A component Shop manufactures a Part called 2-1090 in two operations " A and B"

After inspection at Operation A, the accepted qnatity is passed on to Op B

All Raw Material introduced at Op A.. The rejection rate and scrap value for Rejects are as below

Rejection Scrap
Operation Rate value /Piece RM Cost

A 10% 6.5 1,000,000

B 15% 13

Two pieces of after op A are combined to produce one piece of op B

(a) Prepare a Statement swhowing Gross prodcution, rejection and Accepted production for the 2 Ops
(b) Prepare A Cost sheet showing Total cost, quantities, and cost per piece of accepted outputs for
2 Ops A nd B

Order Cost /order C 4 No of Orders

Carrying cost R% I = R/100 12% Total ordering cost
Sales Vol in nos S 2,400 Avg Inv Carry Qnty
EOQ Q ? Avg Inv Carry Value
Price P 2.4 Avg Inv Carry Cost
Tot Cost (Order+carry) (PIQ/2) + (SC/Q)
DTC / DQ (PI/2) - (SC/Q²) = 0
PI/2 = (SC/Q²)
Q = √ (2SC /PI) √ (2* 2400 * 4)/(2.4*.12)
Total Cost Ordering Cost 4*2400/258 37
Carrying cost 258*12%*2.4/2 37.152
Inv Cost 5,760
Max Level Re order Level + Re order Qnty - ( Min Cons * Min reorder Period)
Min level Reorder level - (Normal Consumption )
Re order level Max consumpation * Max Reorder Period
Danger Level Normal consumpation * Max reorder period under emergency
 Process A Process B

Total No 100,000 90,000

Scrap 10% 10,000 13,500

Accepted
Lab & O/Hs Output Net Production 90,000 76,500
Net Equivalent
Production 38,250
1,000,000 90,000
500,000 38,250 RM Cost 1,000,000 1,935,000
Lab & O/Hs 1,000,000 500,000

Total cost 2,000,000 2,435,000

n for the 2 Ops Less Scrap Value 65,000 87,750
Net Cost 1,935,000 2,347,250

Cost per unit 21.50 61.37

S /Q
(S/Q) * C
Q/2
(Q/2) * P
(Q/2) * P * I

258

5,834
Order Cost /order
Price
Carrying Cost /Unit /year
Carrying cost as a % of Re Val
Sales Vol in nos /Year
EOQ
Tot Cost (Order+carry)
DTC / DQ
Total Cost
C 1,000 5,000 No of Orders
P1 P2 Total ordering cost
0.12 0.60 Avg Inv Carry Qnty
I 0.12/P1 0.60/P2 Avg Inv Carry Value
S 200,000 ### ### Avg Inv Carry Cost
Q ?
(PIQ/2) + (SC/Q)
(PI/2) - (SC/Q²) = 0
PI/2 = (SC/Q²)
Q =√ (2SC /PI) √ [(2* 2,400,000 * 1,000)]/(P1*0.12/P1)
Ordering Cost 200,000
Carrying cost
Inv Cost
 No of Orders S /Q
Total ordering cost (S/Q) * C
Avg Inv Carry Qnty Q/2
Avg Inv Carry Value (Q/2) * P
Avg Inv Carry Cost (Q/2) * P * I

,400,000 * 1,000)]/(P1*0.12/P1)
√ [(2* 2,400,000 * 5,000)]/(P2*0.60/P2)
200,000 200,000
Allocation apportionment and absorption Allocation
Methods of Absorption and Machine hour rate
Understand under or over absorption of Ohs Apportionment
Speical items
Absorption
O/Hs Indirect Material, Indirect Labour and Indirect expenses A Co has 3 production depts (X,Y,Z
That which cant be traced directly to a particular Cost unit
Expenses
Semi variable cost : treatment Rent Rates
Light & Electr
High and Low points method Indirect Wages
(Max OHs - Min OHs for a Period) / (Max output - Min output) Power
(Max O/Hi - Min OHi) / (Max Qi - Min Qi) Deprn - M/C
Method of averages Other Exps
Difference in Avg cost / Diff in avg output
[(∑ OHi / ∑ i) - (∑OHk / ∑k)] / (Vol I - Volk)
Simultaneous Equations Method
Y = mX + c

Expenses
A = 9.250 + 10% B I Rent Rates
B = 3,150 + 10% A II Light & Electr
A - 10% B = 9250 (10) III Indirect Wages
B - 10% A = 3150 IV Power
10 A - B = 92500 V Deprn - M/C
Add 9.9 A = 95650 IV and V Other Exps
A 9662 9250 Direct Wages
B 4116 3150
Reallocation Of
Cost of an Article X Y Z Service Dept cost
No of Hrs 2 3 4 Dept A
Material cost 80.0 Dept B
Labour 40.0 Total Cost
M/c Hour rate 58.0 8.0 18.0 32.0 Working Hours
Total 178.0 Rate Per Hour

M/c Hour rate

 Assignement of whole items of costs directly to a Cost centre

Distribution of Overheads to more than one csot centre on some equitable basis
Primary and Secondary
Charging of Overheads to cost units
s 3 production depts (X,Y,Z) and 2 service departments (A,B). Foll are the figures

Details Total X Y Z A B
10,000 Floor space 10,000 2,000 2,500 3,000 2,000 500
1,200 Light Points 120 20 30 40 20 10
3,000 Direct wages 20,000 6,000 4,000 6,000 3,000 1,000
3,000 M/c Horspower 300 120 60 100 20
20,000 MC Cost 100,000 24,000 32,000 40,000 2,000 2,000
20,000 Wrkg Hrs 10,740 4,670 3,020 3,050
Re allocation 100% 20% 30% 40% 10%
100% 40% 20% 30% 10%

Amount Basis Total X Y Z A B

10,000 Floor space 10,000 2,000 2,500 3,000 2,000 500
1,200 Light Points 120 200 300 400 200 100
3,000 Wages 20,000 900 600 900 450 150
3,000 M/c Horspower 300 1,200 600 1,000 200 0
20,000 M/c Cost 100,000 4,800 6,400 8,000 400 400
20,000 Direct Wages 20,000 6,000 4,000 6,000 3,000 1,000
Actual allocatn 3,000 1,000
57,200 Total 61,200 15,100 14,400 19,300 9,250 3,150

9,662 8,695 1,932 2,898 3,865 0

4,116 3,705 1,646 823 1,235 0
73,600 18,679 18,122 24,399
10,740 4,670 3,020 3,050
6.85 4.00 6.00 8.00
Allocation apportionment and absorption Allocation
Methods of Absorption and Machine hour rate
Understand under or over absorption of Ohs Apportionment
Speical items
Absorption
O/Hs Indirect Material, Indirect Labour and Indirect expenses A Co has 3 production depts (X,Y,Z) an
That which cant be traced directly to a particular Cost unit
Expenses
Semi variable cost : treatment Rent Rates
Light & Electr
High and Low points method Indirect Wages
(Max OHs - Min OHs for a Period) / (Max output - Min output) Power
(Max O/Hi - Min OHi) / (Max Qi - Min Qi) Deprn - M/C
Method of averages Sundries
Difference in Avg cost / Diff in avg output
[(∑ OHi / ∑ i) - (∑OHk / ∑k)] / (Vol I - Volk)
Simultaneous Equations Method
Y = mX + c

Expenses
A = 23,125 + 10% B I Rent Rates
B = 7,875 + 10% A II Light & Electr
A - 10% B = 23125 (10) III Indirect Wages
B - 10% A = 7875 IV Power
10 A - B = 231250 V Deprn - M/C
Add 9.9 A = 239125 IV and V Sundries
A 24154 23125
B 10290 7875

Reallocation Of
Cost of an Article X Y Z Service Dept cost
No of Hrs 4.00 5.00 3.00 Dept A
Material cost 250.00 Dept B
Labour 150.00 Total Cost
M/c Hour rate 131.24 30.00 56.24 45.01 Working Hours
Total 531.24 Rate Per Hour
Reallocation
 84375
s 3 production depts (X,Y,Z) and 2 service departments (A,B). Foll are the figures 56250
1.5
Details Total X Y Z A B 15375
25,000 Floor space 10,000 2,000 2,500 3,000 2,000 500 15000
3,000 Light Points 60 10 15 20 10 5 121,875
7,500 Direct wages 50,000 15,000 10,000 15,000 7,500 2,500 37,500
7,500 M/c Horse power 150 60 30 50 10 85,000
50,000 MC Cost 1,250,000 300,000 400,000 500,000 25,000 25,000 0.44
50,000 M/C Wrkg Hrs 14,320 6,226 4,028 4,066 5,514.71
Labour Hours 500 150 100 150 75 25 7,720.59
Material cost
Re allocation 100% 20% 30% 40% 10%
100% 40% 20% 30% 10%

Amount Basis Total X Y Z A B

25,000 Floor space 10,000 5,000 6,250 7,500 5,000 1,250 25,000
3,000 Light Points 60 500 750 1,000 500 250 3,000
7,500 Wages 50,000 2,250 1,500 2,250 1,125 375 7,500
7,500 M/c Horspower 150 3,000 1,500 2,500 500 0 7,500
50,000 M/c Cost 1,250,000 12,000 16,000 20,000 1,000 1,000 50,000
50,000 Direct Wages 50,000 15,000 10,000 15,000 7,500 2,500 50,000
Actual allocatn 7,500 2,500
143,000 Total 153,000 37,750 36,000 48,250 23,125 7,875

24,154 21,739 4,831 7,246 9,662 0

10,290 9,261 4,116 2,058 3,087 0
153,000 46,697 45,304 60,999
14,320 6,226 4,028 4,066
10.68 7.50 11.25 15.00
A 23,125 0 4,625 6,938 9,250 (23,125) 2,313
B 10,188 0 4,075 2,038 3,056 1,019 (10,188)
A 1,019 (0) 204 306 408 (1,019) 102
B 102 (0) 41 20 31 10 (102)
A 10 0 2 3 4 (10) 1
46,697 45,304 60,998
Data pertaining to the M/ C Shop of an engg co

A B C Total
No of Workers 400 400 800 1,600
No of M/c Hrs 50,000 50,000 60,000 160,000
% of Horse Power 40% 25% 35% 1
Assets Value 20.00 35.00 30.00 85.00
Direct Wages 16.00 20.00 24.00 60.00
Indirect Wages 18.00
Supervisor Salaries 7.00
Depreciation 8.50
Insurance 4.25
Power 12.00
Welfare exps 9.00
Office & Other Exps 16.00
 Basis A B C Total

Direct Wages 16.00 20.00 24.00 60.00

Indirect Wages Direct Wages 4.80 6.00 7.20 18.00
Supervisor Salaries No of Workers 1.75 1.75 3.50 7.00
Depreciation Asset Value 2.00 3.50 3.00 8.50
Insurance Asset Value 1.00 1.75 1.50 4.25
Power Horse Power 4.80 3.00 4.20 12.00
Welfare exps No of workers 2.25 2.25 4.50 9.00
Office & Other Exps M/c Hrs 5.00 5.00 6.00 16.00
Total 37.60 43.25 53.90 134.75
M/C Hour Rate 75.20 86.50 89.83