1. Determine the unit selling price if 35% profit is required by the company.

The company
plans to manufacture 12500 units in this quarter. You are given with the following data:
(All the values are in Indian rupees)
Opening stock of raw materials - 75000
Closing stock of raw materials 15000
Opening stock of work in progress 85500
Closing stock of work in progress - 53000
Opening stock of finished goods 275000
Closing stock of finished goods 77500
Raw material purchased 475000
Wages paid to the machinists 250000
Depreciation on the plant and machinery 35000
Rent for the factory building 45000
Telephone charge 65000
Salary paid to the office staff 350000
Salesmen commission 55000
Advertisement expenses 90000
Maintenance expenses (for machines in the factory) = 45000
Find also the prime cost, factory cost, cost of production, and total cost.
Answer
Prime cost = Raw material purchased + Opening stock of raw materials - Closing stock of raw
materials + Wages paid to the machinists = 475000 + 75000 15000 + 250000 = 785000

Factory cost = Prime cost + All the production overheads

= 785000 + Depreciation on the plant and machinery + Rent for the factory building
+ Maintenance expenses (for machines in the factory) + Opening stock of work in progress -
Closing stock of work in progress

= 785000 + 35000+45000+45000 + 85500 53000 = 942500

Cost of production = Factory cost + office overheads

= 942500 + Telephone charge +Salary paid to the office staff
= 942500+65000+350000 = 1357500
 Cost of goods sold = Cost of production + Opening stock of finished goods - Closing
stock of finished goods
= 1357500 +275000 77500 = 1555000

Total cost = Cost of goods sold + Sales and Distribution overheads

= 1555000 + Salesmen commission + Advertisement expenses
= 1555000 + 55000 + 90000
= 1700000

Selling price per unit = (Total cost + % profit required) / Number of units manufactured

= (1700000 + 35% of 1700000) / 12500 = 183.6

Selling price per unit = Rs.183.6

Note:
1. Financial items like share market investment, income tax, loan repayment etc.
should not be added to the cost sheet.
2. Import tax paid for getting the raw material will get added to the prime cost.