ADVANCED COST & MANAGEMENT ACCOUNTING (MGT705)
ASSIGNMENT NO.1
Due date: 9th June, 2015 Total marks: 30
Learning objectives:
1. To learn about variable and fixed cost.
2. To know the calculations of break-even point per unit and in amount.
3. To analyze the impact of change in variable cost on break-even point.
4. To analyze the impact of reduction in sales price & increase in sales unit on operating profit.
5. To know the calculations of required sales unit for specific target profit.
Question:
ABC Restaurant sells fast food products. One of the restaurants products, Spicy chicken burger, sells for Rs. 270 per unit. Cost of bread used Rs. 60 per spicy chicken burger, cost of ketchup used Rs. 15 per spicy chicken burger, cost of vegetables used Rs. 15 per spicy chicken burger, cost of eggs used Rs. 45 per spicy chicken burger, cost of spices used Rs. 30 per spicy chicken burger, Cost of mayonnaise used Rs. 24 per spicy chicken burger, salaries of worker Rs. 150,000, rent of restaurant Rs. 210,000 and other fixed cost are associated with the product Rs. 45,000.
Required:
1. Compute the restaurant’s Break Even Point in number of spicy chicken spicy chicken burgers and in total sales amount for the month. Marks:2.5+2.5 = 05
2. If the variable expenses per spicy chicken spicy chicken burger increase as a percentage of the selling price will it result in a higher or a lower break-even point? Why? (Assume that fixed expenses remain unchanged.) Marks:2.0+3.0 = 05
3. At present, the restaurant is selling 8,000 spicy chicken burgers per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25 % increase in the number of spicy chicken burgers sold each month. Find the present and proposed net operating income for the month. Is this change favorable for the restaurant? Explain the fact with working. Marks: Marks: 5+5+5 = 15
4. How many spicy chicken burgers would have to be sold at the new selling price (calculated above) to yield a minimum net operating income of Rs. 216,000 per month? Marks: 05
ASSIGNMENT NO.1
Due date: 9th June, 2015 Total marks: 30
Learning objectives:
1. To learn about variable and fixed cost.
2. To know the calculations of break-even point per unit and in amount.
3. To analyze the impact of change in variable cost on break-even point.
4. To analyze the impact of reduction in sales price & increase in sales unit on operating profit.
5. To know the calculations of required sales unit for specific target profit.
Question:
ABC Restaurant sells fast food products. One of the restaurants products, Spicy chicken burger, sells for Rs. 270 per unit. Cost of bread used Rs. 60 per spicy chicken burger, cost of ketchup used Rs. 15 per spicy chicken burger, cost of vegetables used Rs. 15 per spicy chicken burger, cost of eggs used Rs. 45 per spicy chicken burger, cost of spices used Rs. 30 per spicy chicken burger, Cost of mayonnaise used Rs. 24 per spicy chicken burger, salaries of worker Rs. 150,000, rent of restaurant Rs. 210,000 and other fixed cost are associated with the product Rs. 45,000.
Required:
1. Compute the restaurant’s Break Even Point in number of spicy chicken spicy chicken burgers and in total sales amount for the month. Marks:2.5+2.5 = 05
2. If the variable expenses per spicy chicken spicy chicken burger increase as a percentage of the selling price will it result in a higher or a lower break-even point? Why? (Assume that fixed expenses remain unchanged.) Marks:2.0+3.0 = 05
3. At present, the restaurant is selling 8,000 spicy chicken burgers per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25 % increase in the number of spicy chicken burgers sold each month. Find the present and proposed net operating income for the month. Is this change favorable for the restaurant? Explain the fact with working. Marks: Marks: 5+5+5 = 15
4. How many spicy chicken burgers would have to be sold at the new selling price (calculated above) to yield a minimum net operating income of Rs. 216,000 per month? Marks: 05
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