Abnormal pain. 200 units
(Three process without process losses)
A product passes through three processes A, B and C before its completion. Following are
the details:
A
B
C
Materials
35,000
5,000
3,000
Labour
3,000
4,000
3,000
Direct expenses
6,000
5,000
4,000
Indirect expenses amount to 20,000 to be apportioned at 200% of wages in each process
2,000 units were produced.
Prepare Process Accounts.
on sur
Answers
Answer:
(i) C- Rs. 55,880
Fixed cost per unit = Rs. 3,60,000 / 15,000 units = Rs. 24
Profit under absorption costing = Rs. 1,01,000
Adjustment of fixed manufacturing overhead costs of increased inventory = 1,880 units × Rs. 24
= Rs. 45,120
Profit under marginal costing = Rs. 1,01,000 – Rs. 45,120 = Rs. 55,880
(ii) C – Monopoly position.
(iii) A - 5,80,000
Using production related budgets, units to produce equals budgeted sales + desired ending finished
goods inventory + desired equivalent units in ending W-I-P inventory – beginning finished goods
inventory – equivalent units in beginning W-I-P inventory. Therefore, in this case, units to produce
is equal to 5,00,000 + 1,50,000 + 60,000 – 80,000 – 50,000 = 5,80,000.
(iv) B - Rs. 300 lakhs
Margin of safety = Profit/ P/V Ratio
= 30/0.40 = Rs. 75 lakhs
0.25 of sales = Rs. 75 lakhs
Hence, Sales = 75/0.25 = Rs. 300 lakhs
(v) A – The same as good production