Excel Applications in Cost-Volume-Profit Analysis (Problems taken from Management Ac

by Prof. Surender Singh Edition 2024)

Problem 1. (Example 1. Page 5.7) ABC Ltd. provides you the following forecast for the next budget period
Selling price Rs. 50 per unit
Variable cost Rs. 30 per unit
Fixed Cost Rs. 1,80,000
You are required to calculate:
(i) Profit Volume Ratio. (ii) Break-Even Point in units and value

Solution Statement of Contribution per unit

Selling Price
Less: Variable Cost
Contribution
Fixed Cost

(i) P/V Ratio Contribution p.u./

Selling Price p.u. Or in %

(ii) Break Even Point(units) Fixed Cost/Cp.u.

(iii) Break Even Point(Rs.) Fixed Cost/PV Ratio
 taken from Management Accounting Book

orecast for the next budget period.

alue

r unit

Rs.
50
30
20
180000

0.4
40%

9000
450000
Problem 2. (Example 6. Page 5.14) XYZ provides you the following estimated information relating to next year of it
Sales 50,000 units
Selling price Rs. 20 per unit
Variable cost (Out of pocket costs) Rs.12 per unit
Fixed cost per annum Rs. 1,20,000
Calculate the following :
(i) Required sales to break even;
(ii) Required sales to earn a profit of Rs.1,00,000 (iii) Required sales to earn a profit of Rs.4 per unit;
(iv) Required sales to earn a profit of 15% on sales.
(v) Additional sales required to cover an additional expenditure of Rs.20,000 in fixed cost while maintaining the esti

Solution: Statement of Estimated Contribution and Profit

Sales (units)
Per Unit (Rs.)
Selling Price 20
Less: Variable Cost 12
Contribution 8
Fixed Cost
Profit

P/V Ratio Contribution p.u./ Selling Price

p.u. Or

(i) Break Even Point(units) Fixed Cost/Cp.u

Break Even Point(Rs.) Fixed Cost/PV Ratio

(iii) Required Sales to earn a profit of Rs.1,00,000

Required Sales (Rs.) (FC+ DP)/PV Ratio

Required Sales (Units) (FC+ DP)/Cp.u

(iv) Required Sales to earn a profit of 4 per unit:

Desired Profit (DP) p.u.

Required Sales (Units) FC/(Cp.u– DPp.u)
Required Sales (Rs.) Units × Selling Price

(v) Required Sales to earn a profit of 15% on Sales

Per Unit (Rs.)
Selling Price 20
Less: Variable Cost 12
Contribution p.u. 8
 Contribution p.u. towards Desired 3
Profit

Contribution P.U. towards fixed cost 5

Fixed Cost (Rs.) 120000

Required Sales (Units) 24000
Required Sales (Rs.) 480000

(vi) Calculation of additional sales to cover an increase in fixed cost of Rs.20000

Additional Fixed Cost(Rs.)
Required Sales (Units) Additional FC/Cp.u
Required Sales (Rs.) Additional FC/PV Ratio
mation relating to next year of its operations:
0,000 units
Rs. 20 per unit
s.12 per unit
Rs. 1,20,000

of Rs.4 per unit;

cost while maintaining the estimated profit.

50000
Per Unit (Rs.)
1000000
600000
400000
120000
280000

0.4
40%

15000
300000

550000
27500

Alternatively Rs.
Contribution per unit 8
4 Desired Profit (DP) p.u. 4
30000 Contribution p.u. Toward 4
600000 Fixed Cost 120000
Required Sales (units) 30000
Required Sales (in rupees 600000
fixed cost of Rs.20000
20000
2500
50000
 Problem 3. (Example 7. Page 5.16). The following cost information relating to a product is supplied by a cost accountant.
Sales (20,000 units @ Rs. 40 per unit) Rs. 8,00,000
Variable Cost per unit @ Rs. 28 per unit) Rs.5,60,000
Fixed Cost Rs. 1,80,000
Profit Rs. 60,000
You are required to calculate:
(i) Variable cost ratio
(ii) P/V ratio
(iii) Break-even Sales
(iv) Sales to earn a profit of Rs.1,20,000
(v) Sales to earn a profit of 10% of Sales
(vi) Profit at a Sales level of Rs.12,00,000
(vii) Profit at a Sales level of 36,000 units

Solution: Statement of Existing Contribution and Profit

Sales (Units) 20000
Particulars Per Unit (Rs.) Total(Rs.)
Sales 40 800000
Less: Variable Cost 28 560000
Contribution 12 240000
Less: Fixed Cost 180000
Profit 60000

(i) Variable Cost ratio Variable Cost/ Sales 0.7 Or 70%

(ii) Profit Volume ratio Contriburion/Sales 0.3 30%

(iii) Break Even Point(units) Fixed Cost/Cp.u 15000

Break Even Point(Rs.) Fixed Cost/PV Ratio 600000

(iv) Sales to earn a profit of Rs. 1,20,000

 Desired Profit (DP) Rs. 120000
Required Sales (units) (FC + DP)/Cp.u. 25000
Required Sales (Rs.) (FC + DP)/PV ratio 1000000

(v) Sales to earn a profit of 10% of Sales

Per Unit (Rs.)
Selling Price 40
Less: Variable Cost 28
Contribution P.U. 12
Contribution P.U. towards Desired Profit 4
Contribution P.U. towards fixed cost 8
Fixed Cost (Rs.) 180000
Required Sales (Units) 22500
Required Sales (in rupees) 900000

(vi) Profit at a Sales level of Rs.12,00,000

Given Sales (Rs.) 1200000
Profit Given Sales (Rs.)× PV ratio – FC 180000

(vi) Profit at a Sales level of 36000 units

Given Sales (units) 36000
Profit Given Sales (units) × Cp.u. – FC 252000
 Problem 4. (Example 10. Page 5.20). SR Ltd., a multiproduct company provides you the following
revenue and cost details of its operation:
Period I Period II
Sales (Rs.) 2,50,000 3,00,000
Total Costs (Rs.) 2,00,000 2,30,000
Assuming that there is no change in selling price and variable cost per unit and fixed costs are also
incurred equally in the two periods, calculate the following:
(i) Profit-volume ratio
(ii) Fixed-cost
(iii) Break-even point
(iv) Margin of safety ratio in period I and II
(v) Sales required to earn a profit of Rs.1,00,000
(vi) Profit at a Sales level of Rs.4,00,000

Solution:
Statement of Profit
Particulars Period I Period II Change
Sales 250000 300000 50000
Less: Total Cost 200000 230000 30000
Profit 50000 70000 20000

(i) Profit-volume ratio Change in Profit/Change in Sales 0.4

Or 40%

(ii) Fixed Cost 50000

Or 50000

(iii) Break Even Point(Rs.) 125000

(iv) Margin of Safety Ratio (AS-BES)/AS× 100 Period I 50%
Period II 58.33%

(v) Sales required to earn a profit of Rs. 1,00,000

Desired Profit (DP) Rs. 100000

Required Sales (Rs.) (FC + DP)/PV ratio 375000

(vi) Profit at a Sales level of Rs. 4,00,000

Given Sales (Rs.) 400000
Profit (Rs.) Given Sales (Rs.)× PV ratio – FC 110000
 Problem 5. (Example 12. Page 5.23). The Cost Accountant of ABC Ltd. supplies you the following
information:
Sales 10,000 units @ Rs.20 p.u. Rs.2,00,000
Variable Costs @ Rs. 12 p.u. Rs. 1,20,000
Fixed Cost Rs. 50,000
There has been an increase in the costs. The management is contemplating either an increase in
sales quantity or an increase in selling price. You are required to calculate: (a) new sales quantity
and (b) new selling price to earn the same profit when:
(i) Variable Cost increases by Rs. 4 per unit.
(ii) Fixed Cost increases by Rs.10,000
(iii) Variable Cost increases by Rs.2 per unit and fixed cost reduces by Rs.8,000.

Solution: Statement of Existing Contribution and Profit

Sales (Units) 10000
Particulars Per Unit (Rs.) Total(Rs.)
Sales 20 200000
Less: Variable Cost 12 120000
Contribution 8 80000
Less: Fixed Cost 50000
Profit 30000

(i) a New sales quantity to maintain present level of profit When VCp.u. is increased by Rs.4
New Variable cost 16
New Contribution per unit 4
Required Sales (units) (FC + DP)/Cp.u. 20000

(i) b New selling price to maintain present level of profit When VCp.u. is increased by Rs.4

Total Sales VC+ FC +DP 240000

Selling Price(Rs.) 24
(ii) a New sales quantity to maintain present level of profit When Fixed Cost is increased by Rs.10000
New Fixed cost 60000
Required Sales (units) (FC + DP)/Cp.u. 11250

(ii) b New selling price to maintain present level of profit When Fixed Cost is increased by Rs.10000

Total Sales VC+ FC +DP 210000

Selling Price(Rs.) 21

(iii) a New sales quantity to maintain present level of profit when VC p.u. increases by Rs.2 and FC reduces byRs.8000
New Variable cost 14
New Contibution per unit 6
New Fixed cost 42000
Required Sales (units) (FC + DP)/Cp.u. 12000

(iii) b New selling price to maintain present level of profit when VC p.u. increases by Rs.2 and FC reduces byRs.8000

Total Sales VC+ FC +DP 212000

Selling Price(Rs.) 21.2
 Problem 6. (Illustration 6. Page 5.54). Attempt the following (working notes should form part of the answer):
(i) Total fixed cost Rs.12,000; Contribution Rs.20,000; Number of units sold 10,000; Variable cost is 60% of
sales. Determine selling price per unit and also the total profits/loss
(ii) Total fixed cost Rs.12,000. Actual sales Rs. 48,000; Margin of safety Rs.8,000. Determine P/V ratio.
(iii) A company which has a margin of safety of Rs.4 lakhs makes a profit of Rs.80,000. Its fixed cost is Rs.5
lakhs.Find the break-even sales volume.

Solution
(i) Given:
No. of units solld
Contribution (Rs.)
Fixed Cost
Variable Cost ratio

PV ratio
Total sales
Selling Price
Profit

(ii) Given:
Actual Sales(Rs.)
Margin of Safety(Rs.)
Fixed Cost

Break Even Sales(Rs.)

PV ratio FC/BES(Rs.)
Or
(iii) Given:
Margin of Safety(Rs.)
Profit(Rs.)
Fixed Cost

PV ratio Profit/Margin of Safety

Or
BES(Rs.) FC/PV ratio
ould form part of the answer):
000; Variable cost is 60% of

0. Determine P/V ratio.

80,000. Its fixed cost is Rs.5

10000
20000
12000
60.00%

40.00%
50000
5
8000

48000
8000
12000

40000
0.3
30%

400000
80000
500000

0.2
20%
2500000
Problem 14 (Example 14 &15, Page 5.30 &5.31): SR Ltd. provides you the following in
Selling price (Rs.) 20
Variable cost per unit (Rs. 12
Fixed costs per annum (Rs 160000
Sales / Production (units) 25000
Draw a Break Even Chart, Contribution Chart and Profit Volume Chart from the ab
Solution
Output/Sales (units) Sales Revenue VC (Rs.) FC (Rs.)
0 (Rs.) 0 0 160000
5000 100000 60000 160000
10000 200000 120000 160000
15000 300000 180000 160000
20000 400000 240000 160000
25000 500000 300000 160000
30000 600000 360000 160000
35000 700000 420000 160000

Output/Sales (units) FC (Rs.) VC (Rs.) TC (Rs.)

0 160000 0 160000
5000 160000 60000 220000
10000 160000 120000 280000
15000 160000 180000 340000
20000 160000 240000 400000
25000 160000 300000 460000
30000 160000 360000 520000
35000 160000 420000 580000

Output/Sales (units) FC (Rs.) Sales Contributi

0 160000 Revenue
0 on (Rs.) 0
(Rs.)
5000 160000 100000 40000
10000 160000 200000 80000
 15000 160000 300000 120000
20000 160000 400000 160000
25000 160000 500000 200000
30000 160000 600000 240000
35000 160000 700000 280000

Output/Sales (units) Profit (Rs.)

0 -160000
5000 -120000
10000 -80000
15000 -40000
20000 0
25000 40000
30000 80000
35000 120000
des you the following information for its current year of operations: Breake
800000

700000
olume Chart from the above information
600000
TC (Rs.) Contribution Profit (Rs.)
160000 (Rs.) 0 -160000
500000

Sales Revenue
220000 40000 -120000
280000 80000 -80000
400000
340000 120000 -40000
400000 160000 0
460000 200000 40000
300000
520000 240000 80000
580000 280000 120000 200000

100000

Sales Contribution Profit (Rs.) 0

Revenue (Rs.) 0 5000 10000 150
0 0 -160000
(Rs.)
100000 40000 -120000 Number
200000 80000 -80000
300000 120000 -40000
400000 160000 0
500000 200000 40000
600000 240000 80000
700000 280000 120000

Profit
(Rs.)
-160000 Contribution Br
-120000
800000
-80000
700000
600000
 Contribution Br
800000
-40000 700000
0
40000 600000
80000
120000 500000
400000
300000
200000
100000
0
0 5000 1000015000

Profit Volume Graph

150000

100000

50000
Profit/Loss

0
0 5000 10000 15000 20000 25000 3
-50000

-100000

-150000
 -50000

Pr
-100000

-150000

-200000
Number of units
 Breakeven Chart

VC (Rs.)
TC (Rs.)
Sales Revenue (Rs.)

5000 10000 15000 20000 25000 30000 35000

Number of Units

tribution Breakeven Chart

FC (Rs.)
Sales Revenue (Rs.)
Contribution (Rs.)
tribution Breakeven Chart

FC (Rs.)
Sales Revenue
} (Rs.)
Contribution (Rs.)

5000 100001500020000250003000035000

Graph

20000 25000 30000 35000

nits
Problem 14 (Example 14 &15, Page 5.30 &5.31): SR Ltd. provides you the following information for its current ye
Selling price (Rs.) 20
Variable cost per unit (Rs.) 12
Fixed costs per annum (Rs.) 160000 Revised FC200000
Sales / Production (units) 25000
Draw a BE Chart with orignal FC and Revised FC from the above information
Solution
Sales Contribution
Output/Sales (units) Revenue VC (Rs.) FC (Rs.) TC (Rs.) (Rs.)
(Rs.)
0 0 0 160000 160000 0
5000 100000 60000 160000 220000 40000
10000 200000 120000 160000 280000 80000
15000 300000 180000 160000 340000 120000
20000 400000 240000 160000 400000 160000
25000 500000 300000 160000 460000 200000
30000 600000 360000 160000 520000 240000
35000 700000 420000 160000 580000 280000
on for its current year of operations:

Revised BEP
800000
700000

Sales Revenue (Rs.)

600000
500000
Revised
Revised Revised 400000
Profit (Rs.) Profit
FC TC (Rs.) 300000
-160000 200000 200000 -200000 200000
-120000 200000 260000 -160000 100000
-80000 200000 320000 -120000 0
0 5000 10000 15000 20000
-40000 200000 380000 -80000
0 200000 440000 -40000 Number of Units
40000 200000 500000 0
Sales Revenue (Rs.) FC (Rs.)
80000 200000 560000 40000
Linear (TC (Rs.)) Revised FC
120000 200000 620000 80000
 Revised BEP

10000 15000 20000 25000 30000 35000

Number of Units

Rs.) FC (Rs.) TC (Rs.)

Revised FC Revised TC