Cost & Management Accounting
1. The data shown below relate to an industrial organization that manufactures household appliances.
Standard quantity required of materials item 0009 1 kg.
Standard price per kg. ₹ 10
Product in a month appliances 100 kgs.
Actual quantity of materials used 98 kgs.
Actual price paid ₹ 11/kg
The following calculations for variances have been made:
Material usage variance = 2 kgs. @ ₹ 11 = ₹ 22
Material price variance = 100 kgs. × ₹ 1 = ₹ 100
Do you agree with these calculations? If not, provide a correct calculation for the variances.
2. ABC Ltd. started a factory in Kolkata on 1st April, 2021. Following details are furnished about its activity during the year ended 31st March 2022.
Raw Material consumed – 40,000 units @ ₹7 per unit.
Skilled worker – ₹9 per unit.
Unskilled worker – ₹6 per unit.
Royalty (on raw material consumed) @ ₹3 per unit.
Works overheads @ ₹8 per machine hour.
Machine Hours Worked 25,000.
Office Overheads at 1/3rd of works cost.
Sales Commission @ ₹4 per unit.
Units produced 40,000
Stock of units at the end 4,000 units, to be valued at cost of production per unit.
Sale price is ₹60 per unit.
Prepare Cost sheet showing the various elements of cost.
3. a. What are the implications of Economic Order Quantity in proper inventory management?
3. b X Ltd. estimates its carrying cost at 15% and its ordering cost at ₹9 per order. The estimated annual requirement is 48,000 units at a price of ₹4 per unit.
a) What is the most economical number of units to order?
b) How many orders should be placed in a year?
c) How often should an order be placed?
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