Practical Questions

the selling price of which is ?50

1 A company annually manufactures and sells 20,000 units of a product,
and profit earned is 10 per unit.
The analysis of cost of 20,000 units is:
Materials cost 3,00,000
Labour Cost 7 1,00,000
Overheads 4,00,000 (50% variable)
You are required to compute:
(i) Break-even sales in units and in Rupees.
(i7) Sales to earn a profit of 7 3,00,000.
(iü) Profit when 15,000 units are sold.
[Ans. (i) 10,000 units or 5,00,000 (ii) R 12,50,000; (iüi) 7 1,00,000]
You are given the following information:

Fixed cost 4,000

B.E. Sales 20,000
Profit 1,000
Selling price (per unit) 20 om
Calculate (a) Sales and marginal cost of sales
(b) New B.E. Point if selling pice is reduced by 10o. (B.Com. Delhi)
[Ans. Sales 25,000; Marginal cost 20,000; New B.E.P. 7 36,000]
From the following data, you are required to calculate the break-even point and net sales value at this
point
Selling price per unit 25
Direct material cost per unit 8
Direct labour cost per unit 5 ug oqy
Fixed overheads 24,000 ob 1s 1
Variable overheads @ 60% on direct labour
Trade discount bu4% O
If sales are 15% and 20% above the break-even volume, determine the net profits.
(C.S. Inter)
[Ans. B.E.P. 3000 units, Profit (i) 7 3,600, (i) 7 4,800]
ing
Cost-Volume-Profit Analysis 10.55

3.) You are given the following information:

m.)
ala) Selling price per unit 20
Variable cost 12
Total fixed cost
m.) Calculate
96,000
hi) Break-even units and value.
the
ter) ( Profit and margin of safety when sales would be 4,00,000
ive (B.Com., Punjab)
m.) Ans. () 12,000 units, 2,40,000 (i) Profit 64,000, Margin of safety 7 1,60,000J
the ACompany
is 2
budget for a production of 1,50,000 units. The variable cost per unit is
per unit. The company fixes its selling price to fetch a profit of 15% on cost.
14 and fixed cost
re
the (a) What is the break-even point?
ter) (b) What is the profit volume ratio?
ter) () If it reduces its selling price by 5%, how does the revised selling price affect the break-even point and
ain. the profit volume ratio?
hi) (d) If a profit increase of 10% is desired more than the budget, what should be the sales at the reduced
prices? (B.Com. Hons. Delhi)
[Ans. (a) 68,182 units (6) 23.91%, (c) BEP 86,207 units, P/V ratio 19.9% (d) 34,96,000]
50 66. The Profit/Volume ratio of a company is 50% and its margin of safety is 40%. You are required to work
out the break-even point and the net profit if sales volume is 50 lakhs. (B.Com. Hons., Delhi)
[Ans. BEP 7 30 lakhs, Profit 7 10 lakhs]
(a) From the following particulars draw a break-even chart and find out the break-even point.
Variable cost per unit 15
Fixed cost 54,000
Selling pice unit 20
What should be the selling price if break-even point is to be brought down to 6,000 units.
(6)
(B.Com., Bangalore)
[Ans. (a) 10,800 units; (b) 7 24]
8 The operating results of a company for the last two years are as follows
Sales Profit
Year 2011 2,70,000 6,000 an
Year 2012 3,00,000 15,000
You are required to calculate:
(a) P/V Ratio
(b) Break-even point.
(B.Com., Madras)
(c) Margin of safety at a profit of 7 24,000.
elhi) [Ans. (a) 30%, (b) 7 2,50,000, (c) ? 80,000]
below:
The sales and profit during two years are given
this Sales Profit
720 lakhs 2 lakhs
Year 2011
7 30 lakhs 4 lakhs
Year 2012
to profit of 7 5 lakhs. (I.C. W.A. Inter)
Calculate (a) P/V ratio, (b) Sales required earn a

[Ans. (a) 20%; (b) 735 lakhs]

Th fit for tarn rears are as below:
 .Loit., 24dUurarj
[Ans. (a) 25%, (b) 70,000, (c) 2,30,000, (d) 5,00,000, (e) * 7,500, ( 1,12,500 and 1,2750
The Reliance Co. furnishes you the following information
First half Second half
Sales 8,10,000 10,26,000
Profits 21,600 64,800
From the above you are required to compute the following assuming that fixed cost remains the same
in both the periods.
1. P/V. ratio
2. Fixed cost
3. The amount of profit or loss when sales are 6,48,000
4.The amount of sales required to earn a profit of 1,08,000. (B.Com. Hons., Delhi)
[Ans. (1) 20%; (2) 1,40,400; (3) 10,800 Loss; (4) 12,42,000]
12. RK Ltd. manufactures three products X Y and Z. The unit selling prices of three products are 100
and? 30. The
1 6 0 and 7 5 respectively. The corresponding unit variable costs are7 50, 7 80
manufactured and sold are 20%, 30o and 50
proportions (quanity) in which these products are
respectively. The total fixed costs are 14,80,000. C.A. Inter
Calculate the overall break-even quantity and the productwise break-up of such quantity. (
[Ans. Overall BEP =
26,195 units, X-5,239 units, Y-7,858 units, Z-13,098 units]
loctrirr India Itd deri sto effect 10h Teduction in the prices of its products because
it is felt that
 +0,00 (C) 48,000J
17 An analysis of Sultan Manufacturing Company led to the following information:
Cost element Variable cost Fixed cost
(% of sales) betophi
Direct material 32.8
Direct labour 28.4
Factory overhead 12.6
bod aft
Distribution overhead
1,89,900 (
4.1
General administration overhead 1.1
58,400ud
66,700
s
Budgeted sales for the next year 7 18,50,000. You are required to determine:
(a) Break-even sales value.
(6) Profit at the budgeted sales volume.
(c) Profit, if actual sales:
(i) drop by 10%
(ü) increase by 5% from the budgeted sales. (B.Com. Hons., Delhi)
Ans.(a) 15,00,000, (b) 73,500; (c) (i) 34,650, (i) 92,925]
(Hint: Variable cost is 79% of sales. Thus P/V ratio is 100 79 =21%).
7 I+ mauf 11
 pIor.
Leela Hotel has annual fixed cost applicable to rooms of 15,00,000 for a 300 rooms hotel with average
daily rates of ? 40 and average varñable cost of 6 for each room rented. The Hotel operates 365 days per
year. It is subject to an income tax rate of 30 per cent.
It is required to:
(a) Compute the break-even point in terms of number of rooms rented, and
Calculate the number of rooms the Hotel must rent to earn a net income after tax of 10,00,000.
(b)
(B.Com. Hons., Delhi)
Ans. (a) 44,118 rooms per year or 121 rooms per day, (b) 86,134 rooms per year or 236 rooms per dayl

Rs. 15,00,000+ [10,00,000

70% = 86,134.
(Hint Rooms to eam given profit =

Rs.34

following is for the year 2005

budget
24 The
Sales (1,00,000 units r 20) 20,00,000
Variable cost 10,00,000
Contribution 10,00,000

Fixed cost 4,00,000

Net profit 6,00,000

From the above set of information find out:

introduced and also
(a) The adjusted profits for 2005 if the following two sets of changes are suggest
which plan should be implemented.
Plan A Plan B
Increase in pice 20% Decrease in price 20%
Decrease in volume 25% Increase in volume 25%
Increase in vanable cost 10% Decrease in variable cost 10 %
Increase in fixed cost 5l% Decrease in fixed cost 5
(0) points under the two plans referred above.
The P/V ratio and break-even (I.C.W.A., Inter)
BEP 7,75,384 Plan B Profit 4,95,000, P/V
Ans. Plan A Profit5,55,000, P/V ratio
-
54.167%,
and
ratio 43.75%, BEP 8,68,572 Original profit is higher at 6,00,000 and thus Plan A B should not
be implemented)