Amity Campus

Uttar Pradesh
India 201303

ASSIGNMENTS
PROGRAM: MFC
SEMESTER-II
Subject Name
Study COUNTRY
Roll Number (Reg.No.)
Student Name

: Cost Accounting
: Botswana
: MFC001111024 - 20160291
: BOKAMOSO LESETEDI

INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS
Five Subjective Questions
Three Subjective Questions + Case Study
Objective or one line Questions

MARKS
10
10
10

b)
c)
d)
e)

Total weightage given to these assignments is 30%. OR 30 Marks

All assignments are to be completed as typed in word/pdf.
All questions are required to be attempted.
All the three assignments are to be completed by due dates and need to be submitted for
evaluation by Amity University.
f) The students have to attached a scan signature in the form.

Signature :
Date
:

___
______________________________
___12/06/2015______________________________

( ) Tick mark in front of the assignments submitted

Assignment
Assignment B
Assignment C
A

Cost Accounting
SECTION A:

Q1 What is cost accounting? What are its objectives?

Cost Accounting is the process of classifying and recording of expenditure incurred during
the operations of the organization in a systematic way, in order to ascertain the cost of a
cost center with the intention to control the cost.
Following are the basic three objectives of Cost Accounting:
1) Ascertainment of Cost and Profitability
2) Cost Control
3) Presentation of information for managerial decision making.

Q2 Briefly explain the different ways of classifying cost.

The classification of costs can be done in the following ways:
1. By Nature of Element
The costs are divided into three categories i.e. Materials, Labor and Overheads. Further
sub-classification of each element is possible; for example, material can be classified into
raw material components, spare parts, consumable stores, packing material, etc.
Materials: Materials are the principal substances that go into the production process and
are transformed into finished goods. Materials are further classified as direct materials and
indirect materials. Direct materials are that materials that can be directly identified with
and easily traced to finished goods.
Labor: Labor refers to the human effort to produce goods and services. It is a factor of
production; the talents, training, and skills of people which contribute to the production of
goods and services. It involves the physical and mental effort. It can be further classified
into direct and indirect labor.
Overheads: Those elements of costs necessary in the production of an article or the
performance of a service which are of such a nature that the amount applicable to the
product or service cannot be determined accurately or readily. Usually they relate to those
objects of expenditures which do not become an integral part of the finished product or
service such as rent, heat, light, supplies, management, supervision, etc. In other words,
overheads consist of indirect materials, indirect labor and other indirect expenses. The
overheads can be classified into factory overheads, office and administration overheads and
selling and distribution overheads.

2. By Functions
It leads to grouping of costs according to the broad divisions of functions of a business
undertaking or basic managerial activities, i.e. production, administration, selling and
distribution. According to this classification costs are divided as follows:
Manufacturing and Production Costs
This category includes the total of costs incurred in manufacture, construction and
fabrication of units of production. The manufacturing and production costs comprise of
direct materials, direct labor and factory overheads.
Administrative Costs
This category includes costs incurred on account of planning, directing, controlling and
operating a company. For example, salaries paid to managers and other administrative
staff.
Selling and Distribution Costs
Selling costs and distribution costs are most often confused to be one and the same.
However, there is a distinction between the two. Selling costs are defined as the cost of
seeking to create and stimulate demand and of securing orders. Example of selling costs
are advertisement, salesman salaries, etc. Whereas, distribution costs are defined as the
cost of sequence of operations which begin with making the packed product available for
dispatch and ends with making the reconditioned, returned empty packages, if any
available for re-use. For example, insurance on goods in transit, warehousing etc. are
distribution costs.
3. By Traceability
According to this classification, total cost is divided into direct costs and indirect costs
Direct costs are those costs which are incurred for and may be conveniently identified with
or easily traced to a particular cost center or cost unit. The common examples of direct
costs are materials used and labor employed in manufacturing an article or in a particular
process of production.
Indirect costs are those costs which are incurred for the benefit of a number of cost centers
or cost units and cannot be conveniently identified with a particular cost center or cost
unit. Examples of indirect costs include rent of building, management salaries, machinery
depreciation, etc. The nature of the business and the cost unit chosen will determine the
costs as direct and indirect. For example, the hire charges of a mobile crane used onsite by
a contractor would be regarded as a direct cost since it is identifiable with the project/site
on which it is employed, but if the crane is used as a part of the services of a factory, the
hire charges would be regarded as indirect cost because it will probably benefit more than

one cost center or department. The distinction between direct and indirect cost is essential
because the direct costs of a product or activity can be accurately identified with the cost
object while the indirect costs have to be apportioned on the basis of certain assumptions
about their incidence.
4. By Variability
The basis for this classification is the behavior of costs in relation to changes in the level of
activity or volume of production. On this basis, costs are classified into three groups viz.
fixed, variable and semi-variable.
Fixed Costs
Fixed costs are those which remain fixed in total with increase or decrease in the volume of
output or activity for a given period of time or for a given range of output. Fixed costs per
unit vary inversely with the volume of production, i.e. fixed cost per unit decreases as
production increases and increases as production decreases. Examples of fixed costs are
rent, insurance of factory building, factory managers salary, etc. These costs are constant
in total amount but fluctuate per unit as production level changes. These costs are also
termed as capacity costs.
Variable Costs
Variable costs are those which vary in total directly in proportion to the volume of output.
These costs per unit remain relatively constant with changes in volume of production or
activity. Thus, variable costs fluctuate in total amount but tend to remain constant per unit
as production level changes. Examples: direct material costs, direct labor costs, power,
repairs, etc.
Semi-variable Costs
Semi-variable costs are those which are partly fixed and partly variable. For example,
telephone expenses include a fixed portion of monthly charge plus variable charge
according to the number of calls made; thus total telephone expenses are semi-variable.
Other examples of such costs are depreciation, repairs and maintenance
5. By Controllability
On this basis costs are classified into two categories:
Controllable Costs
If the costs are influenced by the action of a specified member of an undertaking, that is to
say, costs which are at least partly within the control of management they are called
controllable costs. An organization is divided into a number of responsibility centers and
controllable costs incurred in a particular cost center can be influenced by the action of the
manager responsible for the center. Generally speaking, all direct costs including direct
material, direct labor and some of the overhead expenses are controllable by lower level of
management.
Uncontrollable Costs
If the costs cannot be influenced by the action of a specified member of an undertaking,
that is to say, which are not within the control of management they are called
uncontrollable costs. Most of the fixed costs are uncontrollable. For example, rent of the
building is not controllable and so is managerial salaries. Overhead cost, which is incurred

by one service section or department and is apportioned to another which receives the
service is also not controllable by the latter.
Controllability of costs depends on the level of management (top, middle or lower) and the
period of time (long-term or short-term).
6. By Normality
On this basis, is the costs are classified into two categories.
Normal Cost
It is the cost which is normally incurred at a given level of output in the conditions in which
that level of output is normally attained. It forms a part of production cost.
Abnormal Cost
It is the cost which is not normally incurred at a given level of output in the conditions in
which that level of output is normally attained. It is not considered as a part of production
cost, hence it is charged to Costing Profit and Loss Account.
7. By Capital or Revenue
If the cost is incurred in purchasing assets either to earn income or increasing the earning
capacity of the business it is called capital cost, for example, the cost of a rolling machine
in case of steel plant. Though the cost is incurred at one point of time the benefits accruing
from it are spread over a number of accounting years. Revenue expenditure is any
expenditure done in order to maintain the earning capacity of the concern such as cost of
maintaining an asset or running a business. Example, cost of materials used in production,
labor charges paid to convert the material into production, salaries, depreciation, repairs
and maintenance charges, selling and distribution charges, etc. While calculating cost,
revenue items are considered whereas capital items are completely ignored.
8. By Time
Costs can be classified as (i) Historical costs and (ii) Predetermined costs.
Historical Costs
The costs which are ascertained after being incurred are called historical costs. Such costs
are available only when the production of a particular thing has already been done. Such
costs are only of historical value and not at all helpful for cost control purposes.
Predetermined Costs
Such costs are estimated costs, i.e. computed in advance of production taking into
consideration the previous periods costs and the factors affecting such costs. If they are
determined on scientific basis they become standard cost. Such costs when compared with
actual costs will give the variances and reasons of variance and will help the management
to fix the responsibility and to take remedial action to avoid its recurrence in future.
Historical costs and predetermined costs are not mutually exclusive. Even in a system when
historical costs are used, predetermined costs have a very important role to play because a
figure of historical cost by itself has no meaning unless it is related to some other standard
figure to give meaningful information to the management.

9. By Association with Product

Costs on this basis are classified as Product Costs and Period Costs. This distinction is
required for the purpose of profit determination. This is because product costs are carried
forward to the next accounting period in the form of unsold finished stock. Whereas period
costs are written off in the accounting period in which it is incurred.
Product Cost
Product costs are associated with unit of output. Product costs are the costs absorbed by
or attached to the units produced. These costs go into the determination of inventory
valuation (finished goods and partly completed goods) hence are called Inventoriable costs.
This consists of direct materials, direct labor and factory overheads (partly or fully). The
extent of inclusion of factory costs depends on the type of costing system in force
absorption or direct costing. If absorption costing method is adopted, both the fixed and
variable factory overheads are included as part of product costs. If direct costing method is
adopted only variable factory overheads are included as part of inventorial cost.
Period Costs
Period costs are costs associated with period for which they are incurred, rather than the
unit of output or manufacturing activity. These costs are not treated as part of inventory
and hence they are treated as expenses of the period for which they are incurred.
Administrative, Selling and Distribution costs are treated as period costs and are deducted
as an expense for the determination of income and are not regarded as a part of inventory

10. According to Planning and Control

Cost accounting furnishes information to the management which is helpful in discharging
the two important functions of management i.e. planning and control. For the purpose of
planning and control, costs are classified as budgeted costs and standard costs.
Budgeted Costs
Budgeted costs represent an estimate of expenditure for different phases or segments of
business operations, such as manufacturing, administration, sales, research and
development, for a period of time in future which subsequently becomes the written
expression of managerial targets to be achieved. Various budgets are prepared for different
phases/segments of business, such as sales budget, raw material cost budget, labor cost
budget, cost of production budget, manufacturing overhead budget, office and
administration overhead budget. Continuous comparison of actual performance (i.e., actual
cost) with that of the budgeted cost is made so as to report the variations from the
budgeted cost to the management for corrective action.
Standard Cost

The Institute of Cost and Management Accountants, London defines standard cost as the
predetermined cost based on a technical estimate for materials, labor and overhead for a
selected period of time and for a prescribed set of working conditions. Thus, standard cost
is a determination, in advance of production, of what should be its cost under a set of
conditions.
11. For Managerial Decisions
Marginal Cost
Marginal cost is the additional cost to be incurred if an additional unit is produced. In other
words, marginal cost is the total of variable costs, i.e. prime cost plus variable overheads. It
is based on the distinction between fixed and variable costs.
Out of Pocket Costs
This is that portion of the cost which involves payment, i.e. gives rise to cash expenditure
as opposed to such costs as depreciation, which do not involve any cash expenditure. Such
costs are relevant for price fixation during recession or when make or buy decision is to be
made.
Differential Costs
If there is a change in costs due to change in the level of activity or pattern or method of
production they are known as differential costs. If the change increases the cost, it will be
called incremental cost and if the change results in the decrease in cost it is known as
decremental cost.
Sunk Costs
Sunk cost is another name for historical cost. It is a cost that has already been incurred
and is irrelevant to the decision making process. A good example is depreciation on a fixed
asset. Depreciation on a given asset is a sunk cost because the cost (of purchasing the
asset) has already been incurred (when it was purchased) and it cannot be affected by any
future action, though we allocate the depreciation cost to future periods the original cost of
the asset is unavoidable. What is relevant in this context is the salvage value of the asset
not the depreciation. Thus, sunk costs are not relevant for decision making and are not
affected by increase or decrease in volume.
Imputed (or notional) Costs
These costs appear in cost accounts only. For example notional rent charged on business
premises owned by the proprietor, interest on capital for which no interest has been paid.
When alternative capital investment projects are being evaluated it is necessary to consider
the imputed interest on capital before a decision is arrived as to which is the most
profitable project.
12. Others.
Future Costs
Are those costs that are expected to be incurred at a later date.
Programmed Cost
Certain decisions reflect the policies of the top management which results in periodic
appropriations and these costs are referred to as programmed cost. For example, the

expenditure incurred by the company under the Jawahar Rojgar Yojana program initiated
by the prime minister is a programmed cost which reflects the policy of the top
management.
Joint Cost
Joint cost is the cost of manufacturing joint products up to or prior to the split-off point.
Cost incurred after the split-off point is called separable cost. Joint cost is common to the
processing of joint products and by-products till the point of separation and cannot be
traced to a particular product before the point of split-off.
Conversion Cost
Conversion cost is the cost incurred in converting the raw material into finished product. It
can be calculated by deducting the cost of direct materials from the production cost.
Discretionary Costs
Discretionary costs are those costs which do not have obvious relationship to levels of
capacity or output activity and are determined as part of the periodic planning process. In
each planning period the management decides on how much to spend on certain
discretionary items such as advertising, research and development, employee
Committed Cost
Committed cost is a fixed cost which results from the decisions of the management in the
prior period and is not subject to the management control in the present on a short run
basis. They arise from the possession of production facilities, equipment, an organization
setup, etc.
Some examples of committed costs are: plant and equipment depreciation, taxes, insurance
premium and rent charges.
Q3 What do you mean by ABC analysis? State its advantages.
Usually a firm has to maintain several types of inventories. It is not desirable to keep the
same degree of control on all the items. The firm should pay maximum attention to those
items whose value is the highest. The firm should, therefore, classify inventories to identify
which items should receive the most effort in controlling. The firm should be selective in its
approach to control investment in various types of inventories. This analytical approach is
called the ABC analysis and tends to measure the significance of each item of inventories in
terms of its value.
The high-value items are classified as 'A items' and would be under the tightest control.
'C items' represent relatively least value and would be under simple control.
'B items' fall in between these two categories and require reasonable attention of
management.
The ABC analysis concentrates on important items and is also known as control by
importance and exception (CIE). As the items are classified in the importance of their
relative value, this approach is also known as proportional value analysis. (PVA). .
The following steps are involved in implementing the ABC analysis:
1. Classify the items of inventories, determining the expected use in units and the price per
unit for each item.

2. Determine the total value of each item by multiplying the expected units by its units
price
3. Rank the items in accordance with the total value, giving first rank to the item with
highest total value and so on.
4. Compute the ratios (percentage) of number of units of each item to total units of all items
and the ratio of total value of each item to total value of all items.
5. Combine items on the basis of their relative value to form three categories: -A, B and C.
Advantages of A.B.C. method of Inventory Control:
(i) It ensures control over the costly items in which a large amount of capital is invested.
(ii) It helps in developing scientific method of controlling inventories. Clerical costs are
considerably reduced and stock is maintained at optimum level.
(iii) It helps in maintaining stock turnover rate at comparatively higher level through
scientific control of inventories.
(iv) It ensures considerable reduction in the storage expenses. It results in stock carrying
stock.
(v) It helps in maintaining enough safety stock for C category of items. The following graph
demonstrates ABC inventory classification.

Q4 What is idle time? What are the causes for idle time? How should idle time wages
be treated in cost Accounts?
There is bound to be some difference between the time booked to different jobs or work
orders & gate time. The difference of this time is known as idle time. Idle time is that time
for which the employer pays, but from which he obtains no production. For example, if out
of eight hours that a worker is supposed to put in the factory, the workers job card shows
only seven hours spent on jobs, one hour will be idle time in such a case. Idle time is of two
types:
(a) Normal Idle Time, and
(b) Abnormal Idle Time
a. Normal Idle time:- It is unavoidable, of normal nature and is inherent in production
environment. This may be due to: Time lost in moving from one job to another
Time lost in waiting for materials or instructions
Temporary absence from duty because of minor accidents, personal breaks tea
breaks etc.

Time taken in traveling form one department to another.

b. Abnormal Idle Time:- This is not caused by usual production routine. It may be:

Time lost through the breakdown of machinery

Time lost through lack of materials
Bottlenecks in production, resulting in a temporary absence of parts for further
processing.
Strikes, lockout, and fire
Treatment of idle time:

Idle time means the amount of time the workers remain idle in a normal working day. The
idle time is usually caused by a sudden fault in machine or equipment, power failure, lack
of orders for the product, inefficient work scheduling, defective materials and shortage of
raw materials etc. The cost associated with idle time is treated as indirect labor cost and
should, therefore, be included in manufacturing overhead cost. For example, the normal
weekly working hours of a worker are 48 and he is paid @ $8 per hour. If he remains idle for
6 hours due to power failure, then the cost of 42 hours would be treated as direct labor cost
and the cost of 6 hours (idle time) would be treated as indirect labor cost and included in
manufacturing overhead cost.
Direct labor (42 hours $8)
Manufacturing overhead (6 hours $8)
Total cost

$336
$48 Idle time

$384

Q5 What is cost volume profit analysis? Explain.

CVP analysis involves the analysis of how total costs, total revenues and total profits are
related to sales volume, and is therefore concerned with predicting the effects of changes in
costs and sales volume on profit. It is also known as 'breakeven analysis'.
Cost Volume Profit CVP analysis is applied in the following situations:
Planning and forecasting of profit at various levels of activity.
Useful in developing flexible budgets for cost control purposes.
Helps the management in decision-making in the following typical areas:
Identification of the minimum volume of activity that the enterprise must achieve to avoid
incurring loss.

Identification of the minimum volume of activity that the enterprise must achieve to attain
its profit objective.
Provision of an estimate of the probable profit or loss at different levels of activity within the
range reasonably expected.
The provision of data on relevant costs for special decisions relating to pricing, keeping or
dropping product lines, accepting or rejecting particular orders, make or buy decision, sales
mix planning, altering plant layout, channels of distribution specification, promotional
activities, etc.
Guide in fixation of selling price where the volume has a close relationship with the price
level.
Evaluates the impact of cost factors on profit.
SECTIONB:
Q1 What is standard costing? How is it different from Historical costing?
Standard costing refers to the principles and procedure which involve the use of
predetermined standard costs relating to each element of cost, and for each line of product
manufactured or service rendered. A standard cost is an estimated cost which suggests
what the cost should be under given conditions. The significance of standard costing can be
understood better if it is viewed in contrast to actual historical costing.
Historical costing has its own usefulness. It provides management with a record of what
has happened. Information regarding actual costs classified by elements are known to
management accurately, at frequent intervals. The cost data can be verified with the help of
documents and evidence regarding various transactions. The result of activities can also be
known on the basis of actual performance.
Q2 What is flexible budget. Explain
A flexible budget is defined as a budget which by recognizing the difference between fixed,
semi-fixed and variable costs, is designed to change in relation to the level of activity
attained.A flexible budget is a budget that is prepared for a range, i.e., for more than one
level of activity. It is a set of alternative budgets to different expected levels of activity. Thus,
a flexible budget might be developed that would apply to a relevant range of production,
say 8,000 to 12,000 units. Under this approach, if actual production slips to 9,000 units
from a projected 10,000 units, the manager has a specific tool (i.e., the flexible budget) that
can be used to determine budgeted cost at 9,000 units of output. The flexible budget
provides a reliable basis for comparisons because it is automatically geared to changes in
production activity.

Q3 What is responsibility Accounting. Explain the responsibility centers.

Responsibility accounting is a management control system based on the principles of
delegating and locating responsibility. The authority is delegated on responsibility centre
and accounting for the responsibility centre. Responsibility accounting is a system under
which managers are given decisions making authority and responsibility for each activity
occurring within a specific area of the company. Under this system, managers are made
responsible for the activities of segments. These segments may be called departments,
branches or divisions etc., one of the uses of management accounting is managerial
control. Among the control techniques responsibility accounting has assumed
considerable significance. While the other control devices are applicable to the organization
as a whole, responsibility accounting represents a method of measuring the performance of
various divisions of an organization.
RESPONSIBILITY CENTERS
1. Cost Centre or Expense Centre:
An expense centre is a responsibility centre in which inputs, but not outputs, are measured
in monetary terms. Responsibility accounting is based on financial information relating to
inputs (costs) and outputs (revenues). In an expense centre of responsibility, the accounting
system records only the cost incurred by the centre but the revenues earned (outputs) are
excluded. An expense centre measures financial performance in terms of cost incurred by
it. In other words, the performance measured in an expense centre is efficiency of operation
in that centre in terms of the quantity of inputs used in producing some given output. The
modus operandi is to compare actual inputs to some predetermined level that represents
efficient utilization. The variance between the actual and budget standard would be
indicative of the efficiency of the division.
2. Profit Centre:
A centre in which both the inputs and outputs are measured in monetary terms is called a
profit centre. In other words both costs and revenues of the centre are accounted for. Since
the difference of revenues and costs is termed as profit, this centre is called profit centre. In
a centre, there are financial measures of the outputs as well as of the input, it is possible to
measure the effectiveness and efficiency of performance in financial terms. Profit analysis
can be used as a basis for evaluating the performance of divisional manager. A profit centre
as well as additional data regarding revenues. Therefore, management can determine
whether the division was effective in attaining its objectives.
This objective is presumably to earn a satisfactory profit. Profit directly traceable to the
division and voidable if the division were closed down. The concept of divisional profit is
referred to as profit contribution as it is amount of profit contribution directly by the
division.
The performance of the managers is measured by profit. In other words managers can be
expected to behave as if they were running their own business. For this reason, the profit
centre is good training for general management responsibility .
Measurement of Expenses:

Another problem with profit centers may relate to the measure of certain type of expenses
which have to be involved in the computation of profit centres. There is a scope for
difference of opinion relating to the treatment of those type of expenses which are not
traceable or attributable should be ignored in working out the profit of the division as a
profit centre.
3. Investment Centres
A centre in which assets employed are also measured besides the measurement of inputs
and outputs is called an investment centre. Inputs are accounted for in terms of costs,
outputs are calculated on investment centre. Inputs are accounted for in terms of costs,
outputs are accounted for in terms of revenues and assets employed in terms of values. It is
the broadest measurement, in the sense that the performance is measured not only in
terms of profits but also in terms of assets employed to generate profits.
An investment centre differs from a profit centre in that as investment centre is evaluated
on the basis of the rate of return earned on the assets invested in the segment while a
profit centre is evaluated on the basis of excess revenue over expenses for the period.

CASE STUDY:
A retail dealer in garments is currently selling 24000 shirts annually. He supplies the
following details for the year ended 31st December,2007.
Rs
Selling Price per shirt
40
Variable Cost per shirt
25
Fixed cost:
staff salaries for the year
120000
General office cost for the year
80000
Advertising costs for the year
40000
As a cost accountant of the firm, you are required to answer the following each part
independently:(i)
Calculate the break-even point and margin of safety in sales revenue and no of
shirts sold.
(ii)
Assume that 20000 shirts were sold in a year. Find out the net profit of the firm.
(iii)
If it is decided to introduce selling commission of Rs 3 per shirt, how many shirts
would require to be sold in a year to earn a net income of Rs 15000/-.
Answer:
(i) BREAK-EVEN POINT, MARGIN OF SAFETY IN SALES REVENUE, NUMBER OF SHIRTS
SOLD
.
Breakeven point of revenue = Fixed Costs C/S
where

C= selling price per unit variable cost per unit = Rs. (40-25) = Rs. 15
S= selling price per unit = Rs. 40
Fixed costs= Rs. (120,000+80,000+40,000) = Rs. 240,000
Break Even Point revenue = 240,00015/ 40 =Rs. 640,000
Number of shirts at Break Even = Rs. 640 000 Rs. 40 = 16 000 shirts
Margin of Safety in Sales Revenue
= Annual Sales- Break Even point revenue
= Rs. 4024,000 Rs. 640,000
= Rs. 960,000 - Rs. 640,000
= Rs. 320, 000
Number of Shirts associated with Margin of Safety in Sales Revenue
= Rs. 320 000 Rs. 40
= 8 000 shirts
Therefore:
Break even point revenue = Rs. 640,000 (16 000 shirts)
Margin of safety in sales revenue = Rs. 320,000 (8000 shirts)
(ii) NET PROFIT OF THE FIRM ASSUMING 20000SHIRTS WERE SOLD IN A YEAR
Total Sales = 20, 000 x Rs. 40 = Rs. 800, 000
Variable Cost per unit = Rs.25
Total Variable Cost = 20, 000 x Rs. 25 = Rs. 500, 000
Net Profit= Total Sales- (Fixed+ variable Costs)
Net Profit = Rs. 800, 000- Rs. (240, 000+ 500, 000)
Net profit = Rs. (800, 000- 740, 000)
Net Profit = Rs. 60, 000

(iii) SHIRTS REQUIRED TO BE SOLD IN A YEAR TO EARN A NET INCOME OF RS

15,000,IF A SELLING COMMISSION OF RS 3PER SHIRT IS INTRODUCED
Net Income Profit = Rs. 15, 000
Variable cost = Rs. 25/unit
Sales Commission = Rs. 3/unit
Total Variable costs = Rs. 28/unit
Let the number of shirts be x, then:
Profit = Total Sales (Fixed Costs + Variable Costs)
15, 000 = 40x - (240,000+ 28x)
15, 000 = 40x - 240,000 - 28x
15, 000 = 12x - 240,000
12x= 240, 000+ 15, 000

 12x= 255, 000

x= 21250
Thus, at a profit of Rs. 15,000 and selling commission of Rs. 3 per shirt,
the number of shirts to be sold is 21250 shirts.

ASSIGNMENT C

ANSWER TO MULTIPLE QUESTIONS

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

B
C
D
D
B
E
D
D
C
B
A
D
E
C
A
C
C
B
E
D

21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

D
B
B
C
A
D
B
B
E
A
D
C
B
B
C
D
B
D
B
B