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Issued share capital - 4,00,000
12% Debentures - 1,50,000
The fixed assets are valued at Rs. 3. 00 lakhs. Production during the previous year is 1.00 lakh units. The same level of activity is intended to be maintained during the current year.
The expected ratios of cost to selling price are
Raw materials - 50%
Direct Wages - 10%
Overheads - 25%
The raw materials ordinarily remain in stores for 2 months before production
Every unit of production remains in process for 2 months
Finished goods remain in the warehouse for 4 months
Credit allowed by creditors is 3 months from the date of delivery of raw materials and credit given to debtors is 3 months from the date of dispatch
Selling price is Rs. 6 per unit. Both the production and sales are in a regular cycle.
From the above information, calculate
1. Sales Value
a. 300000
b. 600000
c. 900000
d. 2400000
Ans - b
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2. Value of Raw Materials
a. 60000
b. 150000
c. 300000
d. 600000
Ans - c
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3. Value of Labour
a. 60000
b. 150000
c. 300000
d. 600000
Ans - a
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4. Value of Overheads
a. 60000
b. 150000
c. 300000
d. 600000
Ans - b
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5. Value of finished goods in the warehouse
a. 104000
b. 170000
c. 340000
d. 510000
Ans - b
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6. Value of Work in Progress
a. 12500
b. 50000
c. 67500
d. 85000
Ans - c
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7. Current Assets
a. 75000
b. 120000
c. 340000
d. 415000
Ans - d
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8. Current Liabilities
a. 75000
b. 120000
c. 340000
d. 415000
Ans - a
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9. Working Capital
a. 75000
b. 120000
c. 340000
d. 415000
Ans - c
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Solution :
1. b
Sales Value = No. of units * Selling price per unit
= 1,00,000 * 6
= 6,00,000
2. c
Raw Material (ratios of cost to selling price) = 50%
= 6,00,000 x 50 / 100
= 3,00,000
3. a
Labour (ratios of cost to selling price) = 10%
= 6,00,000 x 10 / 100
= 60,000
4. b
Overheads (ratios of cost to selling price) = 25%
= 6,00,000 x 25 / 100
= 1,50,000
5. b
Finished Goods = Raw Materials + Direct Labour + Overheads
= 300000 + 60000 + 150000
= 510000
Finished goods remain in the warehouse for 4 months
So, Value of finished goods in the warehouse = 510000 * 4 / 12
= 1,70,000
6. c
Every unit of production remains in process for 2 months. At that time of computing work in progress labour, overhead value is reduced to half.
Raw Materials = 3,00,000 x 2/12 = 50000
Direct Labour = 60,000 x 2/12 x 1/2 = 5000
Overheads = 1,50,000 x 2/12 x 1/2 = 12500
Work in Progress = 50000 + 5000 + 12500
= 67500
7. d
Raw Materials = 3,00,000 x 2/12 = 50000
Work in Progress = 67500
Finished Goods = 5,10,000 x 4/12 = 170000
Debtors = 5,10,000 x 3/12 = 127500
Current Assets = Raw Materials + Work in Progress + Finished Goods + Debtors
= 50000 + 67500 + 170000 + 127500
= 4,15,000
8. a
Current Liabilities = Trade Creditors
= Trade Creditors (Credit allowed by creditors is 3 months)
= 3,00,000 x 3/12
= 75,000
9. c
Working capital = current assets – current liabilities
= 415000 - 75000
= 3,40,000
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From the following estimates of XYZ Ltd you are required to calculate :
(i) Share capital $ 5,00,000, 15% Debentures of $ 2,00,000, Fixed assets at cost of $ 3,00,000
(ii) The expected ratios of cost to selling price are Raw materials 60%, Labour 10%, Overheads 20%
(iii) Raw materials are in stores for an average of 2 months
(iv) Finished goods are kept in warehouse for 3 months
(v) Expected level of production 1,20,000 units per year
(vi) Each unit of production is expected to be in process for 1 month
(vii) Credit given by suppliers is 2 months
(viii) 20% of the output is sold against cash. Time lag in payment from debtors is 3 months
(ix) Selling price is $ 5 per unit
(x) Labour and overheads will accrue evenly during the year
1. Estimated production units p.m
a. 5000
b. 10000
c. 15000
d. 20000
Ans - b
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2. Estimated sales per month
a. 5000
b. 10000
c. 30000
d. 50000
Ans - d
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3. Value of Raw Materials
a. 5000
b. 10000
c. 30000
d. 50000
Ans - c
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4. Value of Labour
a. 5000
b. 10000
c. 30000
d. 50000
Ans - a
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5. Value of Overheads
a. 5000
b. 10000
c. 30000
d. 50000
Ans - b
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6. Value of finished goods / Cost of sales
a. 5000
b. 10000
c. 45000
d. 50000
Ans - c
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7. Value of Work in Progress
a. 37500
b. 60000
c. 280500
d. 340500
Ans - a
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8. Current Assets
a. 37500
b. 60000
c. 280500
d. 340500
Ans - d
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9. Current Liabilities
a. 37500
b. 60000
c. 280500
d. 340500
Ans - b
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10. Working Capital
a. 37500
b. 60000
c. 280500
d. 340500
Ans - c
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Solution :
1. b
Estimated production units p.m. = Expected level of production units per year / 12
= 1,20,000 / 12
= 10,000
2. d
= No. of units * Selling price per unit
= 10,000 * 5
= 50,000
3. c
Raw Materials = 60%
= 50,000 x 60 / 100
= 30,000
4. a
Labour = 10%
= 50,000 x 10 / 100
= 5,000
5. b
Overheads = 25%
= 50,000 x 20 / 100
= 10,000
6. c
Finished Goods = Raw Materials + Direct Labour + Overheads
= 30000 + 5000 + 10000
= 45000
7. a
Each unit of production is expected to be in process for 1 month. At that time of computing work in progress labour, overhead value is reduced to half.
Raw Materials = 30,000
Direct Labour = 5,000 x 1/2 = 2500
Overheads = 10,000 x 1/2 = 5000
Work in Progress = 30000 + 2500 + 5000
= 37,500
8. d
Raw Materials (2 months) = 30,000 x 2 = 60,000
Work in progress = 37,500
Stock of finished goods (3 months) = 45,000 x 3 = 1,35,000
Debtors (3 months) at cost equivalent :
Cost of sales pm - 45,000
Less : Cash sales 20% - 9,000
Cost of sales (credit) pm - 36,000
Debtors (3 months) at cost equivalent = 36,000 x 3 = 1,08,000
Total Current Assets = Raw Materials + Work in Progress + Finished Goods + Debtors
= 60000 + 37500 + 135000 + 108000
= 3,40,500
9. b
Current Liabilities = Creditors 2 months
= 60,000
10. c
Working capital = current assets – current liabilities
= 3,40,500 - 60,000
= 2,80,500
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