PRO

ABC Ltd. manufacturing company producing three types of products i.e. P, Q and R. The current pattern of sales of three prod
Products P Q
Selling Price (₹) 200 260
Raw Material (Kg) 0.5 1.2
Direct Material (Kg) 0.25 -
Skiiled Labour hours 4 6
Semi Skiiled Labour hours 2 2
Variable Overheads (₹) 40 80

Prices of raw materials and direct materials respectively, are ₹ 100 and ₹ 40 per kg. Wage rate of skilled and semi-skilled labou
Particulars Raw Materials Direct Materials
Opening 600 400
Closing 650 260
The fixed overhead amounts to ₹ 2,00,000 per month. The company desires a profit of ₹ 1,20,000 per month. Prepare the follo
1. Sales budget in quantity and value
2. Production budget showing quantity to be manufactured.
3. Purchase budget showing the quantity and value.
4. Direct labour budget showing the number of workers and wages

SOLUTION:

Given:
Products P Q
Selling price 200 260
Raw material(kg) 0.5 1.2
Direct material (kg) 0.25 0
skilled labor hours 4 6
semi skilled labour hours 2 2
variable overheads 40 80
sales mix 8 2

Particulars Raw materials Direct materials

Opening 600 400
Closing 650 260
Sales budget in quantity
Particulars P
Selling price 200
Variable cost
Raw material 100 50
direct material 40 10
skilled labour 6 24
semi skilled labour 5 10
Variable overheads 40
Total variable cost 134
Contribution per unit 66
Sales mix 8
Weighted CPU 528
Desired profit 120000
add: fixed overheads 200000
Desired contribution 320000
No. of batches of p,q,r 549
Sales Qty P 4392
Q 1098
R 549
SALES BUDGET IN VALUE
Particulars P Q
Budgeted sales Quantity 4392 1098
Budgeted price 200 260
Budgeted sales value 878400 285480

PRODUCTION BUDGET
Particulars P Q
Budgeted sales Quantity 4392 1098
Add: Closing stock 400 100
Less: Opening stock 200 300
Budgeted PRODUCTION 4592 898

RAW MATERIAL USAGE BUDGET

Particulars P Q
Budgeted production 4392 1098
raw material usage 0.5 1.2
total raw material required 2196 1317.6
Direct material usage 0.25 0

Total direct material required 549 0

 PRODUCTION BUDGET
e current pattern of sales of three products is in the ratio of 8:2:1 respectively. The relevant data are as follows -
R
420
2.5
-
8
3
80

ge rate of skilled and semi-skilled labour, respectively, are ₹6 and ₹5. Each operator work 8 hours a day for 25 days in a month. The positio
P Q R
400 100 50
200 300 50
₹ 1,20,000 per month. Prepare the following for the month:

R
420
2.5
0
8
3
80
1

P Q
400 100
200 300

Q R
260 420

120 250
0 0
36 48
10 15
80 80
246 393
14 27
2 1
 28 27

R
549
420
230580

R
549
50
50
549

R
549
2.5
1372.5
0

0
ws -

5 days in a month. The position of inventory are as follows -

 GRAPHICAL REPRESENTATION OF COST-VOLUME-PROF

Amount
Selling price per unit (₹) 500

Variable cost per unit (₹) 270

Total Fixed Cost (₹) 6900000
Projected Sales (units) 40000

Contribution per unit (₹) 230

P/V Ratio 0.46
Break-even point (units) 30000
Break-even point (₹) 15000000

UNITS TOTAL FIXED COST TOTAL VARIABLE COST

0 6900000 0
10000 6900000 2700000
20000 6900000 5400000
30000 6900000 8100000
40000 6900000 10800000
50000 6900000 13500000
60000 6900000 16200000
70000 6900000 18900000
80000 6900000 21600000
90000 6900000 24300000
100000 6900000 27000000

Break-even Chart
60000000
Revenue and Costs

50000000
40000000
30000000
15000000
20000000
10000000
0
0 20000 40000 60000 80000 100000 120000

Units

TOTAL FIXED COST TOTAL VARIABLE COST

TOTAL COST TOTAL REVENUE
 Units

TOTAL FIXED COST TOTAL VARIABLE COST

TOTAL COST TOTAL REVENUE

Break-even Chart
60000000

Revenue and Cost

50000000
40000000 Pro
30000000
15000000
20000000
10000000
Losses
0
0 20000 40000 60000 80000

Units

TOTAL COST TOTAL REVENUE

ION OF COST-VOLUME-PROFIT RELATIONSHIPS

Selling price per unit - Variable cost per unit

Contribution per unit ÷ Selling price per unit
Total Fixed Cost ÷ Contribution per unit
Total Fixed Cost ÷ P/V Ratio

TOTAL COST TOTAL REVENUE PROFIT

6900000 0 -6900000
9600000 5000000 -4600000
12300000 10000000 -2300000
15000000 15000000 0
17700000 20000000 2300000
20400000 25000000 4600000
23100000 30000000 6900000
25800000 35000000 9200000
28500000 40000000 11500000
31200000 45000000 13800000
33900000 50000000 16100000

PROFIT VOLUME CHART

20000000

15000000

10000000

5000000 0
100000 120000
0
0 20000 40000 60000 80000 100000 120000

-5000000

-10000000
 0 20000 40000 60000 80000 100000 120000

-5000000

-10000000

Break-even Chart

Profits

15000000

sses
20000 40000 60000 80000 100000 120000

Units

TOTAL COST TOTAL REVENUE

100000 120000
100000 120000
 CASH BUDGET
The following data relates to ABC Ltd.
The financial manager has made the following sales forecast for the first 5 months of the coming year, commencing from 1 Ap
Month Sales (₹)
April 40,000
May 45,000
June 55,000
July 60,000
August 50,000
Other data
1. Debtor's and creditor's balance at the beginning of the year are ₹ 30,000 and ₹ 14,000 respectively. The balance of other re
(a) Cash Balance ₹ 7,500
(b) Stock ₹ 51,000
© Accrued sales commission ₹ 3,500
2. 40% sales are on cash basis. Credit sales are collected in the month following the sale.
3. Cost of sales is 60% of sales.
4. The only other variable cost is 5% commission to sales agents. The sales commission is paid in a month after it is earned.
5. Inventory is kept equal to sales requirements for the next 2 months budgted sales.
6. Trade creditors are paid in the following month after purchases.
7. Fixed costs are ₹ 5,000 per month including ₹ 2,000 depreciation.
You are required to prepare a cash budget for the month of April, May and June 2023 respectively. Also show Sales, Creditors,

Solution:
Opening Debtors 30000
Opening Creditors 14000
Opening Cash Balance 7500
Opening Stock Balance 51000
Accrued Sales Commission 3500

Working Notes
Particulars April May June July August
Sales 40000 45000 55000 60000 50000
Credit sales (60% of sales) 24000 27000 33000 36000 30000
Creditors
Cost of sales (60% of sales) 24000 27000 33000 36000 30000
Desired closing inventory (add next two mont 60000 69000 66000
84000 96000 99000
Less: opening inventory 51000 60000 69000
Purchases 33000 36000 30000
Payment to creditors 14000 33000 36000

Cash Budget
Particulars April May June
Opening Balance 7500 33000 37000
Add receipts
Cash Sales (40% of sales) 16000 18000 22000
Receipt from debtors 30000 24000 27000
Total receipts 53500 75000 86000
Payments
Creditors 14000 33000 36000
Fixed cost (5000-2000) 3000 3000 3000
Commission to sales agent 3500 2000 2250
(5% of prev month sales)
Total payment 20500 38000 41250
Closing balance 33000 37000 44750
SH BUDGET

g year, commencing from 1 April 2023

ctively. The balance of other relevant assets and liabilities are

n a month after it is earned.

ely. Also show Sales, Creditors, Total Receipts and Total Payment information graphically.

sales graph
60000
50000
40000
30000
20000
10000 18000 22000
16000
0
april may june

cash sales credit sales

total receipts

50000
40000
30000
20000
10000
0
april may june

cash sales(40%) receipt from debtors

40000
30000
20000
10000
0
april may june

cash sales(40%) receipt from debtors

 FLEXIBLE BUDGET
The following information relates to a company:

At 80% Capacity
Variable Cost:
Direct Labour 16,000
Material Cost 8,000
Semi-Variable Cost
Power (30% fixed and 70% variable) 50,000

Repairs and maintenance (80% fixed and 20% variable) 7,000

Fixed Overehads:
Depreciation 12,000
Insurance 6,000
Salaries 11,000

Draw a flexible budget at 70% and 80% plant capacity

Solution:

FLEXIBLE BUDGET FOR THE PERIOD OF 2023-24

PARTICULARS 70%

Direct Labour 14000

Material Cost 7000
Variable Cost 21000

Power (30% fixed and 70% variable)

Fixed 15000
Variable 30625
Repairs and Maintenance cost (80% fixed and 20% variable)
Fixed 5600
Variable 1225
Semi variable cost 52450

Depreciation 12000
Insurance 6000
Salaries 11000
Fixed Overheads 29000
Total Cost 102450
023-24
80%
10%
16000 20%
8000 30%
24000 40%
50%
60%
15000 70%
35000 80%
90%
5600 100%
1400
57000

12000
6000
11000
29000
110000
 COST VOLUME PROFIT
Following information is available with respect to ABC Ltd.
Selling Price
Fixed Cost
Variable Cost
Capacity (in units)
The pedicted units of output are 0, 100, 200, 300, 400, 500, 600 and 700
Based upon the information, you are required to compute the following
A) Cost Volume Profit Chart
B) Break Event Point (in units and rupees)
C) Contribution Income Statement at 300 units of output

SOLUTION:
Contribution margin
Profit volume ratio

table of predicted cost and revenue

units
0
100
200
300
400
500
600
700

BREAK EVEN POINT

IN UNITS

IN RUPEES

Contribution income statement at 300 units of output

SALES
LESS: VX
CONTRIBUTION
LESS: FC
PROFIT

0
ROFIT
₹700
₹84,000
₹420
8000

280
0.4

table of predicted cost and revenue

fixed cost total variable cost total cost

84000 0 84000
84000 42000 126000
84000 84000 168000
84000 126000 210000
84000 168000 252000
84000 210000 294000
84000 252000 336000
84000 294000 378000

FIXED COST 300

CONTRIBUTION PER UNIT cvp graph of ABC LT
600000
FIXED COST/ PROFIT VOLUME RATIO 210000

500000

210000
126000 400000
3
84000
RUPEES

300000 28000
84000
0 210000
200000
140000

100000 70000

0
0
0 100 200 300 400

UNITS

total cost total reve

 0
0
0 100 200 300 400

UNITS

total cost total reve

 total revenue
0
70000
140000
210000
280000
350000
420000
490000

cvp graph of ABC LTD.

600000

490000
500000
420000
400000
350000
RUPEES

300000 280000

210000
200000
140000

100000 70000

0
0
0 100 200 300 400 500 600 700

UNITS

total cost total revenue

 0
0
0 100 200 300 400 500 600 700

UNITS

total cost total revenue

 COMPOSITE BREA

PQR manufacture and sells 3 types of products A,B,C.The selling price per unit of these products are rs.200, 160,100 resoecti
or sales mix in which these products are manufactured and sold are 20%, 30% and 50% respectively. Calculate the following

(i) The Overall break-even quantity

(ii) The product-wise BEP in units
(iii) Product-wise BEP (in rupee)
(iv) Overall BEP (in value)
(v) Overall P/V ratio
(vi) The predicted units of output are 10000, 15000, 20000, 25000 and 30000
(vii) Graphically show Overall BEP and P/V Chart

SOLUTION:
PRODUCT SELLING PRICE VARIABLE COST CPU
A 200 120 80
B 160 120 40
C 100 40 60
Composite CPU
FIXED COST 1160000 OVERALL BEP(fixed cost/ comp CPU)
COMP. CPU 58
TABLE FOR THE COMPUTATION OF PRODUCT WISE BEP
PRODUCT WEIGHTED CPU
weighted avg. selling price Weighted avg. VC
A 40 24 16
B 48 36 12
C 50 20 30
Total 138 80 58
OVERALL PV Ratio(total fixed cost/overall BEP)
OVERALL BEP 2760000
TABLE OF PREDICTED COST AND REVENUE
Units FC VC TC
10000 1160000 800000 1960000
15000 1160000 1200000 2360000
20000 1160000 1600000 2760000
25000 1160000 2000000 3160000
30000 1160000 2400000 3560000
 COMPOSITE BREAK EVEN

ucts are rs.200, 160,100 resoectively. The corresponding VC per unit are 120,120,40 respectively.total fixed costs are Rs. 1160000. qty. w
ectively. Calculate the following:

SALES MIX WEIGHTED CPU

0.2 16
0.3 12
0.5 30 Weighted CPU Formula= sales mix
U 58 *contribution per unit
fixed cost/ comp CPU)
20000
WISE BEP Chart Title
BEP(in units) BEP(in value)
4500000
4140
4000 800000 4000000
6000 960000 3450000 3560
3500000
10000 1000000 3160000
20000 2760000 3000000 2760000
42.03% 2360000
RUPEES

2500000
1960000 2070000
2000000
UE
SALES PROFIT/LOSS 1500000 1380000
1380000 -580000 1000000
2070000 -290000
500000
2760000 0
3450000 290000 0
10000 15000 20000 25000 300
4140000 580000
UNITS

Units TC SALES
osts are Rs. 1160000. qty. wise

Formula= sales mix

per unit

le
4140000

3450000 3560000
3160000
760000

20000 25000 30000

NITS

SALES
 COST INDIFFERENCE POINT
A firm wants to replace one of its existing machines. Two alternative machines - Machine A and Machine B are under consider
The costs associated with these alternatives are as follows:
MACHINE A
Variable cost per unit (₹) 50
Total Fixed Cost per annum (₹) 50000
You are required to:

(i) Calculate the cost indifference point.

(ii) Suggest the most economical alternative machine to replace the existing one when the expected level of annual production
(a) 5,000 units (b) 1,000 units
SOLUTION:

COST INDIFFERENCE POINTS (UNITS)

MACHINE A

Units produced Total variable cost

0 0
500 25000
1000 50000
1500 75000
2000 100000
2500 125000
3000 150000
3500 175000
4000 200000
4500 225000
5000 250000
5500 275000
6000 300000
COST INDIFFERENCE POINT
- Machine A and Machine B are under consideration.

MACHINE B
10
150000

e when the expected level of annual production is:

2500 (difference in fixed cost)/( difference in variable point)

MACHINE A MACHINE B

Total fixed cost Total cost (A) Total variable cost

50000 50000 0
50000 75000 5000
50000 100000 10000
50000 125000 15000
50000 150000 20000
50000 175000 25000
50000 200000 30000
50000 225000 35000
50000 250000 40000
50000 275000 45000
50000 300000 50000
50000 325000 55000
50000 350000 60000
nt)
MACHINE B

Total fixed cost Total cost (B)

150000 150000
150000 155000
150000 160000
150000 165000
150000 170000
150000 175000
150000 180000
150000 185000
150000 190000
150000 195000
150000 200000
150000 205000
150000 210000
 PRODUCT
ABC ltd is a power bank manufacturing company and is currently selling its products for the travellers through online portals. T
the current cost structure of its product.
Particulars amount
Direct materials 160
Direct Labour 20
Variable manufacturing overhead 50
Fixed overhead 10
Depreciation 10
variable selling overhead 5
Royalty 10
profit 50
315
central excise duty 30
selling price per unit 345
(a) Airlines is ready to buy 200 such power banks at 250 each. Advice the company weather offer should be accepted or not.
(b) At what price the company should supply the power banks to its sister concerns, if the policy of the company is to transfer

Solution:
Cost Benefit analysis of export order
particulars cost benefits
Offered sales price 250
variable costs
direct material 160
direct labour 20
variable overheads 50
royalty 10
central excise duty 30
total 270 250

Particulars amount
Sales price 345
Less: Profit 50
Less: variable selling overheads 5
Price to be quoted 290
 PRODUCT
s through online portals. ThePRICING
company is nowDECISION
exploring to supply the power banks to an airline. The accounts department has provided th

ould be accepted or not.

he company is to transfer at cost?
nts department has provided the following information about
 SALES OVERHE

AB Ltd. manufactures two types of product A and B and sells them in X and Y markets. The fo
Market Product Budgeted
Quantity
X A 4,000
B 3,000
Y A 6,000
B 5,000

Sales forecast for the next year reveals that product A is very popular but at the same time u
price is increased by Rs.1. On the other hand, product B is over-priced and it can bring more s
to the above price changes. The sales manager has made the following estimates:
Product % increase in sales over current year's actuals
Market X
A 10
B 20

He also estimates that the following additional sales are possible with the help of an intensive
advertisement campaign.

Product Market X (Units)

A 500
B 600

You are required to prepare the sales budget for the next year, i.e., 2024-25 based on the sal

Solution:

Workings: Calculation of budgeted estimates of sales for 2024-25

Market X (units)
Product A: Actual for the year 2023-24 5,000

Add: Increase of 10 % and 5% for X & Y 500

Add: Increase due to advt. campaign (as given) 500

Total 6,000
Product B: Actuals for current year 2023-24 2,000

Add: Increase of 20% and 10% for X & Y 400

Add: Increase due to advt. campaign 600
Total 3,000
Sales Budgets for the Year 2024-25
Product Market X
 Unit Price (Rs.)
A 6,000 10
B 3,000 40
9,000
 SALES OVERHEAD BUDGET

Price Actual Price

(Rs.) Quantity (Rs.)
9 5,000 9
41 2,000 41
9 7,000 9
41 4,000 41

r but at the same time underpriced. It is estimated that it will also continue to find a ready market eve
d and it can bring more sales if price is reduced to Rs.40. The management has approved the plan to g
ng estimates:
s over current year's actuals
Market Y
5
10

h the help of an intensive

Market Y (Units)
650
600

2024-25 based on the sales managers estimates both in quantitative and monetary terms.

Y (units)
7,000

350

650
8,000
4,000

400
600
5,000

Market Y
Value (Rs.) Unit Price (Rs.) Value (Rs.)
60000 8,000 10 80000
120000 5,000 40 200000
180000 13,000 280000
ue to find a ready market even if its
nt has approved the plan to give effect

monetary terms.

Total
 Unit Price (Rs.) Value (Rs.)
14,000 140000
8,000 320000
22,000 460000
 SPECIAL
product "A" in the home market at a price of ₹ 60 per pack. Also, the company has idle manufacturing capacity ORDER
for 6,000 pack
cost per pack at the current capacity utilization is as follows

Particulars
Direct Materials
Direct Labour
Factory expenses
Fixed
Variable
Office and Selling expenses
Fixed
AnVariable
offer from Canada to export 6,000 packs at a price of ₹ 30 per unit is under consideration. Execution of Canadian order will
export order. Further, accepting the export order is not expected to affect the selling price or quantity of product "A" sold in th
You are required to suggest whether the Canadian order should be accepted or not? Also, show the supportive calculations. A

Solution:
Packs
Incremental Approach
Cost Benefit Analysis of Export Offer
Particulars Rs. Costs Benefits
Export Sales (6000 packs @ Rs 30) 30 180000
Savings in maintenance cost 1000
Differential Cost
Direct materials 10 60000
Direct labour 7 42000
Variable Overheads
Factory Overheads 4 24000
Office and selling overheads 3 18000
Additional Fixed Cost 10000
Rental Income Foregone 9000
163000 181000
Incremental Benefit 18000
 SPECIAL
uring capacity ORDER
for 6,000 packs DECISION
which is hired out for ₹ 9,000. This hiring out has increased the maintenance cost of the company by ₹ 1,000

Amount (₹)
10
7

12
4

6
3
cution of Canadian order will result in an additional fixed cost of ₹ 10,000 over and above the variable cost. No additional selling cost is req
ntity of product "A" sold in the domesitc market.
he supportive calculations. Adopt differential approach.
t of the company by ₹ 1,000. The

additional selling cost is required for

 EXPORT ORDER
X Ltd. annually manufactures 10,000 units of a product at a cost of Rs. 4 per unit and sells these in the home market
at a selling price ofRs. 4.25 per unit. In the next year, there is fall in demand in home market which can absorb 10,000
units only at price of Rs.3.72 per unit. The total cost of 10,000 units is as follows:

Materials Rs. 15000

Wages Rs. 11,000
Fixed overheads Rs. 8,000
Variable overheads Rs. 6,000

The foreign market is explored and it is found that this market can consume 20,000 units of the product at a price of
Rs. 3.55 per unit. (Assume that the company has sufficient plant capacity to produce additional output). It is also
discovered that fixed overheads will increase by 10% for additional output above initial output of 10,000 units. Is it
worthwhile to try to capture the foreign market? Give reasons

SOLUTION:

Comparative Statement of Profita

Sales (units)

Selling Price
Sales
Variable Cost:
Material Cost
Labour Cost
Variable Overheads
Total Variable Cost
Contribution
Less: Fixed Cost
Profit
tatement of Profitability
Existing Proposed
Domestic Export Total
10000 10000 20000 30000
Rs. Rs. Rs. Rs.
4.25 3.72 3.55
42500 37200 71000 108200

15000 15000 30000 45000

11000 11000 22000 33000
6000 6000 12000 18000
32000 32000 64000 96000
10500 5200 7000 12200
8000 8000 800 8800
2500 -2800 6200 3400