Академический Документы
Профессиональный Документы
Культура Документы
4.20
Direct wages
1.20
Variable overheads:
Works overhead
3.00
Sales overhead
0.25
8.65
6.35
Selling price
15.00
Statement of Profit on Sales of 60,000 Units
Rs.
Sales
9,00,000
Less: Variable cost (60,000 x 8.65)
5,19,000
Contribution
3,81,000
Less: Fixed costs:
Works overheads (1,80, 000 + 18,000)
1,98,000
49,500
2,47,500
Profit
1,33,500
Profit required
1,80,500
1,33,500
Rs. 47,000
1,73,000
Desired profit
47,000
Total sales
2,20,000
Rs.11
20,000
The above can be verified as under:
Sales 60,000 units x 15 =
9,00,000
20,000 units x 11 =
2,20,000
Less:
11,20,000
6,92,000
Fixed costs =
2,47,500
Profit
9,39,500
1,80,500
SOLUTION 2
(a)
Statement Showing the Variable Cost and Purchase Cost of Component...
Used by Auto Link Ltd.
Variable Cost
Materials
Labour
Expenses
Total variable cost (when component is
produced)
Cost of purchase (when component is
Total
Rs.
24300000
12150000
8100000
44550000
540
48600000
purchased)
Difference, excess of purchase price over
45
variable cost
4050000
Fixed expenses not being affected, it is evident from the above statement that if
the component is purchased from the outside supplier, the company will have to spend
Rs. 45 per unit more and on 90,000 units, the company will have to spend Rs. 40,50,000
more. Therefore, the company should not stop the production of the component.
(b)
The following statement shows the cost implications of the proposal to divert the
available facilities for a new product.
Statement showing the contribution per unit if the existing resources are
200
Labour (variable)
135
Expenses (variable)
90
425
Contribution per unit
60
Loss per unit if the present component is purchased:
Purchase price of the existing product
540
Less: Total variable cost of producing the existing component
495
Excess cost
45
Thus, if the company diverts its resources for the production of another new
product, it will benefit by Rs. 15, i.e. Rs. 60 - 45 per unit. On 90,000 units, the company
will save Rs. 13,50,000. Therefore, it is advisable to divert the resources to manufacture the
new product and the component presently being produced should be purchased from the
market. This is also brought out by the following figures:
Rs.
6,07,50,000
4,86,00,000
1,62,00,000
6,48,00,000
54,00,000
5,94,00,000
Savings A B
1350000
SOLUTION 3
i
for Product A
2.00
4.00
3.00
4.00
4.00
1.20
3.20
3.00
Overheads
Special packing charges
Total variable cost
Export price per unit
Contribution per unit
0.50
12.70
17.50
4.80
0.50
12.70
15.50
2.80
Since machine hour is the limiting (key) factor, the contribution should be linked
with the machine hours. This has been worked out as follows:
Machine hour per unit
2.5 hours
1.5 hours
Rs. 1.92
Rs. 2.13
A
Rs. 5
B
Rs.3
Total
Rs.2
400
600
2100
75%
75
Capacity hours available for export 2,800 2,100 = 700 hr.
(ii)
Units
Materials
Labour Based on capacity
Factory overhead:
Variable
Fixed
Selling & Admn. Overheads:
Variable
Fixed
Special packing
Total costs
Sales
Profit
Product A
Product B
Total
600 Rs.
1200
2400
867 Rs.
3468
1600
Rs.
4668
4000
1800
1200
1561
480
3361
1680
1920
2880
11400
13800
2400
1734
1200
234
10277
14839
4562
3654
4080
234
21677
28639
6962
Working notes
1.
2.
Number of units of B:
Sales in the home market
400
467
Total
867
Sales values of B:
400 units in the home market @ Rs. 19
Rs. 7600
Rs.7839
Total:
Rs. 14,839
SOLUTION 4
Decision analysis (continue or shut down the factory):
Amount in Lakh
Particulars
Operate the
Shut-down the
Differential
factory
factory
revenue and
18.51
costs
18.51
6.40
4.80
0.96
0.32
6.00
6.40
4.80
0.96
0.12
(variable)
Administrative expenses (fixed)
Selling' and distribution expenses
3.24
0.48
3.24
0.48
(variable)
Selling and distribution expenses
3.36
3.36
Sales revenue
Cost:
Direct material
Direct labour
Factory expenses (variable)
Administrative
expenses
(fixed)
Closing down costs:
Redundancy payments
2.00
Maintenance of plant
0.50
Overhauling costs
0.80
Total Cost
19.56
9.30
Differential revenue favouring the decision to operate the plant
2.00
0.50
0.80
10.26