problem 1: A company manufactures a single product and the data regarding the product is as shown below:

a) Sales price of Rs 10

b) Marginal cost of Rs 6.

c) Fixed costs are Rs 60,000 p.a.

Required:

Compute:

a) Number of units to break-even.

b) Sales at break-even point.

c) Contribution/sales (C/S) ratio.

d) What number of units will require to be sold to accomplish a profit of Rs 20,000 p.a.

e) What level of sales will accomplish a profit of Rs 20,000 p.a.

f) Since of increasing costs the marginal cost is expected to increase to Rs 6.50 per unit and fixed costs to Rs 70,000. If the selling price can’t be raised what will be the number of units needed to maintain a profit of Rs 20,000 p.a?

problem 2:

a) Your company regularly employs material X and presently has in inventory 500 kgs for which it paid Rs 1,500 two weeks ago. If this were to be sold as raw material, it could be sold today for Rs 2.00 per kg. You are aware that the material can be bought on the open market for Rs 3.25 per kg; however it should be purchased in quantities of 1,000 kgs.

Required:

Find out the relevant cost of 600 kgs of material X to be used in a job for a customer.

b) In short term decision-making context, which one of the given would be a relevant cost:

• Specific development costs already incurred.
• The cost of special material that will be purchased.
• The original cost of raw materials presently in inventory that will be used on the project.