Question 1

Modern manufactures Ltd. have three production departments P1, P2, P3 and two service departments S1
and S2 , the details pertaining to which are as under.

P1 P2 P3 S1 S2
Direct wages 3,000 2,000 3,000 1500 195
Working hours 3,070 4,475 2,419 –– ––
Value of Machines (Rs.) 60,000 80,000 1,00,000 5,000 5,000
H. P. of machines (Total) 60 30 50 10 ––
Light points 10 15 20 10 5
Floor space (sq ft.) 2,000 2,500 3,000 2,000 500

The following figures extracted from the accounting records are relevant :
Rs.
Rent and rates 5,000
General lighting 600
Indirect wages 1,939
Power 1,500
Depreciation on Machines 10,000
Sundries 9,695
The expenses of the service departments are allocated as under:

P1 P2 P3 S1 S2
S1 20% 30% 40% –– 10%
S2 30% 20% 30% 20% ––
Find out the cost of product X which is processed for manufactures in departments P1, P2, P3 for 4,5 and 3
hours respectively, given that its direct material cost is Rs. 50 and direct labour cost Rs. 30.

Question 2
In a manufacturing unit, factory overhead was recovered at a pre-determined rate Rs. 25 per man-day.
The total factory overhead expenses incurred and the man-days actually worked were Rs; 41.50 lakh and
1.5 lakhs man days respectively. Out of the 40,000 units produced during a period, 30,000 were sold.
On analyzing the reasons, it was found that 60% of the unabsorbed overheads were due to defective
planning and the rest were attributable to increase in overheads cost.