Marginal Costing

Aarna Instruments lost its contribution column during a system migration. Confirmed annual operating profit is ₹4,80,000 and fixed operating costs ₹7,20,000. Its single product earns ₹120 contribution per unit, with unchanged prices and variable rates. There is no inventory or other income. Finance wants to infer actual units sold from these records, rather than divide profit alone by unit contribution. What volume is implied?

Baani Foods sells one product and reports sales ₹48,00,000 and variable costs ₹30,00,000. Its fixed operating expense is ₹9,00,000. All sales occur within the same relevant range, with no stock movement or abnormal charges. Management requests break-even revenue using the actual contribution-to-sales ratio, not the net profit percentage. Which revenue figure is correct?

Charvi Appliances has a 35% P/V ratio, fixed annual expense ₹10,50,000 and forecast revenue ₹42,00,000. No inventory, price change or sales-mix change affects the figures. Finance wants the operating profit as a check on the report. A trainee mistakenly treats the P/V ratio as profit after fixed costs. What profit does the correct contribution statement show?

Dhvani Packaging has accounting fixed expense ₹15,00,000, including ₹4,50,000 non-cash depreciation. The product contributes ₹150/unit. Other fixed expenses are paid in cash, receipts and variable payments match sales, and there is no tax, interest or capital expenditure. The cash break-even report must distinguish accounting loss from cash deficit. At cash break-even, what accounting result is expected?

Ekta Components forecasts ₹50,00,000 sales and break-even sales ₹30,00,000. Fixed expense is constant, product mix is unchanged and inventory is nil. A report shows margin of safety in revenue terms. The board wants the largest percentage drop from forecast sales that would still leave it exactly at break-even, without confusing that percentage with a denominator of break-even sales. Which percentage is correct?

Falguni Devices contributes ₹250 per unit and has fixed annual cost ₹15,00,000. Management needs ₹9,00,000 profit after 25% tax on positive operating profit. No interest or tax adjustment exists, prices and costs stay constant, output equals sales and capacity is sufficient. A trainee adds the after-tax target directly to fixed costs. What target quantity results after the proper gross-up?

Gita Retail Supplies sells a kit for ₹750, with variable cost ₹450 per kit and annual fixed cost ₹12,00,000. The board specifies operating profit equal to 20% of sales, not 20% of contribution or cost. Sales are within a constant-cost range with no inventory. Which revenue meets that ratio target if capacity is sufficient?

Harini Metals currently earns ₹6,00,000 operating profit and needs ₹10,00,000 under a revised sales forecast. P/V remains 25%, fixed cost stays unchanged, no inventory effect arises and spare capacity supports the increase. Management asks for incremental revenue needed, not total target sales. How much extra revenue is necessary to produce the extra ₹4,00,000 profit?

Ila Controls earns ₹4,00,000 profit on ₹40,00,000 sales and ₹7,00,000 on ₹50,00,000 sales in two otherwise identical periods. Selling prices, variable rates, fixed costs and product mix are unchanged, and inventory is nil. Finance uses the difference method to reconstruct contribution ratio and fixed expense. Which fixed-cost amount follows from these records?

Jhanvi Ceramics can make a special 3,000-unit order without displacing normal work. Relevant special variable cost is ₹180/unit. A dedicated test fixture costs ₹60,000 and has no later value. The offered price is ₹230/unit, unchanged existing fixed costs cancel and all output is saleable. Ignore tax. What total incremental profit should appear in the acceptance recommendation?

Kashvi Parts has a special order for 2,000 units, each earning ₹150 contribution before setup. Taking it displaces 800 normal units earning ₹200 each, and setup costs ₹50,000. No overtime or outsourcing is possible and normal selling price is unaffected. Existing fixed costs are unchanged. The complete order must be taken or refused. What net profit change follows if it is taken?

Lavanya Tools has 6,000 scarce machine hours. A contributes ₹100 per unit and needs 2 hours, with demand up to 2,000 units. B contributes ₹180 and needs 3 hours, with demand up to 1,500. Materials and labour are unrestricted, stock is nil and no minimum commitments apply. What maximum total contribution can the hour-priority plan earn, before unchanged fixed costs?

Manvi Industrial Products needs 6,000 inserts. Making costs ₹90 variable cost each and ₹1,20,000 avoidable supervision. Buying identical inserts costs ₹115 each delivered. Remaining fixed costs continue either way. Buying also frees a workshop for a repair job earning ₹1,00,000 net contribution after every extra cost. Ignore tax and assume demand is firm. What profit advantage or disadvantage does buying create?

Naira Repairs uses 1,000 kg of a regular material in a proposed order. Stores historical cost ₹80/kg, current replacement ₹110/kg and possible resale ₹75/kg. The material is essential to confirmed normal work and must be replaced if consumed by the order. No cheaper equivalent or spare stock exists. The order’s other future expenses are separately measured. Which material cost is relevant to the decision?

Ovi Engineering has a one-time contract that needs 400 skilled hours. Normal staff are fully occupied, and those hours would displace another job earning ₹80,000 contribution after all its variable costs. Payroll is paid under either choice and no replacement labour can be hired. Other contract costs are budgeted separately. What labour-related amount is relevant, without charging unchanged wages twice?

Pihu Foods has already incurred ₹5,00,000 joint processing cost. One batch may be sold at split-off for ₹8,00,000, or further processed for ₹2,70,000 and sold for ₹11,00,000 net of selling expenses. The other joint outputs do not change and no scarce capacity is displaced. The further-processing cost is entirely future and decision-specific. What incremental profit does further processing earn?

Ritika Ceramics expects contribution ₹6,00,000 if it operates through a weak season. Fixed cost ₹10,00,000 includes ₹4,00,000 that closure would avoid; the other ₹6,00,000 continues. Closing and restarting costs another ₹80,000, with no alternative use or effect on next season. Ignore tax. Which option is financially better despite the operating loss?

Suhani Packaging chooses between two complete annual production plans. Plan A has fixed cost ₹8,00,000 and variable cost ₹150/unit; plan B has fixed cost ₹14,00,000 and variable cost ₹120. Both have the same selling price, quality and adequate capacity, with output equal to sales. Forecast volume is 18,000. Which plan has the lower total cost at this forecast, and by how much?

Trisha Controls has opening stock of 800 units and closing stock of 500, both carrying ₹70 fixed factory overhead per unit. Stock is fully saleable, variable manufacturing rates do not create other differences and all overhead adjustments are correctly charged. Selling costs are excluded from inventory. What is absorption operating profit minus marginal operating profit for the period?

Uma Devices absorbs fixed factory overhead at ₹60/unit using normal capacity of 10,000 units. Actual output is 9,000 and actual fixed factory expense ₹6,30,000. Its policy charges all under-absorption to current profit and does not recalculate stock cost using actual output. What total fixed-overhead under-absorption must be expensed before comparing absorption and marginal profit?

Vriti Homeware sells A and B with P/V ratios of 50% and 20%. Revenue shares are 40% A and 60% B, maintained at every forecast level. Fixed cost is ₹12,80,000. Management wants ₹6,40,000 profit in a continuous revenue planning model. No stock, scarce resource or fixed-cost step occurs. What total revenue meets the target under the stated revenue-weighted mix?

Yuvika Parts always sells one bundle comprising one X and three Y. X contributes ₹200/unit, Y ₹100. Annual fixed cost is ₹10,00,000. Complete bundles are maintained exactly, there is no stock and capacity is sufficient. A trainee confuses bundles with individual units. How many individual product units are sold at bundle break-even?

Ziya Engineering sells at ₹800 with variable manufacture and delivery ₹500/unit. Commission is 5% of actual revenue, annual fixed cost ₹15,60,000 and forecast sales 8,000 units. All rates stay constant and no stock or abnormal cost arises. Management wants operating profit after commission, not a contribution figure that omits it. What profit should the annual report show?

Ahaana Filters contributes ₹200/unit. Fixed cost is ₹8,00,000 up to 6,000 units and ₹13,00,000 from 6,001 through 9,000 because a new room must be leased in full. Management asks the minimum feasible quantity for ₹5,00,000 profit, with no other cost change or inventory. The lower-range equation suggests 6,500 but exceeds its valid range. What correct quantity meets the target?

Bhairavi Tools is offered a 2,000-unit overtime order. Material costs ₹200/unit, ordinary labour ₹100 but overtime adds a 50% premium, and extra variable overhead ₹70/unit. Dedicated supervision costs ₹1,20,000 for the whole order. Normal work is unchanged and no additional opportunity cost exists. Ignore tax. What minimum selling price per order unit leaves total profit unchanged?

Chaitali Components has 5,000 machine hours. A saves ₹60/unit when made instead of bought and uses 1 hour; B saves ₹100/unit and uses 2 hours. Required quantity is 3,000 of each, supplier can provide every balance and fixed costs do not change. No other constraints exist. What total purchase-cost saving is achieved by the optimal internal production plan?

Devyani Foods can earn ₹7,50,000 by selling 5,000 litres at split-off. Further processing gives 4,500 saleable litres, with extra processing cost ₹1,80,000 and selling cost ₹20 per premium litre. Prior joint cost is sunk; no other difference or scarce-resource cost exists. What premium selling price per litre makes the two alternatives equal, before rounding to quoted paise?

Elina Audio considers a sales increase within existing capacity. Selling price and variable cost per unit are constant, fixed total does not change, mix is unchanged and production equals sales. A manager says a 20% volume increase necessarily creates a 20% profit increase. Which explanation best corrects the claim without inserting an unsupported numerical result?

Fiza Motors can sell an old machine now for ₹1,00,000, or keep it with nil terminal value. A replacement costs ₹5,00,000 and has ₹80,000 resale value after two years. Annual net operating cash saving from replacement is ₹1,70,000 after all extra maintenance. Book value of the old machine is ₹3,00,000. Ignore tax, discounting and working capital. What incremental two-year cash result supports the replacement decision?

Garima Products opens and closes with exactly 1,000 finished units. Opening units carry ₹50 fixed factory overhead each, closing units ₹80 each. Variable cost effects and current overhead adjustments are correctly dealt with, inventory is saleable and selling expense is excluded. A trainee says equal stock quantities prove equal absorption and marginal profit. What difference actually remains because the embedded fixed-overhead rates differ?