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    CVP Analysis Inclass Ass Key 9qans

    Uploaded by

    Naga Nagendra
    This document provides a cost analysis for a company that manufactures a product. It includes calculations to determine: 1) The break-even point is at 20,000 units or 50% activity level. 2) To earn an 8% net income, 27,223 units must be sold. 3) To earn a profit of Rs. 95,000, activity level needs to be 88.33% 4) The selling price required to lower the break-even point to 40% activity level is Rs. 26.875 per unit.

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    CVP Analysis Inclass Ass Key 9qans

    Uploaded by

    Naga Nagendra
    22 views3 pages
    This document provides a cost analysis for a company that manufactures a product. It includes calculations to determine: 1) The break-even point is at 20,000 units or 50% activity level. 2) To earn an 8% net income, 27,223 units must be sold. 3) To earn a profit of Rs. 95,000, activity level needs to be 88.33% 4) The selling price required to lower the break-even point to 40% activity level is Rs. 26.875 per unit.

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    Cvp Analysis Inclass Ass Key 9qans

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    This document provides a cost analysis for a company that manufactures a product. It includes calculations to determine: 1) The break-even point is at 20,000 units or 50% activity level. 2) To earn an 8% net income, 27,223 units must be sold. 3) To earn a profit of Rs. 95,000, activity level needs to be 88.33% 4) The selling price required to lower the break-even point to 40% activity level is Rs. 26.875 per unit.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    22 views3 pages

    CVP Analysis Inclass Ass Key 9qans

    Uploaded by

    Naga Nagendra
    This document provides a cost analysis for a company that manufactures a product. It includes calculations to determine: 1) The break-even point is at 20,000 units or 50% activity level. 2) To earn an 8% net income, 27,223 units must be sold. 3) To earn a profit of Rs. 95,000, activity level needs to be 88.33% 4) The selling price required to lower the break-even point to 40% activity level is Rs. 26.875 per unit.

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    © All Rights Reserved
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    of 3

    CVP ANALYSIS & MARGINAL COSTING_ INCLASS ASSIGNMENT _KEY_

    Prof. Bhavana Raj


    (9)A company manufactures a product, currently utilizing 80%
    capacity with a turnover of Rs 8,00,000 at Rs 25 per unit. The cost
    data are as under: Material Cost Rs 7.50 per unit, Labor Cost Rs 6.25
    per unit, Semi-Variable Cost (including Variable Cost of Rs 3.75 per
    unit) Rs 1,80,000.Fixed Cost Rs 90,000 up to 80% level of output,
    beyond this an additional Rs 20,000 will be incurred. Calculate:
    (1)Activity level at Break-Even Point, (2)Number of units to be sold
    to earn a net income of 8% of sales, (3) Activity level needed to earn
    a profit of Rs 95,000 & (4) What should be the selling price per unit,
    if break-even point is to be brought down to 40% activity level?
    (9A)Working Notes:
    Amount
    (a Variable Cost per unit:
    )
    Material cost per unit
    Labor cost per unit
    Semi-Variable cost per unit
    Variable Cost per unit =
    (
    b
    )

    Rs.
    Rs.
    Rs.
    Rs.

    7.50
    6.25
    3.75
    17.50

    Contribution per unit:


    Contribution per unit = Selling price per unit 25 - 17.50
    Variable cost per unit
    =
    Contribution per unit =
    7.50
    per
    unit

    (c
    )

    Fixed cost in Semi-Variable Cost:


    Total Semi-Variable Cost

    Rs.
    1,80,000
    Less: Variable cost @ Rs 3.75 per unit = (Rs. 3.75 * Rs.
    32,000 units)
    1,20,000
    Fixed cost in Semi-Variable Cost=
    Rs. 60,000
    (
    d
    )

    Total Fixed Cost up to 80% level:


    Fixed cost up to 80%
    Add: Fixed cost in Semi-Variable Cost
    Total Fixed Cost up to 80% level =

    Rs. 90,000
    Rs. 60,000
    Rs.
    1,50,000

    (e Total Fixed Cost above 80% level:


    )
    Fixed cost up to 80% level
    Add: Fixed cost in Semi-Variable Cost
    Add: Additional Fixed Cost
    Total Fixed Cost above 80% level =
    (f
    )

    Rs. 90,000
    Rs. 60,000
    Rs. 20,000
    Rs.
    1,70,000

    No. of units produced at 80% level:


    Total Turnover
    Per Unit
    No.
    of
    units
    [8,00,000/25]=

    (
    g
    )

    produced

    at

    80%

    level

    Rs.
    8,00,000
    Rs. 25
    = 32,000
    units

    No. of units produced at 100% level:


    No. of units produced at 80% level

    32,000
    units
    No. of units produced at 100% level = [32,000/80] 40,000
    =
    units
    (
    h
    )

    Profit at 80% level of activity:


    Profit = [(Sales units * Contribution per unit) Rs. 90,000
    Fixed Cost] = =[(32,000 units * Rs. 7.5) Rs.
    1,50,000] =[( Rs. 2,40,000) Rs. 1,50,000] =
    Percentage to Sales = [Profit at 80% level of 11.25%
    activity]/[Sales] =
    = [Rs. 90,000]/[Rs. 8,00,000] =

    (i
    )

    So up to desired profit Rs 90,000


    Fixed Cost = 11.25% of Sales = [(11.25%) * Rs.
    (8,00,000)]=
    1,50,000

    (1)Activity Level at BEP: FC = Fixed Cost ; C per unit = Contribution


    per unit
    (a)Activity Level at = [FC]/[C per unit]=[Rs. 1,50,000]/[Rs. 7.5] =
    BEP =
    20,000 units.
    b)Activity Level =
    ={[Activity Level at BEP]/[ No. of units

    produced at 100% level]


    * [100]}
    {[20,000]/[40,000] * (100)} = 50% Level.

    (2)No. of units to be sold to earn a net income of 8% of Sales:


    Suppose Sales Unit = X,
    Equation:
    Sales=
    25 X =
    25 X =
    25 X 19.5 X =
    5.5 X =

    Variable Cost + Fixed Cost + Profit


    17.5 X + 1,50,000 + 2 X
    19.5 X + 1,50,000
    1,50,000
    {[1,50,000]/[5.5]} = 27,223 units.

    (3)Activity level needed to earn a profit of Rs 95,000:


    The profit amount can be achieved at over 80% level, hence fixed
    cost will be Rs 1,70,000.
    Sales =

    =[Fixed Cost + Desired Profit]/[Contribution per


    unit]=
    = [1,70,000 + 95,000]/[7.5]= 35,333 units.
    Activity Level ={[Sales]/[No. of units produced at 100% level] *
    =
    [100]} =
    ={[35,333]/[40,000] * [100]} = 88.33%.
    (4)Selling price per unit required to bring down BEP to 40% activity
    level:
    40%
    Activity
    Level =
    Selling
    price
    to Break-Even
    at the level=

    =[40% of 40,000] =[40,000 * (40/100)] =16,000


    units.
    ={{[Fixed Cost]/[Sales]} + [Variable Cost per
    unit]} =
    ={{[1,50,000]/[16,000]} + [17.50]} = Rs. 9.375 +
    Rs. 17.50 = Rs 26.875.

    Selling price per unit required to bring down BEP to 40% activity
    level=
    = Rs 26.875.

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