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  • Case Study-1 Marginal Costing

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    The document presents a case study solution analyzing the financial statements of a company that manufactures radios. It provides two equations showing the relationship between cost (X), profit (Y), and selling price (Rs. 1600) under the current and anticipated future costs. The cost of materials and wages is expected to increase, reducing the current profit by 40% at the current selling price. Solving the equations provides the current cost of X as Rs. 1207.55. The statement then calculates the anticipated future costs and profit at a revised selling price of Rs. 1808 to maintain the original profit rate of 32.5% of total costs.

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    The document presents a case study solution analyzing the financial statements of a company that manufactures radios. It provides two equations showing the relationship between cost (X), profit (Y), and selling price (Rs. 1600) under the current and anticipated future costs. The cost of materials and wages is expected to increase, reducing the current profit by 40% at the current selling price. Solving the equations provides the current cost of X as Rs. 1207.55. The statement then calculates the anticipated future costs and profit at a revised selling price of Rs. 1808 to maintain the original profit rate of 32.5% of total costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    3K views5 pages

    Case Study-1 Marginal Costing

    Uploaded by

    shrutimathur14891802
    The document presents a case study solution analyzing the financial statements of a company that manufactures radios. It provides two equations showing the relationship between cost (X), profit (Y), and selling price (Rs. 1600) under the current and anticipated future costs. The cost of materials and wages is expected to increase, reducing the current profit by 40% at the current selling price. Solving the equations provides the current cost of X as Rs. 1207.55. The statement then calculates the anticipated future costs and profit at a revised selling price of Rs. 1808 to maintain the original profit rate of 32.5% of total costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 5

    Analysis of Financial

    Statements
    Case Study 1
    Solution
    Solution :
    • Let X be the cost, Y be the profit and Rs. 1600, selling price per unit of radio
    manufactured by the company

    Hence X+Y= Rs. 1600 -i

    Statement of present and future cost of a radio

    Particulars Present Cost Increase in Cost Anticipated Future Cost


      (A) (B) (C ) = (A) + (B)
    Direct Material 0.3X 0.09X 0.39X
    Direct Labour 0.4X 0.04X 0.44X
    -
    Overheads 0.3X 0.30X
           
    TOTAL X 0.13X 1.13X
    Solution : (Cont ..)

    • An increase in material price and wage rates


    resulted into decrease in current profit by 40%
    at present selling price :

    • Therefore
    1.13 X + 0.6Y = 1,600 – ii

    On solving i & ii
    X + Y = 1600
    1.13X + 0.6 Y = 1600
    Solution : (Cont ..)
    Statement of revised selling price to maintain the present rate of profit

    Direct Material 470.94


    0.39 X 1207.55  

    Direct Labour 531.32


    0.44 X 1207.55  
    Overheads 362.27
    0.30 X 1207.55  
       
    Total Cost 1,364.53
    Profit 443.47
    (32.5% of total cost)  
    Revised Selling Price 1,808.00
    Questions / Comments ?

    Rohit Bhagwat
    Cell : 99308-96787
    rohit.bhagwat@gmail.com

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