Seth transport operates a fleet of Motor Lorries. The record for Lorry-4150 reveals the following information Days Maintained 30 Days operated 25 Days Idle 5 Total hours operated 300 Total kms covered 2500 Total tonnage carried 200 (4 tonne – load per trip, return journey empty) Total cost for the month 270000 Prepare a performance statement reflecting- A Cost per day operated, cost per kilometer, cost per hour B Cost per round trip, Tonne Km, cost per commercial tonne –km. Note formula plus calculations are required
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Seth transport operates a fleet of Motor Lorries. The record for Lorry-4150 reveals the
following information
Days Maintained 30
Days operated 25
Days Idle 5
Total hours operated 300
Total kms covered 2500
Total tonnage carried 200
(4 tonne – load per trip, return journey empty)
Total cost for the month 270000
Prepare a performance statement reflecting-
A Cost per day operated, cost per kilometer, cost per hour
B Cost per round trip, Tonne Km, cost per commercial tonne –km.
Note formula plus calculations are required
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