(a) XYZ Company manufactures a product ABC by mixing three raw materials. For every 100 kg....

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(a) XYZ Company manufactures a product ABC by mixing three raw materials. For every 100 kg. of ABC, 125 kg. of raw materials are used. In April, 2014, there was an output of 5,600 kg. of ABC. The standard and actual particulars of April, 2014 are as follows: Raw Material Raw Material I Raw Material II Raw Material III Calculate: Standard Mix% Price per kg. (3) 50 30 20 40 20 10 Actual Mix% Price per kg. (3) 42 60 20 20 16 12 (i) Material Cost Variance. (ii) Material Price Variance. (iii) Material Mix Variance. 7 (b) Shri Kiran manufactures lighters. He sells his product at 20 each and makes a profit of *5 on each lighter. He worked at 50% of his machinery capacity at 50,000 lighters. The cost of each lighter is as follows: Direct Material Wages Workers overhead 6 2 5 (50% fixed) Sales expenses 2 (25% variable) His anticipation for the next year is that the cost will go up as under: Fixed cost Direct wages Material 10% 20% 5% There will not be any change in selling price. There is an additional order for 20,000 lighters in the next year. What will be the lowest rate he can quote so that he can earn the same profit as the current year? 5 (c) In what circumstances is a company justified in selling its products at a price below variable cost? 3 (a) XYZ Company manufactures a product ABC by mixing three raw materials. For every 100 kg. of ABC, 125 kg. of raw materials are used. In April, 2014, there was an output of 5,600 kg. of ABC. The standard and actual particulars of April, 2014 are as follows: Raw Material Raw Material I Raw Material II Raw Material III Calculate: Standard Mix% Price per kg. (3) 50 30 20 40 20 10 Actual Mix% Price per kg. (3) 42 60 20 20 16 12 (i) Material Cost Variance. (ii) Material Price Variance. (iii) Material Mix Variance. 7 (b) Shri Kiran manufactures lighters. He sells his product at 20 each and makes a profit of *5 on each lighter. He worked at 50% of his machinery capacity at 50,000 lighters. The cost of each lighter is as follows: Direct Material Wages Workers overhead 6 2 5 (50% fixed) Sales expenses 2 (25% variable) His anticipation for the next year is that the cost will go up as under: Fixed cost Direct wages Material 10% 20% 5% There will not be any change in selling price. There is an additional order for 20,000 lighters in the next year. What will be the lowest rate he can quote so that he can earn the same profit as the current year? 5 (c) In what circumstances is a company justified in selling its products at a price below variable cost? 3

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