Question 1 C Plus I Plus V Plus Selling Price 263 242 237 Direct Material (100) (98) (97) Direct Labour (15) (13) (12) Var OH (23) (19) (16) Var Selling OH (12) (8) (10) Commission (13) (12) (12) CM 100 92 90 CM on net Sales% 40% 40% 40% CM on SP 38% 38% 38% Ratio (unit) 425 255 170 Ratio (Rs) 111,842.11 61,736.84 40,263.16 213,842 Fixed Cost Production 13,500,000 6,050,000 3,700,000 Selling and Distribution 2,125,000 1,275,000 850,000 15,625,000 7,325,000 4,550,000 27,500,000 Units (Manuf) 540,000 275,000 185,000 Units (Sold) 425,000 255,000 170,000 OAR (Manuf) 25 22 20 OAR (S&D) 5 5 5 VC (except Commision) (150) (138) (135) Break even in Units C Plus I Plus V Plus Full CM per packet 42,500.00 23,460 15,300 81,260 Units 425 255 170 850 CM per unit (Average) 96 Total Fixed Overhead 27,500,000.00 Break Even units 287,656.90 C Plus 143,828 I Plus 86,297 V Plus 57,531 Break even in (Rupees) C Plus I Plus V Plus Full CM per packet 38% 38% 38% 114% Ratio (Rupees) 111,842 61,737 40,263 213,842 CM (Rupees) 42,500.00 23,460.00 15,300.00 81,260 CM per unit (Average) 0.38 Total Fixed Overhead 27,500,000.00 Break Even (Rupees) 72,368,421.05 C Plus 37,849,593 143,828.45 I Plus 20,892,975 86,297.07 V Plus 13,625,853 57,531.38
To prove Sales 37,849,592.60 20,892,975.12 13,625,853.34 Var Cost (23,466,747) (12,953,645) (8,448,029) CM 14,382,845 7,939,331 5,177,824 27,500,000 Fixed Cost (27,500,000) Profit -
Question 2-1 2 3 4 Sales 300,000,000 333,900,000 371,630,700 413,624,969 VC (240,000,000) (267,120,000) (297,304,560) (330,899,975) Depriciation (32,000,000) (25,600,000) (20,480,000) (16,384,000) Taxable Profit 28,000,000 41,180,000 53,846,140 66,340,994 Tax Payments (9,520,000) (14,001,200) (18,307,688) (22,555,938) Profit after tax 18,480,000 27,178,800 35,538,452 43,785,056 Add Back Dep 32,000,000 25,600,000 20,480,000 16,384,000 Initial outlay (160,000,000) - - - - Residual Value - - - - 65,536,000 Working Capital (20,000,000) - - - 20,000,000 (180,000,000) 50,480,000 52,778,800 56,018,452 145,705,056 PV @ 18% (180,000,000) 42,779,661 37,904,912 34,094,560 75,153,047 NPV 9,932,180 PV at 60.95% (180,000,000) 41,946,700 36,443,193 32,141,524 69,468,583 (to prove IRR) - Residual Value Cost 160,000,000 Depriciation (94,464,000) RV at the end of project 65,536,000 Internal Rate of Return year Cash Flows - (180,000,000) 1 50,480,000 2 52,778,800 3 56,018,452 4 145,705,056 20.34%
Question 3 Total Fixed over heards 3,600,000 Budgeted units 4,500 Fixed OAR per unit 800 Total OAR per unit 2,000 Fixed OAR (800) Variable OH per unit 1,200 OAR 800 Actual Production 4,325 Budgeted Production 4,500 Absorbed Overheads 3,460,000 Underabsorbed OH 100,000 Actual FOH 3,560,000 Spending Variance Budgeted Expenditure 3,600,000 Actual Expenditure (3,560,000) Expenditure Variance 40,000 Favourable Volume Variance Budegetd Output 4,500 Actual Output (4,325) Under Production 175 OAR 800 Volume Varaince 140,000 Adverse Net (100,000) Total Fixed over heards 4,050,000 Budgeted units 4,500 Fixed OAR per unit 900 Total OAR per unit 2,250 Fixed OAR (900) Variable OH per unit 1,350
Budgeted Profit and Loss Sales 56,580,000 Opening Inventory 4,920,000 Cost of Goods manuf 40,275,000 Closing Stock (4,475,000) (40,720,000) Gross CM 15,860,000 Variable Selling Cost (3,675,000) Net CM 12,185,000 Fixed Production overheads (4,050,000) Fixed Non Manuf Overaheads (1,575,000) Net Profit (Marginal Costing) 6,560,000 Opening Inventory Cost per unit of opening inventory 5,400,000 FOH absorbed (480,000) Variable production cost of opening inventory 4,920,000 Production cost Given under absorption costing 44,325,000 Absorbed FOH (4,050,000) Variable Production cost 40,275,000 Closing Inventory Given under absorption costing 4,925,000 Absorbed FOH (450,000) Variable cost 4,475,000 Reconcilation of Budgeted Profits Absorption costing profit 6,530,000 Loading in closing Stock (450,000) Loading in Opening Stock 480,000 Profit as per Marginal Costing 6,560,000 -
Question 4 Quantity Schedule Opening WIP 15,000 New Input 120,000 135,000 Completed Units 110,000 Closing WIP 17,000 Normal Loss 5,500 Abnormal Loss 2,500 135,000 Cost charged to depart Completed Units Cost Elements Current Cost From Op From New Closing WIP Normal Loss Ab Loss EPU Cost / Unit Material 36,240,000-95,000 17,000 5,500 2,500 120,000 302 Labour 14,224,000 3,000 95,000 13,600 5,500 2,500 119,600 119 Overheads 11,379,200 3,000 95,000 13,600 5,500 2,500 119,600 95 516
Cost Accounted For Completed Units From Opening WIP Prior Period Cost 7,125,000 Material - Labour 356,789 Overheads 285,431 7,767,221 Current Period Output 49,026,990 Normal Loss 2,838,405 59,632,615 Closing WIP Material 5,134,000 Labour 1,617,445 Overheads 1,293,956 8,045,401 Abnormal Loss Material 755,000 Labour 297,324 Overheads 237,860 1,290,184 Total Cost Accounted for 68,968,200
Accounting Entries Material 36,240,000 Labour 14,224,000 OverHead 11,500,000 Cash 61,964,000 Process Account 61,843,200 Material 36,240,000 Labour 14,224,000 Applied Overheads 11,379,200 Process B 59,632,615 Process 59,632,615 Stock in trade 8,045,401 Process 8,045,401 Ab normal Loss 1,290,184 Process 1,290,184 Profit and Loss Account 1,290,184 Ab normal Loss 1,290,184
Question 5 Total variable cost of conversion 4,890,000 Hourly rate 230 Total Hours used in December 21,260.87 Total liters produced Alpha 11,300 Beta 14,700 26,000 Hours per liter 0.82 CM per liter when not Further processed Alpha Beta Direct Materials 6,519,231 8,480,769 Conversion Cost 2,125,269 2,764,731 8,644,500 11,245,500 Liters 11,300 14,700 Cost per liter 765 765 SP (1,000) (1,125) CM per unit (235) (360) Option 1 Alpha Beta Processable liters Hours available 5,000 5,000 Hours per unit 0.453 0.533 Units 11,029 9,375 Increamental Revenue per liter 380 400 Increamental Cost per liter (158) (205) Contribution Margin pe liter 222 195 CM per hour 490 366 Ranking 1 2
Alpha to be processed further Total CM to be generated from Further processing 2,448,529 Additional Fixed Costs Fixed Cash Cost 500,000 Depriciation 1,110,000 (1,610,000) Additional Profit 838,529 Expenstion of current facility Total Hours 5,000 Total liters that can be produced 6,115 Alpha 2,657 Beta 3,457 Alpha Beta CM per unit 235 360 Units 2,657 3,457 Total CM 624,504 1,244,540 1,869,044 Fixed Cost (250,000) Depriciation (930,000) Additional Profit 689,044 Conclusion The company should further process Alpha.
Question 6 Target cost Selling price per unit 11,000.00 Gp percentage 40% Target cost 6,600.00 Current per unit cost Material xx 2,350.00 yy 2,234.04 zz 1,276.60 5,860.64 custom and other charges 879.10 Labour cost per unit Note 1 384.00 Variable overheads Note 2 43.20 fixed absorbed Note 2 77.04 Depreciation 3.00 Current cost 7,246.97 Cost gap 646.97 Discount to be obtained 562.59 Note 1 hours Total labour time per shift 8.00 Labour non working time per shift 0.50 therefore working time per shift 7.50 Ratio of total to working 1.07 Total required time for 1 unit 1.92 Note 2 Using high low method Variable overheads per hours 24.00 total per quarter fixed oh 42,800,000 Normal hours per quarter 1,000,000 OAR 42.80 Explanation A discount reduction of 562.58612 will also lead to reduction in custom duty and other import charges of 15% of 562.58612