CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)
Verma Pens Ltd sells at ₹40 per unit with variable cost of ₹24 per unit and fixed costs of ₹2,40,000. How many units must it sell to earn a target profit of ₹80,000?
The firm must sell 20,000 units. Contribution per unit is ₹16, and the contribution needed to cover fixed costs of ₹2,40,000 plus the target profit of ₹80,000 is ₹3,20,000, which divided by ₹16 equals 20,000 units.
- A15,000 units
- B20,000 unitsCorrect
- C10,000 units
- D5,000 units
Explanation
Contribution per unit = 40 - 24 = ₹16. Required units = (2,40,000 + 80,000) / 16 = 3,20,000 / 16 = 20,000 units. Check: 20,000 x 16 = 3,20,000, less fixed costs 2,40,000 = 80,000 profit. Option 15,000 is the break-even point and gives no profit.
Did you get it right without looking?
One question tells you little. A timed set on Marginal Costing (Management Accounting) shows your real accuracy, how long you take and where you lose marks.
More Marginal Costing (Management Accounting) questions
- A firm's marginal costing profit is Rs 3,00,000 and absorption costing profit is Rs 3,40,000, with a fixed overhead rate of Rs 20 per unit a…
- Sharma Components Ltd produced 12,000 units and sold 10,000 units in a year. There was no opening stock. Variable cost is Rs 40 per unit and…
- On a conventional break-even chart, where sales revenue and total cost lines are plotted against output, what does the vertical gap between …
- Iyer Components sells 20,000 units at ₹100 per unit; variable cost is ₹60 per unit and fixed cost is ₹5,00,000. Management plans to cut the …
- Sagar Ltd has a P/V ratio of 40% and fixed costs of Rs 2,40,000. Its margin of safety is 25% of actual sales. What is the profit?
- Gupta Traders has a margin of safety of ₹2,00,000, which is 25% of its actual sales. Its P/V ratio is 40%. What is its profit?