CA Final SCMPE - Nov 2020 exam solution

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3 Points Joined December 2020

Can somebody please provide solutions for CA Final - SCMPE Paper Nov 2020 Exam?

Q.no. 4(c) and 5(a) .

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On 07 December 2020 at 16:46 Report
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3 Points Joined December 2020

Is the following solutions correct for Q. No. 4(c)?

 

SCMPE - Nov 2020   -  Q. 4(c)              
               
Computation of Contribution Per Unit
Particulars X Y Z
To Outside To Y To Z Purchase from Outside Transfer from X Purchase from Outside Transfer from X
Selling Price                 30               -                        -                        83             83                     90               90
Transfer Price                  -                 27                      27                      -               -                       -                  -  
                  30               27                      27                      83             83                     90               90
Direct Material
(Except Material 'X')		                 10               10                      10                      25             25                     35               35
Direct Labour                   6                 6                        6                        8               8                     10               10
Variable Overhead                   2                 2                        2                        3               3                       4                 4
Purchase Price- Outside
(Material 'X')		                  -                 -                        -                        30             -                       30                -  
Transfer Price- From X
(Material 'X')		                  -                 -                        -                        -               27                     -                 27
Alteration Cost                  -                 -                        -                        -               -                       -                   3
Inspection Cost                  -                 -                        -                          2             -                       -                  -  
Contribution [Per Unit]                 12                 9                        9                      15             20                     11               11
               
NOTE:               
1) Z will pay Rs. 30 if purchased Material 'X' from Outside. If purchased from X, Z will have to incur Rs. 3 towards modification. In such
a case, Z will pay maximum Rs. 27 if purchased from X.          
               
2) Since X will keep uniform price for Material 'X' for both Y and Z, if Z will pay Rs. 27, then for Y also it is Rs. 27.    
               
               
Computation of Additional Production      
Particulars X   Y Z      
Total Capacity (Units)          15,000                   5,000                 2,500      
Current Capacity 60%   80% 100%      
Current Production            9,000                   4,000                 2,500      
Additional Production (Units)
[If 100% Capacity Used]		            6,000                   1,000                      -        
               
External Demand            7,500                   5,000                 3,000      
External Demand Met            7,500                   5,000                 2,500      
Balance Units            7,500                        -                        -        
               
Transfer to Y and Z (Units)  5,000  to  Y
2,500  to  Z 		                        -                        -        
Transfer from X (Units)                  -                     5,000                 2,500      
               
               
               
Net Benefits of Using Idle Capacity      
Particulars X   Y Z      
Additional Fixed Cost Incurred [A]          36,000                 18,000                      -        
   (Rs.9000 x 4)   (Rs.9000 x 2)                       -        
               
Contribution earned after selling              
Additional Production [B]          54,000                 20,000                      -        
  (5000*Rs.9+1000*Rs.9) (1000*Rs.20)        
               
 Net Benefit                          [B-A]           18,000                   2,000                      -        
               
Since Additiional Fixed Cost result in Net Benefits for the Company, it is advisable to go for Expansion/      
Additional Production.              
               
Net Additional Revenue      
Particulars X   Y Z      
Contribution from External Sales          90,000               100,000               27,500      
   (7500 x Rs.12)   (5000 x Rs.20)   (2500 x Rs.11)       
               
Add: Contribution from Internal
         Transfer		          67,500                        -                        -        
  (5000*Rs.9+2500*Rs.9)          
               
Less: Additional Fixed Cost Incurred          36,000                 18,000                      -        
                             -        
               
 Net Additional Revenue         121,500                 82,000               27,500      
               
TOTAL ADDITIONAL REVENUE     = 1,21,500 + 82,000 + 27,500        
      = Rs. 2,31,000           
               
               
HENCE, IT IS BENEFICIAL TO FIX TRANSFER PRICE AT RS. 27 PER UNIT FOR BOTH  Y & Z.    
ALL DIVISIONS WILL EARN ADDITIONAL PROFIT AND THE COMPANY AS A WHOLE ALSO.    
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On 09 December 2020 at 20:01
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2 Points Joined June 2021

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On 18 June 2021 at 18:45


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