MGT 705 ADVANCED COST & MANAGEMENT Assignment Discussion

[Muhammad Amin Ahmad]

Due Date: 12th December, 2013

Mr. Ahmad is manufacturing different plastic sanitary fittings products including bathroom accessories in his factory. One of the factory products, “Ocean bathroom Set”,sells for Rs. 1,800 per unit. Cost of raw material used Rs. 400 per unit, cost of casting Rs. 100 per unit, cost of milling Rs. 100 per unit, cost of grinding Rs. 300 per unit, cost of polishing Rs. 200 per unit, Cost of packaging Rs. 160 per unit, salaries of worker Rs. 1,000,000, rent of factory Rs. 1,400,000 and other fixed cost are associated with the product Rs. 300,000.

Required:

1. Compute the factory’s Break Even Point in number of “Ocean Bathrooms”and in total sales Set amount for the month.
Marks: 2.5+2.5 = 05
2. If the variable expenses per “Ocean Bathroom increase as a percentage Sets”of the selling price will it result in a higher or a lower break-even point? Why? (Assume that fixed expenses remain unchanged.)
Marks: 2+3 = 05
3. At present, the factory is selling 8,000 “Ocean Bathroom per month.The Sets”sales manager is convinced that a 10% reduction in the selling price will result in a 25 % increase in the number of “Ocean Bathroom sold each on the Sets”.Find the present and proposed net operating income for the month. Is this change favorable for the factory? Explain the fact with working.
Marks: 5+5+5 = 15