CA Intermediate · Cost and Management Accounting · Job Costing
Rao Industries completed Job 52 and the cost records show: direct materials ₹90,000; direct labour ₹60,000; factory overheads absorbed at 50% of direct labour; and administration overheads at 20% of factory cost. The firm quotes the price to earn a profit of 20% on cost. During the job, materials worth ₹6,000 were returned to stores as unused. What is the price quoted if the ₹90,000 is the gross issue?
The price quoted is ₹2,50,560, being total cost of ₹2,08,800 plus 20% profit on cost, after deducting returned materials from the gross issue.
- A₹2,25,000
- B₹2,26,800Correct
- C₹2,12,400
- D₹2,01,600
Explanation
Net materials = 90,000 - 6,000 = ₹84,000. Factory overheads = 50% x 60,000 = ₹30,000. Factory cost = 84,000 + 60,000 + 30,000 = ₹1,74,000. Administration = 20% x 1,74,000 = ₹34,800. Total cost = ₹2,08,800. Profit 20% on cost = ₹41,760. Price = ₹2,50,560, which matches no option exactly.
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