This document contains an exam for a profit planning paper with 5 questions. Question 1 asks for a gross profit analysis of sales and cost of goods sold data for two years for a single product. Question 2 provides costs data and asks for income statements using absorption and direct costing. Question 3 provides sales and fixed/variable expense data and asks for contribution margin ratio, break-even point, and contribution margin. Question 4 provides normal and increased capacity data and asks for differential costs of production levels. Question 5 asks to explain the significance of gross profit and causes for changes, and differentiate between absorption and direct costing methods.

1. GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES, PESHAWAR
BS 6TH SEMESTER
INTERNAL EXAMINATION (2021)
PAPER: - PROFIT PLANNING
Time Allowed: 3 hours Marks: 100_
Note: - Attempt any four questions. All questions carry equal marks.
Q 1. Gross profit analysis for one product. The president of the McLachlan Wholesale Company, which
markets a single product, requests an explanation for the gross profit decline for 19B, the following
information is available:
19A 19B
Units Per unit Total Units Per Unit Total
Sales ------------------25,000 $3.00 $75,000 24,000 $ 2.75 $ 66,000
Cost of goods sold 25,000 $2.38 59,500 24,000 $ 2.40 57,600
Gross profit ----------------------------- $ 15,500 $ 8,400
Required: Gross profit analysis
Q2. The Denton Corporation produced 24,000 units (normal capacity) of product during the first quarter
of the year; 20,000 units were sold at $ 22 per unit. The costs of this production were:
Material ------------------------------------------ $60,000
Direct labor --------------------------------------$ 60,000
Factory overhead:
Variable cost---------------------- $ 120,000
Fixed cost -------------------------$ 96,000
Marketing and administrative expenses for the quarter total $ 70,000; all are fixed expenses.
Required: (1) An income statement using absorption costing
(2) An income statement using direct costing
Q3. The Salishan Lodge had sales of $ 4,500,000. The fixed expense was $ 1,200,000 and the variable
expense totaled $ 1,800,000.
1) Contribution margin ratio (C/M).
2) Break–even point.
3) Contribution margin.
Q4. Differential cost ofalternatives capacities: the wood river plant of the union company has a normal
capacity of 90,000 units per month. Monthly production costs are $ 12 variable per unit and $240, 000
fixed. By increasing the fixed costs $10,000 a month, the plant can produce 95, 0000 units.
Required:
1. Differential cost of the production between 80% and 90% of normal capacity.
2. Differential cost of producing the 5,000 units above normal capacity.
3. Per unit total production cost of the 95,000 units , rounded the nearest cent
4. Per unit differential production cost of the 5, 000 units.
Q5. (1) Why is gross profit figure significant and what causes changes in the gross profit?
(2) Differentiate between absorption costing and direct costing method?
October, 2021