SREERAM COACHING POINT
COST Management Test Questions & Suggested Solutions by L. Muralidharan, FCA., Grad. CWA.,
COST MANAGEMENT - TEST QUESTIONS & SOLUTIONS
Question: 1 Bharata Ltd is considering proposals for design changes in one of a range of soft toys. The proposals are as follows: (a) Eliminate some of the decorative stitching from the toy. (b) Use plastic eyes instead of glass eyes in the toys (two eyes per toy). (c) Change the filling material used. It is proposed that scrap fabric left over from the body manufacture be used instead of the synthetic material which is currently used. The design change proposals have been considered by the management team and the following information has been gathered: (a) Plastic eyes
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Question : 3 The Chakrapani Ltd 's Cost behaviour is as follows: Production range in units 0- 20000 20001 - 65000 65001 - 90000 90001 - 100000 Fixed cost Rs. 160000 Rs. 190000 Rs. 210000 Rs. 250000
At an activity of 70000 units per year, variable costs total 280000.Full capacity is 100000 units per year. Required: (1) Production is now set at 50000 units per year with a sales price of Rs.7.50 per unit. What is the minimum number of additional units needed to be sold in an unrelated market at Rs.5.50 per unit to show a net profit of Rs.3000 per year? (2) Production is now set at 60000 units per year. By how much may sales promotion costs be increased to bring production up to 80000 units and still earn a net profit of 5% of total sales if the selling price is held at Rs.7.50? (3) If net profit is currently Rs.10000 with fixed costs at Rs.160000 and a 2% increase in price will leave units sold unchanged but increase profits by Rs.5000.What is the present volume in units? Question: 4 The manager of a business has received enquiries about printing three different types of advertising leaflet. Information concerning these three leaflets is shown below: A Selling prices per 1000 leaf lets Estimated printing costs: Variable per 1000 leaflets Specific fixed costs per month 40 2,400 70 4,000 130 9,500 100 B 220 C 450
In addition to specific fixed costs a further Rs. 4,000/- per month would be incurred in renting special premises if any or all of the
QUESTION 4: Kai decides to add color and keep his price the same. This will increase variable costs by $0.40 per issue. What will be the new unit volume (copies per issue) required to maintain $500 profits and cover the increased fixed and variable costs?
Variable and fixed costs per unit (or per 100 brochures) at the current monthly production level of 150,000 brochures can be determined from the data in case Exhibit 1, as follows:
1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.
Martinez Company’s relevant range of Production is 7,500 to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows:
The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the
Assume that next year management wants the company to earn a minimum profit of $162,000. How many units be sold to meet this target profit figure? [3 points]
In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.
1. The local Mastermind store sells innovative educational toys. Part of their service is giving advice to customers about the best toys for a particular age group, which requires having more customer service representatives in the store. During the month long Christmas buying season, it makes half of its $500,000 yearly sales. Its contribution margin on average is 40% and its fixed costs for the year are about $150,000. The owner believes that she could make even higher sales, if she had more customer service representatives on the floor during the peak season. She plans on hiring four more people for 200 hours each at $20 per hour. How much additional revenue does she have earn to the nearest dollar
Question 12 Refer to the data in Question 11. The profit maximizing level of output is (a) 2 units (b) 3 units (c) 4 units (d) 5 units
If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.
QUESTION # 1: A retailer has yearly sales of $650,000. Inventory on January 1 is $260,000 (at cost). During the year, $500,000 of merchandise (at cost) is purchased. The ending inventory is $275,000 (at cost). Operating costs are $90,000. a. Calculate the cost of goods sold b. Calculate the net profit
Webmasters.com has developed a powerful new server that would be used for corporations’ Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC0 = 10%(Sales1). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company’s
| A representative firm with long-run total cost given by TC = 20 + 20q + 5q2 operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,400 40P and QS = 400 + 20P. If it continues to operate in the long run, its profit-maximizing level of output is:Answer
The cost to Swank Company of manufacturing 15,000 units of a particular part is $135,000, of which $60,000 is fixed and $75,000 is variable. The company can buy the part from an outside supplier for $6 per unit. Fixed costs will remain the same regardless of Swank’s decision. Should the company buy the part or continue to manufacture it? Prepare a comparative schedule in the format illustrated in Exhibit 21-6.
3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?