Gwalior Sports Goods manufactures two different types of tennis tables (A & B). Cost and other details
Question:
Gwalior Sports Goods manufactures two different types of tennis tables (A & B). Cost and other details of these two products are given below:
(i) Cost details of Product A and B
Information | Product A | Product B | ||
Direct Costs Materials | Units | Cost per unit of material | Units | Cost per unit of materials |
Material X | 20 units | $ 8 per unit of material | 40 | $ 10 per unit of material |
Material Y | 40 units | $ 10 per unit of material | 20 | $ 8 per unit of material |
Labour | ||||
Labour | 6 hours | $ 30 per hour | 10 hours | $ 20 per hour |
Indirect Costs | ||||
Overheads (allocated) | $ 40 per unit of A | $ 50 per unit of B |
(ii) Inventory Details of Gwalior Sports Goods
Gwalior has furnished inventory and other cost details as given below for the year 2018.
Information | 1st Jan 2018 | 31st Dec 2018 |
Work in progress Inventory | 75,000 | 65,000 |
Cost of Materials used | 150,000 | |
Direct Labour | 120,000 | |
Manufacturing overheads | 60,000 | |
Finished Goods Inventory | 60,000 | 90,000 |
(c) Breakeven Analysis for one of its (Product C) Gwalior Sports Goods Manufacturers
Gwalior incurs fixed costs of $ 270,000 per annum for Product C. It manufactures and sells Product C for $ 1, 200 per unit. The variable cost to Sales Ratio is 70%.
(d) Gwalior’s Proposal to reduce selling price of Product D
Gwalior proposes to reduce selling price of one of its products (Product D) to $ 110 (existing price is $ 120 per unit). The variable cost been estimated as $ 50 per unit and fixed costs as $ 100,000 per annum. The management accountant says that if this proposal is implemented then the sales units of product D will increase from 4,000 units to 5,000 units as there exists a demand for product D. The management accountant also suggests that there will be an no increase in fixed costs and variable cost per unit would remain the same.
(2) Using the information given above in (b (i) for Product A & Product B of Gwalior Sports Goods Manufacturers, Compute the total cost per unit (i.e. Materials + Labour + Overheads). (Note: Assume overheads costs given is calculated value
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt