opening capital of business=200,000
closing capital=230,000
income=50,000
what will be the drawing of business fr the year?
waiting 4 reply

Ans to Q asked by Samr:
Rs
Opening Capital 2,00,000
Add:Net Profit/Net Income 50,000
Add: Additional Investment During the Yr Nil
Less: Drawings (?)
--------
Ending Capital 2,30,000
-----------
------------
Here drawings will be calculated as balancing figure since question relates to single entry/incomplete accounting system. Balancing figure is Rs.20,000.

Ans 20,000

Q for ur practice:
Find the stock in beginning?
Data: Sales= Rs.2,40,000
Percentage of gross profit on sales=20%
Purchases=Rs.1,75,000
Closing Stock=Rs.30,000
Time limit for the solution of this question is 5 minutes.
Plz donn't exceed the time limit.

Ans : Computation for Inventory (Open)

Sales ---------------------------------------- 240,000
Less: Gross Prrofit (240,000 x 20%)------------ (48000)

Cost of goods sold ----------------------------- 192,000
Add: Inventory (End) --------------------------- 30,000

Cost of goods available for sale ----------------- 222,000
Less: Purchase (net) --------------------------- (175000)

Inventory (Open) ------------------------------- 47000

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Data:

Opneing Stock: 200,000
Closing Stock: 350,000
Stock to b sold: 150,000


Find stock to b manufactured?

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@ Omer

Ans: Computation for Stock Manufactured


Closing Stock -------------------------- 350,000
Add: Cost of stock sold ---------------- 150,000

Cost of stock available for sale ---------- 500,000
Less: Opening Stock -------------------- (200,000)

Cost of stock manufactured ------------- 300,000

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Opening stock of raw materials........3000
Purchases...................................60000
Closing stock of raw mat................5000
Direct wages...............................42000
Carriage inwards..........................6000
Carriage outwards.......................12000
Direct exp.................................4000
Indirect exp................................6000
Salaries......................................1200 0

Calculate Prime Cost

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Devil-may-care

For Tauqeer Kurd:
Calculation of Prime Cost:
........................................Amount in RS.
Opening Stock of RM...................3,000
Add:RM Purchased.....................60,000
......Carriage inwards...................6,000
.......................................-------------
RM available for use....................69,000
Less: Closing/ending stock of RM...(5,000)
.........................................------------
Direct Material Consumed.............64,000
Add: Direct Wages......................42,000
Add: Direct Expenses....................4,000
..........................................--------------
Prime Cost or Direct Cost...........1,10,000

ANS:Rs.1,10,000

Question for Practice;

Data:
Month.............Production (Units) ..... Transportation Cost(Rs.)
Jan............................7,000.............. ..............1,0,000
Feb............................8,000.............. ..............1,5,000
Mar............................7,700.............. ..............1,11,000
Apr.............................6,000............. .................97,000

Required: Using High & Low Method find
1) Fixed Cost
2) Variable Cost per Unit

@ Raz

Though i never studied "Cost Accounting" but i`ll try my level best.


Computation for Variable cost per unit :

VCPU = High cost - low cost / high unit - low unit

VCPU = 111, 000 - 10,000 / 8000 - 6000

VCPU = 101,000 / 2000

VCPU = Rs 50.5 per unit



Computation for fixed cost :

Total cost = Variable cost + Fixed cost
Fixed cost = Total cost - Variable cost

Fixed cost = 233000 - 6000 (50.5)
Fixed cost = 233000 - 303000
Fixed cost = 70,000


Please correct me incase of any mistake.

Allah Nagheban,

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Nice to see ur answer Suresh. Your computation process is exactly right upto the step of VC per unit calculation though there were some errors in the data typed by me. Actually when I typed that data and posted here I failed to edit it within 5 minutes and time lapsed for editing. The data could have been in a way in which low units carry low cost and high units carry high cost. But due to typo mistakes this data does not follow that trend. But the rule which u have applied is correct and all such type of questions can be solved with that format.

VC per unit=(High Cost - Low cost)/(high units - low units)
FC=TC-VC

VC=VC per unit * units

but there was an error in your calculation which was summing up the cost of all the months to find FC. The right way will be to deduct VC from the total cost of that particular month for which you are going to find FC. And that FC will be assumed fixed for all the months if the production cost follows the similar trend.

You can cross verify your answer by deducting that FC from the cost of any other month and see whether VC per unit comes same in all the months; if it comes same your answer must be correct b/c VC per unit and total Fixed cost remain same for a particular normal activity of production.

Due to some shortcomings of High & Low method, other alternatives to now the cost behavior are regression analysis, and scattergraph methods. These methods give a more reliable calculation as compared to high low method. But we must be well versed with all the methods because examiner can specifically ask for any of the method for calculation. I will post question for practice on these alternative methods when I find time by this evening.

Till then Allah Hafiz

Question for Practice;

Data:
Month....................Production (Units)............... ....Transportation Cost(Rs.).
Jan...................................7,000....... ....... ......................1,10,000
Feb...................................8,000....... ....... ......................1,15,000
Mar...................................7,700....... ............... ..............1,11,000
Apr....................................6,000...... ............... .................97,000

Required: Using High & Low Method find
1) Fixed Cost (FC)
2) Variable Cost (VC) per Unit

Solution

VC per unit=(High Cost - Low cost)/(high units - low units)
VC per unit=(1,15,000 - 97,000)/(8,000 - 6,000)
VC per unit=Rs.9 per unit

VC cost for the month of Apr = Units produced * VC per unit=6,000*9=54,000

FC for the month of Apr=TC of Apr-VC of Apr

FC=97,000 - 54,000=43,000

For the cross verification put the value of variabale cost per unit in any other month you will reach at the same fixed amount of Rs.43,000

Suppose we take Feb Month in which production units are 8,000

VC for the month of feb=8,000 * 9=72,000
FC for the month of Feb=TC of Feb - VC of Feb=1,15,000 - 72,000=43,000

Hence proved that our calculation is correct since fixed cost Rs.43,000 remained same for both the months.

Correct answers are :
1) Fixed Cost=Rs.43,000
2) Variable Cost per unit Rs.9 per unit