Marginal Costing Imp Qs PDF

USEFUL FOR CA, CS, CMA
A PUBLICATION BY RAHUL SHIKHA ACADEMY (RSA)

Important Questions with 100% Authentic Answers
MARGINAL COSTING
Important Questions
(Must Do Before Exam)
CA RAHUL GARG
(TRG)
GOLD MEDALIST
ALL INDIA RANKHOLDER in CA CS CMA
Question 1
The following figures are available from the records of ABC Company as at 31st March.
2015 (₹ In Lakhs) 2016 (₹ In Lakhs)
Sales 200 250
Profit 30 45
Calculate :
a. The P/V ratio and total fixed expenses.
b. The break-even level of sales.
c. Sales required to earn a profit of ₹ 70 lakhs.
CA Rahul Garg Gold Medalist All India Rankholder in CA, CS, CMA (incl. Rank 1)
Copyright of these notes is with RSA. Buy Regular & Fast Track Lectures @ www.carahulgarg.com
Question 2
A Ltd. Maintains margin of safety of 37.5% with an overall contribution to sales ratio of 40%.
Its fixed costs amount to ₹ 5 lakhs.
Calculate :
a. Break-even sales
b. Total sales
c. Total variable cost
d. Current profit
e. New ‘margin of safety’ if the sales volume is increased by 7-1⁄2 %.
Question 3
A Chinese soft drink company is planning to establish a subsidiary company in India to produce
mineral water. Based on the estimated annual sales of 40000 bottles of the mineral water, cost
studies produced the following estimates for the Indian subsidiary:
Total annual costs Percent of Total Annual Cost which is variable
Material 2,10,000 100%
Labour 1,50,000 80%
Factory Overheads 92,000 60%
Administration Expenses 40,000 35%
The Indian production will be sold by manufacturer’s representatives who will receive a commission
of 8% of the sale price. No portion of the Japanese office expenses is to be allocated to the
Indian subsidiary.
You are required to
a. Compute the sale price per bottle to enable the management to realize an estimated 10%
profit on sale proceeds in India.
b. Calculate the break-even point in Rupee sales as also in number of bottles for the Indian
subsidiary on the assumption that the sale price is ₹ 14 per bottle.
Question 4
The profit for the year of Push On Ltd. works out to 12.5% of the capital employed and the
relevant figures are as under :
₹
Sales 5,00,000
Direct Materials 2,50,000
Direct Labour 1,00,000
Variable Overheads 40,000
Capital Employed 4,00,000
The new sales manager who has joined the company recently estimates for the next year a profit
of about 23% on capital employed, provided the volume of sales is increased by 10% and
simultaneously there is an increase in selling price of 4% and an overall cost reduction in all the
elements of cost by 2%.
Find out by computing in detail the cost and profit for next year, whether the proposal of sales
manager can be adopted.
Question 5
Mr. X has ₹ 2,00,000 investments in his business firm. He wants a 15 per cent return on his
money. From an analysis of recent cost figures, he finds that his variable cost of operating is 60
per cent of sales, his fixed costs are ₹ 80,000 per year. Show computations to answer the
following questions:
a. What sales volume must be obtained to break even?
b. What sales volume must be obtained to get 15 per cent return on investment?
c. Mr. X estimates that even if he closed the doors of his business, he would incur ₹ 25,000 as
expenses per year. At what sales would he be better off by locking his business up?
Question 6
ABC Ltd. can produce 4,00,000 units of a product per annum at 100% capacity. The variable
production costs are ₹ 40 per unit and the variable selling expenses are ₹ 12 per sold unit. The
budgeted fixed production expenses were ₹ 24,00,000 per annum and the fixed selling expenses
were ₹ 16,00,000. During the year ended 31st March, 2008, the company worked at 80% of its
capacity. The operating data for the year are as follows :
Production 3,20,000 units
Sales @ ₹ 80 per unit 3,10,000 units
Opening stock of finished goods 40,000 units
Fixed production expenses are absorbed on the basis of capacity and fixed selling expenses are
recovered on the basis of period.
You are required to prepare Statements of Cost and Profit for year ending 31st March, 2008 :
a. On the basis of marginal costing
b. On the basis of absorption costing

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USEFUL FOR CA, CS, CMA

A PUBLICATION BY RAHUL SHIKHA ACADEMY (RSA)

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