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1. Preliminaries all 11 computation of PV Ratio, BEP and MOS Vanesh Ltd produces a product , which has a Variable Cost of Materials - * 40, Labour - 10 and OH - 34. The Selling Price is per unit Sales for the current year is expected to be 15,000 units and Fixed OH are 1,40,000. Under a wage agreement, an increase of 10% is payable to all direct workers from the beginning of the forthcoming year, while szterial Cost is expected to increase by 7.5%, Variable OH by 5% and Fixed OH by 3%. You are required to calculate the Slowing- 1 Present PV Ratio, BEP, MOS and Profits. Seles required to earn a Profit of 7,50.000, if the current cost structure continues. 1 Raised PV Ratio and Profits of forthcoming year if the current sales quantity and price were maintained. Nex Selling Price if the current PV Ratio is to be maintained in the forthcoming year. Sales Quantty in the forthcoming year, to yield the same as present profits, if the Sale Price remains 90. ture. erall BEP - Sales Mix Decision dle of the products with the least PVR, in the Overall Sales Mix. 8%, and BEP has increased from 2,160. Variable Costs associated with producing and selling the Vee 900 and with Jay * 1,800. Annual Fixed Production and VEEJAY Ltd makes and sells two products, Vee and Jay. The budgeted Selling Price of Vee is 1,800 and that of Jay is Selling Costs of Veejay Ltd are 88,000. The Company has two production / sales options. Vee and Jay can be sold either in Solution: RTP, N 99 ? Dartiau is preferable, due to - (a) lower BEP, and (b) higher share given for 163 units 54 units (approx) 109 units M 93 1.7 Product Mix, Overall PVR and Sales required to avoid losses The budgeted results of A Ltd were as under, Product Sales in PV Ratio 2,50,000 50% Y 4,00,000 40% Z 6,00,000 30% Fixed Overheads during the year were 5,02,200. The Management is worried about the results. You are required to prepare a statement showing the amount of loss, if any, being incurred at present and recommend a change in the sale value of each product as well as in the total sales value maintaining the same sales-mix, which will eliminate the said loss. Solution: 1. Computation of Loss at present Product Sales ni CVP Analysis and Decision RTP 18 Computation of BEP to recover Fixed Cost, Initial Investment Interest thereon The lovestment for a Project is a 20 Crores. The Selling Price per unit shall be 400 with a Variable Cost of 240 and Fixed Cost of 23,00,000 per annum. 1 the required Rate of Return is 12%, what will be the BEP for a life span of 6 years? 2. the project building period is 2 years with 60% of Capital Invested in the 1st year, what is the Project BEP Production & Sale Volume? with 12% return N 14 1.9 Effect of Change in Costs, Price, etc. A Shoe Manufacturer has a Net Profit of 25 per pair on a Selling Price of 143. He is producing 6,000 pairs per annum which is 60% of the potential capacity. The cost per unit is as under: Direct Materials 35.00 Direct Wages 12.50 Works Overheads (50% fixed) 62.50 administrative Overheads (75% fixed) 6.00 During the current year, the Manufacturer also estimates demand of 6,000 pairs but anticipates that the Fixed Charges to go up oy 10% while the rate of Direct Labour and Direct Materials will increase by 8% and 6% respectively. But he has no option of increasing the Selling Price. Under this situation he obtains an offer to utilize further 20% of capacity. What Minimum Price will you recommend to ensure an overall profit of 3 1,67,300? 2.2 Indiference Point and BEP - Finding out missing figures XY Ltd makes two products X and Y, whose respective Fixed Costs are F1 and F2. You are given that the Unit Con 15 one fifth less than the Unit Contribution of X, that the total of F1 and Fz is 1,50,000, that the BEP of X is 1,800 units (for BEP of X, Fz is not considered) and that 3,000 units is the indifference Point between X and Y.(i.e. X and Y make equal profits at 3,000 unit volume, considering their respective Fixed Costs). There is no inventory build up as whatever is produced is sold. (nu are reauired to find out the values of F1, and F2 and Unit Contributions of X and Y. nactively