Kaloo Ltd. manufactures three products X, Y and Z. The unit selling price of these products are 50, 30 and 20 respectively. The corresponding Variable Cost to Sales Ratio is 20%, 30% and 50%. The total fixed costs are 59,83,000. Required: (i) Calculate the Overall P/V Ratio if the proportion (Quantitywise) in which these products are manufactured and sold are 20%, 30% and 50% respectively. (ii) Calculate Overall Contribution per unit if the proportion (value-wise) in which these products are manufactured and sold are 20%, 30% and 50% respectively.
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Answer:
Step-by-step explanation:
(i) kalooLtd. manufactures three products X, Y and Z. The unit selling price of these products are ` 50,` 30 and ` 20 respectively. The corresponding Variable Cost to Sales Ratio is 20%, 30% and 50%. The Total Fixed Costs are ` 119,66,000.Sales Quantity Mix Ratio of products X, Y and Z is 20%, 30% and 50% respectively. Calculate Overall P/V Ratio, Overall Break Even Quantity and Break Even Value of Product X.
(ii) LOVE Ltd sells two products, X and Y. The Sales Value mix is ` 2 of X and ` 3 of Y. The P/V Ratio is 80% for X and 20% for Y. Fixed Costs are ` 12,32,000. Compute the individual break-even point of Product X.
(iii) Installed Capacity 1,00,000 units, Normal Capacity 80%,Opening Stock 10,000 units, Units Produced 80% of Normal Capacity, Fixed Production Overheads ` 24,00,000, Variable Manufacturing Cost per unit for valuation of stock ` 80 (including Variable Production Overheads ` 8 ).Profit under Absorption Costing ` 21,50,000.Profit under Marginal Costing ` 20,00,000.Calculate the units so
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Given:
To Find:
(i) Overall P/V Ratio
(ii) Overall Contribution per unit
Solution:
(i) Overall P/V Ratio:
The overall P/V ratio is calculated as the weighted average of the P/V ratios of individual products, where the weights are the proportion in which the products are sold.
P/V Ratio = (Contribution / Sales) * 100
Let's calculate the P/V ratio for each product first:
For product X:
Contribution (per unit) = Selling Price - Variable Cost per unit
Contribution (per unit) = 50 - (20% of 50) = 50 - 10 = 40
P/V Ratio = (40 / 50) * 100 = 80%
For product Y:
Contribution (per unit) = Selling Price - Variable Cost per unit
Contribution (per unit) = 30 - (30% of 30) = 30 - 9 = 21
P/V Ratio = (21 / 30) * 100 = 70%
For product Z:
Contribution (per unit) = Selling Price - Variable Cost per unit
Contribution (per unit) = 20 - (50% of 20) = 20 - 10 = 10
P/V Ratio = (10 / 20) * 100 = 50%
Now, calculate the overall P/V ratio using the proportion (quantity-wise) in which products are sold:
Overall P/V Ratio = (20% of 80%) + (30% of 70%) + (50% of 50%)
Overall P/V Ratio = 0.2 * 80 + 0.3 * 70 + 0.5 * 50
Overall P/V Ratio = 16 + 21 + 25
Overall P/V Ratio = 62%
(ii) Overall Contribution per unit:
The overall contribution per unit is calculated as the weighted average of the contribution per unit of individual products, where the weights are the proportion (value-wise) in which the products are sold.
Let's calculate the contribution per unit for each product first:
For product X:
Contribution (per unit) = Selling Price - Variable Cost per unit
Contribution (per unit) = 50 - (20% of 50) = 50 - 10 = 40
For product Y:
Contribution (per unit) = Selling Price - Variable Cost per unit
Contribution (per unit) = 30 - (30% of 30) = 30 - 9 = 21
For product Z:
Contribution (per unit) = Selling Price - Variable Cost per unit
Contribution (per unit) = 20 - (50% of 20) = 20 - 10 = 10
Now, calculate the overall contribution per unit using the proportion (value-wise) in which products are sold:
Overall Contribution per unit = (20% of 40) + (30% of 21) + (50% of 10)
Overall Contribution per unit = 0.2 * 40 + 0.3 * 21 + 0.5 * 10
Overall Contribution per unit = 8 + 6.3 + 5
Overall Contribution per unit = 19.3
Therefore,
(i) Overall P/V Ratio = 62%
(ii) Overall Contribution per unit = 19.3
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