Advertisement

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?
Advertisement
Advertisement
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: Concept: Break-even Point.
Advertisement
Share
Notifications

View all notifications
Login
Create free account


      Forgot password?
View in app×