Ph: 98851 25025/26 www.mastermindsindia.com PROBLEM NO.3 Cost Sheet Direct materials (consumed) (W.N -1) 97,000 Direct labour (manufacturing wages) 50,000 Direct expenses (Royalty) 10,000 Prime cost. Add: Factory Overhead (wN-2) Gross Factory Cost / Gross Works Cost Add: Opening Work-in-Progress Less: Closing Work-In-Progress Net Factory Cost / Net Works Cost Add: Administration Overhead (WN -3) Cost of Goods Produced Add: Opening finished goods 20,000 fr ) (47 400) Less: Closing finished goods (75t50" 1,000 : : Cost of Goods Sold Add: Selling & Distribution Overhead (W.N-4) Cost of Sales Profit (bif) Sales 1. COST SHEET PROBLEM NUMBERS TO WHICH SOLUTIONS ARE PROVIDED: 1,87,000 37,000 1,94,000 0 1,94,000 43,000 2,37,000 (27,400) 2,09,600 30,000 2,39,800 1,84,400 3,94,000 Note: Since the entire opening stock has been sold, the closing stock represents current month production. W.N -1: Calculation of Direct Materials Consumed: Particulars ‘Amount ‘Opening stock 20,000 Purchase of Raw Material 82,000 Less: Closing stock 10,000 Less: Scrap sales (A;) 2,000 Less: Abnormal loss 3,000 ‘Customs duty (Az) 10,000 W.N -2: Calculation of Factory Overhead Particulars ‘Amount Depreciation on plant 15,000 Factory rent, taxes 12,000 Excise duty 10,000 Factory Overhead 37,000 : Calculation of Administration Overhead Particulars Amount (General Charges 15,000 Data processing cost 5,000 Salaries 20,000 Stock insurance Premium 3,000 ‘Administration Overhead 43,000 IPCC _37e_Costing (Problems)_Printed Solutions, 42No.4 for CAICWA & MECICEC MASTER MINDS ) WN. alculation of Selling & Distribution Overhead Particulars ‘Amount Sales tax 10,000 Marketing expenses 15,000 Branch office expenses for after sales service 5,000 Selling & Distribution Overhead 30,000 w. tems to be ignored Particulars ‘Amount Loss on sale of plant — (Non Cost Related Item! 8,000 Discount on sales — (Items of Pure Finance} 70,000 ‘Advanoe Income tax — (Items of Pure Finance] 720,000 Donations - (Non Cost Related Item) 5,000 Interest on loan received ~ (Items of Pure Finance) 5,000 Normal loss — (already included in Direct Material) 5,000 Retumable packing — (not included in cost of material) 4,000 “Transfer to debenture Redemption reserve. (Non Cost Related Item) 5,000 Purchase of computers (Capital Expenditure) 0,000 Assumptions: © Scrap sales relates to Raw Materials, © Customs duty is incurred for importing of Raw Material ‘= Excise Duty relates to Factory Overhead (Indirect expense). a. Changes that occur in cost sheet when 200 units of entire opening stock remained unsold: Particulars [@ynits | Amount [Amount Cost of Production 5,000 =| 237,000 Add: Opening finished goods \\) 4,000] 20.000 Less: Closing finished goods (W.N ~ 6) QO 1,000 41,920 21,920 Cost of Goods Sold we 2,15,080 Add: Selling & Distribution Overhead 30,000 Cost of Sales eS 2,45,080 Add: Profit 1,48,920 Sales 3,94,000 W.N = 6: Calculation of Value of Closing Finished Goods Particulars ‘Amount Opening Stock included in Closing Stock (200 units @ Rs. 20 each) 4,000 Closing Stock of 800 units @ Rs. 47.4 each (47,400 / 1,000) x 800 37,920 Value of Glosing Finished Goods [41,920 Therefore, Profit will decrease by Rs.5,480 (47,400 - 41,920) b. Changes that occur in cost sheet when closing stock included units of opening stock but the units were not known: Particulars Units ‘Amount | Amount Cost of Production 5,000 =| 237,000 ‘Add: Opening finished goods 1,000 20,000 Less: Closing finished goods (W.N- 7) 1,000 42,833] 22,833 Cost of Goods Sold 214,167 ‘Add: Selling & Distribution Overhead 30,000 Cost of Sales 244,167 ‘Add: Profit 149,833 Sales 394,000 IPCC _37e_Costing (Problems)_Printed Solutions 43Ph: 98851 25025/26 www.mastermindsindia.com W.N 7: Calculation of Value of Closing Finished Goods Particulars ‘Amount Cost of Production (6,000 units @ Rs. 47.4 each) 237,000 Opening Finished Goods (1,000 units @ Rs. 20 each) 20,000 Cost of Goods Sold (6,000 units @ Rs. 42.83 each) 2.57.000 Closing Finished Goods (1,000 units @ Rs. 42.83 each) 42833 Therefore, Profit will decrease by Rs.4,567 (47,400 - 42,833). 2. MATERIALS PROBLEM NUMBERS TO WHICH SOLUTIONS ARE PROVIDED: 6, 23, 24, 25, 27, 28, 29. PROBLEM HO. 6 1) Economic Order Quantity 2xAxO - as E00 = : ci Rs.40x10% = 400packs ii) Number of orders per year Annualrequirements E0Q 40,000 packs 400 packs Ordering and storage costs RS, Ordering costs-100 order x Rs 8.00 800 Storage cost:- $ (400 packs x 1% of Rs.40) 800 ‘Total cost or Ordering & storage 7,600 iv) Timing of next order a) Day's requirement served by each order. No.of workingdays _ 360 Number of days requirements = No.oforderina year 100 = 36dayssupply b) Days requirement covered by inventory Unitsininventory = _Unisininventory __ , (Day'srequirement serve by anorder) Economic order quantity “O° 24 u p 333packs x3.6days =3daysrequirement “400packs a pi ¢) Time interval for lacing next order Inventory left for day's requirement — Lead time of delivery 3 days ~ 3 days = 0 days This means that next order for the replenishment of supplies has to be laced immediately. PROBLEM NO. 23 ‘Statement showing Stores Ledger (FIFO) Receipts Issues Balance, Date | Particulars -GyTRP.U | Amt Gly] RP.U] Amt [Oty [R.PU | Amt 1-402 [Opbalance [ - T= = - = = [too 5 500) IPCC _37e_Costing (Problems)_Printed Solutions__No.4 for CAICWA & MECICEC MASTER MINDS ) 700] 5] 500 54.02 | Purchases | 300| 6 | 1800] - : -|300] 6 | 1.800 700 |—s | 500 64.02 |_ Issues | - | - -| 150 | 8 | s00|150| 6 | 900 460] 8 | 900 24.02 | purchases |s00|_7 | 3500] - : -|s00|_7_| 3.500 70 | 6 | 500 | See “| 250 _|_7 | 1.750] 250|_7_| 1.750 260) 7 | 1750 124.02 | Purchases | 600| 8 _| 4s00| 5 -|600| 8 | 4800 alee 20 | 71750 a jesus) ea |e “| 250 | 8 | 2000] 350 | 2s | 2800 TSR | Shortage s0_| 8 | 400 | 300] 6 | 2.400 7200 3.200 Value of closing stock under FIFO method (300 units) Rs. 2,400. Value of Raw material consumed under FIFO method (1,200 units) = Rs. 8,200. Note: Shortage (Difference between physical & book balance) is assumed as normal loss. ‘Statement showing Stores Ledger (LIFO) Receipts Tssues Balance: Date | Particulars Toy TRP.U | Amt | Gy [RP.U[ Amt | ty] RPU | Amt 7402 | Opbalance | = | = r= =[100-[ 5 [500 100 | 5 | 500 54.02 | Purchases | 300| 6 | 1,800 - : =| s00 |__| 1.800 700 5] 500 e040 |icsues _|-_|_- -| 250 |G | 100 50 | 6 | 300 700 | 5] 500 so} 6 | 300 24.02 | Purchases | 500| 7 | 3500| Ny" - -| 500 |_7_| 3.500 Too | 5] 500 so} 6 | 300 10-4-02 | tssues - | - | P00 | 7 | 2000] 100 | 7 | 700 100 | 5] 500 so | 6 | 300 too} 7 | 700 124.02 | purchases |600| 8 | 4000] - | - =| 600 |__| 4800 Too |—s | 500 so} 6 | 300 too} 7 | 700 144-02 | Issues alls =| soo |e | 4000] 100] @ | 200 100 | 5] 500 so} 6 | 300 too} 7 | 700 15.402 | shortage | - | - -| so | 2 | «ol so] e@ | 40 7.200 3.700 Value of closing stock under LIFO method (300 units) = Rs. 1,900. Value of Raw material consumed under LIFO method (1,200 units) = Rs. 8,700. Statement showing Stores Ledger (Simple average in conjunction with FIFO) Date | particulars Receipts Tssues Balance GiyT RP.U | Amt | aty | RP.U_| Amt ary. "Ame 4402 | Opbatance| - | - - : 7 700 200 5-402 | Purchases [300[ 6 | 1.600] - : : 400 2.300 55 e402 | issues | - | - -| = | wmey| 1279] t2@Rs0 | 925 650 (160 @ Rs6 24.02 | Purchases | 500| 7 | 3500] - : “| so0@eRs7)_ | 442 IPCC _37e_Costing (Problems)_Printed Solutions, 45Ph: 98851 25025/26 ‘www.mastermindsindia.com 10-402] Issues | - | - =| 400 | wma) | 2.600| 260 260 @ Re7) | 1.625 12.4.02| Purchases [ooo] 8 | «sof - | - -[PRRaaRy [ans 75 14-402 | Issues - - ~| 500 | nig) | 3:750| 350 (350 @ Rss) | 2.875 18-402 | Shortage | - [= =| 50 é 400, 300) 2aTS 4,200 8.125 Value of closing stock under Simple average in conjunction with FIFO (300 units) = Rs. 2,475. Value of Raw material consumed under Simple average in conjunction with FIFO (1,200 units) = Rs. 8,125, ‘Step-1: Identify the lots out of which we issue. Step 2; Find out the Simple average of the above purchases, W. Naz 6-4-02 W. N-2: 10-4.02 W. Nea: 14-4-02 Si: Identity lots Si: Identify lots Si Identify lots 82250 Sx 400 S: 500 ¥ 7 ¥ ¥, odtoa Dl shetso 01450 Se 121802 @Rs5 — @RsG @Rs6 @Rs7 2 a Simple Avg. Price Simple Avg, Price Simple Avg, Price 546 ‘ ' = 228 ces 55 ST -Rs65 8. R575 2 2 2 Statement showing Stores Ledger (Weighted Average Method! eg eeaeeean | Rocolita Tssues Balance ay[RPU] Amt | ay [RPU] Amt |aty] RPU | Amt 14-02 | OP eae ee _ -| 100} 5 500 54.02 | Purch 300] 6 | 1,800 400] yeiey | 2300 urchases |e 7 Aue 64-02 | lecues amr =[ 250 [575 | 1aa75| 160] 575 | 9625 ert 84-02 | Purchases |500| 7 | 3500] - | - =| 650] ents) | 49518 70-4-02 | sues =a =[ ao [eri | 2680] 250| 671 | 16775 7.62 12-4-02 | Purchases |600] 8 | 4e00] - | - -| 250] wanes) | 8477 144-02 | esues ~[= =[ 300 | 762 | sero] aso] 762 | 2067 75-4-02 | Shortage | - | —~ =| 50 _| 762 381] 300] 7.62 | 2.286 7200 B5125 Value of closing stock under Weighted average (300 units) = Rs, 2,286 Value of Raw material consumed under Weighted average (1,200 units) = Rs. 8.312 waa W.N2 Wns rate =< OBAMOUNt +Receipt amount a4, _ 962.5+3500 par, _ 1.67754 4.800 Op quantity + Receipt quantity 150 +500 {600++ 250 = 500+1800 Rs.15,750 Expected wages under the new § ‘Standard hours (1,050 units + 4 units) 262.50 hours Expected hours tobe taken(45 hours *4 weeks) 180 hours Time saved 82.50 hours Time wages (180 hours x R650) Rs 9,000 ; ) Fs 2,062.50 Incentive 6 “Tin savedRS 50) 1 Total expected wages Rs.11,062.50 Loss from the proposed scheme (= Rs 4,687.50 ‘Supporting the demand of colleague workers will cost Rs.4,687.50 in the next month to Mr. K. PROBLEM NO. 23 Overtime is regular ‘Overtime is Irregular | | 0.T as per Customer request Direct Wages is inflated | | 0.T is treated as Overhead Charged to Job Calculation of labour cost and overhead to job z under different situation: Particulars Labour cost Overhead (VT. regular (125hrs X 11.7) (W.N- 2) 13,162.50 5 (OT. Irregular (1125 hrs X 10) 11,250.00 1082.50 [(100 X 7.5) + (25X 12.5)] (OT as per Customer request 12,312.50 5 (11250+1062.50) IPCC _37e_Costing (Problems)_Printed Solutions, 5Ph: 98851 25025/26 www.mastermindsindia.com Working note: 4. Normal wage rate = Rs.10 Normal days 0.T = 10x175% = = 175 Holidays and SundaysO.T = 10x225% = 22.5 2. Inflated wages 1,00,000x 10 = 10,00,000 20,000 x 17.5 = 3,50,000 5000 x 225 = 112.500 1,25,000 414,62,500 Rate/ hour = 14,62,500 /1,25,000 hours = 11.70 per hour PROBLEM NO. 27 Working Notes: (i) Calculation of no. of employees at the beginning and end of the year Atthe ‘At the end Beginning of | of the year the year Data Processors 540 1,560 Payroll Processors [Left- 60 + Closing- 40 - Joined- 20] 80 40 Supervisors" 30 90 Voice Agents* 30 30 ‘Assistant Managers* 20 30 ‘Senior Voice Agents 4 12 Senior Data Processors 8 34 ‘Team Leaders 60 0 Total 72 1,796 (*) At the beginning of the year: Strength of Supervisors, Voice Agents and Asst Managers = [772 - {840 + 80 + 4 + 8 + 60} employees] or [772 - 692 = 80 employees] (supers 8:2 20, Vee Agente 812-20 & Aes Mangas: 82 20) employes At the end of the year: [Supervisor - (Opening - 30 + 60 Joining) = 30] i) No. of Employees Separated, Replaced and newly recruited during the year 10; Voice Agents - (Opening - 30 + 20 Joined ~ 20 Left) Particulars ‘Separations New Replacement | Total Recruitment Joining Data Processors 60 1,020 60. 1,080 Payroll Processors 60 = 20, 20 ‘Supervisors: = 60. = 60 Voice Agents 20 = 20 20 Assistant Managers 10 10 10 20 Sr. Voice Agents - 8 = 8 Sr. Data Processors = 26 = 26 Team Leaders 60 = = = Total 210 4124 770 7,234 (Since, Corrs Consultancy Ltd. and its subsidiary are maintaining separate Personnel Department, so transfer-in and transfer-out are treated as recruitment and separation respectively.) IPCC _37e_Costing (Problems) _Printed Solutions_________6No.4 for CAICWA & MECICEC MASTER MINDS {a) Calculation of Labour Turnover: Replacement Method = Noof employeesreplaced during the year, 99 ‘Average no. of employees on roll 110 110 -_ US 100 =8.57% (72+1796)/2 4284 No of employees seperated during the year , 499 ‘Average no. of employees onroll Separation Method 210 <100= 16.36% (b) Labour Turnover under Flux Method: = No.of employees (joined + seperated) during the year 499 ‘Average no. of employees onroll _ No.of employees (replaced +new recruited-+ seperated) during the year 100 ‘Average no. of employees on roll 1234 +210 100 = 112.46% 7284 & Labour Turnover calculated by the executive trainee of th el department is incorrect as it has not taken the No, of new recrutment while calculating thed@Sey turnover under Flux method Output by new recruits = 60% of 5,000 = 3,000 units Loss of output = 5,000 ~ 3,000 = 2,000 units Total loss of outpu = 10,000 + 2,000 = 12,000 units Contribution per unit = 20% of Rs.180 = Rs, 36 Total contribution lost = Rs.36 x 12,000 units = Rs, 4,32,000 ,000 units * 0,2 x Rs, 25 = Rs. 15,000 Due to delay recruitment + Due to inexperience Cost of repairing defective units = Profit forgone due to labour turnover (Rs) Loss of Contribution 4,832,000 Cost of repairing defective units 15,000 Recruitment cost 1,86,340 Training cost 1,138,180 Settlement cost of workers leaving 1,83,480 Profit forgone in 2014-15 9,00,000 Calculation of total contributior Contribution = Sales X piv ratio. = 83,03,300 X 20% = 16,60,660 IPCC _37e_Costing (Problems) _Printed Solutions___Ph: 98851 25025/26 www.mastermindsindia.com Calculation of productive hours: No. of hours worked 445,000 (Clunproductive hours due to Taining (80,000 hr x 50%) (15,000) Production hours: 4730000 Calculation of total unproductive hours: (a) Hours lost due to training = 15,000 {b) Hours lost due to delayed replacements = 4,00,000 41,15,000 Contribution forgone = 4,44,130 [4,30,000 hrs -16,60,660 [1,15,000hrs-- 7 Calculation of labour turnover cost: Contribution forgone (profit forgone) = 4,44,130 (+) settlement + recruitment + selection + training costs = 43,820 + 26,740 + 12,750 + 30,490 Total = 5,87,930 ‘Assuming that if 15,000 hrs due to training has been included in 1,00,000 hrs so that '4;30000hr ~16,60,660 Contribution forgone | 1 Cobre — 2 =3,86,200 Total labour turnover cost = 4,44,130 + 43,820 + 26,740 + 12,750 + 30,490 = 557,930 PROBLEM NO.31 1. Present average output per employee and total future expected output per week: TotalPresentoutput Present average output per employees per week= —_—__TofeiPresentoutput _ Totalnumber of Pr esentemployees = 48000unitS —_ 599 Units TE0employees Total Future expected output per week = Total number of future employees. = (present output + 60% of present output per employee) = 120 employees (300 units + 60% *300 units) 2. Present and proposed piece work rate: Present piece work rate = Rs. 1.00 per unit, Proposed piece work rate = Present piece work rate + 30% * Rs. 1 =Rs.1.00 +0.30P = Rs, 1.30 per unit 3. Present and proposed sale price per uni Present sales price per unit (Rs. 6,00,000/48,000 units) = Rs. 1250 Proposed sale price per unit (Rs. 12.50 ~ 4% x Rs.12.50) =Rs. 12 4, Present marginal cost (excluding wages) per unit : Presentsales value ~Fixedexpenses& Profit -Contributionontowardspresent wages Presentoutput (units) = R8600.000-Rs240000-RS48000 _ 26 6 50 per unit 4,000 units IPCC _37e_Costing (Problems)_Printed Solutions, 8No.4 for CAICWA & MECICEC MASTER MINDS ‘Statement of extra weekly contribution (information resulting from the proposed change of mechanization meant for Board's evaluation) Particulars ‘Amount | Amount (Rs.) (Rs.) Expected sales units(Refer to Working note 1) 57,600 units Sales value :(A) (57,600 units *Rs.12\(Refer to Working note 5) 691,200 Marginal costs (excluding wages): (B) (57,600 units *Rs.6.50)(Refer to Working note 4) 3,74,400 [Wages : (C) (57,600 units « Rs. 1.90)(Refer to Working note 2) 74880 Total marginal cost :(D) = ((B) - (C)} 449,280 Marginal contribution | ((A) = (D)} 241,920 Less : Present contribution 2,40,000 Increase in contribution (per week) 1,920 Evaluation: Since the mechanisation has resulted in the increase of contribution to the extent of Rs. 1,920 per week, therefore the proposed change should be accepted. We have examined the advantages and disadvantages of various methods of remunerating labour, so we can summarise below that the best method of remuneration can be adjudged through the following points: a) Aminimum wage should be guaranteed to all workers. Ss b) Efficient workers are given incentives in the form of ‘so that they can work harder and produce more. AA share in profits of the firm is given to workers in i ‘the minimum wages and bonus, PRI 0.33 Given that production per week = 7,200 uni ‘Statement showing calculation of No. of operators, cost per dozen and earnings per week: TotaTime | No.of | wage | Tota | babour Operation | Time required | Required Operators | Rate | _WA9°S | per dozen nae per article Pb) [perteur| = Xa) i (ao) @ 7 Ten = TS Tre} 1.85 2 ca 2 050 500 2.50 3 Tomin 30 0.40 20] 0.00 a an 30 035 7250[ 210 : rami 60 0.30 Tao 120 Total 300 AsB130| Bs. 8.58 4. OVERHEADS PROBLEM NUMBERS TO WHICH SOLUTIONS ARE PROVIDED 5.6,7,13,17,20.22,26 PROBLEM NO.5 Overhead Distribution Statement Production Departments | Service Departments. Machine Packing General ‘Stores ‘Shops Plant Allocated Overheads: (Rs) (Rs) (Rs) (Rs.) Indirect labour 8,000 6,000 4,000, 11,000 Maintenance Material 3,400 1,600 2,100 2,800 Misc. supplies 4,500 2,900 900. 600 ‘Supervisor's salary = 16,000 = IPCC _37e_Costing (Problems) _Printed Solutions___Ph: 98851 25025/26 www.mastermindsindia.com Cost & payroll salary = = ‘80,000 S Total allocated overheads 12,900 70,500 7,03,000, 14,400 “Add: Apportioned Overheads 7,84,350 70,125 22,775 73,150 (As per Schedule below) 797,250 80,625, 7.25775 87.550 ‘Schedule of Apportionment of Overheads Production Departments | Service Departments Item of Cost Basis Machine General ‘shops Packing pane Stores Power HP hours 54,600 7,800 =| 15.600 74:2) Rent Floor space 30,000 72,000 6000] 24,000 6:2:4:4 Fuel & Heat Radiator sec. 72,000 24,000 @000| 16,000 @:6:2:4 Tnsurance Investment 7500 2,250 750 7,500 (10:3:1:2 Taxes Investment 5250 1575 25 7,050 (10:3:4:2 Depreciation Investment 75,000 22,500 7,500 | 16,000 (10:3: 4:2) 1,84,380 70,125 22,775 | __ 73,180 Re-distribution of Overheads of Service Departments to Product Departments: Let, the total overheads of General Plant = ‘a’ and the total overheads of Stores = ‘b’ (25,775 +0.3b (o 17,550 + 0.2 (iy Putting the value of ‘b’ in equation no. (i) a= 1,25,775 +0.3 (87,550 + 0.2a) Or 25,775 + 26,265 + 0.06a 0r0.94 a= 1,52,040 Ora = 1,61,745 (appx.) Putting the value of a = 1,61,745 in equation no. (i) to get the value of by 7,550 + 0.2 * 1,61,745 = 1,19,899 Secondary Distribution Summary Particulars Total Machine Shops Packing (Rs.) (Rs.) (Rs.) Allocated and Apportioned 277,875 1,97,250.00 180,625.00 overheads as per Primary distribution = General Plant 1,61, 7455 3-2) 80,872.50 48,523.50 = Stores 4,19,899 159,949.50 23,979.80 (1,19,899 x 50%) |_(1,19,899 x 20%) 3,38,072.00 153,128.30 ROBLEM NO.6 i) Statement showing the allocation of support department costs to the sales departments (using the Direct Method) Particulars Basis of ‘Sales department ‘Support department allocation |“ Corporate | Consumer | Administrative | Information sales sales (Rs.)| systems (Rs) (Rs) (Rs) Cost incurred 12.97,751 | 636,818 94510 | 304,720 Re-allocation of cost | Number of 36,708, ‘37,804 (24,510) — of administrative | employees department (6:4=-) IPCC _37e_Costing (Problems)_Printed Solutions. 10No.4 for CAICWA & MECICEC MASTER MINDS Re-allocation of | Processing | 1,68.211] 1,38,609 costs of information | time systoms department | (6:5: (04,720) Total 75,20,668 | _8,13,131 ii) Ranking of support departments based on percentage of their services rendered to other support departments, 21x100_) 42428421) information systems support department. Thus 23.077% of Rs. 94,510 = Rs.21,810. 400 2,400 +2000 +400 services to Administration support department. Thus 8.33% of Rs,3,04,720 = Rs, 25,383. lll) Statement showing allocation of support costs (By using step-down allocation method) > Alminiseaton support department provides, 23077%, [ ot its services to 100] of its > Information system support department provides 6.33% ( Particulars Basis of | Sales department Support department allocation | Corporate | Consumer | Administrative | Information sates | sales (Rs) systems (Rs) | (Rs) (Rs) Cost incurred 1297,751| 6.36818 94510 | 304,720 Re-allocation of cost of | Number of 43,620 Sa (04,510) 21,810 Rr Sane & department (64=-) SS Re-allocation of costs | Processing of information systems | time department (65 % 148,423 =| 26530) Total p5,19,478 | 814,321 ‘An alternative ranking is based on the rupee amount of services rendered to other service departments, using the rupee figures obtained under requirement (li) This approach would use the following sequence of ranking. > Allocation of information systems overheads as first (Rs.25,383 provided to administrative). > Allocated administratve overheads as second (Rs.21,810 provided to information systems), iv) Working notes: > Percentage of services provided by each service department to other service department and sales departments, Particulars Service departments Sales departments ‘Administrative | Information Corporate ‘Consumer system ‘sales sales Administrative = 23.08% 46.15% 30.77% Information 8.33% = 50% 41.87% system > Total cost of the support department : (By using simultaneous equation method) Let AD and IS be the total cost of the support departments administrative and information systems respectively, These costs can be determined by using the following simultaneous equations. AD = 94,510+0.08331S Is 04,720+0.2308 AD Or, AD = 94,510 + 0.833 {9,04,720+0.2308} Or, AD 4,510 + 25,893 + 0.01922AD IPCC _37e_Costing (Problems)_Printed Solutions. 41Ph: 98851 25025/26 www.mastermindsindia.com Or, AD 1,22,243 AndIS = 3,32,934 Statement showing the allocation of support department costs to the sales departments (using reciprocal allocation method) Particulars Sales departments Corporate sales | Consumer sales Costs incurred 12,97,751 636,818 Re- allocation of cost _administrative 56,427 37.614 department(48.16% and 30.77% of Rs.1,22,243) Re — allocation of costs of information systems 1,066,467 1,328,734 department(50% and 41.67% of Rs.3,32,934) Total 15,20,645 8,13,166 ROBLEM NO.7 Calculation of Total Cost of Job — X using different methods of Recovery of Overheads: Direct Direct Direct Labour | Machine Particulars | Material Prime Cost] Output | Material lateral | Labour Cost eos) | Hour | Hour Direct Material] 45 45 45 45 45 45 45 Direct Wages} 50 50 50 50 50 50 50 Prime Cost 95 95 95 95 95 95 6 ladd: Factory 90 75 82 64 120 90 60 Overhead] (yn-1) qwn-2) | wns) | cwn-4) | cwnes) | wns) | cwn-7) (46x00) (soxts0%) | (esxeer) | 2x2] (20x6) |15xB)_ | @OX2) eer oe 185 170 177 159 | 216 185 155 Job X Working Notes: Calculation of Factory Overhead Recovery Rate and Factory Overhead in each case: W.N | OHRR on the Basis of Calculations ‘Overhead Recovery Rate EOH _ 300,000 1. | Direct Material Cost (D.M.C) 100 | = 200% of Direct Material Cost DMC" 150000 “ EOH 300000, 99 DLC 200,000 300,000 C 350,000 OH 300000 output” #50000unes EOH_ 300000 “RM” 50000K98 Eon 400000 2. | Direct Labour Cost (D.L.C) = 180% of Direct Labour Cost 3. | Prime Cost (P.C) x 100. | = 86% of Prime Cost 4. | Output = Rs. 2 per unit 5. | Raw Material (in Kg's) (RM) = Rs. 6 per Kg of Raw Material 6. | Labour Hours (LH) = Rs. 6 per Labour Hour 7 [wactine Hourequny | EH B00800 Ta. sper acne Ho Note: £.0.H stands for Estimated Overhead and OHRR for Overhead Recovery Rate. Copyrights Reserved To MASTER MINDS, Guntur IPCC _37e_Costing (Problems)_Printed SolutionsNo.4 for CAICWA & MECICEC MASTER MINDS PROBLEM NO.13 i) Amount of under absorption of production overheads during the period of first six months of the year 2013-2014: ‘Amount | Amount (Rs.) (Rs.) ‘Total production overheads actually incurred during the period 6,79,000 Less: Amount paid to worker as per court order 45,000 Expenses of previous year booked in the current year 10,000 ‘Wages paid for the strike period under an award 42,000 ‘Obsolete stores written off 18,000 | __1,16,000 564,000 Less, Production overheads absorbed as per machine hour rate (48,000 %,04,000 hours x Rs.10,50*) ‘Amount of under absorbed production overheads 0,000 Rs.10.08000 Budgeted Machine hour rate (Blanket rate) = => =Rs.10.50 per hour iil) Accounting treatment of under absorbed production overheads: As, one fourth of the under absorbed overheads were due to defective production policies, this being abnormal, hence should be debited to Costing Profit and Loss Account. ‘Amount to be debited to Costing Profit and Loss Account = (S€QH0 * 1) Rs. 15,000, Balance of under absorbed production overheads sho, istributed over Works in progress, finished goods and Cost of sales by applying suppler te" Amouta be dieibuind » (23,000 °H) Res ORG). Rs. 45000 1.50 Supplementary rate = RS.45,000 a u 30,000 units ili) Apportionment of under absorbed pr overheads over WIP, Finished goods and Cost of sales: Equivalent “Amount completed units (Rs.) Waork-in-Progress (16,000 units » 50% 1,50) 8,000 12,000 Finished goods (4,000 units 1.50) 4,000 6,000 Cost of sales (18,000 units = 1.50) 78,000 27,000, Total "30,000 ‘45,000 PROBLEM NO.17 Installed capacity 1,50,000 per annum. Per month capacity 1,50,000 = 12 = 12,500 units 75% for 3 months (12,500 X 3X 75%) 28,125, 180% for 6 months (12,500 X 6 X 80%) 60,000 90% for 3 months ( 12,500 X 3 X 90%) 33,750 Total production 121,875 Labour cost: For 3 months (Rs. 2,81,250 or Rs. 3,00,000) 3,00,000 Whicherver is higher For 6 months 6,00,000 For 3 months 337,500 Copyrights Reserved Labour cost 12,37,500 To MASTER MINDS, Guntur Semi - variable costs: Rs.60,000 P.A. 75% capacity utlization ie, Rs. 5,000 P.M, IPCC _37e_Costing (Problems)_Printed Solutions, 13Ph: 98851 25025/26 www.mastermindsindia.com For 1" 3 months 15,000 For next 6 months (5,000 X 6 = 2,000) 32,000 For next 3 months (5,000 X 3 + 3,000) 18,000 65,000 Calculation of Selling Price: Total production 4,21,875 Material (1,21,875 X 10) 12,18,750.00 Labour 12,37,500.00 Overhead (1,21,875 X 4) 4,87,500.00 Fixed Overhead 1,92,300.00 Variable overhead 65,000.00 32,01,050.00 Add: Profit (20% on S.P.) 8,00,262.50 (ie. 25% on cost price) 40,01,312.50 Selling price/unit = 40,01,312,50/1,21,875 32.83% unit PROBLEM No.20 ‘Step-1: Computation of Total available machine hours (per annum). Particulars Calculations Hours Normal avallable hours per month 208 Less: Absenteeism 18 Less: Leave 20 Less: Normal loss-le time 10 ‘Available machine hours per month per machine 160. Total available machine hours (per annum) T60x6 machines x 12 months | 17,520 Step-2: Cost statement per annum - for 8 machines Particulars Calculations [ Amount (Rs.) Repairs (3% on value of machine) 8,00,000 X 3% 24,000 Insurance 40,000 Depreciation 800,000 X10% 80,000 ‘Sundry works expenses 12,000 General management expenses 54,530 Power B050X2 76.100 ‘Supervision & indirect labour 3,200K2, 6,600 [Lighting & electricity 4,200X2 2,400) ‘Wages WNT 34,200 Production Bonus 34,.200X15% 5130 Total 274,960 Machine hour rat (274,960) lachine hour rate (Figs Jose W.N-1: Computation of wages: Particulars Calculations Hours ‘Available working hours 208 Less: Absenteeism 18 Paid hours per month 7190 Total paid hours per annum (190X6 operators X 12 Months) 73,880 13,680 Hrs. Rs. 34,200 Wages paid to workers per annum (Sgs0Ht xes20) 8Hrs. Assumption: Given working hours are per month per machine IPCC _37e_Costing (Problems)_Printed Solutions. 14No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM HO.22 Working Note: 1. Effective machine hour when set-up time is unproductive: Budgeted working hours ~ (Maintenance time + Setting-up time) [2,592 - (300 + 92)] hours, = 2,200 hours 2. Effective machine hour when setup time is productive: = Budgeted working hours ~ maintenance time = (2,682 - 300) hours. = 2,292 hours. 3. Operators’ wages per annum Basic wages (4 operators x Rs.420 x 54 weeks) = Rs. 90,720 Ada: Fringe benefits (15% of Rs.90,720) = Rs 13,608 = Re.1,04,328 4. Depreciation per annum ecaeacran ieee = Rs. 1,00,000 5. Cost of special chemical solution 324 days 6 days xRs. 400 = Rs. 21,600 Computation of Machine h@&r Rate ‘Amount per | Amount per hour (Rs.) hour (Rs.) Particulars (when set-up | (when setup time is time is unproductive) | productive) landing charges Operators wages (Rs104328 1) (machines * 2200hours | oe (Rs104928 1) 5.69 ( Smachines * 2292hours } Departmental and general overhead 55,000 (60,000 x 110%) (_Rs.55000 1 | Bmachines “2,200hours } ae ( Rs'55,000 fies) 3,00 (Bmachines “ 2262hours ®& 145,720 9:06 869 Machine Expenses 7,00,000 Depreciation { R's1,00,000 ) / Rs. 100,000 ) 45.45 43.63 \2200hours /|2292hours ) Electricity (16 units - Re) 48.00 48.00 ‘Special chemical solution 21,600 (_Rs.21600 i Rs.21600 ) 9.82 9.42 (Zztohours }2zszhours Maintenance 725,000 (_Rs.25,000 i Rs.25000 ) 11.36 10.91 (Zztonours }(2ziznous ® 114.63 | 111.96 Machine Hour Rate (A+B) 123.69 120.65 IPCC _37e_Costing (Problems)_Printed Solutions, 15Ph: 98851 25025/26 i) Effective hours for standing charges (208 hours ~ 8 hours) www.mastermindsindi com PROBLEM NO.26 200 hours* ll) Effective hours for variable costs (208 hours ~ 28 hours) = 180 hours*™ 2. Standing Charges per hour Cost per month ‘Cost per hour (Rs.) (Rs.) (Cost per month + 200 hours) 26000 2000 10.00 Supenisors salary{ 882022) Smachines ) 7,000 500 Rent of building| 1x 8872000 months General lighting 7,000 500 Total Standing Charges 4,000 20.00 3. Machine running expenses per hour Cost per month Cost per hour (Rs) (Rs) Depreciation “4,000 7 Re. 4000 (Rs(5.00000-20000), 1 20.00 | sohaurs, tOyears Tamonths Wages 2500 / Ra2500 ) ag 1280{ £22500 ) | 200hours } Repairs & Maintenance 5040 7 Ra5040) Rs.60,480 ) 28.00) - eohours } {2months ) f 3960 7 y Consumable stores (847520 22,00 #83960. (12months | te0hours ) Power (25 units *Rs.2 * 160 hours 3,000 50,00 Total Machine Expenses 24,500 132.50 Computation of Two - tier machine hour rate Set up time rate Running time rate per machine hour per machine hour (Rs.) (Rs.) ‘Standing Charges 20.00 20.00 Machine expenses Depreciation 20.00 20.00 Repair and maintenance = 28.00 ‘Consumable stores = 22.00 Power Si 50.00 Machine hour rate of overheads 40.00 140.00 Wages 12.50 12.50 ‘Comprehensive machine hour rate 52.50 152.50 5. MARGINAL COSTING PROBLEM NUMBERS TO WHICH SOLUTIONS ARE PROVIDED: 2, 11,18, 26, 27, 28, 29, 36, 37, 39 Working Notes (segregation of Cost) PROBLEM NO. 2 Total Variable Fixed Material 210000 210000 = Labour, 150000, 720000, 30000 Factory Overheads ‘92000 ‘55200 36800 IPCC _37e_Costing (Problems)_Printed Solutions. 16No.4 for CAICWA & MECICEC MASTER MINDS ‘Administration Expenses: “40000 74000, 26000, Total Cost “482000 "399200 ‘92800 (i) Computation of sale price per bottle: ‘Commission. 8% of sales Profit 70% on sales, ‘Commission including profit 18% on sales, Hence total cost is 82% (100%-18%) of sales So, sales 92,000 2° =Rs 6 00,000 600000 ‘Therefore, sales price per bottle 6. 15 ‘49000 (ii) Variable Cost = 392200 = Rs, 9.98 per bottle ‘40.000 ‘Add: Commission 8% of 14.00 = Rs.1.12 per bottle Variable Cost 's.11.10 per bottle Contribution = 14.00-4110 = 8.2.90 per bottle Break Even Point (Qty,) does a) Current selling price = 700 lakh: Variable cost per unit = 440 lakhs/ 80000 units = Rs. 1100 per unit Revised selling price = 1750 + 10% = Rs, 1925 per unit Contribution per unit selling price ~ variable cost = 1925 - 1100= Rs.825 New volume 40000 ~ 10% = 36000 units Profit = (No. of units x contribution per unit) — fixed cost = (36,000 x 825) ~ 202.5 lakhs = 945 lakhs b) Budgeted Material cost = 264 lakhs! 40000 units = Rs. 660 per unit New variable cost = variable cost + increase in material cost = 1100 + 254laks F100 Tg 10% = 1100 + 66 = 1166 Per unit Contribution per unit = selling price ~ variable cost 1750 — 1680 = 584 Sales volume required to maintain same amount of profit _ Fixedcosts+Profit _202.50lakhs+57.50lakhs, © ContributionPer Unit Rs5e4 = 44,521 units Copyrights Reserved To MASTER MINDS, Guntur IPCC _37e_Costing (Problems)_Printed Solutions. 17Ph: 98851 25025/26 www.mastermindsindi com PROBLEM NO.18 a) Suppose sales units are x then S=V+F+P S= Sales V= Variable Cost F = Fixed Cost P= Profit 20x = 15x + 6,30,000 + 2x 20x - 17x = 630,000 30000 3 Sales value = 2,10,000 * 20 = Rs.42,00,000 b)_ Sales price to down BEP 1,20,000 units aX 10,000 units s-v+__* NEWBEP 630,000 a 8-15 "720,000 8.20.26. ¢) MOS Sales =— Pott, 60000 whore pry © x10. PiVRatio | P/V s 5 OF, X100 = 25% 1 $2000 5199 - 2.40000 25 PROBLEM NO.26 Calculation of Overall Break Even Poi Particulars a 5 c D Total — 20,000 25,000 70,000 5000 | 60,000 (33:33%%60k) | (41.67%x60K) | (16.67%x60K) | (8.33%x60K) Less: Variable cost | 12,000 17,000 8,000 2000 | 39.999 (60%) (60%) (68%) (60%) (40%) d Contribution (40%) 8,000 8,000 2,000 3,000 | 21,000 Profit Volume Ratio 40% 32% 20% 60% 35% Total contributi 20,000 Combined Profit Volume Ratio = “= contibition 20.0 = Total sales 60,000 : Total Fixed Cost 14,700 _ Overall Break Even Point = aes = gang = ReA4z.000 Alternative to find Combined Profit Volume Ratio: Product Profit Volume Ratio (a) Weights o(axb) (Based on Sales) (b) A oy 4 760 B 32 5 160 c 20 2 40 D 6, 1 60 Total 72 420. Combined Proft Volume Rato = “22 x100 = 26% IPCC _37e_Costing (Problems)_Printed Solutions, 18No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM NO.27 Working Note: 1) Calculation of Cost of Goods Sold (COGS): COGS = {(DM- 0.3 COGS) + (DL- 0.15 COGS) + (FOH- 0.10 COGS + Rs. 2,30,000) + (G&AOH- 0.02 COGS + Rs. 71,000)} or cogs 0.57 COGS + Rs. 3,01,000 or cogs = 321000 _ 799409 0.43 ii) Calculation of Cost of Sales (COS): COS = COGS + (S&DOH- 0.04 COS + Rs. 68,000) Or COS = Rs. 7,00,000 + (0.04 COS + Rs. 68,000) 7,68,000 0.96 iii) Calculation of Variable Costs: Or cos =8,00,000 Direct Material = (0.3 * Rs 7,00,000) Rs. 2,10,000 Direct Labour -(0.15 * Rs 7,00, Rs. 1,05,000 Factory Overhead -(0.10 * Rs 7, Rs. 70,000 General & Administration OH Rs.14,000 Selling & Distribution OH Re. 32,000 Rs. 4,31,000 iv) Calculation of total Fixed Costs: General & Administration OH - Rs. 71,000 Selling & Distribution OH - Rs_ 68,000 Rs. 3,69,000 v) Calculation of P/V Ratio: PIV Ratio = Contribution 444 _ sales—variablecost 95 sales sales (Rs.185x 5,000units)-Rs.4,31,000 185x5,000units * Break evensales= ‘edcost _R8362000 _Re gon ge2 P/Vratio 53.41% ‘© Profit earned during the last year = (sales Total variable cost) — total fixed costs = (Rs. 9,25,000 - Rs, 4,31,000) - Rs. 3,69,000 Rs. 1,25,000 Sales-BreakEvenSales Sales Rs.9,25000-Rs6.90882 = x100=25.31% Rs9,25,000 x100 = 53.41% © Margin of safety (96) = 400 ‘* Profit if the sales were 10% less than the actual sales: Profit 90% (Rs.9,25,000 - Rs, 4,31,000)~Rs, 3,69,000 = Rs. 4,44,600 — Rs. 3,69,000 = Rs. 75,600 IPCC _37e_Costing (Problems)_Printed Solutions. 19Ph: 98851 25025/26 www.mastermindsindia.com PROBLEM NO.28 Calculation of Profit made in the month of August 2014 by selling 14,000 units, ‘Amount per unit, ‘Amount (Rs.) (Rs.) ‘Sales revenue 18.00 252,000 Less: variable cost = Direct material 8.00 112,000 = _ Direct labour 3.50 49,000 = Variable overhead 2.50 35,000 Contribution 4.00 56,000 Less: fixed overhead 2.00 28,000 Profit 2.00 28,000 i) To maintain the same amount of profiti.e. Rs. 28,000 in September 2014 also, the company needs to maintain a contribution of Rs. 56,000. Let, number of units to be sold in September 2014 is %’, then the contribution will be Re. 18x-[(RSB x 1.10) + Rs. 35+ (Rs. 25 %*1.05)]x = Re. 66,000 Re. 18x~ (Rs. 88 + Rs. 35 + Rs. 2625) x = Rs, 56,000 _ 8.56000 _ Orx = RSSEOG0 19,211.98 units or 16,212 units, Ii) Margin of Safety August 2014 September 2014 Prof RS, 28,000 Re. 28,000 PIV Ratio 400 RS3075 . 499 18 R18 Rs.1,26,000 Rs.1,63,902 Margin of Safety —PTOmt_ 28,000 148 100 28000 48 100 PiNratio 400 307.5 OBLEM NO.29 1. Total sales = Break even sales + margin of safety 's. 400 crores + Rs. 120 crores Rs, 520 crores ‘otal sales x (1 - piv ratio) s. 520 crores x (1-0.30) Rs, 364 crores 3. Fixed cost = Break even sales x piv ratio = Rs. 400 crores x 30% = Rs. 120 crores = Total sales ~ (Variable cost + Fixed cost) = Rs.620 crores ~ (Rs. 364 crores + Rs.120 crores) = Rs, 36 crores ()) Revised sales figure to eam profit of Rs. 56 crores (Ie., Rs.38crores + Rs. 20 crores) 2. Variable cost 4. Profit Revised sales = Revised fixed” cost +Desiredprofit RevisedP/Vratio™* Re.185crores +R 56crores 28% = Rs, 860.71 crores 20 IPCC _37e_Costing (Problems)_Printed Solutions,No.4 for CAICWA & MECICEC MASTER MINDS “Revised fixed cost = present fixed cost + increment in fixed cost + interest on additional capital Rs. 120crores + Rs. 50 crores + 15% of Rs. 100 crores =Rs. 185 crores, “ Revised piv ratio: let current selling price per unit be Rs. 100 Therefore, reduced selling price per unit = Rs.100 x 90% = Rs.90 Revised variable cost on sales = 70% + 2% = 72% Variable cost per unit = Rs. 90 x 72% = Rs.64.80 Copyrights Reserved Contribution per unit = Rs 90 - Rs.64.80 = Rs. 25.20 TOMASTER/ MINDS Cun Revised piv ratio = COmMBULION 49 _RS25.20 499 _a0y sales ) «Revised break even sales = Fede08t 49. Re185crores plvratio 28% © Revised piv ratio = 28% (as calculated above) © Revised margin of safety = total sales — break even sales Rs, 860.71 crores - Rs. 660.71 crores Rs, 200 crores. S OBLEM NO.3B SS a) Marginal cost statement for Machine A and Machi Particulars Machine A Machine B a. Fixed Cost ¢ 30,000 18,000 b._ Profit S 0,000 22,000 ‘¢._ Contribution (@ +B) 60,000 40,000 d._ Sales (10,000 X 10) 7,00,000 7,00,000 @._ Profit Volume Ratio (e/a) 60% 40% 1. Break Even Sales (Value) (a/e) 50,000 45,000 @._Break Even Sales (Units) (ffs 10) 5,000 4,500 b) Let the indifference point be °X’ units Particulars Machine A Machine B Variable Cost Per Unit (Selling Price X 1- Profit Volume Ratio) Rea Ree Cost equations ‘ax + 30,000 x + 18.000 = 4x +30,000 6x + 18,000 x = 6,000urits ‘At the volume of 6,000 units both machines would earn same profits. ) Range of sales: Upto 6,000 units ~ The machine with low Fixed Cost i.e. Machine ‘B! More than 6,000 units ~The machine with low Variable Cost ie. Machine ‘A’ PROBLEM NO.37 {a) Statement of Profit under Absorption Costing Particulars ‘April (Rs.) May(Rs.) [June (Rs.) Sales (units) 4,200 4,500, 5,200 Selling price per unit 2,050 2,050 2,050 Sales value (A) 86,10,000, 92,25,000 | 1,06,60,000 Cost of Goods Sold IPCC _37e_Costing (Problems)_Printed Solutions. 21Ph: 98851 25025/26 www.mastermindsindia.com ~Opening Stock @ Rs 1,480 0 592,000 4,44,000 = Production cost @ Rs.1,480 168,08 000 65,12,000 | ~ 81 40,000 = Closing Stock @ Rs.1,480, (5,92,000) (444,000) | ~~ (6.88,000, = Under! (Over) absorption 40,000 60,000 (50,000) ‘Add: Fixed Selling Overheads 95,000 95,000 95,000 Cost of Sales (B) 63,51,000 68,15,000__ | _77,41,000, Profit (A ~ B) 22,58,000 24,10,000 | 29,19,000 Workings: 1. Calculation of full production cost Direct Materials (4 kg. * RS. 120) 280) Direct labour (6 hours * Rs. 60) 360, Variable production Overhead (150% of Rs. 360) 540 Total Variable cost 1,380 Rs 600,000 100 Fixed production overhead = 8S.89,00.000 ixed production overhead = FESO 7480 2. Calculation of Opening and Closing stock April Rs.) [May (Rs.) June (Rs.) Opening Stock 0 400, 300 ‘Add: Production 4,600 4,400 5,500 Less: Sales 4,200 4,500 5,200 Closing Stock 400 300 600 3. Calculation of UnderiOver absorption of fixed production overhead ApHIT(RS) May (RS) Tune (RS) ‘Actual Overhead 5,00,000, 5,00,000, 5,00,000 Overhead absorbed 4,60,000 440,000 5,50,000 (4,600 units « (4,600 units «| (4,600 units x Rs. 100) Rs.100) Rs.100) Underi(Over) absorption 40,000 60,000 (60,000) (b) Statement of Profit under Marginal Costing Particulars April(Rs.) [| May(Rs.)_| June (Rs.) ‘Sales (units) 4,200 4,500 5,200 Selling price per unit 2,050 2,050 2,050 Sales value 86,10,000[ _92,25,000 | _1,06,60,000 Less: Variable production cost 57,96,000| _62,10,000 | _71,76,000 Contribution 28,14,000 | 30,15,000| _34,84,000 Less: Fixed Production Overheads 5,00,000 5,00,000 | 5,00,000 “Less: Fixed Selling Overheads 96,000 95,000 96,000 Profit 22,19,000| _24,20,000 | 28,88,000 {c) Reconciliation of profit under Absorption costing to Marginal Costing Particulars ‘April (RS.) May (Rs.) June (RS) Profit under Absorption Costing 22,59,000 24,10,000 29,19,000 (Add: Opening Stock 0 40,000 20,000 (400 x Rs. 100) | (300 x Rs, 100) Less: Closing Stock 40,000 30,000 60,000 (400 «Rs. 100) | (300 x Rs. 100) | (600 « Rs. 100) Profit under Marginal Costing 22,19,000 24,20,000 28,89,000 IPCC _37e_Costing (Problems)_Printed Solutions 22No.4 for CAICWA & MECICEC MASTER MINDS (i) Computation of Unit Cost & Total Income Unit Cost ‘Absorption | Marginal Costing Costing (RS) (RS) Direct Material 16.00 16.00 Direct Labour 54.00 4.00 Variable Overhead (Rs.12+RS.20 000/24 000) 1283 12.83 Fixed Overhead 18.00 = Unit Cost 00.83 283 Income Statements Absorption Costing (Rs.) Sales (27,500 units x RS 168) 36,12,000, Lass: Cost of goods sold (Refer the working not) 21,19.917) 14,92,083 Lass: Selling & Distibution Expenses 77,90,000) Profit 3,02,083 Marginal Costing Re) Sales (as above) 36,12,000, Less. Cost of goods sold (Refer the working Raid) (17,80,917) 18,31,083 Tess: Selling & Distribution Expenses 4,30,000) Contribution 14,07,083 Less: Fixed Factory and Selling & Distribution Res (11,44,000) (RS.3,84,000 + RS.7.60,000) Profit € 257085 il) Under or over absorption of overheads Fixed Overhea (Rs) Budgeted (RS.6 x 72,000 hours) 4,32,000 ‘Actual (RS.4,32,000 - RS.48,000) 384,000, Over-absorption 48,000 Variable Overhead: (Rs) Budgeted (Rs.4 x 72,000 hours) 2,88,000 ‘Actual (RS.2,88,000 + RS.20,000) 3,08,000 Under-absorption 20,000 Reconciliation of Profit: Difference in Profit: RS.3,02,083 - RS. 2,57,083 = RS.45,000 Due to Fixed Factory Overhead being included in Closing Stock in Absorption Costing not in Marginal Costing, ‘Therefore, Difference in Profit = Fixed Overhead Rate (Production ~ Sale) = Rs.18 (24,000 - 21,500) = Rs.45,000 Working Note: Calculation of Cost of Goods Sold ‘Absorption Marginal Costing Costing Direct Materials (RS.16 * 24,000) 384,000, 3,84,000 Direct labour (RS.54 « 24,000) 12,96,000 2,96,000 Variable OH(RS.12 x 24,000 + RS.20,000) 3,08,000 '3,08,000 Fixed Overhead (RS.18 24,000) 4,32,000 ei 24,20,000 719,88,000 (Add: Opening stock 5 = IPCC _37e_Costing (Problems)_Printed Solutions, 23Ph: 98851 25025/26 www.mastermindsindia.com Teas: Closing Stock(24 000-27 500) B20) 2.07 083) (Rs: RS1988000 "24000 units } (zao00units “2600 Uts Cost of Goods Produced 21,67.917 T7097 Add: Adjustment for over / under absorption (48,000) - (Cost of Goods Sold 21.19.917 T7BOSIT PROBLEM NUMBERS TO WHICH SOLUTIONS ARE PROVIDED 5, 13, 15, 18, 25 ROBLEM NOLS Material |___SQ°* SP AQ xSP AQ x AP RSQ SP Vita-X Rs. 2,75,000 Rs. 3,30,000 Rs. 3,45,000 Rs.2,62,460 (2,500 kg. * Rs. 110) | (3,000 kg. x Rs.110) | (3,000 kg. * Rs. 115) | (2,386 kg. * Rs. 110) Promo |. Rs. 480,000 Rs. 400,000 Rs. 412,500 Rs. 458,240 (1.500 kg, * Rs. 320) | (1.250 kg. x Rs, 320) | (1.250 kg. x Rs. 330) | (1.432 kg, x Rs. 320) Mine-L | ~~ Rs. 690,000 Rs, 460,000, Rs, 405,000 Rs, 658,720 (1,500 kg. x Rs. 460) | (1,000 kg. x Rs. 460) | (1,000 kg. x Rs. 405) | (1,432 kg. x Rs. 460) Total Rs. 14,45,000 Rs. 11,90,000 Rs. 11,62,500 Rs. 13,79,420 * Standard Quantity of materials for actual output Vitex BKgs. ~ = 10Kgs «5,000 Kgs.=2,500Kgs. Proto eee S3K98._5,000Kgs.=2,500Kgs. _ 10Kgs Mine ine SK9S__.5,000Kgs.-2,500Kas = 10Kgs. ** Actual Quantity of Material used for actual output: Vita-X SKGS. «5 000Kgs. =3,000Kgs. OKgs Proto-D 2SKOS.5,000Kgs.=1,250Kos. = 10Kos. Wine-L 2Kas FOKgs. 5,000 Kgs. =1,000Kas. “Revised Standard Quantity (RSQ) Vitex ; SKSS. 45 260Kgs. Tikgs. Proto-D Wine-L Kgs. x5,250Kgs.=1,432Kgs, Tikes. es ib (i) Material Cost Variance = (Std. Qty. x Std, Price) ~ (Actual Qty. x Actual Price) or = (SQ * SP)— (AQ * AP) Vita-x = Rs, 2,75,000- Rs, 3,45,000 = Rs, 70,000 (A) Proto-D Rs. 4,80,000 - Rs. 4,12,500 = Rs. 67,500 (F) Mine-L = Rs, 6,90,000- Rs, 4,05,000 = Rs. 2,85,000 (F) = Rs, 2,82,500 (F) IPCC _37e_Costing (Problems)_Printed Solutions. 24No.4 for CAICWA & MECICEC MASTER MINDS ‘Actual Quantity (Std, Price ~ Actual Price) = (AQ x SP) ~ (AQ * AP) (il) Material Price Variance Vita-x Rs, 3,30,000 -Rs. 3,45,000 = Rs. 15,000(A) Proto-D Rs, 4,00,000-Rs. 4,12,500 = Rs. 12,500(A) Mine-L = Rs, 4,60,000-Rs, 405,000 = Rs. 55,000 (F) =Rs, 27,500 (F) (ii) Material Usage Variance = Std. Price (Std. Qty. - Actual Qty.) or (SQ * SP) ~ (AQ * SP) Vita-x = Rs, 2,75,000-Rs. 330,000 = Rs. $5,000 (A) Proto-D Rs, 4,80,000 - Rs. 4,00,000 = Rs. 80,000 (F) Mine-L = Rs, 6,90,000--Rs, 460,000 = Rs. 2,30,000 (F) = Rs. 2,55,000 (F) (iv) Material Mix Variance = Std. Price (Revised Std. Qty. ~ Actual Qty.) or = (RSQ * SP) - (AQ * SP) vita-x Rs. 2,62,460 - Rs. 3,30,000 = Rs. 67,540 (A) Proto-D = Rs. 4,58,240 - Rs. 4,00,000. 9. 68.240 (F) Mine-L Rs. 6,68,720- Rs. 4,60, Rs. 198,720 (F) = Rs. 1,89,420 (F) (v) Material Yield Variance vised Std. Qty.) or Vita-x = Rs. 12,540 (F) Proto-D Rs. 4,80,000-Rs. 458,240 = Rs. 21,760(F) Mine-L = Rs, 6,90,000-Rs. 658,720 = Rs. 31,280(F) = Rs. 65,580 (F). PROBLEM HO.13; Material Variances: sa] SP |SQxsP] RSQ | RSQx AQ=SP] AP [AQx AP Material! (wnv-t) | (Rs) | (Rs) | wn2) |sPiRs)/ A? | (sy | (Rs) | (Rs) A__| 940kg. | 45.00 | 42,300 | e86kg. | 39,870 | 900kg. | 40,500 | 43.00 | 38,700 B_ | 705kg. | 30.00 | 21,150 | 664kg. | 19,920 | 650kg. | 19,500 | 32.50 | 21,125 1645 kg 63,450 | 1850 kg | 59,790 | 1550 kg | 60,000 59,825 WN-1: Standard Quantity (SQ): Material A- { —S0K9S. _14goKgs.| = 930.68 or 940 kg. 0.9x1400Kgs Material 8 -| —S00K9S__yigaokgs | = 704.76 or 705 kg. 0.9x1.400K9s WN- 2: Revised Standard Quantity (RSQ): Material A-( SKS. 15s0Kgs. = 885.71 oF 886 kg. 4400Kos. Material 8 -| P°°KGS. , r5s0Kgs = 664.28 or 664 kg. {400Kgs IPCC _37e_Costing (Problems)_Printed Solutions, 25Ph: 98851 25025/26 (a) Material Cost Variance (A + B) = (SQ * SP) -(AQ * AP)} = {63,450 ~ 59,825} = 3,625 (F) {b) Material Price Variance (A + B) = (AQ * SP) - (AQ * AP) = {60,000 - 59,825} = 175 (F) (c) Material Mix Variance (A + B) = (RSQ * SP) ~ (AQ * SP)} = {69,790 - 60,000} = 210 (A) (d) Material Yield Variance (A + B) = (8Q * SP) ~(RSQ * SP)} = {63,450 - 59,790} = 3,660 (F) Labour Variances: Labour] SH | SR |SHxSR] RSH |RSHxSR] AH |AH*SR] AR |AH=AR qwn-3) | (Rs) | (Rs.)_| (WN-4)| Rs.) (Rs) _| (Rs) | (Rs.) Skiled [1.116 hrs | 37.50| 41,850 | 1144 | 42,900 | 1,200 45,000 | 35.60 | 42,600 Unskilled | @93hrs | 2200| 19,646 | 916 | 20,162 | 860 | 18920 | 23.00| 19,780 2,009 hrs: 61,496 | 2,060 | 63,052 | 2,060| 63,920 62,380 WN- 3: Standard Hours (SH): 0.95 x1,000hr. Skilled iatour{ SS52aoo1400Kos 115.87 or 1,116 hrs. (_0.95x800hr. = Un Site abou -2°SXE0GM y14aoKgs| = 68206907899 rs WN- 4: Revised Standard Hours (RSH): ‘Skilled labour-| 1000hr. x 2,060hr. = 1,144.44 or 1,144 hrs. ({e) Labour Cost Variance (Skilled + Unskilled) = ((SH * SR) - (AH x AR)} “evs0 62500-2641 oie tee) eceen cy ~e1400- ea) =2424 (9) Hear | eee = {61,496 — 63,052} = 1,556 (A) PROBLEM NO.15: ay (2) (3) (4) am pa es '8Q = standard quantity for actual production _ [funit—10kgs =21,600kg9| OMS Copyrights Reserved . To MASTER MINDS, Guntur Ap = 105600 - Rs.4.40/kg 24,000 IPCC _37e_Costing (Problems)_Printed Solutions. 26No.4 for CAICWA & MECICEC MASTER MINDS Variances: Material cost variance = (1)-(4) = 13,920(A) Material price variance = (3)-(4) = 9,120(A) Material usage variance = (1)-(3) = 4,800(A) Calculation of labour variances: “ (2) @) 4) SRX SH SRXRSH SRX AH AR X AH 4X5,400 : 4X5,940 Given 21,600 - 23,760 29,700 ‘unit-2.Shrs SH = standard hours for actual production = §,400 2A160units— Variances: Labour cost variance = (a) Labour rate variance = (3)-(4) 3, 1O0(A) 9404) Labour efficiency variance = (1)(3) = 2,160(A) ey . PROBLEM ng FOH VARIANCES: (hours basi SHX BR AHW XBR RBH XBR BHXBR AHW X AR 21220 X 6.00 20,160 X 6.00 23680$%.00 24,000 X 6.00 20,160 X 7.04 = 1,27,320 = 1,20,960 W2s0 = 1,44,000, = 1,42,000 Working note: Budget | Actual Working hours per month 24,000 _| 20.160 Production units per month = (Budget 24,000 + 4 hrs, Actual given) 6000 | 5,305 Budgeted hours = 8 X 25 X 120 = 24,000 hrs. Budgeted OH _ 1.44000 (1) BR = Budgeted OH = Rs. 6.00 per he a Budgetedhrs 24000 © “* OOO Per nour Actual hours worked = 24 X 840 = 20,160 hrs (a) an= Actualovereads 142000 = 5 7.04 per hour ‘Actualhours worked ~ 20,160 (3) RBH = BH for actual days worked Actualdays_giy = 24,24000 = 23,040 hrs Budgeted days 5 unit 4 hrs, HH = 21,220 hr (8) sH=21220 te | Variances: i) F.0. Expenditure Variance = 4-5 = 1, 44,000~ 1, 42,000 = Re. 2, 000 (F) ii) Total Volume Variance |= 1-4 = 1, 27,320~1, 44,000 = Rs.16, 680 (A) i) Fixed overhead variance =1-5 = 1, 27,320- 1, 42,000 = Rs.14, 680 (A) IPCC _37e_Costing (Problems)_Printed Solutions. 27Ph: 98851 25025/26 www.mastermindsindi com PROBLEM NO.25 a) Material variances: 1) Direct Material Cost Variance = Standard Cost — Actual Cost = (40,960 units * 5 kg.x Rs. 4.20) ~ (2,05,600 kg.x Rs.4,50) = Rs. 860,160 — Rs. 9,25,200 = Rs. 65,040 (A) Hi) Material Price Variance = Actual Qty. (Std. Price ~ Actual Price) = 2,05,600" kg. (Rs. 4.20 - Rs.4.50) = Rs. 61,680 (A) (*Material variances are calculated on the basis of consumption) l) Material Usages Variance = Std, Price (Std. Qty. - Actual Qty.) 's. 4.20 (40,960 units x 5 kg. ~ 2,05,600 kg.) = Rs. 3,360 (A) b) Labour Variances and Overhead Variance: 1) Labour Cost Variance = Standard cost ~ Actual cost (40,960 units * 3 hours x Rs. 3) ~ Rs. 3,87.840 6. 19,200 (A) ii) Labour Rate Variance = Actual Hours (Std, Rate ~ Actual Rate) 21,200 hours (Rs. 3 - Rs. 320) 6. 24,240 (A) Labour Efficiency Variance = Std. Rate (Std. Hour — Actual Hour) = Rs. 3 (40,960 units x 3 hour ~1,21,200 hour) = Rs. 5,040 (F) iv) Total Factory Overhead Varianoe = Factory Overhead Absorbed ~ Actual Factory Overhead = (Actual Hours x Std. Rate) ~ Actual Factory Overhead = (40,960 units * 3 hours * Rs.1.20) ~ Re.1,00,000 s. 47,456 (F) ¢) Preparation of Income Statement: Calculation of unit selling price (Rs) Direct material 21.00 Direct labour 9.00 Factory overhead | 3.60 Factory cost 33.60 Margin 25% on factory cost 8.40 Selling price 42,00 Income Statement (Rs) (Rs) Sales (40,000 units * Rs. 42) 16,80,000 Less: Standard cost of goods sold (40,000 units * Rs.33.60) 13,44 000 3,36,000 Less: Adverse Variances: Material Price variance 61,680 Material Usage variance 3,360 IPCC _37e_Costing (Problems)_Printed Solutions, 28No.4 for CAICWA & MECICEC MASTER MINDS Labour Rate variance 24,240 89,280 2,48,720 ‘Add: Favourable variances: Labour efficiency variance 5,040 Factory overhead 47,456 52.496 ‘Actual gross margin 2:99,216 d) Labourhour saved Rs) ‘Standard labour hours (40,560 units x 3 hours) 1 32,880 ‘Actual labour hour worked 4.21,200 Labour hour saved 71680 Bonus for saved labour = 50% (1,680 hours x Rs. 3) = Rs. 2,520 PROBLEM NO.4 (i). Annual cost statement of three vehicles Diesel {134,784 kin. = 4 kr) x Re, 10) (Refer to Worn) 336980 Oil & sundries {(1,34,784 km, = 100 km.) x Rs. 25} 33,696 Maintenance {(1,34,784 km. x Rs. 0.26) + Re. 6,00 39,696 (Refer to Working Note 2) 6 Drivers’ salary {(Rs. 2.000 x 12 months) =3 pegs 72,000 Licence and taxes (Rs. ,000 »3 trucks) 75,000 Insurance S) 3,000 Depreciation {(Re. 2,90,000 = 10 yearsiamucKs) 37,000 ‘General overhead 17,084 Total annwal cost 300.436 (i) Cost per kn. run ) Cost per kilometer run = { — Totalannualcostef vehicles __ eter to working note 1) { Total kilometer travelledannually ) 600498) 58 34 7e4Kms (lil) Freight rate per tonne km (to yield a profit of 10% on freight) Cost per tonne km, = —_/otalannualcostof three vehicles _ (rs torte workingnote 1) Total effective tonneskmsperannum (s goss | Re 525312 kms Freight rate per tonne km. Fa x Working Notes: 4. Total kilometre travelled and tonnes kilometre (load carried) by three trucks in one year Truck ‘One way No. of Total Load Total number | distance in trips distance | carried per | effective kms (up & coveredin | trip/day | tonnes km down) km perday | in tonnes 7 16 4 128 6 384 2 40. Zi 160 9 720 3 30. 3 180 8 720 TOTAL 468 1,824 IPCC _37e_Costing (Problems)_Printed Solutions. 29Ph: 98851 25025/26 www.mastermindsindi com Total kilometre travelled by three trucks in one year (468 km. * 24 days x 12 months) = 1,34,784 Total effective tonnes kilometre of load carried by three trucks during one year (1,824 tonnes km. x 24 days x 12 months) = 5,25,312 2. Fixed and variable component of maintenance cost: Diferenceinmaintenancecost Diferencein distance traveled 1,60,200 kms - 1,56,700 kms Variable maintenance cost per km = Rs, 0.25 Fixed maintenance cost = Total maintenance cost-Variable maintenance cost 's. 46,050 — 1,60,200 kms x Rs. 0.25 = Rs. 6,000 PROBLEM NO.7 Operating Cost Sheet for the year 2013-14 ‘A__| Fixed Charges: Garage rent (Rs.4,000 « 12 months) 48,000 Salary of drivers (Rs.3,000 * 5 drivers *42 months) 4,80,000 ‘Wages of Conductors (Rs.1,200 « 5 conductors x 12 months) 72,000 Manager's salary (Rs. 7,500 x 12 months) ‘90,000 Road Tax, Permit fee, etc. (Rs. 5,000 x 4 quarters) 20,000 Office expenses (Rs. 2,000 « 12 months] 24,000 Insurance (Rs. 6,50,000 x 5 buses x 3%) 97,500 Total (A) 531,500 B.__| Variable Charges: Repairs and Maintenance (Rs. 22,500 x 5 buses 4,42,500 Depreciation (Rs. 6,50,000 * 5 buses « 15%) 487,500 Diesel {(3,60,000 km. + 6 km.) * Rs.33 19,80,000 Total (B) 25,80,000 Total Cost (A+B) 31,11,500 ‘Add: 33 1/3 % Profit on takings or 50% on cost 15,55,750, Total Takings (Total bus fare collection) 46,67,250 Total Passenger-km. (Working Note 2) 115,20,000 Bus fare to be charged from each passenger per km. 0.405; Working Notes: 1. Total Kilometres to be run during the year 2013-14 = 40 km.x 2 sides * 3 trips x 25 days x 12 months * 5 buses = 3, 60,000 Kilometres 2. Total passenger Kilometres = 3,60,000 km. * 40 passengers 80% = 1,15,20,000 Passenger- km. PROBLEM NO. 10 EPS Public School ‘Statement showing the expenses of operating a single bus and the fleet of 25 buses for a year Particulars Perbus | Fleet of25 per annum buses (Rs.) per annum (Rs) Running costs : (A) Diesel (Refer to working note 1. 56,832 14,20,800 Repairs & maintenance costs: (B) 16,400 4,10,000 Fixed charges: Driver's salary(Rs. 5,000 x 12 months) 60,000 15,00,000. IPCC _37e_Costing (Problems)_Printed Solutions, 30No.4 for CAICWA & MECICEC MASTER MINDS Cleaners salary(Rs 3,000 * 1/Sth x 12 months) 7,200 47,80,000 Licence fee, taxes eto 2,300) 57,500 Insurance 15,600 390,000 Depreciation 93,750 | 23,43,750 Total fixed charges: (C) 178,850 | 44,71,250 Total expenses: (A¥B+C) 252,082 | 63,02,050 ‘Average cost per student per month in respect of students coming from a distance of: (a) 4 km. from the school {Rs, 2,52,082 / (354 students * 12 months} Rs, 59.34 (Refer to Working Note 2) (b) 8 km. from the school (Rs. 59.34 *2) Rs. 118.68, (©) 16 km. from the school (Rs. 59.34 * 4) Rs. 237.36 Working Notes: 1. Calculation of diesel cost per bus: No. of tips made by a bus each day 4 Distance travelled in one trip both ways (16 km. * 2 trips) [32k Distance traveled per day by a bus (22 km. x4 shifts) 128 km Distance traveled during a month (128 km. * 24 days) [3072 km. Distance traveled per year (2072 km. x10 months) 30,720 km: No. of litres of diesel required per bus per year (30, 7@@R>= 10 km) 3,072 litres Cost of diesel per bus per year (3.072 les « Rs Bet Rs. 58,602 2. Calculation of number of students perbus:_¢ Bus capacity of 2 tips (60 students * 2S" 120 students ‘Udth fare students (15% * 120 students 18 students Ye fare 20% students (equivalent to 1/4th fare students) 72 students Full fare 55% students (equivalent to 1/4th fare students) 264 students Total 1/4th fare students 364 students ROBLEM NO. 11 Calculation of Price of the Delhi-Jaipur-Agra-Delhi tour package Particulars Re, ‘Amount Diasel Gost (Working Note-2) 2,635.00 ie 7 452.40 Servicing Cost { B2-30000 sa4ms ); (50,000 kms J ‘Chauffeurs meal cost (three 200 km. completed journey = Re, 60) 750.00 ‘ther Allocable costs: Rs. 12,00,000 y 377.00 Depreciation | ea TSAkes,| (Re. 240.00 Other set-up and office cost | 85-240, says 30days ) (Re. ) 7,200.00 7817.00 Chautfeurs salary {B&12.000 , s4aye); 30days Total Cost 5,054.40 ‘Add: Profit (25% of net takings or 1/3rd of total cost) 1,684.80 6,739.20 ‘Add: Service Tax @12.36% 232.97 Price of the package (inclusive of service tax) 787217 IPCC _37e_Costing (Problems)_Printed Solutions, 31Ph: 98851 25025/26 www.mastermindsindi com Working Notes (1) Total distance of journey From To Distance (in Km.) Delhi aipur 274 Jaipur ‘Agra 238 Agra Delhi 242 Total Distance 754 (2) Cost of Diesel From To Distance (in Km.) Price of diesel | Total diesel Cost per litre (Rs) Rs) i 1 WW Vv Ve (lil = 16km) x IV Delhi Jaipur 274 54 924,75 Jaipur Agra 238 56 833.00, Agra Delhi 242 58 877.25 Total cost 2,635.00 PROBLEM NO. 17 Particulars Rs. Rs. Total Revenue Library fees per month (1,000 members * Rs.100) 41,00,000 Late fees per month (500 times x 5 books x RS.1) 2,500 Total Revenue per month 1,02,600 Total Revenue per annum (Rs. 1,02,500 51 12 months) 112,30,000 Total Cost Staff Costs: Librarian (Rs.10,000 1 person x 12 months) 1,20,000 Assistant Librarian (Rs. 7,000 x 3 persons « 12 months) 252,000 Clerk (Rs. 4,000 * 1 person x 12 months) 48,000 4,20,000 Books maintenance cost (50,000 books x Rs. 10) 5,00,000 ‘Total maintenance cost per annum excluding cost of new books: 9,20,000 Cost incurred per library member per annum (Rs. 9,20,000 +1 000) 920 Cost incurred per library member per month on the library 7687 excluding cost of new books (Rs. 920 +12 months) Cost incurred per club member per annum (Rs. 9,20,000 + 5,000) 184 Cost incurred per club member per month (Rs.184 +12 months) 15.33 Net income from the library per annum (Rs. 12,30,000 — Rs. 9,20,000) 3,10,000 ‘Cost per new book 300) Maximum number of new books per annum (Rs. 3,10,000 = Rs.300) 1,033.33 nos. Number of books purchased 1,200 nos. Excess books purchased (1,200 nos. — 1,033.33 nos.) 168.67 nos. ‘Subsidy being given per annum on excess purchase 60,000 (166.87 books x Rs. 300) ‘Subsidy per library member per annum (Rs. 60,000 +1,000members) 50. Subsidy per club member per annum (Rs. 50,000 = 5,000 members) 10 Comment: The club is exceeding its subsidy target to members by Rs. 45 (Rs. 50 - Rs.5) per library member and Rs. 5 (Rs. 10 ~ 5) per club member. IPCC _37e_Costing (Problems)_Printed Solutions, 32No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM HO. 19 Calculation of cost per Km. under various proposals Proposal - 1; Company's own car Particulars Calculations CostiKm. Depreciation 70500-20000 p, ->6c00%m 0.80 ps Petrol 0.60 ps. Repairs - 0.20 ps. Tyres : 0.12 ps. Insurance 4200 0.06 ps. 25,000Kn Taxes os 0.04 ps. 0,000km ea Proposal -2: Employee's own car Particulars Calculations CostiKm Reimbursement : 60ps insurance +200120,000 0.06ps 1.66 Ps. Proposal 3: Gartaken on Hire basi SS Particulars Cala Costikm Hire charges: 1.00ps ie Petrol KX . 0.60ps Taxes ey”: 0.04ps Tyres SS : O12ps 176ps Ranking of three proposals basing on Cost per Km. Particulars Cost per Km. Rank Proposal 7 1.82p5 rT Proposal - 2 1 66ps \ Proposal - 3 1.76ps I Decision: It is better to accept Proposal ~ 2. ROBLEM NO. 1 Budgeted Cost Sheet for the year 2014 8. JOB AND BATCH COSTING Particulars ‘Amount Direct material consumed 412,00,000, ‘Add: 44% due to increase in output 528,000 17,28,000 Less; 6% decline in price 1,03,680, 16 24,520, Direct wages (manufacturing) 77,00,000 ‘Add: 60% increase 4,20,000 17,20,000 Prime cost 27,44.320 Manufacturing overheads: Fixed 3,860,000 ‘Add: 20% increase 72,000 432,000 Variable 250,000 ‘Add: 60% increase 1,50,000 ,00,000 32,000 Cost of production 35,76,320 ‘Add: 1/9 of cost or 10% of seling price 3,97,369 ‘Selling price '39,73,689 IPCC _37e_Costing (Problems)_Printed Solutions, 33Ph: 98851 25025/26 www.mastermindsindi com Production will increase by 60% but efficiency will decline by 10%. 160 ~ 10% of 160 = 144%. So, increased by 44%, Note: If we consider that variable overhead once will change because of increase in production(From Rs.2,50,000 to Rs 4,00,000) then with efficiency declining by 10% it shall be Rs.3,60,000 andthen again as mentioned in point No. (ii) of this question it will increase by 60% then variableoverhead shall be Rs.3,60,000 x160% = Rs.5,76,000. Hence, total costs shall be Rs.37,52,320 andprofit shall be 1/9th of Rs.37,52,320 = Rs.4,16,924, Thus, selling price shall be Rs.41,69,244, PROBLEM NO. 3 Job cost sheet Customer details Date of commencement - job no. date of completion Particulars ‘Amount Direct materials 70 Direct wages: 45 Dept. X Rs.2.50x 8 hrs. Dept. Y Rs. 2.50 x Ghrs = Rs.15.00 Dept. Z Rs. 2.50 x 4hrs = Rs 10.00 Chargeable expenses 5 Prime cost 120 Overheads 23.75 Dept. x = R85000 199 = 50% of Rs.20 = Rs.10.00 is.10,000 39000 = = Rett Dept. ¥ = REGIE 100 = 75% of Rs. 15 = Re.11.25 Dept. Z = 282000 , 199 = 25% of Rs.10 = R825 88000 Works cost 143.75 Selling expenses = R820000 109 = 10% of works cost 1438 200,000 Total cost 158.13, Profit(20% of total cost) 31.63 Selling price 189.76 PROBLEM NO. 4 {a) Calculation of Total Cost for the Hostel Job: Particulars ‘Amount | Amount (Rs.) (Rs.) Direct Material Cost: = 15mm Gi Pipe (Working Note- 1) 14,051.28 = 20mm GI Pipe (Working Note= 2) 2,588.28 = Other fiting materials (Working Note- 3) 3,866.07 ~ Stainless steel faucet 3,113.57 js units x| OXRS.204- 15XRs209 tunis ~~ Valve: 2,472.75 23,091.95 units x SXR8404 + 10XRs 402 14 XRs.424 t 2units | Direct Labour = Plumber {(180 hours * Rs. 50) + (12 hours x Rs. 25)] 9,300.00 = Helper [(192 hours » Rs. 35) + (24 hours Rs. 17.5)] 7,140.00 | 16,440.00 IPCC _37e_Costing (Problems)_Printed Solutions, 34No.4 for CAICWA & MECICEC MASTER MINDS ~ Overheads [Rs. 13 * (180 + 192) hours] 4/836,00, Total Cost 44,367.95 (b) Price to be charged for the Job work: ‘Amount (Rs.) Total Cost incurred on the job 44,367.95 Add: 25% Profit on Job Price | #498795 x 2595 Cea 75% 59,187.27 Working Note: 4. Costof 15mm GI Pipe Date | ‘Amount (RS.) 17-08-2014 B units * Rs. 600 4,800.00 28-08-2014 rounis | 4R#800 » 35xR=626 6,251.28 un 3ounts 11,051.28 2. Cost of 20mm GI Pipe S Date WS) Amount (Rs.) 1208-2014 _| 2units * Rs, 660 1,320.00 75-06-2014 | > 4 BXRI660: 3OXRE B10,gDN 660 1.28828 Suny | e 2,588.28 3. Cost of Other fitting materials Date ‘Amount (Rs) 1208-2014 _| 18 units x Rs. 26 468.00 17-08-2014 | 30 units x Rs. 26 780.00 28-08-2014 |, aay 12KRS26 + 150 XR5.28 948.96 162 units 30-08-2014 | iggy 12XRS26 1 150XR.26 | 1671.11 162 units 3,866.07 PROBLEM NO. 6 Statement of cost and profit as per unit of each batch Particulars Jan.2013 | Feb.2013 | Mar.2013 | Total a) Batch output (Nos.) 1,250 1,500 1,000 | 3,750 b) Sales value (@Rs. per unit) 18,750 22,500 15,000 _| 6,250 Cost = Material 6,250 9,000 5,000 _| 20,250 = Wages 2,500 3,000 2,000 _| 7.500 = Overheads ¢) Total 12,500 15,000 10,000 _| 37,500 d) Profit per batch (b) = (c) 6,250 7,500 5,000 _| 18,750 e) Cost per unit (¢) = (a) 10 40 10 f) Profit as per unit (d) + (a) 5 5 5 IPCC _37e_Costing (Problems)_Printed Solutions. 35Ph: 98851 25025/26 www.mastermindsindia.com Overall position of the order for 3000 units Sale value (3,000 units x Rs.15) Rs.45,000_ Less: total cost (3,000 units x Rs 10) 7s. 30,00 Profit 15.000 Calculation of overnead per hour: Particulars Jan.2013 Feb. 2013 Mar.2013. Iabour cost 5.2500 3.3000 fs 2000 (0) Labour hours: urrates per hour 9 74280 | 321800 | 5 =1000 (i) Overhead per hour Tealoverhoads | R512000_,.., | R89000_,..> | RB15000 2. Tetalabourrour | ~ 4000 aa Eo {l) Overhead for batch () x Gp Rs. 3750 Rs. 9,000 Rs. 000, 9. NON INTEGRATED ACCOUNTS ‘Acme Manufacturing Co. Ltd. Cost Ledger Material Control Alc Dr. cr, Particulars ‘Amount( Particulars ‘Amount( Rs.) Rs.) To Balance b/d 1,24,000 | By Work-in-progress 4.77,400 To General ledger control Ale | 4,80,100 | By Production overheads Alc 41,200 (Purchases) By Administration overhead Alc 3,400 By Selling and distoverhead A/c 7,200 By Balance cd 74,900 6,04,100 6,04,100 To Balance b/d 74,900 ‘Wages Control Alc Dr. cr. Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs.) To General ledger control Ale 2,14,300 | By Work-in-progress 4,49,300 (Rs.1 49,300 + Rs.65,000) By Production overheads Alc 65,000 2,14,300 214,300 Production Overhead Alc Particulars ‘Amount | Amount Particulars ‘Amount | Amount (Rs) |__ (Rs) (Rs) | __(Rs.) To Balance b/d 8,400 | By Work-in-prog Ale 359,100 To General Ledg con Al By Balance cfd 6.150 To Transportation 8,400 To Production overheads | 2,42,250 | 2,50,650 To Wages control Alc 165,000 To Material control Ale 41,200 3,65,250 3,65,250 To Balance b/d 6.150 IPCC _37e_Costing (Problems)_Printed Solutions. 36No.4 for CAICWA & MECICEC MASTER MINDS Administration Overhead Alc Particulars ‘Amount(Rs,) Particulars ‘Amount(Rs.) To General ledger control A/c 74,000 __| By Balance bid 12,000 To Material control A/c 3,400 | By Work-in-progress Alc 52,900 To Balance old 2,300 __| By Cost of sales Alc 14,800 79,700 78,700 By Balance bid 2,300 Selling and Distribution Overhead Alc Particulars ‘Amount( Particulars ‘Amount Rs.) (Rs.) To Balance b/d 6,250_| By Costof Sales Ale 82,000 To General ledger control Alc 64,200 To Material control Alc 7,200 To Balance cfd 4,350) 2,000 82,000 By balance bid 4.350 Work-in-Progress Alc Particulars “Amount rticulars “Amount (ro) Sal irs) To Balance b/d 62,500 | BRRRSKed Goods Ae 958,400 To Material control Ale 477,400, [BRBBlance cfd 1,42,800 To Wages control Ale 1,49,200. To Production overheads Ale 3 To Administration overhead Alc 00 11,01,200 To Balance bid 742,800 Finished Goods Alc Particulars ‘Amount Particulars ‘Amount (Rs) (Rs) To Balance old 1,24,000_| By Cost of sales Ale 9,77 300 To Work-in-progress 9,58,400_| By Balanoe old 4,05,100 10,82,400 10,82,400 To Balance b/d 4,06,100 Cost of Sales Alc Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs.) ‘To Finished goods A/c 9,77,300_| By Costing profit & loss Alc_|10,74,100 To Administration overheads Alc 14,800 To Selling & distributionoverheadsAlc 82,000 10,74,100 10,74,100 Dr. General Ledger Control Alc cr. Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs.) To Costing profit and loss Alc 14,43,000 | By Balance bid 313,150 To Balance cfd 3,22,300 | By Material control Ale 4,80,100 By Wages Control A/c 2,14,300 By Production overhead A/c 2,50,650 By Administration overhead Alc 74,000 By Selling and distoverhead Alc 64,200 IPCC _37e_Costing (Problems)_Printed Solutions, 37Ph: 98851 25025/26 www.mastermindsindia.com By Costing profit & loss Ale 3,868,900 17,858,300 17,85,300 By Balance bid 3,22,300 Dr. Costing Profit & Loss Alc cr. Particulars ‘Amount Particulars ‘Amount | (Rs) (Rs.) To Cost of sales Ale 10,74,100_| By General ledger control Alc(Sales) | _14,43,000 To General ledger control Ale | 3,68,900 14,43,000, 14,483,000 Dr. Trial Balance as at 30th September, 2012 cr. Particulars Dr. Cr. Material control Ale 74900 Production overhead Ale 6.150 ‘Administration overhead Alc 2,300 Selling and distribution overhead AIS 4,350 Work:in-progress Ale 742,800 Finished goods A/c 7,05,100 ‘General ledger control Ae 322,300 3,28,950 3,28,950 PROBLEM NO. 6 Stores Ledger Control Alc Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs.) To Balance b/d ‘54,000 | By Work in Process Alc 2,88,000 To General LedgerAdft Ale 2,88 000 | By Overhead Control Ale 36,000 To Werk in Process Alc 1,44,000 | By Overhead Control Alc(Deficiency) 10,800" By Balance cid 7,51,200 4,86,000 4,86,000 “Deficiency assumed as normal (alternatively can be treated as abnormal loss) Work in Progress Control Alc Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs) To Balance b/d 7,08,000 | By Stores Ledger Control ale 744,000 TTo Stores Ledger Control Ale | 2,88,000 | By Costing PIL Alc 7, 20,000 (Balancing figures being Costof finished goods) "To Wages Contol Alc 7,08,000 | By Balance old 72,000 To Overheads Control alc 4,32,000 | 9,36,000 9,36,000 ‘Overheads Control Alc Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs) To Stores Ledger Control Ale 36,000 | By Work in Process Ale 4,32,000 To Stores Ledger Control Ae 10,800 | By Balance c/d(Under absorption) | 82,600 To Wages Control Alc 18,000 (Rs.1,26,000- Rs.1,08,000) ‘To Gen, Ledger Adjust A/c 450,000 5,14,800 5,414,800 Costing Profit & Loss Alc Particulars ‘Amount Particulars ‘Amount (Rs) (Rs.) To Work in progress 7,20,000 | By Gen. ledger Adjust. Alc(Sales) | 8,28,000 (Rs.7,20,000 x 115%) To Gen. Ledger Adjust Alc(Profi 708,000 8,28,000 8,28,000 IPCC _37e_Costing (Problems)_Printed Solutions. 38No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM NO. 9 a) Stores Ledger Control Account Particulars “Amount Particulars ‘Amount (Rs.) (Rs.) To Balance b/d 25,000 | By Work in Progress Control AIG 30,000, Creditors/ Bank Ale 75,000 | * Production OH Control A/c 4,000 Balance o/d {66,000 7,00,000 700,000 b) Work-in-Progress Control Account Particulars ‘Amount Particulars ‘Amount (Rs.) (Rs.) To Balance b/d "20,000 | By Finished Goods Control Ale | 65,000 ‘Store Ledger Control Ale "20,000 |" Balance ofd (Physical value) | 40,000. Wages Control Ale 20,000 Production Overhead Control Ale (150% | 30,000 of direct wages) Profit & Loss Alo (Stock Gains) 5,000 7,085,000 7,05,000 ¢) Finished Goods Control Account Particulars ‘Amount articulars, ‘Amount ire) SS tre) To Balance b/d 35,000 | BxCaSi6F Goods Alc 0,000 ‘Workin-Progress Control Ale 65,000 KaNSSiance old 20,000 7,00,09651 7,00,000 4) Production Overhead Control Account Particulars nt Particulars ‘Amount (Rs) To Balance b/d (Prepaid amount) 3,000 | By Workin-Progress Control 30,000 Alc (150% of direct wages) To Stores Ledger Control Alc 4,000 To Wages Control Alc: Direct Workers 5,000 Indirect Workers 5,000 40,000 To Bank [12,000 To Profit & Loss Alc* (Over absorption, 7,000 balancing figure) 30,000 30,000 * Alternatively the over absorbed overhead may be carried forward, €) Profit & Loss Account Particulars “Amount Particulars “Amount (Rs.) (Rs.) To Finished goods Control Ale _ or By Sales Ale 7,00,000, Cost of goods sold Alc 180,000 Selling & Distribution Overhead Alc 6,000 | Production Overhead Control 7,000 Nc Balance id 20,000 | Work-in- Progress Control 5,000 ‘Alo(Stock gain) 7,06,000, 7,06,000, Notes: 1) Materials transferred between batches will not affect the Control Accounts, Ii) Non-production time of direct workers is a production overhead and therefore will not be charged to ‘work-in-progress control Alc. iii) Production overheads absorbed in work-in-progress Control A/c will then equal Rs. 30,000 (150% of Rs, 20,000) Iv) In the work-in-progress Control Alc the excess physical value of stock is taken resulting in stock gain, Stock gain is transferred to Profit & Loss A/c. IPCC _37e_Costing (Problems)_Printed Solutions, 39Ph: 98851 25025/26 www.mastermindsindi com PROBLEM NO. 11 Working Notes: i) Overhead recovery rate per direct labour hour: Budgeted factory overheads Rs.6,75,000 Budgeted direct labour hours 4,50,000 Budgeted factory overheads Overhead recovery rat® = Budgeted directlabour hours Rs, ~4,50,000hours: fi) Direct wage rate per hour: Direct labour cost of WIP: Rs.3,000(on 31st October 2012) Direct labour hours of WIP_ : 1,200 hours Direct labour cost on WIP Direct labour hours on WIP Rs.3000 7,200 hours Direct wage rate per hour =Rs.250 iii) Total direct wages charged to production: ‘Total direct labour hours spent on production x Direct wage rate per hour 8, 200 hours x Rs 2.50 = Rs.70,500 a) Material purchased during October, 2012 Copyrights Reserved To MASTER MINDS, Guntur 6.1.50 per direct labour Particulars Amount(Rs.) Payment made to creditors 4,05,000 ‘Add : Closing balance in the account of creditors for purchase 18,000 41,20,000 Less : Opening balance 30,000 Material purchased 90,000 b) Cost of goods completed in October, 2012 Particulars ‘Amount(Rs.) ‘The cost of goods sold during the month 41,95,000 ‘Add = Closing finished goods inventory 66,000 2,61,000 Less : Opening finished goods inventory 75,000 Cost of goods completed during the month 7,866,000 ©) Overhead applied to production in October, 2012 = 28,200 hours * Rs.1.50 = Rs.42,300 4d) Balance of Work-in-progress on 31st October, 2012 Particulars ‘Amount(Rs.) Direct material cost 6,000 Direct labour cost 3,000 Overheads (1,200 hours * Rs. 1.50) 4,800 10,800 €) Direct material consumed during October, 2012 Rs 78,000 {Refer to following Account) IPCC _37e_Costing (Problems)_Printed Solutions. 40No.4 for CAICWA & MECICEC MASTER MINDS Work in progress Control Ale Particulars ‘Amount Particulars ‘Amount Rs.) ARs.) To Opening Balance 6,000 | By Finished goods(As per (6) | 1,86,000 above) To Direct wages, 70,500 | By Balance of WIP(AS per (d) 10,800 [Refer to Working Note (i) above) To Factory Overheads [AS per (6) 42,200 above] To Balancing figure (Material 78,000 consumed) 1,96,800 1,96,800 1) Balance of Stores Control Account on 31st October, 2012 Rs.66,000(Refer to following Account) Stores Control Account Particulars “Amount Particulars ‘Amount (Rs) (Rs.) To Balance 54,000 | By WIP control Aic(As per(e) | 78,000 above). To Creditors Alo for materials 30,000 | By ou Cratbalancing figure) | 66,000 purchased(As per (a) above) 7,44,000 1,44,000 9) Over - absorbed (or) under - absorbed for Og@he2012: balance in factory overhead below showing that Rs.2,700 is under absorbed Factory overhead Account Particulars Qnsint Particulars ‘Amount To general ledger adj Alc "45 000 | By factory overhead applied 42,300 (total debits for oct.2012) [refer to (C) above] By balance (under — 2,700 absorbed) 45,000 45,000 PROBLEM NO. 13 Statement of Profit as per financial records OR Profit & Loss Account of the company (For the year ended March 31, 2014) Particulars ‘Amount Particulars ‘Amount To opening stock By sales 20,80,000 =" Finished goods 74375 ~_Work-in-progress 32,000 To raw materials consumed 7,80,000 | By closing stock: ~ Work -in-progress 38,667 = _ Finished goods 41,250 To direct labour 4,50,000 | By rent received 18,000 To factory overheads 3,00,000 | By interest received 145,000 To good will witten off 1,00,000 To administration overheads 2,95,000 To selling dist overheads 67,000 To dividend paid 85,000 To bad debts 12,000 To profit 33,542 22,22,917 22,22,917 IPCC _37e_Costing (Problems)_Printed Solutions. aLPh: 98851 25025/26 www.mastermindsindia.com Statement of Profit as per costing records (For the year ended March 31,2014) ‘Amount | Amount ‘Sales revenue (14,500 units) @ 720,80,000 Cost of sales: ‘Opening stock (875 units x Rs 104) 97,000 ‘Add: cost of production of 14,000 units 17,982,000 (Refer to working Notes 1 & 2) Less: closing stock (R##792000x375unts ) (48,000) (14000 units Production cost of goods sold (14,500 units) 18,35,000 Selling & distribution overheads (14,500 units x 4 58,000 Cost of sales: (B) 78,93,000 | 18,93,000 Profit: (A) = @) 4,87,000 Statement of Reconciliation (Reconciling the profit as per costing records with the profit as per financial records) Particulars ‘Amount | Amount Profit as per cost accounts 1,87,000 ‘Add: administration overheads over absorbed 367 (Rs.2,98,667 — Rs.2,95,000) Opening stock over valued (Rs.91,000- Rs.74.375) 76.025 interest received “5,000 Rent received 18,000 | 83,282 2.70.22 Less: factory overheads under recovery 30,000 (Rs.2,98,067 ~ Rs.2,95,000) Selling and distribution overheads under recovery 3,000 (Re.61,000 — Rs.58,000) Closing stock over valued (RS.48,000 — Rs.41,250) 6750 Goodwill written off 7,00,000 Dividend 85,000 Bad debts, 12,000__|_2,36,750 Profit as per financial accounts 33.542 Working note: 4. Number of units produced units Sales 14,500 ‘Add: closing stock 375 Total 14,875 Less: opening stock 875, Number of units produced 14,000 2. Cost sheet Particulars ‘Amounts | Amounts Raw material consumed 780,000 Direct labour 4,50,000 Prime cost 112,30,000 Factory overheads (60% of direct wages) 2,70,000 Factory cost 1,00,000 ‘Add: opening WiP- 32,000 Less: closing WIP 38,667 Factory cost of goods produced 14,93,388 ‘Administration overheads (20% of factory cost) 2,98 667 Cost of production of 14,000 units 17,92,000 Cost of production per unit = Totalcostef production _ Rs.17,62000 2. 19g Noofunitsproduced ~ 14,000units IPCC _37e_Costing (Problems)_Printed Solutions. 42No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM NO. 15 Costing profit & loss account Particulars ‘Amounts Materials 23,01,000 Wages [_12,05,750 Prime cost '35,08,750 Production overheads (20% of prime cost) 7,01,350 [42,08,100 Less: work-in-progress 97,500 Manufacturing cost incurred during the period 41,10,600 ‘Add: administrative overheads (Rs.9.75 x 31,000 units) 3,02,250 Cost of production 44,12,850 Less: closing finished goods stock (asi 2850x1202.) eee 31000, Cost of goods sold | 42,70,500 ‘Add: selling & distribution overheads (Rs.13 x 30,000units) 3,80,000 Costof sales 46 60,500 Profit (balancing figure) 2,14,500 Sales 48,75,000 Production over head neat Particulars ‘Amount Particulars ‘Amount TTo general ledger adjustment Alo | 6.92.250 in progress Alc 7,01,350 To overheads adjustment Alc 3 (over- absorption) ce 7,01,350 Administrative overheads Account Particulars ‘Amount Particulars ‘Amount To generalledger adjustment Alc __ | 3,10,975 | By finished goods Ale 3,02,250 By overheads adjustment Alc 8,125 (under- absorption) 310,375 3,10,375 Selling & distribution overheads Account Particulars ‘Amount Particulars ‘Amount To generalledger adjustment Alc__| 3,68,875 | By cost of sales Alc 3,90,000 To overheads adjustment Ac 21,125 (over- absorption) 3,90,000 3,90,000 Reconciliation statement Particulars Rs. Rs. Profit as per cost accounts 2,14,500 Production overheads (over absorption) 9,100 | Selling & distribution overheads (over absorption) 21,125 Dividend received 3,90,000 Interest on bank deposits 65,000 | 485,225 6,99,725 Less:__| Administration overheads (under — absorption) 8125 IPCC _37e_Costing (Problems)_Printed Solutions, 43Ph: 98851 25025/26 www.mastermindsindia.com Preliminary expenses written off 22,750 | Good will written off 45.500 Fines 3,250) Interest on mortgage 43,000 Loss on sale of machinery 16,250 Taxation 1,95,000 Write down of finished stock (Rs.1,42,350 — Rs.1,30,000) 12,350 | (316,225) Profit as per financial accounts 3,893,500 PROBLEM NO. 19 Memorandum reconciliation accounts Particulars Rs. Particulars Rs. To netloss as per cost accounts | 48,700 | By administrative overhead recoveredin | 65,000 cost accounts To factory overheads under "30,500 | By depreciation over charged in cost #000 absorption in cost accounts accounts(Rs.2,70,000-Rs.2,25,000) To provision for income tax '52,400 | By transfer fees in financial account 40,200 To Obsolescence loss 720,700 | By Notional Rent of own premises 54,000 To Overvaluation of closing stock | 9,500 | By Overvaluation of Opening stock 723,000 in Cost Accounts" in Cost Accounts” To Net Profit (as per Financial 35,400 Accounts) 1,87,200 1,87,200 *Over valuation of opening stock as per cost accounts, = value in cost accounts — value in financial accounts = Rs.1,38,000 ~ Rs.1,15,000 = 23,000 “*Over valuation of closing stock as per cost accounts = value in cost accounts ~ value in financial accounts = Rs.1,22,000 ~ Rs.1,12,500 = Rs.9,500 PROBLEM NO. 21 Stores ledger control account Particulars ‘Amount Particulars ‘Amount To balance B/d 12,60,000 | By work in progress control 67,20,000 To general ledger adjustment Alc 67,20,000 | By overhead control Ac 840,000 To work in progress control Ale '33,60,000 | By overhead control Alc 2,52,000 (storage) By balance C/d 35,28 000 1,13,40,000 4,13,40,000 Work in progress control Alc Particulars ‘Amount Particulars [_Amount To balance bid 25,20,000 | By Stores ledger control Alc '33,60,000 To stores ledger control Nie 67,20,000 | By costing p & | Alc (cost of 7,58, 88,000 sale)(bal,ig) To direct wages control Alc 25,20,000 | By balance Cid 15,20,000 To overhead control Alc '90,08,000 2,07,68,000 2,07,68,0000 Costing profit and loss Account Particulars ‘Amount Particulars ‘Amount To workin progress Ale 7,58,88,000 | By general ledger adjustment Alc 7.77,94,560 ~ Cost of sales 1,58,88,000 -_Add 12% profit 19,06 560 IPCC _37e_Costing (Problems)_Printed Solutions. 44No.4 for CAICWA & MECICEC MASTER MINDS To general ledger adj. Ale (profit 19,06,560 1,77,94,560 1,77,94,560 Financial profit and loss Alc Particulars Rs. | Amount Particulars Rs,__| Amount To opening stock: | 12,60,000 By sales 1,7,94,560 stores To WIP 25,20,000 | 37,80,000 | By income from 00,000 investment, To purchases 67,20,000 | By closing stock ~ Stores 35,28,000 | 50,48,000 -_wP 15,20,000 To wages 29,40,000 | By loss 587,440 To overheads 95,50,000 To loss on sale on 840,000 fixed assets 2,38,30,000 2,38,30,000 Reconciliation statement Particulars Rs. ‘Amount Profit as per cost accounts 19,08,560 ‘Add: Income from Investments OX 4,00,000 723,06,560 Less: [68s on sale on fixed assets 40,000 Under absorption of overhead (refer to working nolgDs 20,54,000 | __28,94,000 Loss as per financial accounts 5,87,440 Working Notes: overhead control account Particulars jounts Particulars ‘Amount To general ledger adjustment Alc 5,50,000 | By WIP control Ale {90,08 000 To stores ledger control Ale 2,62,000 | By balance C/d (under 20,54,000 absorption of overhead) TTo stores ledger control Ale 840,000 To wages control Alc indirect wages 4,20,000 (Rs.29,40,000 ~ Rs.25,20,000) 1,10,62,000 7,10,62,000 PROBLEM NO. 4 Sales value at spit of method Products Sales in tonnes | Selling price per tonne | Sales revenue | Joint cost @) (b) (c)=(a) x (b) | apportioned Caustic Soda 1,200 50 60,000 50,000 Chlorine 800 75 60,000 50,000 “Aopotore jin ose TSE, a rveneo esehpotiet 00,000, Joint cost apportioned to Caustic Soda = 102.002, te 1,20,000 60,000 = Rs 60,000 41,00,000 Joint cost apportioned to Chlorine = «60,000 = 50,000 Physical measure method IPCC _37e_Costing (Problems)_Printed Solutions, 45Ph: 98851 25025/26 www.mastermindsindia.com Products Sales in tonnes Joint cost apportioned Caustic Soda 4,200 60,000 Chlorine 800) 40,000 Apportioned joint cost = —T2tal Joint oS! _, phyycicalunits of each product Joint cost apportioned to Caustic Sod: Joint cost apportioned to chlorine = Total physicalvalue 1:00.00 _,. 4,200 tonnes = 60,000 2/000 tonnes 1,00,000 _. 200 tonnes = Rs.40,000 2,000 tonnes Estimated net realisable value method Products Sales in Further processing cost | Netrealisable | Apportioned tonnes (a) (Rs.) value Joint cost Caustic Soda 60,000, = 60,000 42,857 ‘Chlorine 7,00,000 20,000 ‘80,000 57,143 (500 tonnes of PVC * Rs.200) 7,40,000, 7,00,000, Total oint cost “*Apportioned joint cos! Apportioned joint cost for Caustic Soda =1 Apportioned joint cost for Chlorine= Totalnetrealisable value x Netrealisable value of each product, (000 1,40,000 1,00,000, Fe o00* 80.000 = Rs.57.143 x 60,000 = Rs.42,857 Incremental revenue from further processing of Chlorine into PVC (500 tonnes x Rs.200 ~ 800 tonnes x Rs.75) Less : Incremental cost of further processing of Chlorine into PVC Incremental operating income from Rs.40,000 Rs.20,000 Rs.20,000 further processing The operating income of Inorganic Chemicals will be reduced by Rs.20,000 in August if it sells 800 tonnes of Chlorine to Lifetime Swimming Pool Products, instead of further processing of Chlorine into PVC for sale. PROBLEM HO. 6 i)(a) Statement showing cost of inventory & COGS (NRV) Particulars x ¥ Zz No, of units Sold (a) 186 575) 736 No. of units as clo stock 180 60. 25 Produetion (b) 266 587, 761 % of Closing Stock (afb) 79.18% 10.22% 3.29% % of goods 50.82% 89.78% 96.71% Final sales ‘549000 660375 570750 (366 x 1500) OFPC = = ‘310000 NRV ‘549000 660375 ‘260750 Joint cost 233398 280748 110854 Cost of production 233388 ‘280748 “420854 (WC +F.P.C) ‘COGS T8613 252056 “407008 (283898 x 50.82%) Closing Stock 1,14,785 28,692 13,846 ’b) Based on physical quantity | 2400000 ‘800000 “400000 “400000 (3:1:05:0.5) o) NRV. 20,00,000 4,00,000 10,00,000 6,00,000 IPCC _37e_Costing (Problems)_Printed Solutions, 46No.4 for CAICWA & MECICEC MASTER MINDS Statement incremental profit or loss Particulars M N P Final sale value 120,00,000 40,00,000 | 48,00,000 (©) Sale value of Split off point 20,00,000 12,00,000 | 28,00,000 Incremental income 10000000 2800000 2000000 OEP cost '80,00,000 32,00,000 | 36,00,000 Incremental Profit/ Loss 20,00,000 4,00,000 | 16,00,000 Itis advised to Further Process product M which will increase the profit by 20,00,000 i)(b) Statement showing cost of inventories & (COGs) Constant gross margin’): Particulars x ¥ Zz Final sale value of production 549000 660375 570760 ©) Gross Margin @ 47.4756 7260641 313517 270867 S6(WNI) Cost of Production 288359 ‘346858 289783 COGS 148544 311409. ‘289920 CIO stock 1,41,815 35,449 9,803 (288359 x 49.18%) | (346858 x 0.22%) Statement % of gross Margi © Particulars KY Y Zz Sales. 2 592875 552000 ().COGs (NRV) Skiwei sa. 252056 407008 () COGs (Constant Gross Mrgin%) Sa0544 311409 289920 Gross Profit (NRV) |) 160387 340899 144992 % of Gross profit 57.49% 57.49% 26.27% ‘Gross Profit (Constant Gross Margin %) 182456 281466 7262080 % of Gross Profit, 47 AB% 47.48% 748% wn Gross Margin Percentage Final Sale Value 1780125 (©) Joint & F.P.C (625000 + 310000) _ 935000 Gross Margin 845125 % of gross margin 47.4756 % PROBLEM NO. 8 Statement showing the apportionment of joint costs to joint products Products A B c Total ‘Output sold Kg.: (I) 44,000 | 40,000 | 20,000 Selling price per kg. at split off (Rs.): (ll) 20 2 10 Sales value at split off (Rs.): (I) x (ll) 8,80,000 | 880,000 | 2,00,000 | 19,60,000 Joint costs (costs incurred in department P (Rs.) (apportioned on the basis of sales value at | 8,80,000 | 8,80,000 | 2,00,000 | 19,60,000 the point of split off) Le. (22:22°5) (Working Note 1) IPCC _37e_Costing (Problems)_Printed Solutions. 47Ph: 98851 25025/26 www.mastermindsindia.com company's current processing policy) Statement showing product-wise and total profit for the month under reference (As per the Products A B c Total Output (ka) =(@) 44,000 | 40,000 | 20,000 Selling price per kg. after further processing (RS.) 22 24 16 ©) ‘Sales value after further processing 14,08,000 | 9,60,000 | ~3,20,000 | 26,88,000 (Rs.)-(c) = (a) x (b)) Joint costs (Rs): (@) 44,08 000 | 9,60,000 | ~3.20,000_| 26.88.00 Further processing costs (RS): (@) 1,72,800 | 1,15,200 | 64,800 | 3.52,800 (Working Note 2) Total costs (Rs.) () = [d) + (e)} 10,52,800 | 995,200 | 2,64,800 | 23,12,800 Profit/ (Loss) (Rs.): (@)- 3,565,200 | (35,200) | 65,200_| 3,75,200 Alternatively: incremental sales revenue | 5,28,000(44,000 units | 80,000(40,000 units x | 7,20,000(20,000 units (Rs) xRs, 12) Rs2) xRs. 6) Less: Further processing 1,72,800 7,16,200 64,800 costs (Rs.) [Refer to Working Note 2 (iL incremental net profit/ 355,200 (35,200) 35,200 (loss) The product wise and total profit arising from the recommendation in (I Processing decision to improve the profitability of the company. 44,000 units of product A and 20,000 units of product C should be further processed because the incremental sales revenue generated after further processing is more than the further processing costs incurred. 40,000 units of product B should be sold at the point of-split off because the incremental revenue generated after further processing is less than the further processing costs. above is as follows: Product A B c Total Profit (Rs.) 3,55,200 - 55,200 4,10,400 Working Notes: 4. Statement of department-wise costs Pp Q R s Raw materials 12,68,800 Wages 384,000 | 96,000 | 64,000 | 36,000 Overheads: 307,200 | 76,800 | 51,200 | 28,800 (Apportioned on the basis of departmental direct wages ie. 95:24:16:9) Total Cost 19,60,000 | 1,72,800 | 1,18,200 | 64,800 2. Joint costs and further processing costs i) 19,60,000. li) Costs incurred in the departments Q, R and S Costs incurred in the department P are joint costs of products A, B and C and are equal to Rs. are further processing costs of products A, B and C respectively. Further processing costs of products A, B and C thus are Rs. 1,72,800; Rs, 1,18,200 and Rs, 64,800 respectively. IPCC _37e_Costing (Problems)_Printed Solutions, Copyrights Reserved To MASTER MINDS, Guntur 48No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM HO. 9 i) Statement showing appointment of Joint Cost Particulars Mw N ° P Physical Quantity 3,00,000 | 1,00,.000 | 50,000 | 50,000 Sale value of split off point 20,00,000 | 12,00,000 | 20,00,000 | 28,00,000 Sale value of further process 1,200,000 | 40,00,000 = 48,00,000 (© Further Processing cost 80,00,000 | 32,00,000 = 36,00,000 NRV -40,00,000 | 8,00,000 | 20,00,000 | 12,00,000 Joint Cost: Based on sale value at split off px 10,00,000 | 6,00,000 | 10,00,000 | 14,00,000 (20: P2: 20: 28) a) Based on physical quantity 24,00,.000 | 8,00,000 | 4,00,000 | 4,00,000 b) Based on NRV 20,00,.000 | 4,00,.000 | 10,00,000 | 6,00,000 ii) Decision about the further refining of Product M, Nor P. Products wRs) | N(Rs.) | P(Rs.) Sales revenue after further processing: (A) <€8#84.000 | 40,00,000 | 48,00,000 Sales revenue at the point of split off: (B) \9%00,000 | 12,00,000 | 28,00,000 Incremental sales revenue: (C)=((A)(B) .00,00,000 | 28,00,000 | 20,00,000 Further processing cost: (D) 80,00,000_| 32,00,000 | 36,00,000 Profit (Loss) arising due to further processit 20,00,000 | (4,00,000) | (16,00,000) {(C)— (0) It is apparent from above that further proS Sing of products N and P results in the decrease of the operating profit by Rs. 20,00,000. Hence Wis. Sunshine Oil Company should not resort to further processing of its N and P products. This decision on adoption would increase the operating profits of the company for the month of March, 2014 by Rs, 20,00,000. 11. PROCESS COSTING PROBLEM NO.4 Process- A Account Particulars Units [| Amount Particulars Units | Amount To Input 40,000 | 3,60,000 | By Normal wastage 2,000 30,000 (2,000 units x Rs.15) To Material =| 242,000 | By Abnormal loss A/c 17,000 27,000 (1,000 units x Rs.27) To Direct wages. =| 258,000 | By Process- 8 29,600 | 7,998,200 (29,600 units « Rs.27) To Manufacturing Exp. =| 1,96,000 | By Profit & Loss Afe 7,400 | —_1,99,800 (7,400 units « Rs.27) 40,000 | _10,56,000 40,000 | _10,66,000 10,58,000 - 30,000 Cost per unit= = Rs.27 per unit "40,000 units =2,000 units Normal wastage = 40,000 units x 6% = 2,000 units Abnormal loss = 40,000 units — (37,000 units + 2,000 units) = 1,000 units Transfer to Process- B = 37,000 units x 80% = 29,600 units Sale = 37,000 units x 20% = 7,400 units. IPCC _37e_Costing (Problems)_Printed Solutions. 49Ph: 98851 25025/26 www.mastermindsindia.com Process - B Account Particulars Units [Amount | Particulars Units [Amount To Process- A 29,600 | 7,993,200 | ByNormalwastage | 2,960 | 59,200 (2,960 units * Rs 20) To Material 2,25,000 By Profit & Loss Alc | 27,000 | 12,96,000 (27,000 units « Rs.48) To Direct Wages = 7,30,000 To Manufacturing Exp. 4,23,720 To Abnormal Gain Alc | 360 17,280 (360 units * Rs.48) 43,56,200 29,960 [73.55.20 '8.48 per unit Normal wastage = 29,600 units 10% = 2,960 units ‘Abnormal gain = (27,000 units + 2,960 units) - 29,600 units = 360 units Profit & Loss Account Particulars ‘Amount Particulars ‘Amount To Process- A Ale 4,99,800 By Sales To Process- B Alc 12,96 000 Process-A 273,800 (7,400 units « Rs.37) To Indirect Expenses 448,080 Process: 8 16,47,000 (27,000 units * Rs.61) By Abnormal gain 10,080 By Net loss 25,000 19,55 880 79,55 880 Working Notes: Normal wastage (Loss) Account Particulars Units | __Amount Particulars Units [Amount To Process-A Ale 2,000 | 30,000 | By Abnormal Gain Alc | 360 7,200 (360 units Rs.20) To Process: B Ale 2,960 | 69,200 _| By Bank (Sales) 4600 | 82,000 4960 | 89,200 4960 | 89,200 ‘Abnormal Loss Account Particulars Units [Amount Particulars Units [Amount To Process-A Ale | 1,000 | 27,000 By Bank Alc 7,000 | 15,000 (1,000 units * Rs.15) By Profit & Loss Ae | _— 72,000 1,000 [27,000 7,000 [27,000 ‘Abnormal Gain Account Particulars Units [Amount Particulars Units [Amount ToNormallossAle | 360 | 7.200 By Process- B Ale 360 | 17,280 (360 units « Rs.20) To Profit & Loss Alc 70,080 360 17,280 360_| 17,280 Copyrights Reserved To MASTER MINDS, Guntur 50 IPCC _37e_Costing (Problems)_Printed Solutions,No.4 for CAICWA & MECICEC MASTER MINDS PROBLEM NO.7 Process-| Alc Particulars ary. kgs) | Tey Particulars wy | Aer To Material A 6,000 | _3,00,000 | By Normal loss 500] 8,000 To Material B 4,000 | 4,00,000 | By Process-l Ale 9.200 | 7.38.57 To taba “[__ 21500] Sz@brematiss —T—"S09] 24.00 To Overheads ( Rs. 92,000X430hrs. - 49,450, 800 hrs 40000 | _7,70,980 70,000 |_7,70,960 {(R&300000 + Rs 400,000 + Re 49.450) Re 8000) (10000 = 500) units _ R8,7,70950-Re, 8000 - pe 99 9105 9500 units Process-Il Ale ‘Amount Qty. “Amount Particulars | aty. (kgs.) | AO Partagas ney eros "To Process- 1 Ale 200 | 7,38.657 | By Nomeness 1,000 é By Dept Ae ‘To Material C 6,600 8,25,000 ne pert notes) 18,000 | 18,42,496 P Alc To Material D 4,200 3,15,00f fe the working notes) 1,000} 1,00,711 To Flavourng essence = ‘To Labour =[ 7880 To Overheads ( Rs.92,000x370hrs ) - 42,550 soon 20,000 19,43,207, 20,000 19,43,207 ‘Abnormal loss Ale Pariouars | GM) | Amountitsy] — panieuare | gh] Areuat To Process-1 Ale 300 724,086 | By Bank '300_| 4,800 By Costing Prof & Loss Ale al mee, 300 24,098 300 | 24,095 Working Notes: Calculation of Equivalent Production units Process-1__| Mat-C&D | Labour & OH Input Units Output Ul ne m mee @%) [Units [(%) | Units | (%) | Units Process: | 9,200 Miatsierted 18,000 | 100 18,000 | 100 | 18,000 | 100 | 18,000 to Packing Mat- C 6,600 | Closing WIP 1,000 100 1,000 100 | 1,000 50 500 Mat- D. 4,200 Normal loss. 1,000 : : : : : : 20,000 20,000 79,000 19,000 18,500 Calculation of Unit cost Cost component Amount (Rs.) Equivalent units Cost per unit (Rs.) Transferred-in 738,857 79,000 38.8872 Material- C 8,25,000 19,000 43.4211 IPCC _37e_Costing (Problems)_Printed Solutions, 51Ph: 98851 25025/26 www.mastermindsindia.com Material- D 3,15,000 19,000 16.5789 Flavouring essence 3,300 19,000 0.1737 Total Material Cost 18,82,157 19,000 ‘99,0609 Labour 18,500 18,500 70000 Overheads 42,550 18,500 2.3000 Total Cost 19,43,207 102.3609 Value of Materials transferred to Packing Department = 18,000 unit x Rs. 102.3609 18,42,496 Value of WIP: For Materials- 1,000 units x Rs. 99.0609 = Rs. 99,061 For a Labour & Overheads 500 units x Rs. 3.30 Rs__650 Rs, 4,00,714 PROBLEM NO. 10 {i) Calculation of Raw Material inputs during the month: ‘Quantities Leaving Quantities Entering Process Litres Preneae Litres ‘Opening WiP 800 | Transfer to Finished 4,200 Goods Raw material input (balancing figure) 5,360 | Process Losses 7,800 Closing WIP 760 6.160 6,160 (ii) Calculation of Normal Loss and Abnormal Loss/Gain Particulars liters Total process losses for month 1,800 Normal Loss (10% input) 536 ‘Abnormal Loss (balancing figure) 1,264 {ili) Calculation of values of Raw Material, Labour and Overheads added to the process: Material Labour | Overheads Cost per equivalent unit 5.23.00 Rs.7.00 Rs.9.00 Equivalent units (litre) 4824 4.952 5016 (‘efer the working note) Cost of equivalent units Rs110.952| Rs34664[ Rs45,144 ‘Add: Scrap value of normal loss Rs.8,040 ~ = (636 units * Rs. 15) Total value added Rs.1,18,092 | Rs.34,664 | Rs.45,144 Workings: ‘Statement of Equivalent Units (litre): = Equivalent Production Depaits | Units | Outputdetaits | Units |~Material | Labour | Overheads Units | (%) | Units | (%) | Units | (%) Openin Opening 800 | Units completed Units 5,360 | - Opening wiP aoo} -| -| 240) 30] 320] 40 introduced i =Fresh inputs | 3,400 | 3,400 | 100 | 3,400 | 100 | 3,400 | 700 Normal loss sat =f -[ ff -P ‘Abnormal loss 7,264 | 7,264 | 100 | 7,264 | 700 | 7,264 | 100 Closing WIP. 160| 160{ 100; 48] 30| 32] 20 6,160 6,160 | 4,824 4,952 5016 IPCC _37e_Costing (Problems)_Printed Solutions. 52No.4 for CAICWA & MECICEC MASTER MINDS {iv) Process Account for Month Particulars | titers | AMOUNT | partcutars titers | Amount TeOpeningWiP | 000 26.640| By Finished goods 4200 | 1,63,800 To Rew Materials | 6360] 110,092 | By Normal oss 526 040 ToWages 34,664 | By Abnormal oss 2s | 40,206 To Overheads 45,148 | By Closing WIP 160 4304 6,160 | 2,25,440 6,160 2,25,440 ROBLEM NO. 11 ‘Statement of Equivalent Production (FIFO Method) Equivalent Production a ou Materials | Labour | Overheads Details [Units _| Details Units [% | Units | % | Units | % | Units ‘Opening 600] Finished goods Co ) ) Stock transferred to next process:-from opening stock - From Fesh materials | 8300] 100|@00| 100] 6,300] 100] 6,200) Closing W-I-P 700] 4 700/70] 490] 70; 490) Fresh 9,200| Normal loss 382 re inputs \S 9,000) 3,030) 3030 Less: Abnormal Gain <\©=9r82)| 100] (192)| 100] (192)| 100] (192) 9,800) 3,800 8,808 | 8,808) 8,808 Statement of Bost per equivalent units Elements Cost | Eauivalent | Costper units | equivalent Unit Material Cost 35,200 Less: Scrap realisation 362 units @Rs. 6 | 2.352) 62848 2808 800 pu Labour cost 18,500 3538 210 ‘Overheads 8,630 8838. 098 Total Cost 30.078 9.08 Cost of Abnormal Gain - 192 Units Material cost of 162 units @ Rs, 6007 pu 715200, Labour cost of 192 units @ Rs. 2.10/ pu 403.20 Overheads of 192 units @ Rs. 0.98/-p.u 188.16 T7436 Cost of closing WIP - 700 Units Material cost of 700 equivalent units @ Rs. 6.00/ p.u 4,200.00 Labour cost of 490 equivalent units @ Rs.2.10/- pu. 1,028.00 Overheads of 480 equivalent @ Rs. 0.98/-p.u 480.20 5708.20 PROBLEM NO. 14 Process-I Statement of Equivalent Production Equivalent Production tnput Output Materials Conversion Pariculars | Ka Pariculars | Ka % [9 % [ho ‘Opening 40,000 | Normal loss 40,000 WAP. IPCC _37e_Costing (Problems)_Printed Solutions, 53Ph: 98851 25025/26 www.mastermindsindia.com New material | 2,00,000 | Units 1,60,000] 100] 1,60,000] 100] _1,60,000 introduced introduced & completed ‘Abnormal 10,000 | 100 10,000] 100] 10,000 loss. Closing WIP 30,000 | 100 30,000 | 2/rd| 20,000 2,40,000 2,40,000 2,00,000 1,90,000 Process-| Statement of Cost for each element Elements of | Costs of Costs in Total cost | Equivalent | Cost per cost opening process (Rs) Units Kg. WIP(Rs.) (Rs.) Kg (Rs.) Material 20,000 75,000 95,000 2,00,000 0.475 Conversion 12,000 1,02,000 1,14,000 7,90,000 (0.600 cost 32,000 1,77,000 2,098,000 1.075 ‘Statement of Apportionment of Cost Units Elements Equivalent | Costlunit Cost Total cost completed units: (Kg.) Work Material 1,60,000 0.475 76,000 completed Conversion 1,60,000 (0.600 96,000 472,000 Closing WIP. Material 30,000 0.475 14,250 Conversion 20,000 0.600 12,000 26,250 Statement showing comparative data to decide processed further into ‘AX’. Alternative | - To sell product ‘A’ after Process ~ I Sales 1,20,000 kg. xRs. 1.60 Less: Cost from Process- | 1,20,000 kg. xRs. 1.075 Profit Alternative Il - Process further into ‘AX’ Sales 2,40,000 kg. xRs. 2,00 Less: Cost from Process- | 1,20,000 kg. xRs. 1.075 Material in Process- II Processing cost in Process- II Profit (Rs) 1,92,000 41,29,000 63,000 4,80,000 Rs. 1,29,000 Rs. 1,32,000 Rs. 1,20,000 Hence company should process further It will increase profit by Rs. 99,000 - Rs. 63,000 (ii) Calculation of minimum selling price per kg Cost of processing remaining 40,000 kg. further (Rs.) Material Rs. 1,76,000x Rs. 1,32,000 Processing cost Rs. 140,000 ~ Rs. 1,20,000 Cost from process: | relating to 40,000 kg. ‘A’ (40,000 kg. Rs.1.075) Benefit foregone if 40,000 kg. ‘A’ are further processed IPCC _37e_Costing (Problems)_Printed Solutions, 99,000 Rs. 38,000 3,81,000 44,000 20,000 43,000 whether 1,20,000 kg. of product ‘A’ should be 54No.4 for CAICWA & MECICEC MASTER MINDS 40,000 kg. (Rs. 1.60- Rs. 1.075) 21,000 Total cost 1,28,000 Additional quantity of product ‘AX’ (40,000 kg. x Rs. 2) 80,000 Minimum selling price= 128.000 : Rs. 1.60 30,000%9 PROBLEM NO. 17 Process-I Alc Toiat | Coat | Profit Total | Cost | Profit Particulars Particulars (rs) | @s)_| is) s) | (Rs) | (Rs) To Opening 7,50,000 | 1,50,000 By Transfer to | 10,60,000 | 6,10,000 | 2,70,000 Belance Process Il Ne ‘To Direct Material | ~3,00,000 | 3,00,000 “Te Direct Wages | ~2,24,000 | 2.24,000 674,000 | 6 74,000 : Tess: Closing 74,000 | 74,000 : Stock Prime Cost 3,00,000 | 600,000 To Factory | 2,10,000 | 2,10,000 : ‘Overhead Sy Total Gost | 8.70,600 | 6.10.00 : xe Prof 25% on 270,000 | 270,000 transfer pice Lo SS $8 /Ben tea 6 70,80, 000 | 670,000 | 70.006. 70,80,000 | 6,70,000 | 2,70,000 PrQgeSD- Il Ale Total [Cost it Total [Cost | Profit Particulars Particulars (Rs.)_| Rs.) :) irs) |is)_| (Rs) Te Opening +,20,000 | —1,50,000 | 30.000 | By Transfer | 22.50,000 | 15,15,000 | 7.35000 Balaneo to Process ll Re To Direct ateral | 3.15000 | 315,000 z To Direct Wages | 2.25,000 | 2,25,000 ‘ To Tranefer from | 10,80.000 | 6,10,000 | 270.000 Process Ale 78,00}000 | 75;00,000 | 00,000 Tees Closing 90,000 75,000} 15.000 Stock Prime Cost T7-10}900 | 14,25,000 | 285,000 To Factory 90,000] 80,000 Overhead Total Cost 78,000000 | 15 15,000 | 288,000 Profit 20% on “450,000 =} 450000 transfer price Le 25% on cost 22,50,000 | 18,15,000 | 7.95000 000 Profit element in closing stock 90,000 =15,000 18,00,000 Dr. Finished stock Ale cr Particulars | Total Cost Profit | Particulars | Total Coat Profit To opening 450,000 | 2,85,000 | 1,65,000 | By sales 26,00,000 | 160,000 | 17,50,000 bie Toprocess | 2250000] 15,5000 | _7.35,000 Ale 27,00,000 | 18,00,000 | 9,00,000 IPCC _37e_Costing (Problems)_Printed Solutions, 55Ph: 98851 25025/26 www.mastermindsindia.com ©) closing 2,25,000 1,50,000, 75,000 Sock 2475000 | 1650000 | 625,000 Toproft (on | 325,000 =] 328000 28,00,000 | _16,50,000 | _17,60,000 726,00,000 | _16,50,000 | _17,80,000 Calculation of profit on sale: Unrealized profit | Unrealized profit Process Apparent profit | in opening stock | in closing stock | Actual profit @ co i d=atb-c Process | 2,70,000_ - - 2,70,000 Process I 4,50,000 30,000 75,000 4,05,000 Process II! 3,25,000. 4,95,000 90,000, 41,50,000 PROBLEM HO. 5 Contract No. 999 account for the year ended 31% march, 2014 Dr. cr. Particulars ‘Amount Particulars ‘Amount ‘To work in progress bid: By material return to store 30,000 = Work certified 12,00,000 = Work uncertified 20,000 To stock (material) b/d 15,000 | By material return to suppliers: 20,000 To material purchased 7,80,000 | By stock (material) cfd 30,000 “To material issued %,00,000 | By work in progress ed = Work certified 35,00,000 -__ Work uncertified 40,000 "To wages & salaries 7,00,000 Less :opening O/s (10,000) Add: closing O/s_ 20,000 710,000. To drawing & maps 60,000 To sundry expenses 15,000 To electricity charges 25,000 To plant & hire expenses 60,000 To sub contract cost 20,000 To notional profit cid 8,35,000 (balancing figure) 36,20,000 36,20,000 To costing p & | Alc (W.N.1) 4,17,500 | By notional profit b/d 8,35,000 To WIP reserve (bal. fig) 417,500, 8,35,000 8,35,000 + Assumed that expenses incurred for drawing and maps are used exclusively for this contract only. Particulars ‘Amount Particulars ‘Amount To balance cid 26,25,000 | By balance bid '9,00,000 (35,00,000 x 75%) (75% of Rs.12,00,000) By bank Ale 17,25 000 26,258,000 26,25,000 Working Notes 1. Profit to be transferred to costing profit & loss Account: Copyrights Reserved a) Percentage of completion = workcertified To MASTER MINDS, Guntur Valueof contract 3500000 , 99 = eg 100% 70% IPCC _37e_Costing (Problems)_Printed Solutions, 56No.4 for CAICWA & MECICEC MASTER MINDS b) Profit to be transferred to costing profit & loss account Cashreceived - Direct wages 232| 432| 390] 216 ~ Overheads 40s| 260) 262] 1.05 = _Depreciaton 1.00| 070| 0.55| 060 Total: (P) 10.38 | 9.42) 9.05] 4.61 [ Proftin reserve 150 El enaers : Material at site on 31/03/12 045] 020) 008] 005 Total: (@) 195| 0.20| 0.08] 0.05 Cost of contract (R)= IP) - (@)] 40) 922) 897) 456 Work certified 1276 | 1326| 7.56| 432 Work not certified oss 024) 014] 0.18 Total: (8) 1360| 13.0, 7.70| 4.0 Profit (loss) for the year [(R) - (S) 320] 428) (1.27)| (0.06) Ii) Profitto be taken to costing profit & loss Account of the year in respect of respective contract IPCC _37e_Costing (Problems)_Printed Solutions, 59Ph: 98851 25025/26 www.mastermindsindia.com Contract 723 = 2 Notionalprofitx Casnteceived - 2.5 29,957 _is.1.9086Iakhs 3 Work certified 3 17.40 Workcertified | cashreceived Contract 726 = Estimated total profitoncompletionx contractprice * Work certified 7 90 | 1440" 13.26 Re1.80 LEM NO. 16 Contract Account for the year ended 31st March, 2014 Particulars ‘Amount Particulars ‘Amount To material issue to site 5,000 | By material at site 1,800 To direct wages 3,800 3,910 | By material retuned 100 ‘Add: outstanding wages 110 To plant hire 700 | By cost of contract 8,780 To site office cost 270 To direct expenses ‘500 To depreciation (special plant) 300 10,680 10,680 To cost of contract 8,780 | By work certified 10,000 To profit & loss Ale 1,200 ‘To WIP(reserve)e/d 20 10,000 10,000 Working Note: Value of workcertified , 9 _ 100lakhs Malue of workeorttied , 400 = 100 =92.59% Value of the contract 08lakhs 4. Percentage of completion of contrat 2. Since the percentage of completion of the contract is more than 90% therefore, the profit to be taken to profit & loss Alc can be computed by using the following formula, Profit to be taken to profit & loss Account CashReceived | Workcertified = Budget /estimatedprofit x = Sy, Work certified § Contractprice 7,200 . 10,000 = x Rs 1 1800x7590 *Tog00 7 R® t200lakhs PROBLEM NO. 4 PRODUCTION BUDGET FOR PRODUCTS X AND Y X Units Y Units Inventory at the end of the year 10,000 20,000 ‘Sales forecast ‘80,000 7,50,000 Total requirements ‘90,000 1,70,000 Less: beginning inventory 30,000 50,000 production. 60,000 1,20,000 Budgeted requirements of components P,Q and R Components Pp Q R For product X: production 60,000 units P: 60,000 X 1 per unit 60,000 Q: 60,000 X 2 per unit 1,20,000 IPCC _37e_Costing (Problems)_Printed Solutions. 60No.4 for CAICWA & MECICEC MASTER MINDS For product Y: production 1,20,000 units P:1,20,000 X 2 per unit 2,40,000 Q:1,20,000 X 1 per unit 1,20,000 R: 1,20,000 X 2 per unit 2,40,000 For Component R : Production 2,40,000 comp 2,40,000 Q: 2,40,000 X 1 per component R Total requirement 3,00,000 4,80,000 2,40,000 ‘The company is advised to adopt EOQ System: FERRED « 15,000 components = 20 000 components PROBLEM NO.5 Working note: Total annul production (ut) Sales in 4 quarters 1,53,750 units A: dosing balance 16,250 unis 1 units Less: opening balance units Total number of unis tobe reduced inthe next year 8,000 units i) Production budget (in units) & Particulars ‘Quarters 1 Mi Vv Total Units | Units | Units | Units | Units Sales, 30,000 | 37,500] 41,250| 45,000 | 1,53,750 Production in current quarter 24,000| 30,000 [ 33,000] 36,000 (80% of sale of the current quarter) Production for next quarter 7.500; 6,250/ 9,000] 12,250° (20% of sale of the next quarter) Total production 31,500] 38,250 [42,000] 48,250 | 1,60,000 "Difference figure. ii) Raw material consumption budget in quantity Particulars Quarters T 1 mW W_ | Total Units | Units | units | Units | Units Units to be produced in each quarter: (A) 31,500 | 38,250 | 42,000 | 48,250 | 7,60,000 Raw material consumption pu (kg): (B) 2 2 2 2 Total raw material consumption (kg): (Ax B) | 63,000 | 76,500] 84,000 | 96,500 | 3,20,000 iii) Raw material purchase budget (in quantity) Raw material required for production (kg.) 3,20,000 ‘Add: closing balance of raw material (kg.) 5,000 3,25,000 Less: opening balance of raw material (kg.) 10,000 Material to be purchased (kg.) 3,15,000 IPCC _37e_Costing (Problems)_Printed Solutions. 61Ph: 98851 25025/26 ‘www.mastermindsindia.com ‘Quariers | _%ofannual | Quantity of raw material to be | Rate per | Amount a) requirement of purchased kg. (5) = (3) x (4) (Qty) for @) @ purchasing raw material (2) 1 30 94,500 2 1,89,000 (3.18,000 x 30%) Tr Ea 1,57,500 3 472,500 (3.18/00 x 50%) mW 20 63,000 4 2,52,000 (3.18,000 x 20%) Total 3,15,000_ 9,13,500 PROBLEM HO..6 Number of days in budget period = 4 weeks x5 days = 20 days Number of units to be produced Product-A (units) | Product-B (units) Budgeted Sales 2.400 3,600. ‘Add Closing stock [2.400 units ) [3800units 480 00 Bo days 427% Togas 2508 ‘Less! Opening stock 400 200 2,480 4,300, (i) Material Purchase Budget: Material-X (Kg.) Material-Y (Kg) | Material required Product-A 72,400 9.920 (2,480 units x 5'kg.) | (2,480 units x 4 kg.) Product-5 12,900 25,800 (4,300 units x 3kg) | (4,300 units * 6 kg.) 25,300 35,720 ‘Add. Closing stock [25300K95. 119 Jaye] | 25720K9S. 6 gaye] 12,650 10,716 todays 1%)“ aodays O°", Less: Opening stock 7,000 500 Quantity to be purchased 36,950 | 45 935 Rate per kg. of Material Rs. 4 Rs.6 Total Cost Rs. 147,800 Rs. 275,616 Wages Budget Product-A (Hours) Product-B (Hours) Units to be produced 2,480 units 4,300 units Standard hours allowed per unit 3 5 Total Standard Hours allowed 7,440 21,500 Productive hours required for production | 7.440hours _ 21500 hours _ Tne = 9300 So — 26875 ‘Add: Non-Productive down time 1,860 hours. 5,375 hours, (20% of 9,300 hours) _| (20% of 26,875 hours) Hours to be paid 11,160 32,250 Total Hours to be paid = 43,410 hours (11,160 + 32,250) Hours to be paid at normal rate Hours to be paid at premium rate = 43,410 hours ~ 28,800 hours = 14,610 IPCC _37e_Costing (Problems)_Printed Solutions, = 4 weeks * 40 hours * 180 workers = 28,800 hours hours 62No.4 for CAICWA & MECICEC MASTER MINDS Total wages to be paid 28,800 hours x Rs, 25 + 14,610 hours x Rs. 37.5 = Rs. 7,20,000 + Rs. 5,47,875 = Re, 12,67,875, PROBLEM NO. 8 a) Production budget (in units) Product- Koos (units) Expected sales 8,000 ‘Add: closing stock 7,000 Less! opening stock (600) (1,600) Units to be produced 8,200 4,700 b) Material purchased budget Material X Material Y Material Z (kg.) (kg) (ltr) Material required 98,400 7,23,000 5,600 = Product Kees | (8,200 units x 12kg.) | (6.200 units x 15 kg.) | (8.200 units x Bitr) = Product Hes2 70,500 65,800 (4,700 units x15 kg.) | (4,70 6kg.) | (4.700 units x 14% Total 1,68,900 “200 1,31,400 ‘Add: closing stock 30,000 18,000 7,600 Less! opening stock (25,000) (20,000) (14,000) Quantity to be 173,900 _ © 1,39,200 124,900 purchased SO Rate Re. 15 pea Re16 perky Reb peri Purchase cost 26,08 500 22,27,200 624,500 ©) Direct labour budget Particulars Unskilled (hours) Skilled (hours) For product Keay 198,400 5,600 (8,200 units x 12 hours) (8,200 units x 8 hours) For product Hesz 47,000 23,500 (4,700 units x 10 hours) (4,700 units x Shours) Labour hours required 1,45,400 89,100 Rate Rs.40 per hour Rs.75 per hour Wages to be paid Rs.58,16,000 Rs.66 82,500 ‘OBLEM NO. 12 Particulars 20,000units | 15,000units | 18,000units Direct material 10,00,000 750,000 ,00,000 (20,000x 50) | (15,000x 50) |_(18,000x 50) Direct labour 4,00,000 3,00,000 360,000 (20,000 x 20)_| (18,000 20) | (18,000 x 20) Variable overheads 3,00,000 2.25,000 2,70,000 (20,000 15) | (15,000% 15) |_(18,000x 15) Direct expenses 1,20,000 0,000 1,08,000 (20,0006) | _(15,000x6) | _(18,000x 6) Selling expenses (variable) 2,40,000 1,80,000 2,16,000 (20,000x 12) | (15,000x 12) |_(18.000x 12) Selling expenses (fixed) (3 x 20,000) 60,000 60,000 {60,000 IPCC _37e_Costing (Problems)_Printed Solutions, 63Ph: 98851 25025/26 www.mastermindsindia.com Factory expenses (fixed) (7 x 20,000) 11,40,000 440,000 440,000 ‘Administration expenses{fixed)(4 x 20,000) £80,000) 80,000 ‘80,000 Distribution expenses (variable)"* 2,04,000 1,53,000 1,83,600 (10.20% (10.20 (10.20 20,000) 45,000) 48,000) Distibution expenses (fixed) "*(1 80 x 20,000) 36,000 36,000 36,000 25,80,000 20,414,000 23,53,000 Selling expenses: fixed cost per unit = Rs.15 x 20% =Rs.3 Fixed cost = Rs.3 x 20,000units = Rs.60,000 Variable cost per unit = Rs.15 —Rs.3 = Rs.12 “distribution expenses = fixed cost per unit = 12 x 15% = Rs.1.80 Fixed cost = Rs.1.80 x 20,000 units = Rs.36,000 Variable cost per unit = Rs.12- Rs.1.80 = Rs.10.20 PROBLEM NO. 15 i) Statement showing Flexible Budget and its comparison with actual Master] Flexible Actual for Budget | Budget (at 80,000 | standard ya eeence " units units cost) | A. | Sales 3,20,000 4.00 | 2,88,000 | 2,80,000 | 8,000 (A) B. | Direct material 80,000 4.00| _72,000| 73,600 | 1,600 (A) C. | Direct wages 1,20,000 1.50 | 1,08,000 | 1,04,800 | 3,200 (F) D. | Variable overhead 40,000 050| 36,000] 37,600 | 1,600(A) E. | Total variable cost 2,40,000 300] 216,000] 2,16,000 | — F. | Contribution 80,000 4.00[ _72,000| 64,000 | — G. | Fixed overhead 40,000 050 | 40,000 39,200 | 800 (F) H, | Net prof 40,000 oso] 32,000| 24,800 | 7,200 (A) ii) Variances: © Sales Price Variance = Actual Quantity (Standard Rate ~ Actual Rate) = 72,000 units (Rs. 4.00 - Rs. 3.89) = Rs. 8,000 (A) ‘© Direct Material Cost Variance ——_—= Standard Cost for Actual output — Actual cost = Rs. 72,000 - Rs. 73,600 = Rs. 1,600 (A) © Direct Material Price Variance = Actual Quantity (Standard rate ~ Actual Rate) = 78,400units| Rs.1.00-R&73800_\- Re. 4,800 (F) ( 78,400units © Direct Material Usage Variance Standard Rate (Std. Qty. - Actual Quantity) = Rs.1 (72,000 units ~ 78,400 units) = Rs. 6,400 (A) ‘© Direct Labour Cost Variance = Standard Cost for actual output ~ Actual cost = Rs, 1,08,000 ~ Rs. 1,04,800 = Rs, 3,200 (F) © Direct Labour Rate Variance = Actual Hour (Standard Rate ~ Actual Rate) Rs.104800 ) = 70,400 hour! Rs.1.5 Rs. 800 (F) ‘© Direct Labour Efficiency = Standard Rate (Standard Hour ~ Actual Hour) IPCC _37e_Costing (Problems)_Printed Solutions, 64No.4 for CAICWA & MECICEC MASTER MINDS = Rs. 1.5 (72,000 - 70,400) = Rs. 2,400 (F) © Variable Overhead = Recovered variable overhead — Actual variable overhead = (72,000 units x Rs. 0.50) ~ Rs. 37,600 = Rs. 1,600 (A) * Fixed Overhead Expenditure = Budgeted fixed overhead ~ Actual fixed overhead = Rs, 40,000 ~ Rs. 39,200 = Rs. 800 (F) * Sales Volume (Profit) Variance = Std. Profit (Budgeted Quantity — Actual Quantity) = Rs, 0.50 (80,000 - 72,000) = Rs.4,000 (A) Copyrights Reserved To MASTER MINDS, Guntur Verified By: M.P. Raju Sir Executed By: Kavitha THE END IPCC _37e_Costing (Problems)_Printed Solutions, 65