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Inbound 3884579038992165708

The document outlines the calculation of product-wise cost per unit for two products, A and B, detailing direct material and labor costs, as well as overhead absorption rates based on machine and labor hours. It also defines key cost concepts, classifies costs by function, and provides a statement of equivalent production using the FIFO method, including costs incurred and equivalent units. Additionally, it compares job costing and process costing, highlighting their differences in nature, cost accumulation, and industry applications.

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11 views3 pages

Inbound 3884579038992165708

The document outlines the calculation of product-wise cost per unit for two products, A and B, detailing direct material and labor costs, as well as overhead absorption rates based on machine and labor hours. It also defines key cost concepts, classifies costs by function, and provides a statement of equivalent production using the FIFO method, including costs incurred and equivalent units. Additionally, it compares job costing and process costing, highlighting their differences in nature, cost accumulation, and industry applications.

Uploaded by

winterdays.cold
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Solution for Question 1

1(A) Calculation of Product-wise Cost per Unit

Given Data:

- Direct Material Cost per Kg: INR40

- Direct Labour Cost per Hour: INR10

- Total Overheads: INR80,00,000

Table: Cost Per Unit (Product A & B)

Overhead Absorption Rate Calculation:

1. Machine Hour Rate Basis

- Total Machine Hours Used: 54,000 hrs

- Overhead Rate per Hour: INR148.15 per hour

- Overhead Absorbed:

- Product A: INR1,037.05 per unit

- Product B: INR1,481.50 per unit

2. Labour Hour Basis

- Overhead Rate per Labour Hour: INR148.15 per hour

- Overhead Absorbed:

- Product A: INR1,037.05 per unit

- Product B: INR1,481.50 per unit

Total Cost Per Unit:

- Machine Hour Rate: Product A: INR1,587.05 | Product B: INR1,861.50

- Labour Hour Rate: Product A: INR1,587.05 | Product B: INR1,861.50

- Prime Cost Proportion: Product A: INR1,930.90 | Product B: INR1,332.46

Conclusion:

The selection of the absorption method depends on the nature of operations.


1(B) Definitions:

1. Cost Object - Anything for which cost is measured.

2. Cost Unit - A unit of product/service for cost measurement.

3. Cost Centre - A department or segment where costs are accumulated.

4. Conversion Cost - Total of direct labour and factory overheads used to convert raw materials.

1(C) Classification of Cost by Function:

1. Production Cost - Cost incurred in the manufacturing process.

2. Administration Cost - Expenses related to general management.

3. Selling & Distribution Cost - Costs related to marketing and delivering products.

4. Finance Cost - Interest and other finance-related expenses.

1 (Alternative OR Question)

(i) Statement of Equivalent Production (FIFO Method):

- Opening WIP: 4,000 units

- Units put in: 91,000 units

- Closing WIP: 9,000 units

- Units transferred out: 79,000 units

- Scrap Realized: INR8 per unit

Equivalent Units Calculation:

- Material: 88,000

- Labour: 85,300

- Overheads: 85,300

(ii) Statement of Cost:

- Cost Incurred: Material: INR3,94,400 | Labour: INR1,64,600 | Overheads: INR82,300

- Equivalent Units: Material: 88,000 | Labour: 85,300 | Overheads: 85,300

- Cost per Equivalent Unit: Material: INR4.48 | Labour: INR1.93 | Overheads: INR0.96 | Total: INR7.37

(iii) Process Account:


Prepared using FIFO Method.

(iv) Normal Loss & Abnormal Loss/Gain:

- Normal Loss: Already considered in scrap (INR8 per unit).

- Abnormal Gain/Loss: Requires additional calculation.

1(B) Difference Between Job Costing and Process Costing:

| Aspect | Job Costing | Process Costing |

|--------|------------|----------------|

| Nature | Customized, specific jobs | Continuous, standardized production |

| Cost Accumulation | Per job | Per process/department |

| WIP Treatment | Tracked for each job | Partially completed units valued |

| Industries | Construction, printing, automobile repairs | Chemicals, food processing, textiles |

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