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# MGT402 Assignment#02 Solution & Discussion Due Date:13-01-2011

Semester “FALL 2010”

“ Cost & Management Accounting (MGT402) ”

Assignment No. 02                                   Marks: 20
PROBLEM:
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.

Required:

  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.
Important Tips
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).
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)
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### Replies to This Discussion

your first sol is correct sir

Thanks for this Samia.

this is not correct solution

pehla thk hai bas baqi sab wrong hn

kun k dosre me us ne kaha hai  k sales 20% se increase ho rhi hn to pehle sales 105000 thi phr jb 20% percent increase hova ho jis ka mtlb hai k 105000*20/100=21000+105000= 126000

so sales is = 126000

fixed cost = 30000

variable cost=35000

so the net profit = 61000

not 9000

Mr. Tariq Malik ka first one solution correct tha.
Yes all are ok.
price main 20% increased howa hai goor sy parh lu jani. sales price increase hogi aur variable cost is k sath he vari kary gi. 126000 k sath variable cost ku be change karna.
Dekho app 105000 ka 20% lay lo yan phir 3500 ka lay kar usko add kar lo. Its will come same. Now the other thing Fixed cots which will add in the previous one because in case two fixed cost is also increasing.
see the attached file for another idea solution
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