TALHA SHAHID – ACMA, ACCA MANAGEMENT ACCOUNTING

Breakeven Analysis / Cost Volume Profit Analysis

ICMAP – QUESTIONS
Question No. 1 [ICMAP – Cost Accounting – Winter 2005]
Dream world Resorts maintains a water park and has experienced a steady growth in its sales for the past five years.
Increased competition, however, has led the owners to believe that an aggressive advertising campaign will be
necessary next year to maintain the present growth. In order to launch advertising campaign the next year, following
data has been compiled for the year 2005.

Variable cost Rs.137.50 per ticket

Total fixed cost for the year Rs.1,350,000
Sales price Rs.250.00 per ticket
Expected sales 2005 – 20,000 ticket Rs.5,000,000
Income tax rate 35%
The resort has set sales target for 2006 at a level of Rs.5,500,000 or 22,000 tickets.

Required:
(i) The project after tax net income for the year 2005. (Marks 3)
(ii) Number of tickets at breakeven point during the year 2005. (Marks 2)
(iii) After tax net income for the year 2006 if an additional fixed marketing expense of Rs.112,500 is spent on
advertising in the year 2006 (with all other costs remaining constant) to attain the sales target for the year 2006.
(Marks 4)
(iv) The breakeven point in value for the year 2006 if additional Rs.112,500 is spend on advertising.
(Marks 2)
(v) The required sale (value) to equal after tax net income for the year 2005 if additional Rs.112,500 is spent on
advertising in the year 2006. (Marks 2)
(vi) The maximum amount that can be spent on additional advertising at a sales level of 22,000 tickets, if an after tax
net income of Rs.600,000 is desired. (Marks 3)

Question No. 2 [ICMAP – Cost Accounting – Spring 2006] Q – 6

Rs. Rs.
Sales - 1st half 45,000
Sales - 2nd half 50,000 95,000

Cost incurred - 1st half 40,000

Cost incurred - 2nd half 43,000 83,000
Required:

Calculate for the year:

(i) Profit and volume ratio (Marks 02)

(ii) Fixed expenses (Marks 03)
(iii) Breakeven sales (Marks 03)
(iv) Percentage of margin of safety (Marks 02)

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Question No. 3 [ICMAP – Cost Accounting – Winter 2006]
Gullever Engineering Ltd, manufactures lathe machines. Its budget data for next year is as under:
Rs.
Sales (2,000 units) 8,000,000
Variable cost 3,000,000
Contribution margin 5,000,000
Fixed cost 2,000,000
Operating income 3,000,000
Required:

(i) Calculate breakeven point in units and amount. (Marks 3)

(ii) Calculate margin of safety in units and amount (Marks 4)

Question No. 4 [ICMAP – Cost Accounting – Summer 2007]

Normal annual capacity of Karachi Company is 200,000 units and the sales price is Rs.32 per unit. Unit cost of
components is as under:

Variable cost per unit (Rs.) Fixed Cost (Rs.)

Direct material 9.00 --
Direct labour 10.0 --
Factory overhead 2.00 400,000
Non-manufacturing cost 3.00 100,000
Total cost 24.0 500,000
Required:

(i) Calculate the breakeven point in rupees and in units. Prove your answer. (Marks3)
(ii) Compute amount of sales required to earn a profit of Rs.420,000. Prove. (Marks3)

Question No. 5 [ICMAP – Cost Accounting – Winter 2007]

R Company has prepare the following projections for the coming year 2008:

Rs.
Sales 150,000
Variable cost 112,500
Contribution margin 37,500
Fixed cost 20,000
Net income 17,500
Required:
Compute the following:
(i) Breakeven sales in rupees. (Marks 3)
(ii) Margin of safety in rupee and in percentage. (Marks 4)
(iii) A minimum unit to be sold to breakeven, if the sale price is Rs.15/unit. (Marks 3)

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Question No. 6 [ICMAP – Management Accounting Decision Making – Fall 2007] Q – 6

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Question No. 7 [ICMAP – Management Accounting Decision Making – Fall 2007] Q – 2 (b)

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Question No. 8 [ICMAP – Cost and Management Accounting – Spring 2008] Q – 4 (b) ii, iii

Question No. 9 [ICMAP – Management Accounting Decision Making – Spring 2008] Q – 6 (b)

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Question No. 10 [ICMAP – Cost Accounting – Winter 2008]
The following data has been taken out from the record of Osman Bros., based on the financial result for the year ending
30th June 2008:

Breakeven sales Rs.2,000,000

Contribution margin ratio 40%
Profit for the year ending 30th June 2008 Rs.320,000

Required:

Calculate the following:

(i) Fixed expenses for the year. (Marks 2)

(ii) Sales for the year (Marks 3)
(iii) Variable expenses for the year (Marks 2)
(iv) Margin of safety ratio. (Marks 3)

Question No. 11 [ICMAP – Cost Accounting – Spring 2009] Q – 6 (c)

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Question No. 12 [ICMAP – Cost Accounting – Fall 2009] Q – 6 (a)

Question No. 13 [ICMAP – Cost Accounting – Fall 2009] Q – 6 (b)

Question No. 14 [ICMAP – Management Accounting Decision Making – Fall 2009] Q – 2(a)

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Question No. 15 [ICMAP – Management Accounting Decision Making – Fall 2009] Q – 2(b)

Question No. 16 [ICMAP – Management Accounting Decision Making – Fall 2009] Q – 4

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Question No. 17 [ICMAP – Cost Accounting – Fall 2010] Q – 6 (a)

Question No. 18 [ICMAP – Cost Accounting – Fall 2010] Q – 6 (b)

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Question No. 19 [ICMAP – Cost Accounting– Spring 2011] Q – 6 (b)

Question No. 20 [ICMAP – Management Accounting - DM– Spring 2011] Q – 2

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Question No. 21 [ICMAP – Management Accounting DM – Fall 2011] Q – 2

Question No. 22 [ICMAP – Management Accounting DM – Fall 2011] Q – 6

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Question No. 23 [ICMAP – Cost Accounting – Spring 2012] Q – 6(b)

Question No. 24 [ICMAP – Management Accounting – Fall 2012] Q -4

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Question No. 25 [ICMAP – Management Accounting – Spring 2013] Q -5(a)

Question No. 26 [ICMAP – Management Accounting – Extra May 2014] Q -4(b)

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Question No. 27 [ICMAP – Management Accounting – Fall 2014] Q -5(a)

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Question No. 28 [ICMAP – Management Accounting – Spring 2017] Q -2

Question No. 29 [ICMAP – Management Accounting – Fall 2017] Q -3

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Question No. 30 [ICMAP – Management Accounting – Model Paper] Q -2

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Question No. 31 [ICMAP – Management Accounting – Winter 2018] Q -2

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Question No. 32 [ICMAP – Management Accounting – Fall 2018] Q – 5

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ICAP – QUESTIONS
Question No. 33 [ICAP – Cost Accounting – Autumn 2002]
The fixed cost of an enterprise for the year is Rs.400,000. The variable cost per unit for a single product being made is
Rs.20. Each units sells at Rs.100.

Required
(i) Breakeven point. (Marks 4)
(ii) If the turnover for the next year is Rs.800,000, calculate the estimated contribution and profit, assuming that the
cost and selling price remain the same. (Marks 4)
(iii) A profit target of Rs.400,000 has been desired for the next year. Calculate the turnover required to achieve the
desired result. (Marks 4)
Question No. 34 [ICAP – Cost Accounting – Autumn 2003]
The Parrot Company sold 150,000 units @ Rs. 30 each, Variable cost is Rs. 20 (Manufacturing Rs. 15 & Marketing Rs. 5),
Fixed Cost is Rs. 1,200,000 annually which occurs evenly throughout the year (Manufacturing Rs. 800,000 & Marketing
Rs. 400,000).

Required
i) Breakeven point in units
ii) Breakeven point in Rupees
iii) Number of units to be sold to earn profit before tax of Rs. 200,000
iv) Number of units to be sold to earn after tax profit of Rs. 100,000 if tax rate is 25%
v) The breakeven point in units if selling price is increased by Rs. 3 and variable cost by Rs. 2 per unit.
(Marks 10)

Question No. 35 [ICAP – Cost Accounting – Spring 2005]

Gala Promotions Limited is planning a concert in Karachi. The following are the estimated costs of the proposed concert:
Rs. (000)
Rent of premises 1,300
Advertising 1,000
Printing of tickets 250
Ticket sellers, security 400
Wages of Gala Promotions Limited Personnel employed at the concert 600
Fee of artist 1,000
There are no variable costs of staging the concert. The company is considering a selling price for tickets at either
Rs.4,000/- or Rs.5,000/- each.

Required:
(i) Calculate the number of tickets which must be sold at each price in order to break-even.
(ii) Recalculate the number of tickets which must be sold at each price in order to break-even, if the artist
agrees to change from fixed fee of Rs. 1 million to a fee equal to 25% of the gross sales proceeds.
(iii) Calculate the level of ticket sales for each price, at which the company would be indifferent as between the
fixed and percentage fee alternative.
(iv) Comment on the factors, which you think, the company might consider in choosing between the fixed fee
and percentage fee alternative. (Marks 15)

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Question No. 36 [ICAP – Cost Accounting – Autumn2005]
The Sindh Engineering Company produces a bicycle which sells at Rs.1,000 per unit. At 80% capacity utilization which is
the normal level of activity, the sales are Rs.180 million. Costs are as under:

Prime cost per unit Rs.400

Factory indirect cost Rs.30 million (including variable cost Rs.10million)
Selling costs Rs.25 million (including variable cost Rs.15million)
Distribution costs Rs.20 million (including variable cost Rs.11million)
Administration costs Rs.6 million
Commission and discounts are 5% of sales value.

Required:
a) Calculate the break-even sales value.
b) Prepare statements showing sales, costs, profit and contribution margin at each of the following levels:
(i) at the normal level of activity;
(ii) if unit selling price is reduced by 5% thereby increasing sales and production volume by 10% of the
normal activity level;
(iii) if unit selling price is reduced by 10% thereby increasing sales and production volume by 20% of the
normal activity level. (Marks 12)

Question No. 37 [ICAP – Cost Accounting – Spring 2006]

A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies
have produced the following estimates:

Total annual costs

(in rupees) Variable cost percentage
Material 193,600 100
Labor 90,000 70
Overhead 80,000 64
Administration 30,000 30
The production will be sold through dealers who would receive a commission of 8% of sale price.

Required:
(i) Compute the sale price per bottle which will enable management to realize a profit of 10 percent of sales.
(ii) Calculate the break-even point in rupees if sale price is fixed at Rs. 11 per bottle. (Marks 10)

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Question No. 38 [ICAP – Cost Accounting – Spring 2007] Q – 1

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Question No. 39 [ICAP – Cost Accounting – Autumn 2007] Q – 5

Question No. 40 [ICAP – Cost Accounting – Autumn 2008] Q – 5

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Question No. 41 [ICAP – Cost Accounting –Spring 2009] Q – 6

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Question No. 42 [ICAP – Cost Accounting –Autumn 2009] Q – 3

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Question No. 43 [ICAP – Cost Accounting –Spring 2011] Q – 5

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Question No. 44 [ICAP – Cost Accounting –Spring 2012] Q – 4

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Question No. 45 [ICAP – Cost Accounting –Spring 2013] Q – 6

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Question No. 46 [ICAP – Cost Accounting –Spring 2014] Q – 6

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Question No. 47 [ICAP – Cost Accounting –Autumn 2014] Q – 2

Question No. 48 [ICAP – Cost Accounting – Spring 2015] Q – 1

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Question No. 49 [ICAP – Cost Accounting – Autumn 2015] Q – 3

Question No. 50 [ICAP – Cost Accounting – Spring 2016] Q – 8

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Question No. 51 [ICAP – Cost Accounting – Autumn 2017] Q – 8

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Question No. 52 [ICAP – Cost Accounting – Spring 2018] Q – 3

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Question No. 53 [ICAP – Cost Accounting – Autumn 2018] Q – 2

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