Riya Engineering Works undertakes job work on a contract basis. The following information is available in respect of Job No. 707, which was…

2(a) (i) Job Cost Sheet for Job No. 707 Particulars Amount (₹) Amount (₹) Direct Materials issued 45,000 Less: Direct Materials returned to stores (3,000) Direct Materials consumed 42,000 Direct Labour (250 hours × ₹80) 20,000 Direct Expenses 6,000 Prime Cost 68,000 Add: Factory Overhead (60% of Direct Labour cost) 12,000 Add: Rectification cost of defective work (normal): — Direct material 1,200 — Direct labour (15 hours × ₹80) 1,200 2,400 (ii) Works Cost (Factory Cost) 82,400 Add: Administration Overhead (10% of Works Cost) 8,240 (iii) Cost of Production 90,640 Add: Selling & Distribution Overhead (8% of Cost of Production) 7,251.20 (iv) Total Cost 97,891.20 Add: Profit (20% of SP or 25% of Cost) 24,472.80 Selling Price 1,22,364 Treatment of rectification cost: Since the defect is stated to be normal for this type of job (a recurring tolerance issue inherent to the work), the rectification cost (₹2,400) is charged directly to the job itself, by adding it to the Works Cost / Factory Cost of Job No. 707. It is treated as a normal manufacturing cost specific to this job, since the customer's job benefits from — and should bear the cost of bringing the units up to the required specification. (ii) Price to be quoted to the customer for Job No. 707 = ₹1,22,364 (iii) Treatment if the Defect Were Abnormal If the defect had arisen due to an abnormal cause (e.g., a one-off machine malfunction, not expected to recur in the normal course of operations), the treatment would differ as follows: The rectification cost of ₹2,400 (direct material 1,200 + direct labour ₹1,200) would not be charged to Job No. 707 or included in its Works Cost. Instead, it would be treated as an abnormal loss and charged directly to the Costing Profit & Loss Account, since it represents an avoidable, non-recurring inefficiency rather than a cost the customer should bear.