Professional Documents
Culture Documents
Job 100
Rs 25,000
20,000
22,200
67,200
Job 101
Rs 40,000
15,000
16,650
71,650
During January of the current year, the following transactions took place:
1.
Raw materials costing Rs 2,00,000 were purchased on account.
2.
Supplies costing Rs 40,000 were purchased for cash.
3.
Jobs 102, 103 and 104 were started and the following costs applied to them:
4.
5.
6.
7.
8.
9.
II.
Job 102
Job 103
Job 104
Direct materials
Rs15,000 Rs 50,000
Rs 35,000
Direct labour
25,000
30,000
20,000
Jobs 100 and 101 were completed; additional direct labour costs incurred on them
were Rs 10,000 and Rs 20,000 respectively.
Wages paid to production employees during January totaled Rs 1,25,000, of
which accrued wages of the previous year were Rs 25,000; wages payable at the
end of the current month were Rs 20,000.
Depreciation for the month totaled Rs 50,000.
Utilities bills totaling Rs 60,000 were received for the January operations.
Supplies costing Rs 10,000 were used.
Miscellaneous overhead rate for the month of January.
Actual overhead is applied for individual jobs at the end of each month using a
rate based on actual direct-labour costs. You are required to
(a) Determine the overhead rate for the month of January.
(b) Determine the amount of profit earned on Jobs 100 and 101, assuming job
prices of Rs 1,10,000 and Rs 1,70,000 respectively.
(c) Prepare a statement of cost of goods manufactured.
A jobbing factory has undertaken to supply 200 pieces of a component per month
for the ensuing 6 months. Every month a batch order is opened against which
materials and labour-hours are booked at actuals; overheads are levied at a
per/labour hour rate. The selling price contracted for is Rs 8 per piece.
Months
January
February
March
April
May
Direct wages
Rs 120
140
150
140
150
Direct labour-hours
240
280
280
270
300
June
220
720
160
320
Chargeable expenses
Direct labour-hours
Rs 12,000
Rs 4,800
10,560
4,400
12,000
5,000
10,580
4,600
13,000
5,000
12,000
4,800
From the following data, present the cost and profit per piece of each batch order
and overall position of the order for 1,200 pieces:
III.
Rs 58,000
14,400
33,400
16,700
Statement A
Statement B
Rs 30,00,000
Rs 30,00,000
18,00,000
(6,00,000)
27,00,000
(9,00,000)
18,00,000
Gross profit
Less: other costs
Income
12,00,000
18,00,000
(15,00,000)
3,00,000
12,00,000
(6,00,000)
6,00,000
The question as to which products to stress in order to obtain the most profitable
sales-mix has always been of prime importance to businessmen. The amount of
profit contribution, or the difference between the selling price and the variable
costs, tells how much each product is contributing to fixed costs and profit in the
present sales-mix. This information assists management in forming an opinion as
to which products will add to profits if sales of these units can be increased.
Direct cost data can be utilized in this type of analysis when management seeks an
answer to the question: Which product shall we push?
Data
Selling price
Variable cost
Fixed costs
Units per hour
Product A
Rs 12.60
9.62
2.07
45
Product B
Rs 5.50
4.18
0.65
0.70
Products
A
B
C
Rs 10 Rs 12
Rs 20
25
33.33
20
10,000 15,000
5,000
40,000 45,000
25,000
During the year, the variable costs are expected to increase by 10 per cent. There will,
however, be no change in fixed costs, the selling prices and the units to be produced and
sold. The sales potential for each of the products is unlimited.
(i)
You are required to prepare a statement showing the P/V ratio, break-even point
and margin of safety for each product and for the company as a whole.
(ii) The company intends to increase the production of only one of the three products
to reach the full capacity level by utilizing the spare capacity available. Assuming
that all the three products take same machine time, advise with reasons, which of
the three products should be produced so that the overall profitability is the
maximum.
VII.
Rs 2,000
70,000
5,000
40,000
300,000
40,000
50,000
100,000
150,000
10,000
14,000
54,000
36,000
4,000
Rs 3,000
460,000
1,360,000
60,000
100,000
70,000
100,000
Required
1.
2.
3.
4.
of whether the total cost will change substantially over a wide range of units
produced.
Suppose that both the direct material costs and the plant-leasing costs are for the
production of 900,000 units. What is the direct material cost of each unit
produced? What is the plant-leasing cost per unit? Assume that the plant-leasing
cost is a fixed cost.
Suppose Foxwood Company manufacturers 1,000,000 units next year. Repeat the
computation in requirement 2 for direct materials and plant-leasing costs. Assume
the implied cost-behavior patterns persist.
As a management consultant, explain concisely to the company president why the
unit cost for direct materials did not change in requirements 2 and 3 but the unit
cost for plant-leasing costs did change.