Question

Q 8. The cost of an article at a capacity of 5,000 units is given under 'A' below Far a
variation of 25% capacity above or below this level thr individual expenses vary as indicated
under 'B' below
Particular
Material Cost
40,000
( 100% Varying)
Labour Cost
24,000
( 100 % Varying)
Power
2,000
( 80 % Varying)
Repairs & Maintenance
3.200
( 75 % Varying)
Stores
1,600
(100% Varying)
Inspection
800
( 20 % Varying)
Depreciation
16.000
( 100 % Varying)
Administrative Exp.
8,000
( 25 % Varving)
Selling Exp.
4,800
( 50 % Varying)
1.00-400
Cost Per Unit
Rs. 20.08
Find the unit cost of product at production level of 4,000 and 6.000 units.
15
OR​

Answer 1

Answer :

Explanation :

To find the unit cost of the product at a production level of 4,000 units, we need to calculate the total cost at that production level and divide it by the number of units produced.

A 25% decrease in production level (from 5,000 units to 4,000 units) means that the costs of materials, labor, stores, and depreciation will also decrease by 25%. The costs of power, repairs and maintenance, and inspection will decrease by 20%, 75%, and 80% respectively. The costs of administrative expenses will decrease by 25% and selling expenses will decrease by 50%.

Material cost: 40,000 * (1 - 25%) = 30,000

Labour cost: 24,000 * (1 - 25%) = 18,000

Power cost: 2,000 * (1 - 20%) = 1,600

Repairs & maintenance cost: 3,200 * (1 - 75%) = 800

Stores cost: 1,600 * (1 - 25%) = 1,200

Inspection cost: 800 * (1 - 80%) = 160

Depreciation cost: 16,000 * (1 - 25%) = 12,000

Administrative expenses: 8,000 * (1 - 25%) = 6,000

Selling expenses: 4,800 * (1 - 50%) = 2,400

Total cost: 30,000 + 18,000 + 1,600 + 800 + 1,200 + 160 + 12,000 + 6,000 + 2,400 = 72,160

Unit cost: 72,160 / 4,000 = 18.04

To find the unit cost of the product at a production level of 6,000 units, we will use similar calculations but with the appropriate increase in costs due to the 25% increase in production level.

Material cost: 40,000 * (1 + 25%) = 50,000

Labour cost: 24,000 * (1 + 25%) = 30,000

Power cost: 2,000 * (1 + 20%) = 2,400

Repairs & maintenance cost: 3,200 * (1 + 75%) = 5,600

Stores cost: 1,600 * (1 + 25%) = 2,000

Inspection cost: 800 * (1 + 80%) = 1,440

Depreciation cost: 16,000 * (1 + 25%) = 20,000

Administrative expenses: 8,000 * (1 + 25%) = 10,000

Selling expenses: 4,800 * (1 + 50%) = 7,200

Total cost: 50,000 + 30,000 + 2,400 + 5,600 + 2,000 + 1,440 + 20,000 + 10,000 + 7,200 = 118,640

Unit cost: 118,640 / 6,000 = 19.77

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