A Ltd. makes plastic buckets. Selling price per bucket is ₹210 and variable cost per bucket is ₹60. Fixed cost of making buckets is ₹1,50,000 for the year. The number of buckets to be sold to get a profit of ₹90000 is:
1600 buckets
Understanding the Problem: Plastic Buckets Profit Calculation
This question asks us to determine the specific number of plastic buckets A Ltd. needs to sell to achieve a desired profit of ₹90,000. We are given the selling price per bucket, the variable cost per bucket, and the total fixed costs for the year.
Data Provided
Let's list the information given in the question:
| Item | Value |
|---|---|
| Selling Price (SP) per bucket | ₹210 |
| Variable Cost (VC) per bucket | ₹60 |
| Total Fixed Costs (FC) | ₹1,50,000 |
| Target Profit | ₹90,000 |
Calculating Contribution Margin per Bucket
The Contribution Margin is the amount each unit sold contributes towards covering fixed costs and generating profit. It's calculated as Selling Price per unit minus Variable Cost per unit.
Using LaTeX notation:
$ \text{Contribution Margin (CM) per bucket} = \text{SP per bucket} - \text{VC per bucket} $Plugging in the values:
$ \text{CM per bucket} = ₹210 - ₹60 $ $ \text{CM per bucket} = ₹150 $So, each bucket sold generates ₹150 to cover fixed costs and contribute to profit.
Determining the Number of Buckets for Target Profit
The formula to calculate the number of units needed to achieve a specific profit is:
$ \text{Number of Units} = \frac{\text{Target Profit} + \text{Total Fixed Costs}}{\text{Contribution Margin per Unit}} $This formula works because the total contribution margin (CM per unit multiplied by the number of units) must cover both the fixed costs and the desired profit.
Step-by-Step Calculation:
- Add Target Profit and Fixed Costs: First, sum the desired profit and the total fixed costs. This gives the total amount that needs to be covered by the contribution margin from sales. $ \text{Required Contribution} = \text{Target Profit} + \text{Total Fixed Costs} $ $ \text{Required Contribution} = ₹90,000 + ₹1,50,000 $ $ \text{Required Contribution} = ₹2,40,000 $
- Divide by Contribution Margin per Bucket: Divide the total required contribution by the contribution margin generated by each bucket. $ \text{Number of Buckets} = \frac{₹2,40,000}{₹150 \text{ per bucket}} $ $ \text{Number of Buckets} = 1600 $
Conclusion
A Ltd. needs to sell 1600 buckets to achieve a profit of ₹90,000, considering the given selling price, variable cost, and fixed costs.
Important Questions from Cost accounting
Which of the following business would most likely use job order costing:
The following are the two statements regarding concept of profit. Indicate the correct code of the statements being correct or incorrect. Statement (I) : Accounting profit is a surplus of total revenue over and above all paid-out costs, including both manufacturing and overhead expenses.
Statement (II) : Economic or pure profit is a residual left after all contractual costs have been met, including the transfer costs of management, insurable risks, depreciation and payments to shareholders sufficient to maintain investment at its current level.
Highest in price first out method of valuation is used:
A Biscuit manufacturing concern employs:
Which of the following items is not included in cost accounting?
