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R. Sivakumar

R. Sivakumar analyses where students go wrong when answering costing problems

A COMMON misconception about the examinations conducted by the Institute of Chartered Accountants of India (ICAI) is that the results are restricted and controlled. However, students should realise that the causes of failure are more due to inadequate preparation and poor presentation of the answers. The CA examination system is totally different from that of universities. One has to obtain a minimum 40 per cent in each of the papers and an overall aggregate of 50 per cent. Let us consider a typical examination question involving computation of breakeven point:

Excel Academy proposes to conduct a three-day workshop on accounting standards spread over six sessions. Each session is to be handled by a faculty and each would be paid an honorarium of Rs 600. A hall with a maximum capacity of 500 students will be hired at Rs 3,000 per day. The cost of food and workshop materials per student will be Rs 60 and Rs 20, respectively. The cost of accommodation per student per day will be Rs 40. There are five administrators who will be paid Rs 200 a day as allowance. Directly attributable overheads are Rs 1,900. The fee charged per student is Rs 250. Calculate the number of students to break even.

Answer: Breakeven point = Fixed costs/Contribution per student = Rs 17,500/50 = 350 students.

Working notes 1 and 2, on fixed costs and variable costs and contributions, are presented in Tables 1 and 2.

(To be concluded)

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