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Elective Advanced Cost and Management Accounting

Advanced Cost and Management AccountingTU Board 2081

a) The estimated annual fixed costs for the capacity output of 20,000 units are as follows: : : Factory overheads Rs 80,000 Office overheads 50,000 Selling & distribution overheads 70,000 The…

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a) The estimated annual fixed costs for the capacity output of 20,000 units are as follows:
Factory overheads Rs 80,000
Office overheads 50,000
Selling & distribution overheads 70,000

The estimated variable cost per unit:
Material cost Rs 4
Labour cost 3
Factory overhead 2
Selling & distribution overheads 2

The selling price per unit fixed is Rs 30. The factory has beginning inventory of 6,000 units and finalised the production schedule for 25,000 units with a sales forecast of 27,000 units. Required: Budgeted Absorption Costing Income Statement [5]

b) Why do business firms do cost volume profit analysis? Explain. [5]

Answer

· Based on the official syllabus and past papers
Updated
Absorption Costing Income Statement Breakdown (20,000 units)Dr.Cr.To Sales Revenue8,10,000To Variable Costs (Material + Labor + Variable Overheads)2,75,000To Fixed Costs (Factory + Office + Selling & Distribution)2,00,000By Gross Profit (Sales - COGS)3,35,000By Operating Profit (Gross Profit - Selling & Distribution O2,65,000
Corrected absorption costing breakdown showing proper cost allocation (fixed costs fully absorbed in COGS). Note: Selling & Distribution Overheads (Rs 70,000) a

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