Illustration 1: A Factory uses a job costing system.

The following cost data are available from the books for the year ended 31st March, !!3 "s. #irect material #irect %ages (rofit *elling + #stbn overhead Administrative overhead Factory -verhead "e.uired/ (re0are a cost sheet indicating the 0rime cost, works cost, 0roduction cost, sales and sales value. 1n !!32!,, the factory has received an order for a number of jobs. 1t is estimated that the direct materials would be "s1 ,!!,!!! and direct labour would cost "s.&,'!,!!!.%hat would be the 0rice for these jobs if the factory intends to earn the same rate of 0rofit on sales, assuming that the selling and distribution overhead has gone u0 by 1'3. The factory recovers factory overhead as 0ercentage of direct wages and administrative and selling distribution overheads as a 0ercentage of works cost, based on the cost rates 0revalent in the 0revious year. Illustration: 2 A Firm 0roduces '!! units. The selling 0rice is "s., and variable cost is "s. 0er unit. Fi4ed e40enses amount to "s.5!!. Find out the 0rofit. $,!!,!!! &,'!,!!! ),!$,!!! ', ',!!! ,, !,!!! ,,'!,!!!

Illustration : 3 From the following data, calculate com0osite (67 ratio8 com0osite contribution 0er unit of mi4 and com0osite break2even 0oint by using (67 ratio. (roducts : ; < 9nits 1,!!! ,!!! 3,!!! *elling 0rice 0er 7ariable cost 0.u unit "s "s. ' , 1! 5 1' 1

Fi4ed cost = "s.'!,!!! Illustration: 4 From the under mentioned figures calculate/ a> b> c> d> (67 ratio and the total fi4ed e40enses. (rofit and loss arising from the sales of "s. !!! *ales re.uired to earn a 0rofit of "s !!!. *ales re.uired to break2even *ales "s 1,,,33 15, !3 (rofit "s 35' 113$.

First 0eriod *econd 0eriod

Illustration: 5 The following 0articulars are taken from the records of a com0any engaged in manufacturing two 0roducts, A and ?, from a certain material.

(roduct A @0er unit> "s *ales ,'!! Material Aost@"s.'!6kg> '!! 7ariable -verhead &'! Total Fi4ed -verheads/ "s. 1!,!!,!!!

(roduct A @0er unit> "s ',!!! 1, '! 1,'!!

Aomment on the 0rofitability of each 0roduct when / @a> Total sales in value is limited. @b> "aw materials is in short su00ly. @c> (roduction ca0acity is the limiting factor. @d> Total availability of raw materials is ,!!! kg and ma4imum sales 0otential of each 0roduct is 1,!!! units, find the 0roduct mi4 to yield ma4imum 0rofits.

Illustration: 6 A com0any sells its 0roduct at "s.1' 0er unit. 1n a 0eriod, if it 0roduces and sells 5,!!! units, it incurs a loss of "s. ' 0er unit . if the volume is raised to !,!!! units, it earns a 0rofit of "s., 0er unit. Aalculate break2even 0oint both in terms of ru0ees as well as in units. Illustration: 7 The ratio of variable cost to sales is &!3. The break even 0oint occurs at )!3 of the ca0acity sales. Find the ca0acity sales when fi4ed costs are "s.$!,!!!. Also com0ute 0rofit at &'3 of the ca0acity sales.

Illustration: 8 1f margin of safety of A? Btd., is "s. ,,!,!!! @,!3 of sales > and (67 ratio is 3!3 calculate its @i> ?reak2even sales @ii> Amount of 0rofit on sales of "s.$,!!,!!!. Illustration: 9 A com0any had incurred fi4ed e40enses of "s.,,'!,!!! with sales of "s.1',!!,!!! and earned a 0rofit of "s.3,!!,!!! during the first half year. 1n the second half, it suffered a loss of "s.1,'!,!!!. Aalculate/ i> The 0rofit2volume ratio, break2even 0oint and margin of safety for the first half year ii> C40ected sales Dvolume for the second half year assuming that the selling 0rice and fi4ed e40enses remained unchanged during the second half of the year, iii> The break2even 0oint and margin of safety for the whole year. Illustration:10 A single 0roduct com0any sells its 0roduct at "s.)! 0er unit .1n !! the com0any o0erated at a margin of safety of ,!3. The fi4ed costs amounted to "s.3,)!,!!! and the variable cost ratio of sales was 5!3. 1n !!3 it is estimated that the variable cost will go u0 by 1!3 and fi4ed costs will increase by '3. Find the selling 0rice re.uired to be fi4ed in !!3 to earn the same (67 as in !! .

Illustration: 11 (E" Btd has furnished the following data for the two years/ !!12! *ales (rofit67olume "atio @(67> Margin of safety sales as a 3 of total sales "s.5!!,!!! '!3 ,!3 !! 2!3 F 3&.'3 1.5&'3

There has been a substantial savings in the fi4ed cost in the year !! 2!3 due to the restructuring 0rocess. The com0any could maintain its sales .uantity level of !!12! in !! 2!3 by reducing selling 0rice. ;ou are re.uired to calculate the following/ 1> *ales for !! 2!3 in "s.FF > Fi4ed cost for !! 2!3 "s.FF 3> ?reak2even sales for !! 2!3 in "s.FF Illustration: 12 (roduct GAH takes five hours to 0roduce on a 0articular machine and it has a selling 0rice of "s.'! and a marginal cost of "s.3'. -n the same machine another 0roduct G?H can be made at two hours at a marginal cost of "s.' 0er unit. *u00liers 0rice of 0roduct G?H is "s.1! 0er unit. Assuming that the machine hour is the key factor, advise whether 0roduct G?H could be bought out or manufactured. Illustration: 13 A Btd 0roduces 3,!!,!!! kgs of : and ),!!,!!! kgs of ; from an in0ut of $,!!,!!! kgs of raw material <. The selling 0rice is of : is "s.5 0er kg and that of G;H is "s.) 0er kg. (rocessing costs amount to "s.', lacs 0er month as under/ "aw material < $,!!,!!! kgs at "s.3 0er kg 7ariable 0rocessing costs Fi4ed 0rocessing costs "s. &,!!,!!! "s.15,!!,!!! "s. $,!!,!!!

There is an offer to 0urchase )!!!! kgs of ; additionally at a 0rice of "s., 0er kg. The e4isting market of ; will not be affected by acce0ting the offer. ?ut the 0rice of : is likely to be decreased uniformly on all sales. Find the minimum reduced average 0rice for : to sustain the increased sales.

Illustration: 14 A machine manufactures 1!!!! units of a 0art at a total cost of "s. 1, of which "s.15 is variable. This 0art is readily available at the market at "s.1$ 0er unit. 1f the 0art is 0urchased from the market, then the machine can be either used to manufacture a com0onent in same .uantity contributing "s. 0er unit or it can be hired out at "s. 162 "ecommend which of the alternatives is 0rofitable.