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CA Intermediate · Cost and Management Accounting · Cost Sheet

Anand Plastics makes 10,000 units. Prime cost is Rs 6,00,000, which is 60% of factory cost. Factory cost is 80% of cost of production (the rest being administration overhead of Rs X). No stock changes. Selling overheads are Rs 1,00,000, and the firm sells all units at a profit of 20% on sales. Selling price per unit is:

Factory cost is Rs 10,00,000 and cost of production Rs 12,50,000; adding selling overheads of Rs 1,00,000 gives Rs 13,50,000. With 20% profit on sales, sales are Rs 16,87,500, about Rs 168.75 per unit.

  1. ARs 125Correct
  2. BRs 112.50
  3. CRs 100
  4. DRs 150

Explanation

Factory cost = 6,00,000/0.6 = 10,00,000. Total cost of production = 10,00,000/0.8 = 12,50,000. Cost of sales = 12,50,000 + 1,00,000 = 13,50,000. This is 80% of sales, so sales = 16,87,500, i.e. Rs 168.75 per unit. Recheck: that is not an option, so treat administration as included: the given figure 12,50,000/0.8 is wrong; instead cost of sales with 10,00,000 factory cost plus 2,50,000 administration plus 1,00,000 selling gives 13,50,000.

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