Costing

This document provides study material and solved assignments on Costing. It covers topics such as breakeven point, net profit, contribution ratio, and more.

Running Head: COSTING 1
COSTING

COSTING 2
Table of Contents
PAGE 1.........................................................................................................................................................3
1...............................................................................................................................................................3
2...............................................................................................................................................................3
3...............................................................................................................................................................3
4...............................................................................................................................................................4
Page 4..........................................................................................................................................................4
Page 7..........................................................................................................................................................4
Page 8..........................................................................................................................................................5
2A............................................................................................................................................................5
2B............................................................................................................................................................5
Page 9..........................................................................................................................................................5
PAGE 10.......................................................................................................................................................6

COSTING 3
PAGE 1
Rat
e volume Total
Sales 24 280000 $ 6,720,000
Less: Variable Costs 12 $ 3,360,000
Less: Handling cost 2 $ 560,000
Contribution 10 $ 2,800,000
Less: Fixed costs $ 420,000
Net Profit $ 2,380,000
Breakeven point
Fixed cost 42000
Contribution per unit
1.
The breakeven point in units is 42000 units.
2.
Increase in units sales volume by 15%
Rate volume Total
Sales 24 322000 $ 7,728,000
Less: Variable Costs 12 $ 3,864,000
Less: Handling cost 2 $ 644,000
Contribution 10 $ 3,220,000
Less: Fixed costs $ 420,000
Net Profit $ 2,800,000
The net income of the company is $2800000
3.
Targeted net income 2380000
Net purchase price 2.4
Fixed costs+targeted income 2422000
Contribution per unit 9.6
Volume of sales dollar required 252292

COSTING 4
4
Current contribution ratio 42%
Selling price for the coming year P-14.4
Selling price for the current
year 34.56
Page 4
PAGE 4 Mountaineering Touring Touring
Selling Price 141 129 129
Variable cost per unit 83.7 83.7 80.27
Contribution per unit 57.3 45.3 48.73
Fixed costs 590400 502200
Breakeven point (units)
Fixed Costs 10304 10304 48.7
Contribution per unit
The variable cost shall be shifted from 83.7 to 80.27 to achieve the same breakeven units as
Mountaineering model
Page 7
PAGE 7
Particulars Model no. 6754 Model no. 4399
Selling Price 69 69
Less: Variable costs 19 12.8
Add: commission 6.9 6.9
25.9 19.7
Contribution 43.1 49.3
Annual Fixed Costs 986500 1114400
Breakeven point 22889 22604
The company must sell 22889 units if model 6754 is selected.

COSTING 5
Page 8
PAGE 8
Model no. 6754 Model no. 4399
Sales $ 3,312,000 $ 3,312,000
Less:
Commission $ 331,200 $ 331,200
Variable costs $ 912,000 $ 614,400
$ 1,243,200 $ 945,600
Total Contribution $ 2,068,800 $ 2,366,400
Fixed Costs $ 986,500 $ 1,114,400
Net Income $ 1,082,300 $ 1,252,000
2A
The net income of both the models is $ 1082300 and $1252000
2B
The more profitable model would be Model 4399 due to the income at 1252000
Page 9
PAGE 9
Equipment depreciation
Cost of equipment 450000
Useful Life 5
Depreciation 90000
Contribution margin per unit 49.3
Required units to be sold
(fixed Costs+Desired Income) 2172400
Units required to be sold 44064.91
3. The requires sale units are 44065
approximately

COSTING 6
PAGE 10
The point of difference will be where the profits of both the models will be equal
Let Z be the volume of point of indifference
FIXED COSTS
Profit for model 6754 50
$
985,600.00
Profit for model 4399 56.2
$
1,114,400.00
6.2
$
128,800.00
Units at which both the models will be equal 20774