Question-   Selling Price: Concept, Formulas, Solved Examples

Solution-

Question No. 01;

 

Receipt

Investment

Balance

Date

Q

U.C

Amount

Q

U.C

Amount

Q

U.C

Amount

1st Jan

4000

20

80000

-

-

-

4000

20

80000

10th Jan

1040

21

21840

-

-

-

1040

21

21840

19th Jan

 

 

 

 

1040

1760

 

21

20

 

21840

35200

4000

 

2240

20

 

20

 

 

448000

4th  Feb

 

1600

1200

 

23

25

 

36800

30000

 

 

 

2240

1600

1200

20

23

25

448000

36800

30000

13th Mar

 

 

 

1200

1280

300

660

25

23

23

20

30000

29440

6900

13200

 

 

 

20th Apr

2000

22

44000

 

 

 

1580

2000

20

22

31600

44000

30th Apr

 

 

 

1520

22

33440

1580

470

20

22

31600

10340

 

Quantity at the end = 2050 Unit

Amount at the end = 41940 Amount

 

 

Question No.02

 

  1. Selling Price Per Unit;

 

Selling Price Per Unit=SalesNo.of items per unit sale

 

Sale=15000 unit ×25% on cost

Total cost=V.cost+F.Cost

=P.14+2P.Unit

=16 per unit cost

 

Sales=15000 unit×16 per unit+25% profit

=240000+25% profit

=240000+60000=300000

Sales=300000

 

By putting in formula;

Selling Price Per Unit=30000015000=20 per Unit

 

Selling Price Per Unit=20 per Unit

 

 

 

  1. Contribution Per Unit;

 

Contribution Per Unit=Variable cost per unit-Selling price per unit

 

Selling Price=16 per Unit cost+20% profit

=16+4=20 per unit

Selling Price=20 per unit

 

By putting in formula;

Contribution Per Unit=P 14-20P

Contribution Margin=4 per Unit

 

  1. Break Even Unit;

Break Even Unit=Fixed costRevnue p.unit-variable cost

 

By putting in formula;

Break Even Unit=24-14=210=0.2

Break Even Unit=0.2

 

  1. Profit Ratio;

Net Profit Margin Ratio=Revnue-CostRevnue

 

Net Profit Margin Ratio=300000-240000300000=0.2 Net Profit Ratio

Question No. 03;

 

  1. Allocation of Cost;

 

 

Dep A

Dep B

Dep C

Store

Maintenance

Store

40000

30000

20000

-

10000

Maintenance

44000

16000

16000

4000

-

Total Overhead

48000

46000

36000

4000

10000

 

 

 

Question No. 04 (a)

Purpose of Standard Costing;

  • Provide formal bases for assessing performance.
  • Control and eliminate cost by setting standards.
  • Help to set budget.
  • Making decision.
  • Performance evaluation.
  • Cost control and cost reduction.

 

Question No. 04 (b)

 

  1. Material Cost Variance;

Material Cost Variance=Standard price per unit of direct material-Actual price per unit of direct material×Actual quantity of direct material

=2.50-3.5×0.35

Material Cost Variance=0.35

 

  1. Material Price Variance;

Material Cost Variance=Actual price per unit of direct material-budget price per unit of material×Actual quantity of direct material used

=3.5-2.50×0.35

Material Price Variance=0.35

  1. Material Usage;

Material usage=fav or unfav quantity×standard cost per unit

=3 litres×2.5

Material usage=7.5

Question No. 05

 

Process Amount

(Process One)

Material

 

Labor

 

Overhead

 

Production overhead 200%

 

18000

 

1000

 

3000

 

2000

Closing Stock

 

F. Goods

 

Transfer to Process two

-

 

-

 

24000

 

24000

 

24000

 

 

Process Amount

(Process Two)

D.Material

 

D.Labor

 

D.Expense

 

P. Overhead

 

3000

 

2000

 

-

 

4000

Closing Stock

 

F. Goods

 

Transfer to Process three

-

 

-

 

9000

 

9000

 

9000

 

 

Process Amount

(Process Three)

D.Material

 

D.Labor

 

D.Expense

 

Production Cost

 

1000

 

1000

 

2000

 

2000

Closing Stock

 

Transfer to

-

 

 

6000

 

6000

 

6000

 

 

 

Question N0.06 (a)

 

  1. Cost Per Unit Absorption;

Per Unit Cost=D.M+D.L+Variable overhead+Fixed cost per unit

=400000200000+600000200000+600000200000

=2+3+3

Per Unit Cost=8 per unit cost

 

  1. Marginal Costing;

 

Marginal Costing=Change in cost producing more unitChange in number of goods produce

 

Question N0.06 (b)

  1. Absorption Cost Profit;

  2.  

Income Statement

January

 

Less

Sales          (200000×10)

 

Cost of Sale(400000+600000)

200000

 

100000

 

Gross Profit

100000

Less

Operating Expense

600000

 

Net Income

400000

 

Question No.07 (a)

 

  1. Meaning of Flexible Budget;

“A flexible budget means a budget that flexible to adjust or flex with changes in quantity or activity.”

The flexible budget more used by companies than static budget.

Flexible budget help in;

  • Comparison of actual cost accrued for that level of activity.
  • Help in better planning and understanding

 

Question No.07 (b)

 

  1. Flexible Budget;

Flexible Budget=Variable cost per unit×Actual production per unit

=8.3×2400=19920

Flexible Budget=19920

 

  1. Variance Analysis;

Flexible Variance=60000-19920

Flexible Variance=40080

 

Actual Variance=60000-19920

Actual Variance=40080

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