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.  
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).
2.  Video lectures can be downloaded for free from
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.
Important Instructions:
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. 
Formatting guidelines:
•  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. 
Solution guidelines:
•  Show complete working.
•  Every student will work individually and has to write in the form of an
analytical assignment.
•  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…

Views: 530


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


© 2021   Created by + M.Tariq Malik.   Powered by

Promote Us  |  Report an Issue  |  Privacy Policy  |  Terms of Service