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# Suggested Solution

## Break Even Analysis

Solution # 1
(a) Break even point
Break even in units = Fixed cost / CM per unit
= 400,000 / 80
= 5,000 units
Break even sales value = 5,000 units x Rs.100
= Rs.500,000
(b) Estimated contribution and profit
Sales
Rs.
800,000
Less: Variable cost (20%)
160,000
Contribution margin (80%) 640,000
Less: Fixed cost
400,000
Estimated profit
240,000
(c) Desired turnover
= (Fixed cost + profit ) / CM%
= (400,000 + 400,000) / 80%
= Rs.1,000,000
Break even in units = 1,000,000 / 100
= 10,000 units

Solution # 2
(i)

## Break even point in units

Break even in units = Fixed cost / CM per unit
= 1,200,000 / 10
= 120,000 units
(ii)
Break even point in Rupees
Break even in Rs. = 120,000 units x Rs.30 = Rs.3,600,000
(iii)
Number of units to be sold to earn profit before tax Rs.200,000
Break even in units = Fixed cost + profit / CM per unit
= 1,200,000 + 200,000 / 10
= 140,000 units
(iv)
Number of units to be sold to earn profit after tax Rs.100,000
Break even in units = [Fixed cost + (profit /1 t)] / CM per unit
= [1,200,000 + (100,000 / 75%)] / 10
= 133,333 units
(v)
Break even in units
Break even in units = Fixed Cost / CM per unit
= 1,200,000 / 11
= 109,091 units
Working for revised CM per unit
CM per unit = Revised Sales price per unit Revised variable cost per unit
33 22 = 11

Solution # 3
(i)

(ii)

## Break even point in units and amount

Break even in units = Fixed cost / CM per unit
= 2,000,000 / 2,500
= 800 units
Break even in amount = Fixed cost / CM%
= 2,000,000 / 62.50%
= Rs.3,200,000
Margin of safety in units and amount
Margin of safety in units = Actual unit Breakeven unit
= 2,000 800
= 1,200 units
Margin of safety in amount = Actual sales Breakeven sales
= 8,000,000 3,200,000 = Rs.4,800,000

Solution # 4
(i)

(ii)

## Break even point in units and amount

Break even in unit = Fixed cost / CM per unit
= 500,000 / 8
= 62,500 units
Break even in Rs. = 62,500 x 32
= Rs.2,000,000
Sales
Rs.
2,000,000
Variable cost (62,500 x 24)
1,500,000
CM
500,000
Less: Fixed Cost
500,000
Profit
-----------Amount of sales required to earn a profit of Rs.420,000
= (Fixed cost + profit) / CM%
= 500,000 + 420,000 / 25%
= Rs.3,680,000
Sales
Less: Variable cost (75%)
CM
Less: Fixed cost
Profit

Rs.

3,680,000
2,760,000
920,000
500,000
420,000

Solution # 5
(a) Break even sales in rupees
= Fixed Cost / CM%
= 20,000 / 25%
= Rs.80,000
(b) Margin of safety in Rupees and percentage
Margin of safety = Budgeted sales Break even sales
= 150,000 80,000
= Rs.70,000
Margin of safety in % = (Budgeted sales Break even sales) / Budgeted sales
= (150,000 80,000) / 150,000 x 100
= 46.67%

## (c) Break even in units

Break even in units = Fixed cost / CM per unit
= 20,000 / 3.75
= 5,333 units
Working note for CM per unit
Number of units sold = 150,000 / 15
= 10,000 units
CM per unit = Sales price per unit variable cost per unit
= 15 (112,500 / 10,000)
= Rs.3.75

Solution # 6
(a) Fixed expense for the year
Beak even sales = Fixed cost / CM%
2,000,000 = Fixed cost / 40%
Fixed cost = Rs.800,000
(b) Sales for the year
Sales for the year = (Fixed cost + Profit) / CM%
= (800,000 + 320,000) / 40%
= Rs.2,800,000
(c) Variable expense for the year
CM% = Sales Variable cost
Sales
40% = 2,800,000 Variable cost
2,800,000
Variable cost = Rs.1,680,000
(d) Margin of safety ratio
Margin of safety ratio = (Actual sales Breakeven sales) / Actual sales x 100
= (2,800,000 2,000,000) / 2,800,000 x 100
= 28.57%

Solution # 7
Sales (7,000 x 16)
Less: Variable cost (7,000 x 10)
CM
Less: Fixed Cost
Profit

Rs.
112,000
(70,000)
42,000
(42,000)
----------

Solution # 8
Break even point in units = Fixed cost / CM per unit
= 20,000 / 0.5
= 40,000 units

Solution # 9
(i)

## Computation for sales price

Material

Rs.
193,600

(ii)

Labour
Total cost (i.e. 82% of sales)
Add: Commission expense (8% of sales)
(393,600 / 82%) x 8%
Add: Net profit (10% of sales)
(393,600 / 82%) x 10%
Total sales value

90,000
80,000
30,000
393,600

38,400
48,000
480,000
Rs.12 per unit

## Break even sales value

= Fixed cost / CM%
= 76,800 / 28%
= Rs.274,286

## Working notes for CM% and Fixed Cost

Sales (40,000 units x Rs.11)
Less: Variable cost
Material
Labour
Total variable cost
72%
Contribution margin 28%

Fixed Costs
Labour
Total fixed cost

Rs.
440,000
193,600
63,000
51,200
9,000
316,800
123,200

27,000
28,800
21,000
76,800