Problems On Marginal Costing
Problems On Marginal Costing
Problems On Marginal Costing
2. Determine the fixed component in the semi-variable cost of M/s Model House Ltd.
Semi-fixed costs on prducing 5,000 units Rs. 24,000 semi-variable expenses and
producing an additional 1,000 units Rs. 1,800.
3. A plant produces a product in the quantity of 10,000 units at a cost of Rs. 3 per unit. If
20,000 units are produced, the cost per unit is Rs. 2.50. What is the variable cost per
unit ?
4. Given that fixed cost is Rs. 7,000, profit Rs. 3,000 and Sales Rs. 50,000, find P/V
ratio.
5. The following figures are extracted from the books of Vijay Irons Ltd., for the year 1989
and 1990, whose capacity is 10,000 irons per year.
Direct Materials Rs. 3.50 per unit.
Direct Labour Re. 0.50 per unit.
Fixed Overheads Rs. 2.00 per unit.
Selling Price per unit Rs. 8
1989 1990
Production in units 10,000 10,000
Sales in units 8,000 12,000
Prepare cost statements assuming that the company uses marginal costing.
6. In a period a concern produced 2,000 units of particular commodity. The selling price is
Rs. 50 per unit. The relevant costs were :
Direct Material Rs. 25,000
Direct Labour Rs. 15,000
Direct Expenses Rs. 2,000
Production Overheads :
Variable 5,000
Fixed 2,000
Administration :
Variable 1,000
Fixed 2,500
Selling and Distribution :
Variable 5,000
Fixed 8,000
Assuming closing stock of 500 units, prepare operating statements under absorption
costing and marginal costing techniques.
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8. A company’s turnover in a year was Rs. 50 lakhs and its profit Rs. 5 lakhs. Its p/v
ratio was 40 %, what was the BEP ?
10. From the following figures, calculate the sales required to earn a profit of Rs. 1,20,000.
Sales Rs. 6,00,000
Variable Cost Rs. 3,75,000
Fixed Cost Rs. 1,80,000
11. What would be the volume of sales to derive a profit of Rs. 20,000 if the p/v ratio is 66
2/3 % and fixed overhead for the period is Rs. 40,000.
Indicate the number of units to be manufactured and sold (i) to break even (ii) to earn
a profit of Rs. 10,000 (iii) what additional units would be necessary to increase the
above profit by Rs. 5,000 ?
13. From the following data, calculate the break even point :
Selling price per unit Rs. 20
Direct material cost per unit Rs. 8
Direct labour cost per unit Rs. 2
Direct expenses per unit Rs. 2
Variable overhead per unit Rs. 3
Fixed overheads (total) Rs. 20,000
If sales are 20 % above break even point, determine net profit.
14. (a) A company makes Rs. 5,000 profit from Rs. 60,000 sales. Fixed cost are Rs.
15,000. What is the Break Even Point.
(b) A company’s sales are Rs. 1,00,000. Fixed costs are Rs. 20,000 and the
break even point is Rs. 80,000. What profit has it made ?
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(c) A company has a profit of Rs. 5,000 and fixed cost of Rs. 10,000 and break
even point of Rs. 20,000. What are its sales ?
15. From the following information, calculate the break even point and the turnover required
to earn a profit of Rs. 36,000.
If the company is earning a profit of Rs. 36,000, express the margin of safety available
to it.
16. You are given the following data for the year 1978 of ‘X’ company.
Variable Costs 6,00,000 60 %
Fixed Costs 3,00,000 30 %
Net Profit 1,00,000 10 %
10,00,000 100 %
Find out (a) Break Even Point (b) P/V ratio and (c) Margin of Safety Ratio.
17. Suppose the break even sale is Rs. 10,00,000, fixed costs Rs. 4,00,000, Compute
18. The contribution sales ratio of A Ltd., is 50 % and margin of safety is 40 %. You are
required to calculate the net profit if sales volume is Rs. 10,00,000.
19. Find P/V ratio and margin of safety when Sales, Variable Costs and Fixed Costs are
Rs. Ten lakhs, Four lakhs and four lakhs respectively.
20. Given margin of safety Rs. 20,000 (which represents 20 % of sales) and p/v ratio =
50 %, find out the break even sales, fixed cost and profit ?
21. From the following particulars, find (a) fixed costs (b) break even sales © total sales
and (d) profit. Margin of Safety Rs. 10,000 (which represents 40 % of sales) p/v
ratio 50 %.
22. From the following, calculate (i) P / V ratio (ii) Profit when sales are Rs. 20,000, fixed
expenses Rs. 4,000 and Break Even Sales Rs. 10,000.
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Rs. Rs.
Sales (10,000 tones) 5,00,000
Cost : Material 1,00,000
Labour 50,000
Direct Expenses 10,000 1,60,000
Fixed cost 3,00,000
Profit 40,000
You are required to find out (a) Break Even Point (b) P/V ratio (c) Margin of Safety
(d) Sales required to earn a profit of Rs. 50,000 (e) Profit at a sales level of Rs.
9,00,000.
Required
(a) Calculate break even point for Zack in units and in rupees. Show your
calculations and use the contribution margin ratio to find the rupee break even.
(b) What sales rupees would be required to generate a net income of Rs. 96,000.
(c) What will be the break even point in units if fixed costs are increased by Rs.
18,000.
25. An analysis of Sultan Manufacturing Co., Ltd., led to the following information :
Variable Cost Fixed Cost
(% of Sales) (Rs)
Direct Materials 32.8 ----
Direct Labour 28.4 ----
Factory Overheads 12.6 1,89,900
Distribution Overheads 4.1 58,400
General Administration Overheads 1.1 66,700
Budgeted sales are Rs. 18,50,000. You are required to determine : (i) Break even
sales value (ii) Profit at the budgeted sales value (iii) Profit if actual sales (a) drop by
10 % (b) Increase by 5 % from budgeted sales.
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If sales are 10 % and 15 % above break even sales volume, determine the net profits.
27. The following data are available from the records of a company.
You are required to calculate P/V ratio, Break even point and Margin of Safety. Also
study the impact of change in the following variables on P/V ratio, BEP and Margin of
Safety.
(a) Increase in selling price by 10 %.
(b) Decrease in fixed cost by Rs. 5,000.
28. A company’s turnover in 1989 was Rs. 3.20 crores. Its contribution margin ratio is 0.4
and fixed costs were Rs. 80 lakhs. What will be the company’s profit in 1990 if sales
were Rs. 3.80 crores, assuming that fixed costs will rise by 10 %.
29. From the following data, calculate (i) P/V ratio (ii) Profit when sales are Rs. 20,000
and (iii) New break even point if selling price reduced by 10 %.
30. Company X and Company Y sell the same line of product at a unit price of Rs. 40.
The variable costs per unit for each company are Rs. 24 and the fixed costs are Rs.
4,00,000. Company X reduces its price by 10 % and company Y increases its
variable costs by 10 %.
(a) Compute the break even point before the change in price and costs.
(b) Compute the break even point after the change in price and costs.
(c) Which company must sell a greater volume to break even ?
31. Two competing companies P Ltd and Q Ltd produce and sell the same product in
same markets. For the year ended March 1991, their forecasted profit and loss
accounts are as follows :
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P Ltd. Q Ltd.
Rs. Rs. Rs. Rs.
Sales 3,00,000 3,00,000
Less :
Variable cost 2,00,000 2,25,000
Fixed cost 50,000 2,50,000 25,000 2,50,000
Profit 50,000 50,000
You are required to calculate (a) P/V ratio, BEP and Margin of Safety of each
business (b) sales value at which each business will earn a profit of Rs. 30,000.
Explain which company is likely to earn greater profits in the conditions of (i) heavy
demand for the product (ii) low demand for the products.
32. The sales turnover and profit of a company during two years was as follows :
Sales (Rs) Profit (Rs)
1991 1,50,000 20,000
1992 1,70,000 25,000
You are required to calculate (a) P/V ratio (b) break even point (c) Sales required to
earn a profit of Rs. 40,000 (d) the profit made when sales are Rs. 2,50,000 (e)
Margin of Safety at a profit of Rs. 50,000 (f) Variable costs of the two periods.
33. The sales and profits during two periods are as under :
Period I Sales Rs. 20 lakhs Profits Rs. 2 lakhs
Period II Sales Rs. 30 lakhs Profits Rs. 4 lakhs
Calculate (i) P/V ratio (ii) Break Even Point (iii) Sales required to earn a profit of Rs.
5 lakhs (iv) Profit when sales are Rs. 50 lakhs (v) Margin of Safety at a profit of Rs.
2.50 lakhs.
34. The following figures related to a company manufacturing a varied range of products.
35. Ram Agencies sold during 1990-91 and 1991-92, 7,000 units and 9,000 units at Rs.
100 each. In 1990-91 they incurred a loss of Rs. 10,000 whereas in 1991-92, they
earned a profit of Rs. 10,000. Calculate (i) P/V ratio (ii) Fixed Expenses (iii)
Number of units to be sold where there is neither profit nor loss (iv) Number of units to
be sold to earn a profit of Rs. 40,000.
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36. Hyderabad Industries Ltd’s sale amounted to Rs. 45,000 and total cost Rs. 40,000
during the half year ended 30th September 1991. During the half year ended 31st March
1992, sales were Rs. 50,000 and total cost Rs. 43,000. Calculate for the year ended
31st March 1992, (a) P/V ratio (b) Break Even Sales in value (c) Fixed Expenses
(d) Margin of Safety.
37. A company making and selling a product has made the following estimates. Selling price
Rs. 20 per unit, fixed cost Rs. 15 lakhs a year, variable cost Rs. 16 per unit. Sales
volume 5 lakhs units. Suppose a selling price decrease of 10 % results in a 15 %
increase in sales volume, what will be its profit ?
38. From the following particulars pertaining to ABC Ltd., which manufactures three
products, find break even point
Product Sales (Rs) Variable Expenses (Rs)
X 10,000 6,000
Y 5,000 2,500
Z 5,000 2,000
Total Fixed Cost Rs. 5,700.
39. The following figures relate to one years working at 100 % capacity level of a
manufacturing company.
Fixed overheads Rs. 1,20,000, Variable overheads Rs. 1,00,000, Direct Wages Rs.
1,50,000, Direct Materials Rs. 4,10,000, Sales Rs. 10,00,000. Represent the above
figures on a break even chart and determine the break even point.
40. From the following information, draw break even chart and a P/V graph.
Fixed expenses Rs. 6,00,000. Variable expenses per unit Rs. 10. Selling price per
unit Rs. 15. Output 4,00,000 units.