1.

              The Reynolds Company manufactures and sells pens. Currently 6,00,000 units are sold per year at Rs. 10 p
unit. Fixed costs are Rs. 15,00,000 per year. Variable costs are Rs. 6 per unit.
Consider each case separately:
      i.         What is the present operating income for a year and what is the present breakeven point in revenue?

    ii.         Compute the new operating income for each of the following changes.

a.     A Re. 0.50 per unit increase in variable costs.

b.     A 10% increase in fixed costs and a 10% increase in units sold.
c.     A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit and a 40
increase in units sold.
d.     A 15% increase in fixed costs.
e.     A 10% increase in selling price and Rs. 1,00,000 increase in fixed costs.

A.

Qunatity Of units sold

Fixed cost
Variable Cost Per unit
Total variable Cost
Total cost of production
Total cost Price per unit
Selling price per unit
Contribution margin

Operating Income
Breakeven

B. a
Qunatity Of units sold
Fixed cost
Variable Cost Per unit
Total variable Cost
Total cost of production
Total cost Price per unit
Selling price per unit
Contribution margin

Operating Income
Breakeven
B. b
Qunatity Of units sold
Fixed cost
Variable Cost Per unit
Total variable Cost
Total cost of production
Total cost Price per unit
Selling price per unit
Contribution margin

Operating Income
Breakeven

C.c
Qunatity Of units sold
Fixed cost
Variable Cost Per unit
Total variable Cost
Total cost of production
Total cost Price per unit
Selling price per unit
Contribution margin

Operating Income
Breakeven

Qunatity Of units sold

Fixed cost
Variable Cost Per unit
Total variable Cost
Total cost of production
Total cost Price per unit
Selling price per unit
Contribution margin

Operating Income
Breakeven

Qunatity Of units sold

Fixed cost
Variable Cost Per unit
Total variable Cost
Total cost of production
Total cost Price per unit
Selling price per unit
Contribution margin

Operating Income
Breakeven
 600000 Units
1500000
6 per unit
3600000 Ruppes
5100000
8.5 per unit
10 Per unit
1.5 per unit

6,000,000 Rupees
510,000 Units

600000 Units
1500000
6.5 per unit
3900000 Ruppes
5400000
9 per unit
10 Per unit
1 per unit

6,000,000 Rupees
540,000 Units
 660000.00 Units
1350000.00
6.00 per unit
3960000.00 Ruppes
5310000.00
8.05 per unit
10.00 Per unit
1.95 per unit

6,600,000 Rupees
531,000 Units

840000 Units
1200000
5.4 per unit
4536000 Ruppes
5736000
6.82857142857 per unit
8 Per unit
1.17 per unit

6,720,000 Rupees
717,000 Units

600000 Units
1275000
6 per unit
3600000 Ruppes
4875000
8.125 per unit
10 Per unit
1.875 per unit

6,000,000 Rupees
487,500 Units

600000 Units
1600000
6 per unit
 3600000 Ruppes
5200000
8.66666666667 per unit
11 Per unit
2.33333333333 per unit

6,600,000 Rupees
472,727 Units
1.              Big Jos clothing’s revenues and cost data for 2019 appear below:

Revenues

Cost of goods sold ( 40%)

Gross margin
Operating Costs

Salaries

Sales commission ( 10%)

Depreciation
Store Rent ( Rs. 8,000 p.m.)
Other Operating Costs
Operating Loss
Mr. Nitin, the owner of the store is unhappy with the operating results. An analysis of other operating costs reveals th
80,000 variable costs, which vary with sales volume and Rs. 20,000 fixed costs.
a.     Compute the contribution margin of Big Jos Clothing.
b.     Compute the contribution margin %age
c.     Mr. Nitin, estimates he can increase revenues by 20% by incurring additional advertising cost of Rs. 20,000. Cal
on operating income.

Revenues
Cost of goods sold ( 40%)
Gross margin
Operating Costs
Salaries
Sales commission ( 10%)
Depreciation
Store Rent ( Rs. 8,000 p.m.)
Other Operating Costs- Fxed Cost
Other Operating Costs- Variable

Fixed Cost
Variable cost

Contribution margin
Contribution %

Revenue
Advertising

Fixed Cost
Variable cost

Operating Income
Rs. 10,00,000

400,000
600,000

Rs. 3,00,000

100,000
24,000
96,000
100,000 -620,000
-20,000

1000000
400000
600000

300000
100000
24000
96000
20,000
80,000

440,000
580,000

420,000
42%

1200000
 20,000

460,000
696,000

1,156,000
44,000
Country Annual Fixed Costs

Singapore Rs. 6.5 Million

Thailand 4.5 Million

United States 12 Million

Singapore
Selling price 32
Less
Total variable 19
Contribution margin 13
Fixed cost 6500000
BEQ 500000
BEP sales 16000000

if 800000 800000
Contribution margin 13
Total contribution 10400000
Fixed cost 6500000
Profit 3900000
Variable Variable Marketing and
Manufacturing Cost Distribution Cost per
per Sweater Sweater

Rs. 8.00 Rs. 11.00

5.5 11.5

13 9

Thailand United States

32 32

17 22
15 10
4500000 12000000
300000 1200000
9600000 38400000

15 10
12000000 8000000
4500000 12000000
7500000 -4000000
Airfare Rs. 5,000
Hotel Accommodation 2,000
Meals 3,000
Ground transportation 3,000
Park tickets and other costs 1,000
Total Rs. 14,000

Annual Fixed Costs Rs. 18,00,000

selling Cost 20000

Less
Airfare 5,000
Hotel Accommodation 2,000
Meals 3,000
Ground transportation 3,000
Park tickets and other costs 1,000
Total 14,000

Contribution Margin 6,000

Fixed cost 1,800,000
BEP 300

Contribution Margin 6,000

Fixed cost 1,800,000
profit 600000
Total Cost 2,400,000
Total Quantity 400
Selling price 20,000
Variable cost per canopy 10,000
Annual Fixed costs 5,000,000
Net Income 12,000,000
Income Tax rate 40%

Selling price 20,000

variable Cost 10,000
Contribution 10,000
Fixed Cost 5,000,000
Operating profit
tax
net profit

Net Quantity to be sold

BEP
BEP Sales Rs
 5 Months 7 Month 12 months 5 Months
350 2,700 3,050 350
50,000,000 7000000 48,600,000 55,600,000 7000000
25,000,000 3500000 27,000,000 30,500,000 3500000
25,000,000 25,100,000
5,000,000 5,000,000
20000000 20,100,000
8000000 8,040,000.0
12000000 12,060,000.0

2,500

500
10000000
7 months 12 Months 5 Months 7 months 12 Months
2200 2550 350 2000 2350
40700000 47700000 7000000 36000000 43000000
20900000 24400000 3500000 20000000 23500000
23300000 19500000
5,000,000 4,500,000
18,300,000 15,000,000
7320000 6000000
10,980,000 9,000,000
Particulars Standard Carrier
Units sold 150,000
Revenues at Rs. 1,000 and Rs. 1,500 per unit 150,000,000
Variable costs at Rs.700 and Rs.900 per unit 105,000,000
Contribution margins at Rs. 300 and Rs. 600 per unit 45,000,000
Fixed Costs
Operating Income

Selling price 1000

Less
Variable Cost 700
Contribution 300
Contribution margins at Rs. 300 and Rs. 600 per unit 45,000,000
Qunatity produced 150000

product mix ratio 3

BEP 3X*300
BEP 1500*X
X 40000

BEP of each product 120000

If only standard is sold 200000

if only delux are sold 100000

Quantity of product sold 180000

Revenue 180000000
Less: variable 126000000
Contribution 54000000
Fixed Costs
Operating Income
Deluxe Carrier Total
50,000 200,000
75,000,000 225,000,000
45,000,000 150,000,000
30,000,000 75,000,000
60,000,000
15,000,000

1500

900
600
30,000,000
50000

1
X*600

40000

Total
20000 200000
30000000 210000000
18000000 144000000
12000000 66000000
60,000,000
6,000,000
Even ( Units Probability for Emerald Green Probability for Pink
Demanded) Umbrella Umbrella

50,000 0 0.1
100,000 0.1 0.1
200,000 0.2 0.1
300,000 0.4 0.2
400,000 0.2 0.4
500,000 0.1 0.1

Product A Product B Total A

Qunatity 300000 305000
Selling price 100 100 30000000
less: Variable 80 80 24000000
Contribution 20 20 6000000
Fixed Cost 4000000
Operating Income 2000000

Breakeven 200000
Total B Total

30500000 60500000
24400000 48400000
6100000 12100000
4000000 8000000
2100000 4100000

200000
Quantity 40000
Selling price 150 6000000
less : variable 80 3200000
contribution 70 2800000
Fixed 500000
Transportation 100000 100
operating Income 2200000

Quantity 40000
Selling price 150 6000000
less : variable 80 3200000
contribution 70 2800000
Fixed 500000
Transportation 80000 80
operating Income 2220000

Quantity 0
Selling price 150 0
less : variable 80 0
contribution 70 0
Fixed 500000
Transportation 50000 50

BEP 7857.14286

Quantity 0
Selling price 150 0
less : variable 80 0
contribution 70 0
Fixed 500000
Transportation 100000 100

BEP 8571.42857
Quantity 10,000

Direct Material 12
Direct Manufacturing Cost 60
Variable Manufacturing cost 24
Fixed Manufacturing cost 32
128

Make Buy
Quantity 10,000 10,000

Direct Material 12 120000 0 0

Direct Manufacturing Cost 60 600000 0 0
Variable Manufacturing cost 24 240000 0 0
Fixed Manufacturing cost 32 320000 12 120000
Cost of buying 0 0 120 1200000
Cost of saving -180000
128 1280000 1140000

Product R2 Product R4 Product R2D2 Total

Sales 30000 45000 12000 75000
Variable costs 18000 24000 7500 42000
Contribution margin 12000 21000 4500 33000
Fixed costs:
Avoidable 4500 9000 3000 13500
Unavoidable 3000 4500 2700 10200
Operating income 4500 7500 -1200 9300

Quantity 500000
Selling price 40 20000000
Direct Material 6 3000000
Direct labor 3 1500000
Indirect Manufacturing Cost 10 5000000
Total cost 19 9500000
Quantity 50000

Direct Material 6 3000000

Direct labor 3 1500000
Shipping Cost 4 2000000
Indirect Manufacturing Cost 4 2000000 only relevant cost is taken ; fixed cost wont chang
Total cost 17 8500000

Minimum price should be rs 17

capacity 150000
Selling proce 3

Production Capacity 150000 250000

Direct Material 0.8 120000 200000
Direct Labor 0.6 90000 150000
Factory Overhaed 0.4 60000 100000
Total Cost 1.8
Total Selling Price 2.2
0.4 Profit and hence it should take the order

Description A B
Quantity 3600 8000
Selling Price 100 360000 69 552000
less variable 56.6 203760 38.95 311600
CM 43.4 156240 30.05 240400
Fixed Cost 34.3 123480 25.7 205600
profit 9.1 32760 4.34999999999999 34800
Direct labor 24.2 87120 16.5 132000
DLH required 2.2 7920 1.5 12000
TOTAL DLP 29040
Total Avaliable 26400
2640
CM per unit of scare 19.7 20.0
3 2

proucts
DLH 9120 12000
Units 5700 8000
140000

Do not Drop

10800
n ; fixed cost wont change irrespective of this decision

C
5700
85 484500
46.65 265905
38.35 218595
27.2 155040
11.15 63555
17.6 100320
1.6 9120

24.0
1

5280
2400