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MGT402 - Cost & Management Accounting, Assignment # 02, Opening Date Feb 1st, 2016, Due Date Feb 8th, 2016

Assignment # 02

Cost & Management Accounting (MGT402)

SEMESTER FALL 2015

ASSIGNMENT # 02

DUE DATE: 08th February, 2016

MARKS: 10 TOPIC

TO BE TESTED:

 Breakeven Analysis

LEARNING OBJECTIVES:

 To understand Breakeven Analysis in terms of units, rupees and in terms of target profit. ASSIGNMENT QUESTION:

Mr. Aslam is manufacturing different home appliances including micro wave ovens in his production unit. These are information about costs and selling price of microwave oven for the month of December 2015.

Description Cost (Rs. Per unit)

Selling price 2950

Cost of raw material 800

Cost of casting process 200

Cost of milling & grinding 400

Cost of polishing 300

Cost of packaging 150

Mr. Aslam also incur Salaries of workers, factory rent and other fixed costs Rs , 1.2, 1.6 and 0.4 million respectively during the month.

Required: Based on the above information of Mr. Aslam’s business, you are required to calculate:

1. Breakeven Point in unit of “microwave ovens” and in rupees for the period. (04 marks)

2. Amount of sales for Target Profit of Rs 1.2 million (02marks)

3. At present, production unit is selling 3,000 microwave ovens per month. Marketing department is convinced that a 16% reduction in the selling price will result in a 30 % increase in the number of microwave oven sold each month. What will be impact on Net Operating Income at present plan and proposed plan by marketing department? Is this change is suitable for production unit? (04 marks)

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Fall2015_MGT402_2.pdf

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Replies to This Discussion

Breakeven Point Sales (Rupees) = Breakeven Point (Units) * Selling Price

             =     2909 X 2950

            =       85, 81,818 Rs.

Part 1 may is calculation ki need hai ? 

Adash ye formula mene part 2 me kaha tha use krne klye

BE in Rs. = BE (Units) x selling price per unit

Aur ap sb apne ans ko millions me convert kro tu sbka sahi ayega. jaise ye answer bi theek hai 8581818 lekn round off kro 8.6 million

For part 2 .

I think part 2 ka yay Ans sahi hai.

Target CM =  Target Profit + Fixed Cost = 1.2 million + 3.2 million = 4.4 million

Sales in Units =   Target CM / CM per Unit = 4.4 million / 1100 = 4000 Units

 

Sales in Rs. = Selling price per unit x No. of units = 2950 x 4000 = 11800000

 

han part 2 ka yehi ans hai bint e ahmad. aur part 3 me net profit 100,000 aur net loss 750,800 hai.

aur loss ko 2 ways se likhte hen 1. loss = 750,800 or 2. profit = (750,800). thats accounting rule.

jazak Allah maham , i understand..

CM = 1100 aur C/S ratio = 0.37

they both are different things dont confuse yourself.

aur part 1 ka answer round off krke 8.6 million likhdo

ASSIGNMENT NO. 2 SOLUTION

 

 

 

 

1.     Breakeven Point in Units and Sales.

Break even Points Sales (Units) = Fixed Cost/Selling Price-Variable cost

                                 = 12, 00,000+ 16,00,000+ 400,000 / 2,950- 1,850

                                 =      32,00,000 / 1,100

                                 =      2,909. Units

            Breakeven Point Sales (Rupees) = Breakeven Point (Units) * Selling Price

                                             =   2909 X 2950

                                             =   Rs. 85,81,818

2.           Amount of Sales = Profit + Fixed Cost / Contribution Margin 

                                         = 12,00,000 + 32,00,000 / 37.29%

                                         = Rs. 18,000,000

            Sales in Units = Amount of Sales / Selling Price

                                   = 18,000,000 / 2950

                                   = 4000 units

 

(W-1) 

Contribution Margin  = Selling Price – Variable Cost / Selling Price x 100

                                  = 2950 – 1850 / 2950 x 100

                                  =   37.29 %

3.   Sales Budget = Selling Price x Units

                                       = 2950 x 3000

                                       = Rs. 88, 50,000

  

  Proposed selling price per Unit = Selling Price – (Selling Price x 16 %)

                           = 2950 – (2950 x 16 %)

                           = 2950 - 472

 

 

 

  Proposed selling price = Rs. 2478 per unit

  Value of proposed units by increasing the Actual output of Units

                           = Selling Price + (Selling Price x 30%)

                           = 3000 + (3000 x 30%)

                          = 3900  units

Net Income

At Present Plan

 

                                                                                                        Rs.

Sales                                                                                           88, 50,000                   

(Selling Price x Units)                                             

 (2950 x 3000)                               

Less: Variable Cost                                                                         55, 50,000

      (Variable Cost x units)

      (1850 x 3000)

Contribution Margin                                                                       33, 00,000

Less: Fixed Cost                                                                             32, 00, 000

Net Profit                                                                                        100,000

 

 

 

 

Net Income

At Proposed Plan

                                                                                                                       Rs.

Sales                                                                                                             96, 64,200

(Proposed Selling Price x Proposed units)

(2478 x 3900)

 Less: Variable Cost                                                                                    72, 15,000

(Variable cost x proposed units)

(1850 x 3900)

Contribution Margin                                                                                   24, 49,200

Less: Fixed Cost                                                                                         32, 00,000

Net Loss                                                                                                      ( 750,000)

 

So, In this case change is not suitable for production department because at present plan they are earning profit by Rs. 100,000.

assignment mgt402 solution 2 
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