a) Details Actual sales Actual rates Total sales value Budget sales Budgeted Rates Budgeted sales value

Standard cost Budgeted Total cost Actual cost Actual total cost Actual sales Margin in% Budgeted sales margin in % Total Variance Units variance Selling price variance cost variance A 8000 12 96000 6000 14 84000 8 64000 5.5 44000 52000 54% 20000 24% 30% 33% 14% -31% B 10000 16 160000 9000 13 117000 10 100000 14.5 145000 15000 9% 17000 15% -5% 11% -23% 45% Total

256000

201000

67000 26% 37000 18% 8% Product B has Negetive variance

B) Case 1 Units SP VC Contribution Total contribution Inspection cost Normal loss Spare replacement cost Total Income 1000 800 500 300 300000 10000 40 4000 286000 8000 10 8000 284000 Case 2

C) i ii iii

Comitted cost Discreationary cost Comitted cost

iv v

Discreationary cost Comitted cost

Equipment operation expenses Equipment maintenance expenses wages paid to technicians wages paid to component stores staff wages paid to despatch staff Level 1 of allocation

125000 25000 85000 35000 40000 310000 wages paid to technicians Equipment maintenance expenses 85000 25500

Level 2 of allocation

Equipment operation Receiving components expenses +Equipment consignments from supplier maintenance expenses 175500 26325

Activity pool of costs

Costs

Activities in quarter

Receiving components consignments from supplier Settng up equipment for production runs Quality inspections Despatching goods as per customers orders Total

61325 156850 25500 66325 310000

980 1020 640 420

Settng up Quality inspections equipment for production runs 34000 25500

Settng up Despatching goods as equipment for per customers orders production runs 122850 26325

Cost per unit activity 62.6 153.8 39.8 157.9

Activities used for product R 45 16 10 22

Manufacturing cost of component R 2816 2460 398 3474 9149 560 16.34

no of units of components R Per unit cost

X Selling Price pu Variable cost pu Contribution Market Demand Production capacity Fixed cost Total contribution Profit 10 6 4 3000 2000 8000 5000

Y 12 9 3 2000 3000 6000 3000

Z 12 7 5 1000 900 3000 4500 1500

X will be preferable as the opportunity cost is high.

A) PC No of units Profit Fixed cost Contribution Contribution per unit Variable cost Selling price 6000 106000 74000 180000 30 200 230 Monopoly 1200 106000 74000 180000 150 200 350

B) A Fixed factory overheads Variable overheads per labour hour Direct labour hours required as per direct labour hour budget Product X Product Y Product X budget for overheads Product Y budget for overheads 336000 0.5 140000 28000 406000 350000 B 126000 1.5 70000 56000 231000 210000 210000 84000 637000 560000

3.033333 cost per hour 6.666667 cost per hour

A) Divison X Direct Materials Variable cost at Rs 64/hour units per hour Selling price in the outside market Contribution pu Fixed overheads Divison Y Imported components Direct materials Variable cost at Rs. 40 per hour Units per hour Selling price in outside market Fixed overheads Gears 240 256 4 640 144 Engines 34 64 1 128 30 2400000

640 96 320 8 1160 400000

1) 2) a

Y can offer a max price of

576

Gears Market Demand Direct Materials Variable cost at Rs 64/hour units per hour Selling price in the outside market Contribution pu Fixed overheads Total cost Per unit cost 20000 240 256 4 640 144

Engines 20000 34 64 Total hrs 1 100000 128 30 2400000

12320000 616 minimum cost that x can offer

b Gears Market Demand Direct Materials Variable cost at Rs 64/hour units per hour Selling price in the outside market Contribution pu Fixed overheads Total cost Per unit cost 15000 240 256 4 640 144 Engines 10000 34 64 Total hrs 1 70000 128 30 2400000

9840000 656 minimum cost that x can offer

c Gears Market Demand Direct Materials Variable cost at Rs 64/hour units per hour Selling price in the outside market Contribution pu Fixed overheads Total cost Per unit cost 18000 240 256 4 640 144 Engines 24000 34 64 Total hrs 1 96000 128 30 2400000

11328000 629 minimum cost that x can offer

B) X 120 80 1 5 3 Y 300 100 2 4 1 39600 720 <= 1800 <= 660 <=

Machining Fabricaton Assembly

720 1800 900

Q6 A Order Per month Rate (SP) Sales revenue Cost Variable cost Material cost Other variable cost Fixed cost Fixed cost per month Machine bought Resale value Depriciation Profit Reward Reduction of sunk cost from old machine Net profit Note

Case 1 Case 2 300000 300000 25000 30000 550 550 165000000 165000000

121410000 106500000 14910000 3000000 250000 1420000 355000 1065000 39525000

127015263 112105263 14910000 2642000 264200 1065000 0 1065000 34277737 1500000 355000 35422737 Difference of costs of machine buying 355000

Since net profit arising out of case 2 is more than the net profit from

Q6 B VIP rows Mid level Last level Fixed expense Drama Troupe Theater Arrangement charge Total expense Sponsor contribution Net fixed expense (i) No of avaible seats Seats to be sold for Break even Selling cost Variable cost No of rows No of seats Total seat Rate 3 30 90 320 18 20 360 220 6 30 180 120

71000 14000 7400 92400 9000 83400 Vip 60 60 320 20 Mod 360 282 220 20 Last 180 90 120 20

Contribution Total contribution (ii) No of avaible seats Seats to be sold for Break even Selling cost Variable cost Contribution Total contribution Vip

300 18000

200 56400 Mod Last

100 9000

60 60 320 20 300 18000

360 237 220 20 200 47400

180 180 120 20 100 18000

ference of costs of machine buying

sing out of case 2 is more than the net profit from case 1 after all settlements we drop case 2

Seats available for 60 360 180

83400

83400