Q-1

Demand in Units of Stock Expected stock

Reorder level Safety Stock Safety stock Cost Probability Stock out Cost Total Cost
Lead Time Out out units

a b=a-1000(w-1) c= b*216 (w-2) d e=d-a f g=e*f h=g*2400(w-3)*12(w-4)

1200 200 43200 1200 - 5% - 0 43200

1100 100 21600 1200 100 5% 5 144000 165600

1200 200 5% 10 288000 288000

1000 - 0
1100 100 20% 20 576000 576000

W-1 Avg Demand Units

(900*.3)+(1000*.45)+(1100*.20)+(1200*.05) 1000

W-2 CC pupa Rs.

(2400*(1%+8%) 216

W-3 Contribution Loss Rs.

(3400-2400) 1000

W-4 no of Stock Out Times

(360/30) 12
Solution # 2:

Allocation / Apportionment
Items Basis Total Cutting Stitching Finishing Maintenance Canteen Marks
----------------------------- Rs. million ---------------------------
Dep (build.) Area 40.00 13.64 10.91 7.27 4.55 3.64 2
Machine
Dep (P&M) 18.00 6.00 9.00 3.00 - -
hours 2
Indirect labor Given 54.00 11.00 12.00 13.00 10.00 8.00 0.5
Insurance (build.) Area 22.00 7.50 6.00 4.00 2.50 2.00 2
Power KWH 96.00 21.33 53.33 21.33 - - 2
Gen. light Light points 14.00 4.00 4.00 3.00 1.00 2.00 2
Machine
Repairs (P&M) 36.00 12.00 18.00 6.00 - -
hours 1
75.47 113.24 57.61 18.05 15.64
Secondary apportionment:
Canteen 4.69 4.69 5.47 0.78 (15.64) 1
Maintenance 4.71 8.47 5.65 (18.83) - 1

Total OH 84.87 126.41 68.73 - -

Basis 56,250 36,000 30,000 1

Labor hours Machine hours Labor hours

OAR per hour (Rs.) 1,508.75 3,511.27 2,290.90 0.5

Solution Q.3

Absorption costing
Q-1 Q-2
Sales 100,000 125,000 M-0.5 each
Cost of Sales
Opening - 39,600 M-0.5 each
Production cost (18x1.1x6000) 118,800 79,200 M-0.5 each
Closing stock (18x1.1x2000) (39,600) (19,800) M-0.5 each
Cost of Sales 79,200 99,000
Under /(over )applied adj (7,425) (825) M-0.5 each
Cost of Sales -actual 71,775 98,175 M-0.5 each
Gross Profit 28,225 26,825 M-0.5 each
Admin & Selling (8,000) (8,000) M-0.5 each
Net Profit 20,225 18,825 M-0.5 each

Q-1 Q-2
Applied (3x1.1*6000) 19,800 13,200
Actual (3x1.1*(15000/4) (12,375) (12,375)
7,425 825

Marginal costing
Q-1 Q-2
Sales 100,000 125,000 M-0.5 each
Variable Cost of Sales
Opening - 33,000 M-0.5 each
Production cost (15x1.1x6000) 99,000 66,000 M-0.5 each
Closing stock (15x1.1x2000) (33,000) (16,500) M-0.5 each
Cost of Sales 66,000 82,500
Contribution 34,000 42,500
Admin & Selling (8,000) (8,000) M-0.5 each
Fixed Production (12,375) (12,375) M-0.5 each
Net Profit 13,625 22,125 M-0.5 each
Solution # 4: X Y Z

Basic Wages 13,440.00 16,800.00 11,760.00 M-1 each

(84x160) (84x200) (84x140)

Overtime 3,360.00 9,000.00 - M-1.5 each

(6x160x1.5) (6x200x1.5)
(6x160x2) (18x200x2)

Bonus(w-1) 28,672.00 26,880.00 16,127.89 M-1.5 each

Total Wages 45,472.00 52,680.00 27,887.89

W-1
X Y Z
Std time for actual output(actual prod/std prod per hour) 320.00 276.00 204.00
('320/1) ('276/1) ('136/(0.66667))
Actual time for actual output 96.00 108.00 60.00
Time Saved 224.00 168.00 144.00

Hourly rate 160.00 200.00 140.00

Bonus 28,672.00 26,880.00 16,127.89
Solution Q.5 Ali Chemicals (AC)
Process -B Account
Litres Rs. '000' Litres Rs. '000'
Opening WIP M-1 10,000 4,000 Normal Loss M-1 3,100 434.00
Transferred from Dept A M-1 45,000 27,000 Finished goods M-3 70,000 69,214
Additional Material M-1 25,000 20,000 -
Converson cost M-1 - 25,000

Abnormal gain M-3 1,100 1,061

Closing WIP M-2 8,000 7,413

81,100 77,061 81,100 77,061

Abnormal gain Account

Rs. '000' Rs. '000'

Normal loss adj 154 Work in process 1,061

(1100x140)

P&L (bal.) 907

1,061 1,061
M-1 each
(a) Statement of Equivalent Units
Equivalent Units Quantity
Schedule
Material Conversion
------------------Liter----------------
Opening WIP (90% to conversion) (10,000) (9,000) 10,000
Material received from Process-A 45,000
Material added in Process-B 25,000
80,000
Transferred to finished goods 70,000 70,000 70,000
Units started and completed during the month (A) 60,000 61,000
Closing WIP (60% to conversion) (B) 8,000 4800 8,000
Normal Loss at 5% [(80,000-10,000-8,000) x 5%] 3,100
Abnormal gain (70% to conversion) balancing (C) (1,100) (770) (1,100)
(D) 66,900 65,030 80,000

(b) Statement of Cost Per Unit

Cost Material Conversion Total
-------Rs. in ‘000’------
Opening WIP - - 4,000
Cost for the month: Department-A 27,000 27,000
Department-B 20,000 25,000 45,000
Normal loss scrap value (3100 x 140) (434) - (434)
Net Cost (E) 46,566 25,000 75,566

----------- Rupees ----------

Cost per Unit [F = (E ÷ D)] 696.05 384.44 -

(c) Statement of Evaluation

Cost of finish goods: ------------Rs. in ‘000’-----------
Opening WIP 4,000
Cost for the month ( A x F) 41,763 23,451 65,214
69,214

Cost of Closing Stock (B x F) 5,568 1,845 7413

Cost of abnormal gain (CxF) 766 296 1,061

Solution Q.6
a. Material 80,000
0.75
Account payable 80,000

b. WIP 130,000
0.75
Material 130,000

c. WIP 160,000
0.75
Payroll 160,000

d. Accrued Payable 150,000

0.75
Cash 150,000

e. Account Payable 270,000

0.75
Cash 270,000

f. FOH control A/C 4354

Acc. Dep- Building 400 1.5

Acc. Dep- Equipment 3,954

g. WIP 96,000
0.75
FOH control A/C 96,000

h. Finished goods 406,800 0.75

WIP 406,800

i. Cost of Sale 410,000

1
Finish goods 410,000

j. Account receivables 570,000

0.5
Sales 570,000

WIP
Opening balace 170,800 Finish goods 406,800
FOH 96,000
Material 130,000
Labor 160,000
Closing balance 150,000
Solution Q.7

Direct Material

First 24 Batch
1200x70 x 24 2,016,000.00 M-2

Next 96 Batch
(1200x.92/.95) x 70 x96 7,809,347.37 M-5
9,825,347.37

Direct Labour
265 x 16955.49 4,493,204.85 M-6

4,493,204.85

POH
135 x 16955.49 2,288,991.15 M-2 2,288,991.15

Total Production Cost of 120 Batches 16,607,543.37

(w-1)
A B C=A/B
X YX Y
1.00 200.00 200.00
2.00 380.00 190.00 95%
3.00 554.00 184.67
4.00 722.00 180.50 95%

Thereby Learning Rate is 95%

W-2

YX =75
Y (75) =
200 x 75^(Log(0.95)/(Log(2))
145.30
YX[75] = 10,897.72

10,897.72
75-120
75th batch time will be applicable for all units between 76-100

75th Batch x 45
134.62 x45
6,057.77

75th Batch= YX 75 10,897.72

YX74 (10,763.10)
75th batch 134.62

Y (74) = 200 x 74^(Log(0.95)/(Log(2))

145.45
YX (74) = 10,763.10
10,763.10

TOTAL LABOUR HOURS FOR 120 BATCHES

YX 75 10,897.72
76-100 6,057.77
16,955.49