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Mr. A hired by company as a cost accountant. he has given a task that is related with cost computation. the org. has purchased different type of material. Material A & material B.
A material is considered as direct material an B as indirect.
cost per unit fo material A is 10 nd for material B is 2/-
Company have recieved order to manufacture 5ooo finished products for each finished product. two unit of type A will be used and 1 unit of type B will be added.
to manufacture product co. require 10 labor who contributed thier efforts & charge Rs 25/- per finished goods.
The factory depreciation, rent of mach: & office supplies consumed are: Rs: 50,000/- Rs: 40,000/- & Rs: 10,000/- respectively.
requirements: calculate Variable cost, fixed cost, total cost, Prime cost, conversion Cost, manufacturing cost.
I want to know ( two unit of type A will be used and 1 unit of type B will be added.) wht does it mean?
it means: to make one unit of finished product 2 units of A and one unit of B are used. So the material cost of finished product per unit would be something like this:
1 unit of finished product : 2units of Material A + 1 unit of material B
= 2units * Rs.20 + 1unit * Rs. 2
= Rs. 40 + 2= Rs. 42
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