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Case Study-1 Marginal Costing

The document presents a case study solution analyzing the financial statements of a company that manufactures radios. It provides two equations showing the relationship between cost (X), profit (Y), and selling price (Rs. 1600) under the current and anticipated future costs. The cost of materials and wages is expected to increase, reducing the current profit by 40% at the current selling price. Solving the equations provides the current cost of X as Rs. 1207.55. The statement then calculates the anticipated future costs and profit at a revised selling price of Rs. 1808 to maintain the original profit rate of 32.5% of total costs.

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shrutimathur14891802
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3K views

Case Study-1 Marginal Costing

The document presents a case study solution analyzing the financial statements of a company that manufactures radios. It provides two equations showing the relationship between cost (X), profit (Y), and selling price (Rs. 1600) under the current and anticipated future costs. The cost of materials and wages is expected to increase, reducing the current profit by 40% at the current selling price. Solving the equations provides the current cost of X as Rs. 1207.55. The statement then calculates the anticipated future costs and profit at a revised selling price of Rs. 1808 to maintain the original profit rate of 32.5% of total costs.

Uploaded by

shrutimathur14891802
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Analysis of Financial

Statements
Case Study 1
Solution
Solution :
• Let X be the cost, Y be the profit and Rs. 1600, selling price per unit of radio
manufactured by the company

Hence X+Y= Rs. 1600 -i

Statement of present and future cost of a radio

Particulars Present Cost Increase in Cost Anticipated Future Cost


  (A) (B) (C ) = (A) + (B)
Direct Material 0.3X 0.09X 0.39X
Direct Labour 0.4X 0.04X 0.44X
-
Overheads 0.3X 0.30X
       
TOTAL X 0.13X 1.13X
Solution : (Cont ..)

• An increase in material price and wage rates


resulted into decrease in current profit by 40%
at present selling price :

• Therefore
1.13 X + 0.6Y = 1,600 – ii

On solving i & ii
X + Y = 1600
1.13X + 0.6 Y = 1600
Solution : (Cont ..)
Statement of revised selling price to maintain the present rate of profit

Direct Material 470.94


0.39 X 1207.55  

Direct Labour 531.32


0.44 X 1207.55  
Overheads 362.27
0.30 X 1207.55  
   
Total Cost 1,364.53
Profit 443.47
(32.5% of total cost)  
Revised Selling Price 1,808.00
Questions / Comments ?

Rohit Bhagwat
Cell : 99308-96787
[email protected]

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