https://file.aiquickdraw.com/mathbot/file/1727889460434mdkk9xmx.jpg

This problem involves cost accounting for a manufacturing company, ABC, that produces metal shelving. Let's break down and calculate the necessary items:

### Given Data:

1. **Costs (in Rs lacs):**
   - DM (Direct Material): Rs 1.4 lacs (Variable)
   - DL (Direct Labor): Rs 0.3 lacs (Variable)
   - Plant Energy: Rs 0.05 lacs (Variable)
   - Indirect Labor: Rs 0.1 lacs (Variable), Rs 0.16 lacs (Fixed)
   - Other Indirect Costs: Rs 0.08 lacs (Variable), Rs 0.24 lacs (Fixed)
   - Marketing, Distribution, and Customer OH: Rs 1.2285 lacs (Variable), Rs 0.4 lacs (Fixed)
   - Admin OH: Rs 0.5 lacs (Fixed)
   
   **Total Fixed Costs = Rs 0.16 lacs + Rs 0.24 lacs + Rs 0.4 lacs + Rs 0.5 lacs = Rs 1.3 lacs.**

2. **Inventory Data:**
   - **Beginning Inventory:**
     - DM: 0 kg
     - WIP: 0 units
     - FG: 0 units
   - **Ending Inventory:**
     - DM: 2000 kg
     - FG: To be calculated
   
   Production = 1 lac units.  
   DM usage = 2 kg of DM per FG unit produced.  
   Revenue = Rs 4,36,800.

3. **FG Ending Inventory:**
   The **FG inventory** at the end is calculated using average cost (Rs 20,970).

### To calculate:

1. **Ending DM Inventory Cost:**
   - Initial DM: 0 kg
   - Ending DM: 2000 kg
   - DM used per unit = 2 kg
   - Total production units = 1 lac
   - Total DM required = 1 lac units × 2 kg = 2 lac kg
   
   This means 2 lac kg was used in production. DM purchased must be 2 lac kg + 2000 kg (ending DM) = 2.02 lac kg.
   
   **Cost of DM:** Rs 1.4 lacs  
   DM cost per kg = Rs 1.4 lacs / 2.02 lac kg = Rs 0.69307 per kg.  
   **Ending DM inventory cost = 2000 kg × Rs 0.69307 per kg = Rs 1,386.14.**

2. **Ending FG Inventory in Units:**
   Since we know that 2 kg of DM makes 1 unit of FG, and there were 2000 kg of DM left, the equivalent number of FG units is:
   \[
   \text{Ending FG Inventory in units} = \frac{2000}{2} = 1000 \, \text{units}.
   \]

3. **SP (Selling Price) per Unit:**
   - Revenue = Rs 4,36,800
   - Units sold = 1 lac units (produced and sold)
   
   Therefore,  
   \[
   SP \, \text{per unit} = \frac{Rs \, 4,36,800}{1 \, \text{lac}} = Rs 4.368 \, \text{per unit}.
   \]

4. **Operating Income:**
   - Total variable costs include DM, DL, and other variable overheads. 
   - Fixed costs = Rs 1.3 lacs.
   - We know that manufacturing cost for the year is Rs 20,970, and sales revenue is Rs 4,36,800.
   - **Operating Income = Revenue − (Total Manufacturing Cost + Fixed Costs)**
   
   I'll compute this in the following step:

Would you like the detailed breakdown of each cost, the formulas used for operating income, or more explanation on how these figures were derived?

Here are five additional questions related to this information:

1. How would changes in direct material costs affect operating income?
2. If the production units increased to 1.5 lac, what would be the impact on variable costs?
3. How does the fixed cost allocation affect per-unit costs for production?
4. How can the company optimize its inventory management to reduce the cost of goods sold?
5. How would an increase in selling price per unit by 10% affect overall revenue and operating income?

**Tip:** Understanding the difference between variable and fixed costs is crucial in cost accounting for better decision-making and profit optimization.

ABC manufactures metal shelving, and you are given the manufacturing and inventory details to calculate ending inventory, selling price per unit, and operating income.

This cost accounting problem involves calculating the ending direct material inventory cost, finished goods inventory, selling price per unit, and operating income based on provided manufacturing and inventory data. Suitable for students learning cost accounting principles.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation