A factory uses job costing system. The following data are obtained from its books for the year ended 31st March, 2025: Amount (₹) Direct materials…
CA Intermediate · Cost and Management Accounting · MTP · May 2025
A factory uses job costing system. The following data are obtained from its books for the year ended 31st March, 2025: Amount (₹) Direct materials 18,00,000 Direct wages 15,00,000 Selling and distribution overheads 10,50,000 Administration overheads 8,40,000 Factory overheads 9,00,000 Profit 12,18,000 (i) PREPARE a Job Cost sheet indicating the Prime cost, Cost of Production, Cost of sales and the Sales value. (ii) In 2025-26, the factory received an order for a job. It is estimated that direct materials required will be - 4,80,000 and direct labour will cost - 3,00,000. DETERMINE what should be the price for the job if factory intends to earn the same rate of profit on sales assuming that the selling and distribution overheads have gone up by 15%. The factory overheads is recovered as percentage of wages paid, whereas, other overheads as a percentage of cost of production, based on cost rates prevailing in the previous year.
Suggested Answer and Working Notes:
(i) Job Cost Sheet for the year ended 31st March, 2025 Prime Cost 33,00,000 Factory overheads 9,00,000 Cost of Production 42,00,000 Administration overheads 8,40,000 Selling and distribution overheads 10,50,000 Cost of Sales 60,90,000 Profit 12,18,000 Sales value 73,08,000 Calculation of Rates: Percentage of factory overheads to direct wages = (₹ 9,00,000 /15,00,000) × 100 = 60%Percentage of administration overheads to Cost of production = (₹ 8,40,000 /42,00,000) × 100 = 20%Selling and distribution overheads = 10,50,000 × 115% = 12,07,500 Selling and distribution overhead % to Cost of production = (₹ 12,07,500 /42,00,000) × 100 = 28.75%Percentage of profit to sales = (₹ 12,18,000 /73,08,000) × 100 = 16.67% or, 1/6 (ii) Calculation of price for the job received in 2025-26 Amount (₹) Direct materials 4,80,000 Direct wages 3,00,000 Prime Cost 7,80,000 Factory overheads (60% of 3,00,000) 1,80,000 Cost of Production 9,60,000 Administration overheads (20% of 9,60,000) 1,92,000 Selling and distribution overheads (28.75% of 9,60,000) 2,76,000 Cost of Sales 14,28,000 Profit (1/5 of 14,28,000) 2,85,600 Sales value 17,13,600
Topics: Job Costing
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