A company sells a product for Rs 10 per unit, and incurs Rs 4 per unit for variable costs in its manufacture. The fixed costs are Rs 900 per month and are absorbed on the basis of the normal production volume of 250 units per month. The activity levels for the last four months, when no expenditure variances arose, were as follows: Fundamentals of Cost and Management Accounting (Study Text) 170 | P a g e 1st month units 2nd month units 3rd month units 4th month units Total units Opening stock – 200 300 300 – Production 300 250 200 200 950 ___ ___ ___ ___ ___ 300 450 500 500 950 Closing stock 200 300 300 200 200 ___ ___ ___ ___ ___ Sales 100 150 200 300 750 ___ ___ ___ ___ ___ make The profit statement using absorption costing .

Fundamentals of Cost and Management Accounting (Study Text) 165 | P a g e Example Company A produces a single product with the following budget: Selling price Rs 10 Direct materials Rs 3 per unit Direct wages Rs 2 per unit Variable production overhead Re 1 per unit Fixed production overhead Rs 10,000 per month. The fixed overhead absorption rate is based on volume of 5,000 units per month. There was production of 6000units i.e 4,800 units were sold and 1200 units left in closing stock. Prepare the profit statement for the month under absorption costing.

A manufacturer has the following data regarding a product: Fixed cost per month = Rs. 50000 Variable cost per unit = Rs. 200 Selling price Per unit = Rs. 300 Production capacity = 1500 units per month If the production is carried out at 80% of the rated capacity, then the monthly profit (in Rs.) is________ :

RST Corp. would like to institute an activity-based costing system to price products. The company’s Purchasing Department incurs costs of ₱550,000 per year and has six employees. Purchasing has determined the three major activities that occur during the year. Allocation # of Total Activity Measure People Cost Issuing purchase orders # of purchase orders 1 ₱150,000 Reviewing receiving reports # of receiving reports 2 ₱175,000 Making phone calls # of phone calls 3 ₱225,000 During the year 50,000 phone calls were made in the department; 15,000 purchase orders were issued; and 10,000 shipments were received. Product A required 200 phone calls, 150 receiving reports, and 50 purchase orders. Product B required 350 phone calls, 400 receiving reports, and 100 purchase orders. Required: a. Determine the amount of purchasing department cost that should be assigned to each of these products. b. Determine purchasing department cost per unit if 1,500 units of Product A and 3,000 units of Product B were manufactured during the year

Company A calculated the following information under traditional and activity-based costing for the production and sale of 1,000 units of Product B:  Traditional ABCSales $100,000 $100,000Cost of goods sold $70,000 $110,000Gross margin $30,000 ($10,000)Which decision should be made about the selling price of Product B? The number of production batches of Product B should be increased. Traditional costing should be used instead of activity-based costing. The price of Product B should be increased. The price of Product B should be decreased.

During its first month of operations, a manufacturer incurs the following costs (in dollars) related to activities within its factory:Direct materials $15,000Direct labor $30,000Manufacturing overhead $40,000What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold? $56,000 $68,000 $70,000 $85,000