A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
This power point presentation related to process costing. which is useful to students who studying B.com, BBA,M.COM MBA etc.
It involves short notes on definition of process costing,its features,applications,difference between process costing and job costing, advantages and disadvantageous of process costing, procedure of process costing,format of process account, process losses and abnormal gain.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
To understand the basic concepts of marginal cost and marginal costing.
To understand the difference between the Absorption costing and Marginal Costing.
To learn the practical applications of Marginal costing.
To understand Breakeven charts & Limitation
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
This power point presentation related to process costing. which is useful to students who studying B.com, BBA,M.COM MBA etc.
It involves short notes on definition of process costing,its features,applications,difference between process costing and job costing, advantages and disadvantageous of process costing, procedure of process costing,format of process account, process losses and abnormal gain.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
To understand the basic concepts of marginal cost and marginal costing.
To understand the difference between the Absorption costing and Marginal Costing.
To learn the practical applications of Marginal costing.
To understand Breakeven charts & Limitation
1. to understand the basic principles of Material Control
2. to study the procedures of Purchase, Storing and Issues
3. to acquaint with the latest techniques in inventory control
4. to understand the pricing of issues
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
Elements of Cost: Classification of Cost:element wise classification :function wise classification :behavior wise classification: Managerial decision making classification
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
1. to understand the basic principles of Material Control
2. to study the procedures of Purchase, Storing and Issues
3. to acquaint with the latest techniques in inventory control
4. to understand the pricing of issues
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
Elements of Cost: Classification of Cost:element wise classification :function wise classification :behavior wise classification: Managerial decision making classification
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Inventory management refers to the process of ordering, storing, using, and selling a company's inventory. This includes the management of raw materials, components, and finished products, as well as warehousing and processing of such items. There are different types of inventory management, each with its pros and cons, depending on a company’s needs.
The Benefits of Inventory Management
A company's inventory is one of its most valuable assets. In retail, manufacturing, food services, and other inventory-intensive sectors, a company's inputs and finished products are the core of its business. A shortage of inventory when and where it's needed can be extremely detrimental.
At the same time, inventory can be thought of as a liability (if not in an accounting sense). A large inventory carries the risk of spoilage, theft, damage, or shifts in demand. Inventory must be insured, and if it is not sold in time it may have to be disposed of at clearance prices—or simply destroyed.
For these reasons, inventory management is important for businesses of any size. Knowing when to restock inventory, what amounts to purchase or produce, what price to pay—as well as when to sell and at what price—can easily become complex decisions. Small businesses will often keep track of stock manually and determine the reorder points and quantities using spreadsheet (Excel) formulas. Larger businesses will use specialized enterprise resource planning (ERP) software. The largest corporations use highly customized software as a service (SaaS) applications.
Appropriate inventory management strategies vary depending on the industry. An oil depot is able to store large amounts of inventory for extended periods of time, allowing it to wait for demand to pick up. While storing oil is expensive and risky—a fire in the U.K. in 2005 led to millions of pounds in damage and fines—there is no risk that the inventory will spoil or go out of style.
1
For businesses dealing in perishable goods or products for which demand is extremely time-sensitive—2021 calendars or fast-fashion items, for example—sitting on inventory is not an option, and misjudging the timing or quantities of orders can be costly.
For companies with complex supply chains and manufacturing processes, balancing the risks of inventory glut and shortages is especially difficult. To achieve these balances, firms have developed several methods for inventory management, including just-in-time (JIT) and materials requirement planning (MRP).
Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
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how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the what'sapp information for my personal pi vendor.
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What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the what'sapp contact of my personal pi merchant to trade with.
+12349014282
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Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
1. PRICING OF ISSUES OF MATERIALS
DR. MOHAMED KUTTY KAKKAKUNNAN
Associate Professor
P.G. Dept of Commerce
NAM COLLEGE KALLIKKANDY
Kannur –Kerala – India
2. Methods of Valuing Material Issues or
Material Costing
A firm purchases materials
• frequently at different prices
• keeps all the material in the same store,
without differentiating the price at which the
materials were purchased
• issues the materials from the store to different
jobs, orders, processes etc as and when
required.
3. THUS,
• The cost of the material issued varies
• However, the cost of material is to be recovered
? Then question arises at what price the material is
to be issued.
The problem arises when it is difficult to identify
and locate the price at which the material was
purchased.
To solve this problem issue of materials can be
priced through any of the following methods:-
4. METHODS OF PRICING ISSUES OF MATERIALS
A. Based on Cost Price
B. Based on Market Price
C. Standard Price Method
An appropriate method is to be adopted
The method will affect the price of the
product and recoupment of the price paid for
materials through the production process
5. A. Cost Price Method
i. First in first out (FIFO) method
ii. Last in first out method (LIFO) method
iii. Average cost method
iv. Inflated price method
v. Specific price method
vi. Base stock method
vii. Highest in first out method (HIFO) method
6. B. Market Price Method
i. Replacement price method
ii. Realizable value method
C. Standard Price method
i. Current standard
ii. Basic standard price method
Note that the above methods will not
necessarily mean that materials are
physically issued in the order of pricing, it is
only considered pricing of issues
7. ESSENTIALS OF A GOOD PRICING METHOD
1. Should recover the price of materials
2. Should be near the market price so tat the effect of
current market price is revealed in the cost of issues
3. Should not lead to significant variations in cost of
similar jobs from period to period
4. Should not necessitate heavy adjustment in the
value of sock of materials
5. Consider the policy of management related to
valuation of stock
6. Should consider the nature of materials
8. First in First Out Method (FIFO) Method
Material is first issued from the earliest
consignment on hand and is priced at the cost at
which that consignment was placed in the stock
Assumed and valued as materials first received
are issued first
Units in the opening stock are issued first, then
the next according to the order of purchases.
Closing stock contain materials purchased on the
last days or recent purchases
Suitable when the prices of materials are falling,
9. Example
The received side of the Stores Ledger Account shows the
following particulars
Jan. 1 - opening balance 500 units @ Rs. 4
Jan. 5 - received from vendor 200 @4.25
Jan. 12 - received from vendor 150 @4.10
Jan. 20 - received from vendor 300 @ 4.5
Jan. 25 - received from vendor 400 @ 4
Issue of materials were as follows:-
Jan. 4 – 200 units; Jan. 10 – 400 units; Jan. 15 – 100 units;
Jan. 19 – 100 units; Jan. 26 – 200 units; Jan. 30 – 250
units.
Issues are to be priced on FIFO method. Write out Stores
Ledger Account for the month of January
10. STORES LEDGER ACCOUNT FOR THE MONTH OF JANUARY - (FIFO) METHOD
Date Particulars
Receipt Issues Balance
Units Rate
Total
cost
Units Rate
Total
cost
Units Rate
Total
cost
Jan 1 Balance b/d - - - - - - 500 4.00 2000
Jan 4 Requisition Slip
No….
- - - 200 4.00 800 300 4.00 1200
Jan 5 Goods Received
Note No….
200 4.25 850 - - -
300
200
4.00
4.25
1200
850
Jan
10
Requisition Slip
No…
-- -- -
300
100
4.00
4.25
1200
425
100 4.25 425
Jan
12
Goods Received
Note No…
150 4.10 615 -- -- -
100
150
4.25
4.10
425
615
Jan
15
Requisition slip
No.
-- - -
100 4.25 425
150 4.10 615
Jan
19
Requisition slip
no
- - - 100 4.10 410 50 4.10 205
Jan
20
Goods Received
Note No…
300 4.50 1350 - - -
50
300
4.10
4.50
205
1350
11. STORES LEDGER ACCOUNT FOR THE MONTH OF JANUARY - (FIFO) METHOD (contd.)
Date Particulars
Receipt Issues Balance
Units Rate
Total
cost
Units Rate
Total
cost
Units Rate
Total
cost
Jan
25
Goods Received
Note No.. 400 4 1600
50
300
400
4.10
4.50
4.00
205
1350
1600
Jan
26
Requisition Slip
No….
- - -
50
150
4.10
4.50
205
675
150
400
4.50
4.00
675
1600
Jan
30
Requisition slip
No…
-- -- --
150
100
4.50
4.00
675
400
300 4.00 1200
Closing stock of materials 300 units @ Rs. 4; Value of Closing Stock
Rs. 1200
12. Advantage of FIFO method
1. Simple to understand and easy to operate
2. Logical method, it considers the normal procedure of
utilizing first of those materials which are received
first – materials are issued in order of purchases
3. Issued at purchase prices, recovers the cost of
materials and cost of the process, job, orders etc can
be easily and correctly ascertained
4. Useful when the prices are falling
5. Closing stock is valued at the market price as closing
stock contains materials purchased recently
6. Useful when number of transactions is limited and
prices of materials are steady
13. Disadvantages
1. Increases possibility of clerical errors, if consignments
are received frequently at varying prices
2. In case of wide fluctuation in prices comparison of
cost of different jobs, orders, processes etc will be
difficult
3. For pricing one issue, often more than one price is to
be taken
4. When prices rise, issue price does not reflect market
prices. Products are charged at low prices and closing
stock contain materials purchased at distant prices
and does not represent recent prices
14. LAST IN FIRST OUT (LIFO) METHOD
Just reverse of FIFO
Materials are priced in the reverse order of
purchases
Assumed to be issued from the last lot and priced
at the latest purchase price
Also known as Replacement Cost Method
Suitable when the prices are rising; materials will be
issued from the last consignment and relate to the
current price levels.
15. Advantages
1. Simple to understand and easy to operate
2. Recovers cost of materials from production
3. Production is charged at current price
4. Most suitable when the prices rise
Disadvantages
1. Leads to clerical errors and mistakes
2. Comparison of jobs become difficult
3. For pricing one issue, often more than one price need
be considered
4. The value of closing stock does not represent recent
prices
16. STORES LEDGER ACCOUNT FOR THE MONTH OF JANUARY - (LIFO) METHOD
Date Particulars
Receipt Issues Balance
Units Rate
Total
cost
Units Rate
Total
cost
Units Rate
Total
cost
Jan 1 Balance b/d -- -- -- -- -- -- 500 4.00 2000
Jan 4 Requisition Slip
No….
-- --- --- 200 4.00 800 300 4.00 1200
Jan 5 Goods Received
Note No….
200 4.25 850 -- -- --
300
200
4.00
4.25
1200
850
Jan
10
Requisition Slip
No…
-- -- -- 200
200
4.25
4.00
850
800 100 4.00 400
Jan
12
Goods Received
Note No…
150 4.10 615 -- -- -- 100
150
4.00
4.10
400
615
Jan
15
Requisition Slip
No. ….
-- -- -- 100 4.10 410 50
100
4.10
4.00
205
400
Jan
19
Requisition slip
No…..
-- -- -- 50
50
4.10
4.00
205
200 50 4.00 200
Jan
20
Goods Received
Note No…
300 4.5 1350 -- -- -- 50
300
4.00
4.50
200
1350
17. STORES LEDGER ACCOUNT FOR THE MONTH OF JANUARY - (LIFO) METHOD (contd.)
Date Particulars
Receipt Issues Balance
Units Rate
Total
cost
Units Rate
Total
cost
Units Rate
Total
cost
Jan
25
Goods
Received Note
No..
400 4 1600
50
300
400
4.00
4.50
400
200
1350
1600
Jan
26
Requisition
Slip No…. - - - 200 4.00 800
50
300
200
4.00
4.50
4.00
200
1350
800
Jan
30
Requisition
Slip No…
-- -- --
200
50
4.00
4.50
800
225
50
250
4.00
4.50
200
1125
18. AVERAGE PRICE METHOD
It is based on the assumption that all materials
in store are so mixed up that an issue cannot
be made from any particular lot of purchase
and, therefore, it is proper if the materials
are issued at the average cost of materials in
store
Two averages:-
(a). Simple average price and
(b). Weighted average price
19. Simple Average Price
“The price, which is calculated by dividing the total of
the prices of the materials in the stock from which
the material to be priced could be drawn by the
number of the prices used in that total”
Calculated by dividing the total of unit purchase prices
of different lots o in stock on the date of issue by the
number of prices used in the calculation and quantity
of different lots is ignored
There are chances for under-recovery or over-recovery
of cost of materials, since the quantity purchased is
ignored. Thus, this method is not generally followed
20. Calculate average price of materials – if the firm purchases -
1000 units @ Rs. 10
2000 units @ Rs. 11 and
3000 units @ Rs. 12,
Calculate the issue price of 6000 units for production
Simple Average Price =
Total purchase price of materials =
(1000 x10)+(2000x11)+(3000x12) = 68000
Total cost of material issued for production
6000X11 = 66000
Thus, under-recovery (loss) of material cost
68000 – 66000 = 2000
21. Weighted Average Price
“A price which is calculated by dividing the total cost of
materials in the stock from which the materials to be
pried could be dawn by the total quantity of materials
in that stock”
From the above example, the issue price calculated will
be
Weighted average price recovers cost of materials from
the production process
During the periods of heavy fluctuations, weighted
average price method will provide better results,
because it tends to smooth out wide fluctuations in
prices
22. Advantages of Average Price Method
1. Rational, systematic and not subject to
manipulation
2. Best method when the prices fluctuate widely,
as it tend smooth out the fluctuations
3. Issue price need not be calculated at each issue.
Issue prices are changed only when there is
fresh purchases
4. Recovers cost of materials
5. Issue price tends to be near to the market prices
6. Eliminates unnecessary adjustments in stock
valuation
23. Disadvantages
1. Needs to calculate fresh issue price at each purchases.
Thus, increased chances of clerical errors and
mistakes
2. Issue price does not represent actual cost of
materials, but only average price of materials
3. When the prices rise, it overstates profit, because the
average price is less than the recent market prices
4. Closing stock is not valued at current market cost
Since most of the essentials of a good method of issue
price are possessed by the weighted average cost
method, this method is preferred by firms
24. Prepare Stores Ledger Account - based on:-
i. Simple average price method and
ii. Weighted average price method
Transactions during the month of September
Receipts Rate Issue
Units Rs. Units
02-09-2015 200 2.00 --
10-09-2015 300 2.40 --
15-09-2015 -- -- 250
18-09-2015 250 2.60 --
20-09-2015 -- -- 200
25. STORES LEDGER ACCOUNT FOR THE MONTH OF SEPTEMBER 2015 –
SIMPLE AVERAGE PRICE METHOD
Date References
Receipts Issus Balance
Units Rate Total Units Rate Total Units Total
02-09 Goods Received
Note No… 200 2.00 400 -- -- -- 200 400
10-09 Goods Received
Note No… 300 2.40 720 -- -- -- 500 1120
15-09 Requisition Slip
No… -- -- -- 250 2.20* 550 250 570
18-09 Goods Received
Note No… 250 2.60 650 -- -- -- 500 1220
20-09 Requisition Slip
No… -- -- -- 200 2.50** 500 300 720
* (2+2.40)/2 = 2.20 ** (2.4 + 2.6)/2 = 2.50
26. STORES LEDGER ACCOUNT FOR THE MONTH OF SEPTEMBER 2015 –
WEIGHTED AVERAGE PRICE MTTHOD
Date References
Receipts Issus Balance
Units Rate Total Units Rate Total Units Total
02-09 Goods Received
Note No… 200 2.00 400 -- -- -- 200 400
10-09 Goods Received
Note No… 300 2.40 720 -- -- -- 500 1120
15-09 Requisition Slip
No… -- -- -- 250 2.24* 560 250 560
18-09 Goods Received
Note No… 250 2.60 650 -- -- -- 500 1210
20-09 Requisition Slip
No… -- -- -- 200 2.42** 484 300 726
27. Inflated Price Method
Used for materials subject to natural wastage
To recover the cost of materials such, materials are issued
at inflated prices
In such cases, the cost of materials issued to production
will be more than the original cost
Eg., cost of coal per ton Rs. 75
Loss in handling 5%
Thus, cost of coal per ton issued to production
28. Specific Price or Identification Method
Used when it is possible to identify each lot of materials
and its purchase price.
Materials are issued at the price at which these materials
are purchased
Base Stock Method
The firm always keeps a minimum quantity of materials and
it will be issued only in emergencies. The minimum
quantity of materials so maintained is known as safety or
base stock
This base stock is always valued at the cost of the first lot
and is treated as a fixed asset.
This method is generally combined with LIFO or FIFO
method. Any quantity over and above the base stock is
issued on the basis of the method used as a combination
29. Highest In First Out (HIFO) Method
Materials are issued in the order of the highest value of the materials
available in the store.
This method assumes that closing stock should always remain at the
minimum value and is used at cost plus contracts or monopolistic
firms
Market Price Method
Replacement price method or Realizable price method
Replacement price is used for materials used for production process and
realizable price method is used for materials stored for sale purposes
Cost is not considered the prevailing market price is considered
Used for sending quotations, quotations reflect the recent prices
Helps to match current revenue with current cost – correct operating
profit
Used to determine the efficiency or inefficiency in buying
Recover the cost of materials from the production process
30. Standard Price Method
The predetermined price. Issues are valued at this price
Used by firms following standard costing
The difference between actual purchase price and
standard price is charged to an account known as
“Purchase Price Variance”
Eg:- standard price is Rs. 10; actual purchase price of 500
units is 550
Stores account Dr 500
Purchase price variance Dr 50
To supplier’s or bank account 550
Credit purchase price variance account, if standard price
is more than actual price
31. There are two types of standards :-
i. Basic standard price and
ii. Current standard price
Basic standard price is the ideal standard fixed for a long
period of time so as to help in forward planning
Current standard price is the basic standard price adjusted to
the current or prevailing market conditions
Standard price method will not recover cost of material
through production process and valuation of stock
necessitate adjustments
However, this method is easy to operate and help in
ascertaining the efficiency or inefficiency of purchasing
materials
Efficient = Actual Purchase price / cost < Standard Price or cost
32. Example:-
The standard price of a material is fixed at Rs. 10 per unit.
Prepare stores ledger account following standard price
method. Also ascertain efficiency in purchases
Date Particulars Quantity Rate
02-09 Received 2000 11
05-09 Received 1000 10
10-09 Issued 1200 --
18-09 Received 800 9
25-09 Issued 900 --
29-09 Received 500 12
30-09 Issued 1100 --
33. STORES LEDGER ACCOUNT FOR THE MONTH OF SEPTEMBER 2015 – STANDARD PRICE METHOD
Date References
Receipts Issus Balance
Units Rate Total Units Rate Total Units Total
02-09 Goods Received Note No….
2000 11 22000 -- -- -- 2000 22000
05-09 Goods Received Note No… 1000 10 10000 -- -- -- 3000 32000
10-09 Requisition Note No.. -- -- -- 1200 10 12000 1800 20000
18-09 Goods Received Note No…. 800 9 7200 -- -- -- 2600 27200
25-09 Requisition Note No… -- -- -- 900 10 9000 1700 18200
29-09 Goods Received Note No… 500 12 6000 -- -- -- 2200 24200
30-09 Requisition Note No… -- -- -- 1100 10 11000 1100 13200
Total 4300 45200 3200 32000
Efficiency can be determined by calculating purchase price variance (by comparing the
standard cost of materials issued with the actual cost material issued)
Purchase Price Variance = (Actual Units Received X Standard Price) – Actual Price Of
Materials
= (4300 x 10)-45200 = 43000 – 45200 = -2200 (2200 unfavorable)
Another way, deduct actual value of closing stock from the standard value of closing stock.
A positive figure represent efficiency (favorable) and negative figure represent inefficiency
Standard value of closing stock (1100 X 10) = 11000
Less Actual value of closing stock 13200
= -2200 (2200 unfavorable)
34. Pricing of Returns
• Surplus materials may be returned to the store
• When materials are returned, it is to be recorded
in the stores ledger
• Returns can be priced in two ways:-
1. At the price at which it was issued
2. At the current price
Shortage or deficit found in stock verification is
shown in the issue column by writing in “Credit
Note No… in the particular column and the
balance is shown as usual
35. Determination Purchase Price
When materials are purchased in large quantities, the received
materials may contain different grades with different values
Though single purchase price is paid for the entire material, we
have to find out the purchase price of each grade of materials
In this case the purchase price of each material is determined on
the basis of the ratio of their selling price or sales
Eg:- A lorry load of materials of mixed goods was purchased for
Rs. 9000. these were sorted out into the following grades,
whose market rates are given below:-
Grade A 5000 units selling price @ Rs. 1.20
Grade B 3000 units selling price @ Rs. 1.00
Grade C 2000 units selling price @ Rs. 0.50
Determine the purchase price per units of each grade of
materials assuming that all grade yield the same rate of profit
36. Answer
Since all the grades yield the same rate of profit, the purchase
price per unit of materials will be in direct proportion to the
selling price of different grades of materials
Grade A 5000 @ Rs. 1.2 6000
Grade B 3000@ Rs. 1.0 3000
Grade C 2000@ Rs. 0.5 1000
10000
Thus, the cost of material is to be divided in the ratio of
6000:3000:1000 (6:3:1)
Cost price of Grade A will be Rs. 5400 (9000x6/10); and rate
per unit will be Rs. 1.08 (Rs. 5400 / 5000 Units)
Grade B Rs. 2700 and Rs. 0.90
Grade C Rs. 900 and Rs. 0.45