Q.No.

1)

A retail dealer in garments is currently selling 24,000 shirts

annually. He supplies the following information for the year ended 31st December 1991:

Selling Price per shirt Variable Cost per shirt Fixed Cost: Staff Salaries for the year: General Office Cost for the year Advertisement cost for the year

: Rs.40 : Rs.25

Rs.1,20,000 Rs. 80,000 Rs. 40,000

As a consultant of the firm you are required to answer the following each part independently: 1. Calculate the break even point and the margin of safety in sales revenue and the number of shirts sold. 2. Assume that 20,000 shirts were sold in year, find out the net profit of the firm. 3. If it decided is to introduce additional selling commission of Rs.3 per shirt how many shirt would be required to be sold in a year to earn a net income of Rs.15,000. 4. Assuming that for the year 1992 an additional salary of Rs.33,000 is anticipated and price of shirt is likely to be increased by 15%, what should be the break even point in number of shirts and sales revenue. Do not use Profit/volume ratio to get any of the above answers.

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Q.No.2)

PE Ltd. Produces and sells 2 products P and E. Budgets prepared

for the next 6 months give the following information:

Particulars Selling Price Variable Cost: -Production & Selling

Product P Per unit Rs.10

Product e per unit Rs.12

Rs.5

Rs.10 Rs.5,61,600

Common Fixed Cost: production and selling (6 months)

You are required in respect of the forthcoming 6 months: 1. to state what the break even point in rupees would be and the number of each product. This figure represents if the product are sold in the ratio of 4P:3E. 2. to state the break even point in rupees and the number of products. This figure represents if the sales mix changes to 4P:4E. Ignore fraction of products. 3. Advice the sales manager which product mix should be better that in first or second above and why? 4. To advice the sales manger which of the two products should be concentrated more and the reasons for your recommendation - assume that whatever can be made can be sold, that both products go through a machining process, that there are only 32,000 machine hours available, with product P requiring 0.40 hours per unit and product E requiring 0.10 hours per unit.

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Q.No3.)

M Ltd. Manufactures three products P, Q and R. The unit selling

prices of these products are Rs.100, Rs.80 and Rs.50 respectively. The corresponding unit variable costs are Rs.50, Rs40 and Rs.20 respectively. The proportions (quantity wise) in which these products are manufactured and sold are 20%, 30% and 50% respectively. The total fixed costs are Rs.14,80,000. Given the above information you are required to work out the overall break even quantity and the product-wise break up of each quantity.

Q.No.4)

A company has 2 plants at locations I and II, operating at 100%

and 75% capacities respectively. The company is considering a proposal to merge the two plants at one location to optimize the available capacity. The following details are available in respect of the two plants, regarding their present performance and operations: Location I Sales (in Lakhs) Variable Costs (in Lakhs) Fixed Costs (in Lakhs) Rs.200 Rs.140 Rs.30 Location II Rs.75 Rs.54 Rs.14

For decision making purposes you are required to work out the following information: 1. The capacity at which the merged plant will break even 2. The profit of the merged plant working at 80% capacity 3. Sales required if the merged plant is required to earn overall profit of Rs.22,00,000.

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Q.No.5)

XY Ltd. Is manufacturing 3 house hold products A, B and C and

selling them in competitive market. Details of current demand, selling price and cost structure are given below: Product A Expected demand (units) Selling price per unit (Rs.) Variable cost per unit (Rs.) Direct Material (Rs.10 per Kg) Direct Labor (Rs.15 per hour) Variable overheads 6 3 2 5 4 3 1 4 2 1.5 1 2 10,000 20 Product B 12,000 16 Product C 20,000 10

Fixed overheads per unit (Rs.)

The company is frequently affected by acute scarcity of raw material and high labor turnover. During the next period it is expected to have one of the following situations: Raw Materials available will be only 12,100 kg. Direct labor will be only 5,000 hours It may be possible to increase sales of any one product by 25% with out any additional fixed costs but by spending Rs.20,000 on advertisement. There will be no shortage of material or labor. Suggest he best production plan in each case and resultant profit the company would earn according to your suggestion.

Q.No.6) An agriculturists has 480 hectares of land on which he grows potatoes, tomatoes peas and carrots. Out of the total area of land, 340 hectares of land suitable for all the 4 vegetables but the remaining 140 hectares is suitable only for growing peas and carrots. Labor for all kinds of farm work is available in plenty. The market requirement is that all the 4 types of vegetables must be produced with a minimum of 5,000 boxes of any one variety. The farmer has decided the area devoted to any crop should be in term of complete hectares and not in 4|Page

fractions. The only other limitation is that not more than 1,13,750 boxes any one vegetable can be sold. The relevant data concerning the production, market prices and costs are as below: Potatoes Peas Annual Yield : Boxes per hectare 350 100 432 Carrot 70 384 Tomatoes 180 624

Costs: Direct Material per hectare (Rs.) 952 Direct Labour: (Rs.) Growing per hectare Harvesting and packing per box Transport per box 1,792 7.20 10.40 30.76

1,216 6.56 10.40 31.74

744 8.80 8 36.80

1056 10.40 19.20 44.55

Market Price per Box (rs.) Fixed expenses per annum: Growing Rs.1,24,000 Rs.75,000 General administration Rs.1,50,000.

Harvesting Rs.75,000

Transport

It is possible to make the land presently suitable for peas and carrot, viable for growing potatoes and tomatoes is certain development work in undertaken. This work will involve capital expenditure of Rs.6,000 per hectare which bank is prepared to finance at 15% interest per annum. If such improvement is undertaken, the harvesting cost of entire crop of tomatoes will decrease on an average by Rs.2.60 per box. Required: 1. Calculate, with in the given constraints, the area to be cultivated in respect of each crop to achieve the maximum total profit and the amount of such profit before the land development work in undertaken. 2. Assuming that the other constraints continue, advice whether the land development scheme should be undertaken and if so the maximum total profit that would be achieved after the said development scheme is undertaken. 5|Page

Q.No.1) A company producing products Pie and Sigma using single production process, has the following cost Data:

Pie Selling Price per unit (Rs.) Variable cost per unit (Rs.) Machine hours required per unit of output (hrs) Market limitation (units in lakhs) 20 11 1 1

Sigma 30 16 2 2.5

Total machine hours available : 4 lakhs Fixed costs per annum: Rs.26 lakhs Considering the limiting factor of machine hours and market limitations, you are required to: a) Indicate the best combination of products to give optimum contribution b) Show the additional machinery requirement to be obtained on rental basis at an annual rent of Rs.1.5 lakhs per machine to provide additional capacity of 30,000 hours per machine c) Change in the number of units be rented if the annual rent reduces to Rs.1,25,000 per machine.

Q.No.2) Sterling industries manufactures product Z by assembling three components A,B and C. The components are made in machine shop using three identical machines each of which can make any of the three components. However the total capacity of the threee machine is limited to 12000 machine hours per month and is just sufficient to meet the current demand. Labour for assembling is available according to requirements. Further details are given below:

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Component Machine hours required per unit A B C Assembling 4 5 6

Variable cost per unit

Market orice at which the component can be purchased

48 60 80 30 ( per unit of Z)

64 75 110

Fixed costs per month amount to Rs.50,000. Product Z is sold at Rs.300 per unit. From the next month the company expects the demand of Z to rise by 25%. As the machine capacity is limited, the company wants to meet the increase in demand by buying such numbers of A,B or C which is most profitable. You are asked the following: a.) Current demand and the profits earned by the company b.) Which component and how many units should the company buy from the market to meet the increased demand c.) Profit made by the company if your suggestion in (b) is accepted.

Q.No.1) X Ltd. manufactures and sells four types of products under the brand names ACE, UTILITY, LUXARY and SUPREME. The sales mix value comprises of:

BRAND ACE UTILITY LAXURY SUPREME

Percentage 33.1/3% 41.2/3% 16.2/3% 8.1/3% 100%

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The fixes budgeted sale (100%) are Rs. 6,00,000/- per month. The operating costs are ACE UTILITY LAXURY SUPREME 60% selling price 68% selling price 80% selling price 40% selling price

The fixed costs are Rs. 1,59,000 p.m. Calculate the break-even point for the products on an overall basis. It has been proposed to change the sales mix as follows, the total sales per month remaining Rs. 6,00,000. BRAND ACE UTILITY LAXURY SUPREME Percentage 25% 40% 30% 5% 100%

Assuming that this proposal is implemented, calculate the new break-even point.

Q.No.2) Raj Corporation Ltd. has prepared the following the following budget estimates for the year 2003-2004. Sales Units Fixed expenses Sales Value Variable Costs 15,000 34,000 Rs. 1,50,000 Rs. 6 per unit

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You are required to:1. Find the P/V ratio, break-even point and margin of safety. 2. Calculate the revised P/V ratio, break-even point and margin of safety in each of the following cases: a. Decrease of 10% in selling price. b. Increase of 10% in variable costs. c. Increase of sales volume by 2,000 units. d. Increase of Rs. 6,000 fixed costs.

Q.No.3) From the following particulars, find the most profitable mix and prepare a statement of profitability of the product mix. Product Units budgeted to be produced and A sold Selling price per unit Requirement per unit: Direct materials Direct labor Variable overheads Fixed overheads Coat of direct materials per Kg Direct labor hour rate Maximum possible units of sales 5 Kgs 4 hrs Rs.7 Rs.10 Rs.4 Rs.2 4000 3 Kgs 3 hrs Rs.13 Rs.10 Rs.4 Rs.2 5000 4 Kgs 2 hrs Rs.8 Rs.10 Rs.4 Rs.2 1500 1800 60 3000 55 1200 50 Product B Product C

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Q. 17 X company has been so far producing and selling following three products. Information about selling price and the cost is given below: Product X Selling price Costs Materials Labor Variable overheads Fixed overheads Net profit (loss) 5.00 2.00 1.00 5.00 1.00 10.00 1.00 0.5 2.5 2.00 2.00 3.00 1.50 7.50 (1.00) Rs. 14.00 Y Rs. 16.00 Z Rs. 13.00

The company at present has been producing 5000 units of X, 8000 units of Y and 1000 units of Z. As product Z has been consistently fetching sizeable amount of loss only, the company virtually is putting no worth noting effort to augment the sales of the same. In fact it is seriously thinking of dropping this product. The fixed overheads in all amount to Rs. 50,500/- p.a. and they are apportioned to the three products on the basis of labor cost. You are required to state profit implications of dropping product Z. Q. 16 Kalyan University conducts a special course of Computer Applications For a month during summer. For this purpose, it invites applications from graduates. An entrance Test is given to the candidates and based on same, a final selection of a hundred candidates is made. An entrance test consists of four objective types of examinations and is spread over four days, one examination per day. Each candidate is charged a fee of Rs.50/- for taking up the entrance test. The following data was gathered for the past two years.

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KALYAN UNIVERSITY Statement of Net revenue from the Entrance Test for the course on Computer Applications 2002 Gross Revenue (Fees collected) Rs. Costs Valuation Question booklets Hall rent at Rs.2,000 per day Honorarium to chief administrator Supervision charges (One supervisor for every 100 candidates at the rate of Rs.50 per day) General administrative expenses TOTAL COST Net Revenue You are required to compute: a. The budgeted net revenue if 4,000 candidates take up the entrance test in 2004. b. The break-even number of candidates. c. The number of candidates to be enrolled if the net income desired is Rs.20,000/4,000 6,000 84,000 16,000 6,000 6,000 1,16,000 34,000 40,000 20,000 8,000 6,000 60,000 30,000 8,000 6,000 1,00,000 2003 1,50,000

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Q. 4 The budgeted sales of the products of the company are as follows: Products X Budgeted sales in unit Budgeted sales price per unit Budgeted variable costs per unit Budgeted fixed expenses 10,000 4 2.5 12,000 Y 15,000 4 3 9,000 Z 20,000 4 3.5 7,500

From the above information, you are required to compute the following for each product; a. The budgeted profit b. The budgeted break even sales c. The budgeted margin of safety in terms of sales value.

Q. 5 The Asian Industries specialize in the manufacture of small capacity motors. The cost structure of the motor is as under: Material Labor Variable overhead cost Fixed overheads of the company amounted to Rs.2.30 lakhs per annum. The sale price of the motor is Rs.230 each. a. Determine the number of motors that have to be manufactured and sold in a year in order to break-even. b. How many motors have to be made and sold to make a profit of Rs.1 lakh per year? c. If the sales price is reduced by Rs.15 each, how many motors have to be sold to break-even? Rs.50 Rs.80 75% of labor

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Q. 6 From the following particulars, you are required to calculate: a. P/V ratio b. B.E.P. for sales c. Margin of safety d. Profit when sales are Rs.2,00,000/e. Sales to earn net profit of Rs.40,000/Year Sales 2,40,000 2,80,000 Profit 18,000 26,000 Units 24,000 28,000

You may make plausible assumptions. Also, evaluate the effect on second year profit of a. 20% decrease in sales quantity. b. 20% decrease in sales quantity accompanied by 10% increase in sales price & reduction in fixed cost of Rs.3,500/-

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