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Answer :-1

(A) Particular Purchaes Value Add:- Sales Tax Rs. (2,055) Add:- Railway Freight Rs. (1,000) Add:- Octroi Duty Cartage Total Cost Rate of issue per kg. Basis of apportionment As Given at 5% of Puurchase Value In the ratio of quantity Purchases i.e. 3:5:2 At Rs. 0.10 Per Kg. reveived at Surat As Given

Stt of Rate for Pricing Issue of Chemicals

Total Cost / Qty. Available For issue

Working Note 1 Stt. Of quantity available for issue Chemicals Quantity Purchased Less:- Shortage ( Assumed to be normal ) Quantity received at the store at Surat Less:- Provision for further deterioration 5% Quantity available for issue 2 Total Purchase value A B C Sales Tax Sales Tax in %

12,600.00 19,000.00 9,500.00 41,100.00 2,055.00 5.00

Answer :-2 (a) Invoice value (1000*2) = (2000*85) Customs duty at 100% of invoice value Clearing Charges Freight Charges Total Material Cost

(b)

Quantity received as per Invoice Less:- Normal loss

Normal Receipt Good Units Abnormal Units Total Cost of material Less:- Abnormal loss :((372000/1000)*(40)) Cost of goods pieces 900

Unit cost of material issued to production (357120/900)

Answer :-3

Comparative Statement of Proc Defective (in %) Unit Supplied (in one Lot) Total Defective units in Lot Additional price paid per lot Rs. (A) Rectification cost of defect Rs. (B) Total additional cost as per lot Rs. (A+B)

Decision : On comparing the total additional cost incurred per lot of 1,000 units, we observe Sour is more economical.

Answer :-4(A)

Statement of Earning and rate of earnin Standard Hours i.e. Time Allowed Time Taken Hours Time Saved Hours % of time saved to time allowed Bonus : % of time saved Bonus Hours Bonus Paid Wages Paid Earnings

Answer :-4 (B)

Statement of Earning and rate of earni Standard Hours i.e. Time Allowed Time Taken Hours Time Saved Hours % of time saved to time allowed Bonus : % of time saved Bonus Hours Bonus Paid Wages Paid Earnings

Rate of earning per hour

Answer :-5 (i)

Day Wages

Calculation of earnings of each of 3 workers and labour Cost per Name of Worker Achyuta Ananta Govinda Actual output in pieces (Rs.) 180 120 100 400

Average Cost of Labour for the Company to produce 100 pieces For 400 Pieces

100 Pieces (ii) Piece rate

(100/400)*1800

Piece rate :- (75/10 ) = Rs. 7.5 i.e. Rs. 7.50 per Piece i.e. Rs. 750 Per 100 Pieces Name of Worker Actual output in pieces

Achyuta Ananta Govinda

180 120 100 400

Average Cost of a labour for the Company to produce 100 pieces: (100/400)*3000 Rs. 750 Per 100 Pieces

Answer :-7 Selling Overhead Sales Managers Salary Sales Managers office Expenses Travelling Sales Men's Salaries Travelling Expenses Advertisement Godown Rent Insurance on Inventories Commission on Sales Basis of apportionmet Sales Sales No. of SalesMen Total Mileage Covered % as given in the Question As given in Question 1.00% on Average Stock 5.00% on Sales

Total Selling Overheads


% on Sales

Zone A B C D

Sales 3600000 4800000 1600000 2000000 12000000 120000

Sales Managers Salary

Expenses Relating to sales managers office Traveling Salesmens Salaries Traveling Expenses Advertisements Godown Rent :- A B C D Insurance of inventories Commission on Sales @ 5.00% on Sales

80000 320000 36000 30000 15000 25200 9800 18000 20000 600000

Answer :-8 Materials Labour Processing Charges TOTAL COST Less : Sale value of scrap materials NET COST OF PRODUCTION Profit @ 15% of sales i.e. 15/85 of cost Sales

Cost of Statement of MS Rods

Equivalent unit of sales Total Production Less: Defective 10% Good production Add : Equivalent of defective prodn. @ 90% of 80 EQUIVALENT GOOD PRODUCTION Price of good production 554400/792

Discounted price of defective goods @ 10% discount

Answer 9

Working Notes : Variable Cost Direct Material 9000/1200 12000/1600 Direct Labour 4800/1600 5400/1800 Factory Overheads Week No. 3 2 Difference Var. Factory Overheads 1000/200 Fixed OverHeads Week 3 7.50 7.50

3.00 3.00

Units 1800 1600 200

5.00 Total - Variable 34000 - (1800*5) 34000-9000 25000

COMPUTATION FOR SELLING PRICE PER UNIT WHEN OUTPUT IS 2000 UNI Rate p.u. Direct Material 7.50 Direct Labour Variable Overheads Fixed Overheads TOTAL COST P.U. Add: Profit at 20% on S.P. 3.00 5.00

12.50
28.00

i.e. 25% on Total Cost SELLING PRICE

7.00 35.00

Answer 10

Statement showing cost, revenue and profits Basis of recovery LABOUR HOUR A No. of Units 2500 Rupees
Variable Cost Direct Material Direct Labour Attributable Fixed Cost Common Fixed Overheads TOTAL COST Add: Profit 25% on cost TOTAL SALES Selling price per unit

750000 250000 250000 390000 1640000 410000 2050000 820

Common Fixed Overheads Hours of A Hours of B TOTAL HOURS Total common Fixed OH Rate per hour Recovery per unit A B Total recovery A B

20 40

Answer 11

Marginal Contribution analysis showing the present and propos Per Unit

Sales Unit Sales ( Value) Direct Materials Direct Labour Power Misc. Supplies Jars Variable Cost Marginal Contributoion Fixed Cost Profit / (Loss) Rs. 125 10.00 24.75 1.40 4.30 6.00 46.45 -

Answer 12 Contribution Analysis Product X 250 80 60 90 230 20 0.833 8.00%

Sales (Rs.) Marginal Cost : (Rs.) Direct Material : (Rs.) Direct Wages : (Rs.) Variable overhead : (Rs.)

Contribution per unit : (Rs.) Contribution per hour : (Rs.) P/V Ratio Alternative (i) Total Contribution Less:- Fixed Overhead Net Profit

(250*20)+(250*40)

Alternative (ii) Total Contribution Less:- Fixed Overhead Net Profit

(400*40)

Alternative (ii) Total contribution Less:- Fixed overhead Net Profit

(400*20)+(100*40)

Answer 13 First let us work out the contribution per unit as follows : Production at 50% of capacity 30000*50% Direct materials 82,800 Direct Wages 111,600 Variable & other Mfg. Exp. 39,600 Marginal Cost 234,000 Marginal Cost per Unit Selling price per unit Contribution per unit Selling price in overseas Marginal cost 15.6 20.00 4.40 14.5 -1.1

Stt. Of Profit Particulars Sales - Unit Contribution per unit Total contribution Less :- Fixed exp. Profit (loss) Domestic (15,000) Rs. 4.40 66000 60000 6,000

The offer should not be accepted as it gives negative contribution of Rs. 660. The whole pr Rs. 600 will be wiped out and there will be net loss of Rs. 60. Hence the offer should be reje

Suggestion :- The sales in overseas market will fetch a foreign exchange of Rs. 8,700 (6,000 there will be good name in the foreign market which will improve future business relations. in a loss of Rs. 660 which is a small amount. In view of these reasons, the offer may be acc

Answer 14 Working Note:Particulars Sales Variable Cost Contribution Fixed cost Profit P/V Ratio = (C/S)*100 BEP = (F/ P-V Ratio) Margin of Safety (Sales - BEP) Hero Ltd. Rs. 5000000 4000000 1000000 500000 500000 20.00% 2500000 2500000

Solution :(A) In the conditions of low demand, Hero Ltd. is more profitable as its fixed cost and BEP are very low. After meeting its fixed cost of Rs. 50,000, It will earn profit. Margin of safety is also higher in case of Hero Ltd. Even if the sales is reduced to 50% due to low demand, it will touch BEP and it will not incur any loss. (B) In the conditions of high demand, Zero Ltd. is more profitable as its P/V Ratio is higher at 40% . After meeting its fixed cost of Rs. 1,50,000 the profit in Zero Ltd., will be 40% of sales, whereas it will be 20% of sales only in Hero Ltd. , after meeting its fixed cost of Rs. 50,000/-

Answer 15 i) Manufacturing cost of one unit of Bells Material cost Labour cost Variable overheads 100% of labour cost Variable cost Depreciation :- (500000/5=100000 P.a.) 100000 per annum (Rs. 100000/20000Bells) Cost of manufacturing Purchases Cost Saving, in Manufactured Saving per annum (20000 Units) Hence the company should make them in the factory. ii) Depreciation has been recovered on 20,000 bells. Hence cost of Rs. 40.00 Per unit is top be considered for decision- making. RS. 20.00 10.00 10.00 40.00 5.00 45.00 50.00 5.00 100000

Add:-

Further, machine has additional capacity of 10,000 units per annum (30,000-20,000) Selling price 45 Variable Cost 40 Profit 5 Profit on 5,000 units at Rs. 50= Rs. 25,000 Hence the company should accept on order to supply 5,000 bells at a selling price of Rs. 45 per unit

Answer 16 Working Note : Statement of Contribution and priority A Maximum production per month - units Maximum production per Hour - units Hours required for maximum demand Rs. 200 120 80 2000 I 5000 5000 25 80

Selling price/ unit Variable Cost / unit Contribution / unit Contibution per hour (Key factor) Priority

Solution : a) Statement of profitable product - mix Products A C B Total

Units 2,000 Maximum Demand 2,400 Maximum Demand 1,600 Maximum Demand

Statement of Profit A Sales Value Less:- Variable Cost Contribution Less:- Fixed Expenses Profit per Month b) P/V Ratio {(C/S)*100} Over All Break - even sales of the company (F/P-V Ratio) 400000 240000 160000

41.07% 672,000

Answer 17 A Capacity Production Unit Sales Profit margin is 10% at 90% capacity Total Cost Fixed Expenses

Statement of cost of production an additional 1,500 units. 90% 13,500 Rs. 1,500,000 150,000 1,350,000 300,500

Semi - Fixed Exp. Variable expenses Total Overheads Material & Labour cost (B/f) Total Cost Cost of production additional 1,500 unit For 13,500 units material & Labour Cost For 1,500 Units Material & Labour Cost

97,500 142,000 540,000 810,000 1,350,000 100500 810000 90000

Note :- 1

Note :- 2

Variable Expenses For 100% Capacity 157,777.78 But, as given in question, Rs. 1,49,500 has been taken over into account

B Indigenous Price Total Cost

111.11 100.00

Sales Value of 1,500 unit on the basis of indigenous prices Cost of production additional 1,500 units Cost of Per unit Recommendation : Thought the overseas prices are much lower than indigenous prices, these 1,500 units can be exported even at Rs. 70 Per unit Balance 10% capacity can be utilised and foreign exchange of . Rs. 1,05,000 can be earnd . There will be a profit of Rs. 4,500 also.

Answer 18

Labour is key factor. Hence Contribution per Direct Labour Hour (DLH) is worked out as fol Rs. 300 160 140 70 Rs. 30,000 12,000 12,000 54,000 80,000 26,000

Sales Variable Cost Contribution Per Unit Contribution Per D.L.H Special Order Direct Material Direct Labour (600 hours at Rs. 20) Variable Overhead Variable Cost Sales Contribution Contribution foregone on accepting the special order i.e. opportunity Cost 600 labour hours at Rs. 70 Net Loss Hence the special order should not be accepted

42,000 16,000

Answer 19 Stt. Of Contribution per machine hours (Rs.) Product Direct Material cost Direct Labour cost Variable Overhead Variable Cost Selling Price Contribution per unit Contribution per Machine Hour A 120 130 30 280 350 70 35

M1 A (1200*2) B (1200*3)

Machine Hours utilisation 2400 3600

Committed Available Balance

6000 7800 1800

Product A gives highest contribution per machine hour. At present, the balance hours on M2 can be utilised to produce the product Y. but after Conversion, M2 can be utilised for production o A. Then the additional contribution will be as follows: Contribution from A : 900 hours at 35 Less:- Contribution from Y : 900 hours at 33 Additional Contribution Additional fixed overhead per annum for conversion Net Loss Advice:- Conversion should not be undertaken. 31500 29700 1800 40000 38200

Answer 20 Varable Cost per unit (10,00,000/1,00,000) 10 Adjusted Profit For 2012-13 Plan A Sales Volume 100000-25% = (75,000 Unit) Selling Price 20+20% Variable Cost 10+10% Contribution per unit Sales (75000 Units) Less:- Variable Cost (75000 Units) Contribution (75000 Units) Less:- Fixed cost (400000*5%) Net profit Rs. 24 11 13 1800000 825000 975000 420000 555000

Suggestion : Plan A Should be implemented b) Plan A P/V Ratio =( C/S)*100

54.17%

BEP Value (F/P-V Ratio)

775,385

Answer 21 Plants Selling price per unit Marginal cost per unit Contribution per unit Annual fixed costs BEP (Unit) { F/Con. Per unit) Annual Capacity (Unit) Economical range of output i.e. beyond BEP

Stt. Of Economic Range of Output A RS. 4 2.5 1.5 60,000 40,000 75000

40001 To 75000

Contribution per unit (Note 1) Total Contribution on 1,00,000 units Less:- Fixed Cost (Note 1) Profit

(II) Stt. Of Profit on the Sales of 1,00,000 units (Rs.) A 1.38 137,500 66,000 71,500

Note1 :- Annual Capacity of Plant A Sales

75,000 Units 1,00,000 Units

Balance 25,000 units can be produced in plant A by working double shift with an additional expenses of 10% in fixed costs and 5.% in variable cost of all units: Annual Fixed costs 60,000+(10%) Variable Cost (2.50+(5%)) Contribution (4-2.625) 66000 2.625 1.375

Answer 22 a)

14/307 SALE PRICE PER MONTH Less:- Marginal Cost Material Labour Variable overheads 75% of Rs. 80/Contribution per unit Fixed Overheads per year B.E.P (Units) (F/ Con. Per unit ) 50 80 60

240000 6000

b)

Sales (Units) ({F+P}/Cont. Per Unit) Revised Selling Price (230-15) Less:- Marginal Coat Revised Contribution per unit BEP (units) (F/ Con. Per unit ) Reconcifiation Sales (9600*215) Less:- Marginal Cost (9600*190) Contribution (9600*25) Less:- Fixed Overheads Profit

8500

c)

215 190 25 9600

2064000 1824000 240000 240000 0

Answer 23

29/327

Stt. Of Profitability - Rs. Per Unit'


P Selling Price Direct Material Direct Wages Variable Overheads Dept. A 150% of Direct Wages Dept. B 120% of Direct Wages Dept. C 200% of Direct Wages Variable Cost Contribution Fixed Overhead Dept. A : 200% of Direct Wages Dept. B : 240% of Direct Wages Dept. C : 150% of Direct Wages 300 60 45 30 18 20 68 173 127 40 36 15 91 36

Profit Comment :-

In respect of product B, Material Cost is Very low but the direct Wages are highest. T is comparable. The P/V ratio of the Products is as Follows:P 42.33%

Q R

44.00% 40.33%

In fact P/V Ratio of Q is highest. Hence it should not be discontinued. But Direct to be controlled and as such the absorption of variable and fixed overheads will also be le profitability of Q will improve.

Answer 24

36/334 Particulars Variable cost Fixed Cost Total Cost Loss Sales Contribution (S-V) Result of the first quarters : Sales 10,000 units Per unit (Rs.) 8 3 11 1 10 2

Comparative Statement of 3 Proposals


Finance Manager (Rs.) Selling Price per unit Variable Cost per unit Contribution Per unit Fixed Cost Profit Required BEP (Units) {F/Cont. Per Unit} Sales (Units)[{F+P}/ Cont. Per unit] Additional Sales Volume required in second quarter as compared to First quarter 10.00 8.50 1.50 30,000.00 20000

10000

Answer 25

40/340 First,let us work out the turnover and variable cost of B & C with 100% Capcity and then ad together for arriving the total turnover etc., in respect of merged plant as follows:A 100% 300 200 100 70 30

Capcity Turnover Variable Cost Contribution Fixed Cost Profit Merged Plant P/V Ratio {(C/S)*100} BEP (F/P-V Ratio) For 1,000 Lakhs For 520 Lakhs

(i)

35.00% 520 100% Capacity 52.00%

At 52.00% Capacity of merged plant, It Will achieve B E P. (ii) Turnover at 75% Capacity of merged plant will be 75% of 1000 lakhs Profit = (S* P/V Ratio)-Fixed Cost Rs. 80.5 lakhs profit at 75% capacity of merged Plant

(iii)

Sales = (Fixed Cost+ Profit)/ P-V Ratio Required to give a Profit of Rs. 28 lakhs.

600

Note:Turnover Variable Cost Contribution Fixed Cost profit A 300 200 100 70 30

Answer 26

2/436 Capacity 50%

Statement of Comparative Profitabili

Production and Sales (Units) Material Labour Variable Fy. Overhead Variable Admn. Overhead Marginal cost per unit Selling Per unit Contribution per unit Total Contribution per unit Fixed overhead : FY (5000*6) Admn. (5000*5) Profit Note:Total cost per unit at 50% capacity Marginal cost per unit Fixed Factory overhead Fixed Admn. Overhead Total cost per unit Comments:

5000 Rs. 50.00 15.00 9.00 5.00 79.00 100.00 21.00 105,000.00

55000 50,000.00

79 6 5 90

The profit is the same at 60% capacity and 80% capacity as well. At 80% capacity, m capacity and more efforts are required to get the profit of Rs. 53,000 which is the same as at 60% More risk is involved for sales at 80% capacity Hence 60% capacity production is recommended to achieve the profit of Rs. 53,000/present profit of Rs. 50,000.

Answer 27

08/444

(i) Production Budget For 2013 and total cost there of Particulars I 2/3 of Current Quarter's Sales of 8000 Demand 1/3 of following quarter's sales 5000 demand Production Budget for 2013 units 13000 Rs. Direct Material Cost Direct Labour Cost Variable overheads Fixed overheads Total Cost 65000 78000 19500 45000 207500

Qua

(ii) Sales Value 61,500 units at Rs. 17 Per unit Less:- Variable cost (5.00+6.00+1.50) Contribution : 17.00- 12.50= 4.50 Per Unit on 61,500 unit Less:- Fixed overhead Budgeted Profit for 2013

Rs. 1045500 768750 276750 180000 96750

(iii)

BEP (Units)= {F/Cont. Per Unit} Quarter I II III

40000 No. of Units Sold 12000 15000 16500 43500

In the Third quarter, the company will break - even

Answer 28

9/446

Cash Budget for ABC Ltd.


Particulars Opening Cash Balance Collection from customers A. Total Receipts Payments:Purchases of materials Other Expenses Salary & Wages Income Tax Purchases of Machinery B.Total Payments Minimum Cash Balance Total Cash Required Excess / (Deficit) C. Borrowing Repayment Interest payment (Note:- 1) D. Total Closing Balance 1st Quarter 10,000.00 125,000.00 135,000.00

20,000.00 25,000.00 90,000.00 5,000.00 140,000.00 15,000.00 155,000.00 (20,000.00) 20000

0 15,000.00

Note:- 1

As given in the question, interset is computed and paid when the principal is repai is at the beginning of the quarter and repayment made at the end of the quarter as given in Rs. 20,000 borrowing at the beginning of the first quarter. Rs. 09,000 repayment made at the end of the third quarter. Interest is computed and paid when the principal is repaid. Hence the interest on 9, quarter at 10% is Calculated as follow:9000*9/12*10/100

RS. 11,000 repaid at the end of the 4th Quarter. Hence interest on Rs. 11,000 for 4 q for one year at 10% will be Rs. 1,100.

Answer 29

9/159 Working Note:Jan.13 1 Overheads rate per labour Hour 2 Labour hours :- {Labourcost/labour rate} 3 Overheads (Labour Hours* Labour Rate) 3 1250 3750

Solution Calculation of cost and profit per unit of each batch order Jan. 13 1250 Rs. 6250 2500 3750 12500 18750 6250 5 10

Batch Output Numbers Material Cost Labour Cost Overheads Total Cost Sales Value at Rs.15 Per Unit Profit Profit per unit Cost per unit

OVERALL position of the order for 3,000 units: RS. Sales Value (3,000 units at Rs. 15) Less: Total Cost (3000*10) Profit 45000 30000 15000

Stt of Rate for Pricing Issue of Chemicals (Rs.) A 12,600.00 630.00 300.00 280.00 22.00 13,832.00 B 19,000.00 950.00 500.00 472.00 63.12 20,985.12 C 9,500.00 475.00 200.00 190.00 31.88 10,396.88

5.20 5.20

4.68 4.68

5.76 5.76

A 3,000 200 2,800 140 2,660

B 5,000 280 4,720 236 4,484

C 2,000 100 1,900 95 1,805

Purchases Value

Rs. 170000 170000 18000 14000 372000 Pieces 1000 60

940 900 40 372000 14880 357120

396.80

Comparative Statement of Procuring material from two sources Material Source - I 2 (Future estimate) 1,000 20 (1,000 units * 2%) 100 100 (20 units * Rs. 5) 200 incurred per lot of 1,000 units, we observe Source II

Statement of Earning and rate of earning Amar 100 60 40 40% 20% 8.00 800 6000 6800

Akbar 100 70 30 30% 20% 6.00 600 7000 7600

Anthony 100 95 5 5% 10% 0.50 50 9500 9550

Statement of Earning and rate of earning Amar 100 60 40 40% 20% 8.00 800 6000 6800

Akbar 100 70 30 30% 20% 6.00 600 7000 7600

Anthony 100 95 5 5% 10% 0.50 50 9500 9550

113.33

108.57

100.53

ngs of each of 3 workers and labour Cost per 100 pieces Day wages at 75 per hour for 8 hour (Rs.) Labour Cost per 100 Pieces (Rs.) 600 333.33 600 500.00 600 600.00 1800

roduce 100 pieces RS. 1800.00

450.00

. Rs. 750 Per 100 Pieces Piece Wages Labour Cost per 100 Pieces (Rs.) 1350.00 900.00 750.00 3000.0 750 750 750

duce 100 pieces: Per 100 Pieces

Zone A 36,000.00 24,000.00 100,000.00 7,200.00 9,000.00 15,000.00 6,000.00 180,000.00 B 48,000.00 32,000.00 120,000.00 16,800.00 9,000.00 25,200.00 8,000.00 240,000.00 C 16,000.00 10,666.67 40,000.00 5,400.00 6,000.00 9,800.00 4,000.00 80,000.00

377,200.00
10.48%

###
10.40%

171,866.67
10.74%

No. of Sales Men 5 6 2 3 16

Mileage Covered All. Of Advertisement 6000 30% 14000 30% 4500 20% 5500 20% 30000

Statement of MS Rods Rs. 280000 100000 100000 480000 8760 471240 83160 554400 MT. 800 80 720 72 792 700 Rs. Per MT 630 Rs. Per MT

Overheads 34000 33000 1000

PER UNIT WHEN OUTPUT IS 2000 UNITS Units 2000 2000 2000 2000

Total 15000 6000 10000 25000

e and profits LABOUR HOUR B 1500 Rupees MACHINE HOUR A B 2500 1500 Rupees 750000 750000 300000 250000 300000 250000 468000 660000 1818000 1910000 454500 477500 2272500 2387500 1515 955 Rupees 750000 300000 300000 198000 1548000 387000 1935000 1290

Labour Hour 50000 60000 110000 858000 7.80

Machine Hour 75000 22500 97500 858000 8.80

156 312

30 15

264 132

390000 468000 858000

660000 198000 858000

ion analysis showing the present and proposed position is given below : Present Position ( Capacity 50%) Propsed Total ( Capacity) offer (Capacity 50%) 10,000 20,000 .@ Rs. 75 Per unit 750000 100,000 247,500 14,000 43,000 60,000 464,500 285,500 285,500 929,000 1,071,000 795,500 275,500 2000000

10,000 1250000 100,000 247,500 14,000 43,000 60,000 464,500 785,500 795,500 (10,000)

Contribution Analysis Product Y 200 60 40 60 160 40 2.5 20.00%

15,000 7,500 7,500

16000 7500 8,500

12000 7500 4,500

as follows : 15,000 units

( In the domestic market ) (Negative contribution per unit per unit in overseas sales)

Stt. Of Profit Overseas (6,000) Rs. -1.1 -6600 (6,600)

Total (21,000) Rs. 59400 60000 (600)

egative contribution of Rs. 660. The whole profit of loss of Rs. 60. Hence the offer should be rejected

ll fetch a foreign exchange of Rs. 8,700 (6,000/1.45). Further, which will improve future business relations. The offer may result n view of these reasons, the offer may be accepted by the management.;

Zero Ltd. Rs. 5000000 3000000 2000000 1500000 500000 40.00% 3750000 1250000

e profitable as its fixed cost of Rs. 50,000, It will earn ero Ltd. Even if the sales h BEP and it will not

re profitable as its P/V st of Rs. 1,50,000 as it will be 20% of st of Rs. 50,000/-

ered for decision- making.

0 units per annum

Per unit Per unit

pply 5,000 bells at

B 8000 8000 40 100 Rs. 160 120 40 1600 II

C 6000 6000 30 80 Rs. 100 40 60 1800 III

Hours 80 80 40 200 Statement of Profit B 256000 192000 64000

C 240000 96000 144000

Total 896000 528000 368000 276000 92000

nt of cost of production an additional 1,500 units. 100% Rs.

Additional 1,500 units 15,000 1,500 Rs.

300,500

100,500 149,500 550,500 900,000 1,450,500

3,000 7,500 10,500 90,000 100,500

taken over into account

Per unit Per unit 166,666.67 67.00 Per unit

n indigenous prices, these 1,500 units can be pacity can be utilised and foreign exchange of . of Rs. 4,500 also.

Direct Labour Hour (DLH) is worked out as follows:

Of Contribution per machine hours (Rs.) B 135 195 45 375 465 90 30

X 150 240 66 456 540 84 28

Y 100 80 22 202 235 33 33

Machine Hours utilisation M2 X (1600*3) Y (1600*1)

4800 1600

Committed Available Balance

6400 7300 900

hour. At present, the balance hours on M2 Conversion, M2 can be utilised for production of

Per unit Adjusted Profit For 2012-13 Plan B Sales Volume 100000+25% = (1,25,000 Unit) Rs. Selling Price (20-20%) Variable Cost (10-10%) Contribution per unit Sales (1,25,000 Units) Variable Cost (125000 units) Contribution (75000 Units) Fixed cost (400000*-5%) Net profit 16 9 7 2000000 1125000 875000 380000 495000

Plan B P/V Ratio =( C/S)*100

43.75%

BEP Value (F/P-V Ratio)

868,571

Stt. Of Economic Range of Output B RS. 4 2.2 1.8 108,000 60,000 120000 C RS. 4 2.1 1.9 120,000 63,158 150000

60000 To 120000

63159 To 150000

Of Profit on the Sales of 1,00,000 units (Rs.) B 1.80 180,000 108,000 72,000

C 1.90 190,000 120,000 70,000

by working double shift with an % in variable cost of all units:

Per unit Per unit

230

190 40

Motors

Motors

Motors

Of Profitability - Rs. Per Unit'


Q 275 30 50 30 24 20 74 154 121 40 48 15 103 18 R 305 70 42 18 12 40 70 182 123 24 24 30 78 45

t is Very low but the direct Wages are highest. The Contribution

nce it should not be discontinued. But Direct Labour Cost is f variable and fixed overheads will also be less.Then the

e first quarters : Sales 10,000 units Amount (Rs.) 80000 30000 110000 10000 100000 20000

arative Statement of 3 Proposals


Sales Manager (Rs.) Production Manager (Rs.) 10.00 9.70 8.00 8.00 2.00 1.70 35,000.00 30,000.00 5,000.00 4,000.00

20,000.00

20,000.00

10,000.00

10,000.00

cost of B & C with 100% Capcity and then add respect of merged plant as follows:B 100% 400 300 100 50 50 C 100% 300 150 150 62 88 Rs. In Lakhs Marged Plant 100% 1000 650 350 182 168

Lakhs Capacity

hieve B E P. 75% of 1000 lakhs 750 lakhs 80.5 lakhs

lakhs

B 280 210 70 50 20

C 150 75 75 62 13

Rs. In Lakhs Total 730 485 245 182 63

nt of Comparative Profitability
60% 80%

6000 Rs. 51.00 15.00 9.00 5.00 80.00 98.00 18.00 108,000.00

8000 Rs. 52.50 15.00 9.00 5.00 81.50 95.00 13.50 108,000.00

55000 53,000.00

55000 53,000.00

Reconciled as given question

ty and 80% capacity as well. At 80% capacity, more production, more working profit of Rs. 53,000 which is the same as at 60% capacity.

commended to achieve the profit of Rs. 53,000/- which is more than the

Quarters II 10000 5500 15500 Rs. 77500 93000 23250 45000 238750 III Closing Stock 11000 6000 17000 Rs. 85000 102000 25500 45000 257500 Rs. 92500 111000 27750 45000 276250 IV 12000 6500 18500

Units

Cash Budget for ABC Ltd. (Rs.)


2nd Quarter 3rd Quarter 15,000.00 15,000.00 150,000.00 160,000.00 165,000.00 175,000.00 4th Quarter 15,325.00 221,000.00 236,325.00

35,000.00 20,000.00 95,000.00

35,000.00 20,000.00 95,000.00

54,200.00 17,000.00 109,200.00 20,000.00 200,400.00 15,000.00 215,400.00 20,925.00 0 11000 1100 12100 23,825.00

150,000.00 15,000.00 165,000.00 0

150,000.00 15,000.00 165,000.00 10,000.00 0 9000 675 9675 15,325.00

0 15,000.00

omputed and paid when the principal is repaid. Borrowing ent made at the end of the quarter as given in the question. of the first quarter. of the third quarter. e principal is repaid. Hence the interest on 9,000 for 3 Rs. 675 Quarter. Hence interest on Rs. 11,000 for 4 quarter i.e.

Feb. 13 2 1500 3000

Mar. 13 3 1000 3000

on of cost and profit per unit of each batch order Feb.13 1500 Rs. 9000 3000 3000 15000 22500 7500 5 10

Mar.13 1000 Rs. 5000 2000 3000 10000 15000 5000 5 10

Total 3750 Rs. 20250 7500 9750 37500 56250 18750 5 10

Material Source - II 2.8 (Past experience) 1,000 28 (1,000 units * 2.8%) 140 (28 units * Rs.5) 140

D 20,000.00 13,333.33 60,000.00 6,600.00 6,000.00 18,000.00 2,000.00 100,000.00

Total Over heads 120,000.00 80,000.00 320,000.00 36,000.00 30,000.00 68,000.00 20,000.00 600,000.00

225,933.33
11.30%

1,274,000.00

Avg. Stock 600000 800000 400000 200000 2000000

hine Hour

Total 41000 23000 64000 Rs. 320000 384000 96000 180000 980000

Answer :-2 (a) Invoice value (1000*2) = (2000*85) Customs duty at 100% of invoice value Clearing Charges Freight Charges Total Material Cost Rs. 34400 34400 1800 1400 72000 Pieces 1000 60 940 900 40 72000 2880 69120

(b)

Quantity received as per Invoice Less:- Normal loss Normal Receipt Good Units Abnormal Units Total Cost of material Less:- Abnormal loss :((372000/1000)*(40)) Cost of goods pieces 900

Unit cost of material issued to production (357120/900)

76.80

Statement of Earning and rate of earning Amar Akbar Anthony Standard Hours i.e. Time Allowed 100 100 100 Time Taken Hours 60 70 95 Time Saved Hours 40 30 5 % of time saved to time allowed Bonus : % of time saved Bonus Hours Bonus Paid Wages Paid Earnings 40% 20% 8.00 8 60 68 30% 20% 6.00 6 70 76 5% 10% 0.50 0.5 95 95.5

Day Wages Calculation of earnings of each of 3 workers and labour Cost per Name of Worker Actual Day Labour output in wages at Cost per pieces (Rs.) 75 per 100 hour for Pieces 8 hour (Rs.) (Rs.)

Achyuta Ananta Govinda

180 120 100 400

6 6 6 18

3.33 5.00 6.00

Average Cost of Labour for the Company to produce 100 pieces RS. For 400 Pieces 18.00 100 Pieces (100/400)*1800 4.50 Piece rate Piece rate :- (75/10 ) = Rs. 7.5 i.e. Rs. 7.50 per Piece i.e. Rs. 750 Per 100 Pieces Name of Worker Actual output in pieces Piece Wages Labour Cost per 100 Pieces (Rs.) 750 750 750

Achyuta Ananta Govinda

180 120 100 400

13.50 9.00 7.50 30.0

Average Cost of a labour for the Company to produce 100 pieces: (100/400)*3000 Rs. 750 Per 100 Pieces

Answer 11 Marginal Contribution analysis showing the present and proposed position is given below : Per Unit Present Propsed Total Position ( offer ( Capacit Capacity (Capacity y) 50%) 50%) 10,000 10,000 20,000

Sales Unit

.@ Rs. 0.75 Per unit Sales ( Value) Direct Materials Direct Labour Power Misc. Supplies Jars Variable Cost Rs. 1.25 0.1000 0.2475 0.0140 0.0430 0.0600 0.4645 12500 1,000 2,475 140 430 600 4,645 7500 1,000 2,475 140 430 600 4,645 9,290 20000

Marginal Contributoion Fixed Cost Profit / (Loss)

0.7855 -

7,855 7,955 (100)

2,855 2,855

10,710 7,955 2,755

Answer 12 Contribution Analysis Product X 25 8 6 9 23 2 0.083 8.00% Product Y 20 6 4 6 16 4 0.25 20.00%

Sales (Rs.) Marginal Cost : (Rs.) Direct Material : (Rs.) Direct Wages : (Rs.) Variable overhead : (Rs.)

Contribution per unit : (Rs.) Contribution per hour : (Rs.) P/V Ratio Alternative (i) Total Contribution Less:- Fixed Overhead Net Profit

(250*2)+(250*4)

1,500 750 750

Alternative (ii) Total Contribution Less:- Fixed Overhead Net Profit

(400*4)

1600 750 850

Alternative (ii) Total contribution Less:- Fixed overhead Net Profit

(400*2)+(100*4)

1200 750 450

Answer 13 First let us work out the contribution per unit as follows : Production at 50% of capacity 30000*50% 15,000 units Direct materials 8,280 Direct Wages 11,160 Variable & other Mfg. Exp. 3,960 Marginal Cost 23,400

Marginal Cost per Unit Selling price per unit Contribution per unit Selling price in overseas Marginal cost

1.56 2.00 0.44 ( In the domestic market ) 1.45 -0.11 (Negative contribution per unit per unit in overseas sales)

Particulars Sales - Unit Contribution per unit Total contribution Less :- Fixed exp. Profit (loss)

Stt. Of Profit Domestic (15,000) Overseas (6,000) Total (21,000) Rs. Rs. Rs. 0.44 -0.11 6600 -660 5940 6000 6000 600 (660) (60)

The offer should not be accepted as it gives negative contribution of Rs. 660. The whole profit of Rs. 600 will be wiped out and there will be net loss of Rs. 60. Hence the offer should be rejected

Suggestion :- The sales in overseas market will fetch a foreign exchange of Rs. 8,700 (6,000/1.45). Furthe there will be good name in the foreign market which will improve future business relations. The offer ma in a loss of Rs. 660 which is a small amount. In view of these reasons, the offer may be accepted by the m

Answer 14 Working Note:Particulars Sales Variable Cost Contribution Fixed cost Profit P/V Ratio = (C/S)*100 BEP = (F/ P-V Ratio) Margin of Safety (Sales - BEP) Hero Ltd. Rs. 500000 400000 100000 50000 50000 20.00% 250000 250000 Zero Ltd. Rs. 500000 300000 200000 150000 50000 40.00% 375000 125000

Solution :(A) In the conditions of low demand, Hero Ltd. is more profitable as its fixed cost and BEP are very low. After meeting its fixed cost of Rs. 50,000, It will earn profit. Margin of safety is also higher in case of Hero Ltd. Even if the sales is reduced to 50% due to low demand, it will touch BEP and it will not incur any loss. (B) In the conditions of high demand, Zero Ltd. is more profitable as its P/V Ratio is higher at 40% . After meeting its fixed cost of Rs. 1,50,000 the profit in Zero Ltd., will be 40% of sales, whereas it will be 20% of

sales only in Hero Ltd. , after meeting its fixed cost of Rs. 50,000/-

Answer 15 i) Manufacturing cost of one unit of Bells RS. Material cost 2.00 Labour cost 1.00 Variable overheads 100% of labour cost 1.00 Variable cost 4.00 Depreciation :- (50000/5=10000 P.a.) 10000 per annum (Rs. 10000/20000Bells) 0.50 Cost of manufacturing 4.50 Purchases Cost 5.00 Saving, in Manufactured 0.50 Saving per annum (20000 Units) 10000

Add:-

Hence the company should make them in the factory. ii) Depreciation has been recovered on 20,000 bells. Hence cost of Rs. 4.00 Per unit is top be considered for decision- making. Further, machine has additional capacity of 10,000 units per annum (30,000-20,000) Selling price 4.5 Per Unit Variable Cost 4 Per Unit Profit 0.5 Profit on 5,000 units at Rs. .50= Rs. 2,500 Hence the company should accept on order to supply 5,000 bells at a selling price of Rs. 4.50 per unit

Answer 16 Working Note : Statement of Contribution and priority A Maximum production per month - units Maximum production per Hour - units Hours required for maximum demand Rs. 200 120 5000 5000 25 80 B 8000 8000 40 100 Rs. 160 120 Rs. 100 40 C 6000 6000 30 80

Selling price/ unit Variable Cost / unit

Contribution / unit Contibution per hour (Key factor) Priority

80 2000 I

40 1600 II

60 1800 III

Solution : a) Statement of profitable product - mix Products Units Hours A 2,000 Maximum Demand 80 C 2,400 Maximum Demand 80 B 1,600 Maximum Demand 40 Total 200 Statement of Profit A B C Total 400000 256000 240000 896000 240000 192000 96000 528000 160000 64000 144000 368000 276000 92000

Sales Value Less:- Variable Cost Contribution Less:- Fixed Expenses Profit per Month

b) P/V Ratio {(C/S)*100} 41.07% Over All Break - even sales of the company 672,000 (F/P-V Ratio)

Answer 18

Labour is key factor. Hence Contribution per Direct Labour Hour (DLH) is worked out as follows: Rs. 30 16 14 7 Rs. 3,000 1,200 1,200 5,400 8,000 2,600

Sales Variable Cost Contribution Per Unit Contribution Per D.L.H Special Order Direct Material Direct Labour (600 hours at Rs. 20) Variable Overhead Variable Cost Sales Contribution

Contribution foregone on accepting the special order i.e. opportunity Cost 600 labour hours at Rs. 70 Net Loss

4,200 1,600

Hence the special order should not be accepted

er unit in overseas sales)

0. The whole profit of r should be rejected

Rs. 8,700 (6,000/1.45). Further, iness relations. The offer may result ffer may be accepted by the management.;

orked out as follows: