Mr. Sagar, the CFO of Super high Ltd. was shocked to see the plummeting margins in the second quarterly results of the company as presented in the…

Mr. Sagar, the CFO of Super high Ltd. was shocked to see the plummeting margins in the second quarterly results of the company as presented in the committee meeting. He wondered how can things go so wrong all of a sudden, while he had been awarded for exemplary performance just three months back. In order to set things right and ensure a positive turnaround, he appointed you to analyze and present a report giving narrative for the downfall. You begin with seeking information which is presented as under: There was no change in the selling price of the product from last quarter. There was no opening or closing stocks of raw material or finished units in the beginning or end of the quarter. However, there were stocks of WIP (work in progress) units. Opening WIP was 1,000 units which was 60% complete in respect of labour and overheads. Super high Ltd. was engaged in a process where material was fed immediately in the pipe line. The opening WIP was valued at standard cost which turns out to be - 1,04,000 as shown later. Cost of Material used:3,00,000 (6000 units @ 50 per Kg) The Cost of Labour and overheads incurred during the quarter was - 3,15,900 and - 1,74,960 respectively. 4,500 completed units were produced and 1,600 units were closing WIP which was 60% complete in respect of labour and overheads. The normal loss in process was 900 units which was 15% of the current input. It was sold as scrap for 4,200. The standard cost card showed that 1 unit of finished product would cost 50after considering the normal standard loss which is 15% and the labour hours should be 3 hrs. @20 per hour, the cost of overheads per unit should be 30 per unit. Opening WIP value: Material: 50 × 1,000 = 50,000Labour: 60% × (3 hrs × ₹ 20 × 1,000) = 36,000OH: 60% × 30 × 1,000 = 18,000Total Opening WIP = 1,04,000