Price/output and key factor decisions You work as a trainee for a small management consultancy which has been asked to advise a company, Rane Limited, which manufactures and sells a ‘single product. Rane is currently operating at full capacity producing and selling 25 000 units of its product each year. The cost and selling price structure for this level of activity is as follows: At […]

A business in entertainment, Extravaganza, starts a facility where a single ticket is charged at INR 30. The breakup cost per person is given in . The fixed expenses of the Extravaganza total INR 8,000. Calculate the breakeven price for a single ticket that the business must sell Table 5.1 Break-up cost of one ticket Price per ticket INR 30 Less: Variable expenses Dinner INR […]

Deleting a segment The original budget for the K department of Hilton Ltd for the forthcoming year was as follows: Budgeted sales and production — 30 000 units Per Total unit of for output 30 000 units (£) (£000) Sales revenue 10.0 300 Manufacturing cost Material A (1 litre per unit) 2.0 60 Material B (1 kg per unit) 1.5 45 Production labour 2.0 60 […]

A given company has selling price per unit of INR 18 and fixed cost as INR 8 while variable cost of manufacturing one unit comes out to be INR 6. The company gets a special order for an NGO at a reduced rice of INR 11 per unit. Should the company go for it? Selling price INR 18 Less: Fixed costs INR 8 Variable costs […]

The fixed overheads for Euro are £24 000 000 per annum,- and monthly production varies from 400 000 to 1 000 000 hours. The monthly overhead rate for fixed overhead will therefore fluctuate as follows: Monthly overhead £2 000 000 £2 000 000 Monthly production 400 000 hours 1 000 000 hours Monthly overhead rate £5 per hour £2 per hour Overhead expenditure that is […]

Mr X offers to buy from National Hardware Limited 5,000 hardware components for INR 40. The normal sale price of the product is INR 60 per unit. The company manufactures 75,000 units and its full capacity is 1,00,000 units per annum. The standard cost data is provided in . Determine if the company should sell the product to that customer or not. The company is […]

The Auckland Company is launching a new product. Sales volume will be dependent on the selling price and customer acceptance but because the product differs substantially from other products within the same product category it has not been possible to obtain any meaningful estimates of price/demand relationships. The best estimate is that demand is likely to range between 100 000 and 200 000 units provided […]

The Darwin Company has recently adopted customer profitability analysis. It has undertaken a customer profitability review for the past 12 months. Details of the activities and the cost driver rates relating to those expenses that can be attributed to customers are as follows: Activity Cost driver rate Sales order processing £300 per sales order Sales visits £200 per sales visit Normal delivery costs £1 per […]

AB p.l.c. makes two products, Alpha and Beta. The company made a £500 000 profit last year and proposes an identical plan for the coming year. The relevant data for last year are summarized in Table 1. Table 1: Actuals for last year Product Product Alpha Beta Actual production and sales (units) 20000 40000 Total costs per unit £20 £40 Selling prices per unit (25% […]

Z Limited manufactures three products, the selling price and cost details of which are given below: Product Product Product X Y Z (£) (£) (£) Selling price per unit 75 95 95 Costs per unit: Direct materials 10 5 15 (£5 /kg) Direct labour 16 24 20 (£4/hour) Variable overhead 8 12 10 Fixed overhead 24 36 30 In a period when direct materials are […]