Question

Gwalior Sports Goods manufactures two different types of tennis tables (A & B).   Cost and other...

Gwalior Sports Goods manufactures two different types of tennis tables (A & B).   Cost and other details of these two products are given below:

(i) Cost details of Product A and B

Information

Product A

Product B

Direct Costs

Materials

Units

Cost per unit of material

Units

Cost per unit of materials

Material X

20 units

$ 8 per unit of material

40

$ 10 per unit of material

Material Y

40 units

$ 10 per unit of material

20

$ 8 per unit of material

Labour

Labour

6 hours

$ 30 per hour

10 hours

$ 20 per hour

Indirect Costs

Overheads (allocated)

$ 40 per unit of A

$ 50 per unit of B

(ii) Inventory Details of Gwalior Sports Goods

Gwalior has furnished inventory and other cost details as given below for the year 2018.

Information

1st Jan 2018

31st Dec 2018

Work in progress Inventory

75,000

65,000

Cost of Materials used

150,000

Direct Labour

120,000

Manufacturing overheads

60,000

Finished Goods Inventory

60,000

90,000

(c) Breakeven Analysis for one of its (Product C) Gwalior Sports Goods Manufacturers

Gwalior incurs fixed costs of $ 270,000 per annum for Product C. It manufactures and sells Product C for $ 1, 200 per unit. The variable cost to Sales Ratio is   70%.     

(d) Gwalior’s Proposal to reduce selling price of Product D

Gwalior proposes to reduce selling price of one of its products (Product D) to $ 110 (existing price is $ 120 per unit).   The variable cost been estimated as $ 50 per unit and fixed costs as $ 100,000 per annum.   The management accountant says that if this proposal is implemented then the sales units of product D will increase from 4,000 units to 5,000 units as there exists a demand for product D. The management accountant also suggests that there will be an no increase in fixed costs and variable cost per unit would remain the same.

(2) Using the information given above in (b (i) for Product A & Product B of Gwalior Sports Goods Manufacturers, Compute the total cost per unit (i.e. Materials + Labour + Overheads). (Note: Assume overheads costs given is calculated value

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Answer #1

Requirement 2

Calculation of Total cost per unit
A B
Material
X $        160 $        400
Y $        400 $        160
Labour $        180 $        200
Overheads $          40 $          50
Total $        780 $        810

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