COST STATEMENT AND PROFIT

STATEMENT OF COST FOR SMART AND COWBOY

Smart (1000 units) Cowboy (2000 units)
Cost per unit Rs Total Rs. Cost per unit Rs Total Rs.
Direct materials consumed 20.00 20,000 25.00 50,000
Direct labor 8.00 8,000 8.00 16,000
Prime cost 28.00 28,000 33.00 66,000
Add: Factory overhead
Indirect labor (in works) 2.50 2,500 3.00 6000
Supervision costs (in works) 1.00 1,000 1.00 2,000
Factory premises rent 1.60 1,600 1.40 2,800
Factory lighting etc 0.60 600 0.40 800
Oil for machines 0.10 100 0.05 100
Depreciation of machines 0.50 500 0.35 700
Factory/work cost 34.30 34,300 39.20 78,400
Add: Office and administration expense
Office overhead 8.00 8,000 6.00 12,000
Office salaries 2.00 2,000 1.50 3,000
Miscellaneous office expense 1.00 1,000 3.00 6,000
Cost of production 45.30 45,300 49.70 99,400
Selling and distribution 6.00 6,000 10.00 20,000
Cost of sales 51.30 51,300 59.70 119,400
Profit 10.26 10,260 14.93 29,850
Sales 61.56 61,560 74.63 149,250
1. Solution:

2. Solution:
Let number of Equity Share to be 10,000.

Particular January February March April May June

(4,19,000
Opening Balance 30,000 ) (3,68,000) (4,00,000) (3,15,000) (2,84,000)
Cash inflow
cash collection 57,000 57,000 76,000 95,000 38,000 38,000
 (3,62,000
Total Cost (A) 87,000 ) (2,92,000) (3,05,000) (2,77,000) (2,46,000)
Cash Outflow
Capital Expenditure 500000
Cash Payment 1,01,000
Commission Payable 3,000 3,000 4,000 5,000 2,000 2,000
Salaries 3,000 3,000 3,000 5,000 5,000 5,000
Total cash outflow (B) 5,06,000 6,000 1,08,000 10,000 7,000 7,000
(4,19,000 (3,68,000
Closing Balance (A-B) ) ) (4,00,000) (3,15,000) (2,84,000) (2,53,000)

3. Solution:

Particular October November December

Opening balance 35,000 (7,600) (9,600)
Cash inflow
Cash sales 5,000 6,000 8,000
Cash collected 15,000 18,000 20,000
Total cash (A) 55,000 16,400 18,400
Cash outflow
Equipment 16,000
Credit payment 40,000 23,000 27,000
Payment of short term loans 15,000
Wages 3,000 3,000 3,000
Rent 3,600
Total cash outflow (B) 62,600 26,000 45,000
Closing balance (A-B) (7,600) (9,600) (26,600)

4. Solution:

Particular May 2004 (12,000 unit) June 2004(14,000 unit) July 2004(13,000 unit)
Sales 3,90,000 8,45,000 8,77,500
Cash Collection 1,65,000 6,20,000
Total Cash Inflow 3,90,000 10,10,000 14,97,500
Cash Out Flow
Payment of Raw Material 1,30,000 1,35,000
Wages 2,25,000 2,60,000 2,80,000
Cash Out Flow 2,25,000 3,90,000 4,15,000
Closing balance 1,65,000 6,20,000 10,82,500
Note: Sales = Expected Sales × Rs 65 per unit.
Raw material = Production ×2×5
 Production = 50% sale of current month and 50% of the next month.
5. Solution:
Quantity to purchased Units
Estimated sales for the year 24750
Add: closing stock 1100
Less: Opening Stock 1200
To be purchased 24650

Production Budget in Units

Quarter I II III IV Total
Sales (units) 5000 6250 6500 7000 24750
Production
80% of current sales 4000 5000 5200 5600
20% of next sales 1250 1300 1400 900
5250 6300 6600 6500 24650
Raw Material Consumption Budget in Quantity
Quarter I II III IV Total
Production 5250 6300 6600 6500 24650
2 2 2 2
Material consumption 10500 12600 13200 13000 49300

Raw material purchase budget

Quantity
to be Price
Quarte Closing Openin Total Purchase purchase per kg
r Consumption stock g stock purchase pattern kg Rs Purchase
I 30% 15000 12 180000
II 50% 25000 13 325000
III 20% 10000 14 140000
50000 3500 2800 50000 50000 645000

6. Solution:
Flexible Budget for the period

Particular For 85%

Direct material 18,36,000
Direct labour 8,92,500
Factory overhead-fixed 2,20,000
Variable 1,78,500
Administration overhead 1,76,000
Selling overhead-fixed 1,15,000
Variable 3,67,200
 Total cost 37,85,200
Profit (25% on cost or 20% on sales) 9,46,300
Sales 47,31,500
Note:
Factory overhead and selling overhead are semi-variable items and are segregated by the following
methods.
Difference∈overhead at 2levels
Variable Overhead=
Difference∈outputs
3,30,000−3,50,000
Variable Factory Overhead= =Rs 2 per unit
1,50,000units

Fixed factory overhead = Rs 3,30,000 - (65,000 × Rs 2)

= Rs 2,00,000

7. Solution

1. Sales budget in quantity

Particular products A (Rs) products B(Rs) Products C (Rs)
Selling price per unit 130 230 417
Variable costs per unit 0.5×100=50 1.2×100=120 2.5×100=250
Raw material at Rs 100/kg 0.25×40=10 - -
Direct materials at Rs 40/kg 4×6=24 6×6=36 8×6=48
Skilled labour at Rs 6 per hour 2×5=10 2×5=10 3×5=15
Unskilled labour at Rs 5 per hour 20 40 80
Variable overheads (given) 114 206 393
Total variable costs per unit 16 24 24
Sales mix ratio 8 2 1
Total weighted contribution 16×8=128 24×2=48 24×1=24

Desired profit per month 120,000

Add: fixed overhead per month 200,000
Desired contribution per month 320000
total of weighted contribution 128+48+24=200
Hence, number of batches of A, B, and C = Rs 320000/200 =1600 batches.
So, the sales quantities are A: 1600×8= 12800 units, B: 1600×2=3200 units C: 1600×1=1600 units

1. SALES BUDGET IN VALUE

PARTICULAR PRODUCTS A PRODUCTS B PRODUCTS C TOTAL
Budgeted quantity 12800 units 3200 units 1600 units 17600 units
Budgeted price Rs 130 Rs 230 Rs 417
Budgeted sales values 16,64,000 Rs736000 Rs 667200 3,067,200

2. PRODUCTION BUDGET
PRODUCTS A PRODUCTS PRODUCTS
PARTICULAR (units) B(units) C(units) TOTAL(units)
Budgeted sales quantity 12,800 3,200 1,600 17,600
add: closing stock 200 300 50 550
Less: opening stock 400 100 50 550
Budgeted production 12,600 3,400 1,600 17,600

3. RAW MATERIAL USAGE BUDGET

PARTICULAR PRODUCTS A PRODUCTS B PRODUCTS C TOTAL
Budgeted production 12600 units 3400 units 1600 units 17600 units
Raw material required per unit 0.50 kg 1.20 kg 2.5 kg
Total raw materials required 6300 kg 4080 kg 4000 14380 kg
Direct materials required per unit 0.25 kg - -
Total direct materials required 3150 kg - - 3150 kg

4. MATERIAL PURCHASE BUDGET

PARTICULAR RAW MATERIALS DIRECT MATERIALS TOTAL
Budgeted usage 14,380 kg 3,150 kg
Add: closing stock 650 kg 260 kg
Less: opening stock 600 kg 400 kg
Budgeted purchases 14,430 kg 3,010 kg
Price of material Rs 100 per kg Rs 40 per kg
Cost of purchases Rs 1,443,000 Rs 120,400 Rs 1,563,400

5. DIRECT LABOUR BUDGET

PARTICULAR PRODUCTS A PRODUCTS B PRODUCTS C TOTAL
Budgeted production 12600 3400 1600 17600
Skilled labour-hour per unit 4 6 8
Total skilled DLH required 50400 20400 12800 83600
Cost of skilled labour at Rs 6 p.h. 302400 122400 76800 501600
Skilled workers required 252 102 64 418
Semi-skilled labour hour per unit 2 2 3
Total semi-skilled DLH required 25200 6800 4800 36800
Cost of semi-skilled lab. At Rs 5
p.h 12600 3400 24000 184000
Semi-skilled workers required 126 34 234 184
Total labour 428400 156400 100800 685600
Total worker 378 136 88 602

8. Solution:
 Flexible Budget for the period.

Particular 80% 90% 100% 110%

Sales 6,00,000 6,75,000 7,50,000 8,25,000
Administration cost:
Office salaries (fixed) 90,000 90,000 90,000 90,000
General Expenses (2% of sales) 12,000 13,500 15,000 16,500
Depreciation (fixed) 7,500 7,500 7,500 7,500
Rent and taxes (fixed) 8,750 8,750 8,750 8,750
(A) Total Administration Costs 118,250 119,750 121,250 122,750
Selling cost:
Salaries (8% of sales) 48,000 54,000 60,000 66,000
Travelling Expenses (2% of sales) 12,000 13,500 15,000 16,500
Sales office (1% of sales) 6,000 6,750 7,500 8,250
General Expenses 6,000 6,750 7,500 8,250
(B) Total Selling Cost 72,000 81,000 90,000 99,000
Distribution Cost:
Wages (fixed) 15,000 15,000 15,000 15,000
Rent (1%) of sales 6,000 6,750 7,500 8,250
Other expenses (4% of sales) 24,000 27,000 30,000 33,000
(C) Total Distribution costs 45,000 48,750 52,500 56,250
Total Cost (A+B+C) 2,35,250 2,49,500 2,63,750 2,78,000