Cost Accounting

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Meekha (Querist)
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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)
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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)
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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)
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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)
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24 December 2009 Thank you Sir.

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