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Sri Balaji University Pune (Sbup) Bitm SEMESTER-I-BATCH - 2020-22 Management Accounting - Assignment - Vii (UNIT-V)

The document contains details about an assignment submitted by a student named Jaya Bharne for the subject Management Accounting at SRI BALAJI UNIVERSITY PUNE. It includes 5 questions with answers related to concepts like marginal costing, make or buy decisions, and break-even analysis. The student has provided calculations and recommendations for each question analyzing factors like contribution, profitability, production time and costs.

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Jaya Bharne
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51 views7 pages

Sri Balaji University Pune (Sbup) Bitm SEMESTER-I-BATCH - 2020-22 Management Accounting - Assignment - Vii (UNIT-V)

The document contains details about an assignment submitted by a student named Jaya Bharne for the subject Management Accounting at SRI BALAJI UNIVERSITY PUNE. It includes 5 questions with answers related to concepts like marginal costing, make or buy decisions, and break-even analysis. The student has provided calculations and recommendations for each question analyzing factors like contribution, profitability, production time and costs.

Uploaded by

Jaya Bharne
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SRI BALAJI UNIVERSITY PUNE (SBUP)

BITM
SEMESTER-I-BATCH - 2020-22
MANAGEMENT ACCOUNTING - ASSIGNMENT –VII
(UNIT-V)

(a) Name of Student: Jaya Bharne


(b) Roll no: TM2019322
(c) Reg. No: 09-1311
(d) Specialization: Marketing
(e) Batch: 2020-22
(f) Institute: Balaji Institute of Telecom & Management
(g) Semester: I
(h) Subject Name: Management Accounting
(i) Assignment No: VII
(j) Submission Date: December 11, 2020
(k) Total no. of pages written: 6
Question -1: Due to industrial depression, a plant is running at present at 50% of the
capacity. The following details are available:

An exporter offers to buy 5000 units per month at the rate of rs.6.50 per unit and the
company is hesitant to accept the order for fear of increasing its already large operating
losses. Advise whether the company should accept or decline this offer.
Ans.:
MARGINAL COST SHEET

Particulars For 50% capacity For 12.5% capacity 25000 unit


20000 units 5000 units sells
TC PU TC PU TC
Sales 140000 7 32500 6.5 172500
A. Variable cost:
Direct labour 20000 1 5000 1 25000
Variable overhead 60000 3 15000 3 75000
Direct materials 40000 2 10000 2 50000
Total (A) TVC 120000 6 30000 6 150000

Contribution 20000 1 2500 1 22500


(Fixed cost) (40000) (2) (40000)
Net loss (20000) (1) 2500 0.5 (17500)

Company should accept this offer as the loss has reduced by Rs. 2500.
Question-2: from the following data, which product would you recommend to be
manufactured in a factory, time, being the key factor?

Ans.:
MARGINAL COST SHEET

Particulars Per unit of product X Per unit of product Y


Sales 100 110
A. Variable cost:
Direct material 24 14
Direct labour 2 3
Variable overhead 4 6
Total (A) TVC 30 23

Contribution (profit) 70 87
Standard time to produce 2 3
Contribution per unit 35 29

Product X would be recommended to manufactured in a factory considering timer as a key


factor.
Question-3:
You are the management accountant of XYZ CO. Ltd. The Managing director of the
company seeks your advice on the following problem: the company produces a variety
of products each having a number of computer parts. Product “B” takes 5 hours to
produce on machine no.99 working at full capacity. “B” has a selling price of rs.50 and
a marginal cost, Rs.30 per unit. “A-10” a component part could be made on the same
machine in 2 hours for marginal cost of Rs.5 per unit. The supplier’s price is Rs.12.50
per unit. Should the company make or buy “A10”? Assume that machine hour is the
limiting factor.
Ans.:

Particulars Product B per Particulars Product A


unit cost per unit cost
Sales 50 Sales 13
(-) Marginal cost (30) (-) Marginal cost 5
Contribution (Profit) 20 Contribution (Profit) 8
Contribution/Profit per 4 Contribution/Profit per 4
hour (W.N) hour (W.N)
Standard time to make 5 Standard time to make 2
the product in hour the product in hour

Working Note:
Profit 20
Contribution/Profit per hour = = =4 per hour
Standard time 5

As the production price is greater than Rs. 12.5 per unit, it recommends the company to
make or purchase the good from supplier (A10).
Question-4
A T.V. Manufacturing company finds that while it costs Rs.6.25 To make each
component X, the same is available in the market at Rs.4.85 Each, with an assurance of
continued supply. The breakdown of cost is:

Should you make or buy?

Ans.:
Particulars Component X produced
Sales 6.25
A. Variable cost:
Material 2.75
Labour 1.75
Other variables 0.5
Total (A) TVC 5

Contribution 1.25
(-) Fixed cost:
Depreciation & other fixed costs 1.25
Profit / Loss 0

Variable cost of manufacturing is Rs. 5. When fixed cost is added, there is no profit no loss.
There is saving of 0.15 in variable cost when we are purchasing the component X.
Hence, it is advised to purchase the X Component.
Question-5
The Price Structure Of A Cycle Made By The Visu Cycle Co. Ltd. Is

This is based on the manufacture of one lakh cycles per annum. The company expects
that due to competition they will have to reduce selling prices, but they want to keep
the total profits intact. What level of production will have to be reached, i.e., how many
cycles will have to be made to get the same amount of profits, if:
(a) the selling price is reduced by 10%?
(b) the selling price is reduced by 20%?

Ans.:
MARGINAL COST SHEET

Particulars SELLING PRICE


50 Reduced by 10% Reduced by 20%
TC PU TC PU TC PU
Sales 20000000 200 22500000 180 26666667 160
(-) TVC (10000000 (100) (12500000) (100) (16666667) (100)
)
Contributio 10000000 100 10000000 80 10000000 60
n
(-) FC (5000000) (50) (5000000) (40) (5000000) (30)
Profit 5000000 50 5000000 40 5000000 30

Required 100000 125000 166666.7


quantity sold
(W.N.)

Working Note:
¿ cost+ Profit 10000000
 Required quantity sold = Contribution per unit = 100
=100000

When the Selling Price of the cycle is reduced by 10% then the level of production of cycles
will be 125000.
When the Selling Price of the cycle is reduced by 20% then the level of production of cycles
will be 166667.

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