MGT402 GDB Fall 2019 Solution & Discussion
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MGT 402 - Cost & Management Accounting GDB No.1 semester fall 2019 due date 23-1-2020
AA Manufacturing Co. is engaged in production of coke. The work is done in two processes. The coal is the basic raw material for the production of coke. In addition to coke, the production process also produces other products – light oil, and crude tar. On a certain month 8000 Units@Rs.50 per unit was put in the first process. After the completion of first process, the following capacities of each of the three products are available for second process:
Coke 2400 units
Light-oil 1067 liter
Crude-tar 800 liter
We have ignored the byproduct “gas” which is produced in the said process and which consumes some of the quantity of material that is Coal put in the first process.
The market price of the finished products is:
Coke Rs.213 per unit
Light-oil Rs.120 per liter
Crude-tar Rs.67 per liter
2. What is the monetary difference between the method chosen by you and the other method? Explain with the help of calculations of apportionment under each method.
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A.Physical Quantity Ratio
1. Total Cost 8000*50=400000
Coke 2400 Units
Light -Oil 1067 litters
Crude -Tar 800 litters
Coke= 400,000/4267*2400= 22,4982
Crude-Tar= 400,000/4267*800= 74994.14
B. Selling Price Ratio
Coke 2400*213Rs= 511,200
Light -Oil 1067*120 Rs=128,040
Crude -Tar 800 * 67 Rs= 53,600
Light -Oil 400,000/692840*128040 =73879
Crude -Tar 400,000/692840*53600 =30927
When the unit of measurement is different, e.g litters and kilos,
Some method should be found of expressing them in a common unit.Some joint cost are not incurred strictly equally for all joint products.such cost can be separated and apportioned by introducing weighting factors.
Coke in units 2400
Light oil in litter 1067
Crude tar in litter 800
So we should calculate total cost each separate product to multiple per unit or per litter.
So it is most suitable method then other.
Mgt402 gdb solution
unit put in department 8000 at the rate 50 ;;;; coke=2400 ligt oil=1067 crued taar=800 totale uitn = 4267
Quitnry ratio; c=4000000/4267*2400=2232200 ligt oil;4000000/4267*1067=99231 crude taar =400000/4267*800=74400
physicl qunitaty cost incurred in the departmaent 400000 c=213 ligth oil=120 crued taar=67
coke= light oil= crued oil=
coke=2400*213=41120 light oil=120*1067=128040 crued oil=800*67=53600 totle 692840
c=400000/692840*511200=295133.08 l.o=400000/692840*128040=73921.82 c.o=400000/692840*53600=3094.1 totle; 400000