WORKING NOTES

• CALCULATION OF DIRECT LABOUR

TOTAL MANUFACTURING COST = RS 5,50,000
- MATERIAL CONSUMED = RS (2,30,000)
( 40,000 + 2,20,000 – 30,000)
- MANF. OVERHEADS = RS (3,05,000)

DIRECT LABOUR = RS 15,000

 OPENING WIP
TOTAL COST OF GOODS AVAILABLE FOR SALE = RS 6,50,000
- MATERIAL CONSUMED = RS (2,30,000)
- DIRECT LABOUR = RS (15,000)
- MANF. OVERHEAD = RS (3,05,000)
+ CLOSING WIP = RS 22,000
- OPENING FINISHED GOODS = RS (20,000)

OPENING WIP = RS 1,02,000

 CLOSING FINISHED GOODS
COST OF GOOD SOLD = RS 5,10,000
- MATERIAL = RS (2,30,000)
- LABOUR = RS (15,000)
- MANF. OVERHEAD = RS (3,05,000)
- OPENING WIP = RS (1,02,000)
+ CLOSING WIP = RS 22,000
- OPENING FINISHED GOODS = RS (20,000)

CLOSING FINISHED GOODS = RS 1,40,000

ANS 1(A)
COST OF GOOD MANUFACTURED
DIRECT MATERIALS CONSUMED = RS 2,30,000
+ OPENING = RS 40,000
+ PURCHASES = RS 2,20,000
- CLOSING = RS (30,000)
DIRECT LABOUR = RS 15,000
MANF. OVERHEADS
INSURANCE,FACTORY EQUIPMENT = RS 5,000
RENT,FACTORY,BUILDING = RS 80,000
UTILITY,FACTORY = RS 45,000
CLEARING SUPPLIES,FACTORY = RS 5,000
MAINTANENCE,FACTORY = RS 70,000

WIP = RS 1,00,000

TOTAL MANUFACTURING COSTS = RS 5,50,000

+ OPENING W.I.P = RS 1,02,000
- CLOSING W.I.P = RS (22,000)
COSTS OF GOOD MANUFACTURED = 6,30,000
COST OF GOODS SOLD
DIRECT MATERIAL CONSUMED = RS 2,30,000
DIRECT LABOUR = RS 15,000
MANF. OVERHEAD = RS 3,05,000
OPENING WIP = RS 1,02,000
- CLOSING WIP = RS ( 22,000)
COST OF PRODUCTION = RS 6,30,000

OPENING FINISHED GOODS = RS 20,000

- CLOSING FINISHED GOODS = RS (1,40,000)

COST OF GOOD SOLD = RS 5,10,000

ANS 1 (B)
AVG. COST PER UNIT FOR DIRECT MATERIAL USED =
DIRECT MATERIAL USED 2,30,000 RS 9.20
NO. OF UNITS 25,000

AVG COST PER UNIT FOR RENT =

RENT 80,000 RS 3.20
NO. OF UNITS 25,000
ANS 1 (C)
PRODUCTION = RS 40,000

TOTAL COST = PER UNIT COST x NO. OF UNITS

= 9.20 x 40,000
= RS 3,68,000

RENT = RS 80,000
AVG. COST PER UNIT FOR RENT = 80,000 RS 2.00
40,000
ANS 1 (D)
AS DIRECT MATERIAL USED IS A VARIABLE COST , IT INCREASES
WITH INCREASE IN PRODUCTION. HOWEVER, RENT PAID IS A
FIXED COST AND REMAINS CONSTANT INSPITE OF CHANGE IN
PRODUCTION FROM 25000 TO 40000 UNITS. THUS THE
AVERAGE COST PER UNIT REMAINS THE SAME FOR RENT AND
NOT FOR DIRECT MATERIAL.