Can somebody please provide solutions for CA Final - SCMPE Paper Nov 2020 Exam?
Q.no. 4(c) and 5(a) .
bijay
(student)
(3 Points)
Replied 09 December 2020
Is the following solutions correct for Q. No. 4(c)?
SCMPE - Nov 2020 - Q. 4(c) | |||||||
Computation of Contribution Per Unit | |||||||
Particulars | X | Y | Z | ||||
To Outside | To Y | To Z | Purchase from Outside | Transfer from X | Purchase from Outside | Transfer from X | |
Selling Price | 30 | - | - | 83 | 83 | 90 | 90 |
Transfer Price | - | 27 | 27 | - | - | - | - |
30 | 27 | 27 | 83 | 83 | 90 | 90 | |
Direct Material (Except Material 'X') |
10 | 10 | 10 | 25 | 25 | 35 | 35 |
Direct Labour | 6 | 6 | 6 | 8 | 8 | 10 | 10 |
Variable Overhead | 2 | 2 | 2 | 3 | 3 | 4 | 4 |
Purchase Price- Outside (Material 'X') |
- | - | - | 30 | - | 30 | - |
Transfer Price- From X (Material 'X') |
- | - | - | - | 27 | - | 27 |
Alteration Cost | - | - | - | - | - | - | 3 |
Inspection Cost | - | - | - | 2 | - | - | - |
Contribution [Per Unit] | 12 | 9 | 9 | 15 | 20 | 11 | 11 |
NOTE: | |||||||
1) Z will pay Rs. 30 if purchased Material 'X' from Outside. If purchased from X, Z will have to incur Rs. 3 towards modification. In such | |||||||
a case, Z will pay maximum Rs. 27 if purchased from X. | |||||||
2) Since X will keep uniform price for Material 'X' for both Y and Z, if Z will pay Rs. 27, then for Y also it is Rs. 27. | |||||||
Computation of Additional Production | |||||||
Particulars | X | Y | Z | ||||
Total Capacity (Units) | 15,000 | 5,000 | 2,500 | ||||
Current Capacity | 60% | 80% | 100% | ||||
Current Production | 9,000 | 4,000 | 2,500 | ||||
Additional Production (Units) [If 100% Capacity Used] |
6,000 | 1,000 | - | ||||
External Demand | 7,500 | 5,000 | 3,000 | ||||
External Demand Met | 7,500 | 5,000 | 2,500 | ||||
Balance Units | 7,500 | - | - | ||||
Transfer to Y and Z (Units) | 5,000 to Y 2,500 to Z |
- | - | ||||
Transfer from X (Units) | - | 5,000 | 2,500 | ||||
Net Benefits of Using Idle Capacity | |||||||
Particulars | X | Y | Z | ||||
Additional Fixed Cost Incurred [A] | 36,000 | 18,000 | - | ||||
(Rs.9000 x 4) | (Rs.9000 x 2) | - | |||||
Contribution earned after selling | |||||||
Additional Production [B] | 54,000 | 20,000 | - | ||||
(5000*Rs.9+1000*Rs.9) | (1000*Rs.20) | ||||||
Net Benefit [B-A] | 18,000 | 2,000 | - | ||||
Since Additiional Fixed Cost result in Net Benefits for the Company, it is advisable to go for Expansion/ | |||||||
Additional Production. | |||||||
Net Additional Revenue | |||||||
Particulars | X | Y | Z | ||||
Contribution from External Sales | 90,000 | 100,000 | 27,500 | ||||
(7500 x Rs.12) | (5000 x Rs.20) | (2500 x Rs.11) | |||||
Add: Contribution from Internal Transfer |
67,500 | - | - | ||||
(5000*Rs.9+2500*Rs.9) | |||||||
Less: Additional Fixed Cost Incurred | 36,000 | 18,000 | - | ||||
- | |||||||
Net Additional Revenue | 121,500 | 82,000 | 27,500 | ||||
TOTAL ADDITIONAL REVENUE = 1,21,500 + 82,000 + 27,500 | |||||||
= Rs. 2,31,000 | |||||||
HENCE, IT IS BENEFICIAL TO FIX TRANSFER PRICE AT RS. 27 PER UNIT FOR BOTH Y & Z. | |||||||
ALL DIVISIONS WILL EARN ADDITIONAL PROFIT AND THE COMPANY AS A WHOLE ALSO. |
sa d
(2 Points)
Replied 18 June 2021
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