Page 277 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 12.12 Review Questions

1. SV Ltd. a multi-product company, furnishes you the following data relating to the year
1979:

Particulars First half of the year Second half of the year
Sales 45,000 50,000
Total cost 40,000 43,000

Assuming that there is no change in prices and variable costs that the fixed expenses are
incurred equally in the two half year periods calculate for the year 1979.

Calculate:
(a) PV ration
(b) Fixed expenses
(c) Break even sales

(d) Margin of safety
2. Analyse the important of the following in relation to break-even analysis:
(a) Break-even point
(b) Margin of safety
(c) Profit volume ratio

3. Illustrate the graphic approach of BEP analysis.
4. Examine the concept of the profit volume ratio.
5. The following figures are extracted from the books of KSBS Ltd. Find out profit by using
marginal costing and absorption costing. Is there any variations in the results obtained
under the two methods is given below?
The basic production data are:

Normal volume of production = 19,500 units per period
Sale price - 4 per unit
Variable cost - 2 per unit

Fixed cost - 1 per unit
Total fixed cost = 19,500 ( 1 × 19,500 units, normal)
Selling and distribution costs have been omitted. The opening and closing stocks consist
of both finished gods and equivalent units of work-in-progress.
Other information
Period 1 Period II Period III Period IV Total
Opening stock units — — 4,500 1,500 —
Production units 19,500 22,500 18,000 22,500 82,500
Sales units 19,500 18,000 21,000 24,000 82,500
Closing stock units — 4,500 1,500 — —

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