Tabular Method For Calculating EOQ

FYBCOM Hons NM Mithibai College
Cost Accounting
Annual Consumption of Raw Material A 600 kg

Ordering Cost per Order O 100
Cost per unit of Raw Material C 80
Inventory Carrying + Holding cost in % i 15%
Carrying Cost per unit per anum in Rs. C*i 12
Tabular Method for Calculating EOQ

Annual Qty No. of Ordering Avg Carrying Total
Req. Ordered Orders Cost Inventory Cost Order + Car.
A Q A/Q Q/2
1 2 3 4=3*O 5 6 = 5*C*i 7=4+6
600 50 12 1200 25 300 1500
600 100 6 600 50 600 1200
600 150 4 400 75 900 1300
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Month Stock Consumed
permanently break the chart.
Jan-01 600 50
Feb-01 550 50
Mar-01 500 50
Apr-01 450 50
May-01 400 50
Jun-01 350 50
Jul-01 300 50
Aug-01 250 50
Sep-01 200 50
Oct-01 150 50
Nov-01 100 50
Dec-01 50 50
Solution CA Sapan Sir

1
Cost Accounting
Formula Method for Calculating EOQ

At EOQ, Ordering Cost = Carrying Cost
𝐴 𝑄
𝑄
𝑥𝑂 = 2
xC x i
2 ∗ 𝐴 ∗𝑂
= 𝑄2
𝐶 ∗𝑖
2 ∗𝐴 ∗𝑂
𝑄=
𝐶 ∗𝑖
2 ∗ 600 ∗ 100
𝑄=
80 ∗ 15%
𝑄 = 100 𝑢𝑛𝑖𝑡𝑠
No. of Orders = 600/100 = 6

2
Cost Accounting
A.1
Annual Requirement of Raw Material A 36,000 kgs
Ordering Cost O 7,500 per order
Carrying Cost Ci 15 per unit per anum
2⋅𝐴⋅0
EOQ =
𝐶𝑖
2 ⋅ 36000 ⋅ 7500
15
EOQ = 6,000 kgs

3
Cost Accounting
A.2
Annual Requirement of Raw Material A 800 units
Ordering Cost O 100 per order
Cost per unit C 30 per unit
Carrying Cost Ci 30*10% + 1
4 per unit per anum
2⋅𝐴⋅0
EOQ =
𝐶𝑖
2 ⋅ 800 ⋅ 100
4
EOQ 200 units

4
Cost Accounting
A.3
Comparison of Purchase of Raw Material between supplier 1 and 2
for purhcase of 1000 units in 1 Lot
Particulars Supplier 1 Supplier 2
No. of units 1000 1000

% Defective 2% 2.8%
No. of Defective units 20 28
Cost of Rectification @ 5 100 140

Additional Cost of Supplier 1 100 0
Total Cost for 1 Lot 200 140
Company should purchaes from Supplier 2 since

cost of purchasing 1 lot of 1,000 units is cheaper by Rs. 60 (200 -140)

5
Cost Accounting
A.4
A 12000 units
O 20
C 12
i 16%
Cost Annual Qty No. of Ordering Avg Carrying Material Total

per ut Req. Ordered Orders Cost Inventory Cost Cost Cost
C A Q A/Q Q/2
1 2 3 4=3*O 5 6 = 5*C*i 7 = A *C 8 = 4+6+7
3.00 12,000 1,000 12 240 500 240 36,000 36,480
3.00 12,000 1,500 8 160 750 360 36,000 36,520
2.92 12,000 2,000 6 120 1,000 467 35,040 35,627
2.90 12,000 4,000 3 60 2,000 928 34,800 35,788
Company should order 2000 units since Total Cost is lowest in this option.

6
Cost Accounting
Past Experience Day 1

Raw Material Qty Cost Raw Material Qty Cost
Water 2 Cups 1 Water 2 Cups 1
Milk 2 Cups 10 Milk 2 Cups 10
Sugar 2 Sugar 2
Tea 3 Tea 3
Masala 1 Masala 1
Ginger 1 Ginger 1
Input 4 Cups 18 Input 4 Cups 18
Less Normal Loss 1 Cup Less Actual Loss - 2 cups
Expected Output 3 Cups 18 Actual Output 2 Cups 18
Cost per 18 Cost per unit 18 6 per cup

Expected Output 3 3
= 6 Cost of Finished Goods Produced 2*6 12

per cup Cost of Abnormal Loss 1*6 6
18
Cost per unit = Total Input Cost Less Scrap Value
Total Input Qty - Normal Loss Qty

7
Cost Accounting
A.5
Particulars Qty Amt
Cost of Sealing Ring 1,000 34,400
(1,000 * 2 * 17.2)
Add Import Duty 100% 34,400
Add Clearing Charges 1,800
Add Transportation Charges 1,400
1,000 72,000
Less Normal Loss -60 - Qty Cost
940 72,000 5 40
-1
Cost per Ring 72,000 4
940
76.60
Treatment of Total Cost

Cost of Material Issued to Production 900*76.60 68,940
Cost of Abnormal Loss 40*76.6 3,064
72,004

8
Cost Accounting
A.6
Production and Material Consumption Budget for 4 Quarters
Quarter No. of Production Production Raw Mat. Raw Mat
Days per Day in Qtr required Consumption
1 65 100 6,500 2 13,000
2 60 110 6,600 2 13,200
3 55 120 6,600 2 13,200
4 60 105 6,300 2 12,600
Total Raw Material Consumption 52,000
Purhcase of Raw Material in the Whole Year

Annual Consumption 52,000
Add Closing Stock 2,000
Less Opening Stock -4,000
Annual Purchase 50,000
Raw Material Purchase Budget in Kg and in Rs.

Quarter % Purchase Cost per Purchase
Purchase in kg kg in Rs.
1 30 15,000 1.000 15,000
2 50 25,000 1.050 26,250
3 20 10,000 1.125 11,250
4
Total Raw Material Purchase 52,500

9
Cost Accounting
Stores Ledger as per FIFO Method

Receipt Issue Balance
Particulars Qty Rate Amount Qty Rate Amount Qty Rate Amount
Opening Stock 4,000 1.000 4,000
Quarter 1 15,000 1.000 15,000 4,000 1.000 4,000

9,000 1.000 9,000 6,000 1.000 6,000
Quarter 2 25,000 1.050 26,250 6,000 1.000 6,000

7,200 1.050 7,560 17,800 1.050 18,690
Quarter 3 10,000 1.125 11,250 13,200 1.050 13,860 4,600 1.050 4,830
10,000 1.125 11,250
Quarter 4 4,600 1.050 4,830

8,000 1.125 9,000 2,000 1.125 2,250
50,000 52,500 52,000 54,250
Summary
Particulars Qty Amt
Opening Stock 4,000 4,000
Add Purchases 50,000 52,500
Less Issues -52,000 -54,250
Closing Stock 2,000 2,250

10
Cost Accounting
Re-Order Level = Maximum Consumption * Maximum Lead Time

Minimum Stock Level = Re-order Level - (Average Consumption * Average Lead Time)
Maximum Stock Level = Re-order Level + Re-order Quantity - (Minimum Consumption * Minimum Lead Time)
Danger Stock Level = Average Consumption * Emergency Lead Time
Average Stock Level = (Minimum Stock Level + Maximum Stock Level )/2
or Average Stock Level = Minimum Stock Level + 1/2 * Re-order Quantity

11
Cost Accounting
A.7
Calculation of Chemical Cost per Kg for Chemical A, B and C
Particulars Chemical A Chemical B Chemical C
Qty Cost in Rs Qty Cost in Rs Qty Cost in Rs
Cost of Chemical 3,000 12,600 5,000 19,000 2,000 9,500
Add GST (Input Credit not available) 5% 630 950 475
Add Railway Freight (3:5:2) 300 500 200
Add Octroi Duty @ 0.10 per kg received 280 472 190
Add Cartage 22 63.12 31.80
3,000 13,832 5,000 20,985 2,000 10,397
Less Normal Transit Loss -200 -280 -100
Quantity Received in Store 2,800 4,720 1,900
Less Further Deterioration 5% (Normal Loss) -140 -236 -95
Quantity issued to Production 2,660 13,832 4,484 20,985 1,805 10,397
Cost per Kg = 13,832 20,985 10,397

2,660 4,484 1,805
5.20 4.68 5.76

12
Cost Accounting
A.8
EBQ 3600 bearings
A Setup + Carrying Cost at Q qty = A/Q * S + Q/2 * Ci

= 24000/6000 * 324 + 6000/2 * 1.20
= 4,896
B Setup + Carrying Cost at EBQ = SQRT(2*A*S*Ci)

= 4,320
A- B Extra cost of Set up + carrying if 6,000 bearings are produced = 4896 - 4320 = Rs. 576

13
Cost Accounting
A.9
A 6000 kg
O 1200 per order
C 12 Cost per unit
i 20%
C*i 2.4 Carrying Cost p.a.
Option Annual Qty Cost per No. of Ordering Avg Carrying Carrying Material Total
Req. Ordered unit Orders Cost Inventory Cost p. ut Cost Cost Cost
A Q C A/Q Q/2 c*i Mat + O + C
1 2 3 4 5 = 4 * O 6 = Col 2/2 7 = 3*i 8=1*7 9=1*3 10 = 5+8+9
1 5,000 400 1,200 13 15,600 200 240 48,000 6,000,000 6,063,600
2 5,000 500 1,180 10 12,000 250 236 59,000 5,900,000 5,971,000
3 5,000 1,000 1,160 5 6,000 500 232 116,000 5,800,000 5,922,000
4 5,000 2,000 1,140 3 3,600 1,000 228 228,000 5,700,000 5,931,600
5 5,000 3,000 1,120 2 2,400 1,500 224 336,000 5,600,000 5,938,400
In option 1, 4 and 5 : Number of orders are rounded up
Company should order 1000 Tonnes since Total Cost of this option is lowest.

14
Cost Accounting
A.10 Economic Batch Quantity (EBQ) 200 units
At EOQ At 6,000
200 units
Cost per unit 600 570

Units Required 24000 24000
A Cost of Material 14,400,000 13,680,000

B Ordering Cost = A/Q * O 24000/200 * 100 24000/6000 * 100
12000 400
C Carrying Cost = Q/2 * C * i 200/2 * 600 * 20% 6000/2 * 570 * 20%

12000 342000
Total Cost ( A + B + C) 14,424,000 14,022,400
Saving at 6,000 units 401,600

15
Cost Accounting
A.11
Annual Requirement of Raw Material A 24,000 Tubes
Ordering Cost O 100 per order
Cost per unit C 600 per unit
Carrying Cost Ci 20%
120 per tube per anum
2⋅𝐴⋅0
EOQ =
𝐶𝑖
2 ⋅ 24,000 ⋅ 100
A
B
120
C EOQ 200 units

12000 342000
Total Cost ( A + B + C) 12,000 342,000
Saving at 6,000 units -330,000

16
Cost Accounting
Re-Order Level = Maximum Consumption * Maximum Lead Time

= 200 * 8
= 1,600 units
Minimum Stock Level = Re-order Level - (Average Consumption * Average Lead Time)
= 1,600 - (100 * 7)
= 900 units
Maximum Stock Level = Re-order Level + Re-order Quantity - (Minimum Consumption * Minimum Lead Time)
= 1,600 + 200 - (50 * 6)
= 1,500 units

17
Cost Accounting
A.12 EBQ 200 units
At EOQ At 4,000
2400 units
Ordering Cost = A/Q * O 48000/2400 * 120 48000/4000 * 120
2400 1440
Carrying Cost = Q/2 * C * i 2400/2 * 20 * 10% 4000/2 * 20 * 10%

2400 4000
Total = Mat + Order + Carrying 4,800 5,440
Saving at 6,000 units 640

18
Cost Accounting
A.2 H. W.
A 500 units
O 12500
C
i 25%
Cost Annual Qty No. of Ordering Avg Carrying Material Total

per ut Req. Ordered Orders Cost Inventory Cost Cost Cost
C A Q A/Q Q/2
1 2 3 4=3*O 5 6 = 5*C*i 7 = A *C 8 = 4+6+7
9,600 500 25 20 250,000 12.50 30,000 4,800,000 5,080,000
9,360 500 50 10 125,000 25 58,500 4,680,000 4,863,500
9,120 500 100 5 62,500 50 114,000 4,560,000 4,736,500
8,880 500 200 3 37,500 100 222,000 4,440,000 4,699,500
8,640 500 300 2 25,000 150 324,000 4,320,000 4,669,000

19
FYBCOM HONS NM Mithibai College
Cost Accounting
1 Time Rate Basis

Direct Wages = No. of Hours Worked * Rate per Hour
2 Piece Rate Basis

Direct Wages = No. of Pieces produced * Rate per Piece
3 Halsey Premium Bonus Plan

50
𝐷𝑖𝑟𝑒𝑐𝑡 𝑊𝑎𝑔𝑒𝑠 = 𝑇𝑇 ∗ 𝑅𝑎𝑡𝑒 𝑝𝑒𝑟 𝐻𝑜𝑢𝑟 + ∗ 𝑇𝑆 ∗ 𝑅𝑎𝑡𝑒 𝑝𝑒𝑟 𝐻𝑜𝑢𝑟
100
4 Rowan Premium Bonus Plan
𝑇𝑇
𝑇𝐴

20
Cost Accounting
Extra Q.
In a Factory producing pens, it takes 1 hour to produce 5 pens.

Rate per hour is ` 40. In a 40 hour week production by Ajay, Vijay and Sujay was
300, 200 and 250 respectively.
Calculate wages if payment is on the basis of

a Time Basis
b Piece Basis
c Halsey Premium Bonus Plan
d Rowan Premium Bonus Plan
Ajay Vijay Sujay
Units Produced in a week 300 200 250

Time Allowed (units/5) 60 40 50
Time Taken 40 40 40
Time Saved 20 0 10
Rate per piece = 𝑅𝑎𝑡𝑒 𝑝𝑒𝑟 𝐻𝑜𝑢𝑟 40

= = 𝑅𝑠. 8 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒
𝑃𝑖𝑒𝑐𝑒𝑠 𝑝𝑒𝑟 𝐻𝑜𝑢𝑟 5
1 Time Rate Basis

Direct Wages = No. of Hours Worked * Rate per Hour
Ajay = 40 * 40 = Rs. 1,600
Vijay = 40 * 40 = Rs. 1,600
Sujay = 40 * 40 = Rs. 1,600

21
Cost Accounting
2 Piece Rate Basis
Direct Wages = No. of Pieces produced * Rate per Piece
Ajay = 300 * 8 = Rs. 2,400
Vijay = 200 * 8 = Rs. 1,600
Sujay = 250 * 8 = Rs. 2,000
3 Halsey Premium Bonus Plan

50
100
Ajay 50
40 ∗ 40 + 20 ∗ 40 = Rs. 2,000
100
Vijay 50
40 ∗ 40 + 0 ∗ 40 = Rs. 1,600
100
50
Sujay 40 ∗ 40 + 10 ∗ 40 = Rs. 1,800
100

𝑇𝑇
𝑇𝐴
40
= Rs. 2,133
22
Cost Accounting
Ajay 40
40 ∗ 40 + 20 ∗ 40 = Rs. 2,133
60
Vijay 40
40 ∗ 40 + 0 ∗ 40 = Rs. 1,600
40
Sujay 40
40 ∗ 40 + 10 ∗ 40 = Rs. 1,920
50

23
Cost Accounting
Q.2
X Y Z
Normal Wages per hour 4 5 6
Units Produced 6000 3000 4800
Time Allowed per 100 units 0.8 hr 1.5 hr 1 hr
Time Allowed (TA) = (units produced*Time Allowed)/ 100 48 45 48
Actual Time Taken (TT) 42 40 48
Time Saved TS = (TA - TT) 6 5 0

𝑇𝑇
𝑇𝐴
Ajay 42
42 ∗ 4 + 6 ∗ 4 = Rs. 168 + 21 = 189
48
40
Vijay 40 ∗ 5 + 5 ∗ 5 = Rs. 200 + 22.22 = 222.22
45
48
Sujay 48 ∗ 6 + 48
0 ∗ 6 = Rs. 288 + 0 = 288
X Y Z
Wages Paid 189.00 222.22 288.00
Units Produced 6,000 3,000 4,800
Wages Cost per 100 units 3.15 7.41 6.00

24
Cost Accounting
Q.17
Units Produced 600 dozens per week
Units Produced 7200 units per week
Total Time Hours

Operation Time per required in Total Time Worked by No. of Wage Total
No Grade of Article in in Hours 1 worker Workers Rate per Wages in
Minutes
Worker Minutes (Min/60) in a week required hour Rs.
1 A 15 108,000 1,800 40 45 0.65 1,170

2 B 25 180,000 3,000 40 75 0.50 1,500
3 C 10 72,000 1,200 40 30 0.40 480
4 D 30 216,000 3,600 40 90 0.35 1,260
5 E 20 144,000 2,400 40 60 0.30 720
Total Workers 300 Total Wages 5,130
Labour Cost per Dozen = Total Wages 5,130 8.55 per Dozen
units produced in Dozen 600

25
Cost Accounting
A.1 A B Power Store Repair
Power House 25% 50% - - 25%
Stores 30% 40% 10% - 20%
Repair Shop 30% 50% 20% -
Total Overheads of Department Power House is Rs. P

Total Overheads of Department Repair Shop is Rs. R
P = 47,350 + 10% of 15,000 + 20% of R … 1
R = 60,500 + 25% of P + 20% of 15,000

R = 60,500 + 25% of P + 3,000
R = 63,500 + 25% of P
Sus Value of R in Equ 1
P = 47,350 + 10% of 15,000 + 20% (63,500 + 25% of P)

P = 47,350 + 1,500 + 12,700 + 0.05P
0.95P = 61,550
P = 64,789
Sub P in Equation 2
R = 63,500 + 25% * 64,789
R = 79,697
Statement of Secondary Distribution of OH as per Simultaneous Equation Method
Production Department
Particulars Basis A B
OH after Primary Distribution Given 85,000 70,000
Power Department 64,789 25 % & 50% 16,197 32,395

Stores Department 15,000 30 % & 40% 4,500 6,000
Repair Department 79,697 30 % & 50% 23,909 39,849
129,606 148,243
277849
26
Cost Accounting
A.2
Job 101 Job 102

Cost 100 ??? 100 ???
Profit 10 20
Selling Price 110 166,650 120 128,250
For Job 101 DM

Total Cost = DM + DW + FOH + Admin OH DW
1,51,500 = 54,000 + 42,000 + x%*42,000 + y%( 54,000 + 42,000 + x%*42,000) PC
1,51,500 = 96,000 + x%*42,000 + y%96,000 + X%y%*42,000 FOH
WC
For Job 102 Admin
1,06,875 = 37,500 + 30,000 + x%30,000 + y%(37,500 + 30,000 + x%30,000) Total Cost
1,06,875 = 67,500 + x%30,000 + y%(37,500 + 30,000 + x%30,000) Profit
Selling Price
55,500 = 420x + 960y + 4.2xy ….. 1

39,375 = 300x + 675y + 3xy ….. 2
55,500 = 420x + 960y + 4.2xy

55,125 = 420x + 945y + 4.2xy Multiply Equation 2 by 1.4
375 = 15y
y = 25 Admin is 25% of WC
x = 60 FOH is 60% of DW

27
Cost Accounting
Particulars Job 101 Job 102 Job 103
Direct Material 54,000 37,500 24,000
Direct Wages 42,000 30,000 20,000
Prime Cost 96,000 67,500 44,000
Add Factory OH 60% of Wages 25,200 18,000 12,000
Factory Cost 121,200 85,500 56,000
Add Admin OH 25 % of Factory Cost 30,300 21,375 14,000 CP 87.5 70000
Cost of Goods Produced/Sold 151,500 106,875 70,000 P 12.5
Add Profit 15,150 21,375 10,000 SP 100 ???
Sales 166,650 128,250 80,000

28
Cost Accounting
A.2 Continue
Job 101 Job 102

DM 90,000 37,500
DL 60,000 30,000
PC 150,000 67,500
FOH 25.00% 15,000 30.00% 9,000
WC 165,000 76,500
O&A 40.00% 66,000 60.00% 45,900
COP 231,000 80 122,400 90
P 57,750 20 20% 13,600 10
Sales 288,750 100 136,000 100

29
Cost Accounting
A.4
Particulars Job A Job B Job C Total
Without use of Computer 600 900 - 1,500
With the use of Computer 400 600 1,000 2,000
Total 1,000 1,500 1,000 3,500
Calculation of Machine Cost for the Month

Particulars Amt
Rent (17,500/3) 5,833
Depreciation (2,00,000/12) 16,667
Indirect Charges (1,50,000/12) 12,500
Total Machine Cost for the Month 35,000
Computer Cost for the Month (4,20,000/12) 35,000
Machine Cost per hour Machine Cost per Month

Machine Hours per Month
Rs. 35,000
3,500 Hours
Rs. 10 per Machine Hour
Computer Cost per hour Computer Cost per Month

Computer Hours per Month
35,000
2,000
Rs. 17.5 per Computer Hour
Total Cost per Hour when Machine and 10 + 17.5 = 27.5 per hour
Computer Both are used
30
Cost Accounting
Calculation of Job Cost for the Month
Particulars Job A Job B Job C
Without use of Computer @ Rs. 10 per hr
A : 600 * 10 6,000 - -
B : 900 * 10 - 9,000 -
With use of Computer @ Rs. 27.5 per hr

A : 400 * 27.5 11,000
B : 600 * 27.5 16,500
C : 1,000 * 27.5 27,500
Total Cost of the Job 17,000 25,500 27,500

31
Cost Accounting
Imagica
5 Adults
10 Children
Total Cost 5,500

Cost per child is 60% of cost per adult
Cost of 10 child = Cost of 6 Adults
Equivalent Production
10,000 units 60% = 6,000 units 100%

32
Cost Accounting
A.7
Overheads as per Financial Accounting 375,000
Overheads as per Cost Accounting

2,500 Hours * Rs. 100 per hour 250,000
Under Absorption of OH 125,000
1,25,000
Cost Increase Inefficiency

31,250
9,800 + 50% of 400
25% 75%
31,250 93,750 31,250
10,000
Supplementary Dr to Costing
Rate P&L 3.125 per unit
10,000
units
Sold Stock WIP

9,000 800 200
Accounting Treatment
Costing P & L A/c 93,750
Cost of Sales A/c (9,000*3.125) 28,125
Finished Goods Control A/c (800*3.125) 2,500
Solution WIP Control A/c (200*3.125) 625 CA Sapan Sir
33
Cost Accounting
To Production Overhead Control A/c 125,000
24,000 units
Sold Stock of FG WIP

18,000 units 2,000 units 4,000 units
@ 1.25 = Rs. 22,500 @ 1.25 = Rs. 2,500 @ 1.25 = Rs. 5,000

34
Cost Accounting
A.9
Overheads as per Financial Accounting 80,000 Overheads as600,000
per Financial Accounting
Less Award by a Labour Court -15,000 -45,000
Less Expenses of Last year -5,000
Balance Overheads as per FA 60,000
Overheads as per Cost Accounting -30,000

10,000 Hours * Rs. 5 per hour 50,000 525,000
10,000
Cost Defective
Increase Planning
40% 60%
4,000 6,000 4,000
40,000
Supplementary
Dr to Costing P&L
Rate 0.1 per unit
40,000
Sold Stock
30,000 10,000

35
Cost Accounting
Cost of Sales A/c (30,000*0.1) 3,000
Finished Goods Control A/c (10,000*0.1) 1,000
24,000 units

@ 1.25 = Rs. 22,500 @ 1.25 = Rs. 2,500 @ 1.25 = Rs. 5,000

36
Cost Accounting
A. 11
Overheads as per Financial Accounting 4,150,000

1,50,000 Man Days * Rs. 25 per man day 3,750,000
4,00,000
Defective
Cost Increase
Planning
160,000
40000
40% 60%
1,60,000 2,40,000
160,000
40,000
Supplementary
Dr to Costing P&L
Rate
4 per unit
40,000
Sold Stock
30,000 10,000

37
Cost Accounting
Cost of Sales A/c (30,000*4) 120,000
Finished Goods Control A/c (10,000*4) 40,000
24,000 units

@ 1.25 = Rs. 22,500 @ 1.25 = Rs. 2,500 @ 1.25 = Rs. 5,000

38
Cost Accounting
A.12
Apportionment of Indirect Selling and Distribution Cost
Particulars Basis Total Product A Product B
Insurance Charges Value of Avg. Inventory 78,000 30,000 48,000

(WN 1)
Storage Cost Space Occupied (WN 2) 140,000 100,000 40,000
Packing and Forwarding No. of units Sold (5:4) 720,000 400,000 320,000
Sales Commission 5% of Sales Value (WN 3) 650,000 250,000 400,000
Salesman Salary Equal 200,000 100,000 100,000
Invoicing Cost No. of Invoices (5:4) 450,000 250,000 200,000
2,238,000 1,130,000 1,108,000
1. Value of Average Inventory A B

Average Inventory 1,000 800
Value of Average Inventory 300,000 480,000
2. Space Occupied A B
Average Inventory 1,000 800
Size of Product 2 1
Ratio of Space occupied 2,000 800
3. Sales Value
Units Sold 10,000 8,000
Selling Price per unit 500 1,000
Sales Value 5,000,000 8,000,000
Commission @ 5% 250,000 400,000
Salaries Plus Commission 850,000

Less Sales Commission of A & B 650,000
Solution Fixed Salary 200,000 CA Sapan Sir
39
Cost Accounting
It is assumed that in totality efforts put in are same hence total of 2,00,000 is distributed equally
Particulars Product A Product B
Sales Value 5,000,000 8,000,000

Less Cost of Manufacturing
A : 10,000 * 300 3,000,000
B : 8,000 * 600 4,800,000
Less Indirect S & D Cost 1,130,000 1,108,000
870,000 2,092,000
Profit per unit 87 261.50

% of Profit/Sales 17.40% 26.15%

40
Cost Accounting
A.14
Overheads as per Cost Accounting 150,000

Accounting Treatment - Method 1

Under absorption to be distributed in the ratio of 7:2:1

Accounting Treatment - Method 2
Cost of Sales A/c (20,000*7/10) 14,000
Finished Goods Control A/c (20,000*2/10) 4,000
WIP Control A/c (20,000*1/10) 2,000

41
Cost Accounting
A.15
Overheads as per FA 446,380

2,93,104 Hours * Rs. 1.25 per hour 366,380
80,000
1/2 1/2
Increase in Cost Inefficiency
40,000 40,000
Supplementary
Dr to Costing P&L
Rate
Supplementary Rate = Cost 40,000

Units 7800 + 200
Rs. 5 per unit

42
Cost Accounting
8,000 units
Sold Finished Stock WIP

7,000 units 800 units 200 units
Rs. 35,000 Rs. 4,000 Rs. 1,000
Cost of Sales A/c (7,000 * 5) 35,000
Finished Goods Control A/c (800 * 5) 4,000
WIP Control A/c (200 * 5) 1,000

43
Cost Accounting
A.16
Less Written off obsolete stores -45,000
Less Award under a strike period -30,000
Balance Overheads as per FA 525,000

48,000 Hours * Rs. 10 per hour 480,000
45,000
30,000
2/3 1/3
20,000 + 50% of 8,000
30,000 15,000
30,000
24,000
Supplementary Dr to Costing
Rate P&L
1.25 per unit
Cost of Sales A/c 22,500
Finished Goods Control A/c 2,500
WIP Control A/c 5,000

44
Cost Accounting
24,000 units

@ 1.25 = Rs. 22,500 @ 1.25 = Rs. 2,500 @ 1.25 = Rs. 5,000

45
Cost Accounting
A.17 Calculation of Total Hours
Particulars Forming Heat Treat.
Process Process
Building Brick
1,30,000*3/100 3,900
1,30,000*2/100 2,600
Fire Brick
70,000*2/100 1,400
70,000*5/100 3,500
Total Hours 5,300 6,100
Calculation of Overhead Rate per Hour

Total Overhead 21,200 48,800
No. of Hours 5,300 6,100
4 8
per Hour per Hour
Apportionment of Cost
Particulars Building Fire
Brick Brick
Forming Process
3,900 Hours @ 4 per Hour 15,600
1,400 Hours @ 4 per Hour 5,600
Heat Treatment Process

2,600 Hours @ 8 per Hour 20,800
3,500 Hours @ 8 per Hour 28,000
36,400 33,600
Cost per Brick 36,400 33,600

130,000 70,000
0.28 0.48
per brick per brick
46
Cost Accounting
Statement of Secondary Distribution of OH as per Reciprocal Repeated Distribution Method
Production Department Service Department Total
Particulars Basis A B P Q
OH after Primary Dist. Given 1,320,000 1,760,000 1,120,000 1,600,000 5,800,000
OH of Department P 5:3:2 560,000 336,000 -1,120,000 224,000

- 1,824,000
OH of Department Q 1:2:1 456,000 912,000 456,000 -1,824,000
OH of Department P 5:3:2 228,000 136,800 -456,000 91,200
OH of Department Q 1:2:1 22,800 45,600 22,800 -91,200
OH of Department P 5:3:2 570 342 -1,140 228
OH of Department Q 1:2:1 57 114 57 -228
OH of Department P 5:3:2 29 17 -57 11
OH of Department Q 1:2 4 7 - -11

2,600,000 3,200,000 - - 5,800,000

47
Cost Accounting
Statement of Secondary Distribution of OH as per Reciprocal Repeated Distribution Method
Production Department Service Department Total
Particulars Basis A B P Q
OH after Primary Dist. Given 1,320,000 1,760,000 1,120,000 1,600,000 5,800,000
OH of Department P 5:3:2 560,000 336,000 -1,120,000 224,000

- 1,824,000
OH of Department Q 1:2:1 456,000 912,000 456,000 -1,824,000
OH of Department P 5:3:2 570 342 -1,140 228
OH of Department Q 1:2:1 57 114 57 -228
OH of Department P 5:3:2 29 17 -57 11
OH of Department Q 1:2 4 7 - -11

2,600,000 3,200,000 - - 5,800,000

48
Cost Accounting
Statement of Secondary Distribution of Overheads as per Reciprocal Trial and Error Method
Service Department
Particulars Basis P Q
OH after Primary Distribution Given 1,120,000 1,600,000
OH of Department P 20% 224,000
1,824,000
OH of Department Q 25% 456,000
OH of Department P 20% 228
OH of Department Q 25% 57
OH of Department P 20% 11
1,599,997 1,919,999
Production Department
Particulars Basis A B
OH After Primary Distribution Given 1,320,000 1,760,000
OH of Department P 15,99,997 50% & 30% 799,999 479,999
OH of Department Q 19,19,999 25% & 50% 480,000 960,000
2,599,999 3,199,999
Let us assume that total OH of department P is Rs. P

Let us assume that total OH of department Q is Rs. Q

49
Cost Accounting
P = 11,20,000 + 0.25Q …. 1
Q = 16,00,000 + 0.20P …. 2
P = 11,20,000 + 0.25(16,00,000 + 0.20P)

P = 11,20,000 + 4,00,000 + 0.05P
0.95P = 15,20,000
P = 16,00,000
Q = 19,20,000

50
Cost Accounting
A.19
Statement of Primary Distribution of Overheads to Production and Service Departments
Total Production Department Service Department
Particulars Basis A B C Canteen Stores
Indirect Material and Labour Direct Given 300,000 200,000 100,000
Rent Area 468,000 93,600 114,400 91,000 65,000 104,000
Depreciation Value of Machine 930,000 399,000 330,000 171,000 22,500 7,500
Power HP * Machine Hrs 1,020,000 192,000 516,000 312,000
General Lighting Area 117,000 23,400 28,600 22,750 16,250 26,000
Insurance of Machine Value of Machine 43,400 18,620 15,400 7,980 1,050 350
Repairs of Machine Machine Hours 86,000 25,600 34,400 26,000
Maintenance of Machine Machine Hours 129,000 38,400 51,600 39,000
Maintenance of Building Area 90,000 18,000 22,000 17,500 12,500 20,000
General Expenses Direct Given 108,500 21,380 54,300 26,570 2,600 3,650
Time Keeping No. of Employees 51,100 14,000 17,500 14,000 2,100 3,500
Total Overheads 3,343,000 844,000 1,184,200 727,800 322,000 265,000
HP 25 50 40
MACHINE HOURS 6,400 8,600 6,500
HP * Machine Hours 850,000 160,000 430,000 260,000
Secondary Distribution of Overheads as per Step Down Method

Total Production Department Service Department
Particulars Basis A B C Canteen Stores
51
Cost Accounting
OH after Primary Distribution 3,343,000 844,000 1,184,200 727,800 322,000 265,000
OH of Canteen Department No. of Employees

A:B:C:Stores
4:5:4:1 92,000 115,000 92,000 -322,000 23,000
- 288,000
OH of Stores Department Stores Request

35:48:97 56,000 76,800 155,200 -288,000
Total Overheads 3,343,000 992,000 1,376,000 975,000 - -
Machine Hour Rate Total Overheads 992,000 1,376,000 975,000

Machine Hours 6,400 8,600 6,500
155.00 160.00 150.00

per hour per hour per hour

52
FYBcom Hons NM Mithibai College
Cost Accounting
Cost Sheet Format

Units Produced XXX
Units Sold XXX
Particulars Amt ` Amt `
Opening Stock of Raw Material XX

Add Purchases of Raw Material XX
Add Carriage Inward (if Direct) XX
Add Duties, Taxes etc (if non refundable) XX
Less Closing Stock of Raw Material (XX)
Material Consumed XXX
Direct Wages/Productive Wages XXX
Direct Expenses XXX
Prime Cost XXX
Add Factory Overhead/Manufacturing Overhead/
Production Overhead/Works Overhead XX
Factory Rent
Indirect Material Consumed
Indirect Labour
Factory Electricity
Factory Superviser Salary/Formen
Cost of Rectification of Finished Goods
Gross Works Cost XXX

Add Opening Stock of WIP XX
Less Closing Stock of WIP (XX)
Net Works Cost XXX
Add
Research and Development Cost xx
Primary Packing Cost xx
Administration Overhead related to Production xx
Less Sale of Scrap/by product (xx)
Cost of Goods Produced XXX
Add Opening Stock of Finished Goods xx
Less Closing Stock of Finished Goods (xx)
Cost of Goods Sold XXX
Add
General Administration Overhead xx
Selling and Distribution Overhead xx
Cost of Sales XXX
Add Profit xx
Sales xxx
Solutions CA Sapan Sir

53
Cost Accounting
Profit On Cost Profit On Sales

a/b on Cost a/(a+b) on Sales
1/3 (33.33 % )on Cost = 1/4 (25%) on Sales
1/4 (25%) on Cost = 1/5 (20%) on Sales
1/5 (20%) on Cost = 1/6 (16.66%) on Sales
2/5 (40%) on Cost = 2/7 on Sales
While Going from Cost to Sales, ADD Nr to Dr

While Going from Sales to Cost, Deduct Nr from Dr
Nr = Numerator
Dr = Denominator
Numerical Example 1
Cost Price Rs. 160
Profit is 20% on Selling Price
Since Selling price is not given, we have to use above logic

Profit = 1/4 of Cost Price = 1/5 of Selling Price
Cost Price Rs. 160

Add Profit 1/4 * 160 Rs. 40
Selling Price Rs. 200
Numerical Example 2
Profit is 33.33 % on Cost Price
Since Cost price is not given, we have to use above logic

Profit = 1/3 of Cost Price = 1/4 of Selling Price

Less Profit 1/4 * 200 Rs. 50
Cost Price Rs. 150

54
Cost Accounting
Q.1
Cost Sheet for June 2017
Particulars Amt Rs Amt Rs
Opening Stock of Raw Material 60,000

Add Purchases of Raw Material 480,000
Less Closing of Raw Material (50,000)
Material Consumed 490,000
Direct Wages 240,000
Prime Cost 730,000
Add Factory Overheads 100,000
Gross Wroks Cost 830,000
Add Opening Stock of WIP 12,000
Less Closing Stock of WIP (15,000)
Net Works Cost 827,000
Add Administration Overhead related to Production 50,000
Cost of Goods Produced 877,000
Add Opening Stock of Finished Goods 90,000
Less Closing Stock of Finished Goods (110,000)
Cost of Goods Sold 857,000
Add Selling and Distribution Overheads 25,000
Cost of Sales 882,000
Add Profit (Balancing Figure) 118,000
Sales 1,000,000

55
Cost Accounting
Q.2
Statement of Estimated Cost Sheet for 2,400 units
Particulars Amt Rs
Direct Material (WN 1) 9,600
Direct Labour (WN 2) 3,600
Prime Cost 13,200
Add Factory Ovehead (WN 3) 12,000
Total Cost 25,200
Add Profit (25% on Cost) 6,300
Sales 31,500
Selling Price per unit = 31,500/2,400 = Rs. 13.125 per unit
WN 1 Direct Material Cost per unit is 3,200/800 = 4,000/1,000 = 6,400/1,600 = Rs. 4 per unit
WN 2 Direct Labour Cost per unit is 1,200/800 = 1,500/800 = 2,400/1,600 = Rs. 1.5 per unit
WN 3 Factory OH are semi Variable Cost
Variale Cost pe unit = Change in Total Cost 6,400 - 5,600

Change in Units 1,000 - 800
Rs. 4 per unit
Total Cost = Total Variable Cost + Total Fixed Cost
at 800 units
5,600 = 800*4 + Total Fixed Cost
Total Fixed Cost = 2,400
FOH at 2,400 units

Total = 2,400*4 + 2,400
Rs. 12,000
Alternate Method to find Variable and Fixed Component of Semi Variable Cost
1,000x + y = 6,400 … 1
800x + y = 5,600 ….. 2
200x = 800 subtracting 2 from 1

x=4
Substitute x = 4 in equation 1
1,000 (4) + y = 6,400
y = 2,400

56
Cost Accounting
Q.3
Cost Sheet for the year ended 31st March 1989
Units Produced 40,000 120,000
Units Sold 36,000 100,000
Particulars A B
Amt Rs Amt Rs
Direct Material Consumed (WN 1) 600,000 900,000

Direct Wages (WN 2) 300,000 540,000
Prime Cost 900,000 1,440,000
Add Factory Overheads (1:3) 90,000 270,000
Net Works Cost/Cost of Goods Produced 990,000 1,710,000
Add Opening Stock of Finished Goods - -
Less Closing Stock of Finished Goods (WN 4) -99,000 -285,000
Cost of Goods Sold 891,000 1,425,000
Add General Administration Overhead (150% of Wages) 450,000 810,000
Add Selling Cost @ 1.5 per pair sold 54,000 150,000
Cost of Sales 1,395,000 2,385,000
Add Profit (Balancing figure) 189,000 415,000
Sales 1,584,000 2,800,000
W
C
U
C
C
V

57
Cost Accounting
Working Note 1 : Material

A B
Ratio of Production 1 3 (40,000:1,20,000)
Ratio of Consumption 2 1 (2:1)
Product 2 3
Material 600,000 900,000
Let B is Rs. X
A is 2x
40,000*2x + 1,20,000*x = 15,00,000

2,00,000x = 15,00,000
x = 7.5 per unit
2x = 15 per unit
7.5 per unit of B

15 per unit of A
Working Note 2 : Labour

A B
Ratio of Production 1 3
Ratio of Time 1 0.6
Product 1 1.8
300,000 540,000
Working Note 3 : Factory Overhead

A B
Ratio of usage 1 1
Product 1 3
90,000 270,000
Working Note 4 Value of Closing Stock

COGP 990,000 1,710,000
Cost per unit 24.75 14.25
Closing Stock units 4,000 20,000
Value of Closing Stock 99,000 285,000

58
Cost Accounting
Q.4
Units Sold 2,000 4,000
Particulars A B
Amt Rs Amt Rs
Direct Material Consumed (WN 1) 250,000 250,000

Direct Wages (WN 2) 125,000 100,000
Direct Expenses (1:2) 25,000 50,000
Prime Cost 400,000 400,000
Add Factory Overheads (20% of Prime Cost) 80,000 80,000
Net Works Cost/Cost of Goods Produced 480,000 480,000
Add Opening Stock of Finished Goods - -
Less Closing Stock of Finished Goods (WN 3) -96,000 -96,000
Cost of Goods Sold 384,000 384,000
Add General Administration Overhead (50% of Wages) 62,500 50,000
Add Selling Cost @ 8/9 per pair sold 16,000 36,000
Cost of Sales 462,500 470,000
Add Profit (Balancing figure) 37,500 30,000
Sales 500,000 500,000

59
Cost Accounting
Working Note 1 : Material

S V
Ratio of Consumption 2 1
Product 2 2
Material 250,000 250,000
Working Note 2 : Labour

S V
Ratio of Time 1 0.4
Product 1 0.8
Labour 125000 100000
Working Note 3
S V
COGP 480,000 480,000

Closing Stock units 500 1000
Value of Closing Stock 96,000 96,000

60
Cost Accounting
Q.5
Cost Sheet for the year ended 31/12/2013 and Estimated Cost sheet for 31/12/2014
Units Produced 2500 3000
Units Sold 2500 3000
Particulars 31-12-2013 - Actual 31-12-2014 - Estimated
Amt (RS.) Per unit Amt (RS.) Per unit
Direct Material
Purchase 80,000
Less Closing Stock -5,000
Material Consumed 75,000 30.00 99,000 33.00
Direct Wages 30,000 12.00 45,000 15.00
Direct Expenses 25,000 10.00 30,000 10.00
Prime Cost 130,000 52.00 174,000 58.00
Add Factory Overheads 40,000 16.00 60,000 20.00
Works Cost/COGP/COGS 170,000 68.00 234,000 78.00
Add Administration Overheads (General) -
Office Salaries 25,000 10.00 25,000 8.33
Office Expenses 12,000 4.80 6,000 2.00
Add Sales Overheads 12,500 5.00 15,000 5.00
Cost of Sales 219,500 87.80 280,000 93.33
Add Profit 30,500 12.20 70,000 23.33
Sales 250,000 100.00 350,000 116.67
WN 1) No. units produced = 2,500 + 20% = 3,000 units
WN 2) Material Cost per unit = 30 + 10% = 33 per unit
WN 3) Wages Cost per unit = 12 + 25% = 15 per unit
WN 4) Direct Expenses = 25,000 + 5,000 = 30,000
WN 5) Factory Expense per unit = 16 + 25% = 20 per unit
It is assumed that in 2013 Office expenes Rs. 12,000 relates to Rent of Office premises

61
Cost Accounting
Q.6
Cost Sheet for the year ended 31/03/2014 and Estimated Cost sheet for 31/03/2015
Units Produced 15000 20000
Units Sold 15000 20000
Particulars 31-03-2014 - Actual 31-03-2015 - Estimated
Amt (RS.) Per unit Amt (RS.) Per unit
Direct Material 330,000 22.00 396,000 19.80

Direct Wages 270,000 18.00 288,000 14.40
Prime Cost 600,000 40.00 684,000 34.20
Add Factory Overheads
Variable Cost 180,000 12.00 240,000 12.00
Fixed Cost 45,000 3.00 45,000 2.25
Works Cost/COGP/COGS 825,000 55.00 969,000 48.45
Add Administration Overheads (General) 105,000 7.00 63,000 3.15
Add Sales Overheads 90,000 6.00 120,000 6.00
Cost of Sales 1,020,000 68.00 1,152,000 57.60
Add Profit 255,000 17.00 208,000 10.40
Sales 1,275,000 85.00 1,360,000 68.00
WN 1) No. units produced = 15,000 + 1/3*15,000 = 20,000 units
WN 2) Material Cost per unit = 22 * 0.75 * 1.2 = 19.8 per unit or (22 - 25%) + 20% = 19.8
WN 3) Wages Cost per unit = 18 * 0.8 = 14.4 per unit
WN 4) Admin OH = 1,05,000* 0.60 = Rs. 63,000
WN 5) SP per unit = 85 * 0.80 = Rs. 68

62
Cost Accounting
Q.7
Statement of Estimated Cost Sheet for 5,000 units
Particulars Amt Rs
Direct Material (WN 1) 30,000 6
Direct Labour (WN 2) 15,000 3
Factory Ovehead (WN 3) (25,000 + 2500) 27,500
Total Cost 72,500
Add Profit (1/6 on SP = 1/5 on CP) 14,500
Sales 87,000
Selling Price per unit = 87,000/5,000 = Rs. 17.4 per unit
WN 1 Direct Material Cost per unit is 12000/2000 = 16,800/2800 = 22,200/3700 = Rs. 6 per unit
WN 2 Direct Labour Cost per unit is 6,000/2000 = 8,400/2800 = 11,100/3700 = Rs. 3 per unit
WN 3 Factory OH are semi Variable Cost
Variale Cost pe unit = Change in Total Cost 16,500 - 12,500

Change in Units 2,800 - 2,000
Rs. 5 per unit
Total Cost = Total Variable Cost + Total Fixed Cost
at 2,000 units
12,500 = 2,000*5 + Total Fixed Cost
Total Fixed Cost = 2,500
FOH at 5,000 units

Total = 5,000*5 + 2,500
2,800x + y = 16,500
2000x + y = 12,500

63
Cost Accounting
Q.8
Cost Sheet for the year ended 31/03/2014
Units Produced 20000
Units Sold 19000
Particulars 03/31/2014
Amt (RS.) Amt (RS.) Per unit
Material Consumed 340,000 17.00

Direct Wages 260,000 13.00
Direct Expenses 160,000
Drawing and Designing Expenses 54,000 214,000 10.70
Prime Cost 814,000 40.70
Depreciation of P & M 96,000
Factory Rent 150,000 246,000 12.30
Works Cost/COGP 1,060,000 53.00
Add Openings Stock of Finished Goods 85,250
Less Closing Stock of Finished Goods -106,000
Cost of Goods Sold 1,039,250 54.70
Add Administration Overheads (General)
General Manager Salary 380,000
Depreciation on Computer 172,000
Office Maintenance Charges 188,000 740,000 38.95
Add Selling and Distribution Overhead
Trade Fair Expense 85,500
Advertisement 185,250
Depreciation on Delivery Van 114,000 384,750 20.25
Cost of Sales 2,164,000 113.89
Add Profit 116,000 6.11
Sales 2,280,000 120.00
1 Opening Stock + Production - Closing Stock = Sales

1,000 + x - 2,000 = 19,000
x = 20,000
2 Current Year Cost of Production is Rs. 53 per unit

Value of Closing Stock = 2,000 * 53 = 1,06,000

64
Cost Accounting
Q.9
Cost Sheet for the year ended 31/03/2014
Units Produced 26000
Units Sold 25000
Particulars 03/31/2014
Amt (RS.) Amt (RS.) Per unit
Material Consumed 1,882,400 72.40

Direct Wages 1,001,000 38.50
Direct Expenses 496,600 19.10
Prime Cost 3,380,000 130.00
Indirect Wages 976,300
Work Manager Salary 1,194,700
Indirect Material 731,900
Depreciation on P & M 477,100
3,380,000 130.00
Works Cost/COGP 6,760,000 260.00 26000
Add Openings Stock of Finished Goods 760,000 2000
Less Closing Stock of Finished Goods -780,000 -3000
Cost of Goods Sold 6,740,000 269.60 25000
Add Administration Overheads (General)
Director Fees 973,700
Repairs to Office Furniture 401,700
Depreciation on Computer 1,212,900
Office Salary 791,750 3,380,050 135.20
Add Selling and Distribution Overhead
Salesman Salary 647,500
Showroom Expenses 1,068,750
Advertisement 1,533,750 3,250,000 130.00
Cost of Sales 13,370,050 534.80
Add Profit (1/5 on Sale = 1/4 on Cost) 3,342,513 133.70
Sales 16,712,563 668.50
1 Opening Stock + Production - Closing Stock = Sales

2,000 + x - 3,000 = 25,000
x = 26,000
2 Current Year Cost of Production is Rs.260 per unit

Value of Closing Stock = 3,000 * 260 = 7,80,000

65
Cost Accounting
Q.10
Units Produced 40,000
Units Sold 36,000
Particulars Amt Rs Per unit
Direct Material Consumed 280,000 7

Direct Wages
Skilled Worker 360,000 9
Unskilled Worker 240,000 6
Direct Exepnse
Royalty 120,000 3
Prime Cost 1,000,000 25
Add Factory Overheads (25,000 hours * 8 per hour) 200,000 5
Net Works Cost/Cost of Goods Produced 1,200,000 30
Add Opening Stock of Finished Goods -
Less Closing Stock of Finished Goods (4,000 units * 30) -120,000
Cost of Goods Sold 1,080,000 30.00
Add General Administration Overhead (1/3 of Works Cost) 400,000 11.11
Add Sales Commission 144,000 4.00
Cost of Sales 1,624,000 45.11
Add Profit (Balancing figure) 176,000 4.89
Sales 1,800,000 50.00

66
Cost Accounting
Q.11
Cost Sheet for year ended 31st March 2014
Particulars Amt Rs Amt Rs
Opening Stock of Raw Material 20,000

Add Purchases of Raw Material 1,500,000
Add Carriage on Purchase of Raw Material 20,000
Add Custom Duty and Octroi on Raw Material 60,000
Less Closing of Raw Material (185,000)
Material Consumed 1,415,000
Direct Wages 1,200,000
Direct Expenses
Cost of Special Design 50,000
Prime Cost 2,665,000
Power 99,500
Factory Rent and Rates 70,000
Factory Electricity 30,000
Depreciation on P & M 80,000
Factory Salary (2,50,000 * 1/4) 62,500
342,000
Gross/Net Wroks Cost 3,007,000
Less Sale of Scrap -7,500
Cost of Goods Produced 2,999,500
Add Opening Stock of Finished Goods 30,000
Less Closing Stock of Finished Goods (30,000)
Cost of Goods Sold 2,999,500
Add Office and Administration Overhead (General)
Office Rent and Rates 50,000
Office Telephone (30,000*60%) 18,000
Office Electricity 15,000
Office Salary (2,50,000*2/4) 125,000
Office Establishment Expenses (1,00,000 *1/2) 50,000
Director Fees 60,000
318,000
Add Selling and Distribution Overheads
Telephone Expense (30,000 * 40%) 12,000
Advertisement 75,000
Depreciation on Delivery Van 20,000
Salaries (2,50,000 *1/4) 62,500
Establishment Expense 50,000
Rent of Showroom 65,000
Mailing Charges of Sale Literature 10,000 294,500
Cost of Sales 3,612,000
Add Profit (1/5 on Sale = 1/4 on Cost) 903,000
Sales 4,515,000

67
Cost Accounting
A.3
Particulars Job 101 Job 102 Job 103
Direct Material 54,000 37,500 24,000
Direct Wages 42,000 30,000 20,000
Prime Cost 96,000 67,500 44,000
Add Factory OH 60% of Wages 25,200 18,000 12,000
Factory Cost 121,200 85,500 56,000
Add Admin OH 25 % of Factory Cost 30,300 21,375 14,000
Cost of Goods Produced/Sold 151,500 106,875 70,000
Add Profit 15,150 21,375 10,000
Sales 166,650 128,250 80,000
Job 101 x + 10% x = 1,66,650 X = 1,51,500

Job 102 y + 20% of Y = 1,28,250 Y = 1,06,875
For Job 101

Total Cost = DM + DW + FOH + Admin OH
1,51,500 = 54,000 + 42,000 + x%*42,000 + y%( 54,000 + 42,000 + x%*42,000)
1,51,500 = 96,000 + x%*42,000 + y%96,000 + X%y%*42,000
For Job 102

1,06,875 = 37,500 + 30,000 + x%30,000 + y%(37,500 + 30,000 + x%30,000)
1,06,875 = 67,500 + x%30,000 + y%(37,500 + 30,000 + x%30,000)
55,500 = 420x + 960y + 4.2xy …... 1

39,375 = 300x + 675y + 3xy …......2
55,500 = 420x + 960y + 4.2xy

55,125 = 420x + 945y + 4.2xy Mulitply Eq 2 * 1.4

68
Cost Accounting
375 = 15y
y = 25
x = 60
job 103
SP 100 ???
P 12.5
CP 87.5 70000

69
Cost Accounting
A.4
Cost Sheet for the year ended 04-05 and Job Cost Sheet for 05-06
Particulars 04-05 For a Job
Amt (RS.) Amt (RS.)
Material Consumed 90,000 120,000
Direct Wages 75,000 75,000
Prime Cost 165,000 195,000
Add Factory Overheads 45,000 45,000
Works Cost/COGP/COGS 210,000 240,000
Add Administration Overheads (General) 42,000 48,000
Add Sales Overheads 52,500 69,000
Cost of Sales 304,500 357,000
Add Profit 60,900 71,400
Sales 365,400 428,400
1 % of Factory OH to Direct Wages = FOH * 100

DW
45,000 *100
75,000
60%
Factory OH in 05-06 = 75000 * 60% = 45,000
2 % of Admin OH to Works Cost = AOH * 100

WC
42,000 *100
210,000
20%

70
Cost Accounting
Admin OH in 05-06 = 2,40,000 * 20%
48,000
3 % of S & D OH to Works Cost = S&D OH * 100

WC
52,500 *100
210,000
25%
S & D OH in 05-06 = 2,40,000 * 25%

60,000
Add Increase in Cost 15% 9,000
Total S & D 69,000
4 Profit % to Cost Profit * 100

Cost
60,900 *100
304,500
20%
Profit in 05-06 = 3,57,000 * 20%

71
Cost Accounting
A.6
OH Absorption Rate based on Direct Labour Facory OH 58,000 0.43 per labour hour
Direct Labour Hours 134,600
OH Absorption Rate based on Direct Labour Facory OH ' *100 58,000 *100 59.30%
Direct Labour Cost 97,800
OH Absorption Rate based on Machine Hr Facory OH 58,000 1.16 per labour hour
Machine Hours 50,000
Particulars Labour Hrs Labour Cost Machine Hr

Amt (RS.) Amt (RS.) Amt (RS.)
Material Consumed 42.00 42.00 42.00
Direct Wages 45.00 45.00 45.00
Prime Cost 87.00 87.00 87.00
Labour Hours 30 * 0.43 12.90
Labour Cost 45 * 59.30% 26.69
Machine Hr 20 * 1.16 23.20
Works Cost/COGP/COGS 99.90 113.69 110.20

72
Cost Accounting
Non Integrated Accounts Integrated Accounts
Sr No Financial Accounts Cost Accounts
1 Purchase of Raw Material

Purchase A/c Stores Ledger Control A/c Stores Ledger Control A/c
To Cash/Bank/Supplier A/c To Cost Ledger Control A/c (CLC) To Cash/Bank/Supplier A/c
2 Return of Raw Material

Supplier A/c Cost Ledger Control A/c (CLC) Supplier A/c
To Purchase Return A/c To Stores Ledger Control A/c To Stores Ledger Control A/c
3 Direct Material Issued for Production

No Entry WIP Ledger Control A/c WIP Ledger Control A/c
To Stores Ledger Control A/c To Stores Ledger Control A/c
4 Direct Material returned to Stores

No Entry Stores Ledger Control A/c Stores Ledger Control A/c
To WIP Ledger Control A/c To WIP Ledger Control A/c
5 Indirect Material Issued

No Entry Respective OH Control A/c Respective OH Control A/c
To Stores Ledger Control A/c To Stores Ledger Control A/c
6 Wages Incurred/Paid
Wages A/c Wages Control A/c Wages Control A/c
To Cash/Bank/Outstanding Wages A/c To Cost Ledger Control A/c (CLC) To Cash/Bank/Outstanding Wages A/c
7 Direct Wages Allocated

To Wages Control A/c To Wages Control A/c
8 Indirect Wages Charged/absorbed


73
Cost Accounting
To Wages Control A/c To Wages Control A/c
9 Factory/Production/Manufacturing OH
incurred/paid e.g. Rent, Electricity of Fact.
Rent A/c Factory OH Control A/c Factory OH Control A/c
Electricity Exp A/c To Cost Ledger Control A/c (CLC) To Cash/Bank A/c
To Cash/Bank A/c
10 Factory/Production/Manufacturing OH
charged/absorbed as per Est. OH Rate
To Factory OH Control A/c To Factory OH Control A/c
11 Finished Goods Produced

No Entry Finished Goods Control A/c Finished Goods Control A/c
To WIP Ledger Control A/c To WIP Ledger Control A/c
12 Office OH incurred/paid e.g. Rent,

Electricity of office
Rent A/c O & A OH Control A/c O & A OH Control A/c
Electricity A/c To Cost Ledger Control A/c (CLC) To Cash/Bank A/c
To Cash/Bank A/c
13a O & A OH Charged/Absorbed to Production

No Entry Finished Goods Control A/c Finished Goods Control A/c
To O & A OH Control A/c To O & A OH Control A/c
13b General O & A OH Charged/Absorbed

No Entry Cost of Sales A/c Cost of Sales A/c
To O & A OH Control A/c To O & A OH Control A/c
14 S & D OH incurred/paid e.g. Advertisement

74
Cost Accounting
Sales Commission, Rent of Showroom
Advertisement A/c S & D OH Control A/c S & D OH Control A/c

Sales Commission A/c To Cost Ledger Control A/c (CLC) To Cash/Bank A/c
To Cash/Bank A/c
15 S & D OH Charged/Absorbed
To S & D OH Control A/c To S & D OH Control A/c
16 Finished Goods Sold
a At Cost Price
To Finshed Goods Cotrol A/c To Finshed Goods Cotrol A/c
b At Selling Price
Cash/Bank/Debtors A/c Cost Ledger Control A/c (CLC) Cash/Bank/Debtors A/c
To Sales A/c To Sales A/c To Sales A/c
17 At the end Sales A/c and Cost of Sales A/c are tranferred to Costing P & L A/c
18 Under Absorption of OH (Loss)

No Entry Costing P & L A/c P & L A/c
To Respective OH Control A/c To Respective OH Control A/c
19 Over Absorption of OH (Profit)

To Costing P & L A/c To P & L A/c
Extra Entries related to Integrated Acciounts

1. Depreciation of Plant and Machinery
Factory OH Control A/c
To Plant and Machinery A/c

75
Cost Accounting
2. Depreciation of Office Furniture

O & A OH Control A/c
To Office Furniture A/c
3. Depreciation of Delivery Van

S & D OH Control A/c
To Delivery Van A/c
4. Raw Material issued for own fixed assets

Capital WIP A/c
To Stores Ledger Control A/c
5. Wages allocated for own fixed assets

Capital WIP A/c
To Wages Control A/c
6. Factory OH allocated for own fixed assets

Capital WIP A/c
To Factory OH Control A/c
7. On completion of construction of fixed asset

Fixed Asset A/c
To Capital WIP A/c
8. Receipt from Debtors

Cash/Bank A/c
To Debtors A/c
9. Payment to Creditors
Creditors A/c
To Cash/Bank A/c

76
Cost Accounting
In the Books of _____
Cost Ledger Control A/c

Particulars Amt Particulars Amt
By Balance b/d
To Sales A/c BY Stores Ledger Control A/c -
By Wages Control A/c
BY Stores Ledger Control A/c
By Factory OH Control A/c -
By O & A OH Control A/c -
By S & A OH Control A/c -
By Balance c/d
- -
Stores Ledger Control A/c

To Balance b/d
To CLC A/c By WIP Ledger Control A/c -
To CLC A/c By Factory OH Control A/c -
By O & A OH Control A/c -
By S & D OH Control A/c -
By Balance c/d
- -
Wages Control A/c

To CLC A/c By WIP Ledger Control A/c -
By Factory OH Control A/c
- -
WIP Ledger Control A/c

To Balance b/d
To Stores Ledger Control A/c By FG Control A/c
To Factory OH Control A/c By Balance c/d
- -

To Balance b/d By WIP Ledger Control A/c -
To Stores Ledger Control A/c
To CLC A/c
To Balance c/d
- -

77
Cost Accounting
Finished Goods Ledger Control A/c

To Balance b/d By Cost of Sales A/c
To WIP Ledger Control A/c
To O & A OH Control A/c By Balance c/d
- -
Office and Admin OH Control A/c

To Stores Ledger Control A/c By Balance b/d
To CLC A/c By Finished Goods Control A/c -
By Cost of Sales A/c -
To Balance c/d
- -
Selling and Dist. OH Control A/c

To Balance b/d
To Stores Ledger Control A/c By Cost of Sales A/c -
To CLC A/c
To Balance c/d
- -
Cost of Sales A/c

To O & A OH Control A/c
To S & D OH Control A/c By Costing P & L
To FG Control A/c
- -
Sales A/c
By CLC A/c
To Costing P & L A/c
- -
Costing P & L A/c

To Cost of Sales - By Sales -
To Balance c/d
- -

78
Cost Accounting
Trial Balance as on 30th September 2005

Particulars Dr. Amt Cr. Amt
Stores Ledger Control A/c -
WIP Ledger Control A/c -
Finished Goods Control A/c -
Factory OH Control A/c -
O & A OH Control A/c -
S & D OH Control A/c -
Costing P & L A/c
CLC A/c -
- -

79
Cost Accounting
No. of Rows
CLC A/c 10
Stores Ledger Control A/c 7
Wages Control A/c 5
Factory OH Control A/c 5
WIP Ledger Control A/c 7
Finished Goods Control A/c 5
O & A OH Control A/c 5
Cost of Sales A/c 5
Sales A/c 5
Costing P & L A/c 5

80
Cost Accounting
A.1
In the Books of Supreme Manufacturing Co.

To Stores Ledger Control A/c 3,000 By Balance b/d 98,000
To Sales A/c 300,000 BY Stores Ledger Control A/c 95,000
By Wages Control A/c 65,000
By Factory OH Control A/c 50,000
To Balance c/d 45,000 By S & A OH Control A/c 40,000
348,000 348,000

To Balance b/d 35,000 By CLC A/c 3,000
To CLC A/c 95,000 By WIP Ledger Control A/c 98,000
To WIP Ledger Control A/c 3,000
By Balance c/d 32,000
133,000 133,000
Wages Control A/c

65,000 65,000

To Balance b/d 38,000 By Stores Ledger Control A/c 3,000
To Stores Ledger Control A/c 98,000 By FG Control A/c 213,000
To Wages Control A/c 40,000
To Factory OH Control A/c 60,000 By Balance c/d 20,000
(150% * 40,000)
236,000 236,000

To Wages Control A/c 25,000 By WIP Ledger Control A/c 60,000
To CLC A/c 50,000
75,000 75,000

81
Cost Accounting

To Balance b/d 25,000 By Cost of Sales A/c 210,000
238,000 238,000
Selling and Admin OH Control A/c

To CLC A/c 40,000
By Cost of Sales A/c 40,000
40,000 40,000
Cost of Sales A/c

To S & A OH Control A/c 40,000
To FG Control A/c 210,000 By Costing P & L 250,000
250,000 250,000
Costing P & L A/c

To Cost of Sales 250,000 By Sales 300,000
To Balance c/d 50,000

300,000 300,000
Trial Balance as on 30th April 2005

Stores Ledger Control A/c 32,000
WIP Ledger Control A/c 20,000
Factory OH Control A/c 15,000
CLC A/c 45,000
95,000 95,000

82
Cost Accounting
A.4 Journal Entries under Non Integrated System - Cost Accounts
Sr. Particulars Dr. Amt Cr. Amt
1 WIP Ledger Control A/c Dr 550,000

Factory OH Control A/c Dr 150,000
To Stores Ledger Control A/c 700,000
[Being Direct and Indirect Material issued]
2 WIP Ledger Control A/c Dr 200,000

Factory OH Control A/c Dr 40,000
[Being Direct and Indirect Wages allocated]
3 Factory OH Control A/c 20,000

To Costing P & L A/c 20,000
[Being Over absorbed Factory OH trf to Costing P &L]
4 Costing P & L A/c 10,000

To Adminn OH Control A/c 10,000
[Being Under absorbed Admin OH trf to Costing P &L]

83
Cost Accounting

84
Cost Accounting
A.5

BY Stores Ledger Control A/c
To Balance c/d 699,025 By Factory OH Control A/c 91,510
951,925 951,925

To Balance b/d 301,435 By CLC A/c 2,900

424,435 424,435
Wages Control A/c

72,195 72,195

To Balance b/d 122,365
377,410 377,410

By Balance b/d 10,525
To Wages Control A/c 21,665 By Balance c/d 25,450
113,175 113,175

85
Cost Accounting

To Cost of Sales A/c 5,380 By Balance c/d 282,270
468,160 468,160
Cost of Sales A/c

To FG Control A/c 185,890 By Finished Goods Control A/c 5,380
By Costing P & L 180,510
185,890 185,890
Sales A/c
By CLC A/c 250,000
250,000 250,000
Costing P & L A/c


250,000 250,000
Trial Balance as on 30th Sep 2006

CLC A/c 699,025
768,515 768,515
5 Bottles @ 15
FG 75
To WIP 75
4 @ 15 Cost of Sales 60
To FG 60
4 @ 20 CLC 80
To Sales 80

86
Cost Accounting
A.6

To Balance c/d 32,000 By Factory OH Control A/c 8,000
By Costing P & L A/c 16,000
82,000 82,000

(Bal. Figure)
33,000 33,000
Wages Control A/c

10,000 10,000

To Wages Control A/c 8,000 (Bal. Figure)
44,000 44,000

To Wages Control A/c 2,000 By WIP Ledger Control A/c 9,000
To CLC A/c 8,000 By Costing P &L A/c 1,000
10,000 10,000

87
Cost Accounting
To WIP Ledger Control A/c 35,000 (Bal. Figure)
45,000 45,000
Cost of Sales A/c

To FG Control A/c 33,000
By Costing P & L 33,000
33,000 33,000
Sales A/c
By CLC A/c 50,000
50,000 50,000
Costing P & L A/c

To Factory OH Control A/c 1,000
To CLC A/c 16,000
50,000 50,000
Trial Balance as on
CLC A/c 32,000
32,000 32,000

88
Cost Accounting
A.7
In the Books of Acme Manufacturing Co. Ltd

To Sales A/c 1,443,000 BY Stores Ledger Control A/c 480,100
BY Stores Ledger Control A/c 8,400
By O & A OH Control A/c 74,000
By S & D OH Control A/c 64,200
1,443,000 1,443,000

To CLC A/c 8,400 By Factory OH Control A/c 41,200
By O & A OH Control A/c 3,400
By S & D OH Control A/c 7,200

612,500 612,500
Wages Control A/c

214,300 214,300

1,048,300 1,048,300

To Balance b/d 8,400 By WIP Ledger Control A/c 359,100

89
Cost Accounting
To Stores Ledger Control A/c 41,200
To CLC A/c 242,250
359,100 359,100

To O & A OH Control A/c 52,900 By Balance c/d 158,000
1,135,300 1,135,300
Office and Admin OH Control A/c

To CLC A/c 74,000 By Finished Goods Control A/c 52,900
By Cost of Sales A/c 14,800
79,700 79,700
Selling and Dist. OH Control A/c

To Stores Ledger Control A/c 7,200 By Cost of Sales A/c 82,000
To CLC A/c 64,200
82,000 82,000
Cost of Sales A/c

To O & A OH Control A/c 14,800
To S & D OH Control A/c 82,000 By Costing P & L 1,074,100
To FG Control A/c 977,300
1,074,100 1,074,100
Sales A/c
By CLC A/c 1,443,000
To Costing P & L A/c 1,443,000
1,443,000 1,443,000

90
Cost Accounting
Costing P & L A/c
To Cost of Sales 1,074,100 By Sales 1,443,000

1,443,000 1,443,000
Trial Balance as on 30th September 2005

O & A OH Control A/c 2,300
S & D OH Control A/c 4,350
CLC A/c 46,600
377,800 377,800
charged to production
charged to sales/general

91
Cost Accounting
A.1
1 Calculation of OH rate per Cost Driver

Particulars Cost Driver Cost Pool Cost Driver Level Cost per Cost Driver
Power Kilowatt Hours 200,000 50,000 4
Quality Inspection No. of Inspections 300,000 10,000 30
Total 500,000
4 Statement of Product Cost as per Activity Based Costing

Particulars M S T Unused
Power @ 4 40,000 80,000 60,000 20,000
Quality Inspection @ 30 105,000 75,000 90,000 30,000
Total Cost 145,000 155,000 150,000 50,000

92
Cost Accounting
A.2
Budgeted OH Rate per Direct Labour Hour Budgeted Production OH 1,242,500 62.125
Budgeted Direct Labour Hours 20,000
2 Statement of Cost per unit Traditional Based Costing

Particulars Y Z
Budgeted Units 2,000 3,125
Direct Material 300.000 450.000

Direct Wages
Y 3 hours @ 150 per hour 450.000 -
Z 4 hours @ 150 per hour - 600.000
Production Overhead
Y 3 hours @ 62.125 per hour 186.375 -
Z 4 hours @ 62.125 per hour - 248.500
Total Cost 936.375 1,298.500
3 Calculation of OH rate per Cost Driver

Particulars Cost Driver Cost Pool Cost Driver Level Cost per Cost Driver
Order Processing No. of Orders 210,000 600 350 per order
Machine Processing No. of Machine Hours 875,000 50,000 17.50 per machine hour
Product Inspection Inspection Hours 157,500 15,000 10.50 per inspection hour
Total 1,242,500

Particulars Y Z
Order Processing @ 350 per order 122,500 87,500
Machine Processing @ 17.5 per machine hour 402,500 472,500
Product Inspection @ 10.5 per inspection hour 42,000 115,500
Total Cost 567,000 675,500
Production Overhead per unit 283.50 216.16

93
Cost Accounting
Particulars Y Z
Direct Material 300 450

Direct Wages
Y 3 hours @ 150 per hour 450 -
Z 4 hours @ 150 per hour - 600
Production OH per unit 283.50 216.16
Total Cost as per ABC 1,033.50 1,266.16
Total Cost as per Traditional System 936.38 1,298.50
Difference 97.13 -32.34

94
Cost Accounting
A.3
Calculation of Operating Level Income of 4 customers
wholesale customer Retail customer
Particulars W H R T
No. of Orders 44 62 212 250
No. of suits per order 400 200 30 25
No. of suits Sold 17,600 12,400 6,360 6,250
List Selling Price 1,000 1,000 1,000 1,000

Less Discount -300 -200 -150 -100
Average Selling Price 700 800 850 900
Less Average Cost -550 -550 -550 -550
Average Gross Profit per suit 150 250 300 350
Total Gross Profit 2,640,000 3,100,000 1,908,000 2,187,500
Purchase order Cost @ 1225 53,900 75,950 259,700 306,250

Customer Visit @ 7150 57,200 85,800 157,300 143,000
Regular Deliveries 61,500 72,000 249,000 285,000
Rush Deliveries 12,750 59,500 195,500 255,000
Total Cost 185,350 293,250 861,500 989,250
Net Operating Income 2,454,650 2,806,750 1,046,500 1,198,250

Net Operating Income per suit 139.47 226.35 164.54 191.72

95
Cost Accounting
A.4
Calculation of Operating Level Income of 5 new customers
Particulars A B C D E
No. of Cases Sold 4,680 19,688 136,800 71,550 8,775
List Selling Price 108.00 108.00 108.00 108.00 108.00

Less Discount - -1.80 -9.00 -3.60 -10.80
Actual Selling Price 108.00 106.20 99.00 104.40 97.20
Actual Sales Value 505,440 2,090,866 13,543,200 7,469,820 852,930

Cost of bottled water @ 90 421,200 1,771,920 12,312,000 6,439,500 789,750
Gross Profit 84,240 318,946 1,231,200 1,030,320 63,180
Purchase order Cost @ 750 11,250 18,750 22,500 18,750 22,500

Customer Visit @ 600 1,200 1,800 3,600 1,200 1,800
Deliveries @ 5.75 * No. of Del * Km 1,150 1,035 1,725 2,300 3,450
Product Handling @ 3.75 17,550 73,830 513,000 268,313 32,906
Expedited Delivery - - - - 2,250
Total Cost 31,150 95,415 540,825 290,563 62,906
Net Operating Income 53,090 223,531 690,375 739,758 274

Net Operating Income per case 11.34 11.35 5.05 10.34 0.03

96

Tabular Method For Calculating EOQ

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Tabular Method For Calculating EOQ

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FYBCOM Hons NM Mithibai College

Annual Consumption of Raw Material A 600 kg

Tabular Method for Calculating EOQ

This chart isn't available in your version of Excel.

Solution CA Sapan Sir

Formula Method for Calculating EOQ

No. of Orders = 600/100 = 6

Solution CA Sapan Sir

EOQ = 6,000 kgs

Solution CA Sapan Sir

EOQ 200 units

Solution CA Sapan Sir

Particulars Supplier 1 Supplier 2

No. of units 1000 1000

No. of Defective units 20 28

Cost of Rectification @ 5 100 140

Company should purchaes from Supplier 2 since

Solution CA Sapan Sir

Cost Annual Qty No. of Ordering Avg Carrying Material Total

Solution CA Sapan Sir

Past Experience Day 1

Cost per 18 Cost per unit 18 6 per cup

= 6 Cost of Finished Goods Produced 2*6 12

Solution CA Sapan Sir

Treatment of Total Cost

Solution CA Sapan Sir

Purhcase of Raw Material in the Whole Year

Raw Material Purchase Budget in Kg and in Rs.

Solution CA Sapan Sir

Stores Ledger as per FIFO Method

Quarter 1 15,000 1.000 15,000 4,000 1.000 4,000

Quarter 2 25,000 1.050 26,250 6,000 1.000 6,000

Quarter 4 4,600 1.050 4,830

50,000 52,500 52,000 54,250

Solution CA Sapan Sir

Re-Order Level = Maximum Consumption * Maximum Lead Time

Solution CA Sapan Sir

Cost per Kg = 13,832 20,985 10,397

5.20 4.68 5.76

Solution CA Sapan Sir

A Setup + Carrying Cost at Q qty = A/Q * S + Q/2 * Ci

B Setup + Carrying Cost at EBQ = SQRT(2*A*S*Ci)

Solution CA Sapan Sir

In option 1, 4 and 5 : Number of orders are rounded up

Solution CA Sapan Sir

A.10 Economic Batch Quantity (EBQ) 200 units

Cost per unit 600 570

A Cost of Material 14,400,000 13,680,000

C Carrying Cost = Q/2 * C * i 200/2 * 600 * 20% 6000/2 * 570 * 20%

Total Cost ( A + B + C) 14,424,000 14,022,400

Saving at 6,000 units 401,600

Solution CA Sapan Sir

C EOQ 200 units

Total Cost ( A + B + C) 12,000 342,000

Saving at 6,000 units -330,000

Solution CA Sapan Sir

Re-Order Level = Maximum Consumption * Maximum Lead Time

Solution CA Sapan Sir

A.12 EBQ 200 units

Carrying Cost = Q/2 * C * i 2400/2 * 20 * 10% 4000/2 * 20 * 10%

Total = Mat + Order + Carrying 4,800 5,440

Saving at 6,000 units 640

Solution CA Sapan Sir

B Setup + Carrying Cost at EBQ = SQRT(2AS*Ci)