CA Megh Raj Aryal CHAPTER 8- UNIT COSTING [COST SHEET] Gurukul CA Coverage a) Meaning of Cost sheet bb) Uses of Cost sheet ©) Difference between Production ac and Cost sheet. 4) Practical problems = Current cost sheet ~ Estimated cost sheet (with Efficiency and Inflation effect) ~ Find out missing figures = Determination of Selling Price, Profit ete.CA Megh Raj Aryal Gurukul CA Unit Costing or Single Output Costing What Doni 1a) Cost are accumulated under various elements of cost and b) Cost per unit is ascertained by dividing the total cost by number of units produced. Where applied: 1a) Industries where only one product or a few grades of the same product are produced b) Production involves single process ©) Production is uniform and continuous. Examph + Brick making industries = Coal Industries + Floor Mills Industries = Cement Industries Meaning of Cost Sheet ‘© A cost sheet isa statement which shows the break -up of costs in detailed and analytical manner © Cost are divided showing different elements of cost a) Material Direct & Indirect b) Labor Direct & Indirect ©) Expenses. -Direct & Indirect Note:- All indirect cost (Indirect Material +Indirect Labour Indirect Expenses ) are considered as Overhead Further Overhead are also classified into different parts viz, Factory OH, Administration OH, & Selling and Distribution OH, ‘© Further different stages of cost is also shown viz, Prime cost, Factory cost, Cost of goods produced, Cost of goods sold, and Cast of sales. Uses of Cost Sheet ‘a) Determination of Cost price. b) Determination of Selling price. ©) Determination of Profit. 4d) Product wise and Location wise cost analysis. 2) Preparation of Cost estimates for submitting tenders/quotations 1) Preparation of Budgets. Format of Cost Sheet Particulars ‘Amt Rs Direct Material Consumed [Opening +Purchased-Closing] = Direct Labour incurred [Paid + Closing Ofs-Closing prepaid +Opening Prepaid Opening O's “ Direct Expenses o PRIME COST +e ‘Add: Factory OFT ae Add : Opening WIP ve Less: Closing WIP “ FACTORY COST ar ‘Adit: Administration OF ae COST OF GOODS PRODCUED | Fl ial ‘Add : Opening FG Cost of Goods available for sale ve Less: Closing FG. ee COST OF GOODSSOLD ae ‘Add Selling and Distibution OFF a COST OF SALES a ‘Add : Profit ae SALES ae Note1:- If question is silent, value closing stock on FIFO basis. (i.e on current cost of production) Note 2:- If opening units are given and cos/unit is wot given, then cost/unit of opening stock units should be assumed as same cost/unit of current year. 153CA Megh Raj Aryal Gurukul CA ‘Items excluded from Cost Accounts ‘The following items are normally included in financial account and not in cost aecounts, Tncome Expenditure ‘Appropriation '» Profit on sale of Fixed assets ‘= Profit on sale of Investment ‘© Interest Income © Dividend Income ‘© Rental Income ‘© Transfer Fees = Cash Discount Received (But Trade discount received is reduced from RM purchase cost) ‘© Loss on sale of Fixed assets ‘= Loss on sale of Investment ‘* Interest on loan, (But Bank charges forms part of AON) + Preliminary expenses wioff © Goodwill wlott ‘© Underwriting com & Debenture Discount wiott (But Normal Bad debts form part of S&D OH) ‘© Fines and penalties '* Donations © Cash discount allowed. (But Trade Discount allowed is reduced from sales) © Income Tax ‘© Transfer to General Reserve and other Reserve © Proposed Dividend Difference between Production /Manufacturing Ac VS Cost sheet Basis of distinction Production Ac Cost sheet Format is shown as ledger account. Tis shown as a statement, Accounting System Cost sheet is not based on Double Entry System. Itis based on Double entry system. Classification of Cost Cost are calssified to compute, Cost oF goods produced, Cost of goods sold, Cost of sales ‘Cost are calssified to compute, Prime cost, Factory ‘cast ,Cost of goods produced, Cost of goods sold, Cost of sales. Basis is prepared, based on actual figures It can be prepared, based on actual Figures of only. lexpesnses as well as estimated figures of expenses Useful Tor Quotation Not useful Tor preparing quotation, Estimated cost sheet can be prepared for submitting the quotations. Format of Production Ac Particulars Amt Rs Particulars Amt Rs To Direct Material + By Cost of goods produced wd aa To Direct Labour aad To Direct Expenses aa To Factory OH ” To Add: Opening WIP ad To Less: Closing WIP ce To Admin OH ve To Cost of goods produced Wid wr By closing stock of FG oe ‘To opening stock of FG vo By cast of goods sold cfd a To cost of goods sold bd = By Cost of Sales To Selling and Distribution OH. “ To Cost of Sales = By Sales oo To profit “oe 154CA Megh Raj Aryal Gurukul CA Cost sheet ean be ) Current cost sheet — based on current data bb) Estimated cost sheet:~ based on estimated data, While preparing estimated cost sheets following effects should. be given in question, Concept of inflation 1) The concept of inflation will apply only on the preparation of Estimated cost sheet b) The concept of inflation will be applied to both variable cost and fixed cost ©) Inflation if on variable cost = apply inflation in per unit and muliply by total units <@) Inflation if on fixed cost = apply inflation on total amount. ©) Inflation effect apply on nominator Concept of Efficieney 2) The concept of e b) The concept of et jency will apply only on the preparation of Estimated cost sheet. iency will be applied only on variable cost. Fixed cost are not affected by ef Old ve 7 L+ elliciency= if efficiency increases + Bificiencye ifefficiency decreases ) Efficiency effect apply on denominator. Example: Tet [hr=Tunit and 1 hr =Rs 2¢hr Hence we can say I unit =Rs 2 Efficiency increases by 20%, 20% 2 unit Summary of effect/-change in production, efficiency, and inflation. (Change in production ‘Change inefficiency | Change in inflation Variable Cost | Bffect all Variable cost Effect particular Variable | Tifect per unit of particular [V cont per unit same cost in which efficiency is | variable eost in which But total variable cost increases] | given inflation is given, Fixed Coat | Does not affect fixed cost Does nit affect fixed cost | Effect total amount of particular fixed cost in which inflation is given (Except depreciation) 135CA Megh Raj Aryal Gurukul CA Q.L.Prepare the cost sheet to show the total cost of production and cost per unit of goods manufactured by a company for the month of July, 1996. Also find out the cost of Sales. Particulars ‘Amt Rs. Particulars ‘Amt RS ‘Stock of Raw material 17.1096 3000 Office Rent 500) Raw material Purchased 28000 General expenses 400 Stock of Raw material 31.7.1996 | 4500 Discount on sales 300 ‘Manufacturing wages 7000 “Advertisement expenses to | 600 Depreciation of plant 1500 be charged fully Loss on sale of a part of plant 300 Income Tax paid 2000 Factory Rent and tax 3000 ‘The number of units produced during July. 1996 was 3,000. The stock of finished goods was 200 and 400 units on 1,7.1996 an 31.7.1996 respectively. The total cost of units on hand on 1.7.1996 was Rs 2800. All these had been sold during the month. Ans :- [Total cost of production =Rs 38900, unit cost of production =Rs 12.96, Cost of Sales =Rs 37116) Q.2.The books of Adarsh Manufacturing Company present the following data for the month of April, 1992, Direct labour cost Rs. 17,500 being 175% of works overheads. Cost of goods sold excluding administrative expenses, Rs. 56, 000, Inventory aecounts showed the following opening and closing balance: April L April 30 Rs. Raw materials, 8,000 Works in progress 10,500 Finished goods 17,600 Other data are Selling expenses General and administration expenses Sales for the ‘You are required to (@ Compute the value of materials purchased TAns:- Rs 36500] (il) Prepare a cost statement showing the various elements of east and also the profit eared. (Ans:- Rs 13000] Q.3.A fire occurred in the factory premises or, October 31. 2003. The accounting recordshave been destroyed. Certain ‘accounting records were kept in another building. They reveal the following for the period September 1, 2003 to October 31, 2003. @ iret materials purchased Rs.2,50,000 nventory, 19.2003 Rs.40,000 inventory, 1.9.2003 Rs.20,000. wentory, 1.9.2003 Rs.37,750 (v) Indirect manufacturing costs 40% of conversion cost (vi) Sales revenues. Rs.7,50,000 (vii) Direct manufucturing labour (vi Prime costs Cox) Gross margin percentage bused on revenues 3 (x) Cost of Goods available for sale Rs.5,55,775 The losis ly covered by imsurane company. The insurane company wants fo know the historical eos te (@ Finished gooxs inventory, 31,10,2003 [Ans:- Rs 30775] Gi) Work-in-process inventory, 31.10.2003 [Ans:- Rs 67892] i Is inventory, 31. 10.2003 [Ans:- Rs 94500] 156CA Megh Raj Aryal Gurukul CA Q4.Popeye Company is a metal and wood cutting manufacture, selling products to the home construction market. Consider the following data for the month of October, 2004. Particulars ‘Amt Rs Particulars ‘Amt Rs Sandpaper 5,000 Plant-leasing costs 135,000, aterial-handling costs 1,75,000 [Depreciation-plant equipment 90,000 aubricants and Coolants 72,500 [Property faxes on plant equipment 70,000 iscellaneous indirect manufacturing 1,00,000 [ire insurance on plant equipment 7,500 [Direct manufacturing labour 750,000 [Direct materials purchased 17,50,000 [Direct materials, October 1, 2008 1,00,000 [Sales revenues 34,00,000 [Direct materials, October 31, 2008 1,25,000 1,50,000. Finished goods, October 1, 2004 2,501,000 50, 0007 Finished goows, October 31, 2004 3,75,000 1.75000 fork in-process, October 1, 2004 25,000 50,000 jork-in-process, October 31, 200% 35,000 Required: (i) Prepare an income statement with « separate supporting schedule of cost of goods manufactured. Gi) For all manufacturing items, indicate by V or F whether each is basically a variable cost or a fixed cost (where the cost object isa product unit. [Ans:- Profit=Rs 300000] Q.5:The following figures are extracted from the Trial Bulance of Gogetier= Co. on 30h September, 1985: Particulars Rs. Particulars. | Amt Rs Inventories: Indirect Labour Finished stock ‘80000 | Factory Supervision Raw Materials 140000 | Repairs and Unkeep Factory Work in Progress 200000 | Heat, Light and Power Office appliances 17400 | Rates and Taxes Plant and machinery 4460500 | Miscellaneous Factory Expenses 18700 Buildings 200000 | Sales Commission 33600 Sales 768000 | Sales Travelling 11000 Sales Retumns and Rebates 14000 | Sales Promotion 22500 Material purchased 320000 | Distribution Dep Salaries and Exp 18000 Freight incurred on Materials, 16000 | Office Salaries and Expenses 8600 Purchase Returns 44800 | Interest on Borrowed funds 2000 Direct Labour 160000 ther details are available as follows: Dep to be provided onz @ Closing Inventories Office Appliances S% Finished Goods 1.15, 000 | Plant and Machinery 10% Raw materials, 180,000] Building 4 Works in Process 192,000 Gi) Acerued expenses on ‘v) Distribution of the following costs: Direct Labour 8,000 | -Heat, Light and Power to Factory, office Indirect Labour 1,200 | and Distribution inthe ratio 8:1:1 Interest on Borrowed Funds 2,000 | -Rates and Taxes two-thirds to Factory and one-third to Office, -Depreciation on Buildings to Factory, Office and Selling in the ratio 8:1:1, With the help of the above information, you are required to prepare a condensed profit and loss statement of Gogeiter Co. for the year ended 30® September, 1986 along with supporting schedules of: i) Costs of Sales. (ii) Selling and Distribution Expenses, (iii) Administration Expenses, [Ans:- Operating Profit =Rs 39980, Net profit =Rs 35980] Q.6.A re-roller produced 400 metric tons of M. S. bars spending Rs. 36,00,000 towards materials and Rs. 6,20,000 towards rolling charges. Ten percent of the output was found to be defective, which hadl to be sold at 10% less than the price for good production. Ifthe sales realization should give the firm an Overall profit of 12.5% on cost, find the selling price per metric ton of both the categories of bars. The serap during the rolling process fetched Rs. 60,000. [Ansz- Selling price per MT =Rs 11818.18 and Rs 10636.36] 1s?CA Megh Raj Aryal Gurukul CA Q.7.XYZ Auto Ltd. isin the business of selling cars. It also sells insurance and finance as part of its overall busines: strategy. The following information is available for the company. Physical Units Sales Value Sales of Cars 10, 000 Cars Rs. 30,000 lacs Sales of Insurance 6,000 Policies Rs. 1,500 lacs. Sales of Finance 8,000 Loans Rs. 19,200 lacs ‘The Revenue earnings from each line of business before expenses are as follows: Sale of Cars, 3% of Sales value Sale of Insurance 20% of Sales value Sale of Finance 2% of Sales value ‘The expenses of the company are as follows: Salesman salaries Rs, 200 lacs Rent Rs. 100 lacs Electricity Rs, 100 lacs, Advertising. Rs, 200 laes Documentation cost per insurance policy Rs. 100 Documentation cost for each loan Rs. 200 Direct sales expenses per car Rs. 5,000, Indirect costs have to be allocated in the ratio of physical units sold. () Make a cost sheet for each product allocating the direct and indirect costs and also showing the product wise profit and total profit [Ans: Profit=Rs 150 lakh / Rs 144 lakhy Rs 168 Lakh, Total profit Rs 462] (Gi) Calculate the percentage of profit to revenue earned from each line of business. [Ansi-16.67% 48%, 43.75%] Q8._A Lid. Co. has capacity to produce 1,00,000 units of a produet e production is as under: ry month Its works cost at varying levels of Level, ‘Works cost per unit Rs. 10% 400 20% 390 30% 380 40% 370 50% 360 60% 350 0% 340. 80% 330 90% 320 100% 310 Its fixed administration expenses amount to Rs. 1,50,000 and fixed marketing expenses amount to Rs. 2,50,000 per ‘month respectively. The variable distribution cost amounts to Rs. 30 per unit. ifs capaci it surs the following further expenditure. (@) It gives gift items costing Rs. 30 per unit of sale; (by Ithas lucky draws every month giving the first prize of Rs. 50,000; 2! prize of Rs. 25,000 3° prize of Rs. 10,000 and three consol ion prizes of Rs, 5,000 euch (o customers buying the pra (©) It spends Rs. 1,00,000 on refreshments served every month to its customers. (@) It sponsors a television programme every week at a cost of Rs. 20,00,000 per month, It can market 30% of its capa (ad) above, ‘Advise the company on its course of acti Show the supporting cost sheets. [Ans:- Prfoit 30% =Rs 38 lack and Profit at 100% =Rs 104 lacs} Q.9.Prepare the estimated cost sheet based on the following data and consider the price that you would quote for an export ‘order of 25,000 pes, Raw material; 10,000 kgs @ 6.95 per Kg, Direct labour 15,000 hours; normal @ Rs. 2.00 per hour, 25% over time at double the normal rate Factory overheads normally recovered at 80% of direct wages. Selling and distribution cost: normally recovered at 60% of direct wages, ‘Additional Fixed capital investment to be made Rs. 50;000 Normal net return on capital employed invested 25 Increase in working capital: 20% of the sales value [Ans:- Rs 181083] 158Q.10, Qu. Qi. QB. CA Megh Raj Aryal Gurukul CA Production and Sale unit=100000 unit Material Rs 50000, Labour 40000, Factory Overhead @ 100% of Prime Cost. Administration Overhead are absorbed @ Rs 0.70 per unit produced. Selling and Distribution OH absorbed @ 10% on sales Fixed Capital employed Rs 30000 and varying portion is 40% of sales. A profit of 8% after tax of 40% on capital employed is desired. Find Selling price per unit. [Ans:- Rs 3/ unit} Bright shoe -polish company manufactures black and brown polish in one standard size of tin retailing at Rs 12,00 and Rs 13.30 respectively. Following data are given to you. Partie Sales Opening stock. Closing Stock. Black Polish 72000tins 2400 tins ‘5400 tins Brown Polish 30000tins. $000 tins 3000 tins Particulars Direct Material-Polish Rs 246000 Tins Rs 120000 Direct Wages Rs 204000 Production OH Rs 306000 Administration and Selling OH_ Rs 102000 ©The opening stock of black and brown polish was valued at its production cost ‘The cost of RM for brown polish is 10% higher than for black, but there is no difference in cost of tins Direct wages for brown are 8% higher than black polish, Production overhead are considered to vary with direct wages. Administration and Selling overhead is absorbed at uniform rate per tins of polish sold. Prepare a statement to show the cost and profit per tin of each kind of polish. [Ans:-Black tin= Cost 9.6/ tin and Profit Rs 2.40/tin, Brown Tin=Cost Rs 10.24/tin and Profit Rs 3.06/tin] ‘SK Engineering Company Limited manufactures two types of auto bearing- type “XD and type "XE". The company’s records show the following particulars for those bearings for the month af May 2008. Amt Rs Direct Material 3810000 Direct Labour 2010000 Production Overhead 603000 Office Overhead 642300 ‘There was no work-in progress atthe beginning or at the end of the month. It was ascertained that:~ 1a) Direct material cost per bearing for type XD was 160% of those for type XE ) Direct labour cost per bearing for type XE was 40% of those for type "XD. ©) Production overhead were absorbed on the basis of Direct labour cost. 4) Office overitead were absorbed on the basis of Factory cost e) Selling und Distribution Overheads were Rs 2 per bearing sold for each type. 1) Stock of finished bearing on 1” May, 2009 was 15000 bearings @ Rs 15 of type “XD* and 20000 bearings @ Rs 8 of ype XE, 8) Production during the month of May, 2009 was 270000 bearings of type XD and 330000 bearings of type XE and out of May's output 25000 bearings of type XD and 40000 bearings of type XE would be remains in stock on 31 May 2009 which valued at cost of production, ‘You are required to 1) Prepare a statsment showing cost of production each type of bearings. 2) Prepare a statement showing the selling price at which the bearings would be marketed if the company desires @ 20 percent profit on Selling price. Cost of production XD Rs 4306500, XE Rs 2758800, SP per unit of XD Rs 22.37/unit , XE Rs 12.92/unit} Ia ‘A Company manufactures radios, which are soldat Rs. 1,600 per unit, The total cost is composed of 30% for direct materials, 40% for direct wages and 30% for overheads. An increase in material price by 30% and in wage rates by 10% is expected in te fortncoming year, asa result of which the profit at current selling price may decrease by 40% of the present profit per unit. You are required to prepare a statement showing current and future profit at present selling price, How much Selling Price should he increased to maintain the present rate of profit? [Profit =Rs 392, Rs 235, Selling price =Rs 1808] 159CA Megh Raj Aryal Gurukul CA Q.14, A Manufacturing Company has an installed capacity of “150,000 units per annum. Its cost structure is given below: Qs. Q.16. Rs. (Variable cost per unit Materials 10 Labour (subject to a minimum of Rs. 100,000 per month) 10 ‘Overheads: 4 Gi) Fixed overheads per annum 1,92,300 (iii) Semi-variable overheads per annum at 75% capacity (It will increase by Rs. 4, 000 per annum for increase of every 5% of the capacity utilization 60,000 ‘or any part thereat) The capacity utilization for the next year is budgeted at 75% for first three months, 80% for the next six months and 90% for the remaining three months. Required: Ifthe company is planning to have a profit of 20% on the selling prive, calculate the selling price per unit for the next year. TAns :-Selling price =Rs 32.83 /anit] “Maximum Production Capacity of JK Ltd is 520000 units per annum, Details of estimated cost of production are as follows: = Direct Material Rs 15 per unit = Direct wages RS 9 per unit (Subject to a minimum of Rs-250000 per month) = Fixed Overheads Rs 960000 per annum. = Variable Overheads Rs & per unit ~ Semi variable overheads are Rs 560000 per annum up to S0per eent capacity and additional Rs 150000 per annum for every 25 per eent inerease in capacity ora part oi IK Ld worked at per cent capacity for the first three months during the year 2008, but i is expected to work at 90 per cent capacity forthe remaining nine months. ‘The selling price per unit was Rs 44 during the first three months. ‘You are required what selling price per unit should be fixed for the remaining nine months to yield a total profit of Rs. 1562500 for the whole year. [Ans :- Sellling price Rs 39 /unit] tion effect ABC Lid furnishes the following information for 10,000 units of products manufactured during 061/62. Particulars Amount (Rs) Material 450,000 Direct wages 300,000 ‘Power and Consumables 60,000 Factory wages 75,000 Factory Lightning 27,500 Normal defective works(cost of rectification) 15,000 Salaries and Management expenses 167.500, Selling Expenses 27,500 Sales Proceeds of Scrap (Indirect material) 10,000 ‘Plant repair, Maintenance and depreciation 57,500 The net selling price was Rs 158 per unit and all units produced were sold. During current year, the selling price was reduced to Rs 155 per unt. Is estimated that production could be increased inthe current year by 50% utilizing spare capacity, Price of material and rate of wages will go.up by 10% Required:- 4) Prepare a cost sheet forthe last yea showing varios elements of cost per unit, (Ams:- Profit =Rs 410000] bb) Compute estimated cost and profit for the eurrent year all produced units were sold during the year. (Facto Overhead will be recovered as on percentage of direct wages and office and selling expenses as a percentage of works cost, [Ans:- Profit=Rs 394500] Extension I:-ifin the same question in part (b) above, bracket words (...) are not given than how the solution appears? Extension 2:-ifin the same question in part (b) above, braked words (...) are not given + Factory OH , AOH, & ‘SOH are expected to show an increase of 25% than how the solution will appear? Extension 3:-ifin the same question in part (b) above, braked words (..) are given + Factory OH , AH, & SOH. are expected to show an inerease of 25% than how the solution will appear? 160Qt, Qs. QQ. CA Megh Raj Aryal Gurukul CA The profit of X Ltd for the year 20x1 has been worked out to be 12.5% on the capital employed and the relevant figures are as under:- Sales Rs 500000 Direct material Rs 250000 Direct Labour Rs 100000 Variable Overhead Rs 40000 Capital employed Rs 400000 ‘The new sales manager who has joined the company recently has estimated a profit about 23% on the Capital employed for the next year, provided the volume of sales increase by 10%, the selling price increases by 4%, and there is an overall cost reduction (for all the cost elements) by 2%. You are required to find out (by giving details of computation), the cost and profit figures for the next year and make comments on the estimates of the sales managet. [Ans:- Cost Rs 479220, Profit Rs 92780, Sales Rs 572000, % of profit on capital employed =23.195% ] ‘Tulsian td provides you the following figures for the year 2009-10. Direct Material Rs 320000 Direct Wages Rs 800000 Prod OH (25% Variable} Rs 480000 Admin OH (75% Fixed) Rs 160000 S&D OH (2/3" Fixed) Rs 240000 Sales @ Rs 125 per un Rs 2500000 For the year 2 is estimated that T. Output and sales quantity will increase by 20% by incurring additional advertisement expenses of Rs 45200. 2, Material price will go up to 10% 3. Wages rate will go up by 5% along with, increase in overall direct labour efficiency by 12% 4. Variable Overheads will increase by 5% 5. Fixed Production OH will increase by 33.33% Required: 18) Calculate the cost of sales for the year 2009-10 and 2010-1 1,[Ams:- R's 2000000, Rs 2430000] b) Find out the new selling price for the year 2010-11 i) If the same amount of profit is o be earned as in 2009-10 [Ansi= Rs 122.08/unit) fi) If the same % of profit to sales is to be earned as in 2009-10, [Ans:-126.562] fii) If the existing % of profit to sales is to be increased by 25%. [Ans:-135/unit} iv) If profivunit Rs 10 is to be earned. [Ans:-111.25/unit] A factory incurred the following expenditure during the year 2007 Direct material consumed 120,000 Manufacturing wages 700,000 Manufacturing overheads Fixed 360,000 Variable 250,000 610,000 570,000 In the year 2008, following changes are expected in production and cost of production 1) Production will increase due to recruitment of 60% mare workers in the factory. 2) Overall efficiency will decline by 10% on account of recruitment of new workers. 3) There will be an increase of 20% in fixed overhead and 60% in variable overheads. 4) The cost of direct material will be decreased by 6%. 5) The company desire to carn a profit of 10% on selling price. Ascertain the cost of production and selling price [Ans:- Cost of production Rs 3752320, Sales Rs 4169244] 161CA Megh Raj Aryal Gurukul CA Q.20. A Itd provides you the following information:~ ‘Production Capacity S33G@ SO Sales unit ‘9000 units 15000 units Production unit 10000 units 15000 units Direct material Rss 110000 Rs 165000 Direct Labour Rs 180000 Rs 230000 Production OH (Including depreciation) Rs 110000 Rs 125000 Depreciation on production machinery Rs 20000 Rs 20000 Adiministration expenses Rs 20950 Rs 20950 Selling and Distribution expenses Rs 38000 Rs 50000 ‘© Variable labour cast becomes 50% higher for activity in excess of 19000 units due to the necessity of overtime working. The variable element of S&eD expenses is a function of sales. All other costs with a variable element are a function of production volume. ‘© During 2009-10, all goous produced were sold @ Rs 40 were Rs 720000 © During 2010-11, selling price is expected to decrease by 5%. Direct material price is expected to increase by Rs 1 with 5% inefficiency (wasting allowance), Direct wage rate is expected to increase by 12.5% with 25% increase in productivity of variable labour input, fixed production overheads and fixed S&D overheads are expected to increase by 20%. Required: Prepare a statement of cost and profit for the year »= a) Year 2009-10 [Ans:-Cost of Sales Rs 668950, Profit Rs 51050 Sales Rs 720000] b) Year 2010-11 (ifsales and production are expected to inerease by (a)I000 units (b) 50%. [Ans:- a) Cost of sales 732950, Loss 10950, Sales Rs 722000, 1b) Cost of sales Rs 981960, Profit Rs 44040 Sales Rs 1026000] Question of Production Account Q.21. From the following balances of a manufacturing company, you are required to prepare Production Account ; if articles preciuced is 4000 Rs ‘Stock of Material a beginning 35000 Stock of Material at end 4900 Purchase of Material 52500 Factory Wages 95000 Factory Expenses, 17500 Establishment Expenses [Factory] 10000 Completed Stock at Start Nill Completed Stock at end 35000 Sales 189000 Q.22. From the following particulars make out a monthly production account of the Coke and By-Products Company showing cost per ton and percentage of coal used in cach item of output Particulars ‘Tons Rate per tone (Rs) Amount (Rs) ‘Coal used 5000 12.50 Coke produced 3500 25.00 Tar produced 210 50.00 Sulphate of Ammonia produced 49 150.00 Benzol produced 4B 65.00 ‘Raw Materials used 8750 Wages paid 3585 Repairs and Renewal 2815, Generals Charge 4050CA Megh Raj Aryal Q.23._Given below is the Cloth and Yam Manufacturing Account of Arvind Mills for the year ended 31Ashad 2072 Gurukul CA Particul Rs. Particular Rs ‘To Opening sock By sales of 224000kg of waste, being that Yarn 44800 kg 33600 | portion of 11,53,600kg of cotton as per Cloth 88200kg 88200____| contra which could not 28,000 121800 | manufaeture To Cotton consumed 1153600kg 901250 To Spinning Wages 57050 | By Yarn Sales 168000kg. 189,000 ‘To Weaving Wages 91700 | By Cloth Sales 756000kg 89750 ‘To Store consumed in spinning which increased yarn by S600kgin weight 41300 | By Closing Stock: To Stores and sizing materials consumed in weaving Yarn 140000kg, 148750 ‘which inereased cloth by 186200kg in weight 148400 Cloth 190400 214200 To Spinning fuel 36050 To Weaving Fuel 22400 To Gross Profit, 57750 Total 1477700 _| Total 1477700, Tn the above Manufacturing Account (where the closiny by the Income Tax Author actually made, For the satisfaction of the authorities you are required to prepare from the above Manufacturing Account a separate stock of yarn and cloud es that the closing stock is valued below cost price, iaken at actual C050 ‘Yarn Production Account and separate Cloth produetion Avcount showing the following details 2) Gross profit of the Department. b) Total Quantity produced (including the opening balance) ©) Total cost of production (including the value of opening stock which was at cost) Cost of production per kg (including the quantity of the opening stock in total quantity, and the cost of opening stock in the total cost) = contended in order to suppress the gross profit In manufacturing cloth, 672000 kg of Yarn was consumed which are to be adjusted al the actual cost is arrived atin the manner. Ans: ross profit:- Yarn Rs 10,500, Cloth Rs 47,250] Cost of production:- Yarn Rs 1,041,250, Cloth Rs 1,064,700], Cost of production per kg:- Yarn Rs 1041250/980000 kg= Rs 1.0625 per kg ‘Cloth Rs 1064700/ 946400 kg =Rs 1.125 per kg 163