The company is about to send a tendor for a large plant.the costing department estimated that the material required would cost Rs 52000 and the wages to workmen for making the plant would Rs 31200.the tendor is to be made net profit of 20% on selling price. show what the amount of tendor would be if based on above percentage.
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One operation costing method of costing by units of production and is adopted where production is uniform and a continuous affair, units of output are identical and the cost units are physical and natural. The cost per unit is determined by dividing the total cost during a given period by the number of units produced during that period.
This method of costing is generally adopted where an undertaking is engaged in producing only one type of product or two or more products of the same kind but of varying grades or quality. The industries where this method of costing is used are dairy industry, beverages, collieries, sugar mills, cement works, brick works, paper mills etc. In all these cases, work is a natural unit of cost e.g., a tonne of coal, a quintal of sugar, a tonne of cement, 1,000 bricks, 1 kg of paper and soon.
This method of costing is generally adopted where an undertaking is engaged in producing only one type of product or two or more products of the same kind but of varying grades or quality. The industries where this method of costing is used are dairy industry, beverages, collieries, sugar mills, cement works, brick works, paper mills etc. In all these cases, work is a natural unit of cost e.g., a tonne of coal, a quintal of sugar, a tonne of cement, 1,000 bricks, 1 kg of paper and soon.
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