹ 4,50,000
(4) New break even point in ₹ and unit if total fixed overheads are increased by 15%.
SOLUTION : RS
Selling price (s) 40
Less: Variable Cost
Direct Material 12
Direct Labor 9
Variable Overheads 7 28
Contribution (c) 12

i. P/V Ratio = C *100 = 12 * 100 = 30%


S 40

ii. B.E Sales (in units) = Fixed cost = 7,50,000 = 62,500 units
Contribution per unit 12

B.E Sales (in ₹) = Fixed cost = 7,50,000 = RS.25,00,000


P/V Ratio 30%
iii. Sales Required = Fixed Cost + Desired Profit
P/V Ratio
= 7,50,000 + 4,50,000
30%
= 12,00,000 = 40,00,000
30%
iv. Present Fixed Overheads = 7,50,000
Add: 15% = 1,12,500
Revised = 8,62,500

New BEP (units) = 8,62,500 = 71,875 units


12

New BEP (RS) = 8,62,500 = RS.28,75,000


30%

Illustration 43
A company is producing an identical product in two factories . The following are the details
in respect of both factories.
Particulars Factory X Factory Y
Selling price per unit (₹) 50 50
Variable cost per unit 40 35
(₹) 2,00,000 3,00,000
Fixed cost (₹) 40,000 30,000
Depreciation included in
above fixed cost (₹) 30,000 20,000
Sales in units 40,000 30,000
Production capacity
(units)

You are required to determine :


(1) Break even point (BEP) each factory individually.
(2) Cash break even point for each factory individually.
(3) BEP for company as a whole, assuming the present product mix is in sales ratio.
(4) Consequences on profit and BEP if product mix is changed to 2:3 and total demand
remain same.
Solution :
Particulars Factory X Factory Y
1. Break-even point: 2,00,000 3,00,000
Fixed cost 50 – 40 50 – 35
Contribution = 20,000 units =20,000 units
2. Cash Break-even Point 2,00,000 – 40,000 3,00,000 – 30,000
Fixed cost – 10 15
Depreciation =16,000 units =18,000 units
Contribution

3. BEP as a whole = Complete Fixed Cost


Composite Contribution
= Rs 2,00,000 + Rs 3,00,000
10 * 3 + 15 * 2
5 5
= Rs 5,00,000 = 41,667 units
6+6
4. New Sales Mix = 50,000 * 2 = 20,000 of X
5
= 50,000 * 3 = 30,000 of Y
5
Calculation of Composite Contribution = [10 * 2] + [15*3] = 4 + 9 = RS 13
5 5
Consequence of Profit
Particulars Existing Mix New Mix
Contribution 50,000 *12 = 6,00,000 50,000*13 = 6,50,000
Less: Fixed Cost (5,00,000) (5,00,000)
Profit 1,00,000 1,50,000

Increase in Profit = Rs 1,50,000 – Rs 1,00,000 = Rs 50,000


Consequence on BEP
New BEP as a whole = Complete Fixed Cost = 5,00,000 = 38,462 units
Composite Contribution 13
So, BEP reduced by 3205 units (41,667 – 38,462).

You might also like