Years Exam Question. (iv) Total variable costs and (v) Profit

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1 CA R. K. Mehta Marginal Costing CA Past Years Exam Question Question : 1 (June, 2009) Product Z has a profit Volume ratio of 28%. Fixed operating costs directly attributable to product Z during the quarter II of the financial year will be ` 2,80,000. Calculate the sales revenue required to achieve a quarterly profits of ` 70,000. Question : 2 (Dec, 2008) (ICMA) The fixed cost for the production of a particular item is ` 200 per month. Its variable cost being ` 3 per unit and its sale price being ` 7 per unit, determine its break-even volume. What would be the profit if 2,000 such units were sold in i a month? How many such units should be sold to earn a profit of ` 3,000 per month? Question : 3 (June, 2000) (ICMA) A company has margin of safety at 20% and earns a profit of ` 4 lakhs. If its P/V ratio is 0.4, calculate its current sales and fixed costs. Question : 4 (May, 2008) A company has fixed cost of ` 90,0000 sales ` 3,00,000 and profit of ` 90,000. Required (i) What is the sales value in the next period if the company suffered a loss of ` 30,,000? (ii) What is the margin of safety for a profit of ` 90,000? Question : 5 (June, 2001) (ICMA) A company has a P/V ratio of 40%. It maintains a margin of safety of 20%. If its annual fixed costs amount to ` 24 lakhs, calculate its: (i) Break-even sales, (ii) Margin of safety (iii) Total sales (iv) Total variable costs and (v) Profit Question : 6 (Nov, 1996) A company sells two products, J and K. The sales mix is 4 units of J and 3 units of K. The contribution margin per unit are `40 for J and ` 20 for K. Fixed costs are ` 6,16,000 per month. Compute the break-even point. Question : 7 (June, 2001) (CS Inter) From the following data, you are required to calculate the break-even point and net sales value at that point: Direct materials cost per unit (`) 8 Direct labour cost per unit (`) 5 Fixed overheads (`) 24,000 Selling price per unit (`) 25 Trade discount (%) 4 Variable 60% on direct labour. If sales are 15% and 20% above the break-even volume, determine the net profits. Page No. 1

2 Question : 8 (Dec, 2000) (ICMA Inter) Last year, a company earned 20% profit on a sales turnover of ` 100 lakhs. To improve its profitability and competitiveness, the management has decided to reduce selling price by 10% and increase output and sales by 20%. Cuts are proposed to be effected on variable and fixed costs at 5% and 20% respectively. What effect will these steps have on the company s profit this year? The company was having fixed cost of ` 25 lakhs per annum last year. Question : 9 (June, 2001) (ICMA Inter) A company, having annual sales of ` 10 crores, is earning 12% profit before depreciation amount to ` 100 lakhs respectively. If the P/V ratio of the company is 40%, calculate its break-even sales. Question : 10 (Nov, 1999) PQR Ltd. Has furnished the following data for the two years: Sales ` 8,00,000? Profit/Volume ratio (P/V ratio) 50% 37.5% Margin of safety sales as a % of total sales 40% % There has been substantial in the fixed cot in the year due to the restructuring process. The company could its sales quantity level of in by reducing selling price. You are required to calculate the following: (i) Sales for in ` (ii) Fixed cost for (iii) Break-even sales for in ` Question : 11 (Nov, 2007) A company produces single product which sells for ` 20 per unit. Variable cost is ` 15 per unit and fixed overhead for the year is ` 6,30,000. Required: (a) Calculate sales value needed to earn a profit of 10% on sales. (b) Calculate sales price per unit to bring BEP down to 1,20,000 units. (c) Calculate margin of safety sales if profit is ` 60,000. Question : 12 (Dec, 2007) The following data is obtained from the records of an industrial unit: ` Sale of 4,000 ` 25 each 1,00,000 Material consumed 40,000 Variable overheads 10,000 Labour charges 20,000 Fixed overheads 18,000 88,000 Net profit 12,000 You are required to calculate: (i) The number of units by selling which the company will neither lose nor gain anything. (ii) The sales needed to earn a profit of 20% on sales. (iii) The extra units which should be sold to obtain the present profit if it is proposed to reduce the selling price by 20%. (iv) The selling price to be fixe to bring down its break-even point to 500 units under present conditions. Page No. 2

3 Question : 13 (Nov, 2007) A company manufactures a product, currently utilizing 80% capacity with a turnover of ` 8,00,000 at ` 25 per unit. The cost data are as under: Material cost ` 7.50 per unit, labour cost ` 6.25 per unit. Semi-variable cost (including variable cost of ` 3.75 per unit) ` 1,80,000. Fixed cost ` 90,000 up to 80% level of output, beyond this an additional ` 20,000 will be incurred. Calculate : (i) Activity level at break-even-point (ii) Number of units to be sold to earn a net income of 8% of sales (iii) Activity level needed to earn a profit of ` 95,000 (iv) What should be the selling price unit, if break-even-point is to be brought down to 40% activity level? Question : 14 (Nov, 2008) PQ Ltd. reports the following cost structure at two capacity levels: - Production Overhead 2,000 Units (100% Capacity) 1,500 Units I ` 3 per unit ` 4 per unit II ` 2 per unit ` 2 per unit If the selling price, reduced by direct material and labour, is ` 8 per unit, what would be its breakeven point? Question : 15 (Dec, 2007) ICMA Inter A manufacturing company, currently marketing 15,000 units of a ` 120 per unit indicates the following cost structure: Variable cost: Material ` 56 per unit Labour ` 10 per unit Expenses ` 6 per unit Next year s budget has been based on material price increase by 6%, labour cost increase by 8% due to new wage settlement and variable expenses increase by 3%. Fixed expenses are expected to go up by 5%. Current fixed cost = ` 1,00,000. You are required to present before the management for decision: (a) A statement showing profit in the next year s budget; (b) The new selling price, if the current profit volume ratio is to be maintained; and (c) The quantity to be sold during next year to achieve the same quantum of profit without price increase. Question : 16 (June, 2000) A multi-product company gives the following data of cost and sales of the three products manufactured by it. Production X Y Z Sales mix (% of sales value) Selling price per unit (`) Variable cost per unit (`) Total fixed cost ` 22,00,000 Total sales : ` 1,00,00,000 The current level of production absorbs the entire fixed cost of the company. The management of the company wants to discontinue Z and introduce W to improve profitability. Page No. 3

4 The revised data on production and sales is as follows: Production X Y W Sales mix (% of sales value) Selling price per unit (`) Variable cost per unit (`) Total sales : ` 1,00,00,000 You are required to determine: (a) Profit currently earned and profit likely to be earned after introduction of W. (b) Current break-even sales and break-even sakes after introduction of W (c) If it is possible to increase sales of any one of the products X, Y or W by 20% by keeping the total sales unchanged. What alternative mix would you suggest for higher profit? Question : 17 (Dec, 2001) CS Inter Your company, manufacturing 1,00,000 units p.a. sells it at a price of ` 80 per unit. The variable cost per unit is ` 48 and the annual fixed cost amounts to ` 18 lakhs. Based on these data, you are required to work out the following: (i) Present P/V ratio and break-even sales. (ii) Increase in the volume of sales required if the profit is sought to be increased by ` 3.6 lakhs. (iii) Percentage increase/decrease in sales quantity to offset an increase of ` 7 per unit in variable cost. Question : 18 (Dec, 2001) ICMA Inter The management of your organisation is considering a wage increase of 20%, effective from the beginning of next year. By virtue of various cost drives already implemented, it is expected that there would be no furthered increase in any other cost. The management seeks your feedback on the following: (i) Increase in selling price required for maintaining the existing profit-volume ratio. (ii) Assuming no increase in selling price is possible under the prevailing competitive environment, the extent to which the reduction in overall profit (following wage increase) may be recovered by utilizing the extra capacity. (iii) The effect on overall profitability if the present capacity is increased by 30% accompanied by an increase in fixed overheads by ` 1,00,000, selling price remaining at the present level. The following data are readily available: Present selling price ` 80 per unit Variable cost: Material ` 30 per unit Labour ` 20 per units Variable overhead ` 10 per unit Sales (at present) 50,000 units Fixed overheads ` 2,00,000 Question : 19 (Nov, 2001) A company has prepared the following budget of sales: Product Sales PV ratio ` % A 6,00, B 9,00, C 10,00, The fixed costs amount to ` 8,00,000. You are required to revise the sales mix to ensure a profit of ` 10,000 in such a way that not more than `8,00,000 of sales of product A is possible and that the present total value of sales should not be altered. Page No. 4

5 Question: 20 (June, 2003) The following particulars relate to a manufacturing factory for the month of March, Variable cost per unit ` 14 Fixed factory overhead ` 5,40,000 Fixed selling overhead ` 2,52,000 Sales price per unit ` 20 (i) What is the break-even point expressed in rupee sale? (ii) How many units must be sold to earn a target net income of ` 60,000 per, month. (iii) How many units must be sold to earn a net income of 25% of cost? (iv) What should be the selling price per unit if the break-even point is to be brought down to 1,20,000 units? Question: 21 (Nov, 1997) The ratio of variable cost to sales is 70%. The break-even point occurs at 60% of the capacity sales. (a) Find the capacity sales when fixed costs are ` 90,000. (b) Also compute profit at 75% of the capacity sales. Question: 22 (Dec, 2002) ICWA Inter A newly formed company has an installed capacity to manufacture 5,00,000 units of a certain product per annum. Current capacity utilisation is only 40% and sale price of the product is ` 40 per unit. The product has the following cost profile: Per unit Direct materials : ` 20 Fixed costs per annum = ` 15 lakhs Direct labour : 8 Variable overheads : 4 The company is considering the following options to increase profitability by ` 5 lakhs: (i) Reduce selling price by 5%, (ii) Spend ` 5 lakhs on sales promotion keeping selling price unaltered. How many units have to be sold in either case? Question : 23 (June, 2002) CS Inter From the following information, you are required to find out (i) Margin of safety; and (ii) Volume of sales required to earn profit of 10% on sales: Total fixed cost = ` 4,500 Total variable cost = ` 7,500 Total Sales = ` 15,000 Sales (units) = 5,000 Question: 24 (Dec, 2008) ICWA Inter A company is planning to install a water bottling plant. The estimated annual sales would be 50,000 bottles. Sale price will be ` 27 per bottle. The cost estimates are as under: Annual demand Total cost p.a. (`) Fixed portion (%) Material cost 5,00,000 Nil Wages 3,00,000 50% Factory overheads 2,00,000 40% Administration & Selling overheads 1,60,000 60% Over and above, 10% of sale price is to be paid to the sales agency as commission. (i) Calculate the break-even point and (ii) What should be the sale price if the desired profit is 10% of sales? Page No. 5

6 Question : 25 (Dec, 2008) CS Inter A company has annual fixed cost of ` 1,40,00,000. In the year sales amounted to ` 6,00,00,000 as compared to ` 4,50,00,000 in the preceding year Profit in is ` 42,00,000 more than that in On the basis of the above information, answer the following: (i) At what level of sales, the company would have break-even? (ii) Determine profit/loss on a forecasted sales volume of ` 8,00,00,000. (iii) If there is a reduction in selling price by 10% in the financial year and the company desires to earn the same amount of profit as in , what would be the required sales Questions : 26 (June, 2009) ICWA The summarized profit and loss statement of shivaji limited for the last year us as follows: (in ` 000) Sales (50,000 units) 1,000 Direct material 350 Direct wages 200 Fixed production overhead 200 Variable production overhead 50 Fixed Administration overhead 180 Fixed Selling and distribution overheads 120 1,100 Profit /(loss) ` (100) You are required, as management, to evaluate the following alternative proposals to improve the situation, and to comment briefly on each: (a) Pay salesmen a commission of 10% of sales and, thus, increase to achieve break-even point (b) Reduce selling price by 10%, which, it is estimated, would increase sales volume by 30% (c) Increase sales by additional advertising of ` 3,00,000, with an increased selling price of 20% setting a profit margin of 10%. Question : 27 (Dec, 2004) CS Inter Dinesh limited has provided the following information: Sales price : ` 20 per unit Variable cost : ` 14 per unit Fixed overheads : ` 7,92,000 per annum How many units must be sold to earn profit of 10% on sales? Question : 28 (Dec, 2002) ICWA A company s report of operations for the two years shows the following results: ` ` Sales 3,12,500 3,75,000 Profit/(loss) (7,500) 10,000 (i) At what level of sales does the company break-even? (ii) Consider the following changes for the next year: Selling price to be decreased by 10%. Variable cost to be decreased by 25% Fixed costs to be increased ` 32,500. What sales value would be needs to generate a profit equal to 10% of sales? Question : 29 (May, 2002) A company, which manufactures and sells three products, furnishes the following details for a month: Products A B C No. of units budgeted 1,00,000 38,000 46,000 Selling price per unit ` Variable costs per unit ` Page No. 6

7 It has been proposed that an intensive advertisement campaign involving an expenditure of `1,20,000 per month and reduction of selling prices will increase the sales of product C as under: (i) If the selling price is reduced to ` 55 per unit, the sales will increase to 59,000 units per month. (ii) If the selling price is reduced to ` 51 per unit, the sales will increase to ` 65,000 units per month. The fixed of the company amount to ` 34,20,000 per month. (i) Calculate the current monthly break-even sales value of the company. (ii) Evaluate the two proposals and advise which of the proposals should be implemented. (iii) Calculate the sales units required per month of product C to justify the expenditure on advertisement in respect of your decision in (ii) above. Question : 30 CA (Nov, 1996) CS (Dec, 2002) A company sells its product at ` 15 per unit. In a period, if it produces and sells 8,000 units, it incurs a loss of ` 5 per unit. If the volume is raised to 20,000 units, it earns a profit of ` 4 per unit calculate the break-even point both in terms of rupees as well as in units. Question : 31 (Dec, 2002) ICWA The variable cost structure of M/s. XYZ & company is as follows: ` /unit Materials 40 Labour 10 Overhead 04 Selling price 90 Sales and fixed overhead during the current year are expected to be ` 13,50,000 and ` 1,40,000 respectively. Under a new wage agreement, an increase of 10% in wage is payable to all the direct workers from the beginning of forthcoming year, while the materials cost, variable overhead and fixed overhead are expected to increase by 7.5%, 5% and 3% respectively. You are required to work out: (i) The new selling price, if the current P/V ratio is maintained, and (ii) The quantity to be sold during the forthcoming year to yield the same amount of profit as in the current year, assuming that the selling price unit will remain same. Question : 32 (June, 2003) ICWA Inter M/s. XYZ limited produces and sells three types of products P, Q and R. The following set of information is available: Products Selling Direct Direct Wages/unit Direct Wages/Unit Direct Wages/unit price/unit material/unit Deptt. A Deptt. B Deptt. C P ` 300 ` 60 ` 20 ` 15 ` 10 Q ` 275 ` 30 ` 20 ` 20 ` 10 R `305 ` 70 ` 12 ` 10 ` 20 The absorption rates of overhead on the direct wages are given below: Deptt. A Deptt. B Deptt. C Variable overhead 150% 120% 200% Calculate P/V ratio of P, Q and R. Question : 33 (June, 2003) ICWA Inter A company earned a profit of ` 2,00,000 on a sale volume of ` 14,00,000 during the first half of a year, the fixed cost being ` 5,00,000. However, during the second half of the year, it incurred a loss of ` 1,00,000 although unit variable cost, selling price and fixed cost remain the same. Required (i) Profit-volume ratio, break-even point and margin of safety for the first half of the year. (ii) Sales volume for the second half. (iii) Break-even point and margin of safety for the whole year. Page No. 7

8 Question : 34 (June, 2004) ICWA Inter A company has a project to install a new machine exclusively for the manufacture of a new product which is expected to have good demand and reasonable high margin. Maximum possible annual sales may not exceed ` 50 lakhs and if there is competition, it may fall considerably.. the company has obtained quotations and short listed two offers for the new machine. Details in respect of the two models are given below: Machine models M1 M2 Maximum possible sales per year ` 50 lakhs ` 50 lakhs Fixed cost per year 5 lakhs 8 lakhs Estimated profit for maximum sales 15 lakhs 17 lakhs You are required to calculate: (i) Break-even sales of each machine (ii) Sales at which both models will gives the same profit (iii) Range of sales over which one models is better than the other. Question : 35 (June, 2008) ICWA Inter ABC limited and MNO limited sell in identical products in identical markets. Their budget P.V. statements for the year are as follows: ABC MNO ` ` Sales 5,00,000 6,00,000 (Less) : Variable cost (4,00,000) (1,80,000) Contribution 1,00,000 4,20,000 (Less): Fixed cost (20,000) (2,70,000) Budgeted profits 80,000 1,50,000 Calculate :(a) BEP for each company. (b) Sales at which each company will earn a profit of ` 60,000. (c) Sales at which both companies will have same profits (d) Which company will earn more profit when (i) Heavy demand (ii) Law demand? Question : 36 (June, 2005) CS Inter A newly set up manufacturing company is planning to produce a product that will sell for ` 10 per unit. The demand of product is estimated at 10,000 units per year. The company has choice of two machines, each of which has a capacity of producing 10,000 units per year. Machine-A would have fixed costs of ` 30,000 per year and would yield a profit of ` 30,000 per year on sale of 10,000 units. Machine-B would have fixed costs of ` 18,000 per year and would yield a profit of ` 22,000 per year on sale of 10,000 units. Variable costs behave linearly for both machines. Calculate the volume of sales at which the cost of the two machines will be indifferent. Question : 37 (Dec, 2006) CS Inter A company is producing an identical product in two factories. The following are the details in respect of both the factories: Factory X Factory Y Selling price per unit (`) Variable cost per unit (`) Fixed cost (`) 2,00,000 3,00,000 Depreciation included in fixed cost (`) 40,000 30,000 Margin costing and break-even analysis 30,000 20,000 Production capacity (Units) 40,000 30,000 You are required to determine: (i) Break-even point (BEP) for each individually. (ii) Which factory is more profitable? (iii) Cash BEP for each factory individually. Page No. 8

9 Question : 38 (Dec, 2004) ICWA Inter Two plants manufacturing the same product decide to margin. Particulars of operation of the two plants before the merger as follows: Plant A Plant B Capacity utilized 80% 60% Sales ` 4.80 crores ` 2.40 crores Variable cost 3.52 crores 1.80 crores Fixed cost 0.80 crores 0.40 crores You are required to work out: (i) Break-even capacity of the merged plant. (ii) Profit earned at 75% capacity of the merged plant. (iii) Sales required to earn a profit of ` one crore. Question : 39 (Dec, 2006) ICWA Inter Two cement plants decide to merge to earn higher profits. The working result of the two plants for the last year were as follows: Plant I Plant II Capacity utilized 80% 60% Sales (lakhs of rupees) Variable cost ( ) Fixed cost ( ) After merger, the management wants information on the following: (i) Capacity at which the combined plant will break even. (ii) Profit likely to be made of the combined plant works at 90% capacity. (iii) Sales required to earn a profit of ` 60 lakhs. If the total fixed costs are reduced by ` 10 lakhs, what sales will yield a profit of ` 60 lakhs? Question : 40 (Dec, 2008) ICWA Inter X, Y and Z are the locations of plants owned by a single company. Contemplating merging the plants they want you to find out (i) The capacity of the merged plant at break-even, (ii) Profits at 80% capacity after merger, and (iii) Sales for a desired profit of ` 35 lakhs after merger of plants. The details of pre-merger are as under: X Y Z Capacity utilization 100% 80% 60% Turn over ` 400 lakhs 290 lakhs 160 lakhs Variable cost ` 250 lakhs 200 lakhs 80 lakhs Fixed cost ` 80 lakhs 50 lakhs 60 lakhs Question : 41 (May 2001) A company manufactures three products. The budged quantity, selling prices and unit costs are as under: Products Raw materials Direct Variable Fixed Budgeted Selling ` 20 per kg. ` 5 per hour overheads overheads production (units) per unit (`) A , B , C , Required: (a) Present a statement of budgeted profit. (b) Set optimal product-mix and determine the profit, if the supply of raw materials is restricted to 18,400 kg. Page No. 9

10 Question : 42 (Dec, 2003) ICWA Inter A company manufactures and sells two standard products and Y using the same raw material, labour and identical machines. Further particulars are given below: X Y Selling price/unit ` 80 ` 100 Per unit Direct ` 20/kg ` 20 ` 30 Direct ` 15/hr. ` 15 ` 15 Variable overheads ` 15 ` 15 Machine hours required ½ hr. ¾ hr. Per annum Maximum demand (units) 18,000 15,000 Current production (units) 15,000 12,000 Labour and materials are available according to requirements. But, machine capacity cannot be increased immediately and the available capacity has been fully utilised by the current production plan. Total fixed cost is ` 3,96,000. Required: (i) Current contribution analysis (ii) Profit currently earned by the company. (iii) Alternative production plan, if any more profitable to the company (iv) Profit expected to be earned under the suggested plan. Question : 43 (June 2008) ICWA Inter Novelty limited produces a variety of products each having a number of component parts. Product P takes 5 hours to produce on machine no. 20 working to full capacity. The selling price and marginal cost of product P are ` 100 and ` 60 respectively. A component part B 15 could be made in the same machine in 2 hours for a marginal cost of ` 10 per unit. The supplier price is ` 25 per unit. You are required to advise whether the company should mar or buy the component B-15. (Assume that machine hours is the limiting factor). Question : 44 (Dec, 2008) CS Inter Bindu limited presents the following information for a year: ` Material 1,20,000 Wages 2,40,000 Fixed expenses 1,20,000 Variable overheads 60,000 Selling price per unit 50 Output 12,000 units. The available capacity is 20,000 units of production in a year. The company has an offer to sell 5,000 additional units at ` 40 each in a foreign market. It is anticipated, that, by accepting this offer there will be a saving of re. 1 per unit in material cost on all the units manufactured but fixed expenses will increase by ` 30,000 and an overall efficiency will drop by 2% on all production. Whether this offer be accepted and why? Question 45 :(June, 2009) ICWA Inter New India engineering company limited three components A, B and. The following particulars are provided: Product A (`) B (`) C (`) Sale price Direct material Direct labour Variable overhead expenditure Fixed cost is ` 1,00,000 per year. Estimated sales (in No, of Units) 2,000 2,000 2,000 Machine hrs. per unit Page No. 10

11 Due to break down of one of the machines, the capacity is limited to 12,000 machine hours only and this is not sufficient to meet the total sales demand. You are required to work out: (a) What will most profitable product mix that should be produced, and (b) The total contribution from the revised product mix. Question : 46 (Nov, 2008) The following figures are related to LM Limited for the year ending 31 st March Sales 24,000 units at ` 200 per unit PV ratio 25% and break-even point 50% of sales. You are required to calculate (i) Fixed cost for the year (ii) Profit earned for the year (iii) Units to be sold to earn a target net profit of ` 11,00,000 for a year. (iv) Number of units to be sold to earn a net income of 25% on cost. (v) Selling price per unit if break-even point is to be brought down by 4,000 units. Question : 47 (May, 2013/15) MFN Limited started its operation in 2011 with the total production capacity of 2,00,000 units. The following data for two year is made available to you: Sales 80,000 1,20,000 Total cost (`) 34,40,000 45,60,000 There has been no change in the cost structure and selling price and it is expected to continue in 2013 as well. Selling price is ` 40 per unit. You are required to calculate: (i) Break-Even point (in units) (ii) Profit at 75% of the total capacity in 2013 Question : 48 (Nov, 2015) A company gives the following information: - Margin of Safety ` 3,75,000 Margin of Safety (Quantity) 15,000 units Total Cost ` 3,87,500 Break Even Sales in Units 5,000 units Calculate (1) Selling Price per unit, (2) Profit, (3) Profit / Volume Ratio, (4) Break Even Sales (in Rupees), and (5) Fixed Cost. Question : 49 (May, 2008) Following information is available for the first and second quarter of the year for ABC Limited: Quarter Product (in units) Semi-Variable Cost Quarter I 36,000 ` 2,80,000 Quarter II 42,000 ` 3,10,000 Required: Stare gate the semi-variable cost and calculate (a) Variable cost per unit, and (b) Total fixed cost. Question : 50 (Nov, 2011) The PV ratio of delta limited is 50% and margin of safety is 40%. The company sold 500 units for ` 5,00,000. Calculate (a) BEP, and (b) Sales in units to earn a profit of 10% on sales. Question : 51 (Nov, 2010) MNP Limited sold 2,75,000 units of its product at ` per unit. Variable costs are ` per unit (Manufacturing costs of ` 14 and selling cost of ` 3.50 per unit). Fixed costs are incurred uniformly throughout the year and amount to ` 35,00,000 (including depreciation of ` 15,00,000). There are no beginning or ending inventories. Required: Page No. 11

12 (i) Estimate breakeven sales level quantity and cash breakeven sales level quantity. (ii) Estimate the PV ratio. (iii) Estimate the number of units that must be sold to earn an income (EBIT) of ` 2,50,000. (iv) Estimate the sales level to achieve an after-tax income (PAT) of ` 2,50,000. Assume 40% corporate income tax rate. Question : 52 (May, 2010) Following information is available for the years 1 and 2 of PIX Limited: Year Year 1 Year 2 Sales ` 32,00,000 ` 57,00,000 Profit / (Loss) (` 3,00,000) ` 7,00,000 Calculate (a) PV ratio, (b) Total fixed cost, and (c) Sales required to earn a profit of ` 12,00,000. Question : 53 (May, 1998) A single product company sells its product at ` 60 per unit. Last year, the company operated a margin of safety of 40%.The fixed costs amounted to `3,60,000 and the variable cost ratio to sales was 80%. In the next year, it is estimated that the variable cost will go up by 10% and the fixed costs will increase by 5%. 1. Find the selling price required to be fixed in the next year to earn same PVR as in last year 2. Assuming the same selling price of ` 60 per unit in the next year also, find the number of units required to be produced and sold to earn the same profit as in last year. Question : 54 (May, 2000) The comparative profit statement of two quarters of a firm is as under Particulars Quarter I Quarter II Units sold 2,500 3,750 Direct materials ` 87,500? Direct wages ` 62,500? Fixed and variable factory overheads ` 75,000 ` 95,000 Sales ` 2,75,000? Profit ` 50,000 ` 66,250 In the second quarter, the direct material price has increased by 20%. There was a saving of ` 5,000 in fixed overheads in the second quarter. The other costs and selling price remained the same. Determine the quantity that should have been sold in the second quarter to maintain the same amount of profit per unit as in the first quarter. Question : 55 (May, 2014) SHA Ltd provides the following trading results: Year Sales Profit ` 25,00,000 10% of sales ` 20,00,000 8% of sales Calculate (i) Fixed Cost, (ii) BEP, (iii) Amount of Profit, if sales is ` 30,00,000, (iv) Sales when desired profit is ` 4,75,000 (v) Margin of safety at a profit of ` 2,70,000. Question : 56 (Nov, 2014) Zed Limited sells its product at ` 30 per unit. During the quarter ending on 31 st March, it produced and sold 16,000 units and suffered a loss of ` 10 per unit. If the volume of sales is raised to 40,000 units, it can earn a profit of ` 8 per unit. You are required to calculate: - (a) BEP in rupees. (b) Profit if the sales volume is 50,000 units. (c) Minimum level of production where the company need not to close production if unavoidable fixed cost is ` 1,50,000. Page No. 12