First Test Paper Solution : PC 302 : Elements of Business Management

Q.2 (A)
Apportion the overheads
Considering Administration, based on number of people
For sales / Purchase = (1/11) x 60000 = 5455
For foundry shop = (5/11) x 60000 = 27273
For Machine shop = (5/11) x 60,000 = 27273

New overheads
Sales / Purchase = 15000 + 5455 = 20455
Foundry shop = 90,000 + 27273 = 1,17,273
Machine shop = 1,00,000 + 27,272 = 1,27,273

Sales / Purchase Department Apportionment

For Foundry shop = (75000 / 1,55,000) x 20,455 = 9898
For Machine shop = (80,000 / 1,55,000) x 20455 = 10,557

Dept. Overheads Sales/Purchase Total

Foundry shop 1,17,273 9898 127171
Machine shop 1,27,273 10557 137830
2,65,001

Absorption on Direct Material Cost:

Material Rate = (80,000 / 1,37,830) = 0.5804
Total Cost = (Direct Material cost + OH based on DMC) + (Direct Labour cost)
= [27+ (27x0.5804)] + 22
= Rs. 64.67
Q.2 (B) BALANCE SHEET
Amount in Amount in
ASSETS LIABILITIES
Lacs Lacs
Fixed Assets Long Term Liabilities
Plant, Machines, Building 20 Loan from bank 12
Depreciation (-2) Long term creditors 05
Net tangible assets 18 LTL 17
Loan to xyz company 05
TFA 23
Current Assets Short Term Liabilities
Work in process 08 Payment to supplier 10
Pending payment 03 Debenture sold 01
Cash in bank 11 STL 11
TCA 22
Capital & Surplus
Provision for liabilities 02
Profit and Loss 15
Total 17
45 45