Cost Accounting

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Meekha (Querist)

22 December 2009 Can any one please help me to solve the given problem?:

The yield of certain process is 85%, by product is 10% and normal loss is 5% of its main product. 10,000 units of materials are put in the process and its cost is Rs.30/unit and other expenses amounted to Rs.25,400, 30% of which was accounted for by power cost. It is the practice of the company that the power cost is chargeable to the main-product and the by-product in the ratio of 5:3. The cost of the by-product is?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

22 December 2009 Total Cost of Input Rs.10000x30 = Rs.300000

Cost of Main Product =(300000x85%) Rs.255000/-
Cost of By Product = (300000x10%)
Rs.30000/-

Apportioned cost of Power = (25400X30%)=rS.7620/-
Portion for Byproduct Rs.7620/8x3=Rs.2857.5

So Total cost of By product ( 30000+2857.5) = Rs.32857.5

Cost Per unit Rs.32857.5/1500= Rs.21.91

Meekha

Meekha (Querist)

23 December 2009 Sir here also they have given Rs.36,309; Rs.38282; Rs.32636; Rs.36712 as options. How to do Sir?

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)

24 December 2009 Actually the cost of material as well as other expenses (except power expenses) should be divided in the ratio 85:10 since 5% is normal loss.
Cost of raw material 300000x10/95=31579
Cost of Power 25400x.3x3/8 = 2858
Cost of other exp. 25400x.7x10/95= 1872
Total cost of by-product =36309

Meekha

Meekha (Querist)

24 December 2009 Thank you Sir.

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