Special Questions

Cost & Management Accounting CA Purushottam Sir
SPECIAL QUESTIONS
Question 1 From the following particulars, find the most profitable product mix and prepare a statement of profitability
of that product mix:-
Product A Product B Product C
Units budgeted to be produced and sold 1,800 3,000 1,200
Selling price per unit (Rs. ) 60 55 50
Requirement per unit:
Direct Materials 5 kg 3 kg 4 kg
Direct labour 4 hours 3 hours 2 hours
Variable overheads (Rs. ) 7 13 8
Fixed overheads (Rs. ) 10 12 5
Cost of direct material per kg (Rs. ) 4 4 4
Direct labour hour rate (Rs. ) 2 2 2
Maximum possible units of sales 4,000 5,000 1,500
All the three products are produced from the same direct material using same type of machines and labours. Direct
labour, which is the key factor, is limited to 18,600 hours.
Question 2 A manufacturer with an overall capacity (inter-changeable among the products) of 1,00,000 machine
hours has been so far producing a standard mix of A, B and C as 15,000 units, 10,000 units and 10,000 units
respectively. On experience, the total expenditure exclusive of his fixed charges found to be Rs. 2,09,000 and the
variable costs ratio among the products is 1 : 1.5 : 1.75 respectively per unit. The fixed charges comes to Rs. 2.00 per
unit. When the unit selling prices are Rs. 6.25 for A, Rs. 7.50 for B and Rs. 10.50 for C, he incurs loss.
He desires to change the product mix as under:-
MIX 1 MIX 2 MIX 3
A 18,000 15,000 22,000
B 12,000 6,000 8,000
C 7,000 13,000 8,000
As an accountant, which mix would you recommend ?
Question 3 A firm can produce three different products from the same raw material using the same production
facilities. The requisite labour is available in plenty at Rs. 8 per hour for all products. The supply of raw material, which
is imported at Rs. 8 per kg., is limited to 10,400 kgs for the budget period. The variable overheads are Rs. 5.60 per
hour. The fixed overheads are Rs. 50,000. The selling commission is 10% on sales.
a) From the following information, you are required to suggest the most suitable sales mix, which will maximize
the firm’s profits. Also determine the profit that will be earned at that level:-
Product market Selling price per Labour hours Raw material
demand unit (Rs. ) required per unit required per unit
(units) (Kg.)
X 8,000 30 1 0.7
Y 6,000 40 2 0.4
Z 5,000 50 1.5 1.5
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b) Assume, in above situation, if additional 4,500 kgs of raw material is made available for production. Should the
firm go in further production, if it will result in additional fixed overheads of Rs. 20,000 and 25% increase in the
rates per hour for labour and variable overhaeds.
Question 4 A company produces three products. The general manager has prepared the following draft budget for the
next year.
No. of units 30,000 20,000 40,000
Selling price per unit (Rs. ) 40 80 20
P/V Ratio 20% 40% 10%
Raw material cost as a % of sales value 40% 35% 45%
Maximum Sales potential in Units 40,000 30,000 50,000
The company incurs Rs. 1,00,000 per annum towards fixed cost. The company uses the same raw material in all the
three products and the price of raw material is Rs. 2 per kg.
The draft budget makes full utilization of the available raw material which is in short supply. The managing director is
not satisfied with the budgeted profitability and hence he has passed on the aforesaid draft budget to you for review.
Required:
1) Set an optimal product mix for the next year and finds its profit.
2) The company has been able to locate a source for purchase of additional material 20,000 kgs at an enhanced
price. The transport cost for the additional raw material is Rs. 10,000. What is the maximum price per
kg.which can offered by the company for additional supply of raw material.
Solution: (1) Calculation of available quantity of raw material (Based on budget)
Product Selling Material Material Mat. Sales Raw

price per cost (%) cost (Rs.) Requirement budget material
unit (Rs.) per (Qty)
unit@Rs. 2
per kg
A 40 40% 16 8 kg 30000 240000 kg
units
B 80 35% 28 14 kg 20000 280000 kg
units
C 20 45% 9 4.50 kg 40000 180000 kg
units
Total 700000 kg
Total available raw material = 700000 kg
(2) Statement showing Rank

Particulars A B C
Selling price per unit 40 80 20
P/V Ratio 20% 40% 10%
Contribution per unit 8 32 2

Material required per 8 kg 14 kg 4.50 kg

unit (Kg)
Contribution per kg Rs. 1 Rs. 2.29 Rs. 0.44
Rank II I III
(3) Allocation of available 700000 kg material

Product Rank Demand Material Required Allotted
required per material material
unit
A II 40000 8 kg 320000 kg 280000 kg
(bal.)
B I 30000 14 kg 420000 kg 420000 kg
C III 50000 4.50 kg 225000 kg ---
Total 700000 Kg
possible production of A = = 35000 units

Best production mix
A = 35000 units B = 30000 units
Profit = Contribution – Fixed Cost = (35000 units x Rs.8 + 30000 units x Rs.2) – 100000 = 11,40,000
(2a) Total demand of product A = 40000 units
Less existing supply of A = (35000 units)
Balance demand = 5000 units
Possible production with additional 20000 kg = = 2500 units
Selling price of A = Rs. 40
Less Contribution = (Rs.8)
Variable Cost per unit = Rs. 32
Less Material cost (8 kg x Rs. 2) = (Rs. 16)
Other variable cost per unit = Rs. 16u
Sale value of 2500 units of A= Max cost of material + freight + other variable cost + additional fixed cost + profit
2500 units x Rs. 40 = Max. Material cost + 10000 + (2500 units x Rs. 16)
Max. material cost = Rs. 50000
Max offer price per kg = = Rs. 2.50 per kg
Question 5 ABC Ltd. Produces three products A, B and C from the same manufacturing facilities. The cost and other
details of the three products are as follows:-
Selling price per unit (Rs.) 200 160 100
Variable cost per unit (Rs.) 120 120 40
Maximum production per 5,000 8,000 6,000
months in units
Maximum demand per month 2,000 4,000 2,400

in units
Fixed expenses for the month is Rs. 2,76,000. The total processing hours available for the month cannot be increased
beyond 200 hours. With these available 200 hours, only one of these three products can be produced at maximum
level.
You are required to:-
a) Compute the most profitable product-mix;
b) Compute the overall break-even sales of the company for the month based on the mix calculated in (a) above.
Solution:
Limited available processing hours = 200 hours
With these available hours, only one product can be produced for maximum production quantity.
(1)
Product Production Hours Hour per unit
A 5000 kg 200 hours 1/25 hour per unit ( )
Or B 8000 kg 200 hours 1/40 hour per unit

Or C 6000 kg 200 hours 1/30 hour per unit
Statement showing rank

Particulars A B C
Selling price per unit 200 160 100
Less variable cost per unit (120) (120) (40)
Contribution per unit 80 40 60
Hour per unit 1/25 hour 1/40 hour per unit 1/30 hour per unit
Hourly contribution Rs. 2000 1600 1800
Rank I III II
Allocation of available 200 hours

Product Rank Max. demand units HR Per unit Required Allotted hours
hours
A I 2000 units 1/25 hour per unit 80 hours 80 hours
B III 4000 units 1/40 hour per unit 100 hours 40 hours (Bal.)
C II 2400 units 1/30 hour per unit 80 hours 80 hours
260 hours 200 hours
Possible production of B = = 1600 units

Best MIX
A = 2000 units
B = 1600 units
C = 2400 units
(2) calculation of sales and contribution

Product Qty Selling price Contribution Total Sales Total
(Rs.) per unit (Rs.) (Rs.) Contribution
(Rs.)
A 2000 units 200 80 400000 160000
B 1600 units 160 40 256000 64000
C 2400 units 100 60 240000 144000
Total 896000 368000
P/V Ratio = x 100 = 41.07%

BEP Sales = = Rs. 6,72,000
Question 6 X Ltd. supplies spare parts to an air craft company Y Ltd. The production capacity of X Ltd.
facilitates production of any one spare part for a particular period of time. The following are the cost and
other information for the production of the two different spare parts A and B:
Part A Part B
Per unit
Alloy usage 1.6 kgs. 1.6 kgs.
Machine Time: Machine P 0.6 hrs 0.25 hrs.
Machine Time: Machine Q 0.5 hrs. 0.55 hrs.
Target Price (Rs.) 145 115
Total hours available Machine P 4,000 hours
Machine Q 4,500 hours
Alloy available is 13,000 kgs. @ Rs. 12.50 per kg.
Variable overheads per machine hours Machine P: Rs. 80
Machine Q: Rs. 100
Required
(i) IDENTIFY the spare part which will optimize contribution at the offered price.
(ii) If Y Ltd. reduces target price by 10% and offers Rs. 60 per hour of unutilized machine hour,
CALCULATE the total contribution from the spare part identified above?
Question 7

The profit for the year of R.J. Ltd. works out to 12.5% of the capital employed and the relevant
figures are as under:
Sales ......................................................................................... Rs. 5,00,000

Direct Materials .......................................................................... Rs. 2,50,000
Direct Labour… .......................................................................... Rs. 1,00,000
Variable Overhead…………………………………………………..Rs.40,000
Capital Employed…………………………………………...……..Rs. 4,00,000
The new Sales Manager who has joined the company recently estimates for next year a profit of
about 23% on capital employed, provided the volume of sales is increased by 10% and
simultaneously there is an increase in Selling Price of 4% and an overall cost reduction in all the
elements of cost by 2%.
Required
FIND OUT by computing in detail the cost and profit for next year, whether the proposal of Sales
Manager can be adopted.
Question 8 Following Data is available for XYZ Ltd.

Standard Working hours 8 hours per day of 5 days per week
Maximum Capacity 60 employees
Actual Working 50 employees
Actual hours expected to be worked per four week 8000 hours
Standard hours expected to be earned per four week 9600 hours
Actual hours worked in the four week period 7500 hours
Standard hours earned in the four week period 8800 hours
The related period of is 4 weeks. In this period, there was one special day holiday due to national event.
Calculate following ratios
1. Efficiency Ratio
2. Activity ratio
3. Standard Capacity Usage Ratio
4. Actual Capacity Usage Ratio
5. Actual Usage of Budgeted Capacity Ratio
6. Calendar Ratio
Question 9
A company can make any one of the 3 products X, Y or Z in a year. It can exercise its option only at the beginning of
each year.
Relevant information about the products for the next year is given below.
X Y Z
Selling Price (Rs. / unit) 100 120 120
Variable Costs (Rs. / unit) 60 90 70
Market Demand (unit) 3,000 2,000 1,000
Production Capacity (unit) 2,000 3,000 900

Fixed Cost (Rs.) 3,00,000
Required
COMPUTE the opportunity costs for each of the products.
Question 10
XY Ltd. makes two products X and Y, whose respective fixed costs are F1 and F2. You are given that the unit
contribution of Y is one fifth less than the unit contribution of X, that the total of F 1 and F2 is Rs.1,50,000, that the BEP
of X is 1,800 units (for BEP of X, F2 is not considered) and that 3,000 units is the indifference point between X and Y.
(i.e. X and Y make equal profits at 3,000 unit volume, considering their respective fixed costs). There is no inventory
buildup as whatever is produced is sold.
Required
FIND OUT the values F1 and F2 and units contributions of X and Y.
Question 11
AD Higher Secondary School (AHSS) offers courses for 11th & 12th standard in three streams
i.e. Arts, Commerce and Science. AHSS runs higher secondary classes along with primary and
secondary classes, but for accounting purpose it treats higher secondary as a separate
responsibility centre. The Managing committee of the school wants to revise its fee structure for
higher secondary students. The accountant of the school has provided the following details for a
year:
Particulars Amount (Rs.)

Teachers’ salary (25 teachers × Rs. 35,000 × 12 months) 1,05,00,000
Principal’s salary 14,40,000
Lab attendants’ salary (2 attendants × Rs. 15,000 × 12 months) 3,60,000
Salary to library staff 1,44,000
Salary to peons (4 peons × Rs. 10,000 × 12 months) 4,80,000
Salary to other staffs 4,80,000
Examinations expenditure 10,80,000
Office & Administration cost 15,20,000
Annual day expenses 4,50,000
Sports expenses 1,20,000
Other information:
(i)
Standard 11 & 12 Primary &

Secondary
Arts Commerce Science
No. of students 120 360 180 840
Lab classes in a year 0 0 144 156
No. of Examinations in a year 2 2 2 2
Time spent at library per student 180 120 240 60
per year Hours Hours Hours Hours
Time spent by principal for 208 312 480 1400

administration Hours Hours Hours Hours
Teachers for 11 & 12 standard 4 5 6 10
(ii) One teacher who teaches economics for Arts stream students also teaches commerce
stream students. The teacher takes 1,040 classes in a year, it includes 208 classes for
commerce students.
(iii) There is another teacher who teaches mathematics for Science stream students also
teaches business mathematics to commerce stream students. She takes 1,100 classes
a year, it includes 160 classes for commerce students.
(iv) One peon is fully dedicated for higher secondary section. Other peons dedicate their
15% time for higher secondary section
(v) All school students irrespective of section and age participates in annual functions and
sports activities
Required
a) CALCULATE cost per student per annum for all three streams
b) If the management decides to take uniform fee of Rs. 1,000 per month from all higher
secondary students, CALCULATE stream wise profitability
c) If management decides to take 10% profit on cost, COMPUTE fee to be charged from the
students of all three streams respectively
Question 12
Sanziet Lifecare Ltd. operates in life insurance business. Last year it launched a new term
insurance policy for practicing professionals ‘Professionals Protection Plus’. The company has
incurred the following expenditures during the last year for the policy:
Policy development cost Rs. 11,25,000

Cost of marketing of the policy Rs. 45,20,000
Sales support expenses Rs. 11,45,000
Policy issuance cost Rs. 10,05,900
Policy servicing cost Rs. 35,20,700
Claims management cost Rs. 1,25,600
IT cost Rs. 74,32,000
Postage and logistics Rs. 10,25,000
Facilities cost Rs. 15,24,000
Employees cost Rs. 5,60,000
Office administration cost Rs. 16,20,400
Number of policy sold- 528

Total insured value of policies- Rs.1,320 crore
Required:

i. CALCULATE total cost for Professionals Protection Plus’ policy segregating the costs into
four main activities namely (a) Marketing and Sales support, (b) Operations, (c) IT and (d)
Support functions
ii. CALCULATE cost per policy.
iii. CALCULATE cost per rupee of insured value
Question 13
SLS Infrastructure built and operates 110 k.m. highway on the basis of Built-Operate-Transfer
(BOT) for a period of 25 years. A traffic assessment carried out to estimate the traffic flow per day
shows the following figures:
Sl. No. Type of vehicle Daily traffic volume

1 Two wheelers 44,500
2 Car and SUVs 3,450
3 Bus and LCV 1,800
4 Heavy commercial vehicles 816
The following is the estimated cost of the project:
Sl. Activities Amount

No. (Rs. In Lakh)
1 Site clearance 170.70
2 Land development and filling work 9,080.35
3 Sub base and base courses 10,260.70
4 Bituminous work 35,070.80
5 Bridge, flyovers, underpasses, Pedestrian subway, footbridge, 29,055.60
etc
6 Drainage and protection work 9,040.50
7 Traffic sign, marking and road appurtenance 8,405.00
8 Maintenance, repairing and rehabilitation 12,429.60
9 Environmental management 982.00
Total Project Cost 114,495.25
An average cost of Rs.1,120 lakh has to be incurred on administration and toll plaza operation.
On the basis of the vehicle specifications (i.e. weight, size, time saving etc.), the following
weights has been assigned to the passing vehicles:
Sl. No. Type of Vehicle

1 Two wheelers 5%
2 Car and SUVs 20%
3 Bus and LCV 30%
4 Heavy commercial vehicles 45%
Required
i. Calculate the Total Project cost per day of concession period.

ii. Compute toll fee to be charged for per vehicle of each type, if the company wants to earn
a profit of 15% on total cost.

Note – Concession period is a period for which an infrastructure is allowed to operate and
recovers its investment.
Question 14
A cast iron foundry is importing forged steel moulds for making its castings. The moulds are of
four different sizes A, B, C and D and the CIF values are US $ 4,140, 4,760, 6,340 and 7,875,
respectively. Customs duty may be assumed at 45% and clearing charges 5% of CIF value. The
number of castings that can be made out of each mould is: A 2,000, B 2,000, C 1,800, and D
1,500.
The weight of each casting out of A is 300 kg., B 400 kg., C 500 kg., and D 700 kg. The casting
suffer a normal rejection of 10%. You are required to calculate the average cost of mould per
tonne of saleable casting. (For conversion assume US $1 = Rs. 8.)
Solution
Concept
First of all, Learn the concept of FOB & CIF
Case 1 When Ram purchases goods from john and sells in India (Ram is Buyer)
Case 2 When Ram purchase goods in India and Sells to John (Ram is Seller)
Sequence of Expenditure incurred in foreign Sale case

Seller --- Ex Factory Cost ---Transport charges --- Custom Duty & Clearance charges --- Loading charges in Ship ---
Freight of Ship --- Insurance during transit ---- Custom Duty paid by Buyer (Import) ---- Transport charges in foreign ----
Goods in factory of Buyer
Seller shall always be responsible till goods reach port of his country.
Buyer shall always be responsible after goods reach port of buyer’s country.
Now Question Arise

“Who will be responsible for goods while in transit in ship” –This Question gave birth to FOB & CIF.
If terms are FOB it means Seller shall be responsible till goods reach port of seller’s country.
If terms are CIF it means buyer shall be responsible till goods reach port of buyer’s country.
Free on Board means seller shall be free from responsibility once goods reach port of seller country.
If terms are CIF
 Seller is responsible for any loss till goods reach port of buyer’s country.

 In case of any loss during transit, seller shall bear loss.

 Seller shall pay all exp. till port of buyer
If terms are FOB
 Seller is responsible for any loss till goods reach port of seller’s country.
 In case of loss during transit, seller shall not be responsible.
 Insurance and freight during shipment in ship shall be paid by buyer.
FOB = Free on Board = EX Factory Cost + Transportation Cost + Custom Duty + Clearance Charges + Loading
charges
CIF = Cost Insurance Freight = FOB + insurance + Freight
Landed Cost = CIF + Custom Duty (import)
In Given Question terms are CIF, it means Seller is responsible for any loss till goods reach port of buyer’s country. So
we need to calculate Landed Cost = CIF + Custom Duty (import)
St. Showing average cost of mould per tonne of saleable casting
A B C D TOTAL
CIF Values (US $) 4,140 4,760 6,340 7,875 23,115
Customs duty & clearing charges (50%)
2,070 2,380 3,170 3,937.50 11,557.50
Total Cost (US$) 6,210 7,140 9,510 11,812.50 34,672.50
Cost in Rupees (1$ = Rs. 8) 49,680 57,120 76,080 94,500 2,77,380
--- A (Assumed)
Number of castings 2,000 2,000 1,800 1,500 -
Less 10% normal rejections 200 200 180 150 -
Number of saleablecastings 1,800 1,800 1,620 1,350 -
--- B (Assumed)
Weight of each casting (Kg) 300 400 500 700 -
----- C (Assumed)
Weight of saleable castings (in tonnes)
– D (Assumed) 540 Tonnes 720 Tonnes 810 945 Tonnes 3,015 Tonnes
Tonnes
Cost per tonne (Rs.) – A / D 92 79.3 93.9 100 91.3
The average cost of mould per tonne of saleable casting is, therefore, Rs.91.3 approx.

Question 15
AT Ltd. furnishes the following store transactions for September, 20X8:
1-9-X8 Opening balance 25 units value Rs. 162.50

4-9- X8 Issues Req. No. 85 8 units
6-9- X8 Receipts from B & Co. GRN No. 26 50 units @ Rs. 5.75 per unit
10-9- X8 Return to B & Co. 10 units
15-9- X8 Receipts from M & Co. GRN. No. 33 25 units @ Rs. 6.10 per unit
19-9- X8 Received replacement from B & Co. GRN No. 38 10 units
20-9- X8 Returned from department, material of M & Co. MRR No. 4 5 units
22-9- X8 Transfer from Job 182 to Job 187 in the dept. MTR 6 5 units
29-9- X8 Transfer from Dept. “A” to Dept. “B” MTR 10 5 units
30-9- X8 Shortage in stock taking 2 units
PREPARE the priced stores ledger on FIFO method and STATE how would you treat the shortage in stock taking.
Solution 3:- Working Notes:
1) The material received as replacement from vendor is treated as Fresh Supply.

2) In the absence of information the price of the material received from within on 20-9-X8 has
been taken as the price of the earlier issue made on 17-9-X8. In FIFO method physical
flow of the material is irrelevant for pricing the issues.
3) The issue of material on 26-9-X8 is made out of the material received from a user
department on 20th Sept 2008.
4) The entries for transfer of material from one job and department to other on 22-9-X8 and
29-9-X8 are book entries for adjusting the cost of respective jobs and as such they have
not been shown in the stores ledger account.
5) The material found short as a result of stock taking has been written off.
Stores Ledger of AT Ltd. for the month of September, 20X8 (FIFO Method)
RECEIPT ISSUE BALANCE

Date GRN no. Qty Rate Amount Requisition Qty Rate Amount Qty Rate Amt
MRR no. Units (Rs.) (Rs.) no. Units (Rs.) (Rs.) Units (Rs.) (Rs.)
1 2 3 4 5 6 7 8 9 10 11 12
1-9-X8 -- -- -- -- -- -- -- -- 25 6.50 162.50
4-9-X8 -- -- -- -- 85 8 6.50 52 17 6.50 110.50
6-9-X8 26 50 5.75 287.50 -- -- -- -- 17 6.50 110.50
50 5.75 287.50

7-9-X8 -- -- -- -- 97 12 6.50 78 5 6.50 32.50

50 5.75 287.50
10-9-X8 -- -- -- -- NIL 10 5.75 57.50 5 6.50 32.50
40 5.75 230.00
12-9-X8 -- -- -- -- 108 5 6.50
10 5.75 90 30 5.75 172.50
13-9-X8 -- -- -- -- 110 20 5.75 115 10 5.75 57.50
15-9-X8 33 25 6.10 152.50 -- -- -- -- 10 5.75 57.50
25 6.10 152.50
17-9-X8 -- -- -- -- 121 10 5.75 57.50 25 6.10 152.50
19-9-X8 38 10 5.75 57.50 -- -- -- -- 25 6.10 152.50
10 5.75 57.50
20-9-X8 4 5 5.75 28.75 -- -- -- -- 25 6.10 152.50

10 7.75 77.50
5 5.75 28.75
26-9-X8 -- -- -- -- 146 5 5.75 59.25 20 6.10 179.50
5 6.10 10 5.75
30-9-X8 -- -- -- -- SHORTAGE 2 6.10 12.50 18 6.10 167.30
10 5.75
Question 16
A Factory produces two products “A” & “B” from a single process. The Joint processing costs during a particular month
are:
Direct Material Cost Rs.30,000
Direct Labour Cost Rs.9,600
Variable Overheads Rs.12,000
Fixed Overheads Rs.32,000
Sales: A – 100 units @ Rs.600 per unit; B – 120 units @ Rs.200 per unit.
Apportion Joint Costs on the basis of:
(i) Physical Quantity of each product
(ii) Contribution Margin method
(iii) Determine Profit or Loss under both the methods
Special Point - Contribution of One Product Coming Negative so how to distribute Fixed cost
Concepts
According to this method, The joint costs is to be distributed on the basis of weight or on the basis of quantity of
various joint products i.e. Joint cost is distributed in ratio of quantity manufactured.
(ii) Contribution Margin Method

According to this method, Contribution margin method
 Under this method, joint costs are divided into variable cost and fixed cost.
 Variable cost portion of joint cost is divided among products on the basis of physical units (Quantity / Units
Ratio)
 Fixed cost portion of joint cost is divided among products on the basis of contribution ratio.
Contribution = Sales – Total variable cost
Contribution Ratio = x 100
(iii) Determine Profit or Loss under both these methods
Solution
W. Note 1:- Calculation of Total Joint cost
DMC Rs.30,000
DLC Rs.9,600
Variable Overheads Rs.12,000
Total Variable Cost Rs.51,600
Fixed Overheads Rs.32,000
Total Joint Cost Rs.83,600
Share of Product A in Joint Cost = x 100 units = Rs.38,000
Share of Product B in Joint Cost = x 120 units = Rs.45,600
(ii) Contribution Margin Method
Share of Product A in Joint Cost = x 100 units = Rs.23,455
Share of Product B in Joint Cost = x 120 units = Rs.28,146
St. showing apportionment of FC

Particulars Product A Product B
Total Sales 100 units x Rs.600 = 120 units x Rs.200 =
Rs.60,000 Rs.24,000
Less Total Variable Cost (Rs.23,455) (Rs.28,146)
Total Contribution Rs.36,545 (Rs.4,146)
Total Contribution for FC Rs.36,545 Rs.Zero
Purpose
Contribution Ratio 100% 0%
Share of FC Rs.32,000 Rs. Zero
Note:- In practical life, if contribution of any product comes negative then entity should choose another method
because this method is not suitable.
But since we are supposed to solve this question, we will treat negative contribution as zero contribution.

In this way, we will get contribution ratio as 100% & 0%
(iii)
Profit & Loss Under above methods
St. showing Profit & Loss as per Physical unit method
Sales Rs.60,000 Rs.24,000
Less Share in Joint Cost Rs.38,000 Rs.45,600
Profit Rs.22,000 Rs.21,600
St. showing Profit & Loss as per Contribution Margin method

Sales Rs.60,000 Rs.24,000
Less Share in Joint Var. Cost Rs.23,455 Rs.28,146
Less Share in Joint Fixed Rs.32,000 NIL
Cost
Profit Rs.4,545 (Rs.4,146)
Question 17
GZ Ld. pays the following to a skilled worker engaged in production works. The following are the employee benefits
paid to the employee:
(a) Basic salary per day Rs.1,000

(b) Dearness allowance (DA) 20% of basic salary
(c) House rent allowance 16% of basic salary
(d) Transport allowance Rs.50 per day of actual work
(e) Overtime Twice the hourly rate (considers basic and DA), only if works
more than 9 hours a day otherwise no overtime allowance. If
works for more than 9 hours a day then overtime is considered
after 8th hours.
(f) Work of holidayand Double of per day basic rate provided works atleast 4 hours.
Sunday The holiday and Sunday basic is eligible for all allowances and
statutory deductions.
(g) Earned leave & Casual leave These are paid leave.
(h) Employer’s contribution to 12% of basic and DA
Provident fund
(i) Employer’s contribution to 7% of basic and DA
Pension fund
The company normally works 8-hour a day and 26-day in a month. The company provides 30 minutes
lunch break in between.
During the month of August 2020, Mr.Z works for 23 days including 15 th August and a Sunday and
applied for 3 days of casual leave. On 15th August and Sunday he worked for 5 and 6 hours respectively
without lunch break.
On 5th and 13th August he worked for 10 and 9 hours respectively. During the month Mr. Z worked for
100 hours on Job no.HT200. You are required to CALCULATE:
(i) Earnings per day
(ii) Effective wages rate per hour of Mr. Z.

(iii) Wages to be charged to Job no.HT200.
Solution
First of all we need to understand meaning and implication of lines given in question so we can
understand each point from practical point of view
Line Given in Question Its meaning & Implication
Transport Allowance as Rs.50 per day of If employees comes to Office then he shall be
Actual Work paid Rs.50 per day. This 50 rupees shall be
paid even if it is Sunday, it is holiday. It also
means that If employee does not come on any
day in office then he shall not be paid this
Rs.50
Overtime Line (Read from Question) If worker works for more than 9 hours in a day
then he shall be eligible for overtime payment.
Overtime rate = Twice the hourly rate (Basic
salary Plus DA)
Overtime = Actual time worked – 8 hours
Working on holiday (Read From Question) Holiday Means Sunday and Public Holiday e.g.
15th August.
Overtime rate = Double per day basic Rate
Condition = Works at least 4 hours.
Above Pymt shall be added in Basic as given in
Question.
Earned Leave & Casual Leave. These are paid Company allow some leaves in year for which
leaves salary is not deducted. It means if a worker
takes CL then his salary shall not be deducted.
Out of Normal Working Days

 On 5th Date – He worked for 10 hours – It means he is eligible for Overtime Payment – He shall be
paid Overtime for 2 hours
 On 13th August – He worked for 9 hours – It means he is not eligible for Overtime Payment since
this is not more than 9 hours.
Extra Above Normal Working Days
 On 15th August – He worked for 5 hours – it means he is eligible for “Payment for working on
holiday” since he worked more than 4 hours
 On 23th August (Sunday) – he worked for 6 hours – It means he is eligible for “Payment for
working on holiday” since he worked more than 4 hours
Time Worked
Actual Worked Days 23 Days 21 days X 7.50 Hour Per Day + 10 Hour – 0.50
hour (Lunch Time) + 9 hour – 0.50 hour (Lunch
Time) = 175.50 Hours
2 Days Extra Worked 2 Days 5 hours + 6 Hours = 11 Hour (Lunch Time not
included in this as per Qn.)

Total 186.50 hour
Required Calculations
1. Overtime Rate per hour = Twice the hourly rate (Consider basic & DA)
( )
=2x = 2 x Rs.160 = Rs.320
( )
(1) . Statement showing Earnings Per Day

Basic Salary Per Day Rs.1000
DA (20% of Basic Salary) Rs.200
HRA (16% of Basic Salary) Rs.160
Transport Allowance Rs.50
Employer’s Contribution to PF Rs.144
(12% of Basic Salary Plus DA)
Employer’s Contribution to Pension Fund Rs.84
(7% of Basic Salary Plus DA)
Total Earnings Per Day Rs.1638
(ii) Calculation of effective wage rate per hour of Mr. Z:

Basic salary (Rs.1,000 × 26 days) (Normal Working Days - 26 ) 26,000
Additional basic salary for Sunday & holiday (Rs.1,000 × 2 days) 2,000
Dearness allowance (20% of basic salary) 5,600
33,600
House rent allowance (16% of basic salary) 4,480
Transport allowance (Rs.50 × 23 days) 1,150
Overtime allowance (Rs.160 × 2 × 2 hours)* 640
Employer’s contribution to Provident fund (12% × Rs.33,600) 4,032
Employer’s contribution to Pension fund (7% × Rs.33,600) 2,352
Total monthly wages 46,254
Hours worked by Mr. Z (hours) 186.5
Effective wage rate per hour 248
*(Daily Basic + DA) ÷ 7.5 hours
= (1,000+200) ÷ 7.5 = Rs.160 per hour
(i) Calculation of wages to be charged to Job no. HT200
= Rs. 248 × 100 hours = Rs. 24,800
Question 18

AP Ltd. received a job order for supply and fitting of plumbing materials. Following are the details related with the
job work:
Direct Materials
AP Ltd. uses a weighted average method for the pricing of materials issues.
Opening stock of materials as on 12th August 2020:

- 15mm GI Pipe, 12 units of (15 feet size) @ Rs.600 each
- 20mm GI Pipe, 10 units of (15 feet size) @ Rs. 660 each
- Other fitting materials, 60 units @ Rs. 26 each
- Stainless Steel Faucet, 6 units @ Rs. 204 each
- Valve, 8 units @ Rs. 404 each
Purchases:
On 16th August 2020:

- 10 units of Valve @ Rs. 402 each

- Other fitting materials, 150 units @ Rs. 28 each
- Stainless Steel Faucet, 15 units @ Rs. 209 each

- Valve, 14 units @ Rs. 424 each
Issues for the hostel job:
- 20mm GI Pipe, 2 units of (15 feet size)
- Other fitting materials, 18 units




- Valve, 6 units

- Stainless Steel Faucet, 15 units
Direct Labour:
Plumber: 180 hours @ Rs.100 per hour (includes 12 hours overtime)
Helper: 192 hours @ Rs.70 per hour (includes 24 hours overtime)
Overtimes are paid at 1.5 times of the normal wage rate.
Overheads:
Overheads are applied @ Rs.26 per labour hour.
Pricing policy:
It is company’s policy to price all orders based on achieving a profit margin of 25% on sales price.
You are required to
(a) CALCULATE the total cost of the job.
(b) CALCULATE the price to be charged from the customer.
ANSWER :-
(a) Calculation of Total Cost for the Job:

Particulars Amount (Rs.) Amount (Rs.)
Direct Material Cost:
- 15mm GI Pipe (Working Note- 1) 11,051.28
- 20mm GI Pipe (Working Note- 2) 2,588.28
- Other fitting materials (Working Note- 3) 3,866.07
- Stainless steel faucet
3,113.57
- Valve
2,472.75 23,091.95
Direct Labour:
-Plumber [(180 hours × Rs.100) + (12 hours × Rs.50)] 18,600.00
-Helper [(192 hours × Rs.70) + (24 hours × Rs.35)] 14,280.00 32,880.00

-Overheads[Rs.26 × (180 + 192) hours] 9,672.00
Total Cost 65,643.95
(b) Price to be charged for the job work:

Amount (Rs.)
Total Cost incurred on the job 65,643.95
Add: 25% Profit on Job Price x ( ) 21,881.32

87,525.27
W. Note 1 – Calculation of Cost of 15mm material used

Date Receipts Issues Balance
Qty Rate Amt Qty Rate Amt Qty Rate Amt
12 Aug
th 12 600 7200
17th Aug 8 600 4800 4 600 2400
27 Aug 35 628 21980
th 39 625.1282 24380
28th Aug 10 625.1282 6251.282 29 625.1282 18128.718
Total 11051.282
W. Note 2 – Calculation of Cost of 20mm material used

12 Aug
th 10 660 6600
12th Aug 2 660 1320 8 660 5280
16 Aug 30 610 18300
th 38 620.526 23580
27th Aug 20 660 13200 58 634.1379 36780
28th Aug 2 634.1379 1268.28
Total 2588.28
W. Note 3 – Calculation of Cost of Other Fittings material

12th Aug 60 26 1560
12 Aug
th 18 26 468 42 26 1092
17 Aug
th 30 26 780 12 26 312
18th Aug 150 28 4200 162 27.85 4512
28 Aug
th 34 27.85 946.96 128 27.85 3565.03
30th Aug 60 27.85 1671.11 68 27.85 1893.92
Total 3866.07
W. Note 4 – Calculation of Cost of Stainless Steel

12 Aug
th 6 204 1224
16th Aug 15 209 3135 21 207.5714 4359
30th Aug 15 207.5714 3113.57
Total 3113.57
W. Note 5 – Calculation of Cost of Valve

12 Aug
th 8 404 3232

16th Aug 10 402 4020 18 402.8888 7252

27th Aug 14 424 5936 32 412.125 13188
28th Aug 6 412.125 2472.75 26 412.125 10715.25
Total 2472.75
Question 19
M Ltd. produces a product-X, which passes through three processes, I, II and III. In Process-III a by-product arises,
which after further processing at a cost of Rs.85 per unit, product Z is produced. The information related for the
month of August 2020 is as follows:
Process-I Process-II Process-III
Normal loss 5% 10% 5%
Materials introduced (7,000 units) 1,40,000 - -
Other materials added 62,000 1,36,000 84,200
Direct wages 42,000 54,000 48,000
Direct expenses 14,000 16,000 14,000
Production overhead for the month is Rs.2,88,000, which is absorbed as a percentage of direct wages.
The scrapes are sold at Rs.10 per unit
Product-Z can be sold at Rs.135 per unit with a selling cost of Rs.15 per unit No. of units produced:
Process-I- 6,600; Process-II- 5,200, Process-III- 4,800 and Product-Z- 600 There is not stock at the beginning and end
of the month.
You are required to PREPARE accounts for:
(i) Process-I, II and III
(ii) By-product process.
Question 20
Arnav Electronics manufactures electronic home appliances. It follows weighted average Cost method for inventory
valuation. Following are the data of component X:
Date Particulars Units Rate p.u. (Rs.)

15-12-19 Purchase Order- 008 10,000 9,930
30-12-19 Purchase Order- 009 10,000 9,780
01-01-20 Opening stock 3,500 9,810
05-01-20 GRN*-008 (against the Purchase Order- 008) 10,000 -
05-01-20 MRN**-003 (against the Purchase Order- 008) 500 -
06-01-20 Material Requisition-011 3,000 -
07-01-20 Purchase Order- 010 10,000 9,750
12-01-20 GRN-009 (against the Purchase Order- 009) 10,000 -
12-01-20 MRN-004 (against the Purchase Order- 009) 400 -
25-01-20 GRN-010 (against the Purchase Order- 010) 10,000 -


*GRN- Goods Received Note; **MRN- Material Returned Note
Based on the above data, you are required to CALCULATE:

1. Re-order level
2. Maximum stock level
3. Minimum stock level
4. PREPARE Store Ledger for the period January 2020 and DETERMINE the value of stock as on 31-01-
2020.
5. Value of components used during the month of January, 2020.
6. Inventory turnover ratio.
Question 21
The Following data related to the manufacture of a standard product during the month of April 2020:
Raw Materials 1,80,000
Direct Wages 90,000
Machine Hours worked (hours) 10,000 Hours
Machine hour rate (per hour) Rs.8
Administration Overheads (general) 35,000
Selling Overheads (Per Unit) Rs.5
Units Produced 4,000 units
Units Sold 3,600 units
Selling Price per unit Rs.125
You are required to prepare a cost sheet in respect of the above showing:
(i) Cost per unit
(ii) Profit for the month
Solution Requirement No. 1

Particulars Total Cost (Rs.) Units Cost Per Unit (Rs.)
Raw Materials 1,80,000 4,000 45
Direct Wages 90,000 4,000 22.50
Prime Cost 2,70,000 4,000 67.50
Add: Factory Overheads 80,000 4,000 20
(10,000 hours X Rs.8 per hour)
Cost of Production 3,50,000 4,000 87.50
Less Closing Stock (400 units X Rs.87.50) (35,000) (400)
Cost of Goods Sold 3,15,000 3,600 87.50
Add: Administration Overheads 35,000 3,600 9.72
Add: Selling Overheads (3600 units X Rs.5) 18,000 3,600 5.00
Cost of Sales 3,68,000 3,600 102.22
Requirement No. 2
Particulars Total Cost (Rs.) Units Cost Per Unit (Rs.)
Raw Materials 1,80,000 4,000 45

Direct Wages 90,000 4,000 22.50
Prime Cost 2,70,000 4,000 67.50
Question 22
Arnav Inspat Udyog Ltd. has the following expenditures for the year ended 31st March, 20X8:
Sl. Amount (Rs.) Amount (Rs.) Cost Head

No.
(i) Raw materials purchased 100000000
(ii) GST paid on the above purchases @18% (eligible 18000000
for input tax credit)
(iii) Freight inward 1120600
(iv) Wages paid to factory workers 2920000
(v) Contribution made towards employees’ PF & ESIS 360000
(vi) Production bonus paid to factory workers 290000
(vii) Royalty paid for production 172600
(viii) Amount paid for power & fuel 462000
(ix) Amount paid for purchase of moulds and patterns 896000
(life is equivalent to two years production)
(x) Job charges paid to job workers 812000
(xi) Stores and spares consumed 112000
(xii) Depreciation on:
- Factory building 84000
- Office building 56000
- Plant & Machinery 126000
- Delivery vehicles 86000 352000
(xiii) Salary paid to supervisors 126000
(xiv) Repairs & Maintenance paid for:
- Plant & Machinery 48,000
- Sales office building 18000
- Vehicles used by directors 19600 85600
(xv) Insurance premium paid for:
- Plant & Machinery 31200
- Factory building 18100
- Stock of raw materials & WIP 36000 85300
(xvi) Expenses paid for quality control check activities 19600
(xvii) Salary paid to quality control staffs 96200
(xviii) Research & development cost paid improvement in 18200
production process
(xix) Expenses paid for pollution control and engineering 26600
& maintenance
(xx) Expenses paid for administration of factory work 118600
(xxi) Salary paid to functional mangers:
- Production control 960000
- Finance & Accounts 918000
- Sales & Marketing 1012000 2890000
(xxii) Salary paid to General Manager 1256000
(xxiii) Packing cost paid for:

- Primary packing necessary to maintain quality 96000
- For re-distribution of finished goods 112000 208000
(xxiv) Interest and finance charges paid 720000
(xxv) Fee paid to auditors 180000
(xxvi) Fee paid to legal advisors 120000
(xxvii) Fee paid to independent directors 220000
(xxviii) Performance bonus paid to sales staffs 180000
(xxix) Value of stock as on 1st April, 20X7:
- Raw materials 1800000
- Work-in-process 920000
- Finished goods 1100000 3820000
(xxx) Value of stock as on 31st March, 20X8:
- Raw materials 960000
- Work-in-process 870000
- Finished goods 1820000 3650000
Amount realized by selling of scrap and waste generated during manufacturing process – Rs.86,000/-
From the above data you are requested to PREPARE Statement of cost for Arnav Ispat Udyog Ltd. for the year ended
31st March, 20X8, showing (i) Prime cost, (ii) Factory cost, (iii) Cost of Production, (iv) Cost of goods sold and (v) Cost
of sales.
Answer:
Statement of Cost of Arnav Ispat Udyog Ltd. for the year ended 31st March, 20X8:
Sl. Particulars Amount (Rs.) Amount (Rs.)

No.
(i) Material Consumed:
- Raw materials purchased 100000000
- Freight inward 1120600
Add: Opening stock of raw materials 1800000
Less: Closing stock of raw materials (960000) 101960600
(ii) Direct employee (labour) cost:
- Wages paid to factory workers 2920000
- Contribution made towards employees’ PF & ESIS 360000
- Production bonus paid to factory workers 290000 3570000
(iii) Direct expenses:
- Royalty paid for production 172600
- Amount paid for power & fuel 462000
- Amortised cost of moulds and patterns 448000
- Job charges paid to job workers 812000 1894600
Prime Cost 107425200
(iv) Works/ Factory overheads:
- Stores and spares consumed 112000
- Depreciation on factory building 84000
- Depreciation on plant & machinery 126000
- Salary paid to supervisors 126000
- Repairs & Maintenance paid for plant & machinery 48000

- Insurance premium paid for plant & machinery 31200

- Insurance premium paid for factory building 18100
- Insurance premium paid for stock of raw materials & wip 36000
- Expenses paid for pollution control and engineering & maintenance 26600 607900
Gross factory cost 108033100
Add: Opening value of W-I-P 920000
Less: Closing value of W-I-P (870000)
Factory Cost 108083100
(v) Quality control cost:
- Expenses paid for quality control check activities 19600
- Salary paid to quality control staffs 96200 115800
(vi) Research & development cost paid improvement in production process 18200
(vii) Administration cost related with production:
- Expenses paid for administration of factory work 118600
- Salary paid to Production control manager 960000 1078600
(viii) Less: Realisable value on sale of scrap and waste (86000)
(ix) Add: Primary packing cost 96000
Cost of Production 109305700
Add: Opening stock of finished goods 1100000
Less: Closing stock of finished goods (1800000)
Cost of Goods Sold 108605700
(x) Administrative overheads:
- Depreciation on office building 56000
- Repairs & Maintenance paid for vehicles used by directors 19600
- Salary paid to Manager- Finance & Accounts 918000
- Salary paid to General Manager 1256000
- Fee paid to auditors 180000
- Fee paid to legal advisors 120000
- Fee paid to independent directors 220000 27,69,600
(xi) Selling overheads:

- Repairs & Maintenance paid for sales office building 18000
- Salary paid to Manager- Sales & Marketing 1012000
- Performance bonus paid to sales staffs 180000 1210000
(xii) Distribution overheads:
- Depreciation on delivery vehicles 86000
(xiii) - Packing cost paid for re-distribution of finished goods 112000 198000
- Interest and finance charges paid (assuming related with non-equity 720000
fund)
Cost of Sales 113503300
Notes: GST paid of purchase of raw materials would not be part of cost of materials as it is eligible for input credit.
Question 23

An English willow company who manufactures cricket bat buys wood as its direct material. The Forming department
processes the cricket bats and the cricket bats are then transferred to the Finishing department where stickers are
applied. The Forming department began manufacturing 10,000 initial bats during the month of December for the first
time and their cost is as follows:
Direct material: Rs. 33,000

Conversion costs: Rs. 17,000
Total Rs. 50,000
A total of 8,000 cricket bats were completed and transferred to the Finishing department, the rest 2,000 were still in the
Forming process at the end of the month. All of the forming departments direct material were placed, but, on average,
only 25% of the conversion costs was applied to the ending work in progress inventory.
CALCULATE:
(i) Equivalent units of production for each cost.

(ii) The Conversion cost per Equivalent units.
(iii) Cost of closing work in process (WIP) and finished products.
Solution
(i) Calculation of equivalent units of production:
Equivalent Units
Input Units Output Units Material Conversion cost
Details Particulars
% Units % Units
Unit Introduced 10,000 Finished output 8,000 100 8,000 100 8,000
Closing W-I-P 2,000 100 2,000 25 500
Total 10,000 Total 10,000 10,000 8,500
(ii) Calculation of cost per equivalent unit
Direct Material Conversion costs

Total cost (Rs.) 33,000 17,000
Equivalent units 10,000 8,500
Cost per equivalent unit (Rs.) 3.30 2.00
(iii) The cost of closing work in process (WIP):
Costs Equivalent units Rate (Rs.) Total Cost (Rs.)

Direct Material 2,000 3.30 6,600
Conversion costs 500 2.00 1,000
Total 7,600

The cost of finished products:
Costs Equivalent units Rate (Rs.) Total Cost (Rs.)

Direct Material 8,000 3.30 26,400
Conversion costs 8,000 2.00 16,000
Total 42,400
Question 24
Hill manufacturing Ltd uses process costing to manufacture Water density sensors for hydro
sector. The following information pertains to operations for the month of May.
Particulars Units
Beginning WIP, May 1 16,000
Started in production during May 1,00,000
Completed production during May 92,000
Ending work in progress, May 31 24,000
The beginning work in progress was 60% complete for materials and 20% complete for
conversion costs. The ending inventory was 90% complete for material and 40% complete for
conversion costs.
Costs pertaining to the month of May are as follows:

Beginning inventory costs are material Rs.27,670, direct labour Rs.30,120 and factory overhead
Rs. 12,720
Cost incurred during May are material used, Rs. 4,79,000, direct labour Rs.1,82,880, factory
overheads Rs. 3,91,160.
CALCULATE:
(i) Using the FIFO method, the equivalent units of production for material.
(ii) Cost per equivalent unit for conversion cost.
Solution
(i) Calculation of equivalent units of production:
Output Equivalent Units

Input Details Units Units Material Conversion
cost
% Units % Units
Beginning 16,000 From beginning 16,000 6,400 80 12,800
WIP WIP 40
Unit 1,00,000 Completed output 76,000 100 76,000 100 76,000

Introduced
Closing W- I-P 24,000 90 21,600 40 9,600
1,16,000 Total 1,16,000 1,04,000 98,400
Total
(ii) Calculation of cost per equivalent unit for conversion costs

Direct labour 1,82,880
Factory overheads 3,91,160
5,74,040
Equivalent units 98,400
Cost per equivalent unit (Rs.) 5.83
Question 25
‘Healthy Sweets’ is engaged in the manufacturing of jaggery. Its process involve sugarcane
crushing for juice extraction, then filtration and boiling of juice along with some chemicals and
then letting it cool to cut solidified jaggery blocks.
The main process of juice extraction (Process – I) is done in conventional crusher, which is then
filtered and boiled (Process – II) in iron pots. The solidified jaggery blocks are then cut, packed
and dispatched. For manufacturing 10 kg of jaggery, 100 kg of sugarcane is required, which
extracts only 45 litre of juice.
Following information regarding Process – I has been obtained from the manufacturing
department of Healthy Sweets for the month of January, 2020:
Opening Work in Progress (4500 Units)
Sugarcane Rs.50,000
Labour Rs.15,000
Overheads Rs.45,000
Sugarcane introduced for juice extraction (1,00,000 Kg) Rs.5,00,000
Direct Labour Rs.2,00,000
Overheads Rs.6,00,000
Abnormal Loss: 1,000 kg

Degree of completion:
Sugarcane 100%
Labour and overheads 80%
Closing work-in process: 9,000 litre
Degree of completion:
Sugarcane 100%
Labour and overheads 80%
Extracted juice transferred for filtering and boiling: 39,500 litre (Consider mass of 1 litre of juice
equivalent to 1 kg)

You are required to PREPARE using average method:

(i) Statement of equivalent production,
(ii) Statement of cost,
(iii) Statement of distribution cost, and
(iv) Process-I Account.
Solution
(i) Statement of Equivalent Production
Particulars Input Particulars Output Equivalent Production

Units Units
Sugarcane Labour & O.H.
% Units % Units
Opening WIP 4,500

Completed and 39,500 100 39,500 100 39,500
transferred to
Process - II
Units introduced 1,00,000 Normal Loss 55,000 -- -- -- --
(55%* of
1,00,000)
Abnormal loss 1,000 100 1,000 80 800
Closing WIP 9,000 100 9,000 80 7,200
1,04,500 1,04,500 49,500 47,500
* 100 kg of sugarcane extracts only 45 litre of juice.

Thus, normal loss = 100 – 45 = 55%
(ii) Statement showing cost for each element
Particulars Sugarcane Labour Overhead Total

(Rs.) (Rs.) (Rs.) (Rs.)
Cost of opening work-in-process 50,000 15,000 45,000 1,10,000

Cost incurred during the month 5,00,000 2,00,000 6,00,000 13,00,000
Total cost: (A) 5,50,000 2,15,000 6,45,000 14,10,000
Equivalent units: (B) 49,500 47,500 47,500
Cost per equivalent unit: (C) = (A ÷ B) 11.111 4.526 13.579 29.216
(iii) Statement of Distribution of cost

Amount Amount
(Rs.) (Rs.)
1. Value of units completed and transferred(39,500 units × Rs. 29.216) 11,54,032

2. Value of Abnormal Loss:
- Sugarcane (1,000 units × Rs. 11.111) 11,111

- Labour (800 units × Rs. 4.526) 3,621
- Overheads (800 units × Rs. 13.579) 10,863 25,595
3. Value of Closing W-I-P:
- Sugarcane (9,000 units × Rs. 11.111) 99,999
- Labour (7,200 units × Rs. 4.526) 32,587
- Overheads (7,200 units × Rs. 13.579) 97,769 2,30,355
(iv) Process-I A/c
Particulars Units (Rs.) Particulars Units (Rs.)

To Opening W.I.P: By Normal Loss 55,000 --
- Sugarcane 4,500 50,000 By Abnormal loss [Rs. 1,000 25,613
25,595 + Rs. 18 (Diff. due to
approx.
- Labour -- 15,000 By A/c Process-II 39,500 11,54,032
- Overheads -- 45,000 By Closing WIP 9,000 2,30,355
To Sugarcane 100,000 5,00,000
Introduced
To Direct Labour 2,00,000
To Overheads 6,00,000
104,500 14,10,000 104,500 14,10,000
Question 26
Smile company produces two main products and a by-product out of a joint process. The ratio of
output quantities to input quantities of direct material used in the joint process remains consistent
on yearly basis. Company has employed the physical volume method to allocate joint production
costs to the main products. The net realizable value of the by- product is used to reduce the joint
production costs before the joint costs are allocated to the main products. Details of company’s
operation are given in the table below. During the month, company incurred joint production
costs of Rs. 10,00,000/- The main products are not marketable at the split off point and thus
have to be processed further.
Particulars Product-A Product-B By product
Monthly output in kg. 60,000 1,20,000 50,000
Selling price per kg. Rs. 50 Rs. 30 Rs. 5
Process costs Rs. 2,00,000 Rs. 3,00,000

FIND OUT the amount of joint product cost that Smile company would allocate to the product-B
by using the physical volume method to allocate joint production costs?
Solution
Calculation of Net joint costs to be allocated:

Joint Costs 10,00,000
Less: Net Realizable value of by-product (50,000×5) 2,50,000
Net joint costs to be allocated 7,50,000
Therefore, amount of joint product cost that Smile company would allocate to the product-B by
using the physical volume method to allocate joint production costs:
= Physical quantity of Product-B x Net joint costs to be allocated

Total Quantity
= 1,20,000 units × 7,50,000 = Rs.5,00,000
1,80,000 units
Question 27
‘Buttery Butter’ is engaged in the production of Buttermilk, Butter and Ghee. It purchases
processed cream and let it through the process of churning until it separates into buttermilk and
butter. For the month of January, 2020, ‘Buttery Butter’ purchased 50 Kilolitre processed cream
@ Rs. 100 per 1000 ml. Conversion cost of Rs. 1,00,000 were incurred up-to the split off point,
where two saleable products were produced i.e. buttermilk and butter. Butter can be further
processed into Ghee.
The January, 2020 production and sales information is as follows:
Products Production (in Sales Quantity (in Selling price per

Kilolitre / tonne) Kilolitre/ tonne) Litre/Kg (Rs.)
Buttermilk 28 28 30
Butter 20 — —
Ghee 16 16 480
All 20 tonne of butter were further processed at an incremental cost of Rs. 1,20,000 to yield 16
Kilolitre of Ghee. There was no opening or closing inventories of buttermilk, butter or ghee in
January, 2020.
Required:

(i) SHOW how joint cost would be apportioned between Buttermilk and Butter under Estimated
Net Realisable Value method.
(ii) ‘Healthy Bones’ offers to purchase 20 tonne of butter in February at Rs. 360 per kg. In case
‘Buttery Butter’ accepts this offer, no Ghee would be produced in February. SUGGEST
whether ‘Buttery Butter’ shall accept the offer affecting its operating income or further process
butter to make Ghee itself?
Solution (i) Estimated Net Realisable Value Method:
Buttermilk Amount (Rs.) ButterAmount (Rs.)
Sales Value 8,40,000 76,80,000

(Rs 30 × 28 × 1000) (Rs 480 × 16 × 1000)
Less: Post split-off cost
(Further processing cost) - (1,20,000)
Net Realisable Value 8,40,000 75,60,000
Apportionment of Joint Cost of 5,10,000 45,90,000
Rs. 51,00,000* in ratio of 1:9
* [(Rs. 100 × 50 × 1000) + Rs. 1,00,000] = Rs. 51,00,000
(ii) Incremental revenue from further processing of Butter into Ghee
Incremental revenue (Rs. 480 × 16 × 1000 - Rs. 360 × 20 × 1000) Rs.4,80,000

Less: Incremental cost of further processing of Butter into Ghee Rs. 1,20,000
Incremental operating income from further processing Rs. 3,60,000
The operating income of ‘Buttery Butter’ will be reduced By Rs. 3,60,000 in February if it sells 20
tonne of Butter to ‘Healthy Bones’, instead of further processing of Butter into Ghee for sale.
Thus, ‘Buttery Butter’ is advised not to accept the offer and further process butter to make Ghee
itself.
Question 28
NN Manufacturing company uses joint production process that produces three products at the
split off point. Joint productions costs during September were Rs. 8,40,000. Product information
for September was as follows:
Particulars Product A Product B Product C

Units produced 1,500 3,000 4,500
Units sold 2,000 6,000 7,500
Sales prices:
At the split-off Rs. 100
After further processing Rs. 150 Rs. 175 Rs. 50

Costs to process after split-off Rs. 1,50,000 Rs. 1,50,000 Rs. 1,50,000
Assume that product C is treated as a by-product and the company accounts for the by-product
at net realizable value as a reduction of joint cost. Assume also that Product B&C must be
processed further before they can be sold. FIND OUT the total cost of Product A in September if
joint cost allocation is based on net realizable values?
Solution
Product A can be sold at the split-off point, because the question says that "Products B and C
must be processed further before they can be sold." Since product A is not included in that, we
know that Product A can be sold at the split-off point. Furthermore, the cost to process Product A
after the split-off point is Rs. 150,000, whereas the additional revenue to be earned by processing
it further is only Rs.75,000 (Rs.50 increase in selling price per unit multiplied by the 1,500 units
produced during September). Therefore, Product A will not be processed further, and we use the
sales value at split-off for A for allocating the joint costs. The sales value at the split-off for A is
Rs. 100 × 1,500 units, or Rs.1,50,000.
Since Product B must be processed further, we use its net realizable value for the joint cost
allocation. The net realizable value of Product B is Rs.5,25,000 (Rs.175 selling price after further
processing × 3,000 units produced) – Rs.1,50,000 in further processing costs = Rs.3,75,000.
Product C, the by-product, must also be processed further to be sold. The net realizable value of
Product C is Rs. 75,000 (Rs. 50 sales price after further processing × 4,500 units produced – Rs.
1,50,000 in further processing costs = Rs. 75,000.
Joint production costs total Rs. 8,40,000. Since the by-product C is accounted for as a reduction
to the joint costs, the joint costs to be allocated are Rs. 7,65,000 (Rs. 8,40,000 minus the Rs.
75,000 NRV of Product C), to be allocated between Product A (sales value Rs. 1,50,000) and
Product B (net realizable value Rs. 3,75,000). So, the total on which the allocation of the joint
costs is based is Rs. 1,50,000 + Rs. 5,25,000. Product A represents 28.571% of Rs. 5,25,000).
the total 3,75,000 = (Rs. 1,50,000 ÷ Rs. 5,25,000).
Since Product A has no further processing costs, the total cost of Product A is equal to its
allocated joint costs, which are 28.571% of the net joint costs of Rs. 7,65,000, or Rs. 2,18,568.
Question 29
GAP Limited operates a system of standard costing in respect of one of its products which is
manufactured within a single cost centre. Following are the details.
Budgeted data:
Material Qty Price (Rs.) Amount (Rs.)

A 60 20 1200
B 40 30 1200
Inputs 100 2400
Normal loss 20
Output 80 2400
Actual data:
Actual output - 80 units.
Material Qty Price (Rs.) Amount (Rs.)

A 70 ? ?
B ? 30 ?
Material Price Variance (A) Rs. 105A

Material cost variance Rs. 275A
You are required to CALCULATE:
(i) Actual Price of material A

(ii) Actual Quantity of material B
(iii) Material Price Variance
(iv) Material Usage Variance
(v) Material Mix Variance
(vi) Material Sub Usage Variance
Question 30
Following data is extracted from the books of XYZ Ltd. for the month of January, 2020:
(i) Estimation-
Particulars Quantity (kg.) Price (Rs.) Amount (Rs.)
Material-A 800 ? --
Material-B 600 30.00 18,000
Normal loss was expected to be 10% of total input materials.
(ii) Actuals- 1480 kg of output produced.
Particulars Quantity (kg.) Price (Rs.) Amount (Rs.)

Material-A 900 ? --
Material-B ? 32.50 --
59,825
(iii) Other Information-

Material Cost Variance = Rs. 3,625 (F)
Material Price Variance = Rs. 175 (F)
You are required to CALCULATE:
i. Standard Price of Material-A;

ii. Actual Quantity of Material-B;
iii. Actual Price of Material-A;
iv. Revised standard quantity of Material-A and Material-B; and
v. Material Mix Variance.
Question 31
Paras Synthetics uses Standard costing system in manufacturing of its product ‘Star 95 Mask’.
The details are as follows;
Direct Material 0.50 Meter @ Rs. 60 per meter Rs. 30

Direct Labour 1 hour @ Rs. 20 per hour Rs. 20
Variable overhead 1 hour @ Rs. 10 per hour Rs. 10
Total Rs. 60
During the month of August, 2020 10,000 units of ‘Star 95 Mask’ were manufactured.
Details are as follows:
Direct material consumed 5700 meters @ Rs. 58 per meter
Direct labour Hours ? @ ? Rs. 2,24,400
Variable overhead incurred Rs. 1,12,200
Variable overhead efficiency variance is Rs. 2,000 A. Variable overheads are based on Direct
Labour Hours.
You are required to calculate the missing data and all the relevant Variances.
Question 32
Prisha Limited manufactures three different products and the following information has been
collected from the books of accounts:
Products
A B C
Sales Mix 40% 35% 25%
Selling Price Rs.300 Rs.400 Rs.200
Variable Cost Rs.150 Rs.200 Rs.120
Total Fixed Costs Rs.18,00,000
Total Sales Rs.60,00,000
The company has currently under discussion, a proposal to discontinue the manufacture of
Product C and replace it with Product E, when the following results are anticipated:
Products
A B E
Sales Mix 45% 30% 25%

Selling Price Rs. 300 Rs.400 Rs. 300

Variable Cost Rs. 150 Rs.200 Rs. 150
Total Fixed Costs Rs. 18,00,000
Total Sales Rs. 64,00,000
Required:
(i) CALCULATE the total contribution to sales ratio and present break-even sales at existing
sales mix.
(ii) CALCULATE the total contribution to sales ratio and present break-even sales at
proposed sales mix.
(iii) STATE whether the proposed sales mix is accepted or not?
Solution
(i) Calculation of Contribution to sales ratio at existing sales mix:
Products Total
A B C
Selling Price (Rs.) 300 400 200
Less: Variable Cost (Rs.) 150 200 120
Contribution per unit (Rs.) 150 200 80
P/V Ratio 50% 50% 40%
Sales Mix 40% 35% 25%
Contribution per rupee of sales (P/V Ratio × Sales Mix) 20% 17.5% 10% 47.5%
Present Total Contribution (Rs. 60,00,000 × 47.5%) Rs. 28,50,000
Less: Fixed Costs Rs. 18,00,000
Present Profit Rs. 10,50,000
Present Break-Even Sales Rs. 37,89,473.68
(Rs. 18,00,000/0.475)
(ii) Calculation of Contribution to sales ratio at proposed sales mix:
Products
A B E Total
Selling Price (Rs.) 300 400 300
Less: Variable Cost (Rs.) 150 200 150
Contribution per unit (Rs.) 150 200 150
P/V Ratio 50% 50% 50%
Sales Mix 45% 30% 25%
Contribution per rupee of sales 22.5% 15% 12.5% 50%
(P/V Ratio x Sales Mix)
Proposed Total Contribution Rs. 32,00,000
(Rs. 64,00,000 × 50%)
Less: Fixed Costs Rs. 18,00,000
Proposed Profit Rs. 14,00,000
Proposed Break-Even Sales Rs. 36,00,000

(Rs. 18,00,000/0.50)
(iii) The proposed sales mix increases the total contribution to sales ratio from 47.5% to 50% and
the total profit from Rs. 10,50,000 to Rs. 14,00,000. Thus, the proposed sales mix should be
accepted.
Question 33
K Ltd. produces and markets a very popular product called ‘X’. The company is interested in
presenting its budget for the second quarter of 2020. The following information are made
available for this purpose:
(i) It expects to sell 1,50,000 bags of ‘X’ during the second quarter of 2020 at the selling
price of Rs.1,200 per bag.
(ii) Each bag of ‘X’ requires 2.5 mtr. of raw – material ‘Y’ and 7.5 mtr. of raw – material ‘Z’.
(iii) Stock levels are planned as follows:
Particulars Beginning of Quarter End of Quarter

Finished Bags of ‘X’ (Nos.) 45,000 33,000
Raw – Material ‘Y’ (mtr) 96,000 78,000
Raw – Material ‘Z’ (mtr) 1,71,000 1,41,000
Empty Bag (Nos.) 1,11,000 84,000
(iv) ‘Y’ cost Rs.160 per mtr., ‘Z’ costs Rs.30 per mtr. and ‘Empty Bag’ costs Rs.110 each.
(v) It requires 9 minutes of direct labour to produce and fill one bag of ‘X’. Labour cost is Rs.
70 per hour.
(vi) Variable manufacturing costs are Rs.60 per bag. Fixed manufacturing costs Rs.40,00,000
per quarter.
(vii) Variable selling and administration expenses are 5% of sales and fixed administration
and selling expenses are Rs.3,75,000 per quarter.
Required
(i) PREPARE a production budget for the said quarter in quantity.
(ii) PREPARE a raw – material purchase budget for ‘Y’, ‘Z’ and ‘Empty Bags’ for the said
quarter in quantity as well as in rupees.
(iii) COMPUTE the budgeted variable cost to produce one bag of ‘X’.
Solution
(i) Production Budget of „X‟ for the Second Quarter
Particulars Bags (Nos.)
Budgeted Sales 1,50,000
Add: Desired Closing stock 33,000
Total Requirements 1,83,000
Less: Opening stock (45,000)

Required Production 1,38,000
(ii) Raw–Materials Purchase Budget in Quantity as well as in Rs. for 1,38,000 Bags of „X‟
Particulars „Y‟ „Z‟ Empty Bags
Mtr. Mtr. Nos.
Production Requirements 2.5 7.5 1.0
Per bag of ‘X’
Requirement for 3,45,000 10,35,000 1,38,000
Production (1,38,000 × (1,38,000 × (1,38,000 × 1)
2.5) 7.5)
Add: Desired Closing Stock 78,000 1,41,000 84,000
Total Requirements 4,23,000 11,76,000 2,22,000
Less: Opening Stock (96,000) (1,71,000) (1,11,000)
Quantity to be purchased 3,27,000 10,05,000 1,11,000
Cost per mtr./Bag Rs.160 Rs.30 Rs.110
Cost of Purchase (Rs.) 5,23,20,000 3,01,50,000 1,22,10,000
(iii) Computation of Budgeted Variable Cost of Production of 1 Bag of „X‟
Particulars
(Rs.)
Raw – Material
Y 2.5 mtr @160 400.00
Z 7.5 mtr @30 225.00
Empty Bag 110.00
Direct Labour (Rs.70× 9 minutes / 60 minutes) 10.50
Variable Manufacturing Overheads 60.00
Variable Cost of Production per bag 805.50
Question 34
Woolmark Ltd. manufactures three types of products namely P, Q and R. The data relating to a
period are as under:
Particulars P Q R
Machine hours per unit 10 18 14
Direct Labour hours per unit 4 12 8
Direct Material per unit (Rs.) 90 80 120
Production (units) 3,000 5,000 20,000
Currently the company uses traditional costing method and absorbs all production overheads on
the basis of machine hours. The machine hour rate of overheads is Rs. 6 per hour. Direct labour
hour rate is Rs. 20 per hour.
The company proposes to use activity based costing system and the activity analysis is as under:

Particulars P Q R
Batch size (units) 150 500 1,000
Number of purchase orders per batch 3 10 8
Number of inspections per batch 5 4 3
The total production overheads are analysed as under:

Machine set up costs……………………………………… 20%
Machine operation costs……………………………………. 30%
Inspection costs……………………………………………… 40%
Material procurement related costs……………………….. 10%
Required
(i) CALCULATE the cost per unit of each product using traditional method of absorbing all
production overheads on the basis of machine hours.
(ii) CALCULATE the cost per unit of each product using activity based costing principles.
Solution
(i) Statement Showing “Cost per unit - Traditional Method”
Particulars of Costs P Q R
(Rs.) (Rs.) (Rs.)
Direct Materials 90 80 120
Direct Labour [(4, 12, 8 hours) x Rs. 20] 80 240 160
Production Overheads [(10, 18, 14 hours) x Rs. 6] 60 108 84
Cost per unit 230 428 364
(ii) Statement Showing “Cost per unit - Activity Based Costing”
Products P Q R
Production (units) 3,000 5,000 20,000
(Rs.) (Rs.) (Rs.)
Direct Materials (90, 80, 120) 2,70,000 4,00,000 24,00,000
Direct Labour (80, 240, 160) 2,40,000 12,00,000 32,00,000
Machine Related Costs @ Rs. 1.80 per hour
(30,000, 90,000, 2,80,000) 54,000 1,62,000 5,04,000
Setup Costs @ Rs. 9,600 per setup
(20, 10, 20) 1,92,000 96,000 1,92,000
Inspection Costs @ Rs. 4,800 per
inspection 4,80,000 1,92,000 2,88,000
(100, 40, 60)
Purchase Related Costs @ Rs. 750 per

purchase (60, 100, 160) 45,000 75,000 1,20,000

Total Costs 12,81,000 21,25,000 67,04,000
Cost per unit (Total Cost Units) 427.00 425.00 335.20
Workings
Number of Batches, Purchase Orders, and Inspections-
Particulars P Q R Total
A. Production (units) 3,000 5,000 20,000
B. Batch Size (units) 150 500 1,000
C. Number of Batches (A÷B) 20 10 20 50
D. Number of Purchase Order per batch 3 10 8
E. Total Purchase Orders [C x D] 60 100 160 320
F. Number of Inspections per batch 5 4 3
G. Total Inspections [C x F] 100 40 60 200
Total Machine Hours-
Particulars P Q R
A. Machine Hours per unit 10 18 14
B. Production (units) 3,000 5,000 20,000
C. Total Machine Hours [A x B] 30,000 90,000 2,80,000
Total Machine Hours = 4,00,000
Total Production Overheads = 4,00,000 hrs. × Rs. 6 = Rs. 24,00,000
Cost Driver Rates-
Cost Pool % Overheads Cost Driver Basis Cost Cost Driver Rate
Driver
(Rs.) (Units) (Rs.)
Setup 20% 4,80,000 Number of batches 50 9,600 per Setup
Inspection 40% 9,60,000 Number of inspections 200 4,800 per Inspection
Purchases 10% 2,40,000 Number of purchases 320 750 per Purchase
MachineHours 30% 7,20,000 Machine Hours 4,00,000 1.80 per Machine Hour
Question 35
BABYSOFT is a global brand created by Bio-organic Ltd. The company manufactures three
ranges of beauty soaps i.e. BABYSOFT- Gold, BABYSOFT- Pearl, and BABYSOFT- Diamond.
The budgeted costs and production for the month of December, 2020 are as follows:
BABYSOFT- Gold BABYSOFT- Pearl BABYSOFT-

Diamond
Production of soaps (Units) 4,000 3,000 2,000
Resources per Unit: Qty Rate Qty Rate QtyRate
- Essential Oils 60 ml Rs. 200 / 100 ml 55 ml Rs. 300 / 100 ml 65 ml
Rs. 300 / 100
ml
- Cocoa Butter 20 g Rs. 200 / 100 g 20 g Rs. 200 / 100 g 20 g Rs. 200 / 100 g
- Filtered Water 30 ml Rs. 15 / 100 ml 30 ml Rs. 15 / 100 ml 30 ml Rs. 15 / 100 ml
- Chemicals 10 g Rs. 30 / 100 g 12 g Rs. 50 / 100 g 15 g Rs. 60 / 100 g
- Direct Labour 30 Rs. 10 / hour 40 Rs. 10 / hour 60 Rs. 10 / hour
minutes minutes minutes
Bio-organic Ltd. followed an Absorption Costing System and absorbed its production overheads,
to its products using direct labour hour rate, which were budgeted at Rs. 1,98,000.
Now, Bio-organic Ltd. is considering adopting an Activity Based Costing system. For this,
additional information regarding budgeted overheads and their cost drivers is provided below:
Particulars (Rs.) Cost drivers
Forklifting cost 58,000 Weight of material lifted
Supervising cost 60,000 Direct Labour hours
Utilities 80,000 Number of Machine operations
The number of machine operators per unit of production are 5, 5, and 6 for BABYSOFT- Gold,
BABYSOFT- Pearl, and BABYSOFT- Diamond respectively.
(Consider (i) Mass of 1 litre of Essential Oils and Filtered Water equivalent to 0.8 kg and 1 kg
respectively (ii) Mass of output produced is equivalent to the mass of input materials taken
together.)
You are requested to:

(i) PREPARE a statement showing the unit costs and total costs of each product using the
absorption costing method.
(ii) PREPARE a statement showing the product costs of each product using the ABC approach.
(iii) STATE what are the reasons for the different product costs under the two approaches?
Solution
(i) Traditional Absorption Costing
BABYSOFT- BABYSOFT BABYSOFT Total

Gold - Pearl - Diamond
(a) Production of soaps (Units) 4,000 3,000 2,000 9,000
(b) Direct labour (minutes) 30 40 60 -
(c) Direct labour hours (a × b)/60 2,000 2,000 2,000 6,000
minutes
Overhead rate per direct labour hour:

= Budgeted overheads ÷ Budgeted labour hours

= Rs. 1,98,000 ÷ 6,000 hours

= Rs. 33 per direct labour hour
Unit Costs:
BABYSOFT- BABYSOFT- BABYSOFT-
Gold (Rs.) Pearl (Rs.) Diamond (Rs.)
Direct Costs:
- Direct Labour 5.00 6.67 10.00
(10x30) (10x40) (10x60)
60 60 60
- Direct Material 167.50 215.50 248.50

(Refer working note1)
Production Overhead: 16.50 22.00 33.00

(33x30) (33x40) (33x60)
60 60 60
Total unit costs 189.00 244.17 291.50

Number of units 4,000 3,000 2,000
Total costs 7,56,000 7,32,510 5,83,000
Working note-1 Calculation of Direct material cost

BABYSOFT- BABYSOFT- BABYSOFT-
Gold (Rs.) Pearl (Rs.) Diamond (Rs.)
120.00 165.00 195.00
Essential oils (200×60) (300×55) (300×65)
100 100 100
40.00 40.00 40.00
Cocoa Butter (200×20) (200×20) (200×20)
100 100 100
Filtered water 4.50 4.50 4.50

(15x30) (15x30) (15x30)
100 100 100
Chemicals 3.00 6.00 9.00
(30x10) (50x12) (60x15)
100 100 100
Total costs
167.50 215.50 248.50

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Cost & Management Accounting CA Purushottam Sir

www.purushottamaggarwal.com Call 95 8280 8296 Page 16.1

Solution: (1) Calculation of available quantity of raw material (Based on budget)

Product Selling Material Material Mat. Sales Raw

(2) Statement showing Rank

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Material required per 8 kg 14 kg 4.50 kg

(3) Allocation of available 700000 kg material

possible production of A = = 35000 units

Max offer price per kg = = Rs. 2.50 per kg

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Or B 8000 kg 200 hours 1/40 hour per unit

Statement showing rank

Allocation of available 200 hours

Possible production of B = = 1600 units

(2) calculation of sales and contribution

P/V Ratio = x 100 = 41.07%

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Sales ......................................................................................... Rs. 5,00,000

Question 8 Following Data is available for XYZ Ltd.

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Fixed Cost (Rs.) 3,00,000

Particulars Amount (Rs.)

Standard 11 & 12 Primary &

Time spent by principal for 208 312 480 1400

Policy development cost Rs. 11,25,000

Number of policy sold- 528

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Sl. No. Type of vehicle Daily traffic volume

Sl. Activities Amount

Sl. No. Type of Vehicle

i. Calculate the Total Project cost per day of concession period.

www.purushottamaggarwal.com Call 95 8280 8296 Page 16.9

First of all, Learn the concept of FOB & CIF

Sequence of Expenditure incurred in foreign Sale case

Now Question Arise

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 In case of any loss during transit, seller shall bear loss.

CIF = Cost Insurance Freight = FOB + insurance + Freight

Landed Cost = CIF + Custom Duty (import)

St. Showing average cost of mould per tonne of saleable casting

Cost per tonne (Rs.) – A / D 92 79.3 93.9 100 91.3

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AT Ltd. furnishes the following store transactions for September, 20X8:

1-9-X8 Opening balance 25 units value Rs. 162.50

Solution 3:- Working Notes:

1) The material received as replacement from vendor is treated as Fresh Supply.

RECEIPT ISSUE BALANCE

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7-9-X8 -- -- -- -- 97 12 6.50 78 5 6.50 32.50

20-9-X8 4 5 5.75 28.75 -- -- -- -- 25 6.10 152.50

(ii) Contribution Margin Method

Contribution = Sales – Total variable cost

Contribution Ratio = x 100

(iii) Determine Profit or Loss under both these methods

(i) Physical Quantity of each product

Share of Product A in Joint Cost = x 100 units = Rs.38,000