PRACTICAL PROBLEM
1. Kusum Ltd. has received an enquiry for supply of 1,000 units of steel chairs. The cost
estimated as follows:
Raw Material 11,000 kg @ Rs. 20 per kg
Direct Wages 1,000 hours @ Rs. 10 per hour
Variable Overheads:
Factory: Rs. 15 per labour hour
Selling and Distribution: Rs. 20,000
Fixed Overhead:
Factory: Rs. 10,000
Selling and Distribution: Rs. 45,000
Prepare statement showing the price under the following situation:
Full Cost Method using 30% profit on total cost and 20% profit on sales
Conversion Cost Method, 200% profit on conversion costs
2. Kumar Ltd. has received an enquiry for supply of 3,000 units of cup boards. The cost
estimated as follows:
Raw Material: 10,000 kg @ Rs. 23 per kg
Direct Wages: 1,500 hours @ Rs. 15 per hour
Direct Expenses: 40,000
Variable Overheads:
Factory: Rs. 20 per labour hour
Selling and Distribution: Rs. 15,000
Administration Overhead: 8,000
Fixed Overhead:
Factory: Rs. 8,000
Selling and Distribution: Rs. 30,000
Administration Overhead: 10,000
Prepare statement showing the price under the following situation:
Full Cost Method using 20% profit on total cost and 18% profit on sales
Conversion Cost Method, 150% profit on conversion costs
3. Radha Ltd. manufactured and sold 500 space frames for the year ending 31 st March 2023.
The summarized trading and profit and loss a/c for the year is given below:
Particular Rs. Particular Rs.
To Cost of materials 4,80,000 By Sales 18,60,000
To direct wages 7,20,000
To Manufacturing Expense 3,60,000
To Gross Profit 3,00,000
18,60,000 18,60,000
To Administrative Expenses: By Gross Profit 3,00,000
Fixed: 1,20,000
Variable: 24,000 1,44,000
To Selling expenses:
Fixed: 12,000
Variable: 48,000 60,000
To Net Profit 96,000
3,00,000 3,00,000
For the next year, it is estimated that:
The output and sale will be 1000 space frame.
Price of materials will rise by 15%.
Wages rates will rise by 10%.
Manufacturing expenses will increase in proportion to the combined cost of
materials and wages.
Prepare a statement showing the price at which profit will be 20% on the selling
price.
4. Following are the particulars of Pranav Company of its product:
Estimat.ed annual sales 24000 unit
Estimated Cost:
(1) Material Per Unit Rs.40
(2) Labor Per Unit Rs.6
(3) Indirect Exp. (Annual) Rs. 2,40,000
(4) Administrative Exp. (annual) Rs. 2,88,000
(5) Selling Exp. 15% of sales
If profit per unit is Rs. 10 find out selling price of the product
5. A factory can produce 60,000 units annually at its maximum 100% production capacity.
Estimated production cost is as under:
Direct materials per unit.... Rs. 3.00
Direct wages per unit..... Rs.2.00
(Subject to minimum Rs. 6,000 per Month)
Fixed indirect expenses Rs. 1,00,000 annually.
Variable indirect expenses per unit Rs. 2.00
Semi-variable indirect expenses at 50% production level are Rs.40,000 annually and thereafter
additional Rs. 10,000 for every 20% or more production level.
Factory has worked at 50% production capacity level for the first three months of 2022 and it is
estimated that for the remaining 9 months factory will work at 80% production capacity.
Prepare necessary cost sheet showing what should be the selling price per unit to earn total
annual profit 1, 50,000.
6. Vishal Ltd. Presently operating its plant at 80% capacity to manufacture a product only to
meet the demand of preet Ltd. Vishal Ltd. supplies the product for Rs. 350000 and earns
profit 20% on sales.
Direct cost per unit is constant.
The indirect cost estimation is as under:
Particular 80% capacity 90% capacity 100% capacity
20000 unit 22500 unit 25000 Unit
Variable Cost Rs. 60000 Rs. 67500 Rs. 75000
Semi variable Rs. 25000 Rs. 27500 Rs. 30000
Fixed Cost Rs. 60000 Rs. 60000 Rs. 60000
It received an export order for the product equal to 20% of its present operation
additional packing charge will be Rs. 1000 for the order.
Determine the price of export order to give a profit margin of 10% on export price.
7. Neeta Ltd. has produced and sold 5,000 units of clock at its 50% Production capacity in the
2022. The details of the cost for the year Ended 31-12-2022.
Particulars Amt. Particulars Amt.
Materials 5,00,000 Direct labour 3,00,000
Direct expenses 1,00,000 Factory indirect expenses(50% 2,00,000
variable)
Selling district exp. 1,00,000 Office indirect exp.(fixed) 1,50,000
(60%fixed)
Sales 16,20,000
Estimates for the year 2023:
The output will be at its full production capacity.
80% of the units produced will be sold.
Cost of raw materials and wages per units will be increased20% and 10%
respectively.
Factory, office and selling and distribution overhead (fixed) will increase by 50,000,
Rs. 40,000 and Rs. 20,000 respectively.
Variable selling expense will increase by 25% per unit.
The rate of profit on cost will remain same as per the last year.
Prepare:
a) A statement of cost showing total as well as per unit cost and profit for the year
2022.
b) A statement of showing estimated profit for the year 2023.
8. Shri Jalaram Transport Co. operates a bus on route of 20 kms. length. Cost of bus is 50,000
and insurance of bus is taken at 6% annual premium. Annual tax is Rs. 2000. Garrage Rent
per month is Rs. 100. Annual Repairs will be Rs. 2,000 Estimated life of bus is 5 years.
Driver's annual salary Rs. 3000 and conductors annual salary is Rs. 1800. In addition they both
are paid 10% commission on total income (equally distributed among both) .Annual stationary
exp. is Rs.600.
Manager's monthly salary is Rs.400, who also looks after accounting work.
Petrol and oil expenses are Rs. 25 per 100kms. Bus performs three round trips in a day and 40
passengers travel in each trip. Assuming 25% profit on total income, how much bus fare should
be charged from a passenger. Prepare operating Cost sheet. Bus runs for 25 days in a month.
