# A Factory Engaged in Producing 'Plastic Buckets' in Working to 40% Capacity and Produces 10,000 Buckets P.A.The Present Cost Break-up for One Bucket is as Under: - Cost Accounting(Financial Accounting and Auditing 10)

#### Question

A factory engaged in producing 'Plastic Buckets' in working to 40% capacity and produces 10,000 buckets p.a.
The present cost break-up for one bucket is as under:

 Material (Rs.) 10 Labour Cost (Rs.) 3 Overheads (Rs.) 5( 60% Fixed Cost) Selling Price (Rs.) 20 Per Bucket

If it is decided to work the factory at 50% capacity, the selling price falls by 3%. At 90% capacity, the selling price falls by 5% accompanied by the similar fall in the prices of materials. You are required to calculate the profit at 50% and 90% capacity and also calculate the BEP for the same capacity productions.

#### Solution

Statements Showing Profit and Break-even point at different Capacity Levels :

 Capacity Levels → 50% 90% Production (Units) → 12,500 22,500 Per Unit (Rs.) Total (Rs.) Per Unit (Rs.) Total (Rs.) (i) Sales 19.40 (20- 0.60) 2,42,500 19.00 (20 - 1) 4,27,500 (ii) variable Costs : • Materials 10.00 1,25,000 9.50 2,13,750 • Wages 3.00 37,500 3.00 67,500 • Variable Overheads 2.00 25,000 2.00 45,000 Total Variable Costs 15.00 1,87,500 14.50 3,26,250 (iii) Contribution  [(i) - (ii)] 4.40 55,000 4.50 1,01,250 (iv) Fixed Costs 30,000 30,000 (v) Profit [(iii) - (iv)] 25,000 71,250

Break-even Point (Units) At 50% Capacity :

="Fixed Cost"/"Contribution Per Unit"

=("Rs." 30,000)/("Rs." 4.40)

= 6,818 Units

Sales(Rs.) → = 6,818 Units x Rs. 19.40 Per Unit

= Rs. 1,32,270

Break-even Point (Units) At 90% Capacity :

="Fixed Cost"/"Contribution Per Unit"

=("Rs." 30,000)/("Rs." 4.50)

= 6,667 Units

Sales(Rs.) = 6,667 Units x Rs. 19.00 Per Unit

= Rs. 1,26,673

Is there an error in this question or solution?