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1.Ê A company has developed a new product spending Rs 200 lakh in research and development.
Company will spend Rs 500 lakh on plant, equipments etc to start the production. The product
has an expected life of 10 years and company expects to sell 25 lakh units every year. At this
level of production volume; the estimated per unit cost will be as follows: raw material- Rs
12.00, direct labour Rs 8.00, manufacturing overheads: fixed Rs 8.00, variable Rs 4.00, selling,
distribution and administrative overheads - fixed Rs 3.00, variable Rs.1.00. Company wants to
earn a return of 25% on its investment. What should be the selling price of the product:
a.Ê Rs 35
b.Ê Rs 36
c.Ê Rs 43
d.Ê Rs 52

2.Ê A pharma company manufactures a patented drug. It has a capacity to manufacture 10, 000
doses per month; but because of the short supply of the raw material it is producing only 5,000
doses per month. There is adequate demand in the market for this drug. The cost of
manufacturing is Rs. 25.00 per dose of which Rs 15.00 is fixed cost and Rs. 10 is variable. Selling
distribution and administrative costs are Rs 5.00 per dose of which Rs3.00 is variable. Company
is selling one dose at Rs 50. Company gets a special order to supply 2000 dose. If this order is
accepted company will save Rs 3.00 of the selling and distribution cost (variable component).
What is the minimum price at which the company can accept this offer:
a.Ê Rs 10
b.Ê Rs 13
c.Ê Rs 47
d.Ê Rs 50
3.Ê A Company can produce two products A and B in its plant. The plant can be run for 48 hours in a
week. In one hour the plant can produce either 20 units of product A or 30 units of product B.
The maximum weekly demand for product A is 500 units and for product B it is 900 units. The
selling price is: product A ʹ Rs 250; Product B Rs 200. Variable Cost per unit is: Product A- 200
product B- 160. The Joint fixed cost is Rs. 20,000 per week. How many units of product A and
Product B ought to be produced to maximize profit?
a.Ê 360, 900
b.Ê 500, 690
c.Ê 480, 720
d.Ê 500, 900

4.Ê At the production level of 5000 units cost structure of a firm is as follow: variable cost Rs 120;
Fixed Cost Rs 80, Total Cost Rs 200, Selling Price 220 (Assume total fixed cost and variable cost
per unit remain constant). The firm has made an investment of 4.20 lakh and wants to earn 25%
profit after tax on this investment. The tax rate is 30%. What will the required sales:
a.Ê 4000 units
b.Ê 4500 units
c.Ê 5000 units
d.Ê 5500 units

5.Ê A company is producing 3000 units per month of a product and operating at 50% of its installed
capacity due to demand constraints. It is selling the product at Rs 2100 per unit. Total cost of
the product is Rs 2000 per unit of which Rs 800 per unit is the fixed cost. Company gets an
oversea order for 2000 units. If company produces 5000 units, the variable cost per unit will
come down by 10% while total fixed cost will go up by Rs 6.00 Lakh per month. What is the
minimum price (the floor price) for this special order?
a.Ê 1080
b.Ê 1200
c.Ê 1560
d.Ê 1680