Break Even By Ahmed Raza Mir

Question No. 1 Compute the breakeven point from the following information if the selling price of the product is Rs 100 per unit: Production Qty Upto 5,000 units 5001 8000 units 8001 10,000 Above 10,000 Question No. 2 ARM Company makes and sells 1,500 units of a product for which the profitability is as under: Sales Less: Cost of sales Raw material Direct Labor VOH Fixed Cost 120,000 30,000 36,000 15,000 16,800 Total Fixed cost (Rs) 250,000 300,000 400,000 520,000 Variable Cost per unit (Rs) 54 52 51 53

Ahmed Raza Mir, ACA (ARTT Business School)

(97,800) 22,200 After first 500 units of production the company has to pay a premium of Rs 6 per units towards overtime. The premium so paid has been included in the direct labor cost (Rs 36,000) above. Required Compute the breakeven point Question No.3 ARM Company sells two types of calculators Scientific and Financial. Their sales are linked in the ratio of 2:1. Expected sales and standard cost cards are as under for both products: Particulars Sales (expected) Scientific 12,000 Financial 6,000

Ahmed Raza Mir, ACA

Break Even By Ahmed Raza Mir

Sale price per unit Variable cost per unit Directly attributable Fixed cost The common fixed costs are Rs 390,000. 1. Calculate the breakeven point in units using: Composite unit approach Sub unit approach 2. Calculate the breakeven point in rupees. Question No. 4 ARM Company manufactures and sells two products X and Y. Forecast data for the upcoming year is: Particulars Sales (expected) Ahmed Raza Mir, ACA (ARTT Business School) Sale price per unit Variable cost per unit The common fixed costs are Rs 273,000. 3. Calculate the breakeven point in units using: Composite unit approach Sub unit approach 4. Calculate the breakeven point in rupees. Question No. 5 ARM Company is in expansionary phase of its life cycle. A new product called the Mongoos which fitting the definition of fashion of the age is about to be launched. The engineering and costing departments of the company are setting the target cost structure of the product. The standard cost card which ensures a decent return on capital employed is set forth below. Cost elements Raw materials Direct labor Variable overhead (Rs per unit) 460 350 315 X 80,000 12 8 Y 20,000 8 3 3,000 1,500 900,000 2,000 1,100 270,000

Ahmed Raza Mir, ACA

Break Even By Ahmed Raza Mir

Selling price Fixed cost per annum Tax rate (Income tax) Tax rate (sales tax) 2500 Rs 4,087,500 40% 20%

The company will market the product all over the country including where there no formalize distribution agreements with the local distributors by the company. The company will require multiple 3rd party distribution channels which are subject to a commission in the following manner to the following extent. Commissions (on list price) Ahmed Raza Mir, ACA (ARTT Business School) 20% sales shall be subject to 10% commission. 25% sales shall be subject to 8% commission. 50% sales shall be subject to 7% commission. 5% sales shall be done by company's own distribution channels.

The company is expecting that the discounts shall be given to the customers in the newly penetrated markets in order to get a decent grip on the market. The sales experts are projecting the flowing discounts: Discount (on list price) 44% sales shall be eligible for 12.5% discount 20% sales shall be eligible for 10% discount

Required 1. Breakeven number of units and amount of sales. 2. Units required to be sold to earn a after tax profit of Rs 5.4 million. Question No. 6 Cost structure of product P and Q are Product P Q Variable cost per unit Rs 9 Rs 5 Fixed Cost Rs 60,000 Rs 90,000

Ahmed Raza Mir, ACA

Break Even By Ahmed Raza Mir

Question No. 7 The following particulars relates to ARM Company where no change is observed in the sales price, variable cost per unit and fixed cost (total): Particulars (years) Year 2009 Year 2010 Required Compute the following Breakeven point, CM ratio, Margin of safety, Fixed Cost. Question . 8 Relevant cost of a particular product is: Ahmed Raza Mir, ACA (ARTT Business School) Direct material Direct wages Overheads Selling price 50% of total cost 20% of total cost 30% of total cost 80,000 per unit Total sales 2,223,000 2,451,000 Total Cost 1,983,600 2,143,200

1. 2. 3. 4.

It is anticipated that next year the direct material and direct labor cost shall increase by 20% and 25% respectively. This will cause the profit to reduce by 25%. Required Calculate the selling price required to be fixed for next year in order to ensure same percentage of profit on selling price as at present.

Ahmed Raza Mir, ACA