A manufacturing company follows a job costing system. The following data is extracted from its books for the year ended 31st March, 2025:…
CA Intermediate · Cost and Management Accounting · RTP · January 2026
A manufacturing company follows a job costing system. The following data is extracted from its books for the year ended 31st March, 2025: Particulars Amount (₹) Direct Materials 12,50,000 Direct Wages 9,80,000 Selling & Distribution Overheads (Variable: 60%, Fixed: 40%) 6,30,000 Administration Overheads (Fixed) 5,40,000 Factory Overheads (70% Fixed, 30% Variable) 5,75,000 Profit 8,25,000 Additional Information: Overhead Recovery:Factory overheads are absorbed as a % of Direct Wages.Selling & Distribution and Administration overheads are recovered as a % of Cost of Production.In 2025-26, the company received a new job order. It is estimated that direct materials required will be - 3,20,000 and direct labour will cost - 2,10,000 Additional Information: Selling & Distribution overheads have increased by 20% (with variable portion now being 65%).Factory overheads have decreased by 10% due to efficiency improvements. The company wants to maintain the same profit % on sales as in the previous year. You are required to prepare: Prepare a Job Cost Sheet showing Prime Cost, Cost of Production, Cost of Sales, Sales ValueDetermine the price to be quoted for the new job in 2025-26, considering Revised overhead structure and the company's profit objective. (Assume relevant cost rates are based on previous year's data unless specified otherwise.)
Suggested Answer and Working Notes:
Production Statement For the Year Ended 31st March 2025 Particulars Amount (₹) Direct Materials 12,50,000 Direct Wages 9,80,000 Prime Cost 22,30,000 Factory Overheads 5,75,000 Cost of Production (COP) 28,05,000 Administration Overheads 5,40,000 Selling & Distribution Overheads 6,30,000 Cost of Sales 39,75,000 Profit 8,25,000 Sales Value 48,00,000 Calculation of Rates (2025-26) Percentage of Administration Overheads to Cost of Production (COP) = (₹ 5,40,000 /28,05,000) × 100 = 19.251%Percentage of Profit to cost = 8,25,000 / 39,75,000 = 20.755%Selling & Distribution Overheads (20% Increase, Variable 65%) new S&D = 1.20 × 6,30,000 = 7,56,000 S&D rate (revised) = 7,56,000 / 28,05,000 = 26.952% Note: variable portion changed to 65% - that affects fixed/variable split but not the total used for recovery hereFactory Overheads decreased by 10%: new Factory OH = 0.90 × 5,75,000 = 5,17,500 Factory OH rate (revised) = 5,17,500 / 9,80,000 = 52.806% Job Cost Sheet Particulars Amount (₹) Direct Materials 3,20,000 Direct Wages 2,10,000 Prime Cost 5,30,000 Add: Factory Overhead applied (52.806% of DL) 1,10,893 Cost of Production 6,40,893 Add: Administration overhead (19.251% of CP) 1,23,378 Cost of Sales (CP + Admin) 7,64,271 Add: Selling & Distribution overhead (26.952% of CP) 1,72,733 Total Cost (before profit) 9,37,004 Add: Profit (20.755% on cost) 1,94,475 Sales Value (Quoted Price) 11,31,479
Topics: Job Costing
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