Professional Documents
Culture Documents
2) Direct wages
3) Direct expenses
Office 1740
Appliances 0
Plant & 4605
Machinery 00
2000
Buildings 00
7680
Sales 00
Sales Return and 1400
Rebates 0
Material 3200
Purchased 00
Freight Incurred on 1600
Materials 0
Purchase
Returns 4800
1600
Direct Labour 00
Indirect 1800
Labour 0
Factory 1000
Supervision 0
1400
Repairs and Up-keep - Factory 0
6500
Heat, Light and Power 0
Rates and
Taxes 6300
Miscellaneous Factory 1870
Exp 0
Sales 3360
Commission 0
Sales 1100
Travelling 0
Sales 2250
Promotion 0
Distribution Dept - Salaries 1800
and Exp 0
Office Salaries and
Expenses 8600
Interest on Borrowed
Funds 2000
Depreciation to be provided
on:
Office
Appliances 5%
Plant &
Machinery 10%
Buildings 4%
Solution:
(Rs.)
3200
Materials Purchased 00
Less: Returns 4800
3152
Net Materials 00
1600
Add: Freight 0
Opening Stock - 1400
Raw Mat 00
4712
00
Less: Closing Stock - 1800
Raw Mat 00
Raw Material 29120
Consumed 0
1600
Direct labour 00
16800
Add: Accrued Expense 8000 0
45920
Prime Cost 0
Factory
Overhead:
Indirect 1800
Labour 0
1920
Add: Accrued Expense 1200 0
Factory 1000
Supervision 0
Repairs of 1400
Upkeep 0
5200
Heat, Light and Power 0
Rates and
Taxes 4200
Misc. Factory 1870
Exp 0
Depreciation: 4605
Plant 0
Buil 5245 17005
ding 6400 0 0
Administrative
Overheads:
Heat, Light and Power 6500
Rates and
taxes 2100
Depreciation: Building 800
Office
Appliances 870
Office Salaries and
expenses 8600 18870
65662
Total Cost 0
Add: Opening
Finished Goods 80000
73662
0
Less: Closing 11500
Stock 0
71402
Cost of Sales 0
Example:
Last year, the net selling price was Rs.31.60 per unit and all the units were
sold. As from April 1 of the
current year, the selling price was reduced to Rs.31 per unit. It was estimated
that production could be
increased in the current year by 50% due to spare capacity. Rates for materials
and direct wages would
increase by
10%.
You are required to prepare a statement of cost and profit for the current year,
assuming that 15000
units will be produced and sold during the year and that factory overheads will
be recovered as a %
of direct wages, and office and selling expenses as a percentage of
the works cost.
Soluti
on:
Project Statement of cost and profit for the current year (output
15000 units)
(Rs.) (Rs.)
Particulars Total Cost Cost per unit
14890
Material cost @ Rs.9.90 per unit 0 9.90
Direct Wages @ 6.60 per
unit 99000 6.60
24750
Prime cost 0 16.50
Add: Factory Overhead (0.75 of D.
Wages) 74250 4.95
32175
Works cost 0 21.45
Add: Office and selling overheads (0.20 X
Works cost) 64350 4.29
38610
Cost of sales 0 25.74
Estimated
profit 78900 5.26
46500
Sales revenue 0 31.00
Working Notes:
Determination of Factory
overheads:
Factory overheads (Previous year)
(Rs.)
Power and consumable
stores 12000
Factory Indirect wages 15000
Lighting of
Factory 5500
Cost of rectif. of defective work
(Considered normal) 3000
Plant repairs, maintenance and
depreciation 11500
Less: Sale of
Scraps 2000
Total 45000
Direct Wages 60000
Factory overheads as % of Direct
wages 75