Management Control System

Cost Accounts 312 views 1 replies

A company produces X, Y and Z from a raw material M. For every 100 tonnes of M put into production it obtains 50 tons of product X, 30 tons of Y and 15 tons of Z, while 5 tons goes as waste. The selling price of X, Y and Z is Rs. 40, Rs. 60 and Rs. 80 per ton. The cost of raw material M is Rs. 20 and variable processing costs are Rs. 10. Variable marketing costs are budgeted to be at the rate of 10 percent of sales value. Budgeted fixed overheads per annum are: Manufacturing - Rs. 40,000, Marketing - Rs. 30,000, and Administration - Rs. 20,000. The company intends to process 10,000 tonnes of material M in the coming year.

Calculate

Fixed Cost

Contribution in Rs.

Net Profit in Rs.

Break Even Point in Rs.

Maximum Price Per Ton in Rs.

Replies (1)

First find per tonne fixed and variable costs for x,y,z= total variable costs/5000 for x, total variable costs/3000 for y, total variable costs/1500 units. Apply waste of 50 tonnes 500/3= 167 to x,y,z as variable cost or Eg as per their ratios.( waste per product isn’t not given- bad question)

similarly find fixed cost per unit total fixed costs/number of tonnes

the rest is simple

sales price

- variable cost

= contribution

- fixed costs 

= net profit.

Then Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.

the last thing I’m not sure about maximum price per tonne, it could be total costs of x,y,z.

 


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