C.T Ltd. manufactures and sells a single product X whose selling price is 100 per unit and the variable cost is 60 per unit. (i) If the Fixed Costs…

CA Intermediate · Cost and Management Accounting · MTP · September 2025
C.T Ltd. manufactures and sells a single product X whose selling price is 100 per unit and the variable cost is 60 per unit. (i) If the Fixed Costs for this year are - 24,00,000 and the annual sales are at 60% margin of safety, CALCULATE the rate of net return on sales, assuming an income tax level of 40% (ii) For the next year, it is proposed to add another product line Y whose selling price would be 150 per unit and the variable cost 100 per unit. The total fixed costs are estimated at 28,00,000. The sales mix of X : Y would be 5:3. COMPUTE the break-even sales in units for both the products.

Suggested Answer and Working Notes:

PART-II Descriptive Questions (70 Marks) 1. (a) (i) Contribution per unit = Selling price - Variable cost = 100 -60 = 40 Break-even Point = 24,00,000 40 = 60,000 units Percentage Margin of Safety = Actual Sales - Break - even Sales Actual Sales Or, 60% = Actual Sales - 60,000 units Actual Sales Actual Sales = 1,50,000 units (₹) Sales Value (1,50,000 units × ₹ 100) 1,50,00,000 Less: Variable Cost (1,50,000 units × ₹ 60) 90,00,000 Contribution 60,00,000 Less: Fixed Cost 24,00,000 Profit 36,00,000 Less: Income Tax @ 40% 14,40,000 Net Return 21,60,000 Rate of Net Return on Sales = 21,60,000 × 100 1,50,00,000 = 14.40% (ii) Products X (₹) Y (₹) Selling Price per unit 100 150 Variable Cost per unit 60 100 Contribution per unit 40 50 Composite contribution will be as follows: Contribution per unit = ( 40 × 5) + ( 50 × 3) 8 8 = 25 + 18.75 = 43.75 Break-even Sale = 64,000 units (₹ 28,00,000) 43.75 Break-even Sales Mix: X (64,000 units × 5/8) = 40,000 units Y (64,000 units × 3/8) = 24,000 units

Topics: Marginal Costing

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