M/s Nova Private Limited has a normal production capacity of 48,000 units of toys per annum. The estimated costs of production are as under: (i)…

CA Intermediate · Cost and Management Accounting · MTP · May 2026
M/s Nova Private Limited has a normal production capacity of 48,000 units of toys per annum. The estimated costs of production are as under: (i) Direct Material 55 per unit (ii) Direct Labour 32 per unit (subject to a minimum of 84,000 p.m.) (iii) Factory Overheads: (a) Fixed - 4,80,000 per annum (b) Variable 14 per unit (c) Semi-variable - 1,50,000 per annum up to 60% capacity and additional - 60,000 for every 20% increase in capacity or proportionately. (iv) Administrative Overheads related to factory - 6,72,000 per annum (fixed) (v) Selling overheads are incurred at 10 per unit. (vi) Each unit of raw material yields scrap which is sold at the rate of 7 per unit. (vii) In year 2025, the factory worked at 60% capacity for the first four months but it was expected that it would work at 90% capacity for the remaining eight months. (viii) During the first four months, the selling price per unit was - 180. You are required to: (i) Prepare a cost sheet showing Prime Cost, Works Cost, Cost of Production and Cost of Sales. (ii) Calculate the selling price per unit for remaining eight months to achieve the total annual profit of 15,60,000.

Suggested Answer and Working Notes:

(i) Cost Sheet of M/s Nova Pvt. Ltd. for the year 2025. Normal Capacity: 48,000 units p.a. 4 Months 8 Months 9,600 Units 28,800 units Particulars Amount (₹) Cost per unit (₹) Amount (₹) Cost per unit (₹) Direct material 5,28,000 15,84,000 Less: Scrap (67,200) (2,01,600) Materials consumed 4,60,800 48 13,82,400 48 Direct Wages 3,36,000 35 9,21,600 32 Prime Cost 7,96,800 83 23,04,000 80 Factory overheads: Fixed 1,60,000 16.67 3,20,000 11.11 Variable 1,34,400 14.00 4,03,200 14.00 Semi variable 50,000 5.21 1,90,000 6.60 Works Cost 11,41,200 118.875 32,17,200 111.71 Add: Administrative overheads 2,24,000 23.33 4,48,000 15.56 Cost of Production 13,65,200 142.21 36,65,200 127.26 Selling Overheads 96,000 10.00 2,88,000 10.00 Cost of Sales 14,61,200 152.21 39,53,200 137.26 Working Notes: 1. Calculation of Costs Particulars 9,600 units 28,800 units Amount (₹) Amount (₹) Material 5,28,000 (₹ 55 × 9,600 units) 15,84,000 (₹ 55 × 28,800 units) Wages 3,36,000 (Max. of 32x 9,600 units = 3,07,200 and - 84,000 × 4 months = 3,36,000) 9,21,600 (28,800 Units × 32) Variable Cost 1,34,400 (₹ 14 × 9,600 units) 4,03,200 (₹ 14 × 28,800 units) Semi-variable Cost 50,000 (₹ 1,50,000 ÷ 12 Months × 4 Months) 1,90,000 (₹ 1,50,000 ÷ 12 Months × 8 Months) + 60,000 (for 20 % increase) + 30,000 (for 10% increase) Selling Overhead 96,000 (₹ 10 × 9,600 units) 2,88,000 (₹ 10 × 28,800 units) Notes: Alternatively scrap of raw material can also be reduced from Work cost. (ii) Calculation of Selling price for eight months period Particulars Amount (₹) Total Cost of sales ₹ (14,61,200+39,53,200) 54,14,400 Add: Desired profit 15,60,000 Total sales value 69,74,400 Less: Sales value realised in first four months (₹ 180 × 9,600 units) (17,28,000) Sales Value to be realised in next eight months 52,46,400 No. of units to be sold in next eight months 28,800 Selling price per unit (₹ 52,46,400 ÷ 28,800 units) 182.17

Topics: Cost Sheet

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