Management Accounting II

(Quiz 3)
Set -A

Name. Roll No.

Time allowed: 25 Minutes

Instructions: Each question carries 5 marks. Negative marking of 2 will be done for every wrong
answer.

Q.1 The Pixalator Corporation has 8,000 obsolete units of a product that are carried in inventory at a manufacturing cost
of $160,000. If the units are remachined for $40,000, they could be sold for $72,000. Alternatively, the units could be
sold for scrap for $28,000. If company decides to remachine it, what is the total relevant cost (including opportunity
cost) for that alternative?

(a) $40,000
(b) $68,000
(c) $228,000
(d) $200,000.

Q. 2 The Bata Company manufactures slippers and sells them at Rs. 100 a pair. Currently, Bata is operating 80% of its
capacity and selling 20,000 pairs of slippers. Variable manufacturing cost is Rs.40 a pair, and allocated fixed
manufacturing cost is Rs.25 a pair. Bata has received a one-time-only special order of 10,000 pairs of slippers at Rs.
60 a pair, which is to be accepted or rejected in total. What would the effect on operating income be if the special
order is accepted?

(a) Rs. 100,000 decrease

(b) Rs. 2,00,000 increase
(c) Rs. 4,00,000 decrease
(d) Rs. 50,000 decrease

Q.3 The Tanisque Company manufactures medals for winners of athletic events and others contests. Its manufacturing
plant has the capacity to produce 10,000 medals each month. Current production and sales are 7,500 medals per
month. The company normally charges Rs. 150 per medal. Cost information for the current activity level is as
follows:

Per Unit (Rs) Total (Rs)

Direct materials 35.00 Rs. 2,62,500
Direct manufacturing labour 40.00 3,00,000
Variable costs (for setup materials handling quality control and so on) that vary 10.00 75,000
with number of batches: 150 batches X Rs. 500 per batch
Fixed manufacturing costs 36.67 2,75,000
Fixed marketing costs 23.33 1,75,000
Total costs 145.00 10,87,500

Tanisque has just received a special one-time-only order for 2,500 medals. Accepting the special order would not
affect the companys regular business. Tanisque makes medals for its existing customers in batch sizes of 50 medals.
The special order requires Tanisque to make medals in 25 batches of 100 each. What should be the minimum base
price to accept the order?

(a) Rs 150
(b) Rs 100
(c) Rs 85
(d) Rs80

Q.4 The Sona Steering manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for
20,000 units of part No. 498 is as follows:
 Direct material Rs. 6
Direct manufacturing labour 30
Variable manufacturing overhead 12
Fixed manufacturing overhead allocated 16
Total manufacturing cost per unit 64

The Sundaram Fastners Company has offered to sell 20,000 units of Part No. 498 to Sona Steering for Rs. 55 per
unit. Sona Steering will make the decision to buy the part from Sundaram Fastners if there is an overall savings of at
least Rs. 25,000 for Sona Steering. If Sona Steering accepts Sundaram Fastners offer, Rs. 9 per unit of fixed
overhead allocated would be eliminated. What will be the overall net saving if Sona decides to buy the Part 498:

(a) Rs.1 80,000

(b) Rs. 40,000
(c) Rs. 1,25,000
(d) Rs. 1,40,000

Q.5 Bed & Bath, a retailing company, has two departments, Hardware and Linens. The companys most recent monthly
contribution format income statement follows:

Department
Total Hardware Linens
Sales $ 40,00,000 $ 30,00,000 $ 10,00,000
Variable expenses 13,00,000 9,00,000 4,00,000
Contribution margin 27,00,000 21,00,000 6,00,000
Fixed expenses 22,00,000 14,00,000 8,00,000
Net operating income (loss) $ 5,00,000 $ 7,00,000 $ (2,00,000)

A study indicates that $3,40,000 of the fixed expenses being charged to Linens are allocated costs that will continue
even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 10%
decrease in the sales of the Hardware Department. If the Linens Department is dropped, what will be the effect on the
net operating income of the company as a whole?

(a) Increase by Rs 200,000

(b) Decrease by Rs 1,40,000
(c) Decrease by Rs 3,50, 000
(d) Decrease by Rs 8,10,000

Q. 6 Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin
for one unit of each product is as follows:

Product
A B C
Selling price $ 180 $ 270 $ 240
Variable expenses:
Direct materials 24 72 32
Other variable expenses 102 90 148
Total variable expenses 126 162 180
Contribution margin $ 54 $ 108 $ 60
Contribution margin ratio 30% 40% 25%

The same raw material is used in all three products. Barlow Company has only 5,000 pounds of raw material on hand
and will not be able to obtain any more of it for several weeks due to a strike in its suppliers plant. Management is
 trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $ 8
per pound. The order of preference should be (X> Y indicates that the X is preferred over Y):

(a) A>B>C
(b) B>C>A
(c) B>A>C
(d) A>C>B

Q. 7 Lin Corporation has a single product whose selling price is $120 and whose variable expense is $80 per unit. The
companys fixed expense is $50,000. Companys current margin of safety is 60% of sales. What is the percentage
increase in sales required to increase the current profit by $ 10,000?

(a) 40%
(b) 25%
(c) 8%
(d) 2%

Q. 8 Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a
contribution margin ratio of 30%. The companys fixed expenses are $1,80,000 per year. The company plans to sell
16,000 units this year.

Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit.
What will be companys new margin of safety as a percentage of sales (approximately)?

(a) 6%
(b) 30%
(c) 40%
(d) 50%

Q. 9 A Company can produce two products A and B in its plant. The plant can be run for 48 hours in a week. In one hour
the plant can produce either 20 units of product A or 30 units of product B. The maximum weekly demand for
product A is 500 units and for product B it is 900 units. The selling price is: product A Rs 250; Product B Rs 200.
Variable Cost per unit is: Product A- 200 product B- 160. The Joint fixed cost is Rs. 20,000 per week. How many
units of product A and Product B ought to be produced to maximize profit?

(a) 360, 900

(b) 500, 690
(c) 480, 720
(d) 500, 900

Q. 10 At the production level of 5000 units cost structure of a firm is as follow: variable cost Rs 120; Fixed Cost Rs 80,
Total Cost Rs 200, Selling Price 220 (Assume total fixed cost and variable cost per unit remain constant). The firm has
made an investment of 4.20 lakh and wants to earn 25% profit after tax on this investment. The tax rate is 30%. What
will the required sales:

(a) 4000 units

(b) 4500 units
(c) 5000 units
(d) 5500 units
 Management Accounting II
(Quiz 3)
Set -B

Name. Roll No.

Time allowed: 25 Minutes

Instructions: Each question carries 5 marks. Negative marking of 2 will be done for every wrong
answer.

Q.1 The Pixalator Corporation has 10,000 obsolete units of a product that are carried in inventory at a manufacturing cost
of $2,00,000. If the units are remachined for $50,000, they could be sold for $90,000. Alternatively, the units could be
sold for scrap for $36,000. If company decides to remachine it, what is the total relevant cost (including opportunity
cost) for that alternative?

(a) $86,000
(b) $2,50,000
(c) $2,86,000
(d) $50,000.

Q. 2 The Bata Company manufactures slippers and sells them at Rs. 100 a pair. Currently, Bata is operating 75% of its
capacity and selling 30,000 pairs of slippers. Variable manufacturing cost is Rs.45 a pair, and allocated fixed
manufacturing cost is Rs.25 a pair. Bata has received a one-time-only special order of 20,000 pairs of slippers at Rs.
60 a pair, which is to be accepted or rejected in total. What would the effect on operating income be if the special
order is accepted?

(a) Rs. 6,00,000 decrease

(b) Rs. 2,50,000 decrease
(c) Rs. 3,00,000 increase
(d) Rs. 2,00,000 decrease

Q.3 The Tanisque Company manufactures medals for winners of athletic events and others contests. Its manufacturing
plant has the capacity to produce 12,000 medals each month. Current production and sales are 9,000 medals per
month. The company normally charges Rs. 160 per medal. Cost information for the current activity level is as
follows:

Per Unit (Rs) Total (Rs)

Direct materials 40.00 3,60,000
Direct manufacturing labour 45.00 4,05,000
Variable costs (for setup materials handling quality control and so on) that vary 12.00 1,08,000
with number of batches: 180 batches X Rs. 600 per batch
Fixed manufacturing costs 33.33 3,00,000
Fixed marketing costs 24.67 2,22,000
Total costs 155.00 13,95,000

Tanisque has just received a special one-time-only order for 3,000 medals. Accepting the special order would not
affect the companys regular business. Tanisque makes medals for its existing customers in batch sizes of 50 medals.
The special order requires Tanisque to make medals in 30 batches of 100 each. What should be the minimum base
price to accept the order?

(a) Rs 91
(b) Rs 110
(c) Rs 160
(d) Rs 97

Q.4 The Sona Steering manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for
20,000 units of part No. 498 is as follows:
 Direct material Rs. 8
Direct manufacturing labour 32
Variable manufacturing overhead 15
Fixed manufacturing overhead allocated 20
Total manufacturing cost per unit 75

The Sundaram Fastners Company has offered to sell 20,000 units of Part No. 498 to Sona Steering for Rs. 62 per
unit. Sona Steering will make the decision to buy the part from Sundaram Fastners if there is an overall savings of at
least Rs. 25,000 for Sona Steering. If Sona Steering accepts Sundaram Fastners offer, Rs.10 per unit of fixed
overhead allocated would be eliminated. What will be the overall net saving if Sona decides to buy the Part 498:

(a) Rs.1,40,000
(b) Rs. 2,60,000
(c) Rs. 60,000
(d) Rs. 1,05,000

Q.5 Bed & Bath, a retailing company, has two departments, Hardware and Linens. The companys most recent monthly
contribution format income statement follows:

Department
Total Hardware Linens
Sales $ 55,00,000 $ 40,00,000 $ 15,00,000
Variable expenses 18,00,000 12,00,000 6,00,000
Contribution margin 37,00,000 28,00,000 9,00,000
Fixed expenses 30,00,000 18,00,000 12,00,000
Net operating income (loss) $ 7,00,000 $ 10,00,000 $ (3,00,000)

A study indicates that $5,60,000 of the fixed expenses being charged to Linens are allocated costs that will continue
even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 10%
decrease in the sales of the Hardware Department. If the Linens Department is dropped, what will be the effect on the
net operating income of the company as a whole?

(a) Decrease by Rs 10,80,000

(b) Decrease by Rs 1,00,000
(c) Increase by Rs 3,00, 000
(d) Decrease by Rs 5,40,000

Q. 6 Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin
for one unit of each product is as follows:

Product
A B C
Selling price $ 240 $ 275 $ 300
Variable expenses:
Direct materials 36 90 45
Other variable expenses 144 75 165
Total variable expenses 180 165 210
Contribution margin $ 60 $ 110 $ 90
Contribution margin ratio 25% 40% 30%

The same raw material is used in all three products. Barlow Company has only 5,000 pounds of raw material on hand
and will not be able to obtain any more of it for several weeks due to a strike in its suppliers plant. Management is
 trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $ 9
per pound. The order of preference should be (X> Y indicates that the X is preferred over Y):

(a) B>C>A
(b) C>A>B
(c) C>B>A
(d) A>B>C

Q. 7 Lin Corporation has a single product whose selling price is $150 and whose variable expense is $100 per unit. The
companys fixed expense is $60,000. Companys current margin of safety is 40% of sales. What is the percentage
increase in sales required to increase the current profit by $ 15,000?

(a) 25%
(b) 75%
(c) 60%
(d) 15%

Q. 8 Lindon Company is the exclusive distributor for an automotive product that sells for $50 per unit and has a
contribution margin ratio of 30%. The companys fixed expenses are $1,80,000 per year. The company plans to sell
18,000 units this year.

Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $5 per unit.
What will be companys new margin of safety as a percentage of sales (approximately)?

(a) 50%
(b) 38%
(c) 20%
(d) 40%

Q. 9 A Company can produce two products A and B in its plant. The plant can be run for 48 hours in a week. In one hour
the plant can produce either 30 units of product A or 25 units of product B. The maximum weekly demand for
product A is 600 units and for product B it is 1000 units. The selling price is: product A Rs 300; Product B Rs 250.
Variable Cost per unit is: Product A- 260 product B- 200. The Joint fixed cost is Rs. 20,000 per week. How many
units of product A and Product B ought to be produced to maximize profit?

(a) 600, 1000

(b) 540, 750
(c) 600, 700
(d) 240, 1000

Q. 10 At the production level of 5000 units cost structure of a firm is as follow: variable cost Rs 175; Fixed Cost Rs 90,
Total Cost Rs 265, Selling Price 300 (Assume total fixed cost and variable cost per unit remain constant). The firm has
made an investment of 4.50 lakh and wants to earn 30% profit after tax on this investment. The tax rate is 40%. What
will the required sales:

(a) 4600 units

(b) 5000 units
(c) 5400 units
(d) 4200 units
 Management Accounting II
(Quiz 3)
Set -C

Name. Roll No.

Time allowed: 25 Minutes

Instructions: Each question carries 5 marks. Negative marking of 2 will be done for every wrong
answer.

Q.1 The Pixalator Corporation has 8,000 obsolete units of a product that are carried in inventory at a manufacturing cost
of $160,000. If the units are remachined for $48,000, they could be sold for $80,000. Alternatively, the units could be
sold for scrap for $30,000. If company decides to remachine it, what is the total relevant cost (including opportunity
cost) for that alternative?

(a) $2,38,000
(b) $48,000
(c) $78,000
(d) $2,08,000.

Q. 2 The Bata Company manufactures slippers and sells them at Rs. 120 a pair. Currently, Bata is operating 80% of its
capacity and selling 20,000 pairs of slippers. Variable manufacturing cost is Rs.50 a pair, and allocated fixed
manufacturing cost is Rs.30 a pair. Bata has received a one-time-only special order of 10,000 pairs of slippers at Rs.
70 a pair, which is to be accepted or rejected in total. What would the effect on operating income be if the special
order is accepted?

(a) Rs. 2,00,000 increase

(b) Rs. 1,00,000 decrease
(c) Rs. 1,50,000 decrease
(d) Rs. 3,00,000 decrease

Q.3 The Tanisque Company manufactures medals for winners of athletic events and others contests. Its manufacturing
plant has the capacity to produce 10,000 medals each month. Current production and sales are 7,500 medals per
month. The company normally charges Rs. 120 per medal. Cost information for the current activity level is as
follows:

Per Unit (Rs) Total (Rs)

Direct materials 28.00 2,10,000
Direct manufacturing labour 32.00 2,40,000
Variable costs (for setup materials handling quality control and so on) that vary 10.00 75,000
with number of batches: 150 batches X Rs. 500 per batch
Fixed manufacturing costs 26.67 2,00,000
Fixed marketing costs 15.33 1,15,000
Total costs 112.00 8,40,000

Tanisque has just received a special one-time-only order for 2,500 medals. Accepting the special order would not
affect the companys regular business. Tanisque makes medals for its existing customers in batch sizes of 50 medals.
The special order requires Tanisque to make medals in 20 batches of 125 each. What should be the minimum base
price to accept the order?

(a) Rs 80
(b) Rs 70
(c) Rs 64
(d) Rs 120

Q.4 The Sona Steering manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for
20,000 units of part No. 498 is as follows:
 Direct material Rs. 12
Direct manufacturing labour 40
Variable manufacturing overhead 20
Fixed manufacturing overhead allocated 25
Total manufacturing cost per unit 97

The Sundaram Fastners Company has offered to sell 20,000 units of Part No. 498 to Sona Steering for Rs. 80 per
unit. Sona Steering will make the decision to buy the part from Sundaram Fastners if there is an overall savings of at
least Rs. 25,000 for Sona Steering. If Sona Steering accepts Sundaram Fastners offer, Rs.13 per unit of fixed
overhead allocated would be eliminated. What will be the overall net saving if Sona decides to buy the Part 498:

(a) Rs.3,40,000
(b) Rs. 85,000
(c) Rs. 1,60,000
(d) Rs. 1,00,000

Q.5 Bed & Bath, a retailing company, has two departments, Hardware and Linens. The companys most recent monthly
contribution format income statement follows:

Department
Total Hardware Linens
Sales $ 42,00,000 $ 30,00,000 $ 12,00,000
Variable expenses 13,80,000 9,00,000 4,80,000
Contribution margin 28,20,000 21,00,000 7,20,000
Fixed expenses 24,00,000 14,00,000 10,00,000
Net operating income (loss) $ 4,20,000 $ 7,00,000 $ (2,80,000)

A study indicates that $ 4,00,000 of the fixed expenses being charged to Linens are allocated costs that will continue
even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 10%
decrease in the sales of the Hardware Department. If the Linens Department is dropped, what will be the effect on
the net operating income of the company as a whole?

(a) Decrease by Rs 3,30,000

(b) Increase by Rs 2,80,000
(c) Decrease by Rs 8,10,000
(d) Decrease by Rs 20,000

Q. 6 Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution
margin for one unit of each product is as follows:

Product
A B C
Selling price $ 220 $ 320 $ 210
Variable expenses:
Direct materials 40 64 48
Other variable expenses 125 160 78
Total variable expenses 165 224 126
Contribution margin $ 55 $ 96 $ 84
Contribution margin ratio 25% 30% 40%

The same raw material is used in all three products. Barlow Company has only 5,000 pounds of raw material on
hand and will not be able to obtain any more of it for several weeks due to a strike in its suppliers plant.
 Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The
material costs $ 8 per pound. The order of preference should be (X> Y indicates that the X is preferred over Y):

(a) A>B>C
(b) C>A>B
(c) A>C>B
(d) C>B>A

Q. 7 Lin Corporation has a single product whose selling price is $160 and whose variable expense is $125 per unit. The
companys fixed expense is $70,000. Companys current margin of safety is 60% of sales. What is the percentage
increase in sales required to increase the current profit by $ 21,000?

(a) 52%
(b) 12%
(c) 40%
(d) 30%

Q. 8 Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a
contribution margin ratio of 40%. The companys fixed expenses are $2,00,000 per year. The company plans to sell
18,000 units this year.

Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit.
What will be companys new margin of safety as a percentage of sales (approximately)?

(a) 30%
(b) 44%
(c) 50%
(d) 31%

Q. 9 A Company can produce two products A and B in its plant. The plant can be run for 48 hours in a week. In one hour
the plant can produce either 25 units of product A or 25 units of product B. The maximum weekly demand for
product A is 800 units and for product B it is 750 units. The selling price is: product A Rs 250; Product B Rs 200.
Variable Cost per unit is: Product A- 200 product B- 160. The Joint fixed cost is Rs. 20,000 per week. How many
units of product A and Product B ought to be produced to maximize profit?

(a) 600, 600

(b) 800, 400
(c) 450, 750
(d) 800, 750

Q. 10 At the production level of 8000 units cost structure of a firm is as follow: variable cost Rs 120; Fixed Cost Rs 60,
Total Cost Rs 180, Selling Price 200 (Assume total fixed cost and variable cost per unit remain constant). The firm has
made an investment of 5.20 lakh and wants to earn 30% profit after tax on this investment. The tax rate is 40%. What
will the required sales:

(a) 9250 units

(b) 8000 units
(c) 6750 units
(d) 6500 units
 Management Accounting II
(Quiz 3)
Set -D

Name. Roll No.

Time allowed: 25 Minutes

Instructions: Each question carries 5 marks. Negative marking of 2 will be done for every wrong
answer.

Q.1 The Pixalator Corporation has 10,000 obsolete units of a product that are carried in inventory at a manufacturing cost
of $2,00,000. If the units are remachined for $70,000, they could be sold for $1,00,000. Alternatively, the units could
be sold for scrap for $27,000. If company decides to remachine it, what is the total relevant cost (including
opportunity cost) for that alternative?

(a) $2,97,000
(b) $70,000
(c) $2,70,000
(d) $97,000.

Q. 2 The Bata Company manufactures slippers and sells them at Rs. 110 a pair. Currently, Bata is operating 75% of its
capacity and selling 30,000 pairs of slippers. Variable manufacturing cost is Rs.50 a pair, and allocated fixed
manufacturing cost is Rs.25 a pair. Bata has received a one-time-only special order of 20,000 pairs of slippers at Rs.
70 a pair, which is to be accepted or rejected in total. What would the effect on operating income be if the special
order is accepted?

(a) Rs. 4,00,000 increase

(b) Rs. 1,00,000 decrease
(c) Rs. 4,50,000 decrease
(d) Rs. 2,00,000 decrease

Q.3 The Tanisque Company manufactures medals for winners of athletic events and others contests. Its manufacturing
plant has the capacity to produce 12,000 medals each month. Current production and sales are 9,000 medals per
month. The company normally charges Rs. 135 per medal. Cost information for the current activity level is as
follows:

Per Unit (Rs) Total (Rs)

Direct materials 38.00 3,42,000
Direct manufacturing labour 40.00 3,60,000
Variable costs (for setup materials handling quality control and so on) that vary 12.00 1,08,000
with number of batches: 180 batches X Rs. 600 per batch
Fixed manufacturing costs 23.33 2,10,000
Fixed marketing costs 15.67 1,41,000
Total costs 129.00 11,61,000

Tanisque has just received a special one-time-only order for 3,000 medals. Accepting the special order would not
affect the companys regular business. Tanisque makes medals for its existing customers in batch sizes of 50 medals.
The special order requires Tanisque to make medals in 40 batches of 75 each. What should be the minimum base
price to accept the order?

(a) Rs 90
(b) Rs 86
(c) Rs 135
(d) Rs 95

Q.4 The Sona Steering manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for
20,000 units of part No. 498 is as follows:
 Direct material Rs. 4
Direct manufacturing labour 24
Variable manufacturing overhead 10
Fixed manufacturing overhead allocated 12
Total manufacturing cost per unit 50

The Sundaram Fastners Company has offered to sell 20,000 units of Part No. 498 to Sona Steering for Rs. 40 per
unit. Sona Steering will make the decision to buy the part from Sundaram Fastners if there is an overall savings of at
least Rs. 25,000 for Sona Steering. If Sona Steering accepts Sundaram Fastners offer, Rs.6 per unit of fixed
overhead allocated would be eliminated. What will be the overall net saving if Sona decides to buy the Part 498:

(a) Rs.80,000
(b) Rs. 2,00,000
(c) Rs. 40,000
(d) Rs. 65,000

Q.5 Bed & Bath, a retailing company, has two departments, Hardware and Linens. The companys most recent monthly
contribution format income statement follows:

Department
Total Hardware Linens
Sales $ 52,00,000 $ 40,00,000 $ 12,00,000
Variable expenses 16,80,000 12,00,000 4,80,000
Contribution margin 35,20,000 28,00,000 7,20,000
Fixed expenses 28,00,000 18,00,000 10,00,000
Net operating income (loss) $ 7,20,000 $ 10,00,000 $ (2,80,000)

A study indicates that $4,20,000 of the fixed expenses being charged to Linens are allocated costs that will continue
even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 10%
decrease in the sales of the Hardware Department. If the Linens Department is dropped, what will be the effect on the
net operating income of the company as a whole?

(a) Decrease by Rs 1,20,000

(b) Decrease by Rs 10,80,000
(c) Decrease by Rs 4,20, 000
(d) Increase by Rs 2,80,000

Q. 6 Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin
for one unit of each product is as follows:

Product
A B C
Selling price $ 210 $ 720 $ 320
Variable expenses:
Direct materials 54 108 72
Other variable expenses 72 432 152
Total variable expenses 126 540 224
Contribution margin $ 84 $ 180 $ 96
Contribution margin ratio 40% 25% 30%

The same raw material is used in all three products. Barlow Company has only 5,000 pounds of raw material on hand
and will not be able to obtain any more of it for several weeks due to a strike in its suppliers plant. Management is
 trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $ 9
per pound. The order of preference should be (X> Y indicates that the X is preferred over Y):

(a) A>C>B
(b) A>B>C
(c) B>A>C
(d) B>C>A

Q. 7 Lin Corporation has a single product whose selling price is $150 and whose variable expense is $105 per unit. The
companys fixed expense is $1,35,000. Companys current margin of safety is 40% of sales. What is the percentage
increase in sales required to increase the current profit by $ 22,500?

(a) 10%
(b) 60%
(c) 70%
(d) 16.6%

Q. 8 Lindon Company is the exclusive distributor for an automotive product that sells for $50 per unit and has a
contribution margin ratio of 40%. The companys fixed expenses are $2,00,000 per year. The company plans to sell
14,500 units this year.

Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $5 per unit.
What will be companys new margin of safety as a percentage of sales (approximately)?

(a) 50%
(b) 45%
(c) 30%
(d) 38%

Q. 9 A Company can produce two products A and B in its plant. The plant can be run for 48 hours in a week. In one hour
the plant can produce either 40 units of product A or 30 units of product B. The maximum weekly demand for
product A is 1200 units and for product B it is 900 units. The selling price is: product A Rs 300; Product B Rs 250.
Variable Cost per unit is: Product A- 260 product B- 200. The Joint fixed cost is Rs. 20,000 per week. How many
units of product A and Product B ought to be produced to maximize profit?

(a) 1200, 540

(b) 1200, 900
(c) 720, 900
(d) 960, 720

Q. 10 At the production level of 8000 units cost structure of a firm is as follow: variable cost Rs 100; Fixed Cost Rs 53,
Total Cost Rs 153, Selling Price 170 (Assume total fixed cost and variable cost per unit remain constant). The firm has
made an investment of 4.20 lakh and wants to earn 25% profit after tax on this investment. The tax rate is 30%. What
will the required sales:

(a) 8000 units

(b) 8200 units
(c) 7500 units
(d) 7800 units