Marginal Costing

Aarohi Components sells a single spare part for ₹500. Variable manufacturing cost is ₹280 and variable selling cost ₹20 per unit. Annual fixed cost is ₹12,00,000. Production equals sales, there is no inventory and all rates apply within current capacity. A management report divides operating profit by sales and labels that figure the P/V ratio. Finance wants the contribution-based percentage instead. What is the correct P/V ratio?

Bhavya Plastics forecasts 10,000 units at ₹400, with variable cost ₹250 per unit and fixed annual cost ₹9,00,000. No inventory or capacity step occurs. The board wants the break-even quantity rather than the sales volume that merely covers cash expenses. All fixed cost is charged in operating profit. Which quantity gives exactly zero operating profit under these assumptions?

Chhavi Textiles has revenue of ₹50,00,000 and a constant 30% contribution-to-sales ratio. Fixed costs are ₹9,00,000. Its forecast has no stock movement, abnormal cost or change in sales mix. A trainee reports margin of safety as a percentage of break-even revenue; management instead asks for the percentage of forecast revenue. Which margin of safety percentage should appear in the report?

Dhriti Instruments sells a device at ₹600 with variable cost ₹360. Annual fixed cost is ₹14,40,000, and capacity is 12,000 units without a cost step. The board requests ₹7,20,000 operating profit, before tax. There is no inventory. Sales are in whole units, but the calculated target is an exact integer. Which sales quantity meets the target?

Eshika Medical supplies charges ₹300 per cartridge and incurs ₹180 variable cost. Total fixed annual expense ₹12,00,000 includes ₹3,60,000 depreciation. Every other fixed expense is cash-payable, and customer and supplier cash timing matches sales and costs. Ignore tax, capital expenditure and loan repayment. What is cash break-even quantity, excluding depreciation but not other fixed expenses?

Farah Tools has two quarters with unchanged prices, variable cost rates, fixed costs and no inventory movement. First-quarter revenue ₹24,00,000 earns ₹60,000 profit; second-quarter revenue ₹36,00,000 earns ₹4,20,000. Both are within one relevant range. The controller reconstructs the P/V ratio from the change in profit over the change in revenue. What ratio follows from these records?

Gauri Foods earns a 25% P/V ratio. A quarterly report shows ₹40,00,000 revenue and ₹2,00,000 operating profit. Fixed costs are constant within the relevant range and the company holds no finished stock. A system fault erased the fixed-cost line, but the other two figures are confirmed. What fixed-cost amount can finance reconstruct from the report?

Hina Engineering has unused capacity for a 2,000-unit special order. The offer is ₹350/unit. Special variable cost is ₹260/unit, including all freight. A dedicated fixture costs ₹80,000 only if the order is accepted. Existing fixed cost and ordinary sales remain unchanged; no normal business is displaced. Ignore tax. What incremental operating profit would acceptance produce?

Inaya Bearings faces full ordinary capacity. A complete special order for 1,500 units yields ₹100 contribution per special unit before a ₹30,000 setup fee. It displaces 1,000 ordinary units, each with ₹140 contribution. No overtime, outsourcing or future customer damage is allowed in the comparison. Existing fixed costs are unchanged. What is the net profit change if management takes the order?

Jiya Products makes A and B on its only constrained machine. A contributes ₹180 per unit and uses 3 machine hours; B contributes ₹160 and uses 2 hours. Labour and materials are unrestricted. Demand exists for both and fixed costs do not change with mix. Before allowing for demand limits, which priority maximises contribution from each scarce machine hour?

Kaira Metals needs 4,000 inserts. Making requires ₹70 variable cost per insert and ₹80,000 avoidable annual supervision; all other fixed costs continue. Buying costs ₹95 per insert delivered. Released capacity has no alternative use. Quality and delivery are identical, and tax is ignored. Which option is cheaper, and by how much on relevant costs?

Laya Services considers a job that uses 500 kg of a discontinued material already paid for. Historical cost ₹100/kg; it has no other internal use and would otherwise be sold for ₹60/kg. Replacement price ₹140/kg is irrelevant because the material will not be replaced. The special job prevents resale. What material cost is relevant to accepting it, before the job’s other incremental costs?

Maira Electronics must use a material regularly consumed in confirmed normal production. A special order needs 800 kg from stores. Original cost ₹75/kg, current replacement price ₹90/kg and resale value ₹60/kg. Stores used for the special order must immediately be replaced to preserve normal output. No alternative cheaper purchase exists. What material cost should be charged to the special-order decision?

Nitya Ceramics can run or close for a weak season. Running generates ₹4,00,000 contribution and incurs ₹9,00,000 fixed cost, of which ₹3,00,000 is avoidable by closing. Closure creates ₹50,000 storage and restart costs combined. No alternative use or later demand effect occurs. Unavoidable fixed costs continue. Which option has the better result and by how much?

Oorja Foods can sell a processed batch now for ₹6,00,000 or further-process it. Future premium net receipts after selling expenses are ₹8,40,000. Further processing and a required test cost ₹2,10,000. Joint cost ₹4,00,000 was already incurred and is identical under either choice. No capacity opportunity cost exists. What profit change follows from further processing?

Pari Motors can choose manual production with ₹6,00,000 annual fixed cost and ₹140 variable cost/unit, or automation with ₹12,00,000 fixed and ₹110 variable cost/unit. Both sell the same item at one price, have the same quality and sufficient capacity, and hold no stock. The choices are alternatives, not costs to add. Ignore tax and finance. At what annual quantity are total cost and operating profit equal?

Qaira Kits uses a normal-capacity fixed factory overhead rate of ₹50/unit. Opening stock contains 1,200 units and closing stock 1,800, both carrying the same rate. No under- or over-absorption adjustment or other method difference exists. Selling expense is excluded from stock under both methods. Which profit relationship follows for the period?

Rashi Appliances opens with 1,000 units carrying ₹40 fixed factory overhead each and closes with 1,500 units carrying ₹60 each. Variable costs have no method difference, and current overhead adjustments are correctly charged. FIFO and stable saleable stock values apply. What is absorption profit minus marginal profit, based on the fixed overhead carried into and out of stock?

Saisha Pumps absorbs fixed factory overhead at ₹80/unit using normal capacity. Actual fixed overhead is ₹8,00,000 and output is 9,000 units. No opening stock exists. The company charges all current under-absorption to profit, rather than raising the inventory rate to actual-output allocation. What fixed-overhead adjustment is required before interpreting absorption profit?

Tisha Furnishings earns 40% contribution on A revenue and 20% on B revenue. Planned revenue shares are A 75%, B 25%; these are not unit shares. Fixed expense is ₹7,00,000. Both shares remain constant as revenue changes and there is no inventory or resource constraint. What total revenue is break-even under this revenue-weighted mix?

Urvi Packaging always sells one complete bundle of two A and one B. A contributes ₹100/unit and B ₹150. Annual fixed expense ₹7,00,000 remains unchanged. The bundle proportions are maintained exactly, whole bundles are sold and no capacity step occurs. There is no stock. What number of complete bundles reaches accounting break-even?

Vanya Devices must earn ₹6,00,000 after income tax. Tax is 25% of positive operating profit, with no interest, special adjustments or other income. Contribution is ₹200/unit and annual fixed expense ₹12,00,000. Sales are whole units and capacity is sufficient. What quantity meets the after-tax target, using tax gross-up rather than applying tax to revenue?

Wisha Tools contributes ₹300/unit. Fixed costs are ₹12,00,000 up to 5,000 units but ₹18,00,000 from 5,001 through 8,000 because a full-year workshop lease is triggered. Management wants ₹3,00,000 profit. No other rates change, sales equal production and the target may be achieved without renting. What is the minimum whole-unit quantity that meets the target?

Yamini Filters sells at ₹500 with variable manufacture and freight ₹300/unit. Agents receive 4% of actual sales revenue. Price is cut to ₹450 on every unit, with commission still 4%; other variable costs stay unchanged. Fixed costs do not change. A trainee leaves commission at the old ₹20. What corrected contribution per revised-price unit should finance use?

Zara Metals earns ₹180 ordinary contribution/unit. A special order displaces 500 ordinary units, requires ₹40,000 setup and uses 2,000 special units at ₹250 relevant variable cost each. No other effect or alternative capacity exists and the order must be accepted in full. What minimum price per special unit preserves total profit rather than merely showing positive special contribution?

Anvi Diagnostics forecasts ₹60,00,000 revenue at 30% P/V and fixed expense ₹12,00,000. Price, variable-cost behaviour and sales mix remain constant, with no inventory effect or cost step. The board asks the financial effect of a 10% revenue increase within capacity. Which change in operating profit follows, measured against existing profit rather than against contribution?

Bina Components considers a job needing 600 hours of idle permanent labour. All wages will be paid anyway, no overtime is required and the staff have no other productive use. Materials, equipment and quality costs are assessed separately. Ignore tax. A cost sheet allocates ₹120/hour to this labour. What labour cost is relevant to this accept-or-reject decision on the stated facts?

Ciya Products expects ₹4,00,000 contribution, less ₹5,00,000 unavoidable fixed expense and ₹2,00,000 avoidable fixed expense if operating. Temporary closure removes the avoidable expense but adds ₹1,00,000 storage and restart cost. No alternative use or later revenue effect exists. The plant is loss-making under both choices. What is the better option and financial advantage?

Dina Engineering has already paid ₹2,00,000 for a machine with current book value ₹1,20,000. It can sell the machine now for ₹70,000 or use it for a special job, after which scrap value is nil. No other job can use it. Additional operating costs are separately budgeted. Ignore tax. What equipment-use cost is relevant to taking the job, before those operating expenses?

Ena Foods is comparing equal-revenue plans with different product mixes. A has 50% P/V and B 25%. Both selling prices, cost behaviour and fixed expense remain unchanged, and neither capacity nor inventory differs. Which statement correctly warns management about relying only on equal total revenue when choosing between the plans?