Question

please solve this problem. Ali Mohamed Ltd introduces 5000 units in a process at a cost of $ 20000. The wages and overhead incurred are $ 12000 and $ 15000 respectively. In normal course 10 % of the units introduced are defective. Actual output of goods is 4400 units. The rectification cost of defective units is $ 5 per unit.

Calculate

The cost per unit

Value of abnormal loss

BEP

Process Account                                                                                                                                                   (4Marks)

2. It is very necessary for an organization to analyses the cost drivers in order to control cost and to maximize overall value. You are the cost accountant in Cipla Ltd, suggest the major components for analysis, so that the company can lower its costs and also create strategic competitive advantages.

3. As this is the season of festivals employees of Mumbai Rayon fashion ltd are getting the overtime premium because they are working beyond the working hours in order to meet the market demand. You are the cost accountant of the company, the management wants to discuss with you the effects of overtime on productivity and how the same will be treated in cost accounting. Create a plan for overtime productivity and with at least five points.

Answer 1

Question 1.

Solution:   BEP Process a/c

Particulars	Units	Amount	Particulars	Units	Amount
Direct Material	5,000	$20,000	Abnormal loss (5,000*90% - 4,400) * $9.90	100	$990
Wages		12,000	Finished goods or Transferred to next process a/c	4,900
Overhead		15,000
Cost of defective units(500*$5)		2,500
	5,000	$49,500		5,000

The cost per unit = $49,500 / 5,000 = $9.90

Value of abnormal loss = $990

Note: Assumed that normal loss units becomes good units after rectification process therefore normal loss units not deducted from denominator in computing the cost per unit.