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What is the mistake i have done here???

Niraj Budha Magar (audit executive) (27 Points)

10 October 2021  

want suggestions on this issue please...., suggested answer and  the answer i came up with is different.... what is the mistake i have done there,  

thank you


 8 Replies

yasaswi gomes (My grammar is 💯 good I)   (6611 Points)
Replied 11 October 2021

What is the issue? There isn’t anything here

Niraj Budha Magar (audit executive) (27 Points)
Replied 19 October 2021

ohhhh sorry, had uploaded an attachment... i think it was uploaded........ 

here is the problem...... please have a look...

 

thank you


Attached File : 423685 20211019223220 what is my mistake 1 .pdf downloaded: 10 times

yasaswi gomes (My grammar is 💯 good I)   (6611 Points)
Replied 20 October 2021

Great. I analysed Labor and until 40 hours, they are used in other process. This makes it that they were never idle until 40 hours and there after the additional hours of break down has to be calculated as per the answer. example 90 hours= 90-40 hrs= 50*40

1 Like

yasaswi gomes (My grammar is 💯 good I)   (6611 Points)
Replied 20 October 2021

There is one more issue, 100 hours of breakdown per month is not equal to monthly maintenance. That was not given properly and only repair cost is given. The problem is, they must give total production hours per month. These are like tricky questions so that no one can get marks cause the problem is easy.

1 Like

yasaswi gomes (My grammar is 💯 good I)   (6611 Points)
Replied 20 October 2021

Regular maintenance= per month and no of hours per month not known

Break down  = 100 hours and only repair cost is given.

optimum amount of maintenance= lesser for 10,20, 40 because labour charges are not applicable. What ever reduces costs maximises profits and hence its called Optimal.

Labour was rightfully calculated. 

From the optimum hours & values data, you were asked to calculate additional costs and revenues ie., excluding 40 hours makes it 60 hours. You could have been correct (I did not go through your problem completely)  only that amount 115750 for 100 hours gives the wrong profit number. I wonder how can anyone pass with printing errors and logical errors. 

1 Like

Niraj Budha Magar (audit executive) (27 Points)
Replied 21 October 2021

thanx lots, but i dint get the answer i was looking for..... 

1) as far as optimality is concerned, it is the point where the profit is highest..... right??? then why did they consider only the expenses ??? and not the contribution from the extra units that would have been produced due to reduced breakdown hrs????

2) if i had considered only the expenses part and not the contribution from extra units produced due to reduced break down hours, my answer would have been same as theirs. is it that i still do not understand the requirement of the question???

anyways thanks a lot 

yasaswi gomes (My grammar is 💯 good I)   (6611 Points)
Replied 21 October 2021

To answer your first query, additional units will be falling under marginal costing. Contribution does not consider it because there is always marginal contribution calculations for it. That is why they have calculated stuff on 60 hrs. I’ll read your problem today and get back.

yasaswi gomes (My grammar is 💯 good I)   (6611 Points)
Replied 21 October 2021

Optimal hours gives optimal value

Additional revenue= optimal hours contribution - marginal hours value derived from marginal hours

The biggest flaw is, you have defined working hours as 100 hours and derived total profits from it. Because the total production would be 10 tonnes * 80 rs * total production unit. 

Here, total production was not given and in the last column, there is not revenue calculated in your method of statement. If one understands, no statement can be prepared from inadequate information and you just followed normal absorption costing kind of tabular format. 

Under relevant costs sub heading- you calculated wages as per constant production hour at 10 but not as per the break down hours. 

Adding back, labour used in other processes is not an opportunity cost at all consider it as a benefit. 

You must have followed that differential costing/ relevant costing method to appraise benefit.

This 26250 additional revenue you got, your lucky because when you don't add back labour benefit (there is no labour benefit in this problem cause they are used up in other processes) how will you get that figure 26250?

Even statement 2 is also like that, the answer may look very close when the revenue is correct and if we use absorption costing technique. 

Overall, this question is wrong 115750 is general maintenance and not 100 hours breakdown cost. 

 


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