CA Final Costing Problem

Per unit raw material cost=6₹

Variable absorption rate= 4₹

Fixed absorption rate= 12.60₹

Total costs= 22.60₹

Now that you have per unit data, include new input of 40,000 into raw material, variable and fixed overheads. 

Per unit raw material= 175000*6₹= 10,50,000₹/175000= 6₹

Variable absorption rate= 175000*4₹= 7,00,000/175000= 4₹

Fixed overhead absorption rate= 175000*12.60₹= 2203704175000=1 2.60₹

Total production cost/unit= 22.60₹

Lets see for R= 90,000*12.60= 11,34,000₹ and it is the same cost of production before additional units were included. 

R sales= 90,000*12=  10,80,000₹ This is a LOSS in absorption costing. With additional units, it is still a loss.

Considering Q production cost 22.60*45000= 1016667₹

Selling price= 15*45000= 6,75,000₹ and this is selling at LOSS despite additional units being manufactured. 

Please paste your answer when you have it. Thanks.

Originally posted by : yasaswi gomes
	Per unit raw material cost=6₹ Variable absorption rate= 4₹ Fixed absorption rate= 2.60₹ Total costs= 12.60₹ Now that you have per unit data, include new input of 40,000 into raw material, variable and fixed overheads.  Per unit raw material= 175000*6₹= 10,50,000₹/175000= 6₹ Variable absorption rate= 175000*4₹= 7,00,000/175000= 4₹ Fixed overhead absorption rate= 175000*2.60₹= 455000/175000= 2.60₹ Total production cost/unit= 12.60₹ Lets see for R= 90,000*12.60= 11,34,000₹ and it is the same cost of production before additional units were included.  R sales= 90,000*12=  10,80,000₹ This is a LOSS in absorption costing. But it will make a difference to R after new order 40000*9= 3,60,000. With additional units, you are getting a Profit.  Considering Q production cost 12.60*45000= 5,67,000₹ Selling price= 15*45000= 6,75,000₹ and this is selling at profit despite additional units being manufactured.  Please paste your answer when you have it. Thanks.

Dear Yasaswi 

I am really appreciate your working but final answer pending 

Calculate minimum reduced average price of Q to sustain the increased sales.

 

Originally posted by : yasaswi gomes
	Per unit raw material cost=6₹ Variable absorption rate= 4₹ Fixed absorption rate= 2.60₹ Total costs= 12.60₹ Now that you have per unit data, include new input of 40,000 into raw material, variable and fixed overheads.  Per unit raw material= 175000*6₹= 10,50,000₹/175000= 6₹ Variable absorption rate= 175000*4₹= 7,00,000/175000= 4₹ Fixed overhead absorption rate= 175000*2.60₹= 455000/175000= 2.60₹ Total production cost/unit= 12.60₹ Lets see for R= 90,000*12.60= 11,34,000₹ and it is the same cost of production before additional units were included.  R sales= 90,000*12=  10,80,000₹ This is a LOSS in absorption costing. But it will make a difference to R after new order 40000*9= 3,60,000. With additional units, you are getting a Profit.  Considering Q production cost 12.60*45000= 5,67,000₹ Selling price= 15*45000= 6,75,000₹ and this is selling at profit despite additional units being manufactured.  Please paste your answer when you have it. Thanks.

Dear Yasaswi 

I am really appreciate your working but final answer pending 

Calculate minimum reduced average price of Q to sustain the increased sales.

 

@ Mr. Ravi

I have some Costing material. So tell me what chapter this problem relates to. I’ll try and fix it. 

Products are produced simultaneously therefore when additional 40,000 Kgs of R will produced then 20,000 Kgs of Q will also produced. The input of Z required for these additional 40,000 Kgs of R and 20,000 Kgs of Q will 60,000 Kgs of material Z. Hence, the cost of processing of 60,000 Kg of material Z.

Particulars Rs. Cost of Raw Material (60,000 Kgs × Rs. 6 per Kg) 3,60,000

Variable Processing Cost (60,000 × Rs. 4 per Kg) 2,40,000

Total Processing Cost 6,00,000

Sales Revenue (from 40,000 units × Rs. 9 per Kg of R) 3,60,000

Balance Cost (to be recovered) 2,40,000

Current Sales (45,000 Kg of Q × Rs. 15) 6,75,000

Total Sales Revenue to be earned from Sales of Q (45,000 + 20,000 = 65,000 Kgs) 9,15,000

Minimum Price per Kg of Q to be recovered Rs. 14.08 (Rs. 9,15,000/ 65,000 Kgs)

Hi, thanks for sharing your answer. I got your logic apart from increased production of 20,000 additional units of Q. 

Then, I also read your cost simulation problem and found a video: https://youtu.be/xKhbIVbAeHU

The solution starts from 34:25 minutes. I’m sure you will find answer for rate of arrivals or number of arrivals per day. Once you have that, I’m sure logic can be applied to separate 60% self service and 40% attended customers from the total arrivals.