01/07/2024

INTRODUCTION TO COSTING

Fixed cost is also know as the period cost and it is fixed for a period irrespective of production activity
For Example: Slary paid to employees

Variable cost is directly propostional to the production activity

For Example: THE RAW MATERIAL COST OR LABOR COST INCURED FOOR THE NUMBER OF UNIT MANUFA

Semi-Variable Cost is partially fixed and partially variable

For Example: In case of electricity bill the fixed charges paid and balance bill is calculated on the number of unit con

Marginal cost is the cost incured for manufacturing and additional unit
Marginal costing is a tool for decision making analysis wether to contnue with the particular decision or not.

Opportunity cost is a cost incured for the next best alternative

Cost sheet is statement which takes into account all the expenses that is fixed cost and as well as variable cost for

Stock is classified as raw material, working progress, and finished goods. In any business raw material stock is in th
Work in progress stock means semi finished gooods or the work is partially done and partially undone
Stock of finised goods mena that the product is ready for dispatch
Cost of raw material consumed takes into account the information about the opening and closing stock of the mater

Raw material consumed

Opening stock of raw material
Add purchase of raw material
Add expenses
Less Closing stock of raw material

COST SHEET FOR GOGETTER CO FOR THE YEAR ENDED 31/03/2020

PARTICULARS AMOUNT AMOUNT
DIRECT MATERIALS
Opening stock of Raw materi1,40,000
Add Purchases 3,20,000
Carriage inwards 16,000
Less Closing stock -1,80,000 2,96,000

Direct Labour 1,60,000

PRIME COST 4,56,000
ADD: FACTORY OVERHEADS
Indirect Labour 18,000
Factory Supervision 10,000
Repairs 14,000
Heat,light,fuel 65,000
misc factory exp 18,700
Dep on Plant 46,050 1,71,750
Factory cost (gross) 6,27,750
Add opening WIP 2,00,000
Less Closing WIP -1,92,000
FACTORY COST (NET) 6,35,750
ADD OFFICE & ADMINISTRATIVE OVERHEADS
Office salaries 16,000
Depreciation on off appliance870 16,870
COST OF PRODUCTION 6,52,620
Add: opening stock of Finished Goods 80,000
Less : Closing stock of Finished Goods -1,15,000
COST OF GOODS SOLD 6,17,620
Add: SELLING & dISTRIBUTION OVERHEADS
Sales comm 33,600
Sales Promotion 11,000
Sales Travelling 22,500
Sales dept salaries 18,000 85,100
COST OF SALES 7,02,720
ADD PROFIT(Bal fig) 65,280
SALES 7,68,000

Q.2 SWATI ELECTRONICS LTD

COST SHEET FOR THE YEAR ENDED 31 MARCH 2020

PARTICULARS AMOUNT AMOUNT WORKING NOTES
 2020 2021 1) UNITS SOLD IN 2021
Direct materials 3,30,000 3,30,000 Units sold in 2020
Direct Wages 2,70,000 2,88,000 Add increase by 1/3
PRIME COST 6,00,000 6,18,000 TOTAL
Add Factory overheads 2,25,000 2,85,000
WORKS COST 8,25,000 9,03,000 2) Material cost
aAdd :Administrative overhe 1,05,000 63,000 cost per unit 3,30,000/15000=22 p.u
COST OF PRODUCTION 9,30,000 9,66,000 Cost in 2021 will be lower by 25%
Add: Selling overheads 90,000 1,20,000 original cost 22
COST OF SALES 10,20,000 10,86,000 Less by 25% 5.5
ADD PROFIT 2,55,000 2,74,000 New cost 16.5
SALES 12,75,000 13,60,000 Total cost=20000*16.5=3,30,000

3) Direct Wages 4) Factory overheads

Cost per unit=2,70,000/15,0 18 Cost in 2020 2,25,000
Reduced by 20% -3.6 Less Fixed cost -45,000
New Cost 14.4 Balance is variab1,80,000
Total cost=20,000*14.4=2,88,000 cost per unit=1,80,000/15,000=12

5) Admin overheads Factory overheads for 2021

Total cost 1,05,000 Variable cost=12*20,000= 2,40,000
Reduce by 40% -42,000 Add Fixed cost 45,000
Balance 63,000 Total 2,85,000

6) sales overheads Sales price for 2020

cost p.u 90,000/15,000=6 price per unit=12,75,000/15,000=85
Less by 20% 17
Cost for 2021=20,000*6=1,20,000 new price 68
Total sales value=20,000*68=13,60,000

Q.3 COST SHEET FOR THE YEAR ENDED----

PARTICULARS AMOUNT AMOUNT
DIRECT MATERIAL COST
Op stock of raw materials 2,000
Add Purchases 120,000
Less Closing stock -3,000 119,000
Direct Labour 75,000
PRIME COST 194,000
Add Factory overheads
(65%*Direct Labour) 48,750
FACTORY COST (GROSS) 2,42,750
aDD OPENING WIP 5,000
Less Closing WIP -9,000
FACTORY COST (NET) 2,38,750
Add Administrative overheads 10,000
(4% Of Sales)
COST OF PRODUCTION 2,48,750
Add Op stk of Finished Goods 7,200
Less Closing stk of Fin goods -5,800
COST OF GOODS SOLD 2,50,150
Add Selling expenses
(8% of Sales) 20,000
COST OF SALES 2,70,150
Less Loss(Bal Fig) 20,150
SALES 2,50,000

Q.4 LUCKY LTD

COST SHEET FOR THE YEAR ENDED 2020
PARTICULARS AMOUNT AMOUNT 1) FACTORY OVERHEADS TO WAGES
DIRECT MATERIALS
Op stock of Raw Materials 33,280 2) OFFICE OVERHEADS TO FACTORY COS
Add Purchases 4,59,720
Less Closing stock -93,000 4,00,000 3) NET PROFIT PERCENTAGEProfit/cost of goods sold *
Direct Wages 2,80,000 1,92,500/7,70,000*100=2
PRIME COST 6,80,000
Add Factory overheads 70,000
FACTORY COST 7,50,000
Add Office overheads 37,500
COST OF PRODUCTION 7,87,500
Add Opening stock of Finished Goods 77,500
Less Closing stock of Finished goods -95,000
COST OF GOODS SOLD 7,70,000
ADD PROFIT 1,92,500
SALES 9,62,500

ESTIMATED COST SHEET

PARTICULARS AMONT
Raw materials 80,000
Direct Wages 40,000
PRIME COST 1,20,000
Add Factory overheads
(25% of wages) 10,000
FACTORY COST 1,30,000
Add Office overheads
(5% of Factory Cost) 6,500
COST OF PRODUCTION 1,36,500
ADD PROFIT
(25% 0F cost of Prod) 34,125
SALES 1,70,625

Q.5 ROSHNI LTD

COST SHEET FOR THE YEAR ENDED 2020

PARTICULARS AMOUNT AMOUNT COST P.U WORKING NOTES
UNITS SOLD 1000 1 Material cost p.u in 2020
Less by 2%
Material 35,00,000 3500 New Cost
Direct Wages 7,00,000 700
PRIME COST 42,00,000 4200 2 Wages cost p.u
Add Factory overheads Less By 2%
power 3,20,000 New Cost
lighting 3,00,000
indirect wages 2,00,000 3 factory overheads as a
other cost 1,00,000 factory O/H/Direct materia
depreciation 4,00,000 12,20,000/35,00,000*100=
Less Scrap sales -1,00,000 12,20,000 1220
FACTORY COST/works cost 54,20,000 5420 4 Office exp to works cost
Add Office exp 12,00,000 1200 12.00,000/54,20,000*100=
COST OF PRODUCTION 66,20,000 6620
Add Selling exp 25,00,000 2500 5 selling exp to works cos
COST OF SALES 91,20,000 9120 25,00,000/54,20,000*100=
ADD PROFIT 48,80,000 4880
SALES(1000*14,000) 1,40,00,000 14000

COST SHEET FOR 2021

PARTICULARS AMOUNT Cost p.u
NO OF UNITS SOLD 1250
Material 42,87,500 3430
Direct wages 8,57,500 686
PRIME COST 51,45,000 4116
Add Factory overheads 14,94,500 1196
FACTORY COST 66,39,500 5312
Add Office overheads 14,70,000 1176
COST OF PRODUCTION 81,09,500 6488
Add Selling exp 30,62,500 2450
COST OF SALES 1,11,72,000 8938
ADD PROFIT 69,53,000 5562
SALES 1,81,25,000 14,500
BER OF UNIT MANUFACTURED

n the number of unit consumed this cost is also known as the step cost

decision or not.

Cost of direct martial conumsed or cost raw material consumed or direct materials

Direct wages are wages paid which are durectly associated to the product for Example; Wages paid to the tailor ma
Whereas wages paid to the worker in the factory for operating machines is indirect wages.

Prime cost takes into account all the variable cost necessary for manufacturing the particular product
Direct material
Direct wages
 Direct expenses
Prime Cost (Total of the all three expenses above)

Factory overheads are alll the expenses incured at the shop floor level aslo known as factory

Office and administrative expenses are those expense which are incured as back-end expenses for smooth running
sellling and dsitribution expe takes into account all the expenses related to selling the product,packing and packagin

Carriage inwards are the expenses incurred on bringing the raw material into the factory.

carriage outwards are the expenses incurred to distribution of finished goods and so they should be included in sell

well as variable cost for manufacturing the product and dispatching the product to the distributors

w material stock is in the intial stage.

sing stock of the material and the raw material purchased to achieve the targeted production
 15,000
5,000
20,000

30,000/15000=22 p.u
be lower by 25%

*16.5=3,30,000
 70,000/2,80,000*100=25%

37,500/7,50,000*100=5%

ofit/cost of goods sold *100

92,500/7,70,000*100=25%
ORKING NOTES
Material cost p.u in 2020 3500
70
3430

Wages cost p.u 700

14
686

actory overheads as a %age of direct material

tory O/H/Direct material*100
,20,000/35,00,000*100=35%(approx)

Office exp to works cost

.00,000/54,20,000*100=22%

elling exp to works cost

,00,000/54,20,000*100=46%
Wages paid to the tailor manufacturing shirt

ular product
penses for smooth running of the buisness
duct,packing and packaging expenses as well as the distribution expenses.

should be included in selling & distribution overheads

Q.1 SUN LTD

S.P P.U 2400

Less variable cost -1500
Contribution p.u 900

Fixed cost 3000000

a)
BEP UNITS=FIXED COST/CONTRIBUTION P.U
BEP= 3000000/900
3333.333333

b) New Fixed cost=3000000+5%*3000000= 31500000

BEP=3150000/900 3500

C) TOTAL CONTRIBUTION=900*7000 6300000

Less New Fixed Cost 3150000
Profit 3150000

D) New S.P 2200

Less Var cost -1500
Contribution p.u 700

Fixed Cost 3000000

BEP=3000000/700 4285.714286

Q.2)
X Y Z
Selling price p.u 125 100 200
Less Var cost
Raw Material 100 60 150
Labour 12 20 40
Var Overheads 3 5 10
12/8=1.5 hrs 20/8=2.5 hrs*240/8=5 hrs@2
per hour

Total var overheads 115 85 200

Contribution 10 15 0
Raw Mat used per unit 100/10=10 kg 60/10=6 kg 15/10=15 kg

Contribution per kg 10/10=1 2.5 0

RANKS 2 1 3

TO DECIDE THE BEST PRODUCT MIX

RANKS PRODUCT Raw mat reqd per unit Max units Raw Mat used
1Y 6 4000 24000
2X 10 6000 60000
3Z 15 1066.666667 16000 Bal fig
100000 kg

CALCULATION OF FIXED COST

Fixed cost is 3 per hour
Maximum prod hours are 18400
Total fixed cost=18400*3 55200

STATEMENT OF PROFIT
X Y Z
UNITS SOLD 6000 4000 1066
Contribution p.u 10 15 0
Total contribution 60000 60000 0 120000
Less Fixed cost -55200
Profit 64800

CALCULATION OF BEST PRODUCT MIX WHEN LABOUR HOURS ARE THE LIMITING FACTOR
X Y Z
No of labour hours p.u 1.5 2.5 5
Contribution p.u 10 15 0
Contrper hour=contr p.u/lab 6.666666667 6 0
RANKS 1 2 3

BEST PRODUCT MIX IN 18400 HOURS

RANKS PRODUCT Lab hrs p.u max units Total hrs

1X 1.5 6000 9000
2Y 2.5 3760 9400 Bal fig
3Z 5 ----
18400
STATEMENT OF PROFIT
X Y Z TOTAL
Contr p.u 10 15 0
units sold 6000 3760 0
Total contr 60000 56400 116400
Less Fixed cost -55200
PROFIT 61200

Q.3 ESTIMATED COST SHEET

cost p.u
PARTICULARS AMOUNT
Direct Mat 750000 750
Direct Wages 450000 450
Direct Exp 300000 300
PRIME COST 1500000 1500
Add Factory Overheads
(100% of wages) 450000
WORKS COST 1950000
Add Office O/H
(80% OF Works cost) 1560000
COST OF PRODUCTION 3510000
Add Selling exp
(75% of Cost of Prod) 2632500 LET S.P BE 100
COST OF SALES 6142500 Less profit -25
ADD PROFIT 2047500 COST PRICE 75
SALES 8190000
25% ON s.p=1/3 on cost price

ESTIMATED COST SHEET

NO OF UNITS 2000

Direct material cost per unit increased by 750+50%*750 1125

Direct lab increased by 25% 450+25%*450 562.5
Direct Exp increased by 40% 300+40%*300 420

particulars amount
Direct Mat 2250000
Direct Wages 1125000
Direct Exp 840000
PRIME COST 4215000
Add Factory Overheads 1125000
(100% of wages)
WORKS COST 5340000
Add Office O/H 4272000
(80% OF Works cost)
COST OF PRODUCTION 9612000
Add Selling exp 7209000
(75% of Cost of Prod)
COST OF SALES 16821000
ADD PROFIT 5607000
Sales 22428000
BREAK EVEN POINT is that point where there is no profit or loss.Expenses should be classified as fixed cost and v
PER UNIT TOTAL
sales 10 1,00,000
Less Variable cost 6 60,000
CONTRIBUTION 4 40,000
Less Fixed cost
PROFIT

Sales,variable cost and contribution remains constant whether calculated on per unit basis or total basis.
CMR(CONTRIBUTION MARGIN RATIO) OR P.V.RATIO(PROFIT VOLUME RATIO)=CONTRIBUTION/SALES *10

MEANING OF CONTRIBUTION- Positive profit earned by the company after taking care of variable cost only

MEANING OF PROFIT-Profits arrived after taking into account total Cost (variable + fixed cost)

BREAK EVEN POINT(BEP) UNITS=FIXED COST/CONTRIBUTION PER UNIT

BEP(AMOUNT)=FIXED COST/P.V.RATIO

MARGIN OF SAFETY=ACTUAL SALES-BREAK EVEN SALES

MARGIN OF SAFETY RATIO=MARGIN OF SAFETY/ACTUAL SALES*100

Q.1 UNIVERSITY PIZZA

Sales price per unit 100

Less Variable cost p.u -60
Contribution p.u 40
Fixed cost 5,40,000

1) CMR OR P.V.RATIO=CONTRIBUTION /SALES*100=40/100*100=40%

BREAK EVEN POINT(BEP) UNITS=FIXED COST/CONTRIBUTION PER UNIT

BEP(UNITS)=5,40,000/40=13,500 UNITS
BEP(RS)=F.C/P.V.RATIO
5,40,000/40%= 13,50,000 OR 13,500 UNITS*100=13,50,000

sales
Less Variable cost
 CONTRIBUTION 11,40,000(540,000+6,00,000
Less Fixed cost 5,40,000 (GIVEN)
PROFIT 6,00,000(GIVEN)

No of units to be sold to earn a profit of 6,00,000=11,40,000/40=28,500 units

Q.2 LEVIS JEANS CO

SELLING PRICE PER UNIT 3000

Less Variable cost 2100
sales commission @5% of 3,000 150 2250
Contribution p.u 750
Fixed cost(120+30) 1,50,00,000

CMR=750/3000*100=25%

BEP(UNIT)=FIXED COST/CONTR PER UNIT

1,50,00,000/750=20,000 UNITS
1) The company must sell 20,000 jreans to break even.

2) FIXED COST + PROFIT REQUIRED TO EARN=TOTAL CONTRIBUTION

1,50,00,000+45,00,000=1,95,00,000

NO OF UNITS TO BE SOLD=TOTAL CONTRIBUTION/CONTRIBUTION PER UNIT

1,95,00,000/750=26,000 UNITS

Q.3 a) selling price is 3250

Selling price per unit 3250

Less Variable cost 2100
Commission @5%*3250 162.5 2262.5
CONTRIBUTION P.U 987.5
FIXED COST (120+30) 1,50,00,000

PROFIT REQUIRED=45,00,000
FIXED COST + PROFIT REQUIRED TO EARN=TOTAL CONTRIBUTION
1,50,00,000+45,00,000=1,95,00,000

NO OF UNITS TO BE SOLD=TOTAL CONTRIBUTION/CONTRIBUTION PER UNIT

NO OF UNITS=1,95,00,000/987.5=19,747 UNITS
Q.3 B) CHANGE IN VARIABLE AND FIXED COST

Selling price per unit 3000

Less Variable cost(2100+200) 2300
commission @5%*3000 150 2450
CONTRIBUTION 550
FIXED COST
Manufacturing cost is 40%*120 lakhs 48,00,000
Marketing cost 30,00,000
Total fixed cost 78,00,000

PROFIT REQUIRED=45,00,000
FIXED COST + PROFIT REQUIRED TO EARN=TOTAL CONTRIBUTION
78,00,000+45,00,000=1,23,00,000

NO OF UNITS TO BE SOLD=TOTAL CONTRIBUTION/CONTRIBUTION PER UNIT

Q.3 MUMBAI INTERIO

Selling price per unit 30,000

Less Variable cost
Manufacturing cost 12,000
Marketing cost 6,000 18,000
Contribution 12,000
Fixed Cost
Manufacturing cost 540
Marketing cost 216
Total 756 ,00,000

CMR=CONTRIBUTION/SALES *100
CMR=12,000/30,000*100=40%

1) break even sales=fixed cost/cmr

7,56,00,000/40%
BES=18,90,00,000

2) Net income of 540,00,000

Add Fixed cost756,00,000
Total contr 12,96,00,000
No Of Units To Be sold=12,96,00,000/12,000 10800 units to be sold

3) Increase in Variable Manufacturing cost by 10%

Old Variable cost 12,000
Add 10% increase 1200
New Cost 13,200
Add Old Marketing cost 6,000
Total variable cost 19,200

To Calculate the CMR

Selling price per unit 30,000
Less Variable cost 19,200
Contribution 10,800

CMR=10,800/30,000*100=36%

TO CALCULATE BREAK EVEN SALES

FIXED COST 756,00,000

CMR 36%
BES=Fixed cost/CMR
BES=756,00,000/36%=21,00,00,000

Q.4 VIKROLI LTD Amount in '000

no of units sold 1800k TOTAL PER UNIT
Sales 18,00,000 1000
Less Total Variable cost 9,90,000 550
Contribution 8,10,000 450

LESS TOTAL FIXED COST 4,95,000

Profit 3,15,000

1) CMR=Contribution/Sales *100=450/1000*100=45%

2) BREAK EVEN SALES (UNITS)=FIXED COST/CONTRIBUTION PER UNIT

495000000/450=11,00,000

ESTIMATED COST SHEET FOR 2024(2100k units)

TOTAL AMOUNT
000
Sales(2100*1000) 21,00,000
Less Variable cost
(2100*550) 11,55,000
Contribution 9,45,000
Less Fixed Cost 4,95,000
Net Income 4,50,000

3) sale in AFRICA
Net Income as per 2023 3,15,000
Add Fixed Cost
2023 4,95,000
New Advertisi 1,23,000 6,18,000
Total contribution 9,33,000

To Calculate contribution per unit

Selling Price per unit 1000
Less Variable cost 550
Sales Commission 50 600
Contribution per unit 400

NO OF UNITS TO BE SOLD=TOTAL CONTRIBUTION/CONTRIBUTION PER UNIT

9,33,000/400=2333 UNITS
TOTAL UNITS TO BE SOLD 2333
Less sold in local market 1800
units sold in africa 533

4) change in labour cost

Fixed cost 4,95,000
Add Increase in manufacturing 1,17,000
Total cost 6,12,000

Selling price per unit 1000

Less Variable cost
Cost in 2023 550
Less Reduction in Mfg cost 50 500
Contribution 500

CMR=Contribution /Sales *100 500/1000*100=50%

BREAK EVEN SALES (UNITS)=FIXED COST/CONTRIBUTION PER UNIT

6,12,000/500=1224 UNITS
BREAK EVEN SALES (AMOUNT)=1224*1000=12,24,000

Q.5 PREMIER CORPORATION

Mister icecrea Cold king TOTAL
Selling price 370 430
Less Variable cost 205 325
Contribution 165 105
No of units sold 21,000 39,000 60,000
Total contribution 3465000 4095000 75,60,000
Less Fixed Cost 20,00,000
PROFIT 55,60,000

PLAN A 10% COMMMISSION ON GROSS RUPEE SALE

Mister icecrea Cold king TOTAL
Selling price 370 430
Less Variable cost 205 325
Less 10% commission 37 43
Contribution 128 62
No Of Units sold 19,500 45,500 65,000
Total contribution 2496000 2821000 53,17,000
Less Fixed cost 0
Profit 53,17,000

Total commission recived 37*19500 43*45,500

sold 60000 units which has now 721,500 19,56,500 26,78,000
1(A) increased
has to 65,000tounits
now increased 65,000
1(b) units
1(c) Yes, the sales force previously got 20 Lakh as salaries whereas the commision received is 26,78,000
1(d) From the company's perspective the profits have reduced from 55,60,000 to 53,17,000 so this plan is

PLAN B 30% COMMISSION ON PRODUCTION CONTRIBUTION MARGIN

Selling price 370 430
Less Variable cost 205 325
Contribution 165 105
Less 30% commssion on Contribution 49.5 31.5
REvised contibution per unit 115.5 73.5
No Of Units sold 39,000 26,000 65,000
Total contribution 4504500 1911000 6415500
Less Fixed cost 0
Profit 64,15,500
Commission received 1930500 819000 2749500
2(a) Mister Ice cre Cold King Total
Plan A No. of units sold 19500 45500 65000
Plan B No
andofsounits
focussold
shifted to Mister 39000 26000 65000
Icecream
to 2749500. So the sales force is
2(b) happy.
55,60,000 and in case of Plan B it
has increased to 64,15,500.

Q6. Calculate BEP,MOS FOR 19000 UNITS

PARTICULARS AMOUNT('000)
Selling price per unit 40
Less Variable cost 25
Contribution p.u 15
Total contribution 285000
Less Fixed Cost
Staff salaries 1,20,000
General Office Cost 80,000
Advertisement 40,000
Total Fixed cost 2,40,000
Profit 45,000
1) BEP(UNITS)=Fixed cost/contribution p.u
BEP=2,40,000/15=16,000 UNITS
BEP(rs)=16000*40=6,40,000
MOS=Actual sales-Break eve sales
7,60,000-6,40,000=1,20,000

TO CALCULATE BES,AND PROFIT FOR 20,000 UNITS

PARTICULARS AMOUNT('000)
Selling price per unit 40
Less Variable cost 25
Contribution p.u 15
Total contribution 300000
Less Total fixed cost 2,40,000
Profit 60,000

BEP(UNITS)=Fixed cost/contr per unit

2,40,000/15=16,000
BEP(RS)=16000*40=6,40,000

MOS=ACT SALES-BREAK EVEN SALES

8,00,000-6,40,000=1,60,000
 TARGET TO ACHIEVE PROFIT OF 75,000 K PROFIT,COMMMISSION CHARGED 3 K PER UNIT
PARTICULARS AMOUNT('000)
Selling price per unit 40
Less Variable cost 25
Less Commission 3
Contribution 12

Total contribution=Profit required+Fixed cost

Total contribution=75,000+2,40,000=3,15,000

No Of Units to be sold=Total contribution/Contribution per unit

3,15,000/12=26,250 units

To Calculate BEP when Selling price per unit has increased by 10%,salary increase by 33,000k
New Selling Price (40+10%*40) 44
Less Variable cost 25
Contribution p.u 19

Old Fixed cost 2,40,000

Add Salary increase 33,000
Total fixed cist 2,73,000

BEP (UNITS)=fIXED COST/Contribution per unit

2,73,000/19=14,369 units

No Of Units to be sold to achieve profit of 75,000 K

Total contribution=Profit required+Fixed cost
Total contribution=75,000+2,73,000
Total contribution=3,48,000

No Of Units to be sold=Total contribution/Contribution per unit

No of units=3,48,000/19=18,316 units
uld be classified as fixed cost and variable cost

unit basis or total basis.

TIO)=CONTRIBUTION/SALES *100

ng care of variable cost only

e + fixed cost)

S*100=13,50,000

Sales price per unit 100

Less Variable cost p.u -60
Contribution p.u 40
e commision received is 26,78,000 so the sales force is happy.
60,000 to 53,17,000 so this plan is not viable for the company.
SSION CHARGED 3 K PER UNIT

ase by 33,000k
Q.1
100% CAPACITY---30000 UNITS
50% Capacity---15000 units
Calculation of variable cost at 50% capacity(15000 units)
Variable cost total Cost per unit
Direct Materials 8280 0.552
Direct Wages 11160 0.744
Variable mfg exp 3960 0.264
Total variable cos 23400 1.56

Calculation of contribution per unit

Selling price per unit 2
Less Variable cost 1.56
Contribution 0.44

Overseas offer
Price Offered 1.45 Reject the offer since we are suffering a loss.
Less Var cost p.u 1.56
Loss P.u -0.11
Total loss (6000*0.11) 660

Q.2 Jeff company

Calculate cost per unit (No Of Units Produced 11000)

Particulars Total cost cost p.u

Direct Materials 25000 2.272727273
Direct Labour 34000 3.090909091
Variable Prod 65000 5.909090909
Fixed Indirect 30000 2.727272727
Total cost 154000 14

Suppliers offer 12.5

Less Total cost 14
Loss -1.5
It Is advisable to buy the product from the supplier since we are incurring aloss of 1.5 per unit

A) If ther are no facilities available Jeff Company should continue doing business if they can bear the loss and find a

B) Rent out idle capacity

Savings if product got from supplier 1.5*11000 16500
Rent Received 50000
Total Earnings 66500

Accept the offer

Q.3
CALCUALATION OF PROFIT
Product A B C TOTAL
Selling price per unit 7.25 8.5 11.5
Less Variable cost 4.4 6.6 7.7
Contribution p.u 2.85 1.9 3.8
units sold 15000 10000 10000
Total contribution 42750 19000 38000 99750
Less Fixed cost 70000
Profit 29750

MIX 1
units sold 18000 12000 7000
Total contribution 51300 22800 26600 100700
Less Fixed cost 70000
Profit 30700

MIX 2
units sold 15000 6000 13000
Total contribution 42750 11400 49400 103550
Less Fixed cost 70000
Profit 33550

MIX 3
units sold 22000 8000 8000
Total contribution 62700 15200 30400 108300
Less Fixed cost 70000
Profit 38300

Q.4
Variable cost of manufacturing
Total cost price 6.25
Less Fixed cost 1.25
Variable cost of manufacturing 5

Suppliers price 5.75

It is advisable to make the product since the cost of manufacturing is less than suppliers price

Suppliers offer is 4.85

Variable cost 5
Suppliers offer 4.85
Savings 0.15

Q.5 The Chartered Air Ltd

CALCULATION OF CMR
MYSORE SHIMOGA MANGALORE
Revenue 50000 60000 80000
Less Variable cost 16000 40000 26000
Contribution 34000 20000 54000
CMR=contr/sales*100 68 33.33333333 67.5

We will continue with the shimoga route since the Company is making a positive contribution

Calculation of CMR for the new route

Revenue 100000
Less Variable cost 60000
Contribution 40000
CMR=contr/sales*100 40%

Yes we will replace Shimoga route with the Kochi route because our contribution will increase fromm 33.33% to 40%

Limiting Factor:
In case of business there is always a scarcity of resources. In such a case, we need to utilise our resources in such
eg: Raw material is in scarcity, we will find out contribution per KG of raw material, then assign ranks and decide on

Q.6 STAR MIXERS

STAR MINI STAR MAXI

Selling Price 330 500
Less Variable cost
D.Material 40 240
D.Labor 150 100
Var Overheads 30 20
Total Var cost 220 360
Contribution 110 140
CMR=contr/sales*100 33.33333333 28
a) The Company will manufacture Star Mini in Maximum quantity to maximise profits

Star Mini Star maxi

Contribution per unit 110 140
Material per unit 2 kg 12 kg
Contri per kg of Raw Mat=Contr per unit/Material used per unit
55 11.66
RANKS 1 2

b) 22000 kg of raw material is available

RANKS PRODUCT UNITS RAW MATE USED
1 Star mini 5000 5000*2=10000 kg
2 Star maxi 12000/12=100 12000 BAL FIG
22000 kg

C) LABOUR HOURS IS THE LIMITING FACTOR

Star Mini Star maxi

Contribution per unit 110 140
Labour hours p.u 30 20
contr per hour=contr p.u/lab hrs 3.666666667 7
RANKS 2 1

Calculate the no of units to be made in 140000 hours

RANKS PRODUCT UNITS HOURS USED
1 Star maxi 4000 4000*20=80000
2 star mini 60000/30=200 60000 bal fig
140000

Q.8
A B
Selling price p.u 100 120
Less Variable cost
Mat cost 10 15
Dir wages 15 10
Variable overheads 15 20
Total var cost 40 45
Contr p.u 60 75
CMR=contr/sales *100 60% 62.5
1) If Sales potential in units is limited we should make Prod B

2) WHEN RAW MATERIAL IS LIMITING FACTOR

A B
Contr p.u 60 75
Raw Mat p.u (in kgs) 2 3
Cont per kg=contr/raw mat 30 25
RANKS 1 2

Raw Material available is 10000 kg

RANKS PRODUCT UNITS Raw mat used
1A 3500 3500*2=7000 KG
2B 3000/3=1000 3000 KG BAL FIG
10000KG
3) PRODUCTION CAPACITY IN TERMS OF MACHINE HOURS IS THE LIMITING FACTOR

A B
Contr p.u 60 75
Machine hrs used p.u 3 2
Contr per Machine hour 20 37.5
RANKS 2 1

Q.9 STATEMENT OF PROFIT FOR BUDGETED QUANTITY

X Y Z TOTAL
Selling price p.u 1040 950 1450
Less Variable cost
Materials 125 289 175
Dir labour
Dept 1 324 180 360
Dept 2 110 88 154
Dept 3 140 70 280

Var overheads 30 16 36
Total variable overheads 729 643 1005
Contr p.u 311 307 445
No Of Units 20500 16800 14500
Total contribution 6375500 5157600 6452500 17985600
Less Fixed Cost 900000
Profit 17085600
In this question, it is given that the labour hours in department 2 is the limiting factor but, the total number of hours a
X Y Z
Budgeted QTY 20500 16800 14500
Lab. hrs in dep 2 10 8 14
Total Hours 205000 134400 203000 542400

2) To decide the best product mix

X Y Z
Contr p.u 311 307 445
Lab hrs in dep 2 10 8 14
Cont per hr 31.1 38.375 31.78571429
RANKS 3 1 2

To Calculate the best product mix

RANKS PRODUCT UNITS Hrs p.u total hrs in dept 2
1Y 21840 8 174720
2Z 18850 14 263900
3X 10378 10 103780 BAL FIG
542400

Units for prod Y & Z can be increased by 30%

Y 16800+30%*16800 21840
Z 14500+30%*14500 18850

TO CALCULATE PROFIT FOR BEST PRODUCT MIX

X Y Z TOTAL
Contr p.u 311 307 445
Units 10378 21840 18850
total contr 3227558 6704880 8388250 18320688
Less Fixed Cost 900000
PROFIT 17420688
bear the loss and find a business to rent it .Yes It is a loss making proposal but no hasty decision should be taken.
se fromm 33.33% to 40%.

e our resources in such a manner that the profits can be maximised. This can be done by finding out the contribution per limitin
gn ranks and decide on the best product mix.
total number of hours are not given. We wll first calculate the total number of hours for Department 2.
ould be taken.
the contribution per limiting factor.
In a regular cost sheets we arrive at total cost by adding different overheads to the Prime Cost. The total cost is the
In case of marginal costing, emphasis is laid on the variable cost as well as the fixed cost to calculate contribution a
But these techniques cannot be applied for service industries where different activities are important. These activitie
For example: Packing and packaging cost, travellingt cost, cost of delivering goods etc.
This is applicable in case of supermarkets, swiggy, zomato, etc.
In such cases we have the cost pool which is divided by the cost driver to arrive at the cost per activity

Q1
To calculate cost per activity
particulars activity cost Driver Consumption cost per activity
Printing set up 360000 3000 120
other handling 100000 25000 4
Electric power 40000 40000 1

To Calculate cost per unit using ABC COSTING

PARTICULARS Wedding cardsPamphletts
No Of Units produced 4000 20000
Direct Cost of paper 40000 50000
Direct Labour 24000 40000
Printing setup @120 per hou 24000 28800
Handling @ 4 per hour 4000 12000
Electric power @1 per hour 2000 4000
Total cost 94000 134800
Cost per unit=Total cost/no of 23.5 6.74

Q.2 MALAD SUPER MARKETS

To calculate cost per activity
particulars Total cost Activities Cost per activity
Ordering 62400 624 100
Delivery 100800 1260 80
Shelf stocking 69120 3456 20
Cutomer suppo 122880 614400 0.2

Statement to calculate cost

particulars Soft Drinks Fresh producePackaged foods
Revenues 317400 840240 483960
Less COGS -240000 -600000 -360000
GROSS PROFIT 77400 240240 123960
LESS OVERHEADS
Cost of bottles returned 4800
Ordering cost @100 per orde14400 33600 14400
Delivery cost @80 per order 9600 70080 21120
Shelf stocking @20 per hour 4320 43200 21600
Customer support @0.2 per 10080 88320 24480
Total overheads 43200 235200 81600
Operating profit 34200 5040 42360

Gross Profit ratio=G.P/sales 24.38563327 28.59183091 25.61368708

Net Profit ratio=op profit/sal 10.77504726 0.59982862 8.752789487

It is observed that Gross profit is maximum in case of Fresh Produce ie 28.6% but operating profit is lowest at 0.6%

Q.3 SUPERMART FOOD STORES

To calculate profit under current costing system

Particulars Frozen food Baked Goods Fresh produce
Sales 120000 90000 158125
Less COGS -105000 -67000 -110000
lLess Stores support exp
at 20% of sales -24000 -18000 -31625
Profit -9000 5000 16500

To Calculate profit using ABC Costing

Particulars Frozen food Baked Goods Fresh produce
Sales 120000 90000 158125
Less COGS -105000 -67000 -110000
Less stores support expenses
Order processing @80 per or800 4400 7200
Receiving @110 per delivery1100 7700 13200
Shelf stocking@15 per hour 300 525 7200
Customer support @0.2 per 6000 8000 17200
Total support expenses 8200 20625 44800
Operating profit 6800 2375 3325

It is observed that the Frozen food section showed losses in the current costing system but after using ABC costing

Q.4)
TO CALCULATE THE CMR
A B C
Actual selling price 280 250 300
Less Variable cost
Direct Material 50 60 65
Direct Labor 20 20 10
Total Variable cost 70 80 75
Contribution 210 170 225
Less Fixed cost
Factory Overheads 116 116 58
Profit 94 54 167

CMR=Contribution/sales *10 75 68 75 (in %)

Ans 1) Yes Product B is the least profitable since the CMR IS 68% whereas for Prod C it is 75%.

TO CLACULTE ABC(ACTIVITY BASED COST) COST

PRODUCT A B C
Contribution per unit 210 170 225
Less Factory overheads
Machine set up 1600 4000 2400
Materials handling 40000 25000 35000
Hazardous control 62500 112500 75000
Quality control 22500 26250 26250
Other Overheads 12000 42000 6000
Total overheads 138600 209750 144650
No Of Units Sold 1000 3000 500
Overheads per unit 138.6 69.91666667 289.3
Profit per unit=Contribution- 71.4 100.0833333 -64.3

Total cost per unit as per ABC COSTIONG

PRODUCT A B C
Direct Material 50 60 65
Direct Labor 20 20 10
Overheads per unit 138.6 69.92 289.3
TOTAL COST P.U 208.6 149.92 364.3

ANS 3) NEW TARGET PRICE IS 150% OF THE NEW COST AS PER ABC COSTING
PRODUCT A B C
TOTAL COST P.U 208.6 149.92 364.3
Target Selling price at 150% 312.9 224.88 546.45

To Compare Target selling price with Actual selling price

PRODUCT A B C
Target Selling price at 150% 312.9 224.88 546.45
Actual selling price 280 250 300

Analysis The Actual selling price is much below the Target selling price for Product A & C.The management s
if they want this to be a profitable business.
 Cost. The total cost is then divided by the total number of units to arrive at cost per unit.
to calculate contribution and profits.
e important. These activities are called as Cost Drivers

st per activity
ng profit is lowest at 0.6%.

ut after using ABC costing it is the most profitable section.

A & C.The management should revise this selling price
Budgets are the estimated data for the future. We can prepare budgets uder different heads, ie,
Production BudgetOverheads Budget
Sales Budget Cash Budget
Material Budget Flexible Budgets
Master Budgets

1) Cash Budgets: Under this budget, we calculate the estimated availability of cash for every month.
The proforma for the cash budget is as follows:
1) Opening Balance
Add: Receipts - Money received as cash sales, collection from debtors, sale of assets, dividend received, other inco
Less: Payments - Amount paid for cash purchases, payment to suppliers, expenses paid, purchase of assets etc.
Closing Balance - Closing Balance is considered as the opening balance for the next month.

Q.1 FASHION FABRICS

CASH BUDGET FOR APRIL 25---- JULY 25
PARTICULARS APRIL MAY JUNE JULY
Opening balance 150000 595000 932500 1187500
ADD RECEIPTS
Cash Sales 320000 400000 360000 320000
Collection from Debtors 960000 960000 1280000 1600000
Interest on Deposits 160000
sale of old assets 12500

TOTAL RECEIPTS 1590000 1967500 2572500 3107500

LESS PAYMENTS
Payment to suppliers 720000 720000 960000 1200000
Variable expenses 140000 180000 190000 170000
Commission on sales 60000 60000 80000 100000
fixed expenses 75000 75000 75000 75000
Payment of taxes 80000
Purchase of Fixed assets 650000
TOTAL PAYMENTS 995000 1035000 1385000 2195000
CLOSING BALANCE 595000 932500 1187500 912500

WORKING NOTES
1) SALES FEB MARCH APRIL MAY JUNE
Sales 1200000 1200000 1600000 2000000 1800000
20% Cash Sales 240000 240000 320000 400000 360000
80% Credit Sales 960000 960000 1280000 1600000 1440000
2) Collection -debtors
80% Credit Sales 960000 960000 1280000 1600000 1440000
960000 960000 1280000

3) purchases
Sales 1200000 1200000 1600000 2000000 1800000
60% of Sales=Pur 720000 720000 960000 1200000 1080000
Payment to suppliers
done after 2 months 720000 720000 960000

4) variable expenses
Sales 1200000 1200000 1600000 2000000 1800000
10% of sales=var 120000 120000 160000 200000 180000
50% in Current mo 60000 60000 80000 100000 90000
50% in next month 60000 60000 80000 100000
140000 180000 190000

5) commission on sales is 5% of Sales value paid in 3rd Month

Sales 1200000 1200000 1600000 2000000 1800000
commi=5% of sale 60000 60000 80000 100000 90000
Paid in 3rd Month 60000 60000 80000

q.2
CASH BUDGET FOR APRIL 25---- JUNE 25
PARTICULARS APRIL MAY JUNE
Opening balance 5000 5200 -8260
ADD RECEIPTS
Cash Sales 15200 22040 16720
Collection from debtors 100000 84000 78400
income from investments 5000
TOTAL RECEIPTS 125200 111240 86860
LESS PAYMENTS
Payment to suppliers 100000 104000 106000
Payment for wages 9000 9500 8500
Misc expenses 8000 6000 12000
Rent paid(1000*3) 3000
income tax paid 25000
TOTAL PAYMENTS 120000 119500 151500

CLOSING BALANCE 5200 -8260 -64640

WORKING NOTES
FEB MARCH APRIL MAY JUNE
1) CASH SALES
Sales 120000 130000 80000 116000 88000
Cash sales 20% 24000 26000 16000 23200 17600
Credit sales 80% 96000 104000 64000 92800 70400

Cash sales 24000 26000 16000 23200 17600

Less cash Disc 5 -1200 -1300 -800 -1160 -880
Balance 22800 24700 15200 22040 16720

COLLECTION FROM DEBTORS

2) credit sales 96000 104000 64000 92800 70400
50% of credit sal 48000 52000 32000 46400 35200
Paid in next month 48000 52000 32000 46400
50% in second month 48000 52000 32000
TOTAL COLLECTION 100000 84000 78400

3) PURCHASES 84000 100000 104000 106000 80000

Paid in next month 100000 104000 106000

4) wages 10000 12000 8000 10000 8000

75% paid in same 7500 9000 6000 7500 6000
25% of wages 2500 3000 2000 2500 2000
paid in next month 3000 2000 2500
9000 9500 8500
(6000+3000) (7500+2000) (6000+2500)

Flexible Budgets:
Flexible budgets are prepared to find out the cost incurred at different activity levels.
In this case, the costs are classified into Variable Costs and Fixed Costs.
The main purpose of preparing flexible budgets is to identify the increase in costs if the production activity increases

Q.3 PG NO 29

STATEMENT OF FLEXIBLE BUDGET

PARTICULARS 5000 UNITS 5500 UNITS 6000 UNITS
Sale price @12 p.u 60000 66000 72000
LESS VARIABLE COST
Mnufacturing@6 p.u 30000 33000 36000
Admin @ 1.5 p.u 7500 8250 9000
Selling @0.5 p.u 2500 2750 3000
TOTAL VARIABLE COST 40000 44000 48000
CONTRIBUTION 20000 22000 24000
LESS FIXED COST
Manufacturing 15000 15000 15000
Administative 5000 5000 5000
TOTAL FIXED COST 20000 20000 20000
PROFIT 0 2000 4000

Q.4
NO OF UNITS CAPACITY
10000 40% NO OF UNITS AT 50% CAPACITY=10000*
? 50%
NO OF UNITS AT 90% CAPACITY=10000*

SELLING PRICE FALLS BY 5% 90*95% 85.5

SELLING PRICE FALLS BY 10%90*90% 81 FIXED COST
MATERIALS PRICE FALLS BY 20*90% 18

STATEMENT OF FLEXIBLE BUDGET

PARTICULARS 40% 50% 90%
no of units 10000 12500 22500
Selling price per unit 90 85.5 81
Less Variable cost
Materials 20 20 18
Labour 16 16 16
Overheads 8 8 8
Total Variable exp 44 44 42
Contribution per unit 46 41.5 39
Total contribution 460000 518750 877500
Less Fixed Cost 120000 120000 120000
PROFIT 340000 398750 757500

BEP=F.C/Contribution p.u 2608.695652 2891.566265 3076.923077

BEP (UNITS) 2609 2892 3077
BEP (RS) 234810 247266 249237

Q.6
NO OF UNITS SOLD=140000/14=10000 UNITS-----70% CAPACITY
NO OF UNITS AT 60% CAPACITY=10000/70* 8571.428571
NO OF UNITS AT 80% CAPACITY=10000/70* 11428.57143

STATEMENT OF FLEXIBLE BUDGETS

PARTICULARS 60% 70% 80%
Selling price p.u 14 14 14
Less Variable cost 6 6 6
Less Semi variable cost
(Variable cost component) 0.5 0.5 0.5
Total variable cost 6.5 6.5 6.5
Contribution p.u 7.5 7.5 7.5
NO OF UNITS SOLD 8571 10000 11429
TOTAL CONTRIBUTION 64282.5 75000 85717.5
Less Fixed Cost 25000 25000 29000
Profit 39282.5 50000 56717.5

BEP=F.C/Contr p.u 3333.333333 3333.333333 3866.666667

BEP (Rs) 46666.66667 46666.66667 54133.33333

Q.5 CASH BUDGET

CASH BUDGET FOR JULY 2024----SEPTEMBER 2024

PARTICULARS JULY AUGUST SEPTEMBER
Opening balance 250000 1457500 2492500
ADD RECEIPTS
Cash Sales 495000 660000 600000
Collection from debtors 1170000 1200000 1375000
Div recd 1000000
Sale of Inv 250000
TOTAL RECEIPTS 2915000 3567500 4467500
LESS PAYMENTS
Purchases 450000 412500 550000
wages 172500 192500 210000
Overheads 360000 330000 440000
Commission 75000 90000 82500
Fixed exp 50000 50000 50000
Ta Paid 80000
Purchase of Fixed assets 350000
TOTAL PAYMENTS 1457500 1075000 1412500
CLOSING BALANCE 1457500 2492500 3055000

WORKING NOTES
1) SALES
MAY JUNE JULY AUG SEPT
Sales 1500000 1800000 1650000 2200000 2000000
30% Cash sales 450000 540000 495000 660000 600000
70% Credit Sales 1050000 1260000 1155000 1540000 1400000

2) collection from debtors

Sales 1500000 1800000 1650000 2200000 2000000
40% in 2 month 600000 720000 660000 880000
30% in 3rd month 450000 540000 495000
1170000 1200000 1375000

3) Purchase
Sales 1500000 1800000 1650000 2200000 2000000
purch=25% of sal 375000 450000 412500 550000 500000
Paid after 1 month 450000 412500 550000

4) wages
Sales 1500000 1800000 1650000 2200000 2000000
wages=10% of sal 150000 180000 165000 220000 200000
50% paid in same 75000 90000 82500 110000 100000
50% in next month 75000 90000 82500 110000
172500 192500 210000
5) overheads
sales 1500000 1800000 1650000 2200000 2000000
20% of sales 300000 360000 330000 440000 400000
Paid after 1month 300000 360000 330000 440000

6) commission
sales 1500000 1800000 1650000 2200000 2000000
5% of sales 75000 90000 82500 110000 100000
Paid in 3rd month 75000 90000 82500
fferent heads, ie,

cash for every month.

assets, dividend received, other incomes received etc.

nses paid, purchase of assets etc.
e next month.

JULY AUG
1600000 1400000
320000 280000
1280000 1120000
1280000 1120000
1600000

1600000 1400000
960000 840000

1200000

1600000 1400000
160000 140000
80000 70000
90000 80000
170000

1600000 1400000
80000 70000
100000
sts if the production activity increases.
 12500

22500

10000*12 120000
 0
irrelevant information