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7. At the budgeted activity of 75% of total capacity, a company earns a P/V ratio of 25% a profit of 10% on sales. During the course of the year the company had to reduce its price of the product by 10% due to recession. The company was able to only 50% of its capacity- The sales value at this level was Rs. 13,50,000 at the reduced price of Rs. 9 per unit. Due to reduction in production the actual variable costs went up by 2% of the budget. What is BEP at original and reduced price ?

20. Xyz makes 10,000 units of a product at a cost of Rs. 4 per unit and there is home market for consuming the entire volume of production at the sale price of As. 4.25 per unit. In the year 2008, there is a fall in the demand for home market which can consume 10,000 units only at a sale price of As. 3.72 per unit. The analysis of the cost per 10,000 units is: Materials rs. 15,000 Wages 11,000 Fixed overheads 8,000 Variable overheads 6,000 The foreign market is explored and it is found that this market can consume 20,000 units of the product if offered at a sale price of Rs. 3.55 per unit. It is also discovered that for additional 10,000 units of the product (over initial 10,000 units) that fixed overheads will increase by 10 per cent.

22. A company purchased a machine two years ago at a cost of Rs. 60,000. The equipment has no salvage value at the end of its six years, useful life and the company is charging depreciation according to straight-line method. The company learns that a new equipment can be purchased at a cost of Rs. 80,000 to do the same job and having an expected economic life of 4 years without any salvage value. The advantage of the new machine lies in its rester operating efficiency which will reduce the variable operating expenses from the present level of Rs. 1,65,000 to Rs.1 30,000 per annum. The sales volume is expected to continue at Rs.2 lacs per annum for the next four years. Rate= 20%

24. Two competing food vendors BIKAJI (a) and Bhikharaam (B) were located side by side at a fair. B occupied buildings of the same size, paid the same rent, Rs.1 250, and charged similar prices t their foods. Vendor a employed three times as many employees as B and had twice as much income as B even though B had more than half the sales of A. Other data are as follows Vendor A Vendor B Sales Rs. 8,000 Rs. 4,500 Cost of goods sold 50 % of Sales Wages Rs. 2,250 Rs.l 750 Explain why vendor A is twice as profitable as Vendor B.