Ratio Analysis

Liquidity Ratios Solvency Ratios

1. Current Ratio= CA/CL 1. D-E Ratio= Debt/Equity

Equity= Share Capital+RE
2. Quick Ratio= QA/CL 2. Debt to Assets Ratio= Debt/Assets

3. Cash Ratio= (Cash+MS)/CL 3. Debt to Capital Ratio= Debt/Capital

4. Interest Coverage Ratio= EBIT/Interest

Merits of Ratios
i. Easiest technique of financial analysis
ii. Performance of the compay on various parameters e.g. liquidity, profitability, solvency, activity e
iii. Comparison
iv. Trend Analysis
v. Helps in decision making

Limitations
i. Inflation is not considered.
ii. Some ratios have multiple/different formulae.
iii. Qualitative aspects are not considered.
iv. Differrent methods of valuation of assets.
 Turnover Ratios

1. Assets Turnover Ratio= COGS/Net Assets

2. Debtors Turnover Ratio= Credit Sales/Average Debtors

Debtors Turnover Ratio= Sales/Debtors (Approx)
Debtors Collection Period= 12/DTR

3. Inventory Turnover Ratio= COGS/Average Inventory

Inventory Turnover Ratio= Sales/Inventory (Approx)
Inventory Holding Period= 12/ITR

4. Creditors Turnover Ratio= Credit Purchases/Average Creditors

Creditors Turnover Ratio= Purchases/Creditors (Approx)
Creditors Payment Period= 12/CTR

profitability, solvency, activity etc.

Profitability Ratios

1. Gross Profit Margin= GP/Sales*100

2. Net Profit Margin= PAT/Sales*100

3. ROA= PAT/Average Assets* 100

4. ROE= PAT/Equity*100

5. ROCE= EBIT/Capital Employed*100

Other Ratios

1. EPS= PAT (After Preference Dividend) /n

2. DPS= Dividend Paid/n

3. Book Value per Share= Net Worth/n

4. P/B Ratio= MP/BV

5. Dividend Payout Ratio= Dividend Paid/PAT = DPS/EPS

6. Earnings Yield= EPS/MP

7. Dividend Yield= DPS/MP

8. P/E Ratio= MP/EPS

Current Ratio= 550000/200000 = 2.75 = 2.75 : 1 = 275%

Quick Ratio = 400000/200000 = 2
STR= COGS/Average Inventory =1150000/200000 = 5.75
Where, COGS= Sales-Gross Profit= 1800000-650000= 1150000
DTR = Sales/Debtors = 1800000/250000 = 7.2
GPM= GP/Sales*100 = 650000/1800000*100 = 36.11%
NPM = NP/Sales* = 350000/1800000*100 = 19.44%
ROE = NP/E = 350000/1050000*100 = 33.33%
 Following information is given about two companies i.e. ABC Ltd. and XYZ Ltd. belonging to t
Particulars ABC Ltd. XYZ Ltd.
Current Ratio 3.2 2
Acid-Test Ratio 1.7 1.1
Debt Equity Ratio (%) 30 40
No. of Times Interest Earned 6 5

As a loan officer of the company, you are required to consider the 5 year loan application of b
What would be your decision if:
i. You could grant loan to just one company?
ii. You could grant loan to any no. of companies?
YZ Ltd. belonging to the same industry:

loan application of both the companies.

Following information is given about Aditya Mills Ltd. for the current year:
Balance Sheet
Liabilities Amt. (Rs. Thousand)
Equity Share Capital (Rs. 100 each) 1000
Retained Earnings 368
Sundry Creditors 104
Bills Payable 200
Other Current Liabilities 20

Total 1692
Statement of Profit
Particulars (Rs. Thousand)
Sales 4000
Less: Cost of goods sold 3080
Gross profit on sales 920
less: Operating Expenses 680
Net Profit 240
Less: Taxes (35%) 84
Net profit after taxes 156
Note: Sundry debtors and stock at the beginning of the year were Rs. 300000 and Rs. 400000 respectively.

1. Determine the following ratios of Aditya Mills Ltd.:

i.Current Ratio ii.Quick Ratio iii.Stock Turnover iv.Debtors Turnover v.Gross Profit Ratio vi.Net Profit Rati
2. Indicate for each of the following transactions whether the transaction would improve, weaken or won't
i.Sell additional equity shares ii.Sell 10% debentures iii.Pay bills payable iv.Collect sundry debtors v. Purch
vii.Collecting bills receivables from debtors viii.Purchase of treasury bills ix.Writting off bad debt.
year:
Sheet
Assets Rs. (Thousand) CR=
Plant & Equipment 640 QR=
Land & Buildings 80 STR=
Cash 160 DTR=
Sundry Debtors 320 GPM=
Stock 480 NPM=
Prepaid Insurance 12 n=
1692 EPS=
ROE=
P/E = 10
MP=

300000 and Rs. 400000 respectively.

v.Gross Profit Ratio vi.Net Profit Ratio vii.EPS viii.ROE ix.Market Price of Share if P/E Ratio is 10.
tion would improve, weaken or won't have an impact on current ration of Aditya Mills Ltd:
ble iv.Collect sundry debtors v. Purchase additional plant vi.Issuing bills payable to creditors
bills ix.Writting off bad debt.
 3.00
1.48
7.00
12.90
23.00
3.90
10000.00
15.60
11.40
MP/EPS=10
156.00

f P/E Ratio is 10.

Mills Ltd:
e to creditors
Following information is given about Royal Plastics Ltd. for the curre
Balance Sheet
Liabilities Amt. (Rs.) Assets Amt. (Rs.)
Equity Share Capital (Rs. 10 each) 100000 Plant & Equipment 151000
10% Preference Share Capital 40000 Cash 12300
Retained Earnings 27400 Sundry Debtors 36000
Long Term Debt 34000 Stock 60800
Sundry Creditors 31500
Outstanding Expenses 1200
Other Current Liabilities 26000
Total 260100 260100
Statement of Profit
Particulars (Rs. Thousand) (Rs. Thousand)
Sales 225000
Less: Cost of goods sold 152500
Selling Expenses 29500
Admin Expenses 14800
R&D Expenses 6500
Interest 2900 206200
Earning Before Taxes 18800
Less: Taxes (35%) 6580
Net profit after taxes 12220
Dividend Paid to Equity Holders 5000
Calculate the indicated ratios for the company and comment of strengths and weaknesses of the company in terms of liquidity
 Industry Ratios Royal Plastics Ltd.
Current Ratio 2.2 1.86
Stock Turnover (times) 2.8 2.51
Debtors Collection Period (days) 56 58.40 6.25
Total Debt/Equity 45% 72.76 55.38
ICR 10 7.48
Assets Turnover 1.35 0.59 1.01
EBT/Sales 11.90% 8.36
ROE 10.90% 9.59

ngths and weaknesses of the company in terms of liquidity, solvency and ptofitability as revealed by your analysis.
Following information is given about Surat Textiles Ltd.:

Sales to Networth Ratio (times) 2.3

Current Debt to Networth Ratio 42%
Total Debt to Networth Ratio 75%
Current Ratio (times) 2.9
Sales to Inventory (times) 4.7
Average Collection Period (days) 64
Fixed Assets to Networth 53.20%

Prepare the balance sheet of the company if its sales are Rs. 32,00,000.

Liabilities Amount (Rs.) Assets Amount (Rs.)

Networth 1391304.35 Fixed Assets 740173.91
Long Term Debt 459130.43 Cash 444868.74
Current Debt 584347.83 Debtors 568888.89
Inventory 680851.06
Total 2434782.61 Total 2434782.61
Networht=3200000/2.3 1391304.35
Current Liabilities 584347.83
Total Debt 1043478.26
Current Assets 1694608.70
Inventory 680851.06
Debtors 568888.89 5.625
Fixed Assets 740173.91

Long Term Debt 459130.43

Cash 444868.74
CVP Analysis
BEP Analysis

Sales= FC+VC+Profit (-Loss)

Sale-VC=FC+Profit=Contribution
Unit Contribution=SP-VC per unit
P/V Ratio = (Sales-VC)/Sales*100 = (Change in Profit/Change in Sales)*100
P/V Ratio= (SP-VC per unit)/SP*100
V/V Ratio = 1-P/V Ratio = 100-P/V Ratio
BEP (Units)= FC/Unit Contribution
BEP (Rs.)=FC/P/V Ratio =BEP in Units*SP
Desired Sales (Units)=(FC+DP)/Unit Contribution
Desired Sales (Rs)=(FC+DP)/P/V Ratio
MoS=Actual Sales-BEP Sales
MoS Ratio= Margin of Safety/Actual Sales*100
Kippon Batteries Ltd. is a market leader in its industry. It manufactures batteries to be fitted in electric cars
Following cost data is available about the company and its product:
i. Selling price per unit - Rs. 8000
ii. Variable cost per unit - Rs. 6500
iii. Fixed cost - Rs. 90,00,000
Calculate the following for the company:
(a) How many batteries the company must produce and sell so that it achieves break-even?
(b) Sales required to earn a profit of Rs. 40,00,000.
(c) Profit earned by company if it generates sales of Rs. 6,25,00,000.
(d) New Break Even Point if management of the company decides to reduce the selling price by 10% due to

Unit Contribution=SP-VC per unit=8000-6500=1500

P/V Ratio=C/S*100=1500/8000*100=18.75%
(a) BEP (Units)=FC/Unite Contribution= 9000000/1500=6000 Units
(b) Desired Sales=(FC+DP)/UC=(9000000+4000000)/1500 8666.67 8667 Units
62500000=(90000000+DP)/0.1875
(c) DP 2718750
(d) New selling price=7200
New unit contribution = 700
New BEP (Units) =9000000/700 12857.1
es to be fitted in electric cars.

s break-even?

he selling price by 10% due to increased competition in market.

8667 Units 69336000

Asian Industries Ltd. specialises in the manufacture of small capacity motors. The cost structure of
Material- Rs. 50; Labour- Rs. 80; Variable overheads- 75 per cent of labour cost.
Fixed overheads of the company amount to- Rs. 2.40 lakh per annum. The sale price of the motor is
(a) Determine the number of motors that have to be manufactured and sold in a year in order to b
(b) How many motors have to be made and sold to make a profit of Rs. 1 lakh per year?
(c) If the sale price is reduced by Rs. 15 each, how many motors have to be sold to break-even?

FC 240000
VC 190
SP 230
New SP 215

BEP (Units) 6000

Desired Sales (Units) 8500
New BEP (Units) 9600
 The cost structure of a motor is as under:
st.
e price of the motor is- Rs. 230 each.
in a year in order to break-even.
per year?
ld to break-even?
KRF Cycles Ltd. is an important player in Indian cycle industry. It has set up a new plant to produce a new range o
Following cost data is available about this new plant and this product:
i. Selling price per unit - Rs. 5000 ii. Variable cost per unit - Rs. 3000
Calculate the following for the company:
(a) P/V ratio (b) How many tyres the company must produce and sell so that it a
(c) Break Even Point in rupees (d) Margin of Safety and MoS Ratio if the company generates sales
(e) Sales required to earn a profit of Rs. 25,00,000 (f) Profit earned by company if it generates sa
(g) New Break Even Point if management of the company decides to reduce the selling price by 15% due to incre

P/V Ratio 0.4

BEP (Units) 3000
BEP (Rs.) 15000000 New Selling Price 4250
MoS 10000000 New P/V Ratio 0.294118
MoS Ratio 40
DS 21250000
Profit 8000000
New BEP 20400000
to produce a new range of cycle with gear.

iii. Fixed cost - Rs. 60,00,000

oduce and sell so that it achieves break-even?

company generates sales revenue of Rs. 2,50,00,000.
ompany if it generates sales of Rs. 3,50,00,000.
price by 15% due to increased competition in market
Following information is available about ABC Ltd.:
Selling Price Rs. 20 per unit
Variable Cost Rs. 12 per unit
Fixed Cost Rs. 240000
Find out: (a) BEP in Units and Rupees (b) Number of units to be sold to earn a net income of

(a) BEP (Units) 30000

BEP (Rs.) 600000

(b)
DS=(FC+DP)/UC
Let sales be X units. Sales Amount=20X P/V Ratio = (20-12)/20
Profit= 2X
20X=(240000+2X)/0.4
8X-2X=240000
X=40000
Amount os Sales = 20X = Rs. 800000
to earn a net income of 10% of sales.
Following information is available about ABC Ltd.:
Year 2018-19 Year 2019-20
Sales Rs. 400000 Rs. 500000
Profit Rs. 100000 Rs. 140000

Variable Cost 240000 300000

Fixed Cost 60000 60000
Find out: (a) BEP in Rupees (b) Sales for a profit of Rs. 200000
(c) Profit when sales are Rs. 600000 (d) Margin of Safety when profit is Rs. 50000

P/V Ratio 0.4

V/V Ratio 0.6
BEP (Rs.) 150000
DS 650000
DP 180000
DS 275000
MoS 125000
MoS Ratio 45.454545454546
fit is Rs. 50000
Cost Sheet of Deccan Chronicle for the Period ending December 2020

Particulars Total Cost (Rs.)

i. Direct Material
a. Paper pulp – 500 tonnes @ Rs. 500 per ton 250000
b. Other Materials -100 tonnes @ Rs.300 per ton 30000

ii. Direct Labour

a. 80 skilled men @ Rs. 30 per day for 25 days 60000
b. 40 unskilled men @ Rs. 20 per day for 25 days 20000

iii. Direct Expenses

a. Special equipment – Rs. 30,000 30000
b. Special dyes – Rs. 10,000 10000
Prime Cost 400000

Add: Factory Overheads

a. Variable @100% of direct wages 80000
b. Fixed @60% of direct wages 48000
Deduct: Sale of Waste Material -8000
Factory/Works Cost 520000

Add: Admin Overheads @10% of Factory Cost 52000

Cost of Production 572000
Add: Selling & Distribution Overheads @15% of Factory Cost 78000
Cost of Sales 650000
Add: Profit 150000
Sales 800000
Cost Per Ton (Rs.)

625
75

150
50

75
25
1000

200
120
-20
1300

130
1430
195
1625
375
2000
Cost Sheet for Commodity Y for the Half Year Ending September 30, 2020

Particulars Amount (Rs.) Total Cost (Rs.)

i. Direct Material
Opening stock of Raw Material 22000
Add: Purchase of Raw Material 132000
Add: Carriage Inwards 1584
Deduct: Closing stock of Raw Material -24464
131120
ii. Direct Wages 110000
Prime Cost (25600 Tonnes) 241120
Add: Factory Overheads
i. Rent, Rates, Insurance & Works Overhead 44000
ii. Cost of Factory Supervision 8800
Works Cost (Gross) 293920
Add: Opening Sock of WIP 5280
Deduct: Closing Stock of WIP -17600
Works Cost (Net) 281600
Add: Opening Stock of Finished Good 17600
Deduct: Closing Stock of Finished Goods -35200
Cost of Goods Sold (24000 Tonnes) 264000
Add: Advertising & Sales Overhead 18000
Cost of Sales 282000
Add: Profit 48000
Sales 330000
Cost Per Ton (Rs.)

9.41875

11
0.75
11.75
2
13.75
 Particulars Total Cost for 2020 (Rs.)
1. Direct Material 12000
2. Direct Labour 20000
Prime Cost 32000
Add: Work Overhead 40000
Works/Factory Cost 72000
Add: Admin Expenses 36000
Cost of Production 108000
Add: Opening Stock of Finished Goods - Nil
Deduct: Closing Stock of Finished Stock- 200*108 21600
Cost of Goods Sold (800 Fans) 86400
Selling & Distribution Overhead 16000
Cost of Sales 102400
Profit 10240
Sales 112640
Per Fan Cost for 2020 (Rs.) Quotation Per Fan for 2021 (Rs.)
12 13.2
20 23
32 36.2
40 46
72 82.2
36 41.1
108 123.3

108 123.3
20 22.83
128 146.13
12.8 14.61
140.8 160.74
Material Cost

Inventory Management
1. ABC Analysis A B C
2. VED Analysis Vital Essential Desirable

EOQ-Economic Order Quantity (2AO/C)^1/2

A- Annual Requirement (Units)
O- Ordering Cost per Order
C- Carrying Cost per Unit

From the following transaction, prepare a Stores Ledger Account using:

i. FIFO Method ii. LIFO Method iii. Simple Average Co
Year 2021
1-Jul Opening Stock 500 units @ Rs. 20 each
5-Jul Purchased GRN 574 400 units @ Rs. 21 each
7-Jul Issued SR 251 600 units
10-Jul Purchased GRN 578 800 units @ Rs. 24 each
15-Jul Issued SR 258 500 units
18-Jul Issued SR 262 300 units
25-Jul Purchased GRN 584 500 units @ Rs. 25 each
30-Jul Issued SR 269 400 units
Solution
Stores Ledger Account (Weighted Average Met
Date Receipts Issu
Jul-21 Ref. (GRN) Quantity (Units) Rate (Rs.) Amount (RRef. (SR)
1
5 574 400 21 8400
7 251
10 578 800 24 19200
15 258
18 262
25 584 500 25 12500
30 269

Stores Ledger Account (LIFO Method)

Date Receipts Issu
Jul-21 Ref. (GRN) Quantity (Units) Rate (Rs.) Amount (RRef. (SR)
1
5 574 400 21 8400
 7 251

10 578 800 24 19200

15 258

18 262
25 584 500 25 12500

30 269

Stores Ledger Account (FIFO Method)

Date Receipts Issu
Jul-21 Ref. (GRN) Quantity (Units) Rate (Rs.) Amount (RRef. (SR)
1
5 574 400 21 8400

7 251

10 578 800 24 19200

15 258

18 262
25 584 500 25 12500

30 269
 iv. Weighted Average Cost Method

@ Rs. 20 each
@ Rs. 21 each

@ Rs. 24 each

@ Rs. 25 each

Weighted Average Method)

Issues Balance
Quantity (Units) Rate (Rs.) Amount (Rs.) Quantity (URate (Rs.) Amount (Rs.)
500 20 10000
900 20.444444 18400
600 20.4444 12266.64 300 20.4444 6133.32
1100 23.030291 25333.32
500 23.0303 11515.15 600 23.0303 13818.18
300 23.0303 6909.09 300 23.0303 6909.09
800 24.261363 19409.09
400 24.2614 9704.56 400 24.2614 9704.56

count (LIFO Method)

Issues Balance
Quantity (Units) Rate (Rs.) Amount (Rs.) Quantity (URate (Rs.) Amount (Rs.)
500 20 10000
500 20 10000
400 21 8400
 400 21 8400
200 20 4000 300 20 6000
300 20 6000
800 24 19200
500 24 12000 300 20 6000
300 24 7200
300 24 7200 300 20 6000
300 20 6000
500 25 12500
400 25 10000 300 20 6000
100 25 2500

count (FIFO Method)

Issues Balance
Quantity (Units) Rate (Rs.) Amount (Rs.) Quantity (URate (Rs.) Amount (Rs.)
500 20 10000
500 20 10000
400 21 8400
500 20 10000
100 21 2100 300 21 6300
300 21 6300
800 24 19200
300 21 6300
200 24 4800 600 24 14400
300 24 7200 300 24 7200
300 24 7200
500 25 12500
300 24 7200
100 25 2500 400 25 10000
Labour Cost
1. Basic Compensation/Wage 2. Incentive Plans
i. Time Rate Method=Time*Rate i. Halsey Plan
ii. Piece Rate Method=No. of Units Produced*Rate per Unit

ii. Halsey-Weir Plan

iii. Rowan Plan

iv. Merrick's Plan

(Piece Rate System)

V. Taylor's Plan
(Piece Rate System)
Bonus= 50% of (Time Saved*Time Rate)
Time Allowed- 50 Hours, Wage Rate- Rs. 30 per hour, Actual Time Taken- 42 Hours

Basic Wage= 42*30=1260

Bonus=1/2*8*30=120

Bonus = 1/3 of (Time Saved*Time Rate)

Basic Wage= 42*30=1260
Bonus=1/3*8*30=80

Bonus=(Time Saved/Time Allowed)*Time Taken*Time Rate

Bonus=8/50*42*30=201.6

a. Level of Efficiency upto 83% - Ordinary Piece Rate

b. Level of Efficiency between 83% to 100%- 110% of Ordinary Piece Rate
b. Level of Efficiency Above 100%- 120% of Ordinary Piece Rate

Standard Output- 150 Units per Day (of 8 Hours), Piece Rate- Rs 20 per Unit
Output of Labour1- 100 Units, Labour1- 135 Units and Labour3- 180 Units.
Find out the earning of each one of them.

Efficiency:
Labour1=100/150*100 = 66.67%
Labour2=135/150*100 = 90%
Labour2=180/150*100 = 120%
Earnings:
Labour1=100*20 = Rs. 2000
Labour2=135*20*110/100 = Rs. 2970
Labour3=180*20*120/100 = Rs. 4320

a. Lower Wage Rate

b. Higher Wage Rate

Standard Production- 8 Units per Hour, 8 Hours per Day, Lower Rate-Rs. 50 per Unit,
Higher Wage Rate- Rs. 70 per Unit, Labour1 produces 7 units per hour and Labour2 produces 9 units per hour on a given d

Labour1- 8*7*50 = Rs. 2800

Labour2- 8*9*70 = Rs. 5040
 Total Wage=Time Taken*Rate+Bonus

Total Earning= Rs. 1380

Total Wage=Time Taken*Rate+Bonus

Total Earning= Rs. 1340

Total Wage=Time Taken*Rate+Bonus

Total Earning=42*30+201.6 = Rs. 1461.6

2 produces 9 units per hour on a given day. Find out their earning for that day.

2800
5040
Labour Turnover

1. Separation Method No. of people left during the mentioned time/Average no. of employees*100
2. Replacement Method No. of employees replaced/Average no. of employees*100
3. Flux Method (No. of employees left+No. of employees replaced)/Average no. of employee
 no. of employees*100 5
2.5
verage no. of employees*100 7.5
Distribution of Overheads
1. Primary Distribution
2. Secondary Distribution (Re-distribution)

Production Departments- A, B, C
Service Departments- D & E

Particulars Amt. (Rs.)

Rent & Rates 50000
Indirect Wages 15000
Depreciation on Machinery 100000
General Lighting 6000
Power 15000
Sundry Expenses 100000
Total 286000

Further Details:
A B C D E
Floor Space (Sq. Ft.) 4000 5000 6000 4000 1000
Light Points 20 30 40 20 10
Direct Wages (Rs.) 3000 2000 3000 1500 500
H.P. of Machines 60 30 50 10 Nil
Value of Machinery 60000 80000 100000 5000 5000

Apportion the overheads to various departments on most equitable basis.

Overhead Distribution Summary

Particulars/Items Basis of Apportionment Producation Departments Service Departments
A (Rs.) B (Rs.) C (Rs.) D (Rs.)
Direct Wages 1500
Rent & Rates Floor Space 10000 12500 15000 10000
Indirect Wages Direct Wages 4500 3000 4500 2250
Depreciation Value of Machinery 24000 32000 40000 2000
General Lighting Light Points 1000 1500 2000 1000
Power H.P. of Machines 6000 3000 5000 1000
Sundry Expenses Direct Wages 30000 20000 30000 15000
75500 72000 96500 32750
 Total
20000
120
10000
150
250000

Service Departments Total

E (Rs.) Rs.
500 2000
2500 50000
750 15000
2000 100000
500 6000
0 15000
5000 100000
11250 288000
Following data have been from the books of XYZ Ltd. For the financial year ending on March 31, 2021.
Production Departments- A, B, C; Service Departments- X & Y
The overheads were as under:
Particulars Amt. (Rs.)
Stores Overhead 40000
Rent & Rates 60000
Depreciation 600000
Lighting 20000
Motive Power 150000
Labour Welfare 300000
Repairs & Maintenance 120000
General Overhead 1000000
Total 2290000
Further Details:
A (Rs.) B (Rs.) C (Rs.)
Direct Wages (Rs.) 700000 600000 500000
Direct Materials (Rs.) 300000 250000 200000
No. of Employees 400 300 300
Electricity (KWh) 8000 6000 6000
Floor Space (Sq. Ft.) 8000 6000 6000
Light Points 10 15 15
Value of Assets (Rs.) 5000000 3000000 2000000
Apportion the overheads to various departments on most equitable basis. Also apportion the expenses of department X
in the ratio of 4:3:3 and that of department Y in proportion to direct wages, to departments A, B and C respectively.

Solution

Overhead Distribution Summary

Particulars/Items Basis of Apportionment Producation Departments
A (Rs.) B (Rs.)
Direct Wages* Actual
Direct Material* Actual
Stores Overhead Direct Material 12000 10000
Rent & Rates Floor Space 20000 15000
Depreciation Value of Assets 250000 150000
Lighting Light Points 4000 6000
Motive Power Electricity 48000 36000
Labour Welfare No. of Employees 100000 75000
Repairs & Maintenance Value of Assets 50000 30000
General Overhead Direct Wages 350000 300000
834000 622000
Overhead of X Distributed to A, B & C In the Ratio of 4:3:3 (Given) 164000 123000
Overhead of Y Distributed to A, B & C Direct Wages 141555.556 121333.333
Total 1139555.56 866333.333
arch 31, 2021.

X (Rs.) Y (Rs.) Total

100000 100000 2000000
150000 100000 1000000
100 100 1200
2000 3000 25000
2000 2000 24000
5 5 50
1000000 1000000 12000000
n the expenses of department X
ents A, B and C respectively.

ary
tion Departments Service Departments Total
C (Rs.) X (Rs.) Y (Rs.) Rs.
100000 100000 200000
150000 100000 250000
8000 6000 4000 40000
15000 5000 5000 60000
100000 50000 50000 600000
6000 2000 2000 20000
36000 12000 18000 150000
75000 25000 25000 300000
20000 10000 10000 120000
250000 50000 50000 1000000
510000 410000 364000 2740000
123000 -410000
101111.11 -364000
734111.11 0 0 2740000
Cash Budget for ABC Ltd. From January to June

Particilars Jan Feb March April May

Opening Balance 60000 42000 59800 64800 51500
Cash Inflows
i. Cash Sales 24000 20000 30000 48000 40000
ii. Recovery of Past Credit Sales
50% of Last Month Credit Sales 88000 48000 40000 60000 96000
30% of Last to Last Month's Credit Sales 48000 52800 28800 24000 36000
20% of Credit Sales Done Two Months Back Not Given 32000 35200 19200 16000
iii. Sale of Debentures 40000
Total Cash Inflows 200000 152800 134000 151200 188000
Cash Outflows
i. Purchases (Payment to Credotirs) 165000 90000 75000 112500 180000
ii. Wages & Salaries
1/3 of Previous Month 10000 8000 8000 8000 10000
2/3 of Current Month 16000 16000 16000 20000 18000
iii. Misc. Expenses 27000 21000 30000 24000 27000
Total of Cash Outflows 218000 135000 129000 164500 235000
Balance (Interim/Indicated) 42000 59800 64800 51500 4500
Borrowings 36000
Interest
Final Balance 40500
(Rs.)

June
40500

40000

80000
57600
24000

201600

150000

9000
18000
27000
204000
38100
3000
360
40740
 Flexible Budget
(At 40%, 50% and 90% Capacity Utilisation)
Particulars 40% Capacity Utilisation 50% Capacity Utilisation
Production (Units) 10000 12500
Selling Price Per Unit (Rs.) 20 19.4
Sales Revenue (Rs.) 200000 242500

Variable Cost:
i. Material Cost 100000 125000
ii. Labour Cost 30000 37500
iii. Overhead (Rs. 2 Per Unit) 20000 25000

Fixed Cost:
i. Overhead (Rs. 3 Per Unit) 30000 30000

Total Cost 180000 217500

Profit (Revenue-Cost) 20000 25000

Flexible Budget
(At 50%, 60% and 80% Capacity Utilisation)
Particulars 50% Capacity Utilisation 60% Capacity Utilisation
Production (Units) 10000 12000
Selling Price Per Unit (Rs.) 200 196
Sales Revenue (Rs.) 2000000 2352000

Variable Cost Per Unit:

i. Material Cost 100 102
ii. Labour Cost 30 30
iii. Factory Overhead 18 18
iv. Administrative Overhead 10 10
Total Variable Cost Per Unit (Rs.) 158 160
Total Variable Cost (Rs.) 1580000 1920000

Fixed Cost:
i. Factory Overhead (Rs. 12 Per Unit) 120000 120000
ii. Administrative Overhead (Rs. 10 Per Unit) 100000 100000
Total Fixed Cost (Rs.) 220000 220000

Total Cost (Rs.) 1800000 2140000

Profit (Revenue-Cost) (Rs.) 200000 212000

90% Capacity Utilisation
22500
19
427500

213750
67500
45000

30000

356250

71250

80% Capacity Utilisation

16000
190
3040000

105
30
18
10
163
2608000

120000
100000
220000

2828000

212000
Variance Analysis

Total Cost Variance

1. Material Cost Variance= St. Material Cost-Actual Material Cost 2. Labour Cost Variance=St. Labour Cos
MCV=SQ*SP-AQ*AP LCV=ST*SR-AT*AR=SH*SR-AH*AR

i. Material Price Variance= AQ*SP-AQ*AP =(SP-AP)*AQ i. Labour Rate Variance=(SR-AR)*AH

ii. Material Quantity (Usage) Variance=(SQ-AQ)*SP ii. Labour Efficiency Variance=(SH-AH)*
iia. Material Mix Variance=(RSQ-AQ)*SP ii a. Idle Time Variance= Idle Time(Hou
iib. Material Yield Variance=(AY-SY)*St Material Cost per Unit of Output iib. Labour Mix Variance=(RSH-
iic. Labour Yield Variance=(AY-SY)*St La

Solution:
Material Standard for 10 Units Actual for 10 Units
Q (Units) P (Rs.) Amt (Rs.) Q (Units)
A 600 15 9000 640
B 800 20 16000 950
C 1000 25 25000 870
Total 2400 50000 2460

1. Material Cost Variane= St. Cost (of Actual Output)-Actual Cost

MCV=5000*10-52225 = -2225 = Rs. 2225 (U)
-2225

2. MPV= (SP-AP)*AQ
A -1600 Rs 1600 (U)
B 1900 Rs. 1900 (F)
C -2175 Rs. 2175 (U)
-1875 Rs. 1875 (U)

3. MQV/MUV=(SQ-AQ)*SP
A -600 Rs. 600 (U)
B -3000 Rs. 3000 (U)
C 3250 Rs. 3250 (F)
-350 Rs. 350 (U)

4. MMV/MMSV= (RSQ-AQ)*SP -375 Rs. 375 (A)

-2600 Rs. 2600 (A)
3875 Rs. 3875 (F)
900 Rs. 900 (F)

5. MYV/MYSV=(AY-SY)*SC per unit of output -1250 Rs. 1250 (U)

AY= 10 (Given)
SY=2460/2400*10=10.25
Solution:
Labour Standard Actual
Hours Rate Amt (Rs.) Hours
Skilled 1280 30 38400 1120
Semi-Skilled 480 20 9600 720
Unskilled 240 10 2400 160
Total 2000 50400 2000

1. LCV=St. Labour Cost for Actual Output-Actual Labour Cost

St. Labour Cost for 1800 St. Hours= 45360

2. LSV=(SR-AR)*AH
Skilled -11200
Semi-Skilled -7200
Unskilled -1600
-20000

3. LEV=(SH for Actual Output-AH)*SR

Skilled 960
Semi-Skilled -5760
Unskilled 560
-4240

4. Labour Mix Variance=(RSH-AH)*SR

Skilled 4800
Semi-Skilled -4800
Unskilled 800
800

5. LYV=(AY-SY)*St. Labour Cost Per Unit of Output -5040

Q.
Particulars Dept. A Dept. B
Actual Wages Rs. 200000 Rs. 180000
St. Hours Produced 8000 6000
St. Rate Per Hour Rs. 30 Rs. 35
Actual Hours Worked 8200 5800

Solution
LCV (Dept A)=St. Labour Cost-Actual Labour Cost 40000 Rs. 40000(F) 40000
LCV (Dept B) 30000 Rs. 30000 (F) 30000
LCV (Total) 70000 Rs. 70000 (F) 70000

LRV (Dept A)=(SR-AR)*AH 46000 Rs. 46000 (F)

LRV (Dept B) 23000 Rs. 23000 (F)
LRV (Total) 69000 Rs. 69000 (F)

LEV (Dept A)=(SH-AH)*SR -6000 Rs. 6000 (U)

LEV (Dept B) 7000 Rs. 7000 (F)
LEV (Total) 1000 Rs. 1000 (F)

Solution:
Material Standard for 10 Units Actual for 182 Kgs
Q (Kgs) P (Rs.) Amt (Rs.) Q (Kgs)
Chemical A 80 20 1600 90
Chemical B 120 30 3600 110
Total 200 5200 200
Less: Loss 20 18
Output 180 182

MCV=SMC for Actual Output-AMC -102.222222 Rs. 102.22 (U) -102.2222

MPV
A 180
B -440
-260
MQV
A -182.222222
B 340
157.777778 157.7778
MMV
A -200
B 300
100

MYV 57.7777778
 Sales Variance
Cost Variance=St. Labour Cost-Actua3. Overhead Cost Variance
R-AT*AR=SH*SR-AH*AR

Rate Variance=(SR-AR)*AH
Efficiency Variance=(SH-AH)*SR
me Variance= Idle Time(Hours)*SR
r Mix Variance=(RSH- Gang Composition Variance
Yield Variance=(AY-SY)*St Labour Cost Per Unit of Output

Actual for 10 Units

P (Rs.) Amt (Rs.) RSQ
17.5 11200 615
18 17100 820
27.5 23925 1025
52225 2460

-2225

-350
 Actual
Rate Amt (Rs.) SH for Actual Output RSQ
40 44800 1152 1280
30 21600 432 480
20 3200 216 240
69600 1800 2000

-24240 Rs. 24240 (U)

Rs 20000 (U)

Rs. 4240 (U)

Rs. 800 (F)

Rs. 5040 (U)

-4240
Actual for 182 Kgs
P (Rs.) Amt (Rs.)
18 1620
34 3740
5360
Profit Variance
Marginal Costing

Sales Revenue due to export order 1000000 612500

Variable Cost 800000 560000
Shipping Charges 50000 50000
Special Packing 25000 17500
Contribution 125000 -15000