XYZ Private Limited manufactures two products, Mini and Maxi, utilising the same production methods. The company operates under the Absorption…

Answer (a) (i) Total sales and total profit for each product under absorption costing system Factory overhead rate per unit = 54,00,000/18,000 units = 300 per unit Particulars Mini Maxi No. of units produced 8000 units 10000 units No. of units sold 6400 units 8000 units Direct Material Cost per unit 250 400 Direct Labour Cost per unit (4 hours per unit @50 per hour) 200 (5 hours per unit @50 per hour) 250 Factory overheads @300 per unit* 300 300 Cost per unit 750 950 Total Cost of Production (Cost per unit x No. of units produced) 60,00,000 95,00,000 Less: Closing stock of finished goods (Cost per unit x no. of units of closing stock) 12,00,000 19,00,000 Cost of Goods sold 48,00,000 76,00,000 Profit (Balancing figure) 12,80,000 18,40,000 Total Sales (Selling price per unit x No. of units sold) 60,80,000 94,40,000 *Overhead rate = Budgeted overheads / Units Produced = 54,00,000 / 18,000 units = 300 (ii) Activity cost-Driver rates Activity Activity Costs (₹) Cost-driver Cost-driver rate Set-up cost 9,00,000 300 set-ups 3,000 per set-up Machine running costs 18,00,000 1,800 machine runs 1000 per machine run Inspection costs 27,00,000 270 inspections 10,000 per inspection Total sales and total profit for each product as per Activity Based Costing Method Particulars Mini Maxi No. of units produced 8,000 units 10,000 units No. of units sold 6,400 units 8,000 units Direct Material Cost per unit 250 400 Direct Labour Cost per unit (4 hours per unit @50 per hour) 200 (5 hours per unit @50 per hour) 250 Prime cost per unit 450 650 Total Prime Cost 36,00,000 65,00,000 Activity Costs: Set-up cost (₹ 3,000 per set-up) 3,00,000 (3,000 x 100 set-ups) 6,00,000 (3,000 x 200 set-ups) Machine running costs (₹ 1,000 per machine run) 7,50,000 (1,000 x 750 machine runs) 10,50,000 (1,000 x 1050 machine runs) Inspection costs (₹ 10,000 per inspection) 6,00,000 (10,000 x 60 inspections) 21,00,000 (10,000 x 210 inspections) Total Overhead Cost 16,50,000 37,50,000 Overhead per unit 206.25 375 Cost per unit 656.25 1,025 Total Cost of Production (Cost per unit x No. of units produced) 52,50,000 1,02,50,000 Less: Closing stock of finished goods 10,50,000 20,50,000 (Cost per unit x no. of units of closing stock) Cost of Goods sold 42,00,000 82,00,000 Profit (Balancing figure) 18,80,000 12,40,000 Total Sales (Selling price per unit x No. of units sold) 60,80,000 94,40,000