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Q 3 ) Kissan is a large food - processing company in India that produces various food products. One of the famous products of Kissan
Q Kissan is a large foodprocessing company in India that produces various food products.
One of the famous products of Kissan is 'Kissan Berry Blast, a Berry Jam. For many years,
Kissan has enjoyed market leadership with almost negligible competition; however, other
companies have begun marketing similar products in the area, and price competition has
become increasingly important. Mr Mohan, the company controller, is planning to implement
a standard cost system for Kissan Berry Blast and has gathered considerable information
from his coworkers on production and material requirements for Berry Blast. Mohan
believes using standard costing will allow Kissan to improve cost control and market better
pricing decisions.
Out of the three flavors of Berry Blast, strawberry jam is quite popular. Jam is usually
produced in a batch of For each batch of jam, of handpicked strawberries enters
the production process. All the strawberries purchased from the market are not useable;
therefore, the fresh strawberries purchased from the market are first sorted by hand before
entering the production process.
Three minutes is the standard direct labor time for sorting to obtain of berries. Then
acceptable strawberries are blended with the other ingredients. Blending requires hour of
direct labor hour time per batch. After blending, the jam is packaged in containers. Mohan
has gathered the following information from the accounting department.
Kissan purchases strawberries at the cost of Rs per kg Strawberries are purchased
in tonnes, and in one lot, the company purchase tonne of strawberries.
Kissan adds sugar to the jam as sweetener. Each batch requires around of sugar,
and the cost of the sugar is Rs per kg
The company adds some preservers also. In one bottle of jam, preservers costing Rs
is added.
Direct labor is paid at the rate of Rs per hour.
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