MASTER MINDS
No.1 for CA/CWA & MEC/CEC
13. JOB COSTING & BATCH COSTING
SOLUTIONS TO ASSIGNMENT PROBLEMS
Problem No. 1
Statement showing the price for the year ending 1998 and 1999
Particulars
1998
1999
Direct Materials (W.N – 1)
Direct Labour (W.N – 2)
80,000
1,20,000
1,15,200
1,51,200
Prime cost
Add: Factory Overhead (W.N – 3)
2,00,000
50,000
2,66,400
66,600
Net works cost
Add: Administration overhead:
Staff & Salaries
Rent, Rates & Insurance
General Expenses
2,50,000
3,33,000
60,000
10,000
20,000
60,000
10,000
20,000
Cost of Production
Add: Selling & Distribution Overhead (W.N – 4)
3,40,000
30,000
4,23,000
36,000
Cost of Sales
Add: Profit (W.N – 5)
3,70,000
30,000
4,59,000
51,000
Sales
4,00,000
5,10,000
 4,00,000 

=
 1,000 
Selling price per unit
400
 5,10,000 


 1,200 
= 425
W.N: Increase in Costs during 1999:
1,200


× 120%  = 1,15,200
1. Direct Material =  80,000 ×
1
,
000



2. Direct Labour = 1,20,000 ×


1,200

× 105%  = 1,51,200
1,000

3. Factory Overhead =  50,000 ×

2,66,400 
 = 66,600
2,00,000 

4. Selling & Distribution overhead =  30,000 ×


5. Profit =  4,59,000 ×

1,200 
 = 36,000
1,000 
10 
 = 51,000
90 
Problem No. 2
Statement showing the cost (per unit) & offer price
Particulars
Material Cost
A
B
C
D
40
60
100
300
 60 × 480 

 16
 1800 
 50 × 480 

 48
500 

 50 × 480 

 80
300 

 65 × 480 

 120
260 

56
108
180
420
Add: Profits (20% on cost)
11.20
21.60
36
84
Offer Price / Sale Price
67.20
129.60
216
504
Add: Machine Center
Cost (WN–1)
Total Cost
IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________1
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W.N-1: Calculation of Overhead Distribution to Products on the basis of Machine Hours
1800
Machine hours for Product A =
= 60 Machine hours
30
500
Machine hours for Product B =
= 50 Machine hours
10
300
Machine hours for Product C =
= 50 Machine hours
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To MASTER MINDS, Guntur
260
Machine hours for Product D =
= 65 Machine hours
4
Total Machine Hours
= 225 Machine hours
Total Factory Overhead per month = (50,000 + 10,000 + 2,000 + 6,000 + 40,000) = Rs.1,08,000
1,08,000
= Rs. 480 per Machine Hour
Factory Overhead Recovery rate per machine hour =
225
PROBLEM NO.3
Customer Details ———
Date of commencement ——
Job Cost Sheet
Job No._________________
Date of completion _________
Particulars
Direct materials
Direct wages :
Deptt. X Rs. 2.50 × 8 hrs. = Rs. 20.00
Deptt. Y Rs. 2.50 × 6 hrs. = Rs. 15.00
Deptt. Z Rs. 2.50 × 4 hrs. = Rs. 10.00
Chargeable expenses
Prime cost
Overheads:
5,000
Deptt. X=
X100 = 50% of Rs. 20 = Rs. 10.00
10,000
Deptt. Y =
Amount(Rs.)
70
45
5
120
9,000
X100 = 75% of Rs. 15 = Rs. 11.25
12,000
2,000
X100 = 25% of Rs. 10 = Rs. 2.50
8,000
Works cost
20,000
Selling expenses =
X100 = 10% of work cost
2,00,000
Total cost
Profit (20% of total cost)
Selling price
Deptt. Z =
23.75
143.75
14.38
158.13
31.63
189.76
PROBLEM NO.4
Particulars
Direct Materials
Direct Wages
Price Cost
Add: POH
Last year
9,00,000
7,50,000
16,50,000
4,20,000
Relationship
Actuals
Actuals
Actuals
Rs. 4,50,000
=60% on Wages
Absorbed at
Rs. 7,50,000
Next year
12,00,000
7,50,000
19,50,000
4,50,000
IPCC_34e_Costing (Problems) _ Job Costing & Batch Costing ______________2
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
Cost of Prodn
Add: S & D OH
25,20,000
5,25,000
Cost of Sales
Add: Profit
30,45,000
6,09,000
Sales
36,54,000
Taken at
Rs. 5,25,000
= 25% on Factory Cost
Rs. 21,00,000
+ 15% thereon
Rs. 6,09,000
= 20% on Cost of Sales
Rs. 30,45,000
28,80,000
6,00,000 +
15% =
6,90,000
35,70,000
7,14,000
42,84,000
PROBLEM NO.5
Particulars
Direct Materials
Direct Labour: Department A
Department B
Department C
Prime Cost
Add: Overheads: Department A
Department B
Department C
Total Cost
th
Add: Profit (25% i.e. 1/4 on
Price = 1/3th on Cost)
Quoted Selling Price
Job 1
Job 2
154.00
20 hours X Rs.7.60 = 152.00
12 hours X Rs.7.00 = 84.00
10 hours X Rs. 6.80 = 68.00
458.00
20 hours X Rs. 12.86 = 257.20
12 hours X Rs. 12.40 = 148.80
10 hours X Rs. 14.03 = 140.03
1,004.03
108.00
16 hours X Rs. 7.60 = 121.60
10 hours X RS. 7.00 = 70.00
14 hours X Rs. 6.80 = 95.20
394.80
16 hours X Rs. 12.86 = 205.76
10 hours X Rs. 12.40 = 124.00
14 hours X Rs. 14.03 = 196.42
920.98
334.68
1,338.71
306.99
1,227.97
PROBLEM NO.6
Job cost sheet
Particulars
Direct material (a)
Direct wages (b)
Prime cost (a) + (b)
Add: Factory overhead:
Machining department – 15h x 4
Finishing department – 150% on DW
Total cost / works cost
No .of units
Cost per unit
Amount
57
85
142
60
60
262
10
26.2
Working notes:
Overhead recovery rate =
Estimated overhead
Estimated base
80,00,000
= Rs.4 M.H
20,00,000
60,00,000
For finishing department =
x 100 = 150%
40,00,000
For machining department =
PROBLEM NO.7
Job costing
Particulars
Direct material
Direct wages
Prime cost
(+) Factory overhead
Job 1
17,150
12,500
29,650
43,750
Work in progress
Job 2
29,025
23,000
52,025
80,500
Finished goods
Job 3
4,500
4,500
1,50,750
IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________3
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(350% on wages)
Gross works cost
(+) Work in progress
73,400
8,500
81,900
1,32,525
1,32,525
20,250
46,000
66,250
Closing work in progress:
Job 1 + job 2 = 81,900 + 1,32,525 = 2,14,425
PROBLEM NO.8
Direct Material
Direct Wages
Particulars
Given
Department I Given
Department II Given
Department III Given
Prime Cost
Add: Factory Overheads (absorbed based on Direct Labour Cost)
Rs.8,000
Department I
= 80% on Direct Labour Cost of Rs. 2,000
Rs.10,000
Rs.4,000
= 50% on Direct Labour Cost of Rs. 1,500
Department II
Rs.8,000
Rs.7,200
= 60% on Direct Labour Cost of Rs. 3,000
Department III
Rs.12,000
Factory Cost
Rs.
6,800.00
2,000.00
1,500.00
3,000.00
13,300.00
1,600.00
750.00
1,800.00
17,450.00
Rs.11,420
Add: AOH absorbed based on Factory Cost =
= 10% on Works Cost
Rs.1,14,200
of Rs. 17,450
Total Cost
th
Add: Profit (20% on Price, i.e. 25% on Total Cost) i.e. 1/4 of Rs. 19,195
Estimated Selling Price
1,745.00
19,195.00
4,798.75
23,993.75
Problem No. 9
Statement showing the profit from sale of 60% capacity and additional 20% capacity (i.e. at 80,000 units)
Particulars
Sales
Less: Variable cost:
Direct material (W.N – 1)
Direct wages (W.N – 2)
Factory Overhead
Selling Overhead
Contribution
Less: Fixed Cost (W.N – 3)
Profit required
60,000 units
Per unit
Total
15
9,00,000
4.20
1.20
3.00
0.25
6.35
2,52,000
72,000
1,80,000
15,000
3,81,000
2,47,500
1,33,500
20,000 units
Per unit
Total
(b/f)11.15 2,23,000
4.20
1.20
3.00
0.25
2.50
84,000
24,000
60,000
5,000
50,000
(Note) 50,000
80,000 units
Total
11,23,000
3,36,000
96,000
2,40,000
20,000
4,31,000
2,47,500
1,83,500
W.N-1: Revised Direct Material Cost = 4 X 105% = 4.20
W.N-2: Revised Direct Wages = 1 X 120% = 1.20
W.N-3: Calculation of Fixed Cost:
IPCC_34e_Costing (Problems) _ Job Costing & Batch Costing ______________4
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
Particulars
Factory Overhead = 6 X 50% = 3 X 60,000
Selling Overhead = 1 X 75% = 0.75 X 60,000
Add: Increased by 10%
Total Fixed Cost
Amount
1,80,000
45,000
2,25,000
22,500
2,47,500
2,23,000
= Rs. 11.15 per piece.
20,000
Note: Fixed Cost is to be ignored, as there will be no increase in it, on acceptance of this order.
Selling Price per piece =
BATCH COSTING
Problem No. 1
EQB
=
2DS
=
C
2 x 500 x 12 x 60
0.1x 20
= 600 units.
Problem No. 2
1. EBQ =
2AS
C
Where:
A = Annual Demand for Finished Product = 2,40,000 units
S = Set-Up Cost per batch = Rs.75
C = Carrying Cost per unit of Finished Product per annum = Re. 1.00
On substitution, EBQ = 6,000 units.
2. Comparison of Associated Costs at different Batch Output Levels:
a.
b.
c.
d.
Particulars
Batch Quantity
Number of Batches
p.a
Set-up Costs p.a. at
Rs.75
Average Inventory
e. Associated Costs
p.a. = (c + e)
EBQ
6,000 units
2,40,000 ÷ 6,000 =
40
40 X Rs. 75 = Rs.
3,000
½ X 6,000 = 3,000
units
Rs. 6,000
Existing Policy
20,000 units
2,40,00 ÷ 20,000 = 12
Arun’s suggestion
5,000 units
2,40,000 ÷ 5,000 =48
12 X Rs. 75 = Rs. 900
48 X Rs. 75 = Rs.
3,600
½ X 5,000 = 2,500
units
Rs. 6,100
½ X 20,000 = 10,000
units
Rs. 10,900
Note: At EBQ using the above formula, Set-up Costs p.a. = Carrying Costs p.a. = ½ of Associated
Costs p.a.
3. Number of Batches p.a. =
Annual Re quirement ( A ) 2,40,000
=
= 40 batches per annum. (for
PRoduction per Batch (Q)
6,000
least cost)
Problem No. 3
a. Optimum production run size (Q) =
2DS
C
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Where,
D = No. of units to be produced within one year.
S = Set-up cost per production run
C = Carrying cost per unit per annum.
=
2DS
=
C
2 x 24,000 x Rs.324
= 3,600 bearings.
0.10 x 20
b. Total Cost (of maintaining the inventories) when production run size (Q) are 3,600 and 6,000
bearings respectively
Total cost = Total set-up cost + Total carrying cost.
Total set up cost
Total Carrying cost
Total Cost
When run size is 3,600 bearings
24,000
=
x Rs. 324 =Rs. 2,160
3,600
1/2×3,600 × 0.10P × Rs.12
= Rs. 2,160
Rs. 4320
When run size is 6,000 bearings
24,000
=
x Rs. 324 =Rs. 1,296
6,000
1/2 × 6,000 × 0.10P × Rs.12
= Rs. 3,600
Rs. 4,896
c. Minimum inventory holding cost = 1/2 Q × C
(When Q = 3,600 bearings) = 1/2 × 3,600 bearings × 0.10P × Rs. 12 = Rs. 2,160
Problem No. 4
Batch output (in units)
Sale value Rs.
Material cost Rs.
Direct wages Rs.
Chargeable expenses* Rs.
Total cost Rs.
Profit per batch Rs.
Total cost per unit Rs.
Profit per unit Rs.
Jan.
210
1,680
650
120
600
1,370
310
6.52
1.48
Feb.
200
1,600
640
140
672
1,452
148
7.26
0.74
March
220
1,760
680
150
672
1,502
258
6.83
1.17
April
180
1,440
630
140
621
1,391
49
7.73
0.27
May
200
1,600
700
150
780
1,630
-30
8.15
-0.15
June
220
1,760
720
160
800
1,680
80
7.64
0.36
Total
1,230
9,840
4,020
860
4,145
9,025
815
7.34
0.66
Overall position of the order for 1,200 units
Sales value of 1,200 units @ Rs. 8 per unit
Total cost of 1,200 units @ Rs. 7.34 per unit
Profit
Ch arg eable exp enses
xDirect labour hours for batch
*
Direct labour hour for the month
Rs. 9,600
Rs. 8,808
Rs. 792
Problem No. 5
1. Computation of OH Absorption Rates:
Rs. 6,000
Wedding Department:
= Rs. 4 per Labour Hou.
1,500
Rs.10,000
= Rs. 10 per Labour Hour.
Assenmbly Department:
1,000
2. Batch Cost Sheet:
Direct Material
Direct Wages
Particulars
Given
100 hours in Welding Shop at Rs. 10 per hour
Rs.
12,000
1,000
IPCC_34e_Costing (Problems) _ Job Costing & Batch Costing ______________6
No.1 for CA/CWA & MEC/CEC
200 hours in Assembly Shop at Rs. 8 per hour
Direct Expenses Hire of Special Scan Equipment
Prime Cost
Add: Overheads: 100 hours in Welding shop at Rs. 4 per hour
200 hours in Assembly Shop at Rs. 10 per hour
Factory Cost
Add: SOH absorbed at 20% on Factory Cost of Rs. 17,500
Total Cost
Cost per unit =
Rs. 21,000
= Rs. 84.00
250
MASTER MINDS
1,6000
500
15,100
400
2,000
17,500
3,500
21,000
THE END
IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________7