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Unit 4: Cost Volume Profit Analysis
Solution: Notes
Amount (`)
Selling price (per unit) 10.00
Less: Trade discount (5% on selling price) 0.50
9.50
Less: Variable cost (3 + 2 + 2) 7.00
Contribution (per unit) 2.50
10,000
BEP (in units) = = = 4,000 units
2.50
(i) BEP (in units) = 4,000
Add: 10% = 400 units
4,400 units
Contribution from 4,400 units @ ` 2.50 ` 11,000
Less: Fixed cost ` 10,000
Profit ` 1,000
(ii) BEP (in units) = 4,000
Add: 15% = 600 units
4,600 units
Contribution from 4,600 units @ ` 2.50 ` 11,500
Less: Fixed cost ` 10,000
Profit ` 1,500
Self Assessment
Fill in the blanks:
11. The …………………… refers to amount by which sales revenue can fall before a loss is
incurred.
12. …………………… of various products can be compared with the help of break-even chart.
13. This angle is an indicator of profit earning capacity ………………… the break-even point.
14. …………………… involves the act of choice and the alternative chosen out of the available
alternative.
15. Marginal cost of a product represents the …………………… price of the product.
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