| Mixing | Bottling | Total | |
| Direct Material | $ 1,13,000.00 | $ 17,000.00 | $ 1,30,000.00 |
| Direct Labour | $ 15,000.00 | $ 6,000.00 | $ 21,000.00 |
| Manufacturing overhead | $ 32,000.00 | $ 9,000.00 | $ 41,000.00 |
| Total Cost | $ 1,60,000.00 | $ 32,000.00 | $ 1,92,000.00 |
| 1 litre | 1000 ml | ||
| 4800 litres | 4800000 | ||
| Per bottle capacity | 300 ml | ||
| Total number of bottles | 16000 | ||
| Cost per bottle | Total Cost | ||
| Number of bottles | |||
| $ 1,92,000.00 | |||
| 16000 | |||
| $ 12.00 | |||
| Journal Entries | Debit | Credit | |
| Raw Material Inventory | $ 1,30,000.00 | ||
| Cash | $ 1,30,000.00 | ||
| Raw Material Purchased for cash | |||
| WIP Inventory | $ 1,30,000.00 | ||
| Raw Material Inventory | $ 1,30,000.00 | ||
| Being raw material used. | |||
| Factory Payroll | $ 21,000.00 | ||
| Cash | $ 21,000.00 | ||
| Being wages paid in cash. | |||
| WIP Inventory | $ 21,000.00 | ||
| Labour | $ 21,000.00 | ||
| Recording of direct labour | |||
| Manufacturing Overhead | $ 41,000.00 | ||
| Cash | $ 41,000.00 | ||
| Being manufacuting overhead paid in cash. | |||
| WIP Inventory | $ 41,000.00 | ||
| Factory Overhead | $ 41,000.00 | ||
| Recording of factory overhead | |||
| Cost of goods sold | $ 1,92,000.00 | ||
| WIP Inventory | $ 1,92,000.00 | ||
| Being WIP transferred to COGS account | |||
| Assumed that payment for all the production costs have been made. | |||
| Actual Purchases | 6000 | ||
| Actual Rate | 7.4 | ||
| Standard Data | |||
| Material | |||
| Quantity per unit | 2 kg | ||
| Price | 7.20 per kg | ||
| Total quantity required to produce actual units | 4000 | ||
| Labour | |||
| Hours per unit | 3.5 hours | ||
| Rate | 18 per hour | ||
| Hours required for actual units | 7000 | ||
| Actual Data | |||
| Material | |||
| Direct Material Consumed | 31080 | ||
| Rate per kg | 7.4 | ||
| Total Kgs consumed for 2000 units | 4200 | ||
| Labour | |||
| Hours per unit | 6450 | ||
| Rate | 18.3 | ||
| Direct Material Price Variance | Actual Quantity * (Standard Price – Acutual Price) | Unfavourable | |
| 4200*(7.20-7.40) | |||
| -$ 840.00 | |||
| Direct Material Usage Variance | Standard Price* (Standard Quantity- Actual Quantity) | Unfavourable | |
| 7.20*(4000-4200) | |||
| -$ 1,440.00 | |||
| Direct Labour Rate Variance | Actual Hours* (Standard Labour Rate-Actual Labour Rate) | Unfavourable | |
| 6450*(18-18.30) | |||
| -$ 1,935.00 | |||
| Direct Labour Efficiency Variance | Standard Labour Rate* (Standard Hours- Actual Hours) | Favourable | |
| 18*(7000-6450) | |||
| $ 9,900.00 | |||
| Particulars | Standard | Deluxe | |
| Selling Price | $ 70.00 | $ 120.00 | |
| Direct Material | $ 15.00 | $ 22.00 | |
| Direct Labour | $ 10.00 | $ 30.00 | |
| Manufacturing Overhead | $ 30.00 | $ 60.00 | |
| Total Manufacturing Cost | $ 55.00 | $ 112.00 | |
| Monthly Demand | 40000 | 24000 | |
| Particulars | Standard | Deluxe | |
| Manufacturing Overhead | 30 | 60 | |
| Rate per hour | 30 | 30 | |
| Number of hours per unit | 1 | 2 | |
| Number of units per month | 40000 | 24000 | |
| Total Hours Required | 40000 | 48000 | 88000 |
| Available hours | 60000 | ||
| Part b | |||
| Particulars | Standard | Deluxe | |
| Selling Price | $ 70.00 | $ 120.00 | |
| Direct Material | $ 15.00 | $ 22.00 | |
| Direct Labour | $ 10.00 | $ 30.00 | |
| Variable Overhead | $ 10.00 | $ 20.00 | |
| Total Variable Cost | $ 35.00 | $ 72.00 | |
| Contribution | $ 35.00 | $ 48.00 | |
| Fixed Manufacturing Overhead | $ 20.00 | $ 40.00 | |
| Profit | $ 15.00 | $ 8.00 | |
| Particulars | Standard | Deluxe | |
| Fixed Manufacturing Overheads per unit | $ 20.00 | $ 40.00 | |
| Variable Manufacturing Overheads per unit | $ 10.00 | $ 20.00 | |
| Total Manufacturing Cost per unit | $ 30.00 | $ 60.00 | |
| Particulars | Standard | Deluxe | |
| Contribution per unit | $ 35.00 | $ 48.00 | |
| Number of hours per unit | 1 | 2 | |
| Contribution per hour | $ 35.00 | $ 24.00 | |
| Rank | I | II | |
| Hours Allocation | 40000 | 20000 | |
| Hours required per unit | 1 | 2 | |
| Optimal Mix Units | 40000 | 10000 | |
| Sales | $ 67,500.00 | ||
| Less: Variable Costs | |||
| Cost of sales | $ 30,000.00 | ||
| Wages | $ 18,000.00 | ||
| Consumables | $ 6,000.00 | ||
| Total Variable Costs | $ 54,000.00 | ||
| Contribution | $ 13,500.00 | ||
| Less: Fixed Cost | |||
| Depreciation of counter equipment | $ 3,750.00 | ||
| Profit | $ 9,750.00 | ||
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