Problem Set 2 (Problem No-

Rs.
DM (V) 140,000
DL (V) 30000
Plant Energy Cost (V) 5000
Indirect Labour (V) 10000
Indirect Labour (F) 16000
Indirect Other (V) 8000
Indirect Other (F) 24000
Marketing, Distribution & Customer OH (V) 122850
Marketing, Distribution & Customer OH (F) 40000
Admin OH (F) 50000
Note: Variable manufacturing costs are with respect to units produced; variables Marketing, Distribution & Cust

Solution
i. Calculate the direct material inventory

Production in current year 100,000 units

2 kg of DM is used to make 1 unit of FG
Cost of material used or consumed 140,000 Rs.
Ending inventory of direct material 2,000 kg
To produce 1,00,000 units of FG, DM used is 200000 kg
Cost per unit material used or consumed 0.7 Rs.
Cost of DM Inventory (Ending) 1400 Rs.

ii.Finished goods inventory in units

A Direct Material 140,000 Rs.

B Direct Labour 30,000 Rs.
Manufacturing Overhead
Variable
a. Plant Energy Cost (V) 5,000 Rs.
b. Indirect Labour (V) 10,000 Rs.
c. Indirect Other (V) 8,000 Rs.
C Total Variable Manufacturing OH (a+b+c) 23,000 Rs.
Fixed
d. Indirect Labour (F) 16000 Rs.
e. Indirect Other (F) 24000 Rs.
D Total Fixed Manufacturing OH (d+e) 40000 Rs.

E Cost of goods Manufactured (A+B+C+D) 233,000 Rs.

F Production in units 100,000 Units
G Cost of goods manufactured per unit (E/F) 2.33
H Total value of ending goods inventory 20,970 Rs.
I Ending Finished Goods Inventory (H/G) 9000 Units
 Note: Ending inventory of FG is carried at the average unit manufacturing cost

iii.Selling Price per unit

No. of units sold= Opening Inventory + Units Produced-Closing Inventory

A Opening Inventory (FG) 0 Units
B Production Units 100,000 Units
C Ending Inventory (FG) 9000 Units
D No. of units Sold = A+B-C 91,000 Units
E Revenue (given) 436,800 Rs.
F Selling Price per unit = E/D 4.8 Rs.

iv. Operating Income

Operating Income= Gross Margin- Operating Cost

Gross Margin= Revenue- COGS
A Revenue 436,800 Rs.
B Cost of Goods Sold
I. Cost of good manufactured 233,000 Rs.
II. Beginning inventory (FG) 0 Rs.
III. Ending inventory (FG) 20,970 Rs.
Cost of Goods Sold (I+II-III) 212,030 Rs.
C Gross Margin= Revenue- COGS 224,770 Rs.
D Operating Costs
i. Marketing, Distribution & Customer OH (V) 122850 Rs.
ii. Marketing, Distribution & Customer OH (F) 40000 Rs.
iii. Admin OH (F) 50000 Rs.
D Total Operating cost (i+ii+iii) 212850 Rs.
E Operating Income (C-D) 11,920 Rs.
em Set 2 (Problem No- 2)
Inventory data: begin Jan 01 and ending Dec 31

Direct Material (DM) 0 2000 kg

WIP 0 0 Unit
FG 0 ? Unit
FG 0 ? Rs.

es Marketing, Distribution & Customer Service costs are wrt to units sold
nit manufacturing cost