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Montex Pens Cost Analysis: Return On Sales

The document analyzes the cost of producing different varieties of pens - blue, black, red, and purple pens. It finds that blue and black pens have the highest production volume and sales revenue. An activity-based costing analysis is also performed to allocate overhead costs like labor and machine costs to different pen varieties based on cost drivers like direct labor hours and machine hours used.

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Abhishek Bhushan
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115 views6 pages

Montex Pens Cost Analysis: Return On Sales

The document analyzes the cost of producing different varieties of pens - blue, black, red, and purple pens. It finds that blue and black pens have the highest production volume and sales revenue. An activity-based costing analysis is also performed to allocate overhead costs like labor and machine costs to different pen varieties based on cost drivers like direct labor hours and machine hours used.

Uploaded by

Abhishek Bhushan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Montex Pens Cost Analysis

Return on sales
Variety Blue pens Black pens Red pens Purple pens Total
Production/sales volume 25000 20000 4500 500 50000
Direct material (Rs) 375000 300000 70200 8250 753450
Direct labour (Rs) 150000 120000 27000 3000 300000
Overhead cost 0 0 0 0 0
Total cost 525000 420000 97200 11250 1053450
Cost per unit 21 21 22 23 21
Unit sales price 45 45 46.5 49.5 49.5
Sales 1125000 900000 209250 24750 2259000
Profit 600000 480000 112050 13500 1205550
Return on sales 53% 53% 54% 55% 53%

ABC - Tracing Cost To Activities


Handle Support
Activities
Indirect labour and 50% production run Set up machines Run machine Total
fringe benefits 50% 40% 10% 0
Computer expenses 80% 20% 0
Machine depreciation 100% 0
Maintenance 100% 0
Energy 100% 0
Total 0 0 0 0 0

Tracing Cost Drivers To Products


Activity cost drivers Blue pens Black pens Red pens Purple pens Total
Quantity 25000 20000 4500 500 50000
Direct labour hour/unit 0.04 0.04 0.04 0.04
Machine hour/unit 0.2 0.2 0.2 0.2 10000
Production runs 70 65 50 15 200
Setup time/run 4 2.4 5.6 5.6
Total setup time (hours) 280 156 280 84 800
Number of products 1 1 1 1

Activity cost
ActivityCost Driver
no. of
Rate Total cost driver rate,
Activity expense Cost driver
production drivers Rs/driver
Handle production runs 0 runs
no. of setup 200 0
Set up 0 hours
no. of 800 0
Support machines 0 products
no. of 4 0
Run machine products 0 machine hours 10000 0
Total 0

Activity Expenses
Blue Pens Black Pens Red Pens
Activity ACDR ACDQ Activity Exp ACDQ Activity Exp ACDQ
Handle Production Runs 0 70 0 65 0 50
Set up 0 280 0 156 0 280
Support Machines 0 1 0 1 0 1
Run Machine Products 0 5,000 0 4,000 0 900

Overhead Allocation - ABC System


Particulars Blue Pens Black Pens Red Pens Purple Pens Total
50% fringe benefit 0 0 0 0 0
Handle Production Run 00 0 0 0
Set up 0 0 0 0 0
Support Machines 0 0 0 0 0
Run Machine Products 0 0 0 0 0
Total 0 0 0 0 0

Unit Cost
Variety Blue Pens Black Pens Red Pens Purple Pens Total
Direct Materials 375,000 300,000 70,200 8,250 753,450
Direct Labour 150,000 120,000 27,000 3,000 300,000
Total Overhead 0 0 0 0 900,000
Total Cost 525,000 420,000 97,200 11,250 1,953,450
Cost per Unit 21.00 21.00 21.6 22.5 39.07

Return on sales
Variety Blue Pens Black Pens Red Pens Purple Pens Total
Sales Revenue 1,125,000 900,000 209,250 24,750 2,259,000
Material Cost 375,000 300,000 70,200 8,250 753,450
Direct Labour Cost 150,000 120,000 27,000 3,000 300,000
Gross Margin 600,000 480,000 112,050 13,500 1,205,550
Overheads
50% fringe benefit 0 0 0 0 0
Handle Production Run 00 0 0 0
Set up 0 0 0 0 0
Support Machines 0 0 0 0 0
Run Machine Products 0 0 0 0 0
Total 0 0 0 0 0
Operating Income 600,000 480,000 112,050 13,500 1,205,550
Return on Sales 53.33% 53.33% 53.55% 54.55% 53.37%
Overhead Expenses
Particulars Cost (Rs)
Indirect labour 300000
Fringe benefits 240000
Computer system e 150000
Machinery 120000
Maintenance 60000
Energy 30000
Total 900000

Red Pens Purple Pens


Activity Exp ACDQ Activity Exp
0 15 0
0 84 0
0 1 0
0 100 0
Patio Grill Company Cost Analysis
Illustration 1
A B C D
Standard mix % 30% 40% 20% 10%
price per kg(rs) (SP) 1.25 1.50 3.50 3.00
actual qty used (kg) 1180 1580 830 440 4030
actual price per kg (rs) 1.30 1.80 3.40 3.00
actual output 1000 units
standard qty 1200 1600 800 400 0
standard cost 1500 2400 2800 1200 7900
actual cost 1534 2844 2822 1320 8520
cost variance -34 -444 -22 -120 -620
price variance -59 -474 83 0 -450
quantity variance 25 30 -105 -120 -170
revised actual qty 1209 1612 806 403 0
material mix variance 36.25 48 -84 -111 -110.75
material yield variance -11.25 -18 -21 -9 -59.25

Illustration 3

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