Costing

IPCC 1403 views 1 replies

tha cost structure of an article, the selling price of which is Rs. 45,000 is as follows:-

                                                direct material   50%

                                                direct labour      20%

                                                overheads         30%

an increase of 15% in the cost of material and of 25% in the cost of labour is anticipated. these increased costs in relation to the present selling price would cause a 25% decrease in the amount of present profit per article.

Required to prepare:-

   1) statement of profit per article at present and,

   2) the revised selling price to produce the same % of profit to sales as before

   Ans:- 1) 15,000  2) 50,625

Replies (1)

assume total  cost..........x

and profit ............y

eq-1

x+y = 45000 .........................

 

now material- 50%+ 50*15% = 0.575

 and labour      20%+20*25% = 0.25

+ ovrehead        = 0. 30

total cost=      1.125

and profit  =  1y - 0.25 y  = 0.75y

eq -2

1.125x + 0.75 y = 45000

by solving this both eqns

y= 15000

and x=30000

now profit = 33750(presen cost)*15000(exsiting profit)/30000(exsiting taotal cost)=16,875

revised selling price= 33750+16875 = 50625 


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