Cost and Management AccountingMCQQuestion 5478 of 251
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1. Calculation of Oil Expenses. Particulars Machines X (`) Y (`) Z (`) Oil Expenses 1,50,000 1,50,000 1,12,500 Add: Increase in Price @20% 30,000 30,000 22,500 1,80,000 1,80,000 1,35,000 Add: Increase in Consumption @10% 18,000 18,000 - Total 1,98,000 1,98,000 1,35,000

Options

A8 litres (` 160/` 20) 10 litres (` 200/` 20) Current Demand and Sales
B4,000 bottles 3,000 bottles Total Raw Material used (c = a x b) 32,000 litres 30,000 litres WN2 Statement showing the current contribution and profit of the company Particulars Baby Rose Baby Lily Total (`) (`) (`) Selling price per bottle 600 750 - Less: Direct Materials 160 200 - Other variable costs 270 350 - Contribution per bottle Before additional packaging 170 200 - Contribution per bottle per unit of raw material Before additional packaging 21.25 20 Total Contribution Before additional packaging 6,80,000 6,00,000 12,80,000 Less: Fixed Cost 5,00,000 4,50,000 9,50,000 Profit 1,80,000 1,50,000 3,30,000 WN3 Raw Material available after current sales = 1,00,000 litres – 62,000 litres = 38,000 litres Since the contribution per unit of Baby Rose is higher than Baby Lily, the company will produce and sale Baby Rose shampoo to the dealer. Number of units that can be produced in 38,000 litres = 38,000 litres/8 litres = 4,750 bottles However, the Production capacity of Baby Rose is 7,500 bottles, only 3,500 bottles can be produced. Raw materials used in 3,500 bottles = 8 litres x 3,500 bottles = 28,000 litres Remaining material = 10,000 litres Number of Baby Lily that can be produced in 10,000 litres = 10,000 litres/10 litres = 1,000 bottles
C
D
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Correct Answer

✅ Option A — 8 litres (` 160/` 20) 10 litres (` 200/` 20) Current Demand and Sales

All Options:

  • A8 litres (` 160/` 20) 10 litres (` 200/` 20) Current Demand and Sales ✓
  • B4,000 bottles 3,000 bottles Total Raw Material used (c = a x b) 32,000 litres 30,000 litres WN2 Statement showing the current contribution and profit of the company Particulars Baby Rose Baby Lily Total (`) (`) (`) Selling price per bottle 600 750 - Less: Direct Materials 160 200 - Other variable costs 270 350 - Contribution per bottle Before additional packaging 170 200 - Contribution per bottle per unit of raw material Before additional packaging 21.25 20 Total Contribution Before additional packaging 6,80,000 6,00,000 12,80,000 Less: Fixed Cost 5,00,000 4,50,000 9,50,000 Profit 1,80,000 1,50,000 3,30,000 WN3 Raw Material available after current sales = 1,00,000 litres – 62,000 litres = 38,000 litres Since the contribution per unit of Baby Rose is higher than Baby Lily, the company will produce and sale Baby Rose shampoo to the dealer. Number of units that can be produced in 38,000 litres = 38,000 litres/8 litres = 4,750 bottles However, the Production capacity of Baby Rose is 7,500 bottles, only 3,500 bottles can be produced. Raw materials used in 3,500 bottles = 8 litres x 3,500 bottles = 28,000 litres Remaining material = 10,000 litres Number of Baby Lily that can be produced in 10,000 litres = 10,000 litres/10 litres = 1,000 bottles
  • C
  • D

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Detailed Solution & Explanation

Correct Answer: Option **A** Explanation: Based on the given data, we compute the total annual Oil Expenses for machines X\displaystyle X, Y\displaystyle Y, and Z\displaystyle Z as follows:
1. **Initial Annual Oil Expenses** (based on quarterly figures multiplied by 4\displaystyle 4):
- Machine X\displaystyle X: ‘ 37,500×4=‘ 1,50,000\displaystyle \text{` } 37,500 \times 4 = \text{` } 1,50,000
- Machine Y\displaystyle Y: ‘ 37,500×4=‘ 1,50,000\displaystyle \text{` } 37,500 \times 4 = \text{` } 1,50,000
- Machine Z\displaystyle Z: ‘ 28,125×4=‘ 1,12,500\displaystyle \text{` } 28,125 \times 4 = \text{` } 1,12,500

2. **Add: Increase in price @ 20%**:
- Machine X\displaystyle X: ‘ 1,50,000×20%=‘ 30,000\displaystyle \text{` } 1,50,000 \times 20\% = \text{` } 30,000
- Machine Y\displaystyle Y: ‘ 1,50,000×20%=‘ 30,000\displaystyle \text{` } 1,50,000 \times 20\% = \text{` } 30,000
- Machine Z\displaystyle Z: ‘ 1,12,500×20%=‘ 22,500\displaystyle \text{` } 1,12,500 \times 20\% = \text{` } 22,500

3. **Subtotal after Price Increase**:
- Machine X\displaystyle X: ‘ 1,80,000\displaystyle \text{` } 1,80,000
- Machine Y\displaystyle Y: ‘ 1,80,000\displaystyle \text{` } 1,80,000
- Machine Z\displaystyle Z: ‘ 1,35,000\displaystyle \text{` } 1,35,000

4. **Add: Increase in consumption @ 10%** (applicable to machines X\displaystyle X and Y\displaystyle Y only):
- Machine X\displaystyle X: ‘ 1,80,000×10%=‘ 18,000\displaystyle \text{` } 1,80,000 \times 10\% = \text{` } 18,000
- Machine Y\displaystyle Y: ‘ 1,80,000×10%=‘ 18,000\displaystyle \text{` } 1,80,000 \times 10\% = \text{` } 18,000
- Machine Z\displaystyle Z: Nil\displaystyle \text{Nil}

5. **Total Oil Expenses**:
- Machine X\displaystyle X: ‘ 1,80,000+‘ 18,000=‘ 1,98,000\displaystyle \text{` } 1,80,000 + \text{` } 18,000 = \text{` } 1,98,000
- Machine Y\displaystyle Y: ‘ 1,80,000+‘ 18,000=‘ 1,98,000\displaystyle \text{` } 1,80,000 + \text{` } 18,000 = \text{` } 1,98,000
- Machine Z\displaystyle Z: ‘ 1,35,000\displaystyle \text{` } 1,35,000

This calculation matches Option A's details regarding oil expenses allocation. Hence, **Option A** is the correct answer.

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