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3.1 CVP Questions
3.1 CVP Questions
Nethu PLC has been in the business of manufacturing and sales of the floor tile
“STYLISH”. The following cost structure of the tile “STYLISH “produced by the
company is available for your information.
Rs.
Material 50
Direct labor 40
Variable Overhead 10
Selling price of a unit of STYLISH is Rs.250. During the year 2015 the company
budgeted to produce and sell 500,000 units. You are required to compute,
d) If selling and distribution fixed costs are increased by Rs. 1,000,000 and material
cost are also increased by 10% while the selling price is reduced by Rs.50
,compute the number of units to be produced and sold to earn the present profit
earned by the company. (4 marks)
e) Assuming that the original conditions prevailed, compute the Selling price to be
charged to earn a profit of Rs. 10,000,000 on sales of 500,000 units.
(4 marks)
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2. GOODLUCK Plc is currently preparing its budget for the year ended 31st March
2016. The company manufactures and sells three products, “A”, “B” and “C”.
The unit selling price and variable cost of each product is as follows.
A B C
Rs. Rs. Rs.
Selling Price 500 800 1000
Variable Cost
Material 300 400 600
Direct Labour 100 200 150
Cost of 1 Kg of material will be Rs.50 while cost of one direct labour hour will be
Rs.100/=. For the next year ending 31st March 2016, 300,000 kg of material and
300,000 hours of direct labour will be available. The fixed cost will be Rs. 4 Mn for
the year.
Demand for the product will be as follows.
A B C
25,000 50,000 10,000
Board of Directors decided that a minimum of 5,000 units of each product should be
produced. The remaining production capacity would then be allocated so as to
achieve the maximum profit possible.
a) Compute the product mix that would earn maximum profit for the company
.For this purpose you should consider the fact that 5,000 units of each
product in minimum should be produced.
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3. BOSS PLC has been in the business of manufacturing and sale of product
“BOSS”. The following detail pertaining to one unit of the product “BOSS “is
available for your information.
Rs.
Materials 50
Labour 30
Variable Overhead 20
Fixed Overhead 20
Total cost 120
Profit 30
Selling Price 150
You are required to compute the net profit earned by BOSS PLC in 2014.
(8 marks)
4. MAT Plc has been in the business of manufacturing and sale of toys. The
following information about toy “LION” produced by the company is available for
you.
Rs.
Selling Price 200
Direct Material cost 50
Direct Labour cost 40
Other Variable Overhead cost 10
Fixed Cost per unit 60
Actual sales in year 1 800,000 units
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The above fixed cost per unit is computed on the assumption that the company
will produce and sell 1Mn units during the year.
5. Rich Plc is currently preparing its budget for the year ended 31 st December 2015.
The company manufactures and sells three products, ”BIG”, “SMALL” and
“MEDIUM”.
The unit selling price and variable cost of each product is as follows.
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Cost of Direct labour hour will be Rs. 6/= while cost of 1 Kg of material will be Rs.10.
For the next year ending 31 st December 2015, 850,000 direct labour hours and
500,000 kg of material will be available. The fixed cost will be Rs. 5 Mn for the year.
You are required to compute the product mix that would earn maximum profit for
the company .For this purpose you should consider the fact that 10,000 units of
each product in minimum should be produced.
(10 marks)
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