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COST-VOLUME-PROFIT ANALYSIS

 

Learning Objective: Students will be able to to learn and apply the cost-volume-profit analysis.

 

Scenario:


Modern Industries (PVT) Ltd. manufactures basketballs and sells them across the country. The company’s management is desirous to boost-up the yearly profits and considering a change in the sales price of its products in this regard. The company’s management accountant has developed following information using the recent year’s published accounts:

          

 

TOTAL  

   UNITS

Sales (200 units)                   

Rs. 30,000                    

Rs.150.00

Variable cost                            

17,500                        

087.50

Contribution margin                  

12,500                          

62.500

 

Fixed cost                                  

 5,000                          

 

Profit before tax                         

7,500                    

 

                       

The management accountant believes that a 10% reduction in selling price would increase the sales volume by 30%.

 

Required: Analyze the above information carefully and answer the following assuming no change in the fixed cost:                                                        
  i)     Change in the net sales;                                                                

ii)      Change in the contribution margin in total & per unit;                                             

iii)    Change in per unit net profit assuming 40% tax rate;

iv)     Would you recommend the proposed sale price and why?

 

Important Instructions:

 

1. The GDB will remain open for 3 working days/ 72 hours.

2. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

3. Obnoxious or ignoble answer should be strictly avoided.

4. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

 

Ø For Detailed Instructions please see the GDB Announcement

Views: 6411

Replies to This Discussion

ali ilyas shakeel bhai ka solution absolutly right ha

AGER mujay pata hota toh pochta k kis ka theek hay isi liay pocha ap say ap bta do00 ?

bro me to always khud hi working krta hun for betr understanding !! U dekh lo agr theak lgta hai to sari calculations U k samny heen B.O.L

 

i) 5100

ii)a. -150

ii)b. -15

iii)-5.54

iv) reject the proposal

    

 

 Unit

Sales (260 units)                                   Rs. 135          

Variable Cost                                             67.31

Contribution Margin                                      67.7

Fixed Cost                                                  

Profit before Tax                                         48.46   

 40% tax                                                                                        

 Profit after Tax                                                  29.1

D@nY@L@fR()Z! plz tell how you calculate it .

variable cost kaisy change ho gai?

shakeel bhai is correct 

and the last option the perposa is 100% reject

Asalam o Alikum to all,

please help me in question no 2, because i does not understand that from where 12350 comes, please help me

Usman Shahid

sales=260x135=   35,100

varable cost=260x87.5=  22,750

(35100-22750)=12350

12350=contribution margin

feel free to ask any query related to gdb

واہ

Amir - عامر مغل 33 chl bago yaha sy ap yaha kia kr rhy ho

Humna Afzal when per unit cost will be change than variable cost and contribution margin will also change.

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