PREFACE ‘Tals Book ia the Passport to the future? for tomorrow belongs to those who prepare for it today! ‘AAC has ensured that this book gives the student "whet is required to study " and not " what he wants to study in r ; 1) Folly coved sitions with slavant names Act where ever applicable: t updated solutions, +2) Perfect Book for COSTING including practical sums and theoty’ as your (CMA INTER te complieated Syllabus and huge like aces to haves right _amount of revision and cover all concepts in least posible time = Thief your ONE STOP SOLUTION! 2) For revision purpose” we have handpicked questions chapter wise for studentsto summarize the whole sylabus, This will help the student to eeaptulte the chapter in examination days, Needless to say the compilation of this book would not have been possible without the wholehearted support guidance and motivation of CA Akash -Acacaal Sito constantly strive to lp students in every posible way, ‘WE SHOWER OUR ALL BEST LUCK 10 OUR BELOVED CMA STUDENTS AND HAPPY STUDING,COSTING SUCCESS BATCH NOTES — INDEX Greene 1, [OPERATING COSTING Gu 2, [costsHeer 12-22 3, __ | MATERIAL COSTING (23-38) 4. [308 AND BATCH COSTING 39-44 3, [LABOUR COSTING S-51 6. | OVERHEADS: 52-99 7, __ | MARGINAL COSTING, [60-74 8, _| STANDARD COSTING e5— 90 9, _ | BUDGET AND BUDGETORY CONTROL a= 95 10, | CONTRACT COSTING, 00-108 Ti, _[JOINTAND BY-PRODUCT fos = Ws 12, | PROCESS COSTING a= 120, 13,__ [INTEGRATED a= 14, _ | RECONCILIATION 125133 CONTACT US: 9545879706 @ 2 eo For more details click on above iconsTae ‘CHAPTER_ OPERATING COSTING — ‘2 Colca pasionges hm from the following information: ‘umber of bses 6. numberof days operating ina mont 25 ps made by each Ts per day 8 distance covered 20am (one ie) capaclty of bus 40 passengers, normally S04 of enpacty atlization SOLUTION, Total k= Chases 25 dips Biipon km row 38,00 ks “Total pasenger= a0 passenger BOVE = 32 passenger "Total pans = 30000 x 52 pase 156,000 pas-Ems rnc} ‘O57-A Torey ats witha load of 4 tonnes of goods from station A. W unfoads 10 tonnes at station Band est of gods at station C. I reaches back dicey (station A after geting reloaded with 18 tonnes of gooi a ‘ation C. The distance between A to B, Ho C and then from Cto Aare 270 kms, 180 ams and 325 kms respectively Compute ‘Absolute tonnes km and 'Commersalfones-ka “Total absolute tonne lam = 10830 tonne km ‘Commercial otal tonne k= Average tonne xm of total me =H tonne H tonneH 18 tonne x QTOSTS0II5 Raa 3 TSC tonne ka "TRANSPORT FACIUTY all ranaport company har 70 vehicle, which capaci are as Tllowse Neat Venices [Ca Per Weta Doone 12 tonne 15 tonne 2 20 one “Tike company provides the goods transport service hebvcen sation Ato station 'W Distance between these “ations fs 200 Kilometres, Each vehicle makes one round trp per day an average: Vehicles ae loaded with an average of 90 pereent of capacity atthe tne of departure from station‘ to station "Wand atthe ime of return ack loaded with 70 percent of capacity. 10 pe cent of vehicles are lid up for repairs every day. The following information are related tothe month of Octber, 2013: AKASH AGARWAL 2900 CLASSES sreePe Satan of Transport Manager Tso Salary of 0 drivers L000 eaeh Gene Wages of Helpers 52,001 euch helper “Wages of20 Labourer Re. each labourer ‘Consumable stores TAS. Tasurance (Annual Ts 24000 Road Licence (Anau) 60.00 = Cost of Diesel por litre BS Kilometres run per Hire each vehile Sm Lbricant, Oil ete. RBS, Cost of replacement of Tyres, Tubes, other paris [ s.125000 Garage reat Annual) 90.000 “Transport Technical Service Charges 10.000, Plecriityand Gas charges Re, S000 Depreciation of vehicles Re200,00 “There isa workshop attached To ansport department which repairs thee vehicles and her vehicles also +40 por cent of transport managers wlary in debited tothe workshop. The transport department is charzed During the month of October, 2075 por ton-l, the company earned a profiof 8 per cnt on elt Category Total ta “Total tonne-k Troan Te TON HO (outward 02,500, Rew) TIENT, = 157500 Tame = Toke existe TEx Sopa 90% = 30,000 an (Retura} 30D TEtoane Woe x Ta Stas TEs p00 = 35,00 ks = 472,000, (Return) 50 TEx 50m TE = 3.67500 tome 300m x2 Bae Box 1,000 x 90% = 10,000 kn = 150,000 (Retura) = 10000 ke Bo 1,pom 70% = 140,000, 0,000 70,96.000 tonne AKASH AGARWAL ®2Soeo GLASSES 1 HYSSEISIeSOL6LSSPSG 16 * BY sassw13 e8ee Tumaisy HSiMW SMTP OTS TERY) worseRT ET = oureror= Sawa eT“BERNA transport compa is distance travelled, number Trask Ne, 1 3 Tia a let of ree trac of 10 ton »eapaely ach ping in decent ns for transport of customer's goods. The trucks run loaded with goods and reiurn empty, The of Ips made andthe load carried per day by cach truck areas under dy [on avis por ip May tonne < 7 = "The spain of maintenance cont and he total distance taveied uring he Int two yeaa as der ‘Year| Total distance traveled | Maintenance Cont Re 1 1.603200 96,050 2 156,70 S05 The ftiowing are the deals of expenses forthe year under review Dies TT per Tre ch Wire gives 4h per Wire of lee oan ave Drivers 2,000 per month Licenee and xen Rs, 5.000 per annun per ack Tasurance Hs. 5.000 per annum forall the Tee vices Purchase Price per track 3.00.00, Life 1 ars, Serap value at the end of Me Ra 10,000 RS per 100k Rs 1084 per annum Res the cost per kn. run ic perionne-Sa to Sa profi of 1% om ih “Th vehicles operate 74 days per month om an averag et of three vehicle, SOLUTION WN: CALCULATION OF TOTAL KM & TOTAL TONN-KM ck Journey — ‘otal km “Total omne-kan Na. 1. (oatward) Toda Tawa = 1882 he = 10 (etaray eat a 2__(ontwara Wind aye Bas = 23,040 = 207360 eur) oa 7 3. (award) Wi xds 3 dyes Eo a = 25920 ka 207360 (Rawr a a T3474 Ee GLASSES AGARWAL g9eo0 preyMAINT + Chet per iam = ahnasg = a Hrsg pertone-lom = GOTT = 137 S531 “WN: CALCULATION OF MAINTENANCE COST “46050 = 02875 - 160200 S175 = 0a T5600. = Maintenance cots SVC ‘Variable portion = Ditin TVG ithin KMS Sas can 156700 SOS per 50 Te OS = 000 SISTER OE Parienars TIXED: Driver aa License & taxes Tasuramce relation ‘General OF Maintenance cost Total YARIABLE: Diesel 8 sande Mlaitenance cos Total otal OF [Total pro “Total ak AKASH AGARWAL SEeGo0 CLASSES wees“OE Tripat ransport company has Dee ora J) Mlometre Tong route fo Fan 8 buses The cost of ach busi Rs. 6,50,000The buses will make 3 round trips per day ear gers of ther set 2OI3-1d are given below: Capacity. The seating eapacty of a run onan average 25 daysin a month, The other iaformation for 0 arage eat TOO per month ‘Aanual repairs and Re2,500 cach be Salaries of S drivers e300 cach per monTH Wages ofS conductors 1.200 each per mow Managers Re7S00 per init us i 40 passengers Road tax permit fee Hs.5000 fora quarter ‘Office expenses 2,000 per month Cont of diesel per Ress Kilometre run per Hire oreach bat_ [i lomsten Annual depreciation Tse of et -Anuwal Insurance 3 af cost “You are required fo cateuate the bus fae to be charged rom cach passenger per Mamet, Whe omany wants earn profs of S313 percent on taking (Cota receipts from passengers). SOLUTIO: WORKING NOTE: “Total kom = 40x $x 2x Sd x Se = 30,000 Total asst = 0,000 XBT = 60,00, OcRP=ET 25929167 + 0STR=N = S898 586 Cost per pase-km = 1001.0 0,000 S037 Way tare = SSDEST avi50 (©) Profit 70380) e0a30 Total sales [22000 [1026-000 AKASH AGARWAL 29OoO CLASSES WV or'ssasa7s:‘ZG The books of Bala Manufacturing Company present the following data for the month “of Api Direct labour cost Rs, 1? 00 being 175% of works overheads, Cost of goods sald Rs, 56000 Excluding Admin Expense Inventory accounts shawed the following opening and closing balances Particulars Re 8.000 10500) 1.600 Raw materials Works-in- Finished goods Other data are Selling expenses General and administration expenses Sales forthe month Required (0 Compute the value of purchased apa Apr a0 Bs 10.630 105500 195000 m 3500 2500 755000 (id Prepore a statement showing the elements of cost ond materials cost various also the profit earned Works = 10:00 Spring eae orem —| Ba Cabing nosot eenat [a eh Pones often eon ORT am (4) Direct labour cost 175500. Pinedo 0 AKASH AGARWAL ©@@0 GLASSES ‘Sar Seaserarssworks OH [opening wie ©) elosing WP, Factory cost/COP (opening stock of FG (© alosing stock of FO Cost of goods sold (@) selling expense (@ general admin expenses Total cost of goods tal profit Total sales———_| 0a _—a ‘2.1 The annual carrying cost of material X Te Rs, 3,6 per unit and hs total carrying cost is Rs, 9:00 per annum, What would be the Eeonomie onder quantity for material X) ifthere: Ts na safety stock of material X? TANSWER: CARRYING COST p.Up. Total carrying cost (annual) R360) OOF Clore safety cont or now) €0Q= VZxAx0 t 0g: Tota’ carrying cost (annual) = Rs, 9-000 Average nventoryx coring cost PUP ‘Ordering Sie (Q) xR. 3.60 = Rs, 9.000 2 ‘Order size (@) €OQ= $000 Units 'G.2 The Lalu Gardener Is deciding on the economic order quantity fortwo brands of lawn ertillaer Super Grow and Nature s own, The following Information is collected Fertilizer Super Grow [Natures Own ‘Annual demand 2000 bags [128 boss —FRetevant ordering cost |_s, 1200 | _ As, 400 per purchase order “Annual Relevant carrying | fe, 480 | fs, 500 [east per bag Required: ()___Compute £09 for Super Grow and Nature's own, (i) For the €0Q what isthe sum of the total annual relevant ordering costs and “total annual relevant Carrying costs for Super Grow and Nature's own’ (ii)__ For the EO compute the number of deliveries per year for Super Grow and Natures own, AKASH AGARWAL ®2Oe0o CLASSES Ysy'9s45e7970¢ANSWER: Super grow Nature's own TRAE Ta “Annual purchase 2000 bags 1280 ba Requirement of RMCAY ‘Ordering cost per order (0) Rs, 1200" 5.1400 Carrying cost pu p.3 (C) Rs, 480 W560 () £00 (@) = V2xAxO C Super grow = /2 x 2,000 bags x 1200 i 480) joo bags ‘Super grow =J2 x 1,280 bags x 1400 560 10 bags (i) Sum of total annual O,cost & C.cost = O,cost * C.cost cotalne, of _X__ ordering cost + Average + carrying cost pupa orders ine year per order Inventor ‘Annual purchase _X_ Ordering cost + Order slee X carrying cost p.v po requirement oF RM__per order 2 ‘Order size =axo + xe 2 2 :000 bags X 12007 100 Bags * Ae, 480 100 bags z Super grow AKASH AGARWAL CLASSES(280 bags x Re, 1000 + AO age «560 30 bags z 72400 + 22400 = 46.900 (Gi No, of deliveries = No, of orders =A Tne year lnayear Nature's own= 1280 baga= 16 order 700 bags RANGE WISE £00 ‘G3 ROTADI Limited has received an offer of quantity discount on its or materials os under: Price per ton. ‘Order Sie (in ton) Rs, 99600 Less than 50 Bs, 9360 50 ond less than 100) Rs, 9120 100 and less than 200 Rs, 8880 200 and less than 200 Rs, 8640 '300 and above “The annual requirement for the material is 500 tons, The ordering cost per order Is Rs, 1200 and the stock holding cost i estimated at 25% of the material cost per annum. ‘Required: () Compute €90, (i) Compute the most economical purchase level (ii) Compute £09 ifthere are no quantity discounts and the price per ton Is RS, 10:500, ANSWER: A= 500 Tons "= As, 1200 ‘C= (sock holding cost AKASH AGARWAL @@@0 _ [Bl SLNSSES Brasserie WK pa() Statement showing EOQ Th each range Range (tons) | Ordering cost | Carrying cost 9.0 [oq = EAEO Remarks Eee er order po . Tessthan Oton | 12800 [5400x25% faxsooronsaz.500 | _Invald = 24 2400 oa = 72,17 ton 30 e less than 12500 [360% 25% Grover | VM 100 ton 2340 Se = 7.0900 TWOETessthan | 12500 | 9120x25% lexsooron sazsoo | ™2"d 200 ton = 280 ree awl ee DOO Tessthan | R500 | BBBOxISH Trait 300 ton 2220) 3008 above 13500 [BAO x a5% Treat = 2160 (i) Most economical purchase level (optimum order siae) may not be E09 see = ‘Computation of most economics purchase lve Tange] Oraee ] No, of || Total P,cost (Ra,) [Total O.cost] Total C, cont | Tom OMe sie | ordersp.a (hs) (&s.) 4 (tors) - Tessthan | 40ton | s00ton [500tonsx9:600 [iB orderx | 40/2x 25% x = 50ton aoton |= 4lecs 12500 = orders wees00 ie ZO%Kess |SOton | GOOtOR |S00tensxa360 froorderx |S0/2x asx [ascnsoO }than 00 Soto |=4680000 — |rsoo= | 9:360= f= Hons Floorders 25000 _ | 58:00 ie roo etess footer | SOoton [500 tonexoI20 [Sorderx —[T0O7ax2s%x [arsosoo | _ than 200 Tooton |=45:60000 — frasoo= J on20 Hons = Sorders 62500 | mao00 [- 2o0ten | sOOtoN |SOOtonsxeBBO |Forderx |200/2n2s%xfIsIDIO0 |_ 2o0t0n' |= 4440000 |rasoo= _ | aa AKASH AGARWAL ®29o6°o 28 CLASSES Gis o1'5545875706200 Gless Borders 37500-12220 than 300 tons 3008 | 300ton GOO tons BAO |Porderx | 300/2x_5%x | Aw|000 | above = 4320000 fizso0= | arsao Ez aaa] 25/000 Ez Total No. of orders i-a year (it shall be increased to next highest whole no.) EL. —> Workers 14.99 —> 14 orders | 13.0 —> orders: Total C, cost = Qx C(%) x Pcost p.unit 2 Caleulation Of total DMC at E02 slae Fe 73,09 ton otal P, cost + Total 0. cost + Total C, cost 500 ton x9'360 + 500 ton_X1SOO * 73,09 x 25% xOSCO, 73,09 ton 2 80°00 + 7 orders + 12500 + 85515,30, = 48553015,30 ‘Drm onder sine evel SOON Tec lost of range 6669-000" between E09 Range ~ ABE5O15.40 range ~ 8669-000» Least 300 tons] (ii) €00= V2xar0 c [2x 500 ton x 12,500 = 69 tons 25% «10500 "a The quarterly production ofa company's product which has a steady morket is 20°000 units, ‘Each unt ofa product requires 0.5 kg, of raw moterial, The cost of placing one order for raw material = Ts, 100 and the inventory carrying cost Is Rs, 2 per annum, The lead time for procurement of raw materials 36 days and a safety stock of 1000 keg. of raw materials Is maintained by the company, The ‘company has been able to negotiate the following discount structure with the raw material supplier AKASH AGARWAL @@@0 CLASSES eee ners‘Order quantity (kg.) Discount(Re) Upto 6:000 NIL G001=8:000 200) B001- 16000 2.000 16:001- 30-000, 39200 '30:001- 45:00 000 Required | () Calculate the re-order paint taking 30 days ina month, (Ci) Prepare a statement showing the total cost of procurement and storage of raw ‘material after considering the discount ofthe company elects to place ane» two: four oF sicorders in the year, "ANSWER: Annual requirement of RM: 20000units x4 quarter x 0.5 kg pv = 40-0005 (O= Rs.100 per onder CNS. pupa Normal lead time = 36 days: ‘Safety stock = 1000kg of Ri ROL = Safety stock > Average lead time x average usage per day) $000 TONOKg * 36 days x 1M, TMeg otal usage = 40-000kg Total days BOdays x 2 months GLASSES Teg ‘Statement showing total cost of storage procurement Parievars ‘One orders [Two = orders [4™~ orders (Gores FAnnuat porchasereq-of | 4000083 | 40;000%3 | «000083 | «0.000% aM Poder sie @ aoo00Kg | 400003 | _aO.000K | 400m Torder order ‘order Corder cal 40.000Kg | =20000k¢ | =10-000K | = 6666.67 Total 0,cost (A7@XO) AKASH AGARWAL ®2S8o0o | 2 |Torderx Rs, | 2 order xfs, w0=100 | 100=200 Rs.100 = 600 Tatale, cow (Q/axe) | 40000x2 | g0000%2 | 1OODKa | 6666.67x2 J z 2 a cca = 40.000 =10:000 tC Total discount (©) (2000) (000) Net cost (AB=C) 36100 8200 lo 3 From the following particulars with respect to a particular Rem of materials of wnufacturing company: calculate the best quantity to order: ‘Ordering quantities (tonne) Price per ton (Re) ese than 350 6,00 [250 but tess than 800 5.90 '800 but less than 2000 5.80) 27000 butless than 4000 570 #000 and above 5.60 The annual demand for the material is 4.000 tonnes, Stock holding costs ore 25% of material cost p, The delivery cost per order is Rs, 6,00, ARSWER: Statement showing computation of total inventory cost at different onder see PaRTaTTS 1] —|Furehasing cost ii) —INo, of orders fering Cost 1) [Average siae of Ons (W)__ [Inventory carrying cost per unit error cornu a (I) [Fatatiaventory cost (Ci fering Quantires vs [was [145 1425 4 (695%) | 5.95255) |(5.9125%) | (5.215%) | (6.625%) For theabove computations the best quantity to order ls 800 units, Note: Mi in ordering quantity sssumed to be 200 tons; it may be any quantity ‘below 250 tons: but the decision wll remain same, TYPES OF LEVEL CLASSES AKASH AGARWAL 29860‘ZA company uses “hree raw materials A 6 and © fora particular product forwhich the: Tollowing data apply = Raw [Usage [Re [Price fe Material | per unit order — {per order | mievel of quantiy | (kg) level | (kg) product ](kg) | (Rs) (ks) ea (kg), ‘MIN, [AVG._[ MAX A 10 410/000_| 0.10 1 2 3 8000 2 8 <__| 5000 [ow [a | «| s_jeno | 2 ¢ 6 [roo fous [2 [3s | « | 2? [2000 ‘Weekly production varies from 5 to 225 units averaging 200 units of the sid product, What ‘Would be the following quantities (Minimum Stock of AP (i) Maximum Stock of 82 Ai) Reorder level of C2 (iv) Average stock level of 10 gM A - ANSWER: Product (unt)e> 4g AM 0 kg RM=C @_Minimum stock ofA FL= ROL — Average lead time x Average Usage: .OOOKS = 2 weeks «200 units x10 kg = 8:000kg = 4000 kg = 4000 kg FE = Marirayin fead ine » Maxiinun usage — Average lod Unie x Average usage 3 weaks 225 units x10 kg 2 weeks x Z00 Units x 1Okg = 2750 kg @)_ Maximum stock of B ;OL + ROQ = Minimom lad time x minimum usage = 4750 eg ¥ 5000 kg = 3 week x PS units x4 bg KASH AGARWAL ©9800 CLASSES Mere information cats: ¥'91'9545879706@_AOLeFe Max lead time x Maxusage = weeks x 225 units x ka 400 kg FE= Minimum stock level > Average lead time x Average usage 2000 kg * 3 weeks x 200 units x Gkg 600 @_Average stock level of FI = Possible FA= Minimum stock lavel > ROD 7 £2000 KG + 10:000 Kg = 9000, 2 ‘Maximum stock level {OL > ROO — Minimum lead ime x Minimum usage 1000 kg * 10000 kg = T week x 15 units x 10 ky = 16250 ke FL= Maximum stock level + Minimum stock level @r_200 kg. Of certain material valued at ¥50 perl, were esued from the wearer department tothe producion department. Ouring transit @ kf Physicly disappeared due to shrinkge (1 shrinkage considered normal) nthe production process: the ved of 00d output was 80% ef the input. 85 ofthe input hd slightly svbstandard dimension and this can be sld as seconds in the market at discount of 25% ofthe sling price of god output whch is 300 per kg. 125 ofthe input eme-yed as trimmings in the proses, This was collected wl ca be wl i ve are wet rie of €20 pe Kg, Wish in ‘credited to the manufacturing overhead as per the company’s practice. ‘Explain with reasons the quantities that you will cassify () Woste (i Scrap» (ii) Spoilage. (i) What wil be the material cost peF unit of the good output? AKASH AGARWAL ®@@0© CLASSES wearers‘CAsimply computed value will suffice and a detailed statement isnot required). ANSWER [Material issued to production 200K, [Less= Shrinkage (1% of 200), 2 input To kg, [Less= 12% of 198 Ba 7oks. P4.24kg, [Lese- 8¥s sub-standard (8% of 198) or Peotwet 158.60) (Q) Wastage~ Ae waste has practicoly no value the accounting is relatively simple, The effec of the waste isto reduce the quantity of output In order to arive atthe unit cost ofthe process: operation or job: the tal cost of the process et. is distributed over the reduced output. the units af good preduetion ony. The cost of abnormal waste should however be excluded from the total cost and charged to Profit and Toss Account, Here: waste genorated = 2g. jental material W) Scrap ~ Scrap ste form of je conn OL of eran yes of manufacturing. processes but i Is usually in small amounts and has low measurable utility or market value» recoverable without further processing. Scrap is discorded moteral having some valve, Here Scrap generated = 76ks, Gi) Spollage = Spollage arises when the production output fs damaged i such a manner and to such an ‘extent that cannot be used forthe original purpose for which it was designed but is to be dlsposed off m ‘some suitable manner without further processing, Spollage involves nat only the loss of material but also Tabour and manofacturing overheads, Here spoilag Cost of material (200 x50) = 210,000.00 ‘Material cost per unit of output = 10,000 7156.4 = € 63.187 unit ee FIFO - LIFO. Ke ‘2.8 The following summariaed information Is available from the records of OI Ltd, for the month of ‘March 2017; ‘Sale for the month: €19,25,000 ‘Opening stock as on | March, 2017; 125,000 litres @ © 6.50 per itre Purchases (Including fright and insurance) ‘March 5-1,80,000 litres @ #710 per ttre ‘March 27-1,00,000 litres @ 27.00 per litre Closing stock as on ist Warch, 2017 130,000 litres AKASH AGARWAL S960 CLASSES SassiExpenses for the month ls 45,000. Pricing of material Issues fe being done atthe end of the month afer all receipts during the month On the basis of sbove information calculate the following using FIFO and LIFO methods of pri () Value of closing stock as on 31 March: 2017, i) Cost of goods sold during March 207 (i) Profit or loss for Marchy 2017 (A detailed stores ledger accbunt is not required, Only relevant figures need to be calculated). "ANSWER: (}) Valuation of closing stock as on 31-03-2077: (@)__ FIFO Method; (the closing stock will comprise the items purchased inthe and) = 00:000 litres purchased on 27-04-2077 #8700 700.000 000 litres from purchases mode on 05-03-2017 @ 87.10 215000 30-000 value of closing stock under FIFO method 918000 (©)_UFO Method: (he closing sock wil comprise the ems ving fn operng stock and purchased in the bgining) = (25,000 litres from opening stock @ €6.50 312500, 000 litres from purchases made on 05-03-2017 @ 87.10 35500 130-000 value of closing stock under LIFO method 48.000 Gi Cost of Goods Sold FIFO Method () [UFO Method Opening stock as on 01,08,207 12500 2500) Purchases made on 05,03,207 10:65:00) 10:65:00 Purchases made on 27.03.2017 7-00-00 7.00:000) Total 2577500, 257500 ess: Closing stock as per 913000 48.000) ‘Cost of material consumed 1664500, T99500) ‘Add: Expenses 459000, 459000 Cost of goods sold 1709500 1274500, Profit for Marah 2017; FIFO Method (@® [UFO Method @ ales 19.25.00) 15:25:00 ost of goods sod 7.091500 1774500) oft 25500 1505900) AKASH AGARWAL ©O@0 CLASSES f¥'sr'9845879706'@.9 The following Information Is provided by Sundari Industries forthe fortnight of Aprib 2016 Material ee ‘Stock on 42016 100 units at Rs, Sper unit, ‘Purchases: 54-16 300 units ahs. 6 84-16 500 _units at Rs,? 124-16 600 _units at fs. 8 Issues: (6-416 250 _ units 10-4-16400 units 144-1650 _unite ‘The stock verifier ofthe company reported a shortage of 30 unite on Xon account of shortage, On 20-04-2016; There happened firein company which resulted In loss of 26-units of material, ‘Required: . 1, Calculate using FIFO» LIFO & weighted average methods of pricing issues 3,___the value of materials consumed during the period bh, __the value of stock of materials on 30-416, ANSWER: APRIL ae ‘Op. stock _(+) ee ee ee eee ‘We will make store ledger to calevlate cost of material consumed & cost of Cl, stock AKASH AGARWAL ©2960 CLASSES BS or'ssase7s706FO) ‘Store ledger (MU = stock register) Dae Tecate Tesue Balance ‘Gaty. | Rate, [Ame | nty, ] Rate, [Amt | @nty. ] Rate, [am t T 10 | 3} 30 3 300_| 6 [1800 10 | 3/30 300 | 6 fo é mo] 5 | soo iso | 6 | 900 [so | 6 | oo 0 e 300 |? | 3500 0 | 6 [90 ° soo | 7 [30 0 0 o_| 6 [900 "250 7 [wo [aso | 7 [ws ° w@ 00 | 8 | 800 30 | 7 [ws ooo fe | 00 « 20 [7 150) 20 (8 2000 [350_ 18 0 15 (NL) 30 30 [ars [aso CLASSES ¥s1's54587970620 [20 ars prs [300 Jars [ree (a8,Loss) 5 7200 Cost of closing stock = 2625 Cost of abnormal ls = 175, Cost of material consumed = 7800 ‘Store ledger (IFO) Date Recents Qnty. | Rate, [Amt | Qnty 300 00 TEND) AKASH AGARWAL CLASSES Tssue Rate, Balance ‘Gnty, | Rate, 100 100 300) 300, 100 30) 109) 700 30 100) 600 100) 30 100 100 100 0 2800woo |? | 700 70__[0.42_| 800. 208, 3 [nea faeeaa [io |= | soo Loss) 30 |__| 300 woo [7 _| 700 so [ne] sv Cost of closing stock = 500 300+ 700+ S71 a = 2071 Cost of Abnormal loss = 228,40 essa Cost of material consumed = [Add issue ~ Amt, except Ab, oss] Dae om Rate, Ant ‘Qaty, | Rate, [Amt | Qnty, [Rate | Amt, | Qnty, [Rate | Amt 7 Too [5 [500 Sait] sons) 800 400 [se _|aeas 250 [evs pars [iso _|s.rs_[asns 3 [500 3500 70 [on aS 0 a0 fan [acsa [aso fan fans 2 [e008 00 350 [rea_[eatrs 1% 300 [62 [3a0 Ta _[aoer TSN) 2 = m0 [ass [ese 20(Ab.0 a0 fase [ise.c0 [300 ]a.s3 _[aa05 3) Cost of losing stock = 2499 (9500 or 0). Cost of abnormal loss = 166.6 AKASH AGARWAL ®2O8O°O CLASSES 919845879706AKASH AGARWAL CLASSESJOB + COST SHEET i -Z.TA acon uses afb cong sytem, The Following con data are avoTole from the Tok forthe previous year Direct eriaterial| Rs,9:00-000, ang eed Gist wbution [Rs 525-000 Direct wages BS, 7501000 | administrative 5, 420:000 ‘overheads (related with production activity) Profit TeGon000 | Factory overheads | Re 50.000 (a)_Frepare a Cost Sheat Indicating the prime cost works cost production cost cost “of sales and sales value, (H)__Inthe next year the factory had received an order fora numberof jabs. eis ‘estimated that the direct materials would be Rs, 1200-000 and direct labour would cost Rs, 750-000, “What would be the price for these Jabs inthe factory intends to earn the same rate of profit on salen ‘assuming that the selling and distribution overhead has gone up by 15%, “The factory recovers factory overhead as a percentage of direct wages ‘and sdministrative and selling and distribution overheads Isa percentage ‘of works cost based on the cost rates prevalent in the previous year, ANSWER: (3) Statement showing desired info fearticulrs ARoUR DMC 3:00°000 Duc 750-000) Prime cost 1650-000, (factory OH 450-000 Works cast 21-00:000) (Admin OF 420-000 Cost of production 7520-000) (@seling& distribution OH $25.00 Total cost of sales 30-45.000, Taal prof 609-000 Total saps 3654000 7 AKASH AGARWAL = @@@O GLASSES 551 Senseo(HLWN: Calculation of charging Rates Factory OF as 9% of OLC = FOR x100 Due = 450,000 2100, 730000 60% Te rneane F,0H = 60% af DLC ‘Admin OH 98 8 % of works cost = Admin OH X10 Works cost 20-000 x100 2100-000 1% of works cost Admin OH 0.0n Works cost Selling & distribution OH as a % af works comt 257000 100 2100-000 = 2556 2: SUDOH = 25% OF WORKS COST Rate of profiton sales = profit 100 es 6-09-00 3100 45.000 16.66% Profit = 16.66% of sales J08 COST SHEET FOR NEXT YEAR ome 12.0000 LC 750000, Prime cost 950,000 = CLF.OH (60% of works cost) [4350:000 Works cost [26-00-000 ‘C Admin OH (20% of works cost) [480-000 29860 AKASH AGARWAL CLASSESCost of production 28.8000 CYS DOM (25% of works cost) (240-000 x25%) = 600-000 (7 inerease 6:00:00 x 15% = 50000, 90000 Total cost 3570000, ‘We know that Total cost * Total profit = Total Sales Tet us assume Total sales be Rs, X 720,000 +X x16,66% x (Total sales) = 4284-000 Tz Component "pe! made erly cow Gentes 100, Material coat Spaive per “component and each component takes 10 minutes to produce, The machine operators paid 72 alse per hour» and machine hour rate is1,50, The setting up of the machine to produce the component pee’ takes 2 hours 20 minutes, On the basis ofthis information prepare a cost sheet showing the production and setting ‘vp cost bath in total and per component» assuming that a batch of (2) 10 components: (b)100 components: and (@) 1000 components is produced, ANSWER a Particulars Batch Size | TO components 100 component 1000 component Total | Per Total] Per | Total | Per el component component ccompone | _ nt A Setting up Cost: ‘Machine Operators wages TFeehours20minutes@72 Jica fo.cs — fics —fo.ows fies o.oo | oy | ‘Overheads 3350 [0.390 [350 ]0,0350 __|3,50 [0.00850 T] (hours 20minutes «7,50 i Tem) t_ 8, Production Cost: ‘Materiel Cost & 0, 06 per [component 0.60 Jo.o60 [6,00 0.0600 _]60.00_} 0.06000 | AKASH AGARWAL SOOO CLASSES Gi¥s1'9545875706‘Machine Operators Wages 120 [olzo [i200 [o.oo [ianoo Jowooo (Refer to Working Note ()] Overheads TeRefer to Working Note (I [250 [O20 fes00 fo.2s00 |aso.00 oaso00 | © Total Cost (A 8) aa [ooes [aes oan _|aasa [oaseia Working Notes: TO Components 100 Components [1000 Components (Operators Wages Time taken in minutes by machine operators and | 109 1000 10000 | machine e10minutes per ~~] component fo0/60«. 000/60 x {1000/60 x | Operators Wages @ “0,72 |0.72)-1.2 0.721120 — {per nour ¢) __| (H) Overhead expenses: 2.50 25.00 Total overhead expenses }[100/60x" 1.501 }{i000/60% 1,501 | fi0000/60%1,50) .2"1,50 per Machine hour sen Gi. foctory following the lob Costing Method on abstract from the workin process as ot 30th ‘September was prerored 35 under [Job No, Materials Direct Labour _ | Factory Overheads Applied (Re) 1S 1395 400 Hrs 800 | 640 8 810, 250 hrs $00 [400 120) 6s 300 nrs7s | 380 2500 was 1420) AKASH AGARWAL CLASSES 2S9Oo‘Materials used in October were as follows: Material requisitiors No, 4 55 56 5 38 9 Tob No, 18, 1a, Te 120) 121 1a Cost Rs) 300, a5 aS 665 310) 720 3535 “A summary at Labour Hours deployed during October is as under No, Of Hours TOR NO. Tdirect Labour: Waiting for material Machine ‘breakdown Tale time ‘Overtime premium Shop 25 20 75 S 20 25 Shop rd 30 10 0 75 01 [A shop credit slip was legued in October which material issued under requisition No, S@ was returned back to stores as being not suitable, A material transfer note iss in October indicated that material issued under requisition No, S$ for Job 118 was directed to Job 124, “The hourly rate in shop A per labour hour is Re while at shop Bit 8 in September; Jobs 15118 and 120 were completed ‘overhead is applied at the same rat s2 per hour, The factory in October, You are asked to compute the factory cost of the completed jobs, It is practice of the ‘management to put a 10% on the factory cost to cover administration and selling overheads ‘and invoice the job ta the customer on a total cost plus 207 basis what would be the Invoice price ofthese three jobs? AKASH AGARWAL GLASSES 819545875706 oo‘ANSWER: Calculation of selling price of the Job JOPNo, i 1 1a. Re Rs RS Costs in September: Material a0) 1S Labour 300) 300 ars [Overheads 60 400 380 Total (A) 2765 | ro | 1620 Costs in October Material a 665 Labour (25x 3 (25 xa) 1 (0% 3)+30x2) 330 (25 «3)F(10%3) 205 Overheads (80%) 100) 264 196, Tots! (8) 2% v9 [_ Hog Total Factory Cost (A*8) 2590 | 2a19 | 2726 ‘Add; Admn, Overheads" 105 amo | as [a6 3299.0 | 3100.9 | 2098.6 Profit 20% 65180 | 2018 | 39972 Selling Price 3945,80 | 3721.08 | 959832‘QUESTION: ‘You are given the folowing information of = worker, Name of worker Mr. Bun (Ticket No, (iWork started (i) Work finished E14 at 12 noon (e)Work allotted [__: Production of 2160 units (a) Work done and approved: 2000unts (GipTime and units allowed a0 units per hour (Gi)Wage ate fs, 25 per hour (GdMr. Bunny worked 9 hours a doy. Yow ae required to calultethe remuneration of Mr, Roger onthe flowing baa (Halsey pin and (@ Rowan pion ‘SOLUTION: Hours worked =9~@44 a0 hes ‘Wage rate = #25 per hr ‘Actual production = 2000 units w allowed = 40 pr/ hr units ‘Std time for actual output Time saved = 50 hrs = 40s Thre T)HALSEY SCHEME: = hrs worked “wage rate *hrs saved “wage rate “50% 405 +107 25 "50% = 1s ROWAN SCHEME! = hrs worked “ wage rate hrs saved “wage rate” ETA 40 95 +0795 200 AKASH AGARWAL QOeOo GLASSESMr Paty excite a ee of worn T Fours a against Sohours awe Aim Ws Rouly rates Rs 10 and he gets 9 dearmess allowances Rs, 30 per day of & hours worked in addon to Tis wages, Vou are required to caleulate total wages received by Mr, Michael under the following incentive schemes: (Rowan Premivm Plan and (i) Emerson's efficiency Plan “SOLUTION: () Rowan premiom plan i = Hrs worked “wage rate “deamness allowance * wage rte 0710+ 30710 = 140 Deamon allowarce 120 = 450) “Total wages = 1440 7 450 = 1890 (@ Emerson efiency plan 72" 100 = 125% bonus = 20% 7 25% = 4H Wages = 120710 1200 bonus = 1200 45% _= 540) pa 450, Totalwages 210 ‘QUESTIONS: Calculate the eornings of workers of workers Sonur Titu ond Sweety under Straight Plece Rate System ‘and Merrck’s Piece Rate System from the following particulars, ‘Normal Rate per Hour Rs. 540 Stondard Time per Unit T Minute ‘Sutput per day iss follows ‘Worker A-390 Units ‘Worker 8-450 Units Worker C600 Units ‘Working hours per dayare 8, AKASH AGARWAL 2960 CLASSES risers aisStd time per unit = min Neml rate hr= ¢5.4 60min “1= 60 min t lece rate per hr = 5 = 20.09 Calgulation of total earning (piece rate) Sony = 390 “0,09 = 35.1 Titu= 450 *0.09 = 40.5 ‘Sweety = 600 ~0.09 = 54 Calgulation of total earning (merrick) PARTICULARS SOND Tm SWEET Actual output 390 450 00 Standard output 80 a0 a0 LOE e125 37 5% TOTAL WAGES 30 O05 0 0.9 coo 0.7 OTTO. a a5 TORE TH #10 20% ahr Ti Anthony St, showing total earnings and eff wage rate Particulars amar bar Std time 00h TOOK Actual time One he ime saved a0hr 30h Bons brs (wn) 65 a5 Total hrs to be paid 665 5S total wage at] hr ws Effwoge rate 74s [70> F062 0052, AKASH AGARWAL CLASSES: 2OOo Bi v'or'9sa5878700SEPERATION / DISCHARGE QUESTIONS The Cost Accountant of Bahubsli Ltd, has computed labour turnover rate for he quarter ‘ended Slst March 2016 a8 10% 5% and 3% respectively under Flux method Replacement method ‘and Separation methoc respectively, ifthe number of workers replaced during that quarter is 30> find out the number of (workers recruited and joined and (@) workers let and discharged “SOLUTION: LTR under flox = 10% {LTR under replacement = 5% LTR under separation = 3% Na of replarement = 20 TDL ander replacement = no of rep 7a workers 100 3%_=30/ avg workers Ag workers = 600 TD LTR under separation 600 "3% No of se 100 TH) LTR under flux = 18 * no of accession / 600 “100, 10% * 600 = 18 no of accession a of accession = 42 ‘QUESTION ZINTES LTD. a manufocturing company haste factories at two lations Rowan plan is Tn uae a location A and Halsey plan at location 8, Standard time and basic rate of wages are same for 8 job whichis similar ond is coried out on similar machinery, Time allowed Is 60 hours Job at location Ais completed in 36 hours while at Brit has taken 48 hours. Conversion coste at respective laces are Rs.122¢ and fs,1500, Overheads amount to Rs.20 per hour, Required () Find out the normal wage rate and (i) Compere conversion ost‘SOLUTION: Let Rs, X per hour be the normal wage rate, Wage rate at location A willbe Rs, 36x and at location B= It willbe Rs, 4850 on the basis of actual time taken’ as against 60 hours permitted, For time saved: Bonus willbe payable as under: TOCATIONA: ‘Bonus under Rowan system ime alowed x hrs, worked x rate per hour Time taken 24760 x 236 x= WAX Total wages =Rs, 36x * Re.16.4x= 50.4 ‘Overheads BRs, 20 per hour worked = 36 hrs, “Rs, 20= Re, 720 Therefore: total conversion cost is (50, 4x+ Rs, 720) = Re, 1224 oF 50,4 =Rs, 50% ‘Or x= Rs.504/50.4= Rs. 10 ‘So Bonus = 14,44 =14,4 “85, 10= fs, 104 TOCATIONE: Bonus under Halsey plan = 50% oftime saved “va 50x 50% of fs, 1 Total wages = 8s, 48x 7 Re, x= Re, 54% ‘Overheads @ Rs, 20 per hour= 4 hrs, “Rs, 20= Re.900 Total conversion cost is (54x * Rs, 960) = Re, 1500 oF 54K Location A (Rowan) 8 (Halsey) ‘Amount fs BS, Wages @ Rs,10 perhour worked [360 480 Bonus 14a 60 ‘Overheads m0. oO Tots! 1224 1500) AKASH AGARWAL ©2ee0o0 CLASSES rer seeneis[ MACHINE HR RATE ‘QUESTION 3 The preliminary budget for a company with 4 departments wos as under Departments ‘Direct Overheads ‘apportioned Direct labour hours Allocation (Rs.) ‘Overheads (%) Det. 14200 0 60000 Dept.2 7200 30 [200000 Dept.# 16400 20) 20000 Dent. 22600, 40 15000 Total 60400 T6000 530000 Tews decid to establah new department (6) and to slightly re-onganve the existing deportes The following alternations were agreed to in making a revised budget:~ -3)A Sum of Rs, 15:000/~ being addtional overheads wil be allocated directly to department (@) )Am amount of 8s, 600/-being overhead previously allocated directly to department (3) wil now be transferred to department (5) Rs, 30:000/= edtonal overhead expected to be neurred to re-organisation wil we apportioned as folows= Department 1234S Propartion(%6) 10% 20% - 10% Om ‘A)Revised direct labour hours are expected tobe Department ove 7 [65600 2 [2:00.000, 3 1:00.00, @ 60-000) 3 30-000 Total [619.600 You are required to calculate 1) The departmental direct labour hour rates of overhead based on the praliminary budget il)The departmental direct labour hour rates of overhead based on the revised budget Ti)The overhead chargeable at the revised rates to one unit of product “x for which t are spent in each department = Department 1 3 4 5 Hours ¢ 4 8 3 lowing hours AKASH AGARWAL CLASSESSee See ‘SOLUTION 1) Statement showing DL hr rates based on preliminary budget Particulars 1 2 3 [a ‘Allocated OH 14200 7200 16400 ra2600 ‘Apportioned OH 17600) 52800 35200 0400 (76000) 10%, 30%) 20% [40% TOTAL OH (A) 31800 60000, 51600 (93000, DLARS: 60000 200000 120000, 15000 ‘ORR=TOTALOHTOLHRS [0.5% 08 0.48 0.02 I St showing OL HRS on revised budget [Particulars T z 3 (a iS ‘Allocated OH 14200 7200 3800 22600 __ [21600 Apportioned OH 12600) 32800 [35200 [70400 (0000), 3000 6000 | 3000 18000 TOTAL OHTA) 34800 66000 [45000 [96000 [29600 OU hrs 2600, "200000 | 1c0000 _}160000 __[>0000. ‘ORR (A7B) 05 0.33 0.45 oa 0.44 ii) st showing OH chargeable toX Err T HRS ORR Co ma A 08 : 06 ie 0.40 ae AKASH AGARWAL CLASSES O2O@0 8 ¥'s1'9545879706Ea "SIMULTANEOUS *CONTINUOUS QUESTION “A company has three production cost centres A B and ( and to services cost centres X ond ¥. Costs allocated to service centres are required to_be apportioned to the production centres 70 find out cost of Production of different products IL found benefit of service cost centres Is also received Tay each other al with the praduction cost centres, Overheads casts as allocated tothe five cowt “centres and estimates of benefit of service centres received by each of them are as under: Cost Overheads cost as Estimates of benefits received from Centres [allocated (Rs) services centres (%) x Y x 30000 20 20 8 20000 30 25 c 20000 20 50 x 20000, 7 z Y 10000 7 = Required; Wark out fal overhead costs of each ofthe production department apportioned cost of service centres using @)ontinuaus distribution method and (b)Simultaneous equation method. SOLUTION: 1) dletrinution method = PARTICULARS: a 20000 2000) Dist = OF (20:30:40: Dist -¥ OF (20:25:50:5:0) Dist =X OH Dist =¥ OW Dist = OH 0) 2400 e c x Y 749000 _]20000 [20000 [19000 000 [8000 __|(20000)_|2000 3000 00 000) (R000 wo [240__—[(600)_ |. 1S 0 3 ° 0 7 3071 i simultaneous method GLASSES Particulars a @ c x ry O# [30000 [40000 [20000 [20000 0000) Dist =x OF oo cat [eam___[ (20603) | 2000 AKASH AGARWAL ®28e°oDist=¥ OW Po 6030 [08 [TOTAL OH v6s33 [aoe [saan WN: DEPT X= 20000 + 5% ofY-OR DEPT Y= 10000 710 ¥ of X-OH 0000+ SKofy — —> CW) 19000 10% ofx_ — @) y On putting eg vin ea? X= 20000 ¥ 0,05" (10000 * 0.10), X = 20000 * 500 + 0,005x X= 20500 + 0,005 X= 20603 ¥ Y 10000 10% “20608 12060 ‘QUESTION: 3 'SONAX LTO, has three Production Departments and two Service Departments, The overhead distribution ‘sheet showed the folowing totals z Production Departments: A 000 8 31000 c 28.000 Service Departments: s —___fea00 rT T 15900 as Required Using the folowing bases of apportionment ‘Simultaneous Equation Method: istribute the cost of service departments under a 8 c s rr Department S 30% [eon *faom—=«d 10% Department T 40% _‘(S% [25% 20% = SOLUTION I [etx be the expense of Department Sand y be the expense of Department T AKASH AGARWAL SGeo CLASSES WSs SeasaysesThen x= Re, 8000 Wethof ¥@OR FY) es.5900-* Vid of x Paling the vale oe we 7 Y= 518900 V0" (@D00*V/E oY) Ony = 8.18500 Rs, 800 775 y 5.162007 750 y OR SO y= 735000 y (On S0y = y= Rs, 795,000 of y =R87:35:000/49= Re Putting the value of y we get ' 8:00 + 75 of Vs OR XE Rs, 8000 + 175 of Rs,150000 ‘oF x= Rs,81000 + e.5:000" oF x= f.1¥000 Total expenses of Dept. S_ = Rs.10000, Total expenses of Dept. T = Rs,15000 ‘Overhead Distribution Summar Particulrs a 8 c 5 T RS Rs_( RS. RS, Be, Total es per Primary Distribution 25000 _]3-000 [28.000 |@000 [131900 Distribution of Expenses of Dept. Sin | 300 [2200 [aana |-1o00 fag the ral 3:2:421 Distribution of Expenses of Dept, Tin | 5000 ED 3an00 [35850 [aens0 [= = ‘SUPPLEMENTARY METHOD: QUESTION: in 9 manufacturing ualt of EXOTICA LTD overhead was recovered ata pre-determined rate of Rs, 30 per man day, The total factory overhead incurred and the man ~days actually worked were Ry, 5720-000 ard 125500 respectively, Qut of ive 49000 units produced during period 30000 unite were ‘sald, There were also 10000 uncompleted units which may be reckoned at 60% complet, ‘On analysing the reasons It was found that 50% of the unabsorbed overheads ware due to defective ‘Planning and the rest were attributable to Increased averhead costs. How would unsbsorbed overhead bbe treated in Cost Accounts? _ ‘SOLUTION: Amount (Rs.) ‘Overheads incurred 520-000, ‘Less; Overheads absorbed (12500 man-days " R5.20) | 275.000 ‘Under absorption 4S AKASH AGARWAL CLASSES:“The under absorption of Rs, 145-000 being considerable whether due to defective planning oF due to Tncrease in prices: would be disposed off by applying Supplementary Overhead Rate inthe following manner Supplementary Overhead Rate = Rs, 145-0007 [[30,00010-000*(30.000"60%)] Units] = Rs, 145000758000 orits Rs. 2.50 per Unit Tobe absorbed on cost of goods sold = 20°000 Units “Re, 2.50 = Rs,75000 Tobe absorbed on closing stock 10-000 Units “Rs, 2,50 Rs 25000 To be absorbed on work -in-prograss = 30.000Unts “Rs,2,50°60% = Rs, 45000 MACHINE HRT RATE QUESTIONS From the following particulars given below compute Machine hour rate for a machine, ) Cost £24,000 (i) Serap value #4,000 (ii) Estimated Working if 40-000 hours (iv) Estimated cost of repairs and maintenance during the whole life # 2,000 (W) Standard charges of the shop for 4 weekly period ® 3,000 (wi) Working hours in 4 weekly period 100 hours (vi) No, of machines inthe shop each of which Is lable for equal charge are 30 machines, (Wit) Power used per hour € unite & 10p, per unit SOLUTION: ‘Computotion of Machine Hour Rate Particulars Rate Per hour Standing Charges (0007 100XS0) 7.00) Machine Expenses Depreciation T(24000-4000)/40-000) Repairs [2:000/40:000]_=0.05 Power [ex.10] £0.40 0.95 ‘Machine Hour Rate 195 AKASH AGARWAL GLASSES ®QOOGoOQUESTION: DISTRIBUTION © RE-DISTAIUTION DH ‘A company has two production departments and two service departments, “he data relating toa (period are a8 under: Production Departmehts ‘Service Departments 701 72 $01 soz Direct Materials @®__ [80-000 40:000 40:000 30/000, Direct Wages @__ [95-000 50000, 000 [20-000 ‘Overheads (@®__ [80000 50000, 40000 30-000 Power Requirement at Norma capacity (ny | 25:060 30.000 15000 10000 operations Actual power consumption daring the | (kwh) | 12.000 30.000 000 12000 period The power requirement of these departments is met by @ power generation plant. The seid plant ig not included above, of € 121875 out of which a sum of €84,375 incurred an experditure, was variable and the rest feed overheads are to be redistributed on ‘After epportionment of power generation plant costs to the four departments: the service department he folowing bases: FOr Poe SOL soa S01 50% 40% = ho. 02 60% 20% 20% You are required 0 CiRe- apportion services department. ‘(DAnportion the power generation plant costs to the four departments, cost to production departments SOLUTION: Apportionment of the power generation plant cost to the four departments: Particulars | Basis of Apportionment [Total [P01 |PO2 [SOT ‘soa Power requirement at Fixed Cost | Noenal x00 nar fraoca |roa — faces (s:¢3:2) Variable Actual power consumption Cost (528) sears [roar | 3e652_|ra9m {roar Total oat Tanars_[ 31190 [46515 enon [ais AKASH AGARWAL 2800 ‘919:‘Overhead distribution summary and re-epportionment: Perticulars Total [POI [P02 ___[SOi___[ S02 Power generation lant cost wavers [30190 [46515 [200m [20nss ‘Direct Materist T 50,000 20.000 [30.000 Direct Wages 307000, 30:000 | 20:00, ‘Overheads 2.00,000_|80:000 | 50000 | 40.000_| 30.000. Total overheads as per primary ‘eavers prima [o6sis [moon | oaIs9 distribution ‘Secondary Oistibutions tartare a S02, (6:2:2) [69096 [23032 [23032 | (15160) sol (5:41) [iste 9213 (23032) [2303 802, 6:22} [i382 461 460, (303) sot (5:41) [230 194 (460) 46 $02 f6:2:2) [2a 2 9 (46) sot tsa) [s 4 @) es Ton pane ef f ' AKASH AGARWAL = @OO@O +91 9545879706‘CIAPTER 7 MARGINAL COSTING " 1 Following information are avallale for the year 2015 and 2014 of PEG Limit [eer eee eee eee at 2021 i Sle Be 32..000 Res7.000 7 Rs 5.0.0007 Ri, 70,000 elt a) Prix Teal aed nt and) Sa Fado san a Pro COTS LEMON SOLUTION: (a) PA Rati = Difference Difference profit 100 ses = Tao Sapo 370.000 — 32.00.00 ‘WGP rata = Total comtrbatiay = 100 oral a “= Tosa contribution 100 32,00,00 “Foil conte = 120.000 TEC Total contribution + Total owe 12,80,000 + 3,00,000= 15,0,000 Prato = Total contribution = 100 “Total sales 2 = Total conten x 100 570,000 “oral sont= 20.000 C= Total contr 22,50,000 7.00.00 = 18:80,000 (@WTosl contribute Fx ‘VC= Total ses Tota contrition = 32,0,000 12,5000 = 1930.00 Gi Total contribution =7550,000, £ToSATINTTTES FETE = 34.20.00 (Dail ad oral CLP = ROO DOO = OOH Pa 0% AKASH AGARWAL ®BSeoO CLASSES Ssr's: 1545879706.(93 Vow are given the folowing dats Tie i Trot [ Year 2020, 1.20.00, R000 Year 1021 Ts 140.000 Tes 15.000 Find out i) PY sat, (i) EE: Polat, (i) Feit when sles are Re 180000, {in Sales roquted earn « profit of Ks. 1.00, (0) Margin of safety in year 2014, DPI Ratio= Diftivones iw promt ¥ 100 Diflerence in sales oa To Ta000= 140.000, =o so o.000 ro Tae i000, OVC Contebution SOT RC 22.000) Profit 5.00. WaEP =O 100 PY aw 0 25% = 000 (i Deve Sales =O 7,500 32,000 F 25% Profit= 23,000 {Desired Salor= FOP 7 Bows 000 25%, T3000. ()MOSSales = Pratt PI FESEAO 25 =3000 = AKASH AGARWAL ©OG6o0 CLASSES eedQS RC Ta as Terabe Oe flowing data Tor the who years icons 21st + [B01 Sates a.0009 7 Profi ame Raia Sov. Tan ‘Margin of safety sales asa % oF oad 0% TTS sales “There has beens a sang aU ied cot tthe yen DO7G-17 due to Oe esta “The company could maintain is sae quautity level of 2018-16 in 2016-2017 by reducing che Sling pres ‘You are required fo calelate te following values Gn Ti Sales for 201 Tireak-even sales for 20167 i) Fed cou for 2016-17, ‘SOLUTION: lable cost ratio = 100% 50% = 50% BUS 2016 = €70,00,000 50%. = € 50000 sales quant has not changed. “Thus Variable Cost i 2016 — 3017 is € 500,00. Ta 2016-2017, PV ratio= 37.30%, “The, Variable Cont ratio = 10072 373 aa Ths aks a UIST = SOOT EH ‘Atbrealeven point, Fixed Cot i equal to contribution. Ta 2076017 Brealceren ae 978% = TR IDS% Break ven sales = 800,000 7.17572 = €625,00 (ip Fie Con of F016 T= BE wakes Pao = 625,000 ¥37.50% = D345 i oliowing parca ak ton manatictaring facto for the month of March, 2077 Variable cost p= unit Ret Fined factory overhead Te $10.05 Fite sling overbcad is. 25,000 ——Tsaes rice per amit a iw coe point eapree a rapee Ee Ga How mans nits be sold to earn a target nt incom O Rs, 60,000 perma Hove many units mus be sold income dt 25% on cast? jo) What shouldbe the selling orice per anit if break ven oo to 0000 wait? 6) Caleaaton of BEP in rupee sales: EP Hise cost =, 0 0007, 5, 000 = Re, 260,000, al 3% (i) Saleso carn a target net income of Rs. 60,000 per month Conteibtion per unit= Re, 10= Rs, d= Rs 6 Sales in units = E+ Desusd Profit = 0,92, 000 = 6000 = 1,0 wn ‘Contribution per anit 6 AKASH AGARWAL S800 CLASSES +91 954! 6.{Gp/No. of units tbe sold to earn a net income of 25% on cost Profi 25% on cost menne a profit 20% on Sale, Let sales be aatumed an Ra 3 the dered prod willbe 20% of x oF 20%. Now x= Es Desnal Pot LV Ratio ‘De x= 7HH.000 + 0305 100 T 30 30x = 7.93, ,000+ FOE 10K = Rs 7,9,00,00 ora Re, 79,2000, To: of ents bead = 70000 ISP. per ud EEX BEP in units 1-20-00 VE C= Re + Re G6 = Re, 2060 and profit Taring to perio were ws Totowa Sales © Profit n 200,000 20,000 2 3.00.900 0.000 = 20,000 x02) 20,000 = £30,000 Sale required to earn desired profit = Fixed Cast Desired Prom PIV Ratio = 20,00 = 5,000) 7 30% £350,000 ‘BREAK-EVEN POINT ‘6 TOTO Cad sali product at Ws 15 pr ani a period TE produces and ses 8.00) urea loss of Re per ust, the volume saved 020,000 nil, ears a profit Rs 4 per ani Caleulate break-even point both in terms of rupacs as wel a i wnt AKASH AGARWAL CLASSES QOOGoO Mi v'o1'9545879706SOLUTION: OWN. 1) Calclaton of sks, profit PIV Ratio on rn 3.0003 18 20p00 is TEI 0,000 Tete Tape = 40,00) = 0,900 "PLY Rao = Difsrense i pent x 100 Difference insales = Bae pom) TOW 300,000 — 120,000 = ZLaa oT foo — 180.000, T 6.66 % (WN.=2) Caleulation of Fd cost SOOTY Sale 3.0000 (C) variable cow 7.00,00, Contribution Gale x ph) 2.00.00, (©) Fed eos 20.0007 Profi 50,000 EP sales (unit) = FC Conta PT = ELOY = 0000 was ‘a Conteh “Total vats 20,000 uals ‘HEP Sais ()= FC = | pom_= Fa PV Raa — 66.066 INOIFRENCE POINT 07 Tio firms ala Coa IG Co, sl the same proc Tn he Same mara Their budgeted profit a oss acount forthe yea ending Sat mareh, 2016 are as follows Parueules [tala & ons) [tall co. (85) Sates $.00,000 600,000 Variable Cont 00.000 0.000, Fined Costs 30,000 70.00" Net Profit 70.000 130.005 AKASH AGARWAL CLASSES 29Oo 64 + 919545879706Heavy demand forthe produ 1b. Law demand forthe product. Give reasons SOLUTION: (WN= 1) Calculation of PIV Ra PA Ratio Tala & Co (RS) Tall & Co. (x) Total contribution 100 0.800 — 000005. 1006.0, 000— $00,100 100 “Total sales 50,000 000 =O = 588% Gon the basis of FC) ‘=> Lalli & Co, wes caitalintensive method since FC fs higher Inthe company > Lala & Co. woes labour intensive method sings Total FC is lw. Situation Trew demand high production) Gow VC w sales rato) Taw demand Tan Ca. ‘ow pradution) ‘high VC to lesraioy {Since VC pu not posible to Find we wil go with VC to sala rat VC to sales Ratio ala & Co Tali Con 100% 203 10% = 33.0% 0% = 666T%. "Ok Cok, Pepatand Slice are tee sim merged far better operation The detalls areas under: them tobe TP tartcatirs | PiantCokeat | Plant Popstar Plant 100% (Rsin | 70% (Rs ia Laks) | 50% (Rin Lakhs) = aks) 007 a 7s 200, 210, 7S 70 0 a. Required: 8) Compute the eapaciy ofthe merged pani for breakeven 1b) Compute the profit ofthe merged plan at 75% capacity ©) Compute the expaeity ution ofthe merged plant to earn prof of RE lake AKASH AGARWAL Qeoeo GLASSES i ¥or'9545875706TSOUUTON: vate margin equation a 100% cap aa Plant Coke at Plant Sie] Toad (Rs. a Tatas) (Bsn taki) Sates Sor 300 —| i000 ve “aw sy) [16807 Contribution | 100 130 350 QFC ra ey —asay Profi 30 38 188 TOLBEF fakay_= Tou FC (merged plan) —PY merge == ais 38% (WANI)_PW Ratio of merged co. Total soninbaion 100 Toad sales 30 10 Tou = 35% Capliyat HEP = WEP Sates = S30 100 Torat Sales 1000.7 (Fes at 75s Capacity = Contribution = FC T esx PIV Ratio = TFC STL 3806 -TL MST. ‘Total Sales at 75% level = 1000 Lx 75% 750 (Desired sales “TEC Profit = PVRato 35% ‘Cap, Uiization for =x 100 = GT ‘60 L sales 00 “9 There are hres mar plants under one Corporate Management who wants than be meraed for Teter operation, Toe following are the details eel Piast [Plant | Piast Capes ts Operation 100% 70, Ls, (Rn aka Taree Tor 70) = Variable Cost 007 30, 78 Fised Cost a 3 ee @o AKASH AGARWAL 2900 CLA ISSES Es‘You ave required to caleuate GL Capacity of merged plant tobe operated to breakeven {iy Profitability of working at 73% capacity: (i The turnover from the merged plant to givea profit of Rs. 28 ak Capacity Pista Pant [Plant C Merges Plant a Toor |—to0rs | 100% [100% Sate 300 —[ — 400 —[ — 300 | — 1.007 Les: Variable Costa 100% Capacity | 200 [3001 a Contribution 300 [100 iso 300 Ts: Fixed Cost 70 St o ro} Profi 30 30 8 168 ‘DPIV Ratio = Contribution x 100 = 350x100 359 000 ‘EEF (eRe) = Tied Con = = Re SO PWV Ratio 35% ‘Capaeliy oF Rs 20 aki tia sales Rs 000 aks = S30 3 10 SE 00 “Gp Sales at 75% capacity= Re. 750 Laks P= Gales 5 P/V ratio) Fined Cost {TV Sales to earn profi of Rs 78 Tas. Sales = Fined Cost = Desired Profit= 182-28 = 210 600 “ARES PIV Rat 333500 PROFTABLE MIN, ‘On-Air cam Produce three different produc from aw material usng ihe same production facies of Faw material, whichis forthe budget period, The variable overheats are 2560 imported at €8 rots Also determine the profit that wil be earned at how [rete | Marter Demand | Seting Pic Por | Labcur Gloun | Raw Materat =I (anit) © Roguired per | (Ke Required per ‘ot ‘unit x 0" 3 r or ¥ 6.007 0 =i. ot z 5.000 zy is Ls QOeo 5 ¥o1'9545875706 AKASH AGARWAL CLASSESSOLUTION: aoe ‘MARGINAL PROFITABILITY STATEMENT asia Production Yq [27a Direct Material 320 [2.007 Direct Labour igo | 12.00 ‘Variable Prediction Overheads 20 | 40 ‘Variable Selling Overheads 00 S00 1A) Total Variable Cost Seat [37-0 )Seling Price 0.00 | —s0.00 (C) Contribution por wait BA) 3.60 | 12.60 (D) Contribution per kgof raw material Re) cE EE (Ranking L HL ed a ‘Contribution Max. Units Produetion | Materiats | Materials Kp) = ‘Max. | Consumed — Unie | ikes) TF J sam s.000 6.000 07 Tana Sy 33600 | S000 | soe 700 van = 780 62.00 Z| S000 [aos 7 Tr600 x 3.60)= 1.600 20,160 otal Contribvtion T1660 Les: Fixed Cost 50.000 = Profit ON Parca x z ‘Seling Prien (Rx) 200 [60 rT ‘Variable Costuni i) 1010 0 Fixed Expenses/nonth (Rs) ano ‘Maximum 000 | 8000 | — eno fe Production (as) “Total Howrs available for the 200 th Maxinun demandmonth (nit) | p00 | 009 | 3200 AKASH AGARWAL 2860 CLASSES 01 oS4s8 70708TT ‘Total Contribution ‘uit tobe ca produced x 20007 = 1.0.00 5 Ts 0 4.00, — € 2.00 o 1.85.00 oval Contribution 3.68.00 TessFixed Cost 2.76.00) Profi Rs 92.000 * Please refer Working Note Break Even Sales in Rs) = (Fixed Cost Contributin) Sal = (Hs2,76,000 73,65,00) Re 672,000 male has on Te me SaaE a) ao) ‘Working Note x 7 o 307 Ta 700 Les: variable costonit Ty i207 “e) as) ContibatonTanit RS) wo we a "Maximum produetiowhr | (S000 200-25 P (BOOTEON= W | To0H 003 nits) (Contribation per hour | SnsiS=Zp00 | aoxworian0 | S0xcom1 00 is) ‘Contribationeait ay Toxay oy Maximum produetion/hr [Ranking r 7 7 Units to be produced Zo 7.00 200 "Time requirement for he ‘30 0 0 suits o be produced Work =i Products c Baling [Sates Revenwe 200 £00,000 160 256,000 20.000 596.000 AKASH AGARWAL CLASSES @QeeG0 ‘919545879706THA deere i te variable coat pean A decrease in the contribution mary (apa 0% fog pcice and varabio cat per al lA 10% increase nthe sling price per & 10% decrease i the Pai sales VOLUME Ao) A 80% increase a de variable cust per pnitan 30% desresse in ws SOLUTION: PV Ratio = Consribation px 100 pp (Baia formula) Tatas assome spp = £100 7 Contribution PAV Rao = Contribution pa 5 100 pba 3 100 Ea ‘YA crease the Pca sales volume — No change in P/V Ratio [No change in PIV Ratio (Gi) PV Ratio = 00-40 100 = GM oe deoreave by ETD) (PH Ralo= Tas contribution now 40 “PWV rato will dee iN 0 1030s 100= SE 110 "PIV Ratio wil increase =x 10> 110 “No change ia PIV Rato (Si Sater volume ‘Non spp. =E110 TLV Ratio = [W080 100= 548076 110 AKASH AGARWAL ©9860 CLASSES WES SSSPV Raila will decrease ‘PRODUCT ma ‘Q:13 ANKTH LTD, a manufacturing Company which produecs three products furishes the flowing Tnformation forthe year 2016-17: Partiewars Products E c Selling Prise (ger anit as. 200 [sg Ts. 100 Profit Volume Ratio m7 40% Raw Material content sa 2 of Variable Coat | 50° 30% Maximum Sales Potential (units) 0.000 o.oo Fined coos are estimated a Rs, 12 Takis The firm ase same raw mu Raw materiale llth three produc. "Short Supply’ The frm has «quota for the supply of ray materials of the value of Rs. 36 lakhs forthe yen? 2016-17 forthe production of three products to met sales demand. Required: Determine To oi eretrom Sous: BE n aaa Fada Te] Rs) Tie ier or 200 150 100 Les: Variable Cost V> SP-SP =P 180 1a a a Continaion por Ua SPV) Fn za a Contrtbuton per Key-Facir (CIRFSOM oF war 7 13 vey Tati 1 7 r Units Prodaced Tape) — F000 T7000 1090) | tasimem |_cussinum Rae Naveral od a) Tao — 1s00000 —]— an a00 caedeonann | sno: no) | ogee» Re30) 180,000 Prodect 7000 eit Fron ronaliag av mate) Predt 825,00 units (Masia) roduc © 1,00 nis (Masia) Tie ara Product A 2BID0 yitex Rs 20 pe ld “imate Prods 82500 70,000 Prod € 1000 “otal comeribation issn Test Fed cost 00 Mazin pro {sta AKASH AGARWAL QOOo + 91 9545879706TU MODERNE 1 budgeted data forthe coming year are as fllows Taam Paria x ¥ Za Tales 22.40.500-|15.30:000 | 1a.50.000 Direct mater 280,000 280,000 00] 1.s0,900 | 44.000 50.000 T 2.sn.000 1 se Tihs Sompant Te cossiering a ste down depariment’Z7 There a poslbaiy in. ied ct By Rs 450,000 department 2 closed down. Auvise the management whether oF not department Z” should be closed down, SOLUTION: Sistement of Profit bore dosing Department "Ze Particulate x Y Z Tar aes Fao | rr30-000 | 130.900 | $0.40.000 i) Variable Cost Dinest Matera Zaooo | amaoo_| Ro _| p00 Direct Labour 12,000 [10.000 | 4.18000 [_7.00.000 Direct Expenses 2.0,000 | 14,000[ 5.60.00 | 9.5.000 i) Total Variable Cost 6.72,000_| 4.20.00 2390.00 (iv) Contribution ei) 758.000 | 700.000 2660.00 ae (9) Fised Cost (As given in Question) | 5.000 | 2.80.00 00,00, (vi) Profi) 710.08.000 [420,000 71.68.00) | 12.60.000 ‘Statement of profit after dosing Deparment > Particulars x ¥, Tear Sates 22..000 | 1 0,000 | 33.60.000 (GDVariae cont 1 Direct Materials 280.000 | 140000 | 20,00 + Direst Labour riz000 | 140.000 | 2's:000 Direct Expenses 280,000 | 140,000 | 20,000 (Total Variable Cost Epo | 000 | 1,500 (Gy) Contribution (i) 158.000] 7.00,000 [22,0000 (9) Fised cost 51.000 (i) Profit (a) should not be closed down, AKASH AGARWAL CLASSES 2900 +61 954!a Hf LIMITING FACTOR fo save extracted from the records of comp PER UNIT = PpRopucr «| PRODUCED, Sates @ 10, 120 Consumption of materal Eki 3K Material eos = is ey i 0 @ 3 ©. Tie THe a z 7 ey is 20 Dineet wages per hour BES {Comment on profitability af each product (bok use the same raw material) whew 1Total sales potential ia uals is Umied 2) Total sles potential in valve i limited 3) Ra material sin short supply 4) Production enpaety (a terms of machine hour) i the Ming Taco [i Assuming raw material av the Key Tatar avalabiity oF WHTEHTs 10,000 Kgs. and each produ cannot he sd more than 3.500 uals find out the product mix which will yield the mavimam profi ROLUTION statement showing computation of contribution per unit of diferent factors of prduction and determination of prof Sr Particulars ae we Na. i [Sates 0 Bo rit [Variable cont Mater 10 1s Labour Is 0 ] Direct expenses 5 6 |_| Variasie on is 0 = a | Gontribation =f = o 1. [PWV rato iti) ca SEA V. | Contibation per igofmaterial | S52 = 275 | O3= 25 Vi__[ Contribution per machine hour [583-1815 | a= MS ‘From tie above computation, we may comment upon the profitably inthe lowing manner. 1.1 tota sales potential in units Hinied, product Bis more profitable, it has mors contribution por wal 2; When total sls in valu ited, product Bis more profitable because it has higher P/V rai Sc Tehe raw materiale in short supply, Product A is more profitable herunse thas more contri per Ke of material 2 Ife productn capacity fe imitl, product Bs more profitable, because has more contribution per machine howe: AKASH AGARWAL ®©eeo GLASSES BS wi Saassrsree