Excel Applications in Cost-Volume-Profit Analysis

Problem 1. (Example 1. Page 5.7) ABC Ltd. provides you the following forecast for the next budget perio
Selling price Rs. 50 per unit
Variable cost Rs. 30 per unit
Fixed Cost Rs. 1,80,000
You are required to calculate:
(i) Profit Volume Ratio. (ii) Break-Even Point in units and value

Solution Statement of Contribution per unit

Selling Price
Less: Variable Cost
Contribution
Fixed Cost

(i) P/V Ratio Contribution p.u./

Selling Price p.u. Or in %

(ii) Break Even Point(units) Fixed Cost/Cp.u.

(iii) Break Even Point(Rs.) Fixed Cost/PV Ratio
or the next budget period.

nit

Rs.
50
30
20
180000

0.4
40%

9000
450000
Problem 2. (Example 6. Page 5.14) XYZ provides you the following estimated information relating to next year of
Sales 50,000 units
Selling price Rs. 20 per unit
Variable cost (Out of pocket costs) Rs.12 per unit
Fixed cost per annum Rs. 1,20,000
Calculate the following :
(i) Required sales to break even;
(ii) Required sales to earn a profit of Rs.1,00,000 (iii) Required sales to earn a profit of Rs.4 per unit;
(iv) Required sales to earn a profit of 15% on sales.
(v) Additional sales required to cover an additional expenditure of Rs.20,000 in fixed cost while maintaining the es

Solution: Statement of Estimated Contribution and Profit

Sales (units)

Selling Price
Less: Variable Cost
Contribution
Fixed Cost
Profit

P/V Ratio Contribution p.u./ Selling Price

p.u.

(i) Break Even Point(units) Fixed Cost/Cp.u

Break Even Point(Rs.) Fixed Cost/PV Ratio

(iii) Required Sales to earn a profit of Rs.1,00,000

Required Sales (Rs.) (FC+ DP)/PV Ratio

Required Sales (Units) (FC+ DP)/Cp.u

(iv) Required Sales to earn a profit of 4 per unit:

 Desired Profit (DP) p.u.
Required Sales (Units) FC/(Cp.u– DPp.u)
Required Sales (Rs.) Units × Selling Price

(v) Required Sales to earn a profit of 15% on Sales

Per Unit (Rs.)
Selling Price 20
Less: Variable Cost 12
Contribution p.u. 8
Contribution p.u. towards Desired Profit 3

Contribution P.U. towards fixed cost 5

Fixed Cost (Rs.) 120000

Required Sales (Units) 24000
Required Sales (Rs.) 480000

(vi) Calculation of additional sales to cover an increase in fixed cost of Rs.20000

Additional Fixed Cost(Rs.)
Required Sales (Units) Additional FC/Cp.u
Required Sales (Rs.) Additional FC/PV Ratio
information relating to next year of its operations:
50,000 units
Rs. 20 per unit
Rs.12 per unit
Rs. 1,20,000

profit of Rs.4 per unit;

n fixed cost while maintaining the estimated profit.

50000
Per Unit (Rs.) Per Unit (Rs.)
20 1000000
12 600000
8 400000
120000
280000

0.4
Or 40%

15000
300000

550000
27500

Alternatively Rs.
 Contribution per unit 8
4 Desired Profit (DP) p.u. 4
30000 Contribution p.u. Towards 4
600000 Fixed Cost 120000
Required Sales (units) 30000
Required Sales (in rupees) 600000

n increase in fixed cost of Rs.20000

20000
2500
50000
Problem 3. (Example 7. Page 5.16). The following cost information relating to a product is supplied by a cost accountant.
Sales (20,000 units @ Rs. 40 per unit) Rs. 8,00,000
Variable Cost per unit @ Rs. 28 per unit) Rs.5,60,000
Fixed Cost Rs. 1,80,000
Profit Rs. 60,000
You are required to calculate:
(i) Variable cost ratio
(ii) P/V ratio
(iii) Break-even Sales
(iv) Sales to earn a profit of Rs.1,20,000
(v) Sales to earn a profit of 10% of Sales
(vi) Profit at a Sales level of Rs.12,00,000
(vii) Profit at a Sales level of 36,000 units

Solution: Statement of Existing Contribution and Profit

Sales (Units) 20000
Particulars Per Unit (Rs.) Total(Rs.)
Sales 40 800000
Less: Variable Cost 28 560000
Contribution 12 240000
Less: Fixed Cost 180000
 Profit 60000

(i) Variable Cost ratio Variable Cost/ Sales 0.7 Or 70%

(ii) Profit Volume ratio Contriburion/Sales 0.3 30%

(iii) Break Even Point(units) Fixed Cost/Cp.u 15000

Break Even Point(Rs.) Fixed Cost/PV Ratio 600000

(iv) Sales to earn a profit of Rs. 1,20,000

Desired Profit (DP) Rs. 120000
Required Sales (units) (FC + DP)/Cp.u. 25000
Required Sales (Rs.) (FC + DP)/PV ratio 1000000

(v) Sales to earn a profit of 10% of Sales

Per Unit (Rs.)
Selling Price 40
Less: Variable Cost 28
Contribution P.U. 12
Contribution P.U. towards Desired Profit 4
Contribution P.U. towards fixed cost 8
Fixed Cost (Rs.) 180000
Required Sales (Units) 22500
Required Sales (in rupees) 900000

(vi) Profit at a Sales level of Rs.12,00,000

Given Sales (Rs.) 1200000
Profit Given Sales (Rs.)× PV ratio – FC 180000

(vi) Profit at a Sales level of 36000 units

Given Sales (units) 36000
Profit Given Sales (units) × Cp.u. – FC 252000
 Problem 4. (Example 10. Page 5.20). SR Ltd., a multiproduct company provides you the following revenue and cost
details of its operation:
Period I Period II
Sales (Rs.) 2,50,000 3,00,000
Total Costs (Rs.) 2,00,000 2,30,000
Assuming that there is no change in selling price and variable cost per unit and fixed costs are also incurred equally
in the two periods, calculate the following:
(i) Profit-volume ratio
(ii) Fixed-cost
(iii) Break-even point
(iv) Margin of safety ratio in period I and II
(v) Sales required to earn a profit of Rs.1,00,000
(vi) Profit at a Sales level of Rs.4,00,000

Solution:
Statement of Profit
Particulars Period I Period II Change
Sales 250000 300000 50000
Less: Total Cost 200000 230000 30000
Profit 50000 70000 20000

(i) Profit-volume ratio Change in Profit/Change in Sales 0.4

Or 40%
(ii) Fixed Cost 50000
Or 50000

(iii) Break Even Point(Rs.) 125000

(iv) Margin of Safety Ratio (AS-BES)/AS× 100 Period I 50%

Period II 58.33%

(v) Sales required to earn a profit of Rs. 1,00,000

Desired Profit (DP) Rs. 100000

Required Sales (Rs.) (FC + DP)/PV ratio 375000

(vi) Profit at a Sales level of Rs. 4,00,000

Given Sales (Rs.) 400000
Profit (Rs.) Given Sales (Rs.)× PV ratio – FC 110000
Problem 5. (Example 12. Page 5.23). The Cost Accountant of ABC Ltd. supplies you the following
information:
Sales 10,000 units @ Rs.20 p.u. Rs.2,00,000
Variable Costs @ Rs. 12 p.u. Rs. 1,20,000
Fixed Cost Rs. 50,000
There has been an increase in the costs. The management is contemplating either an increase in sales
quantity or an increase in selling price. You are required to calculate: (a) new sales quantity and (b) new
selling price to earn the same profit when:
(i) Variable Cost increases by Rs. 4 per unit.
(ii) Fixed Cost increases by Rs.10,000
(iii) Variable Cost increases by Rs.2 per unit and fixed cost reduces by Rs.8,000.

Solution: Statement of Existing Contribution and Profit

Sales (Units) 10000
Particulars Per Unit (Rs.) Total(Rs.)
Sales 20 200000
Less: Variable Cost 12 120000
Contribution 8 80000
Less: Fixed Cost 50000
Profit 30000
(i) a New sales quantity to maintain present level of profit When VCp.u. is increased by Rs.4
New Variable cost 16
New Contribution per unit 4
Required Sales (units) (FC + DP)/Cp.u. 20000

(i) b New selling price to maintain present level of profit When VCp.u. is increased by Rs.4

Total Sales VC+ FC +DP 240000

Selling Price(Rs.) 24

(ii) a New sales quantity to maintain present level of profit When Fixed Cost is increased by Rs.10000
New Fixed cost 60000
Required Sales (units) (FC + DP)/Cp.u. 11250

(ii) b New selling price to maintain present level of profit When Fixed Cost is increased by Rs.10000

Total Sales VC+ FC +DP 210000

Selling Price(Rs.) 21

(iii) a New sales quantity to maintain present level of profit when VC p.u. increases by Rs.2 and FC reduces byRs.8000
New Variable cost 14
New Contibution per unit 6
New Fixed cost 42000
Required Sales (units) (FC + DP)/Cp.u. 12000

(iii) b New selling price to maintain present level of profit when VC p.u. increases by Rs.2 and FC reduces byRs.8000

Total Sales VC+ FC +DP 212000

Selling Price(Rs.) 21.2
 Problem 6. (Illustration 6. Page 5.54). Attempt the following (working notes should form part of the answer):
(i) Total fixed cost Rs.12,000; Contribution Rs.20,000; Number of units sold 10,000; Variable cost is 60% of sales.
Determine selling price per unit and also the total profits/loss
(ii) Total fixed cost Rs.12,000. Actual sales Rs. 48,000; Margin of safety Rs.8,000. Determine P/V ratio.
(iii) A company which has a margin of safety of Rs.4 lakhs makes a profit of Rs.80,000. Its fixed cost is Rs.5 lakhs.Fi
break-even sales volume.

Solution
(i) Given:
No. of units solld
Contribution (Rs.)
Fixed Cost
Variable Cost ratio

PV ratio
Total sales
Selling Price
Profit

(ii) Given:
Actual Sales(Rs.)
Margin of Safety(Rs.)
Fixed Cost

Break Even Sales(Rs.)

PV ratio FC/BES(Rs.)
Or
(iii) Given:
Margin of Safety(Rs.)
Profit(Rs.)
Fixed Cost
PV ratio Profit/Margin of Safety
Or
BES(Rs.) FC/PV ratio
m part of the answer):
able cost is 60% of sales.

mine P/V ratio.

s fixed cost is Rs.5 lakhs.Find the

10000
20000
12000
60.00%

40.00%
50000
5
8000

48000
8000
12000

40000
0.3
30%

400000
80000
500000
 0.2
20%
2500000
 Problem 7. (Illustration 29. Page 5.74). A company is manufacturing three products details of which, for the last y
given below:

Product Price( Rs.) Variable Cost ( Rs. ) Per cent of Total Sales value (%)
A 20 10 40
B 25 15 35
C 20 12 25
Total fixed cost per year Rs.1,10,000
Total sales Rs.5,00,000
(a) You are required to work out the break-even point in rupee sales for each product assuming that thesales mix
retained.
(b) The management has approved a proposal to substitute product C by product D in the coming year.Thelatter p
a selling price of Rs. 25 with a variable cost of Rs. 12.50 per unit. The new sales mix of A, B and D is expected to b
20. Next year fixed costs are expected to increase by Rs.31,000. Total sales are expected to remain at Rs.5,00,000
required to work out the new break-even point in rupee sales and units for each product.
(c) What is your comment on the decision of the management regarding changing product mix?

Solution: (a) Statement of contribution and profit

Solution:
(a) Product A B
Sales Value 40% 35%
Per Unit(Rs.) Total(Rs.) Per Unit(Rs.)
Sales 20 200000 25
Less: Variable Cost 10 100000 15
Contribution 10 100000 10
Less: Fixed Cost
Profit

Overall P/V Ratio= Overall Contribution/Overall Sales

Overall BEP(Rs.)= Fixed Cost/Overall PV Ratio

Share of sales of individual products in overall Break-Even Sales of Rs.2,50,000

Rs. Units
A 100000 5000
B 87500 3500
C 62500 3125
(b) Statement of contribution and profit (when product C is substituted by D)
 Product A B
Sales Value 50% 30%
Per Unit(Rs.) Total(Rs.) Per Unit(Rs.)
Sales 20 250000 25
Less: Variable Cost 10 125000 15
Contribution 10 125000 10
Less: Fixed Cost
Profit

Overall P/V Ratio= Overall Contribution/Overall Sales

Overall BEP(Rs.)= Fixed Cost/Overall PV Ratio

Share of sales of individual products in overall Break-Even Sales of Rs.3,00,000

Rs. Units
A 150000 7500
B 90000 3600
C 60000 2400

(C) Substitution of product C by product D is more profitable. This is because of fact that P/V ratio has
increased from 44% to 47%. But due to increase in fixed cost by Rs.31,000, the overall profit has come
down from the existing level of Rs. 1,10,000 to Rs. 94,000. Hence, profit-wise the existing product mix is
better. However if sales can be increased in long-run then proposed change can also be considered
 oducts details of which, for the last year, are

t of Total Sales value (%)

40
35
25

product assuming that thesales mix is to be

duct D in the coming year.Thelatter product has

es mix of A, B and D is expected to be 50 : 30 :
e expected to remain at Rs.5,00,000 You are
ach product.
nging product mix?

B C Total Total(Rs.)
35% 25% 100% 500000
Total(Rs.) Per Unit(Rs.) Total(Rs.) Overall
175000 20 125000 500000
105000 12 75000 280000
70000 8 50000 220000
110000
110000

0.44
250000

000
 B D Total Total(Rs.)
30% 20% 100% 500000
Total(Rs.) Per Unit(Rs.) Total(Rs.) Overall
150000 25 100000 500000
90000 12.5 50000 265000
60000 12.5 50000 235000
141000
94000

0.47
300000

000

act that P/V ratio has

he overall profit has come
e the existing product mix is
an also be considered
 Problem 8.(New Question) SR Ltd. is manufacturing three products, the detail of its estimated sales for the next yea
Product Selling price (Rs. ) Variable cost ratio (%)
A 50 40
B 30 50
C 20 75
The annual fixed cost is estimated at Rs.4,92,000. The Quantity wise sales mix is 50%, 30% and 20%
You are required to calculate :
(i) Overall break-even sales in units
(ii) Break even sales of individual products in value and units
(iii) Overall P/V ratio of the firm

Solution

(i) Product Selling price (Rs. ) Variable cost ratio (%) Variable Cost Contribution p.u.
A 50 40 20 30
B 30 50 15 15
C 20 75 15 5

Fixed Cost (Rs.)

Overall BEP(units)= Overall FC/Composite Cp.u.=
Overall P/V Ratio= Overall Contribution/Overall Sales
Overall BEP(Rs.)= Fixed Cost/Overall PV Ratio

(ii) Share of individual’s product in Break Even Sales

Product Selling price (Rs. ) BEP (units) BEP(Rs.)

A 50 12000 600000
B 30 7200 216000
C 20 4800 96000
Total 24000 912000
ated sales for the next year is given below:–

and 20%

Quantity Sales Mix % Weighted Cp.u. Weighted SP

50 15 25
30 4.5 9
20 1 4
20.5 38
492000
24000
0.539473684210526
912000
Problem 9. (Illustration 34. Page 5.79). M/s Northern Industries specialises in the manufacture of small capacity m
cost structure of a motor is given below:
Material Rs.100
Labour Rs.160
Variable overheads 50% of labour cost
Fixed overheads of the company Rs.3,00,000 per annum. The sale price of the motor is Rs. 400 each.
(i) Determine the number of motors that have to be manufactured and sold in a year in order to break-even.
(ii) How many motors have to be made and sold to make a profit of Rs.1,20,000 per year.
(iii) If the sale price is reduced by Rs.20 each, how many motors have to be sold to break-even?

Solution Calculation of Contribution per Motor

Rs.
Selling Price 400
Variable Cost:
Material 100
Labour 160
Variable Overheads 80
Total Variable Cost 340
Contribution 60
Fixed Cost 300000

(i) BEP(Units)= FC/Cp.u. 5000

(ii) Calculation of Motor to be sold to make a desired profit of Rs.1,20,000

Desired Profit 120000
 Required Sales(units)= (FC+DP)/Cp.u. 7000

(iii) Calculation of number of motor to be sold to break-even if sale price is reduced by Rs.20 e

New Selling Price(Rs.) 380

Contribution 40
BEP(Units)= FC/Cp.u. 7500
he manufacture of small capacity motors. The

motor is Rs. 400 each.

a year in order to break-even.
0 per year.
d to break-even?

0,000
n if sale price is reduced by Rs.20 each
Problem 10 (Illustration 36. Page 5.81) There are two factories under the same management. It is desired to merge these two factories. The following information is availa

Factory A Factory B
Capacity operation 100% 60%
Rs.Lakhs Rs.Lakhs
Sales 300 120
Variable costs 220 90
Fixed cost 40 20
You are required to calculate:
(i) the capacity of the merged plant for the purpose of break-even; and
(ii) the profit on working at 75% of the merged capacity

Solution Statement of Contribution and Profit

Factory A B Merged Plant At 75 %

Capacity (%) 100 100% 100 75
Rs.Lakhs Rs.Lakhs Rs.Lakhs Rs.Lakhs
Sales 300 200 500 375
Variable costs 220 150 370 277.5
Contribution 80 50 130 97.5
 Fixed Cost 60 60
Profit 70 37.5
P/V Ratio = C/S 0.26
Or 26%
(i) The capacity of the merged plant for the purpose of break-even
BEP(Rs)= FC/PV Ratio 230.769230769231 Lakh

(ii) The profit on working at 75% of the merged capacity.

Profit = Given Sales (Rs.) × P/V ratio - FC 37.5
e following information is available:
Problem11 (Illustration 40. Page 5.85 A company is producing an identical product in two factories. The follow

Factory X
Selling price per unit 50
Variable cost per unit 40
Fixed cost 200000
Depreciation included in above 40000
Sales (units) 30000
Production capacity (units) 40000
You are required to determine:
(a) Break-even point (BEP) for each factory individually.
(b) Which factory is more profitable
(c) Cash BEP for each factory individually.
(d) BEP for company as a whole, assuming the present product mix.
(e) BEP for company as a whole, assuming the product mix can be altered as desired.
(f) Consequences on profits and BEP if product mix is changed to 2 : 3 and total demand remains co

Solution
Factory X
Production capacity (units) 40000
Sales (units) 30000
Selling price per unit (Rs.) 50
Variable cost per unit (Rs.) 40
Contribution (Rs.) 10
Fixed cost (Rs.) 200000
Depreciation included in above (Rs.) 40000
Cash Fixed Cost (Rs.) 160000
P/V Ratio =C/S 20.00%
(a) BEP(Rs.) = FC/PV Ratio 1000000
BEP(units.) = FC/Cp.u 20000

(b) Cost Indifference Point = Difference in FC/Difference in Cp.u.

(c ) Cash BEP(Rs.) = Cash FC/PV Ratio 800000

Cash BEP(units.) = Cash FC/Cp.u 16000

(d) Overall P/V Ratio = Total Contributio/Total Sales

Overall BEP(Rs.) = FC/PV Ratio

(e ) Let the desired product- mix is in the ratio of 1 : 1, i.e., 25,000 units for each factory
Desired Product Mix 25000
Overall P/V Ratio = Total Contributio/Total Sales
Overall BEP(Rs.) = FC/PV Ratio
(f) Desired Product Mix 20000
Overall P/V Ratio = Total Contributio/Total Sales
Overall BEP(Rs.) = FC/PV Ratio
duct in two factories. The following are the details in respect of both the factories.

Factory Y
50
35
300000
30000
20000
30000

altered as desired.
2 : 3 and total demand remains constant.

Factory Y
30000
20000
50
35
15
300000
30000
270000
30.00%
1000000
20000

20000 units

900000
18000

24%
2083333.33333333

or each factory
25000
25%
2000000
30000
26%
1923076.92307692
Problem 12. (Illustration 52. Page 100) (Key Factor) Super India Ltd. is producing three products X, Y and Z. The data for t

X Y
Maximum Capacity (units) 5,000 2,000
Direct material @ Rs.10 per Kg. 40 10
Other variable costs (Rs.) 36 25
Selling price (Rs.) 100 50
Fixed cost (unavoidable) (Rs.) 20,000 15,000

Calculate the best product-mix in each of the following three independent cases: (i) Total availability of raw materials is limite
(ii) Under a trade agreement the firm cannot produce more than 7,500 units of three products taken together.
(iii) Total sales value of the three products cannot exceed Rs.6,50,000
Give complete working showing contribution and total profit

Solution
X Y
Maximum Capacity (units) 5000 2000
Selling price (Rs.) 100 50
Direct material @ Rs.10 per Kg. 40 10
Other variable costs (Rs.) 36 25
Total Variable Cost (Rs.) 76 35
Contribution per unit(Rs.) 24 15
When Raw material is the Key Factor
Material Consumption p.u. (Kg.) 4 1
Contribution per Kg. of R.M.(Rs.) 6 15
Ranking on R.M Consumption basis 3 1

When sales is limited in terms of total units

Ranking on Contribution per unit basis 1 3
When sales value is limitedto Rs.6,50,000
P/V Ratio = C/S 24% 30%
Ranking on P/V ratio basis 3 2
Fixed cost (unavoidable) (Rs.) 20000 15000

When Raw material is the Key Factor

(i) Total R.M. available (Kg.)

Product Ranking wise Units Consumption of R.M. p.u.(Kg.)

Y 2000 1
Z 3000 3
X 1750 4
Total Contribution
Less: Fixed Cost(Rs.)
Profit
When sales is limited in terms of total units
(ii) Overall sale of units

Product Ranking wise Units Contribution per unit (Rs.)

X 5000 24
Z 2500 20
Y 0 15
Total Contribution
Less: Fixed Cost(Rs.)
Profit
When sales value is limitedto Rs.6,50,000
(iii) Total Sales Value (Rs.)

Product Ranking wise Units Selling Price (Rs.)

Z 3000 60
Y 2000 50
X 3700 100

Product Ranking wise Units Contribution per unit (Rs.)

Z 3000 20
Y 2000 15
X 3700 24
Total Contribution
Less: Fixed Cost(Rs.)
Profit
roducts X, Y and Z. The data for the three products is given below:

Z
3,000
30
10
60
10,000

ilability of raw materials is limited to 18,000 kg.

ts taken together.

Z
3000
60
30
10
40
20

3
6.66666666666667
2
RANK FUNCTION

2 RANK FUNCTION

33%
1 RANK FUNCTION
10000

18000

sumption of R.M. p.u.(Kg.) Total Consumption of Material (Kg.) Material Available

1 2000 16000
3 9000 7000
4 7000
 7500

ontribution per unit (Rs.) Contrbution (Rs.) Balance Units

24 120000 2500
20 50000
15 0
170000
45,000
125,000

650000

Sales Value (Rs.) Balance Sales (Rs.)

180000 470000
100000 370000
370000

ontribution per unit (Rs.) Contrbution (Rs.)

20 60000
15 30000
24 88800
178800
45,000
133,800
Contrbution (Rs.)
30000
60000
42000
132000
45,000
87,000
 Problem 13. (Illustration 55.Page 105) ( Cost Indifference Point) Top-tech a manufacturing company is presently evaluating two possible machines for the manufacture of su

Particulars Machine A Machine B

Selling price per unit (Rs.) 400 400
Variable cost per unit (Rs.) 240 260

Total fixed costs per year 35000000 20000000

Capacity (in units) 800000 1000000

Required: (i) Recommend which machine should be chosen?

(ii) Would you change your answer, if you were informed that in near future demand will be unlimited and the capacities of the two machines are as follows?
Machine A - 12,00,000 units; Machine B- 12,00,000 units
Why?

Solution
Particulars Machine A Machine B
Installed Capacity ( Units) 800000 1000000
Selling price per unit (Rs.) 400 400
Variable cost per unit (Rs.) 240 260
Contribution per unit (Rs.) 160 140
Total Contribution (Rs.) 128000000 140000000
Less:Total fixed costs (Rs.) 35000000 20000000
Profit (Rs.) 93000000 120000000
P/V Ratio = C/S 40% 35%
BEP (units) = FC/Cp.u 218750 142857.142857143

Level of sales (units) at which both the models will earn the same profit i.e., Cost Indifference point.
Difference in FC/Differrence in Cp.u. 750000
(i) Machine B having lower fixed cost is suitable if the demand is between 1,42,857 units and 7,50,000 units. However if demand excceds 7,50,000 units Mac

(ii) Yes, preference for machine will change, As discussed above, Machine A with lower variable cost will be more profitable if demand is unlimited. This can be seen from follow
Installed Capacity (Units) 1200000 1200000
Contribution per unit 160 140
Total Contribution 192000000 168000000
Less: Fixed costs 35000000 20000000
Profits 157000000 148000000
le machines for the manufacture of superior Pen-drives. The following information is available:

ines are as follows?

f demand excceds 7,50,000 units Machine A with lower variable cost per unit will be more profitable

limited. This can be seen from following analysis with increased capacity of machines
Problem 14 (Example 14 &15, Page 5.30 &5.31): SR Ltd. provides you the following i
Selling price (Rs.) 20
Variable cost per unit (Rs.) 12
Fixed costs per annum (Rs.) 160000
Sales / Production (units) 25000
Draw a Break Even Chart, Contribution Chart and Profit Volume Chart from the
Solution
Output/Sales (units) Sales Revenue VC (Rs.)
0 (Rs.) 0 0
5000 100000 60000
10000 200000 120000
15000 300000 180000
20000 400000 240000
25000 500000 300000
30000 600000 360000
35000 700000 420000

Output/Sales (units) FC (Rs.) VC (Rs.)

0 160000 0
5000 160000 60000
10000 160000 120000
15000 160000 180000
20000 160000 240000
25000 160000 300000
30000 160000 360000
35000 160000 420000

Output/Sales (units) FC (Rs.) Sales

0 160000 Revenue
0
(Rs.)
5000 160000 100000
10000 160000 200000
 15000 160000 300000
20000 160000 400000
25000 160000 500000
30000 160000 600000
35000 160000 700000

Output/Sales (units) Profit (Rs.)

0 -160000
5000 -120000
10000 -80000
15000 -40000
20000 0
25000 40000
30000 80000
35000 120000
provides you the following information for its current year of operations:

Profit Volume Chart from the above information

FC (Rs.) TC (Rs.) Contribution Profit (Rs.)

160000 160000 (Rs.) 0 -160000
160000 220000 40000 -120000
160000 280000 80000 -80000
160000 340000 120000 -40000
160000 400000 160000 0
160000 460000 200000 40000
160000 520000 240000 80000
160000 580000 280000 120000

TC (Rs.) Sales Contribution Profit (Rs.)

160000 Revenue
0 (Rs.) 0 -160000
(Rs.)
220000 100000 40000 -120000
280000 200000 80000 -80000
340000 300000 120000 -40000
400000 400000 160000 0
460000 500000 200000 40000
520000 600000 240000 80000
580000 700000 280000 120000

Profit
Contributio
n (Rs.) 0
(Rs.)
-160000 Contribu
40000 -120000
80000 -80000
800000
700000
600000
 Contribu
800000
120000 -40000 700000
160000 0
200000 40000
600000
240000 80000 500000
280000 120000
400000
300000
200000
100000
0
0 00
50

Profit Volume Grap

150000

100000

50000
Profit/Loss

0
0 5000 10000 15000 2000
-50000

-100000

-150000
 -50000

Pr
-100000

-150000

-200000
Number of units
 Breakeven Chart
800000

700000

600000
Sales Revenue

500000

400000 400000

300000

200000

100000

0
0 5000 10000 15000 20000 25000 30000
Number of Units

Contribution Breakeven Chart

000
000 FC (Rs.)
000 Sales Revenue (Rs.)
Contribution Breakeven Chart
000
000 FC (Rs.)
}
Sales Revenue (Rs.)
000
Contribution (Rs.)
000
000
000
000
000
0
0 00 000 000 000 000 000 000
50
10 15 20 25 30 35

olume Graph

0 15000 20000 25000 30000 35000

mber of units
hart

VC (Rs.)
TC (Rs.)
Sales Revenue (Rs.)
PROFIT

0000

0 25000 30000 35000

 Problem 15. A company is manufacturing three products details of which, for the last year, are given

Product Price( Rs.) Variable Cost ( Rs. ) Sales mix

A 200 120 20
B 160 120 30
C 100 40 50
Total fixed cost per year Rs.11,60,000
You are required to work out
(I)The overall break-even point in units
(II)Product wise BEP in units & in Rs.
(iii) overall BEP in value
(iv) Overall PV ratio
(v) the predicted units of output are 10000,15000,20000,25000 and 30000
(vi) Graphically show overall BEP & PV ration

Product S.P. V.C.(PU) CONT.(P.U.)

A 200 120 80
B 160 120 40
C 100 40 60

Table for the computation of product wiseBEP

Product WEIGHTED avg. S.P WEIGHTED avg. . VC WEIGHTED cont. PU

A
B
C

PV RATIO #DIV/0!
units FC VC TC
or the last year, are given below:

mix
20
30
50

0 and 30000

MIX WEIGHTED CONT. PU OVERALL BEP= FC/COMPOSITE BEP

0.2
0.3
0.5

BEP BEP( in Rs.)

SALES PROFIT/LOSS
FC/COMPOSITE BEP #DIV/0!
 Problem 15. A company is manufacturing three products details of which, for the last year, are given

Product Price( Rs.) Variable Cost ( Rs. ) Sales mix

A 200 120 20
B 160 120 30
C 100 40 50
Total fixed cost per year Rs.11,60,000
You are required to work out
even point in units
(II)Product wise BEP in units & in Rs.
(iv) Overall PV ratio
(v) the predicted units of output are 10000,15000,20000,25000 and 30000
overall BEP & PV ration

Product S.P. V.C.(PU) CONT.(P.U.)

A 200 120 80
B 160 120 40
C 100 40 60

Table for the computation of product wiseBEP

Product WEIGHTED avg. S.P WEIGHTED avg. . VC WEIGHTED cont. PU

A 40 24 16
B 48 36 12
C 50 20 30
138 80 58

PV RATIO 0.420289855072464
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 chart

4500000
4000000
profit
Cost and Revenue
3500000
3000000
2760000
2500000
2000000 Loss
1500000
1000000
500000
0
10000 15000 20000 25000 30000

No. of units produced/sold

units TC SALES
or the last year, are given below:

mix
20
30
50

(I)The overall break-

(iii) overall BEP in value

(iv) Overall PV ratio
0,20000,25000 and 30000 (vi) Graphically show

MIX WEIGHTED CONT. PU

0.2 16
0.3 12
0.5 30
58

BEP BEP( in Rs.) Chart Title

4000 800000 4500000
6000 960000 4000000
10000 1000000
3500000
2760000
3000000
2760000
2500000
2000000
1500000
1000000
500000
0
10000 15000 20000 25000

TC SALES
 2500000
2000000
1500000
1000000
500000
0
10000 15000 20000 25000

SALES PROFIT/LOSS TC SALES

1380000 -580000
2070000 -290000
2760000 0
3450000 290000
4140000 580000

PROFIT/LOSS
800000

600000
profit 400000

200000

0
1 2 3 4
-200000

-400000
00 30000
-600000

-800000
 OVERALL BEP= FC/COMPOSITE BEP 20000

Title

2760000

000 25000 30000

SALES
000 25000 30000

SALES

LOSS

3 4 5
Problem 14 (Example 14 &15, Page 5.30 &5.31): SR Ltd. provides you the following information for its current y
Selling price (Rs.) 20
Variable cost per unit (Rs.) 12
Fixed costs per annum (Rs.) 160000 Revised FC200000
Sales / Production (units) 25000
Draw a BE Chart with orignal FC and Revised FC from the above information
Solution
Sales
Output/Sales (units) Revenue VC (Rs.) FC (Rs.) TC (Rs.)
(Rs.)
0 0 0 160000 160000
5000 100000 60000 160000 220000
10000 200000 120000 160000 280000
15000 300000 180000 160000 340000
20000 400000 240000 160000 400000
25000 500000 300000 160000 460000
30000 600000 360000 160000 520000
35000 700000 420000 160000 580000
ormation for its current year of operations:

R
800000
700000

Sales Revenue (Rs.)

600000
500000
Contribution Revised Revised Revised
(Rs.) Profit (Rs.) 400000
FC TC Profit (Rs.) 300000
0 -160000 200000 200000 -200000 200000
40000 -120000 200000 260000 -160000 100000
80000 -80000 200000 320000 -120000 0
0 5000 1
120000 -40000 200000 380000 -80000
160000 0 200000 440000 -40000
200000 40000 200000 500000 0
Sales Revenue (Rs.
240000 80000 200000 560000 40000
Linear (TC (Rs.))
280000 120000 200000 620000 80000
 Revised BEP
0000
0000
0000
0000
0000
0000
0000
0000
0
0 5000 10000 15000 20000 25000 30000 35000
Number of Units

Sales Revenue (Rs.) FC (Rs.) TC (Rs.)

Linear (TC (Rs.)) Revised FC Revised TC
Problem 13. (Illustration 55.Page 105) ( Cost Indifference Point) Top-tech a manufacturing company is presently

Particulars Machine A Machine B

Variable cost per 50 10
unit (Rs.)
Total fixed costs per
50000 150000
year

Required: (i CIP
ii) Suggest the most economical alternative machine to replace the existing one when the e
a) 5000 b)1000

CIF= Diff. in FC/Diff in VC 2500

UNITS
VC
0 0
500 25000
1000 50000
Cost indifference point chart 1500 75000
2000 100000
2500 125000
500000 3000 150000
3500 175000
400000
4000 200000
300000 4500 225000
Axis Title

5000 250000
200000
5500 275000
100000

0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800
 400000

300000

Axis Title
200000

100000 6000 300000

6500 325000
0
0 00 00 00 00 00 00 00 00 00 00 00 007000 350000
00 000 500 000
5 10 15 20 25 30 35 40 45 50 55 60 7500
6 5 7 7375000
8
8000 400000
TC TC
manufacturing company is presently evaluating two possible machines for the manufacture of superior Pen-drives. The following information is available:

ace the existing one when the expected level of output is

MACHINE A MACHINE B
FC TC VC FC TC
50000 50000 0 150000 150000
50000 75000 5000 150000 155000
50000 100000 10000 150000 160000
50000 125000 15000 150000 165000
50000 150000 20000 150000 170000
50000 175000 25000 150000 175000
50000 200000 30000 150000 180000
50000 225000 35000 150000 185000
50000 250000 40000 150000 190000
50000 275000 45000 150000 195000
50000 300000 50000 150000 200000
50000 325000 55000 150000 205000

0 0 0
00 750 800
 50000 350000 60000 150000 210000
50000 375000 65000 150000 215000
0 0 0 50000 400000 70000 150000 220000
00 750 800 50000 425000 75000 150000 225000
50000 450000 80000 150000 230000
following information is available: