11. The performance of a company at two levels of operations during a financial year is as under
Capacity Utilization
50%
60%
Direct Materials
61,00,000
21,20,000
Direct Wages
21,60,000
21,92,000
Production Overheads
€6,00,000
36,50,000
Administration Overheads
21,20,000
21,20,000
Selling Overheads
<2,20,000
<2,40,000
The Company produced 12,000 units at 60% capacity utilization. The profit margin is 20% on Soles.
During the next financial year, the company is poised for increasing the capacity utilization to 75%
The Company desires to have the same profit margin as in the last financial year. The following
percentage changes in costs are expected to be applicable in the next year.
Unleash your potential with us..........
ICA-INTER. NOV. 2020 SAHAJANAND CHOWK KALYAN WEST]
18
TOIGHNT
PRIVATE GROUP TUTTONS & PROFESSIONALS CACADEMY CRALAM TEST SERIES
COST ACCOUNTING
• Direct Material Prices will increase by 5%
• Direct wage Rates will increase by 3%. Direct Labour Efficiency will fall by 4%
• Variable production Overheads will increase by 6%
• Fixed production Overheads will increase by 10% up to 80% capacity utilization, and by 22%
thereafter.
• Variable Selling Expenses will increase by 10%. Fixed Selling Expenses will increase by 8%.
• Administrative Overheads will increase by 15%.
The Company expects to receive an export order for 3,000 units while operating at 75% capacity
utilization. The anticipated Export Price Offer is 92 per unit.
1. Prepare a Flexible Budget for the next year, and determine the cost per unit of the capacity
levels of 75% and 90%
2. Calculate the Sales Value and Profit for the next year at 75% capacity.
3. Advise Management as to whether or not the export order at the price of 92 per unit should be
accepted
Answers
Answer:
11. The performance of a company at two levels of operations during a financial year is as under
Capacity Utilization
50%
60%
Direct Materials
61,00,000
21,20,000
Direct Wages
21,60,000
21,92,000
Production Overheads
€6,00,000
36,50,000
Administration Overheads
21,20,000
21,20,000
Selling Overheads
<2,20,000
<2,40,000
The Company produced 12,000 units at 60% capacity utilization. The profit margin is 20% on Soles.
During the next financial year, the company is poised for increasing the capacity utilization to 75%
The Company desires to have the same profit margin as in the last financial year. The following
percentage changes in costs are expected to be applicable in the next year.
Unleash your potential with us..........
ICA-INTER. NOV. 2020 SAHAJANAND CHOWK KALYAN WEST]
18
TOIGHNT
PRIVATE GROUP TUTTONS & PROFESSIONALS CACADEMY CRALAM TEST SERIES
COST ACCOUNTING
• Direct Material Prices will increase by 5%
• Direct wage Rates will increase by 3%. Direct Labour Efficiency will fall by 4%
• Variable production Overheads will increase by 6%
• Fixed production Overheads will increase by 10% up to 80% capacity utilization, and by 22%
thereafter.
• Variable Selling Expenses will increase by 10%. Fixed Selling Expenses will increase by 8%.
• Administrative Overheads will increase by 15%.
The Company expects to receive an export order for 3,000 units while operating at 75% capacity
utilization. The anticipated Export Price Offer is 92 per unit.
1. Prepare a Flexible Budget for the next year, and determine the cost per unit of the capacity
levels of 75% and 90%
2. Calculate the Sales Value and Profit for the next year at 75% capacity.
3. Advise Management as to whether or not the export order at the price of 92 per unit should be
accepted
can't answer more sorry