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1.A manufacturing Company’s director budgeted the following data for the coming year:
a) Find out the P/V ratio, break-even points & margin of safety
vii) Rs 15,000 variable cost decrease accompanied by Rs 45,000 fixed cost increase.
2.A single product company sells its products at Rs 60 per unit. In 1996, the company
operated at a margin of safety of 40%. The fixed costs amounted to Rs. 3, 60,000 & the
variable cost ratio to sales was 80%.
In 1997, it is estimated that the variable costs will go up by 10% & the fixed costs will
increase by 5%.
Find the selling price required to be fixed in 1997 to earn. The same P/V ratio as in 1996.
Assuming the same selling price of Rs 60 per unit in 1997, find the number of units
required to produced & sold to earn the same profit as in 1996.
3. Murthy Ltd has two divisions P & Q.P has the capacity to manufacture 150000 units of
a special component X annually and it has some idle capacity currently. The relevant
details extracted from the budget of P are as under:
VC per unit – Rs 60
Division q received an order for which it requires 25000 units of a component similar to
X and additional variable cost of Rs 6 per unit will be incurred to make minor
modifications to X to suit the requirement of division Q.What is the minimum transfer
price per unit which P should quote to Q if it targets a residual income of Rs 2500000.
4.This price structure of a gas cooker made by super frame company Ltd is as follows:
Materials 30
Labor 10
Variable overheads 10
50
Fixed overheads 25
Profit 25
5.Assuming that the cost structure and selling price remains the same in the period I & II
as given in the preceding question, find out:
a) P/V ratio
Rs Rs
I 120000 9000
II 140000 13000
6.Sterling Tea Ltd & dollar Tea Ltd, sell their entire product in tea in the same market at
a uniform price of Rs 10 per kg. Their budget for the year ended 31st December 2007
was as follows:
Rs Rs
b) State the impact on each company when the year ended with production exceeding
the budget by 20% and had to be sold at a price 10% lower than budgeted. The
variable & fixed cost increased by 5% over budget.
7.A Ltd company has three departments. The following data relates to the period ending
31 st December 2006.
Marginal cost:
8.A radio manufacturing finds that while it costs Rs 6.75 each to make a component of
376 R , that same is available in the market at Rs 5.75 each with the assurance of
continued supply.
Rs 6.25
b) What should be your decision if the supplier offered the component at Rs 4.55?