ADVANCE COST & MANAGEMENT ACCOUNTING
Due Date: 12th December, 2013 Total Marks: 25
Topic to be tested:
Break Even and Target Profit Analysis
Learning objectives:
To learn about variable and fixed cost.
To know the calculations of break-even point per unit and in amount.
To analyze the impact of change in variable cost on break-even point.
To analyze the impact of reduction in sales price & increase in sales unit on operating profit.
To now the calculations of required sales unit for specific target profit.
Assignment Question:
Mr. Ahmad is manufacturing different plastic sanitary fittings products including bathroom accessories in his factory. One of the factory products, “Ocean bathroom Set”, sells for Rs. 1,800 per unit. Cost of raw material used Rs. 400 per unit, cost of casting Rs. 100 per unit, cost of milling Rs. 100 per unit, cost of grinding Rs. 300 per unit, cost of polishing Rs. 200 per unit, Cost of packaging Rs. 160 per unit, salaries of worker Rs. 1,000,000, rent of factory Rs. 1,400,000 and other fixed cost are associated with the product Rs. 300,000.
Required:
1. Compute the factory’s Break Even Point in number of “Ocean Bathroom Sets” and in total sales amount for the month.
Marks: 2.5+2.5 = 05
2. If the variable expenses per “Ocean Bathroom Sets” increase as a percentage of the selling price will it result in a higher or a lower break-even point? Why? (Assume that fixed expenses remain unchanged.)
Marks: 2+3 = 05
3. At present, the factory is selling 8,000 “Ocean Bathroom Sets” per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25 % increase in the number of “Ocean Bathroom Sets” sold each month. Find the present and proposed net operating income for the month. Is this change favorable for the factory? Explain the fact with working. Marks: 5+5+5 = 15
Due Date: 12th December, 2013 Total Marks: 25
Topic to be tested:
Break Even and Target Profit Analysis
Learning objectives:
To learn about variable and fixed cost.
To know the calculations of break-even point per unit and in amount.
To analyze the impact of change in variable cost on break-even point.
To analyze the impact of reduction in sales price & increase in sales unit on operating profit.
To now the calculations of required sales unit for specific target profit.
Assignment Question:
Mr. Ahmad is manufacturing different plastic sanitary fittings products including bathroom accessories in his factory. One of the factory products, “Ocean bathroom Set”, sells for Rs. 1,800 per unit. Cost of raw material used Rs. 400 per unit, cost of casting Rs. 100 per unit, cost of milling Rs. 100 per unit, cost of grinding Rs. 300 per unit, cost of polishing Rs. 200 per unit, Cost of packaging Rs. 160 per unit, salaries of worker Rs. 1,000,000, rent of factory Rs. 1,400,000 and other fixed cost are associated with the product Rs. 300,000.
Required:
1. Compute the factory’s Break Even Point in number of “Ocean Bathroom Sets” and in total sales amount for the month.
Marks: 2.5+2.5 = 05
2. If the variable expenses per “Ocean Bathroom Sets” increase as a percentage of the selling price will it result in a higher or a lower break-even point? Why? (Assume that fixed expenses remain unchanged.)
Marks: 2+3 = 05
3. At present, the factory is selling 8,000 “Ocean Bathroom Sets” per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25 % increase in the number of “Ocean Bathroom Sets” sold each month. Find the present and proposed net operating income for the month. Is this change favorable for the factory? Explain the fact with working. Marks: 5+5+5 = 15
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