Cost Concept & its Classification

Part-A
1. What do you mean by cost concept? (e¨‡qi aviYv ej‡Z Kx eyS ?)
Ans: Cost is a forgoing measured in a monetary terms, incurred or potentially to be incurred
to achieve a specific objective.(GKwU wbw`©ó D‡Ïk¨ AR©‡bi Rb¨ Avw_©Kfv‡e †h g~j¨ ev A_© w`‡Z nq ev
†`Iqvi m¤¢veYv _v‡K Zv‡K e¨q aviYv e‡j|)
2. What are the elements of cost? (e¨‡qi Dcv`vb mg~n Kx Kx?)
Ans: (i) Material (KvuPvgvj) (ii) Labor (kÖg) (iii) Overhead (Dcwie¨q)
3. What do you mean by opportunity Cost? (my‡hvM e¨q ej‡Z Kx eyS?)
Ans: The potential benefit that is lost or sacrificed when the selection of one course of action
makes it necessary to give up a competing course of action. (GKvwaK weK‡íi ga¨ †_‡K †h †Kvb GKwU
MÖnY Kiv n‡j eR©bK…Z ev Z¨vMK…Z myweavB n‡jv my‡hvM e¨q|)
4. What is the variable cost? (cwieZ©bkxj e¨q Kx?)
Ans: A cost that varies, in total , in direct proportion or change in the level of activity is
called variable cost. (‡h Drcvb‡`i cwigv‡bi mv‡_ AvbycvwZK nv‡i cwieZ©Z nq Zv‡K cwieZ©bkxj e¨q e‡j|)
5. What is sunk cost? (wbgw¾Z e¨q Kx?)
Ans: Any cost has already incurred and that can not be changed by any decision made now or
in the future is calles sunk cost. (wbgw¾Z e¨q n‡jv Ggb GK ai‡Yi e¨q hv AZx‡Z e¨q Kiv n‡q‡Q Ges hv
eZ©gvb I fwel¨r wm×všÍ Øviv †Kvbiƒc cwieZ©b Kiv hvq bv|)
6. What do you mean be work-in-progress? (PwjZ Kvh© ej‡Z Kx eyS?)
Ans: Goods that are only partially completed as to manufacturing at the beginning or end of a
period and that will need future work before being ready for sales to sales to a customer. (‡Kvb
mg‡qi †k‡l ev ïiæ‡Z Drcv`‡bi chv©‡q AvswkKfv‡e m¤ú~Y© Kiv n‡q‡Q Ges †µZv‡`i wbKU weµ‡qi c~‡e© fwel¨r
Kv‡h©i `iKvi n‡e Zv‡K PwjZ Kvh© e‡j|)
7. What is periodic cost? (KvjvwšÍK e¨q Kx?)
Ans: All cost that are matched against revenues on a time period basis; such costs consist of
selling and administrative expense. (GKwU wbw`©ó mg‡qi wfwˇZ ivR‡¯^i wecix‡Z Zzjbv Kiv hvq Ggb mKj
e¨q| GB ai‡Yi e¨q weµq I cÖkvmwbK e¨q‡K AšÍf©~³ K‡i|)
8. What is product cost? (cY¨ e¨q Kx?)
Ans: All costs that are in the purchase or manufacture of goods are called product costs. (cY¨
Drcv`b ev µ‡qi mv‡_ RwoZ mKj e¨q‡K cY¨ e¨q e‡j|)
9. What is cost behavior? ( e¨q AvPiY Kx?)
Ans: The way which a cost will react or respond to changes in the level of business active is
called cost behavior. (e¨emvwqK Kvh©µg ¯Í‡ii cwieZ©‡b e¨q ‡hfv‡e mviv †`q ev cÖwZwµqv K‡i Zv‡K e¨q AvPiY
e‡j|)
10. What is conversion cost? (iƒcvšÍi e¨q Kx?)
Ans: Conversion cost is the combined form of direct labor and manufacturing overhead.
(Drcv`‡bi Dcwie¨q I cÖZÿ kÖg ev gRywii GKwÎZ e¨q‡K iƒcvšÍi e‡jv|)
11. What is differential cost? (cv_©K¨g~jK e¨q Kx ?)
Ans: difference is cost between two alternatives is called differential cost. (`yB weKí cš’vq e¨‡qi
†h cv_©K¨ nq Zv‡K cv_©K¨g~jK e¨q e‡j|) .
12. What is incremental cost? (ewa©Z e¨q Kx?)

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Ans: An increase in cost between any two alternatives is called incremental cost. (`yB weKí
c×wZ ev cš’vq e¨‡qi †h e„w× cvq Zv‡K ewa©Z e¨q e‡j|) .
13.What is prime cost? (g~L¨ e¨q Kx?)
Ans: Direct materials cost combined with direct labor cost is called prime cost. (cÖZ¨ÿ KuvPvgvj
e¨q I cÖZ¨ÿ kÖ‡gi wgwjZ e¨q‡K g~L¨ e¨q e‡j|)
14. What do you mean by fixed cost? (¯’vqx e¨q ej‡Z Kx eyS?)
Ans: The cost that remains constant in total in all levels of activity of activity is called fixed
cost.( mKj Kvh©¯Í‡i †h e¨q mgwó‡Z w¯’Z _v‡K A_©vr cwieZ©b nq bv Zv‡K ¯’vqx e¨q e‡j|)
15. What do you meant by Raw material? (KvuPvgvj ej‡Z Kx †evS?).
Ans: Any materials going into manufactured product.
16. What is Computer-integrated manufacturing system. (CIM)? (CIM c×wZ Kx?)
Ans: Several flexible manufacturing system cells linked together by means of an automated
materials-handing system and in which the flow of goods between cells is controlled by a
compute.
17. What is Relevant range? (cÖvmw½K cwimi Kx?)
Ans: The range of activity within which assumption relative to variable and fixed cost
behavior are valid.
18. What is Just-in-time (JIT) inventory system? (JIT gRy` c×wZ Kx?)
Ans: A method of inventory control designed to reduce of even eliminate inventories in a
company.
19. What is Finished goods? (‰Zwi cY¨ Kx?)
Ans: Goods that are complicated as to manufacturing but not yet sold to customers. 20. What
do you mean cost of goods sold? (wewµZ c‡Y¨i e¨q Kx?)
Ans: In the period of sales, the product costs are recognized as an expense called cost of
goods saled.
Part-B & C
(Theoretical Question)
1. Define cost concept. Discuss the cost Classification for decision making.
2. Show the difference between product cost & period cost.
3. Difference between cost & Expense.
Class work
Pro.-01: The following particulars have been extracted from the books of Alfa Ltd. as on
31st Dec. 2005:
Taka
Purchase of raw materials 66,000
Direct wages 52,500
Inventory of raw materials (1.1.2005) 75,000
Inventory of raw materials (31.12.2005) 91,500
Inventory of finished goods (1.1.2005) 54,000
Inventory of finished goods (31.12.2005) 31,000
Inventory of work-in-progress (1.1.2005) 28,000
Inventory of work-in-progress (31.12.2005) 35,000
Sales 2,11,000
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Factory rent & power 15,000
Indirect wages 2,750
Depreciation of plant and machinery 3,500
Direct expenses 1,500
Sundry factory expenses 10,000
Salesman salaries and commission 6,500
Office rent 2,500
Sundry office expenses 6,500
Advertisement expenses 3,500
Carriage outward 2,500
You are required to prepare a statement showing:
(a) Raw material consumed. Ans: 49,500; (b) Prime cost. Ans: 1,03,500
(c) Cost of production. Ans: 13,4,750; (d) Net profit or loss. Ans: 38,750
Pro.-02: From the following particulars, prepare a statement showing the Cost of Goods
Sold, Total Cost and Sales:
Opening Balances : Tk.
Work-in-process 5,100
Finished goods 6,500
Direct labor 9,600
Raw materials used 17,200
Factory overhead : 65% of direct labor cost.
Administrative overhead : 25% of Works cost.
Selling expenses : 5% on sales
Total cost 44,160
Sales 55,200
Profit : 20% on sales
Closing balances:
Work-in-process 3.800
Finished goods 7,700
Pro.-03: As a cost accountant of Meena Ltd. you have collected the following relevant
information:
Direct materials Tk.1,00,000
Direct labor 80% of Material Factory
on cost 50% of direct labor Office
on cost 75% of factory on cost
Selling on cost 50% of office on cost
Profit 25% of sales
Required: (i) Prime cost. Ans: 1,80,000
(ii) Factory cost. Ans: 2,20,000
(iii) Cost of production. Ans: 2,20,000
(iv) Cost of sales. Ans: 2,65,000
(v) Sales. Ans: 3,53,333
(vi) Percentage of total cost on sales Ans: 75%

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Pro.-04: The following information is obtained from the cost records of Sahadat
Manufacturing Company for the year 2014:
Taka
Total manufacturing cost 2,50,000
Finished goods inventory (closing) 42.000
Cost of goods finished 2,30,000
Work-in-progress closing 20,000
Factory overhead was applied 30% of total manufacturing cost and direct labor cost 150% of
factory overhead. Administrative and selling total expenses amounted to tk.40,000. Total
sales during the period was tk. 2,60,000. Prepare a cost sheet from the above account titles.
Pro.-05: A factory produced and sold 1,000 units of a product in the month of June, 2013 for
which the following particulars are available.
Stock of raw-materials of 1st June Tk:6,000
Purchase and receipt of raw materials during the month of June 1,44,000
Direct wages paid in cash in (June which included tk. 3,000 on
account of May and tk. 2,000 advance for July) 55,000
Works overhead charges for the month 60,000
Stock of raw materials on 30th June 10,000
Administration and selling overheads Tk. 25 per unit
Sales price Tk. 300 per unit
From the above particulars you are required to prepare:
(a) A statement of cost for the month of June 2013, Sales. Ans: 3,00,000
(b) Estimate sales price of a unit of the same product in July 2013 assuming
(i) 10% increase in the cost of raw materials/ raw materials used. Ans: 1,54,000
(ii) 10% increase in direct wages. Ans: 55,000
(iii) 5% increase in works overhead charges. Ans: 63,000
(iv) 20% decrease in administration and selling expense. Ans: 20,000
(v) Same percentage of profit on sales price as earned during the month of June, Sales. Ans:
31,8,534
Pro.-06: A factory produces and supplies goods according to customer's specification. From
the following particulars for the year, 2010 prepare a statement of cost:
1 January, 2010
Stock of Raw materials Tk. 50,000 Cost sheet = 8,00,000 sales
Stock of Finished goods 1,00,000 Tender cost = 3,09,375
31 December, 2010 tender price
Stock of raw materials 75,000
Stock of finished goods 60,000
Purchase of raw materials 3,25,000
Wages 2,00,000
Factory overhead 1,25,000
Office and administrative expenses 62,500
Sales 8,00,000
The factory is about to send a tender for supply of machine. The costing department estimates
that the materials required would cost tk.1,00,000 and the wages would cost tk.80,000. What
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would be the price of the tender to earn a profit of 25% on total cost? Factory overhead is
charged at a parentage on Prime cost and
Office and administrative expenses as a percentage on Factory overhead.
Pro.-07: The following figures have been obtained from the records of a company for the
year ended 31-12-2011:
Taka
Direct materials 1,70,000
Direct wages 1,00,000
Works overhead 60,000
Administrative overhead 67,200
Selling overhead 44,800
Distribution overhead 28,000
Profit 1,05,000
A work order has been executed in 2012 and the following have been incurred:
Taka
Direct materials 2,000
Direct wages 1,000
Assuming that in 2012 the rate of factory overhead has gone up by 20%, distribution
overhead have gone down by 10% and selling and administration overhead have gone up by
12.5%, at what price should the product be sold so as to earn the same of profit on the selling
price?
University Question
Pro.-01: The following information has been taken from the accounting records of the Swift
Company Ltd. for last year: N.U-10
Selling expenses Tk. 1,40,000
Raw materials inventory, January 1 90,000
Raw materials inventory, December 31 60,000
Electricity expenses, factory 36,000
Direct labor cost 1,50,000
Depreciation, factory 1,62,000
Purchase of raw materials 7,50,000
Sales 25,00,000
Insurance, factory 40,000
Supplies, factory 15,000
Administrative expenses 2,70,000
Indirect labor 3,00,000
Maintenance, factory 87,000
Work-in-process inventory, January 1 1,80,000
Work-in-process inventory, December 31 1,00,000
Finished goods inventory, January 1 2,60,000
Finished goods inventory, December 31 2,10,000
Management wants these data organized in a better format so that financial statements can be
prepared for the year.

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Required:
(1) Prepare a schedule of cost goods sold 17,00,000
(ii) Prepare an income statement 3,90,000
Pro.-02: The Apex Company produces different type of leather goods. The sales revenue for
the year tk. 12,00,000. The cost related different information during the year were as follows:
N.U.-2013
Particulars Taka
Raw material purchased 50,000
Freight in 2,000
Opening work-in-process 80,000
Opening finished goods 40,000
Opening raw materials 2,50,000
Closing work-in-process 70,000
Closing finished goods 60,000
Closing raw materials 60,000
Productive wages 1,70,000
Changeable expenses 50,000
Factory overhead 2,50,000
Selling expenses 40,000
General and administrative expenses 10,000
Sale of scrap 5,000
Prepare a statement showing the following:
(a) Raw material used 3,62,000
(b) Prime cost 4,62,000
(c) Cost of manufacturing 7,07,000
(d) Cost of goods manufactured 71,7000
(e) Cost of goods available for sale 7,57,000
(f) Cost of goods sold 6,97,000
(g) Cost of sales 7,47,000
(h) Profit or loss 4,53,000
Pro.-03: The Rico Watch Co. Ltd. manufactures different types of clocks. The sales revenue
for the year tk.9,45,000. The cost related to production during the year and the inventories in
different dates were as follows:
Start of the period Tk. End of the period Tk.
Work-in-process 75,000 60,000
Finished goods 35,000 54,000
Direct material purchased during the year were tk.2,05,000. Material used in production tk.1,76,000.
Direct labor cost tk.2,50,000 and factored overhead costs tk.2,37,500. Selling expenses are tk.55,000
and general administration expenses tk.1,17,000.
Prepare a statement showing:
(i) Cost of goods manufactured 6,78,000
(ii) Cost of goods available for sale 7,13,500
(iii) Cost of goods sold 6,59,500
(iv) Cost of sales 8,13,500
(v) Profit or loss 1,13,500

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Pro.-04: The books and records of the Faruk Manufacturing Company present the following
data for the month of August 2012: [NU: 2014] Direct labor cost Tk.16,000 (160% of
factory overhead)
Cost of goods sold Tk.56,000
Inventory accounts should these beginning and ending balances:
Account Title August 1 August 31
Raw materials Tk.8,000 Tk.8,600
Work-in-process 8,000 12,000
Finished goods 14,000 18,000
Other data:
Selling expenses 3,400
General and administrative expenses 2,600
Sales for month 75,000
Required: A statement showing 54,000 prime cost, 64,000 production cost, 62,000 cost of
sales and 13,000 profit earned.
Pro.-05: Moon Star Co. provided the following data for May 2012: N.U.-2013
Sales tk. 72,000; marketing expenses tk.3,600; administrative expenses tk. 72,000; other
expenses tk.360; purchase tk.36,000; factory expenses tk. 10,000; direct labor tk.15,000.
Inventories Beginning(Tk.) Ending (Tk.)
Finished goods 7,000 10,200
Work-in-process 8,000 15,000
Materials 8,000 8,500
Required: Cost of goods manufactured 53,500
Pro.-06: A manufacturing company produces bicycles. The company had 260 units of
opening inventory costing Tk. 700 per unit in 2014.[N.U. BBA (Hons)- 2014] During the
year 2014 the company sold 2150 bicycles at a gross profit of 20% on sale. Cost of material
per unit was Tk. 420. Direct labor cost per bicycle was 40 hours at Tk. 4 per hour. Factory
overhead was charged at Tk. 5 per direct labor hour. Administrative and selling expenses
amounted to Tk. 1,20,000. The finished inventory at close was 110 units.
Prepare: i. Statements of 16,56,200 cost of goods sold; ii. 2,94050 Income statement.
Pro.-07: The following data are related to the Tazin Company: N.U.-2012
Inventories
Ending (Tk.) Beginning (Tk.)
Finished goods 95,000 1,10,000
Work in process 80,000 70,000
Direct materials 95,000 90,000
Costs incurred during the period: Taka
Cost of goods available for sale 6,84,000
Total manufacturing costs 5,84,000
Factory overhead 1,67,000
Direct materials used 1,93,000

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Required:
(i) Direct labor cost 2,24,000
(ü) Direct materials purchased during the period 1,98,000
Pro.-08: From the following particulars prepare a statement of cost showing (a) the cost of
materials used; (b) the cost of production; (c) total cost; (d) the percentage of works overhead
to productive wages and (e) the percentage of office & general expenses to works cost. N.U-
09
Stock of finished goods (31.12.2008) Tk. 56,000
Stock of materials (31.12.2008) 25,600
Purchases of raw materials 5,84,000
Productive wages 3,97,600
Sales of finished goods 11,84,000
Stock of finished goods (31.12.2009) 60,000
Stock of raw materials (31.12.2009) 27,200
Works overhead charges 87,472
Office and general expenses 71,048
The company is about to send a tender for a large plant. The costing department estimates
that the materials required would cost tk.40,000 and wages to workmen for making the plant
would cost tk.24,000. The tender is to made at a net profit of 20% on the selling price. Show
what the amount of the tender would be if based on the above percentages.
2. What do you mean by Break-even chart? Ans: The relationship between revenues, costs
and level of activity in an organization presented in graphic from. Also see cost-volume profit
(CVP) graph.
3. What is the contribution margin ratio? Ans: The contribution margin per unit expressed as
a percent age of the selling price per unit. This term is synonymous with profit volume ratio.
4. What is the equation method? Ans: A method of computing the break-even point that relies
on the equation.
5. Why use the equation method? Ans : A method of computing the break-even point in
which the fixed costs are divided by the contribution margin per unit.
6. What do you mean by margin of safety? Ans: The excess of budget (or actual) sales over
the break-even volume of sales is called margin of safety.
7. What is profit volume raito? Ans: The ratio that is used to analyze the relation between
contribution and sales is known as profit volume ratio. The ratio is also called contribution-
sales ratio or marginal income ratio or variable profit ratio.
8. What is operating leverage? Ans: A measure of the extent to which fixed costs are being
used in an organization. The greater the fixed cost, the greater is the operating leverage
available and the greater is the sensitivity of net income to change in sales.
9. What is sales mix? Ans: The relative combination in which a company's products are sold.
Sales mix is computed by expressing the sales of each product as a percentage of total sales.
10. What is target net profit? Ans: Net income is operating income minus income taxes. CVP
calculations for target income must then be stated in terms of target net income instead of
target operating income.
11. What is fixed cost? Ans: Fixed cost is a cost that is not immediately affected by changes
in the cost driver level.
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12. What is incremental analysis? Ans: It is an analytical approach that focuses only on those
item of revenue, cost and volume that will change a result of a decision
13. What is variable cost? Ans: The cost which changes in direct proportion to change in the
cost driver is called variable cost.
14. What is mark up? Ans: It is an amount by which price exceeds cost.
15. What is net income? Ans: The bottom line ------ the residual amount after we deduct from
revenues all expenses including income taxes is net income
16. What is production cost? Ans: Production cost identified with goods produced or
purchases of resale.
17. What is gross margin? Ans: Gross margin is the excess sells over the total cost of good
sold
Part - B - Theoretical
1. What do you mean by cost column profit analysis? Discuss the assumptions of C-V-
P.[N.U. BBA (Hons)w 2010, 14]
2. Advantage or objectives of cost volume profit analysis.
3. Discuss the limitations or demerits of BEP analysis –
4. Uses of cost volume profit analysis
Class Work
Pro.-01: General Electronic Co. Ltd. has provided you the following data related December
ended 2005:
Total Sales : 15,000 units
Selling price per unit @ tk. 100
Variable cost per unit @ tk.20
Total fixed cost @ tk.4,00,000
Required: (a) Break even sales units
(b) Break even taka
(c) Net profit ratio
(d) Contribution margin ratio.
(e) Margin of safety ratio.
Ans: a) 5000 Units b) Tk500000 c)53.33% d) 80% e) 66.67%
Pro.-02: The following particulars were obtained from the books of Happy Company.
Period Sales (Tk.) Profit (loss) Tk.
1 90,000 10,000(loss)
2 1,30,000 10,000
Required : Determine the following
(a) Profit volume ratio (b) Fixed overhead (c) Break-even point sales (d) Amount of sales
required to earn a profit of tk.40,000 (e) Profit when sales amount of tk.2,00,000.
Ans: a)50% b)55000 c)110000 d)190000 e) 45000
Pro.-03 : A Company's data relating to expected operation for the coming year are given
below:
Tk. Tk.
Sales 1,00,000 units 8,00,000

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Purchase price of product 3,00,000
Commissions 10% on sales 80,000 3,80,000
Contribution margin 4,20,000
Fixed cost 3,00,000
Profit before tax 1,20,000
The Managing Director of the company has some questions for you to answer, each situation
is independent of the other.
(i) What is the company's break-even point?
(ii) What unit sales would give you a pre-tax profit of tk.1,80,000?
(iii) If the company could sell 1,00,000 units and wanted a pre-tax profit of tk.1,80,000 and
what price would it have to charge?
(iv) If the purchase price of the product increased by 10%. What volume would be required to
earn a after tax profit to tk. 72,000? Tax rate 40%.
Ans: i) Tk 571429 ii) 114286 Units iii) TK 8.67 iv) Tk861538
Pro.-04: Delta manufacturers and sells a single product. The company's sales and expenses
for a recent month follows:
Sales tk.6,00,000 @ tk.40 per unit. Total variable cost tk.4,20,000 and fixed cost tk.1,50,000.
Calculate:
(a) Monthly Break-even point sales in unit and taka.
(b) How many units would have to be sold to earn a minimum profit target of tk.18,000?
(c) The M/S in both taka and percentage term.
(d) C/M ratio if monthly sales increase by the tk.80,000 by how much would you expects
monthly net income to increase?
Ans: a) 12500Units and Tk 500000, b) 14000Units, c) Tk 100000, 16.67% d)30%, Tk 24000
Pro.-05: The cost and sales date of Moon and Apon Ltd. are given below:
Per unit Tk.
Sales price 5.00
Purchase price 4.00
Sales commission 0.25
Annual fixed expenses 30,000.00
Considering each part independently
(a) What is the annual break-even point in taka sales and in unit sales?
(b) If 35,000 units were sold. What would be the net profit or loss?
(C) If sales commission were discontinued in favor of a tk.8,000 increase in fixed salaries. What
would be the annual break-even point, in tk. and in unit sales?
(d) Keeping regular tk.0.25 commission still in forced, if the store Manager were paid tk.0.10 per
unit as commission on each unit sold in excess of break-even. What would be the 'net income if
50,000 units were sold?
Ans: a) Tk 200000, 40000Units, b) Loss (3750), c) 38000Units, Tk 190000, d) 6500
Pro.-06: The following information is obtained from a manufacturing concern: Sales Tk.
1,80,000
Fixed cost Tk. 25,000
P/V ratio 20%

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Required:
(a) What is the break even sales volume?
(b) What is the amount of profit?
(c) What sales volume would earn the same amount of profit if variable cost increases by
10% and selling price increases by 20%?
Ans: a) Tk 125000, b) Tk 11000, c) Tk 134983.
Home Work
Pro.-01: A company is able to sell its only 'product for tk.20 per unit. Variable cost per unit
tk. Total.
fixed cost tk.96,000.
You are require to calculate:
(i) Break even sales in units.
(ii) Break even point in sales.
(iii) P/V ratio.
(iv) What number of units will need to be sold to earn a total profit of tk.36,000 and
tk.48,000.
(v) What level of sales will earn pre-tax profit of tk.42,000 p.a.
(vi) If taxation rate is 40% how many units need to be sold to make a profit of tk.36,000 after
tax.
(vii) Because of inflationary trend, variable cost expected to rise by tk.2 per unit and fixed
cost per unit tk. 12,000 p.a. If the selling price can not be increased. What will be the number
of units required to be sold to maintain the pre-tax profit of tk.36,000.
Ans: i) 12000Units, ii) Tk240000 iii) 40% iv) 18000 & 16500 Units, v) Tk 345000, vi)
19500Units, vii) 24000Units.
Pro.-02: SV Ltd. A multi product company furnishes you the following data relating to the
year 2007.
1st half of the year Τk. 2nd half of the year Τk.
Sales 45,000 50,000
Total cost 40,000 43,000
Assuming that there is on charge in price and variable cost and the fixed expenses were
incurred equally in the two half year periods. Calculate for the year 2007.
(i) The P/V ratio, (ii) Fixed expenses (iii) Break even sales (iv) Percentage of margin of
safety.
Ans: a)40% b)26000 c)65000 d)31.58%
Pro.-03: Pritom Company manufactures and sells a single product. The company's sales and
expenses for a recent month follows: N.U - 2009
Total Unit
Sales Tk.6,00,000 Tk.40
Less, Variable expenses 4,20,000 28
Contribution margin Tk.1,80,000 Tk.12
Less fixed expenses 1,50,000
Net income Tk. 30,000

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Required:
(a) What is the BEP in units sold and sales taka?
(b) What is the CM (total) in BEP?
(c) How many units would have to be sold each month to earn a minimum target net income
of tk.18,000
(d) Refer to the original data, compute company's margin of safety in both taka and
percentage terms.
(e) What is the company's CM ratio?
Ans: a) Tk 500000, 12500Units, b) Tk150000 c) 14000Units, d)tk 1,00,000, e)30%
University Question
Pro.-01: Total sales of a production Co. is Tk. 2,00,000, margin of safety is Tk. 80,000. CM
ratio 40%. Determine:
[N.U. BBA (Hons)-
2014]
i) Profit of the Co. Ans: 32,000
ii) Total variable cost. Ans: 1,20,000
Pro.-02: You have been supplied with the following data to Rafi & Co. [NU-13]
Annual sales Tk. 2,20,000
Margin of safety ratio 35%
Contribution margin ratio 45%
You are required to find out:
(i) Break even sales in Taka. (ii) Total margin of safety in Taka.(iii) Required sales to earn a
net income of tk.40,000. (iv) Annual Profit (v) Profit on Sale Tk.1,20,000 Ans: i) 1,43,000,
ii)77,000.iii)2,31,889, iv) 34,650 v) 10,350)
Pro.-03: The operating results of a Co. for the last two years were as follows: N.U-2012
2011 (Tk.) 2012 (Tk.)
Sales 6,00,000 10,00,000
Profit (Loss) (60,000) 1,00,000
Based upon the above information calculate the following:
(a) Contribution margin ratio (b) Amount of fixed expenses (c)Break-even point(d) Amount
of profit increase/decrease if sales are increased by tk. 1,00,000(e) Margin of safety at a profit
of tk.60,000
Ans: a)40% b)300000 c)750000 d)1,40,000 e) 150000
Pro.-04: Sales Tk. 10,00,000
P/V ratio 40%
M/S ratio 25%
Find out: (i) BEP in taka; (ii) Variable cost in Taka; (iii) Profit in taka.
Pro.-05: The Balee Chemical Company has sales of tk.1,20,000 and a margin safety 40% and
P/V ratio 30% during the current year. The company expects that next year the fixed cost and
the sales price will increase. As a result, the margin of safety and the P/V ratio will change to
35% and 40% respectively.
Required:
(a) The present break-even sales
(b) The amount of current profit
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(c) The break-even sales next year
(d) The amount of profit for next year
Ans: a) Tk 72,000, b) Tk 14,400, c) Tk 91,000, d) Tk 19,600
Pro.-06: Asif and Co. manufacturing and sells a single product. The company's sales and
expenses for last quarter follow: N.U-2010
Total (Tk.) Per Unit (Tk.)
Sales 9,00,000 60
Less: Variable expenses 3,60,000 24
Contribution margin (CM) 5,40,000 36
Less: Fixed expenses 4,32,000
Net operating income 1,08,000
Required:
(i) What is company's CM ratio?
(ii) What is quarterly breakeven point in units sold and in sales taka?
(iii) Compute company's margin of safety in taka and in percentage terms.
(iv) How many would have to be sold each quarter to earn a pre-tax profit of tk. 1,80,000?
(v) If company can sell only 15,000 units but wanted to earn a pre-tax profit of tk. 1,80,000
then what would be the selling price per unit?
(vi) If sales increase by tk. 1,00,000 per quarter and there is no change in fixed expenses, by
how much would you expect net operating income to increase?
Ans: i) 60%, ii) Tk720000 & 12000 Units iii) Tk180000, 20% iv) tk 10,20,000, v) Tk 64.80,
vi) Tk 60,000.
Pro.-07: OTOBI Furniture Company collected the following data for the second quarter of the year:
Month Sales (Tk.) Cost (Tk.)
April 70,000 56,000
May 77,000 59,990
June 85,000 64,550
Required: Compute the following:
(i) The fixed cost and the variable cost per unit sales tk.
(ii) The contribution margin ratio.
(iii) The break-even point.
(iv) July profit if sales are tk.79,000.
(v) August sales if the month's loss is tk.1,050.
Ans: i) Tk 16100, ii) 43% iii) Tk 37442, iv) Tk 17870, v) Tk 35000
Pro.-09: The following figures are available from the books M/s. Sadia Enterprise for the year ended
31st December, 2011: N.U-07
Tk.
Materials stock on 1.1.2012 1,000
X Materials stock on 31.12.2012 2,000
Materials purchased during 2012 10,000
Wages 7,500
Factory overhead 4,500
Administrative overhead 4,200
Selling overhead 5,250
Profit for the year 6,090

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In the year 2013 the factory received an order for a job which will require materials tk.1,200
and wages tk.750. The management of the enterprise intends to earn a profit 10% higher than
the percentage of profit earned in 2012 and assume that the factory overhead has gone up
15% and selling & administrative overhead has gone down by 20% in 2013. Further assume
that factory overhead is recovered as
a percentage of wages and selling & administrative overhead as a percentage of works cost.
You are required to:
(i) Prepare a cost sheet for 2012
(ii) Ascertain the sales price of the job order received in 2013.
Pro.-10: The following data relate to XYZ Ltd:
Details Taka
Inventory of finished goods-01-01-2014 72,800
Inventory of raw materials 01-01-2014 33,280
Purchase of raw materials 7,59,200
Productive wages 5,16,880
Sales of finished goods 15,39,200
Inventory of finished goods 31-12-2014 78,000
Inventory of raw materials 31-12-2014 35,360
Work managers salary 50,000
Indirect wages 30,000
Fuel 15,000
Depreciation on plant 15,000
Indirect raw material 10,000
Tools use in production 9,220
Administrative expense 30,160
Salary to the managing director 40,000

Required:
(i) Prepare a cost sheet for the year.
(ii) Compute total cost of a plant and find out the price of a tender for another plant to be
submitted. It isestimated that the cost of raw materials required for the tender will be Tk.
52,000 and direct wages. Tk.31,200. The
tender is to be made at a profit of 20% on selling price. Sales 1,07,771 tender price. Pro.-11:
From the cost records of Sheba manufacturing company prepare a cost and determine the
selling price per unit if goods are sold at a profit of 20% on sales: NU.-2006
Raw material purchased 15,000 units Tk.1,80,000
Raw materials, 1st January, 2013 1,500 units Tk. 15,000
Raw materials, 31st December, 2013 2,000 units Tk.24,000
Work-in-progress, 1st January, 2013 1,225 units Tk.30,000
Work-in-progress, 31st Dec. 2013 1,000 units Tk.20,000
Finished goods, 1st January, 2013 1,500 units Tk.33,000
Finished goods,31st December,2013 500 units
Conversion cost tk.1,00,450 (60% constitutes direct wages). Normal loss are 5% of material
consumed which realized at tk.2 per unit. Administrative expenses are 25% of factory
expenses. Selling expenses 5% of sales.

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