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Ans Q.1
Income Statement of Chamne pte Ltd for the Year ended 2014
 (In $)
Particular Amount
Sales Value
(750000Units*55$/U) 41250000
Variable Cost
Direct Material
(930000*25) 23250000
Direct Wages
(930000*8) 7440000
variable Overhead
(930000*5) 4650000
Total Cost Of production 35340000
(+) Opening Stock
(10000*35340000/930000) 380000
Total 35720000
(-) Closing Stock
(190000*35340000/930000) -7220000
(-)Variable Cost of Goods Sold 28500000
Contribution 12750000
Fixed Cost
Production Overhead 1350000
Non Production Cost 328000
(-)Total Fixed Cost 1678000
Profit 11072000
If we follow absorption costing method than profit get increased as when we follow absorption costing fixed production overhead become part of inventory valuation hence value of closing stock get increased and value of closing stock affect the profit.
Ans Q2
Overhead Distribution Table
Cost Cost Driver
Factory rent Floor Area
Factory Premises Insurance Floor Area
Depreciation of Plant And
 machineries Value of plant and machineries
Woodwork Dep. Material -
Indirect Labour Cost Indirect Labour Hours
 (in $)
Particular Woodwork Electrical Stores Total
Factory rent
(15:12:3) 310000 248000 62000 620000
Factory Premises Insurance
(15:12:3) 19500 15600 3900 39000
Depreciation of Plant And
 machineries (25:11:4) 22500 9900 3600 36000
Woodwork Dep. Material 20000 - - 20000
Indirect Labour Cost
(2:2:1) 74000 74000 37000 185000
Total 446000 347500 106500 900000
As cost incurered at stores department will be distributed between production department
Woodwork and Electrical In ratio of 1:2 Hence
 (in $)
Particular Woodwork Electrical Stores Total
Overhead Cost 446000 347500 106500 900000
Distribution of stores Dep Cost
(1:2) 35500 71000 -106500 0
Total 481500 418500 0 900000
Ans 2(2)
Total Overhead at woodwork is $481500 and Labour Hours at woodwork is 90000 hrs
so Overhead Absorption rate at wood work is
 = Total Overhead/ Total Labour Hours
 = 481500/90000
 ;=$5.35/Hrs

Question Set #263

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