Semester “FALL 2010”
“ Cost & Management Accounting (MGT402) ”
Assignment No. 02 Marks: 20
Mirza & Co manufactures and sells 3,500 units of product “A” at a selling price of Rs.
30 per unit. Fixed Cost Rs. 45,000 and variable cost Rs 10 per unit incurred to
manufacture the product A.
Management of Mirza & Co. is anxious to improve the company’s profit performance
and has asked for analysis of a number of items.
Scenario 1: Calculate contribution margin and net profit with the help of given data.
Scenario 2: Refer to original data; the management feels that due to increase of
advertising budget by Rs. 30,000 (this cost is considered as fixed cost) would increase
sales volume of product “A” by 20%. Should the advertisement budget be increased and
show complete calculation of contribution margin and net profit with these changes?
Also compare the findings of scenario 2 with scenario 1 and suggest which scenario
is more profitable.
Scenario 3: Refer to original data the management decided to improve the quality of its
product “A” by increasing the variable cost by 40%. Due to improvement in quality of
product the sales volume also increased by 20%. What effects should be seen on its
Contribution margin and net profit with new these changes.
Also compare the findings of scenario 3 with scenario 1 and suggest which scenario
will more profitable.
Scenario 4: Refer to original data; management has a plan to increase the sale price of
the product “A” by 25%. Due to this, they expect that their sales volume decreased by
30%. Analyze the all changes by preparing income statement.
Also compare the findings of scenario 4 with scenario 1 and suggest which scenario
is more profitable.
1. This Assignment can be best attempted from the knowledge acquired after
watching video Lecture # 01 to Lecture # 31 and reading handouts as well as
recommended text book).
2. Video lectures can be downloaded for free from www.youtube.com/vu
Schedule Opening Date and Time January 10, 2011 At 12:00 A.M. (Mid-Night)
Due Date and Time January 13, 2011 At 11:59 P.M. (Mid-Night)
Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned
due date is usually available to overcome uploading difficulties which may be faced by the
students on last date. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
Please read the following instructions carefully before attempting the assignment solution.
• Make sure that you upload the solution file before the due date. No
assignment will be accepted through e-mail once the solution has been
uploaded by the instructor.
• Use the font style “Times New Roman” and font size “12”.
• It is advised to compose your document in MS-Word 2003.
• Use black and blue font colors only.
• Show complete working.
• Every student will work individually and has to write in the form of an
• For acquiring the relevant knowledge don’t rely only on handouts but
watch the video lectures and use other reference books also.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals etc…