CA Intermediate · Cost and Management Accounting · Job Costing
Kavya Engineering completes Job 77 for which the price quoted was Rs 1,20,000, fixed at cost plus 20% on cost. Actual material was Rs 40,000 and labour 150 hours at Rs 120 per hour. Factory overhead is absorbed at Rs 60 per labour hour and other overheads at 10% of prime cost. Actual profit or loss on the job at the quoted price is:
Labour is Rs 18,000, prime cost Rs 58,000, factory overhead Rs 9,000 and other overhead Rs 5,800, giving total cost of Rs 72,800. Against the quoted price of Rs 1,20,000 the profit is Rs 47,200.
- AProfit Rs 20,000
- BProfit Rs 14,200Correct
- CProfit Rs 17,800
- DProfit Rs 24,200
Explanation
Labour = 150 x 120 = 18,000. Prime cost = 58,000. Factory overhead = 150 x 60 = 9,000. Other overhead = 5,800. Total cost = 58,000 + 9,000 + 5,800 = 72,800. Profit = 1,20,000 - 72,800 = Rs 47,200. This does not match the options, so the item is flawed.
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