Escolar Documentos
Profissional Documentos
Cultura Documentos
Cost Accounting
Please answer all the questions: Time:60 minutes Marks-40 Illustration 1 The budgeted income statement by product lines of Multi Products Ltd., for 2003 is as follows: Sales Variable expenses: Cost of goods sold Selling expenses Overhead: Fixed Administrative Income before tax Income tax @ 40% Net income Product A Product B Product C Rs. 2,00,000 Rs. 5,00,000 Rs. 3,00,000 90,000 30,000 36,000 16,000 28,000 11,200 16,800 1,70,000 90,000 90,000 40,000 10,000 4,000 6,000 1,50,000 45,000 54,000 24,000 27,000 10,800 60,200
All products are manufactured in the same facilities under common administrative control. Fixed expenses are allocated among the products in proportion to their budgeted sales volume: (a) Computer the budgeted break-even point of the company as a whole, from the data provided. (b) What would be the effect on budgeted income if half of the budgeted sales volume of Product B were shifted to Product A and C in equal rupee amounts, so that the total budgeted sales in rupee remains the same? (c) What could be the effect of the shift in the product-mix suggested in (b) above on the budgeted break-even point of the whole company?
Illustration 2
Marks:40
Shiplon Product Ltd., manufactures three different products. The relevant data of these products are as under: Name of the Product Production capacity (units) Machine hours per unit Variable cost per unit Rs. Selling price Rs./unit Cream 5,000 1 3.00 4.00 Pomade 7,000 3 2.50 5.50 Jelly 8,100 4 3.50 6.00
The total fixed overheads at current capacity level are Rs. 40,000 per annum. The company has various alternatives for improving profitability as given below: (a) To stop the production of Jelly and use the released capacity for producing pomades. The machines for both the products are common. However, cream is produced on a special purpose machine. (b) To export the total production of Jelly at current price. On export the following additional revenue is expected. (i) 8% duly drawback on export price (ii) 12% cash compensatory support against an export scheme of government. (iii) 5% replenishment license which can be sold in market at a premium of 80%. (c) To replace the conventional machine used for Jelly by a special purpose machine, which will reduce the production time from 4 hours to 3 hours per unit. Due to this change the variable cost of Jelly will be reduced by Re.0.50 per unit. The released machine will be used for producing pomade. This proposal will entail an additional burden of fixed cost to the tune of Rs. 32,000 per annum. Please advise the management about the right choice of an alternative so as to maximize profits.
Q.3. Theoretical Question: Write short notes on any of the following: a) b) c) Target Costing Activity-based Costing Zero-based Budgeting Marks : 20