Solution 1
P
Allocated fixed cost for 4 months 650,000
Fixed cost for full year 1,950,000 650k/4x12
Amount Per unit
Sales 1,560,000 650.00
Material Cost (390,000) (162.50)
Labour Cost (312,000) (130.00)
Variable overheads (234,000) (97.50)
CM 624,000 260.00
For next 8 Months
KLP LQV
Selling price 617.50 308.75 (617.5x50%)
Material Cost (163) (98)
Labour Cost (130) (72)
Variable overheads (98) (54)
Sales Commission (31) (15)
CM per unit 197 71
Ratio 1 2
CM per Composite 197 141 338.00
Old Fixed Cost 1,950,000
Depreciation of new Machine 66,667
Marketing Campaign 500,000
Annual Cost to be covered 2,516,667
Target profit 600,000
CM to be covered in entire year 3,116,667
CM in first 4 Months (624,000)
CM to be covered in next 8 Months 5,609,333
CM per composite 338.00
Composites for break even 16,596
Units of KLP 16,596
Units of LQV 33,191
Solution 2
P
Units produced 120
Skilled labour utilised 6,000 Hours
Average time per unit 50.00 Hours / unit
Learning rate 90%
Find first unit time 103.52 Hours / unit
Wages last year 3,900,000
Hours 6,000.00
Hourly rate LY 650.00
Next year Hourly rate 747.50 650x1.15
Next year plan
Skilled Labour
Total units 320 (120 Last yr + 200 NY)
Learning Stops at 225
Per unit Total Hrs
Y for 225 45.44 10,225
Y for 224 45.47 10,186
Time for 225th unit 38.55
Total time for 225 units 10,225
Time for last year 120 units (6,000)
Further time for 105 units 4,225
Further time for 95 uint 3,662
Labour hours required NY 7,887
Hours Rate Amount
Labour hours - normal 6,000 747.50 4,485,000
Labour hours - Overtime 1,887 1,196.00 2,256,827
Total employee cost 6,741,827
Semi Skilled Labour
Next year production 200 units
Hours required per unit 90 Hours
Total Hours required 18,000 Hours
Wages rate 373.75 747.5x50%
Wages cost total 6,727,500
Training Cost 200,000
6,927,500
Skilled labour is a better option
Solution 3
P
Materials Production Wages
Op Bal 6,000 WIP 6,850 Cash 6,270 WIP 4,180
Creditors 8,500 FOH 2,650 FOH 2,090
C/d 5,000 6,270 6,270
14,500 14,500
Overheads WIP
Cash 4,000 WIP 8,360 Op Bal 3,500
Material 2,650 Under 380 Material 6,850 FG 18,390
Wages 2,090 Labour 4,180 C/d 4,500
FOH 8,360
8,740 8,740 22,890 22,890
Solution 4
P 500 Grams 1 Kg 2 Kg Total
Units 200,000 120,000 90,000
Weight 0.50 1.00 2.00
Kgs 100,000 120,000 180,000 400,000
Percentage 25.0% 30.0% 45.0%
Material A 15,000,000 18,000,000 27,000,000 60,000,000
Material B - 100,000 Kg 3,000,000 3,600,000 5,400,000 12,000,000
Material B - 1500,000 Kg 4,125,000 4,950,000 7,425,000 16,500,000
Material B - 1500,000 Kg 4,687,500 5,625,000 8,437,500 18,750,000
Packing Material 6,000,000 4,800,000 4,950,000 15,750,000
Unskilled Labour 450,000 540,000 810,000 1,800,000
Skilled Labour 306,250 367,500 551,250 1,225,000
Fixed Cost 937,500 1,125,000 1,687,500 3,750,000
Cost 34,506,250 39,007,500 56,261,250 129,775,000
GP 8,626,563 9,751,875 14,065,313 32,443,750
Selling price 43,132,813 48,759,375 70,326,563 162,218,750
Price per unit 215.66 406.33 781.41
Material B
Total Qty 250,000
Free (150,000)
Usable 100,000
Opertunity cost
NRV 11,000,000
in UVW
sales 16,000,000
Cost (4,000,000)
NRV 12,000,000 120
Skilled Labour
500 Grams 1 Kg 2Kg Cost
Hours required 5,000 6,000 9,000 20,000
Avaiable (5,000) 175,000
To be acquired 15,000 1,050,000
1,225,000
Capacity
Full Capacity 2,000,000
Current Utilization (1,000,000)
Idle Capacity 1,000,000
Further Utilisation 400,000
New utlisation 1,400,000
% 70%
Increase in FOH 3,750,000
Solution 5
P
Budgeted Sales 20,000,000
Budgeted Units 40,000
Std Selling Price 500.00
Actual Sales 19,920,000
Actual Selling Price 480
Actual units Sold 41,500
Std CM per unit 150 6million / 40,000
Sales Price Variance
Std Selling Price 500
Actual Selling Price 480
Actual Sales Qty 41,500
Variance (830,000) Adverse
Sales Volume Variance
Budgeted Sales Qty 40,000
Actual Sales Qty 41,500
Std CM per unit 150
Sales Volume Variance 225,000 Favourable
Materials
Budgeted cost 40,000 unit 8,000,000
Cost per unit 200
Std Usage per unit 4 Kg
Cost per Kg 50.00
Actual Materials Used 9,171,500
Actual rate per kg 52
Actual Kgs used 176,375
Material Price Variance
Std Price 50.00
Actual Price 52.00
Actual Material used 176,375
Variance (352,750) Adverse
Material Usage Variance
Budgetd usage for 41,500 units 166,000
Actual Material used 176,375
Std Price 50
Variance (518,750) Adverse
Budgeted cost 40,000 unit 6,000,000
Cost per unit 150
Std Hourly rate 75
Std usage per unit 2 Hours
Budgeted usage for 40k units 80,000.00
Actual Labour Hours 77,812.50
Actual Labour Cost 5,446,875
Actual hourly rate 70.00
Labour Rate Variance
Std Price 75.00
Actual Price 70.00
Actual Labour Hours 77,813
Variance 389,063 Favourable
Labour effeciency Variance
Budgetd usage for 41,500 unit 83,000
Actual Material used 77,813
Std Price 75
Variance 389,063 Favourable
Budgeted Actual
Kgs/Hrs/Units Rate Kgs/Hrs/Units Rate
Sales 40,000 Units Rs 500 / unit 41,500 Rs 480 / Unit
Material Cost 160,000 Kgs Rs 50 / Kg 176,375 Kgs Rs 52 / Kg
Labour Cost 80,000 Hours Rs 75 / Hr 77,812.5 Hours Rs 70 / Hr
