Indian Institute of Management Kashipur

PGP 2021-23, Term III

Management Accounting
Quiz 3
Maximum Marks: 36 Time: 25 Minutes.
Bombay dyeing produces various cotton based products and one of the products line is bed sheets.
Company produce three categories of bed sheet based on the market segments: Regular, Standard,
and Deluxe. Its cost accounting system applied conversion costs using a plant-wide application rate
using sum of material and labour cost as the cost driver. Company is thinking of employing an
ABC system for conversion costs. Company concluded that its plant had six activities and costs
budgeted for the upcoming year are as follows:

Activity Area Budgeted Costs

Material and Coloring Cost ₹ 40,12,000
Block and Design Procurement Cost ₹ 1,14,000
Machine Setups Cost ₹ 1,60,000
Depreciation & Maintenance Cost ₹ 40,10,000
Labour Cost ₹ 10,92,000
Packaging & Shipping Cost ₹ 1,90,000
Other Cost ₹ 60,00,000
Total ₹ 1,55,78,000
Material handling and coloring cost include the cost of the raw material procured and after
procurement company color the white material into different colors as per the requirements. Cost
details for three categories are as follows:

Particulars Regular Standard Deluxe

Fabric (meters) 3.5 3.5 4.5
Cost per Meter of material and colouring Rs. 60 Rs. 100 Rs. 200
After coloring company put the colored sheet for printing purpose. Sheets are printed in different
design therefore company has to procure deferent blocks and design to printed specific sheets.
Sheets of same designs are printing in batches and to produce a batch first they have to set up
machine as per given design and thereafter printing of sheets happen. Printed sheets are then
washed hard to fasten the colors and ironed thereafter. Cost of washing and ironing is included in
other costs. Finally, as per the orders sheets are packed and shipped. Irrespective of the no. of
sheets, packaging and shipping cost per order remains same.
Company follow standard costing method for pricing purpose and for this month company
summarizes following information regarding projections of the activities performed for all three
categories:

Particulars Regular Standard Deluxe

Units to be produced 10,000 5,000 800
Machine hours (per unit) 3 5 8
No. of Blocks and Design Procured 100 50 50
No. of machine set ups 75 25 10
 Labor Hours per unit 2 5 12
Orders shipped 1,000 2,000 800

Question 1: Fill the following table: (12)

Activity Area Cost Driver Overhead allocation rate per unit

Block and Design Procurement Cost
Machine Setups Cost
Depreciation & Maintenance Cost
Labour Cost
Packaging & Shipping Cost
Other Cost

Question 2: Calculate the cost of all different sheet using ABC. (24)

Activity Regular Standard Deluxe

Material and Coloring Cost
Block and Design Procurement Cost
Machine Setups Cost
Depreciation & Maintenance Cost
Labour Cost
Packaging & Shipping Cost
Other Cost
Total
Units
Per unit cost