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if normal capacity of one manufacturing unit is 50000 units per year, production overhead -: 350000 for year, administrative cost
-:500000, direct material n labour during the year -: 1000000,manufacturing unit remained closed during 2 months due to non receipt of order then if it was abnormal due to which unit remains idle,calculate the value of closing stock of 6000 units????????????????? answer is 155000 but how?????????????
Replies (1)
1. Closing Stock shall ignore admin cost for 6000 uts as the stock is still lying with us.
2. Production was closed for 2 months, hence no cost to be loaded on the closing stock. Thus, Production OH for 10 months will be (350000 / 12 months * 10 months). Now distribute this to 6000 uts which results into Rs. 35,000
3. Material & Lab should be allocated as (10,00,000 / 50000 uts capacity * 6000 uts of stock). This will give you Rs. 120,000
Hence, total value of stock = Rs. 155,000
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