Luxz Ltd. is into luxury pens business manufacturing 120 pens in a batch. To process a single batch of 120 pens, company needs to incur following…

CA Intermediate · Cost and Management Accounting · MTP · January 2025
Luxz Ltd. is into luxury pens business manufacturing 120 pens in a batch. To process a single batch of 120 pens, company needs to incur following expenditure: Particulars (₹) Direct Materials 57,375 Direct wages 6,750 Batch Set-up cost 18,900 For each batch, the company absorbs the Production Overheads at a rate of 20% of direct wages and 15% of the total production cost is allocated to cover selling, distribution, and administrative overheads. During the month of March, Luxz Ltd. received an order for 2,400 pens and the company aims to achieve a profit margin of 25% on its sales value. You are required to DETERMINE the total sales value for 2,400 pens.

Suggested Answer and Working Notes:

Determination of total sales value of Luxury pens Particulars Amount per Batch (₹) Amount for 2,400 units or 20 batches (₹) Direct materials 57,375 11,47,500 Direct wages 6,750 1,35,000 Batch set-up cost 18,900 3,78,000 Production overheads (20% of direct wages) 1,350 27,000 Total Production Cost 84,375 16,87,500 Selling, distribution and administration cost (15% of Total Production cost) 12,656 2,53,125 Total Cost 97,031 19,40,625 Add: Profit (25% of Sales value or 1/3rd of Total cost) 32,344 6,46,875 Total Sales value 1,29,375 25,87,500

Topics: Unit & Batch Costing

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