Solution 1.

Assumption: It is assumed that fixed cost will remain same during the next year also.
Statement of Contribution and Profit
(i) Column1 Column2 Column3 Column4 Column5 Column6
Existing When selling price is reduced by
5% 10%
No. of units sold 30,000 ? ?
Per unit (Rs.) Total (Rs.) Per unit (Rs.) Per unit (Rs.)

Sales 100 3000000 95 90

Less: Variable cost 60 1800000 60 60
Contribution 40 1200000 35 30
Less: Fixed cost 700000
Profit 500000

(a) When selling price is reduced by 5%

Required sales (units) (FC+DP)/Cp.u 34285.71429
or say 34286
Increase in units 4,286

(b) When selling price is reduced by 10%

Required sales (units) = (FC+DP)/Cp.u 40000
Increase in units 10,000
(ii) Required contribution = Sales (units) × Cp.u
Cp.u= Required contribution/ Sales (units) 25
Selling price (Rs.) = Cp.u.+VCp.u 85
Solution 2.
Statement of Contribution and Profit (without special offer)
Year Last Year Current Year

Capacity 60% 60%

No. Of Units 60000 60000
Selling Price 150 150

Variable Cost p.u:

Direct material 40 42
Direct Labour 10 12
Work Overhead 25 25
Sales Overhead 5 5
Variable cost p.u 80 84
Contribution p.u 70 66
Total Contribution 4200000 3960000

Fixed Cost:

Work Overhead 1500000 1650000

Sales Overhead 900000 990000
Total Fixed Overhead 2400000 2640000
Profit 1800000 1320000

Calculation of additional contribution / profit to be earned from special offer:

Desired Profit 1740000

Less: Estimated Profit 1320000
Additional Profit to be earned from special offer 420000
Additional units= 20000
Additional p.u= Additional contribution/ Sales (units) 21
Recommended Selling Price(Rs.) =Cp.u.+VCp.u 105
Solution 3.
Statement of Cost of Production and Profit
Column1 Column2 Column3 Column4 Column5 Column6

Month Ist 2 months Next 6 months Last 4 months For Whole Year
Capacity 60% 75% 80% 74.17%

Production/Sales (units) 12000 45000 32000 89000

Material 96000 360000 256000 712000
Labour 112000 360000 256000 728000
Variable Overheads 36000 135000 96000 267000
Total Variable Cost 244000 855000 608000 1707000
Semi-Variable Cost 60000
Fixed Cost 168750
Total Cost 1935750
Add: Profit (1/3 of cost) 645250
Sales 2581000
Selling Price 29
Solution 4. Statement of Marginal Cost (Per Pair Of Boxing Glove)

Particulars Five Years Ago (Rs.) Now (Rs.)

Selling Price (Sp.u.) 28 ?
Direct Material 3.3 6.45
Direct Labour 3.5 4.5
Variable Overheads 10 13

Variable Cost per pair 16.8 23.95

Contribution (Cp.u.) 11.2
P/V Ratio Cp.u./Sp.u. 40%
Fixed Cost (FC) 18000 22500
BEP(units) FC/Cp.u. 1607.142857
Or Say 1607 1607

Calculation of Current Selling Price to break even at 1607 units

Contribution (Cp.u.) FC/BEP(units) 14.00124456

Or Say 14
Recommended SP Cp.u.+VCp.u. 37.95
Solution 5.
Statement of Marginal Cost, Contribution and Profit

Particulars Domestic Sale Export Order Total

Sales(units) 15000 2000 17000
Selling Price(Rs.) 200 120
Sales(Rs.) 3000000 240000 3240000
Variable Cost: Cost p.u
Material Cost 40 600000 80000 680000
Wages 30 450000 60000 510000
Variable exps 20 300000 40000 340000
Semi-variable exps.(Variable) 5 75000 10000 85000
Total Variable Cost 95 1425000 190000 1615000
Contribution 1575000 50000 1625000
Fixed Cost:
Fixed Cost 750000 0 750000
Semi-variable exps.(Fixed) 75000 0 75000
Special Packing Cost 0 10000 10000
Total Fixed Cost 825000 10000 835000
Profit 750000 40000 790000

Export order should be accepted as it increases overall contribution by Rs. 50000 and Profit by Rs. 40000

Decision: Yes
Solution 6.
Statement of Contribution

Product X Y Z
Expected Demand (units) 6000 4000 3000
Raw material cost as % of Sales Value 80% 60% 75%
Rs. Rs. Rs.
Selling price (SP) 250 200 400
Variable cost per unit:
Direct material @Rs.20 p. kg. 200 120 300
Direct labour @ Rs 16 per hour 24 40 32
Variable overheads 6 10 8
Total variable cost per unit 230 170 340
Contribution per unit 20 30 60
Material required p.u. (Kg.) 10 6 15
Contribution per Kg. of material 2 5 4
Ranking (Contribution per Kg. of material ) III I II
Labour hours required per unit (Labour cost /
Rs.16) 1.5 2.5 2
Contribution per labour hour 13.33333333 12 30
Ranking (based on contribution per labour
hour) II III I
Fixed Cost 36000 24000 18000 78000

(i) When raw material is key factor: Total raw material available = 1,00,000 kg. Optimum product mix will be

Ranking of products( as per Contribution per

Kg. of material ) Units Material required p.u. (Kg.) Total material consumption (Kg.)
Y 4000 6 24000
Z 3000 15 45000
X 3100 10 31000
Total 100000

Statement of Contribution and Profit

Product Units Cp.u (Rs.) Total(Rs.)

Y 4000 30 120000
Z 3000 60 180000
X 3100 20 62000
Total Contribution 362000
Less; Fixed Cost 78000
Profit 284000

(ii) When labour time is key factor Labour hours available= 18,400; Optimim product mix will be

Ranking of products( as per Contribution per

labour hour ) Units Labour hours required p.u. Total labour hours consumed
Z 3000 2 6000
X 6000 1.5 9000
Y 1360 2.5 3400
Total 18400

Statement of Contribution and Profit

Product Units Cp.u (Rs.) Total(Rs.)

Z 3000 60 180000
X 6000 20 120000
Y 1360 30 40800
Total Contribution 340800
Less; Fixed Cost 78000
Profit 262800
Solution 7.
(i) Statement of Contribution and Profit under option (i)

Sales 2675000

Less: Variable Cost 2000000

Contribution 675000
Less: Fixed Cost 300000
Profit 375000

Statement of Contribution and Profit under option (ii)

Sales 2975000

Less: Variable Cost 2235000

Contribution 740000
Less: Fixed Cost 320000
Profit 420000
Solution 8.
Comparative Statement of Profitability

Existing Proposed

Domestic Export Total

Sales (units) 10000 10000 20000 30000
Rs. Rs. Rs. Rs.
Selling Price 4.25 3.72 3.55
Sales 42500 37200 71000 108200
Variable Cost:
Material Cost 15000 15000 30000 45000
Labour Cost 11000 11000 22000 33000

Variable Overheads 6000 6000 12000 18000

Total Variable Cost 32000 32000 64000 96000
Contribution 10500 5200 7000 12200
Less: Fixed Cost 8000 8000 800 8800
Profir 2500 -2800 6200 3400

Recommendation: Yes, ign s worthwhile to try enter the foregin market as it will give a net profit of Rs. 6,200. Next year this will, help the firm to cover a loss of Rs. 2,800 from domestic market and earn an overall net profit of Rs. 3,400 (Rs. 6,200 - Rs. 2,800)
Solution 9.

Working: Computation of Material and Labour cost using information at 90% capacity
Rs.
Sales 1500000
Less Profit 150000
Total Cost 1350000
Less: All cost other than material & Labour
Fixed Expenses 300500
Semi-fixed expenses 97500
Variable expenses 145000 543000
Material & Labour 807000

Statement showing differential cost of 1,500 units

Material & Labour 89666.66667

Fixed Expenses 100
Semi-fixed expenses 3000
Variable expenses 4500
Differential Cost 97266.66667

Minimum Export Price 64.84444444

Solution 10.
Statement of Incremental Revenue (IR), Differential Cost (DC) and Incremental Profit (IP) Total Capacity 50000
Capacity 100%
Capacity (%) Output (units) Selling Price (Rs.) Sales (Rs.) IR (Rs.) VC (Rs.) FC (Rs.) TC (Rs.) DC (Rs.) IP (Rs.) Profit Units 50000
50% 25000 2 50000 25000 20000 45000 5000 Selling Price 1.6
60% 30000 1.9 57000 7000 30000 20000 50000 5000 2000 7000 Less: VC 1
70% 35000 1.85 64750 7750 35000 20000 55000 5000 2750 9750 Contribution 0.6

80% 40000 1.8 72000 7250 40000 20000 60000 5000 2250 12000 Total Contribution 30000
90% 45000 1.7 76500 4500 45000 20000 65000 5000 -500 11500 Less: FC 20000
100% 50000 1.6 80000 3500 50000 20000 70000 5000 -1500 10000 Profit 10000
P/V Ratio 0.375
BEP in Units 33333.33333
BE Sales 2000
M/S 79988
Solution 11.

Selling Price 22 SP ranges between 15 to 50

Less: VC 8.8 VC is 40percent of SP
Contribution 13.2
Units 14998 Sales may range between 10000 to 30000 units
Total Contribution 197973.6
Less: FC 150000
Profit 47973.6