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  • Cost Analysis of Production Units from 8000 to 14000 with Managerial Implications

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    rajyalakshmi
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    The document presents cost details like direct material, direct labor, variable overhead etc. for different production levels ranging from 8000 units to 14000 units. It calculates the cost per unit for each level and finds that the cost per unit decreases as the production level increases, making 12000 units the most cost effective level. The cash budget shows projected cash inflows from sales and loans and outflows for purchases, wages, rent etc. for months from June to September 2019.

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    The document presents cost details like direct material, direct labor, variable overhead etc. for different production levels ranging from 8000 units to 14000 units. It calculates the cost per unit for each level and finds that the cost per unit decreases as the production level increases, making 12000 units the most cost effective level. The cash budget shows projected cash inflows from sales and loans and outflows for purchases, wages, rent etc. for months from June to September 2019.

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    8 views5 pages

    Cost Analysis of Production Units from 8000 to 14000 with Managerial Implications

    Uploaded by

    rajyalakshmi
    The document presents cost details like direct material, direct labor, variable overhead etc. for different production levels ranging from 8000 units to 14000 units. It calculates the cost per unit for each level and finds that the cost per unit decreases as the production level increases, making 12000 units the most cost effective level. The cash budget shows projected cash inflows from sales and loans and outflows for purchases, wages, rent etc. for months from June to September 2019.

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    © All Rights Reserved
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    of 5

    particulars 8000 10000 12000 14000

    Direct material ₹ 2,400,000 ₹ 3,000,000 ₹ 3,600,000 ₹ 4,200,000


    direct labour ₹ 1,200,000 ₹ 1,500,000 ₹ 1,800,000 ₹ 2,100,000
    variable overhead ₹ 1,000,000 ₹ 1,250,000 ₹ 1,500,000 ₹ 1,750,000
    variable expenses ₹ 200,000 ₹ 250,000 ₹ 300,000 ₹ 350,000
    Selling cost(750000)
    Fixed (10%) ₹ 75,000 ₹ 75,000 ₹ 75,000 ₹ 75,000
    Variable(90%) ₹ 675,000 ₹ 843,750 ₹ 1,012,500 ₹ 1,181,250
    Administration Expenses ₹ 250,000 ₹ 250,000 ₹ 250,000 ₹ 250,000
    Distribution cost(250000)
    Fixed (20%) ₹ 50,000 ₹ 50,000 ₹ 50,000 ₹ 50,000
    variable(80%) ₹ 200,000 ₹ 250,000 ₹ 300,000 ₹ 350,000
    Fixed overhead ₹ 750,000 ₹ 750,000 ₹ 750,000 ₹ 750,000
    total cost ₹ 6,800,000 ₹ 8,218,750 ₹ 9,637,500 ₹ 11,056,250

    Managerial Implication:
    In the 8000 units the cost of sale per unit is rs. 850 where as in 100
    822 which is less than 8000 units and in 12000 units the cost of sale
    units and 12000 units and in 140000 units the total cost of sale is 79
    units, 12000 units.As the no.of units is going to increase the total co
    units is preferable.
    per unit
    particulars 8000 10000 12000 14000
    Direct material ₹ 300 ₹ 300 ₹ 300 ₹ 300
    direct labour ₹ 150 ₹ 150 ₹ 150 ₹ 150
    variable overhead ₹ 125 ₹ 125 ₹ 125 ₹ 125
    variable expenses ₹ 25 ₹ 25 ₹ 25 ₹ 25
    Selling cost(750000)
    Fixed (10%) ₹ 9 ₹ 8 ₹ 6 ₹ 5
    Variable(90%) ₹ 84 ₹ 84 ₹ 84 ₹ 84
    Administration Expenses ₹ 31 ₹ 25 ₹ 21 ₹ 18
    Distribution cost(250000)
    Fixed (20%) ₹ 6 ₹ 5 ₹ 4 ₹ 4
    variable(80%) ₹ 25 ₹ 25 ₹ 25 ₹ 25
    Fixed overhead ₹ 94 ₹ 75 ₹ 63 ₹ 54
    total cost ₹ 850 ₹ 822 ₹ 803 ₹ 790

    unit is rs. 850 where as in 10000 units the cost of sale per units is
    in 12000 units the cost of sale per unit is 803 which is less than 8000
    units the total cost of sale is 790 which is less than 8000 units,10000
    s going to increase the total cost of sale sis going to decrease.8000
    Cash budget till period ending 30 sept 2019
    Particulars June July Aug Sept
    Opening balance 2400000 -7801000 3581000 472500
    Receipts
    Sales in cash(1st instl) 6175000 6650000 7612500 7243750
    debtor(2nd instl of previous month) 6400000 6500000 7000000 7250000
    Loan from bank 12000000
    Total Receipts (A) 14975000 17349000 18193500 14966250
    Payments
    Purchase in cash 5376000 5568000 5856000 6144000
    Creditors(payment of pervious month purchase) 5600000 5800000 6100000 6400000
    Wages 2400000 2400000 2640000 2640000
    Rent 3000000 3000000
    8% debentures 6400000
    Dividend 2400000
    Total Payments (B) 22776000 13768000 16996000 18184000
    Cash balance(A-B) -7801000 3581000 1197500 -3217750
    Month sales figure purchase figures
    April 12000000 10240000
    may 12800000 10400000
    june 13000000 11200000
    july 14000000 11600000
    august 14500000 12200000
    sept 15250000 12800000
    oct 16000000 12600000
    nov 15750000

    Total no. of debenture 800000


    10000 15000 units
    400000 600000
    2000000 3000000
    2200000 3300000
    1000000 1500000
    1500000 2250000
    2500000 3750000
    2500000 3750000
    3000000 4500000
    400000 600000
    15500000 23250000

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