OUTPUT CosTiN tio” price wo sone ‘Total Cost Materials Antici it siret ticipated Conditions iret Labour 06 X Die ad 0.33X over” Total Cost 02 X profit (600 -x) (500 ~ x) BX ~ (500 ~ 1.13x) (500 - 1.13 X) ) = 80% of 600 - x) * 113K = 159 9 9y aus, Profit = € 150, and Cost =z 599 JAS proxinatey Comparative Statement Of Co: , Profit and Sale, and Saleprice Present Total Cost, = 169 profit; Increased sale price = % 395 + 169 = 564, THEORETICAL QUESTIONS 1, Hows tender price determined? cost sheet and explai Sgiten a . 2 ec ofan cmanele *xplain how a cost sheet helps in finding out tender Price, Elucidate with NUMERICAL QUESTIONS {) Short Calculation Questions a 1, The cost price of a tender is € 5,00,000. What will be the tender price ifthe profit is added 20% on tender price? What will be the difference on tender price, ifthe profits tobe added 20% on cost price, ‘Ans. % 6,25,000 and 6,00,000. Ina company, works overheads are 20% of wages and office overheads are 10% of works cost. What price should the company quote for a supply which, it is estimated, will require material worth % 1,000 and % 1,500 for wages and profit would be 20% of selling price. Ans. % 3,850. In manufacturing 5,000 units, direct labour cost is % 25,000, For manufacturing additional 1,000 units the cost of labour increases 10% less than proportionately. Find out the amount of direct labour for tender of 8,000 units. Ans. % 38,500. ‘The outputs ofa manufacturing concern for the years 2019, 2020 and 2021 were 800, 1,000 and 1,500 units pectvely. ‘The factory overheads for these years were % 6,400; % 7,000 and & 8,500 respectively. Find out the amount of factory overhead for 2,000 units to be produced in the year 2022. Ans. % 10,000, 5. The cost sheet of a cycle is as under : x 100 Materials q Wages ‘0 Variable experses - Fixed expenses (Tota exp. ¥ 15,000) Total Cost ze_ COST ACCOUNTING Calculate tender price for 250 cycles, By Ans. = 63,750, % 255 per unit GD Long Calculation Questions When past period cost, output produced and quantity or =, output for tender to be quoted Is given (A) When there is no change in past cost and past percentage of profit h The following figures relate to the costing of a manufacturer of electric fans for a period P| ending 31st Dee., 2020 : Monthy Completed stock on Ist Oct., 2020 ; Completed stock on 31st Dec., 2020 Ni Stock of raw materials Ist Oct., 2020 5 Stock of raw materials 31st Dec., 2020 sa Factory wages woe Indirect charges no ‘Materials purchased 2 Sales Ls The number of fans manufactured during the 3 months was 3,000. Prepare a statement showing the cost per fan and the price to be quoted for 750 fans to reais, same percentage of profit as was realized during the three months. the Ans. Cost per fan % 40.50; Quotation for 750 fans € 33,750. ‘The following figures have been taken from the costing department of a manufacturer who produ bicycles of uniform size and quality for the year ending 31st December, 2020 : Stock of Finished Goods on 1.1.2020 ao Stock of Raw Materials on 1.1.2020 non Stock of Finished Goods on 31.12.2020 1000 Stock of Raw Materials on 31.12.2020 2.000 Materials Purchased 3600) Direct Wages 100 Factory Overheads 20 Sales of Finished Goods 108.000 ‘The number of bicycles produced during the year was 500. Prepare a statement showing the Total Cost and price to be quoted for 300 bicycles which ares uniform size and quality to realise same percentage of profit as was realised during the year 200. Ans. Cost per bicycle =~ 176; Percentage of Profit on Cost 20%; Total Cost for Tender of 300 bicycles =F 63,360. (B) When there is a change in past cost but no change in past percentage profit Saami 3. The following informations are extracted from the books of a Blanket manufacturer who intends quote for the supply of 5,000 Blankets. Prepare a statement showing what price he should quits that he may get the same percentage of net profit on turnover which he got during the last year! which the particulars are given : Stock of Materials on 1st April, 2020 1,00,000 Material purchased during the year 1,50,000 Factory Wages 300,002 Indirect Expenses 50.00 Sales 5,400 Stock of Materials, 31st March, 2021 wo Completed Stock in hand on 1st April, 2020 (0 Completed Stock in hand on (2,047 Nos. of Blankets) 31 March, 2021 ie Output during the year (Blankets) Provision has to be made in the estimate for the expected increase of 10% in the cost of and 5% in the material cost. . ‘Ans. Tender Price @ 2,92,963 (if it is assumed that indirect expenses are based on factory we .e., 16.67%), % 2,90,672 (if it is assumed that indirect expenses are fixed per unit) factory in———UNTOR OUTPUT CosTINGH et |, The following information is available from the account books of Mysore Industries Ltd. for th “aided Bist March, 2021. Prepare a cost sheats ns Pook of Mysore Industries Ltd. forthe year ng Stock : on ished Goods te 00 Raw Material _tgooon Purchases aoe | Factory Wages 3,80,000 | Factory Overhead en nae | Administrative Overhead once Closing Stock ; Raw Material Finished Goods 0000 Bales 756,000 ‘The numberof products manufactured was 4,000 including those sold and those in the stock atthe end. The company wishes to supply 1,000 units of the product in the coming period on the basis of the above figures. It is likely that the cost of material and labour will increase by 15% and 10% respectively. Calculate the price to be quoted. Ans. Present Cost Sheet : Prime Cost % 7,10,400; Factory Cost % 7,80,400; Cost of Production % 8,20,400; Cost of Goods Sold % 6,80,400; Gross Profit & 75,600; Quotation Price € 255.51 per unit if Factory overheads are charged as 18.42% of wages and Administration overhead as 5.13% on works cost. % 232.21 if factory overheads and administration overheads are taken % 17.50 and & 10 per unit as in the previous cost sheet. (C) When there is a change in previous cost and change in percentage profit 5. Pleasant Limited manufactured and sold 1,000 cycles in the year ending 31st March, 2021. The summarized Trading and Profit & Loss Account is given below : ‘Trading and Profit & Loss Account (for the year ended 31st March, 2021) t z To Cost of Material 80,000 | By Sales 4,00,000 Te Direct Wages | 1,20,000 To Mfg. Cost '50,000 To Gross Profit o/d 41,50,000 | = [4,00,000 | z ‘To Management and Staff By Gross Profit b/d 1,50,000 Salaries 60,000 ‘To Rent, Rates and Insurance 10,000 To Selling Expenses 30,000 To General Expenses 20,000 ‘To Net Profit : tae For the year ending 31st March, 2022, it is estimated that : (1) Output and sales will be 1,200 cycles; (2) Price of materials will rise by 20% on ® eae een rise in proportion to the combined cost of materials and wages; () Sell vases per unit will remain unchanged; (6) Other osrenses will remain unaffected by the rise in output “oa You are required to submit a statement for the Board of Directors showing the price at which eycles would be marked so as to show a profit of 10% on selling price. ; An or cast (2021) Prime Cost & 2,00,000; Works Cost & 2,50,000; Cost of Production * ro uoo00: Total Cost & 3,70,000; New Sales Estimate for 31st March, 2022 % 5,10,000; Selling Price per cycle 425. the previous year’s level;322 Material Wages 6. An Engineering Co, manufactured 1,000 Typewni ‘Manufacturing Expenses Salary Rent, Rates & Insurance General Expenses Distribution Expenses Sales ‘The Company plans to mant these typewriters ifa also : (a). The price of materials will ri (b) Wage rates are expected to show an ineres (©) Manufacturing expenses will rise in propo (@) Distribution expenses per unit (e) Other expenses will remain unaffected by the Ans, Year profit of 10% Prime Cost Works Cost 2021 (%) —2,80,000 38,50,000 2022(%) — 4,59,000 5,178,750 Soles for 2022 = % 7,70,833; Selling Price per Typewriter = % 513.89 7. Crystal Cold Private: 1,500 typewriters during 202: Eo aide on selling price? Make use of the following information COST ACCOUNTING _______ a neal ters during the year 2021. Particulars are as under; 1.20000 1,60,009 70,000 50,000 25,000 15,000 20,000 5,00,000 2. What will be the selling price of se by 15% on the previous year's level; nase of 5%; rrtion of the combined cost of materials and wages; will remain the same; rise in output. Cost of Production Total Cost 4,40,000 4,60,000 6,63,750 6,93,750 ‘Limited manufactured and sold 200 Fan coolers in the year ending 31st March, 2021. The summarised Trading and Profit & Loss Account is given below : Ri ‘To Cost of Materials 16,000 | By Sales ‘Te Direct Wages 24,000 ‘To Factory Expenses 10,000 ‘To Gross Profit o/d 30,000 ‘To Management and Staff Salaries | 12,000 | By Gross Profit b/d ‘To Rent, Rates and Insurance 2,000 ‘To Selling Expenses 8,000 ‘To General Expenses 6,000 ‘To Net Profit 2,000 30,000 For the year ending 31st March, 2022 it is estimated that : (a) Output and sales will be 300 Fan coolers. (b) Prices of Raw Materials will rise by 25% on the previous level. (©) Wages will rise by 10%. (@) Factory on cost will rise in proportion to the combi i ¥ (©) Selling on cost per unit will remain vangeds eee (Rent, Rates and Insurance will be reduced by 25% per unit. ® Other expenses will remain unaffected by rise in output. fou are required to submit a statement for the Board of Directors showing the pri i Fan coolers should be quoted so as to show a profit of 20% onthe selling me peice abhi ‘Ans. Year Prime Cost Works Cost Cost of Producti Total Cost 31.3.2021(%) 40,000 50,000 70,000 = 78,000 31.38.2022 (2) 69,600 87,000 1,07,250 taal Total Selling Price (81.3.2022) = & 1,49,062.50 Selling Price per fan = % 496.8710. lL _ UNIT OR OUTPUT COSTING-II Calculation of Absorption Overhead Rate when Past Production Quantity is not given ‘The accounts of Saraf Co. Ltd, show the following information for the year ‘ending 31st March, 2021 : Materials used 323 beta el Works Overheads 54,000 Establishment & General Expenses 16.200 Caleulate : 5 (1) Works Cost; 2) Total Cost of manufacture; (8) The percentage that works overheads hears to direct wages; 4 aallahnient ond General expenses as percentage to works cost, What price should the company quote to manufacture a machine whieh, it i fifeennt an eenitare of € 720 on materials and € 600 on wages ne iat etd weld apron eee cost? Ans. (1) € 1,40,200, (2) & 1,51,416, (8) 30%, (4) 8%. ‘The under-mentioned figures have been e: Cost of materials € 4,00,000, Cost of labour & 3,00,000, Factory charges € 1,50,000, Administration charges € 1,70,000, Selling charges ¥ 42,500, Distribution charges % 42,500, On the basis of the above figures, a work-order has been executed and the following expenses have been incurred thereon : Materials 10,000, Labour ¢ 6,000. Factory overheads are based on Direct Wages. Administration, Selling and Distribution charges are based on Factory cost, Assuming that the Factory overheads have gone up by 10% and other overhead expenses maintaining the same percentages and the profit charged is 20% on total cost, find the total price of the work-order. Ans. Prime cost & 7,00,000; Factory Cost & 8,50,000; Cost of Production & 10,20,000; Total Cost ¢ 11,05,000; Percentage of Factory overheads on Direct wages 50%; Percentage of Administration Expenses 20%; Selling Expenses 5%; Distribution Expenses 5% on works cost; Quotation Price Quotation price for a machine = 1,863. ollected from the books of a company : % 30,108, In respect of a factory the following figures have been obtained for the year 2021 : z Cost of Materials 6,00,000 Wages for Labour 5,00,000 Factory Overheads 3,00,000 Administration charges 3,36,000 Selling charges 224,000 Distribution charges ren Awork-order has been executed in 2022 and the following expenses have been incurred : Materials 8,000 Labour 5,000 Assuming that in 2022 the rate of factory overheads has gone up by 20%; distribution charges have > ing & administration charges have each gone up by 124%, at what price Should the odes Tides soto car bie ane rave profit on selling price as it was in 20217 Factory overheads are based on Direct labour and Administration, Selling, Distribution on Factory cost. Ans. Prime Cost % 11,00,000; Factory Cost < 14,00,000; Cost of Production & 17,36,000; Total Cost, 21,00,000; Factory overheads on labour = 60%, Admin. overheads on Factory Cost = 24%, Selling overheads on Factory Cost = 16%; Distribution overheads on Factory Cost = 10% Percentage of Profit on Cost = 20%; Quotation Price 30,677. shaving tha oe i i Wu are required to prepare a statement showing: (a) the rae ‘need tb i eu ost, (¢) the total eost, () the percentage of works overhead to Productive wages, and (e) the percentage of general overhead to works cost : ‘ Stock of finished goods, 31st Dec., 2019 ed Stock of raw materials, 31st Dec., 2019 - } q q 112. 13. cost ACCOUNTING - ss Purchases ity Productive wages ag Sales of finished goods nat x Stock of finished goods, 31st Dec., 2020 om Stock of raw materials, as Dee., 20! a Works overhead charges : : oe eapua oor rvend a tender for a large plant. The costing department estimates that ‘The company is about to send a : i. to workmen for making the Plant wou i i t 40,000 and the wages li ice. Show what om, TEA, Te tender ito be made at 08 roi at aihce Te the area ofthe tender would be, if based onthe abo" PETE aap; e) 6.66%, Tender Amount op 5 a 82,400; (b) % 10,67,472; (c) mmr are 7 st Aube a ets finds that in 2021, it cost him © 7,20,060 to manufacture 175 sets yy, he sold at & 5,400 each, The cost was made up of : 238209) Materials 3,24,099, Direct Wages 48,60) Factory Overhead Expenses 546) Establishment and General Expenses Y T T200m i timates : Fics Nao that each er il oie materials to the value of 1,600 and an expenditure in wager yg Fes i ion to direct wages as in the previous factory overhead expenses will bear the same relation . Year, that the percentage of establishment and general expenses on factory cost will be the games’ in the previous year. - Prepare astatemont showing the profit he should make per unit he reduces the price of the sethy Ane Percentage of Factory overheads to Direct wages 15%; Percentage of Establishment ang General Expenses to Factory Cost 10%; Profit 1,163. ‘The following informations are obtained from Eswar Engineering Company, manufacturer of fang for the year 2021 : Production 1,000 fans t Cost of raw materials consumed 12,00 Cost of direct labour 20,009 ‘Works overhead 40,000 General overhead 36,000 Selling and distribution overhead 16,000 Sale price for 800 fans 1,12,640 On the basis of undernoted information, prepare a quotation per fan for the year, 2022: (2) Cost of raw materials and direct labour are to increase by 10% and 15% respectively, over the previous year's level, (b) Works overhead, general overhead and sellin; the same percentage as in the previous year, (c) Profit is to be estimated at the same percentaj Ans. Output of fans is 1,000, while sale is 800 of which will be deducted from cost of 72,000; Cost of Production 2 1,08,0 i and distribution overhead are to be charged at ge on total cost as is earned in the previous year, fans. Thus there is closing stock of 200 fans, the cost ‘production year 2021 : Prime Cost € 32,000; Works Cost 100; Cost of Goods Sold = 86,400; Cost of Sales ¥ 1,02,400; Goods Sold 18.52%; Quotation Price on (2022) % 160.7414 —_ _UNIT OR OUTPUT cosTING.1 Calculation of Tender Price on the basis of Behavi ‘The Managing Director of Company consults you sto the oliog Nears of Py stands how ts eee anita ogo ec The coon Sales following particulars H ‘mass production in future. 325 Cost Materials Direct Wages Direct Expenses Factory Overheads Office Overheads Selling Expenses Profit itis Lowes = = hie ed that 70% of factory overheads fluctuate directly with ‘siete sa tr nye enrol expected to show an increase of 25%. Besides, these, no other Sasecre ato at It is expected that the department would Amanat for Gabiiesion to gous elles Peer ee one. units pet annum. Peepere’a . Total Sales Value % 2,38,285; Sei ‘ ‘ Ape Total Sales V 2,38,285; Selling Price per unit 158.86 after charging the same rate of profit Materials per unit % 75; Direct wages per unit ¢ 35; Facti i D 5 5; Factory overheads—Fixed ® 1,750 (7 1,000), Variable factory overheads per unit % 17.50, Ofice overheads total ® 1200 “300 2 ¥ 1,500; Selling expenses fixed ¥ 400 + 100 = % 500; Variable selling expenses per unit ¢ 4. ‘The management of a manufacturing concern has approached the Costi of 3,000 units. The cost analysis of 2,000 units ives he bowie: eee eee Materials 45,000; Labour 25,000; Direct Expenses 7 500; Factory Overheads? 1,000; Administra- tion Overheads % 800 and Selling and Distribution Overheads ® 400. aa ‘ss The further details in this connection are follows : (a) An increase of 10% is expected in the cost of raw materials and 5% in the cost of the labour. (b) 70% of the factory overheads are fixed and 30% variable. (© The ratio of fixed and variable expenses in administration overheads is 60 : 40. (@) Half of the selling and distribution overheads are fixed ‘The management desires to charge 25% profit on the sale price. Ascertain selling price. ‘Ans.Production Prime Cost Works Cost Cost of Production Total Cost 2000 units (%) 70,500 71,500 72,300 72,700 3000 units (€) 1,14,375 1,15,525 116,485 1,16,985 Selling Price of 3,000 units = ¢ 1,55,980; ie, 52 per unit (Approx.) ‘The elements comprising the cost of a factory output for the three years 2019, 2020 and 2021 are as follows : Particulars 2019 | 2020 | 2021 z z z Direct Materials 10,000 | 7,500 | 12,500 Direct Wages 8,000 | 6,000 | 10,000 Works Overheads 2,000 | 1,500 | 2,500 Adi i heads 5,000 | 5,000 | 5,000 iministration & General Overhea 2000 | 1'500 | 1,000 Selli page jelling & Distribution Overheads 1000 750 | 1,250 Output in ton. Exami are required to state on what basis you would allocate ‘Oncost” in Quatiae farce te supp 1,500 tow of the commodity representing the whole of the anticipated output of the year 2022.For manufacturing every 2,000 extra units of (a) Materials—Proportionately (b) Wages—10% less than proportionately (ec) Chargeable expenses—Nil (d) Fixed Overheads—x 400 extra (e) Variable Overheads—25% less than proportionately. You are required to : (1) Calealate estimated cost of producing 16,000 unite of the commodity, and (2) Show by haw much it would differ if a flat rate of factory overhead on wages was charged. ‘Ane, (1) Cost of 10,000 units ® 1,26,800; Cost of additional 6,000 units ¥ 54,000. Estimated cos of producing 16,000 units % 1,80,800; (2) If flat rate of factory overheads on wages is charged the total cost would be % 1,97,240 and hence, there is a difference of f 16,440. 326 COST ACCOUNTING What price would you quote sonuming gthat there was no change in the organization and that aprg, is considered sufficient? | ot oe ateral @t 1l0per unit; Direct wages @t 8 per unit; Works overhead 26% on Dit wages, Administration & General overheads < 5,000 (fixed); Selling & Distribution Expenses 7 500 on the basis of decreasing trend of 7 500 per year; Tender Fe eat ig i roduces a uniform of article and has a capacity of producing * units: 11. certain Metours, The following n €7P2 Gteon shows the different elements of costs for ae consecutive weeks of 48 hours ‘each when the output has changed from week to week : Units Produced in48 Direct Materials Direct Labour Factory Overheads Hours Partly Fixed and Partly Variable z z z 400 800 1,600 3,800 500 1,000 2,000 4,000 800 1,600 3,200 ' 4,600 ‘You are asked to find the selling price per unit when the weekly output will be 1,000 units and profit of 82% on sale price will have to be made. ‘Ans, Direct Materials @€ 2 per unit; Direct wages & 4 per unit, Factory overhead—Fixed & 2,000, Variable @ % 2 per unit; Sale price per unit & 12 18. Manufacturing cost of a product for 2,000 units is below : t Materials 8,000 Wages 6.000 Direct Expenses 2.000 Fixed overheads 6,400 Variable overheads 1500 rena ciacturing additional 1,000 units the cost of production is estimated as follows Materials Proportionately Wages 20% less than proportionately Direct Expenses % 3 per unit on extra units Variable overheads 20% more than proportionately Fixed overheads No extra cot Calculate estimated total cost of production for 3,000 units. sane otal Cost for 2,000 units % 23,900; Total Cost for additional 1,000 units 10,300; Tetal Cst for 3,000 units € 34,200. 19. The cost of manufacturing 10,000 units of a commodity comprises the following : t Materials 40,000 Wages 50,000 Chargeable Expenses 800 Fixed Overheads 32,00 Variable Overheads 4000 the commodity the cost of production increases as fillors:____UNIT OR QUTPUT COSTING. 327 Gatoulation of Tender Price when cost are given In Percentage 0, ‘Tho cost structure of an article the selling price of which is € 430 is as under : 2. Direct Materials 50% of total cost Direct Labour 80% of total cost Overheads Balance of total cost Due to anticipated incroase in existing material price by 20% and in existing labour rate by 10%, the existing profit would come down by 30% if the selling price remains unchanged. Prepare a comparative statement showing cost, profit and sale price under present condition and with the increase expected for future. Assume that the same percentage of profit on cost as at present will have to be earned, Ana, Present total cost ¥ 300; Present profit % 130 and its percentage on sales 30.23; Future Total cost % $39; Profit € 146.90; Selling price € 485.90. ‘The cost structure of an article, the selling price of which is € 45,000 is as follows : Direct Materials 50% Direct Labour 20% Overheads 30% An increase of 15% in cost of materials and of 26% in cost of labour is anticipated. These increased costs would cause a 25% decrease in the amount of present profit per article. You are required : (i) to prepare a statement of profit per article at present; (ii) to suggest revised selling price to produce the same percentage of profit to sales as before. Ans. (i) Total cost 30,000; Profit per article ¥ 15,000. (ii) € 50,625. The Metal Product Company produces a sewing machine that sells for % 300. An increase of 15% in cost of materials and of 10% in cost of labour is anticipated. If tho only figures available are given below, what must be the selling price to give the same percentage of Gross Profit as before? (a) Material costs have been 45% of cost of sales. (b) Labour costs have been 40% of cost of sales, (c) Overhead costs have been 15% of costs of sales. (a) The anticipated increased costs in relation to the present sales price would cause a 35% decrease in the amount of the present Gross Profit, Ans. If Selling Price is unchanged % 300. If Selling Price is changed % 332.26. A company of Civil Engineers proposes to make tender for the construction of an auditorium and estimates its direct cost at < 1,12,500 as given below : z Material 45,000 ‘Wages 47,250 Cost of Transport of men and materials to site 12,750 Other Direct Expenses 7,500 Existing commitments of the company are involving total overhead oft 6,37,875 for various projects. ‘The direct labour cost of which is % 4,25,250. Assuming all the overheads as variable, calculate the estimated value of tender keeping in view the following : i) Necessary overheads (ii) 5% interest on total capital outlay ii) 10% margin, Ans. (i) & 70,875, i) & 9,169, (iii) = 21,94; Tender Price 2,13,938.