Answer to Question #152276 in Accounting for Prashant Kumar

Question

Please compute cost per unit of each product on the new method of allocation The information related to manufacturing is given below. WRITERS' Company Year 2018-19 Fountain Pen Ball point Units 10000 20000 Area occupied (sq feet) 7000 8000 Variable cost – Direct 32 25 Fixed Cost - Direct (per unit) 10 8 Rent - Fixed Cost per month (Indirect - common for all products) 3,00,000.00

Answer 1

Total variable cost = $variable cost per unit \times units$ = $Rs 32\times 10000 units$ = $Rs 320,000$

Total fixed cost = $fixed cost per unit \times units = Rs 10 \times 10000 units = Rs 100,000$

Total Fountain’s rent = 

Total products’ units = 10000 + 20000 = 30000

Total Fountain’s rent = $\frac{10000}{30000} \times Rs 300,000 = Rs 100,000$

Total cost = total variable cost + total fixed cost + total rent

= Rs 320,000 + Rs 100,000 + Rs 100,000

= Rs 520,000

Cost per unit = $\frac{Total cost}{total units} = \frac{ Rs 520,000}{10000 units } =Rs 52$

Pen ball point’s cost per unit

Total variable cost = $variable cost per unit \times units = Rs 25 \times 20000 units = Rs 500,000$

$Total fixed cost = fixed cost per unit \times units = Rs 8 \times 20000 units = Rs 160,000$

Total Pen ball point’s rent = 

$\frac{ Pen ball point’s units }{ total products’ units } \times the total fixed indirect cost of rent$

Total products’ units = 10000 + 20000 = 30000

Total Pen ball point’s rent = $\frac{ 20000}{ 30000} \times Rs 300,000 = Rs 200,000$

Total cost = total variable cost + total fixed cost + total rent

= Rs 500,000 + Rs 160,000 + Rs 200,000

= Rs 860,000

$Cost per unit = \frac{Total cost }{ total units } = \frac{ Rs 860,000}{ 20000 units } = Rs 43$