Question

THIRD TIME I AM PUBLISHING AND I WOULD REALLY APPRECIATE IT IF THE PERSON SOLVING THIS PROBLEM COULD READ THE QUESTION THOROUGHLY. 

A manufacturer of Christmas decorations has in 20x8 produced 1,000,000 large Christmas balls and 2,000,000 small
Christmas balls. Both products use the same raw materials and the production process
requires only minor adjustments when changing product. The company uses equivalence calculation for
to calculate the cost of the products.
The Christmas decoration manufacturer has calculated that a small Christmas ball requires 40% of the raw materials that go with a
large Christmas ball, 60% of direct salary and 50% of the indirect manufacturing costs involved in
production of large Christmas balls. The supplement for sales and administration is calculated as a percentage supplement
on manufacturing cost.
Total costs in 20x8 were:

Direct materials NOK 450,000
Direct salary NOK 660,000
Indirect manufacturing costs NOK 900,000
Sales and administration costs NOK 600,000

What is the cost of a small Christmas ball?

a. 0,51 NOK
b. 0,66 NOK
c. 0,87 NOK
d. 1,00 NOK

Answer 1

INPUTS [Given Data] Cost [ in NOK ] Christmas Balls Particulars Small Large Total % Quantity Produced 2,000,000 1,000,000 3,000,000 Raw Material requirement 40% 100% 140% Direct Salary requirement 60% 100% 160% Indirect Manufacturing Cost 50% 100% 150% Total Manufacturing Cost Sales & Administration Cost ===> Sales & Administration Cost (% on Manufacturing Cost) Total Cost of Small & Large Christmas Balls 450,000 660,000 900,000 2,010,000 600,000 29.85% 2,610,000 ANSWER [Based Equivalent Units Produced] Amounts in NOK Particulars Small Total Direct Material Direct Salary Indirect Manufacturing Cost Total Manufacturing Cost Sales & Administration Cost 300,000 440,000 600,000 1,340,000 400,000 1,740,000 2,000,000 Large 150,000 220,000 300,000 670,000 200,000 870,000 1,000,000 450,000 660,000 900,000 2,010,000 600,000 2,610,000 Total Cost Quantity Produced Cost Per Unit 0.87 0.87 Answer: (c ) 0.87 NOK Note: Upto Manufacturing Cost: based on Equivalent Units, i.e., 2,000,000 & 1,000,000 respectively Sales jes & Admin.Cost: 29.85% CamScanner