Institute of Rural Management Anand

< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

1a. Given data:

kg Rs
Opening
Stock 1000 48000 48
Closing Stock 800 42000 52.5

This data will be used to calculate Cost of production, below are the working from excel with
formula written sidewise,

Material Sold 6000 kg

Selling Price 60 Rs./kg

Sales 360000 Rs. (Sales volume*selling price)

Profit 43200 Rs. (12% of sales)
Cost of Production + S&D
overheads = Cost of Sales 316800 Rs. (Sales value-Profit)
6000 Rs. (Given)
Cost of Products Sold 310800 Rs. (Cost of Sales-S&D overheads)
Less: Closing Stock 42000
Add: Opening Stock 48000
Factory cost + Admin ovhereads
= Cost of Production 304800 Rs. (Cost of Products Sold-Opening Stock+Closing Stock)
Administration overheads 32000 Rs. (Given)

Total = PRIME COST 272800

Direct wages+Direct expenses 75000 Rs. (Given)
Direct material including raw
material, pkg material 197800 Rs. (Total -( Direct wages+Direct expenses))
Total Material 6200 kg (Cost of Products Sold+Opening Stock-Closing Stock)
Cost of Direct Material per Unit 31.9 Rs./kg

So, the cost per unit of direct material consumed is 31.9 Rs./kg.

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 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

1b.

Below are the excel working with notes

per
Selling price 6000 unit
Units Manufactured 100 units
Primary
Function
Direct material including raw material, pkg
material
Direct labour 70000
Direct expenses 40000
Total = PRIME COST 110000
Other
Functions
Manufacturing
Manufacturing overheads/production
overheads
Amortized share of R&D cost of successful
product/process related project
Total of manufacturing overheads 330000 Rs. (Factory Cost-Prime Cost)
Prime Cost + Manufacturing Overheads =
Factory Cost 440000 Rs. (Given)
Administration
(Cost of Production-
Administration overheads 40000 Rs. Factory Cost)
Factory cost + Admin ovhereads = Cost of
Production 480000 Rs (Given)
Selling and
Distribution
Selling overheads
Distribution overheads
Amortized share of R&D cost of successful
mktg/S&D project
(Cost of Sales-Cost of
Total Selling and Distribution overheads 60000 Rs. Production)
Cost of Production + S&D overheads = Cost
of Sales 540000 Rs. (Given)
Profit 60000 Rs. Sales Value- Cost of Sales)
Sales Value 600000 Rs (Units sold*Selling Price)

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 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

2a. Block-A Block B

Insurance premium on finished Cost of production of
1 goods 5 quantity sold
Godown Rent for storing raw Purchase value of raw
2 material 4 material
3 Indirect wages 1 Direct wages
4 Repairs to processing machines 2 Book value of machines
5 Office expenses 6 Factory cost

2b. Block-P Block Q

No. of employees (workers +
1 HR department 3 staff)
No. of employees (workers +
2 Canteen 3 staff)
3 Maintenance department 2 No. of complaints attended
Value of material
4 Stores department 1 consumption
5 Security department 4 No. of workers

3.

Given Data for Raw material:

Total Processed milk 50000 litres

Process loss@ 10% 5000 litres
Total Skimmed milk Produced 30000 litres
Total Cream Produced 15000 litres

Production Further
Production Selling Advanced Sale price
Products After Further Sales Processing
at Split-off Price Products Rs/unit
Processing Cost

Skimmed Milk 30000 30 Condensed Milk

28,000 25,000 42 120,000
Cream 15000 20 Butter Cream
14,500 14,000 84 150,000

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 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

Computation of Product-wise
Joint Cost
Skimmed
Particulars Milk Cream Total

Production 28,000 14,500

Selling Price 42 84

Realisable value of production 1,176,000 1,218,000 2,394,000

Less: Further Processing cost 120,000 150,000 270,000

Net Realisable Value of
production 1,056,000 1,068,000 2,124,000
Joint Cost distributed in the
ratio of NRV 745,763 754,237 1,500,000
Computation of Stock value

Total Cost 865,763 904,237 1,770,000

Cost per unit 30.92 62.36

Stock quantity - kg 3,000 1,000

Stock value - Rs. 92,760.29 62,361 155,121

Computation of Profit/Loss

Sales realisation 1,050,000 1,176,000 2,226,000

Cost of production 865,763 904,237 1,770,000

Less: Stock value 92,760 62,361 155,121

Cost of Sales 773,002 841,876 1,614,879

Profit/Loss 276,998 334,124 611,121

Total Cost= Further processing cost+Joint Cost divided

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 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

4.

Production Service
Basis of
Particulars Total apportionment Appie Juicy goldie Maintainance HR
Primary allocation
Direct material
cost 100000 40000 20000 30000 10000
Direct labour cost 100000 41000 30000 18000 6000 5000
Stores and spares 11000 2000 1000 3000 4000 1000
Power HP*Machin
consumption 51000 hour 34931.51 931.51 13972.60 1164.38 0.00
Domestic power
consumption 6800 Light points 2000 1200 1800 1000 800
Depreciation 20000 Asset value 7619.05 3809.52 5714.29 1428.57 1428.57
Repairs and mnt 5500 Break downs 2750 1650 1100 0 0
Direct labour
Indirect labour 10000 cost 4100 3000 1800 600 500

Total cost 304300 53400.55 11591.03 27386.89 8192.95 3728.57

Sceondary
allocation
Maintenance 8192.95 Machine hour 4876.76 390.14 2926.06
HR 3728.57 No. of staff 1657.14 1242.86 828.57
Total Overhead
Cost 59934.46 13224.03 31141.52
Machine Hours
of production
cost Centres 2500.00 200.00 1500.00
Overhead cost
per machine Rs./Machine
hour Hour 23.97 66.12 20.76

Page 5 of 8
 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

Additional data and Ratios are as under:

Additional Data Total

Asset value 4 2 3 0.75 0.75 10.5
Machine hour 2500 200 1500 1000 0 5200
HP 60 20 40 5 0 125
HP*Machine 150000 4000 60000 5000 0 219000
Break-down 5 3 2 10
No. of workers 40 28 12 80
No of staff 8 6 4 18
Light points 20 12 18 10 8 68

Ratio
Asset value 0.3810 0.1905 0.2857 0.0714 0.0714
Machine hour 0.4808 0.0385 0.2885 0.1923 0.0000
HP 0.4800 0.1600 0.3200 0.0400 0.0000
HP*Machine 0.6849 0.0183 0.2740 0.0228 0.0000
Break-down 0.5000 0.3000 0.2000 0.0000 0.0000
No. of workers 0.5000 0.3500 0.1500 0.0000 0.0000
No of staff 0.4444 0.3333 0.2222 0.0000 0.0000
Light points 0.2941 0.1765 0.2647 0.1471 0.1176

5a.

Fixed Cost 300000 Rs.

Variable Cost @75% 1300000 Rs.
Total Cost 1600000 Rs.

PAT 80000 Rs. (Given)

Income Tax 40% (Given)
PBT or Operating Income 133333.33 Rs.
Contribution 433333.33 Rs. (Operating Income+Fixed Cost)
Contribution % or PV Ratio 25 (100-VC%)

Break even Revenue 12000 Rs.

Total Sales 1733333.33 Rs. (Contribution/PV Ratio)

Page 6 of 8
 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

Notes: FC=Rs.300000

VC%= 75%

Contri Margin or PV Ratio= 1-VC%

1-75%

-25%

Break even sales= Fixed Cost/PV Ratio

=300000/25%

=Rs. 1200000 in value

Operating income

Profit before tax= 80000/60%

=Rs.133333

Total Sales= Contri/PV Ratio

=433333/25%

=Rs.1733333

5b.

VC% 70%
Break Even point at 60%
FC 90000 Rs.
Break even sales= FC/Contribution%
Contribution % 1-VC%
30%
Break even sales= 300000 Rs.
Since break even Sales is 60% of Capacity
Therefore Total Capacity is 500000

At 75% utilisation,
Sales= 375000 Rs.

Page 7 of 8
 Institute of Rural Management Anand
< CMA>
<PRM40>
<28-04-2020>
<Vanila Mehta, Roll number: P40049>

(75%* Total
Capacity)
VC% 262500 Rs.
(70% of Sales)
FC 90000 Rs.
Profit 22500 Rs.

5c.

PV Ratio 40%
Let Sales 100 Rs
Suppose Sales @1rs/unit 100 Rs
-Contribution 40 Rs
VC 60 Rs
If selling price is reduced by 20%
New Sales @ 0.8 Rs/unit 80 Rs
-VC 60 Rs
New Contribution 20 Rs
In order to maintain same level of Rs
contribution of Sales should be (40/20*80)
160 Rs
Sales must be increased by 60 %

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