Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Question:
GOGO Manufacturing Company provides the following information on June 30, 2006. Particulars Amount (Rs) Sales for the year 2,50,000 Raw material inventory, July 1, 2005 10,000 Finished goods inventory, July 1, 2005 10,000 Purchases 1,50,000 Direct labor 20,000 Power, heat and light 2,500 Indirect material consumed 2,500 Administrative expenses 4,000 Depreciation of plant 3,000 Selling expenses 5,000 Indirect labor Costs 2,000 Other manufacturing expenses 1,000 Work in process, July 1, 2005 10,000 Work in process, June 30, 2006 20,000 Raw materials inventory, June 30, 2006 20,000 Finished goods inventory, June 30, 2006 20,000 • Factory over heads are 50% of Direct Labour Costs

Required: 1. Prepare cost of goods sold statement (Adjustment of over or under applied FOH charge to entire production) & Income statement. (10) 2. Calculate gross margin & markup ratio. (5) Q1. S.P Johns Corporation is a manufacturing concern. Following is the receipts & issues record for the month of January, 2006. Date Receipts Issues Jan 1 Jan 8 Jan 11 Jan 13 Jan 16 Jan 18 Jan 20 Required: Opening Balance 100@ 40 200 units @ Rs. 45/unit Inventory lost 50 units 50 units @ Rs. 60/unit 100 units @ Rs. 70/unit

150 units

150 units

Find the value of ending inventory by preparing Material Ledger card under Perpetual and Periodic inventory system based on the above information using each of the following methods:

Cost & Management Accounting (Mgt-402) Fall Semester 2006 FIFO Method. Marks (05) Weighted Average cost Method. Marks (05)

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Q2. The Hedge Corporation manufactures only one product: planks. The single raw material used in making planks is the dint. For each plank manufactured 12 dints are required. Assume that company manufactured 150,000 planks per year, that demand for planks is perfectly stead throughout the year, that it cost Rs. 200 each time dints are ordered, and that carrying cost is Rs. 8 per dint per year. a) Determine the economic order quantity of dints. Marks (2) b) What is the total inventory cost for Hedge (total carrying cost plus total ordering cost)? Marks (3) Q3. Wage rate per hour Time allowed for the job Time taken Rs. 1.50 16 hours 12 hours.

Required: Find out effective “rate of earnings under Rowan & Halsey-Weir premium plan” Marks (2.5 x 2) Question: The information relating Kareem Corporation is as follow regarding FOH: Estimated Cost Fixed FOH cost Variable FOH cost Activity Level Actual Cost Fixed FOH cost Variable FOH cost Activity Level Calculate: 1. Over & under applied FOH. 2. Budgeted Variance. 3. Volume variance. Show all necessary workings. Rs. 80,000 1,20,000 25,000 Direct Labor hours Rs. 80,000 1,00,000 20,000 Direct Labor hours

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Question JV Company began its operations on January 1, 19A and produces one product that sells for Rs 7. Normal capacity is 100,000 units per year, with 100,000 units produced and 80,000 units sold in 19A. Manufacturing costs and marketing and administrative expenses were as follows: Fixed Costs Variable Costs Materials ---------Rs 1.50 per unit produced Direct labor ---------1.00 per unit produced Factory overhead Rs 150,000 0.50 per unit produced Marketing & admin expenses 80,000 0.50 per unit sold Required: 1) Determine the 19A operating income, using direct / marginal costing and absorption costing.

Following data relates to the AB Public High School which is currently running in loss. Costs incurred during the first month operations are as follow:

Cost
Electricity bill Telephone bill Gas bill Teaching staff salary Non teaching staff salary Rent of school building Maintenance of furniture Stationary

Nature of Cost
80% Variable 70% Variable 90% Variable 100% Fixed 10% Variable

Amount (Rs)
24,500 5,330 1,200 55,000 12,500

100% Fixed 100% Variable 70% Variable

50,000 2,000 3,220

Cost & Management Accounting (Mgt-402) Fall Semester 2006 Printing Advertisement Library expenses Other expenses 100% Variable 80% Variable 100% Variable 50% Variable

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4,500 7,000 5,500 6,300

Total Expenses 155 students took admission and fee per student is Rs. 800 (155 x 800) Net Loss

1,77,050 1,24,000 53,050

a. Break-even point where firms Revenue = Cost. Comment whether the cost of Rs. 1, 77,050 will consider as a breakeven point? b. Find the Break even point in number of students? c. Find the Break even in Rupees? d. Find the number of students that are required to earn a profit of Rs 25,000? e. Find out margin of safety ratio? The following information was taken from the books and records Ali Manufacturing for the year ended 31st December, 2006. Cost (Rs.) ? ? ? ? 30,000 20,000 16,000

Sales during the year Opening Inventories: Work in process Finished goods Closing Inventories: Work in process Finished goods Manufacturing Cost: Direct Material Direct Labor Factory Overhead

Units 8,000 1,800 100 2,000

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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The foreman has submitted the following cost estimate for the closing work in process Inventory: Direct material cost Direct Labor cost Rs. 2,700 Rs. 1,000

The company’s past experience showed that factory overhead cost tends to fluctuate closely in proportion to direct labor cost. Required: 1. 2. 3. 4. 5. Determine the number of units that were manufactured during the year (1.5) complete the foreman’s estimate of the cost of work in process (1.5) Prepare a manufacturing statement for the year (3.5) Determine the cost of each unit manufactured during the year (1.5) Assume that the first cost recorded in the Finished goods account is the first costs to be credited to the account. Determine the ending Inventory of Finished goods and the Cost of Goods Sold. (2)

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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QUESTION The cost department of the Alpha Corporation prepared the following data and costs for the year 19----: Inventories: January 01 December 31 (Rs.) (Rs.) 48,600 ? 81,500 42,350 34,200 49,300

Finished Goods Work in process Materials

Cost & Management Accounting (Mgt-402) Fall Semester 2006 Depreciation ------factory equipment Interest earned Finished Goods Inventory: January 1, 300 units; December 420 units, all from current year’s production Sales during 19------: 3,880 units at Rs. 220 per unit. Materials Purchased Direct Labour Indirect labour Freight in Miscellaneous factory overhead Purchased discount Rs. 364,000 162,500 83,400 8,600 47,900 5,200

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Rs. 21,350 6,300

Required: (1) The unit cost of the finished goods inventory, December 31 (2) The total cost of the finished goods inventory, December 31 (3) The cost of goods sold (4) The gross profit total and the gross profit per unit (5) Question# 01: (Marks: 10) (6) (7) Following is the receipts & issues record of Imran & Company for the month of November, 2006. (8) Date Receipts Issues November 07 200 units @ Rs. 150/unit -November 09 -75 units November 13 150 units @ Rs. 100/unit -November 15 100 units @ Rs. 175/unit -November 18 -250 units November 20 100 units November 22 300 units @ Rs.125/unit November 24 -300 units November 27 200 units @ Rs. 150/unit -November 30 -125 units (9) (10)Required: (11) (12)Calculate the Value of closing stock by using Weighted Average Method of stock valuation.

Cost & Management Accounting (Mgt-402) Fall Semester 2006 (13)

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(14)
(15)Question # 02 (16)The ABC Company provides the following information: (Marks: 05)

(17) (18)Estimated requirements for next year: (19)Per unit Cost: (20)Ordering Cost (per order): (21)Carrying Cost:

2400 units Rs. 1.50 Rs. 20 10%

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Cost & Management Accounting (Mgt-402) Fall Semester 2006

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The cost department of the Alpha Corporation prepared the following data and costs for the year 19----: Inventories: January 01 December 31 (Rs.) (Rs.) 48,600 ? 81,500 42,350 34,200 49,300 Rs. 21,350 6,300

Finished Goods Work in process Materials

Depreciation ------factory equipment Interest earned Finished Goods Inventory: January 1, 300 units; December 420 units, all from current year’s production Sales during 19------: 3,880 units at Rs. 220 per unit. Materials Purchased Direct Labour Indirect labour

Rs. 364,000 162,500 83,400

Cost & Management Accounting (Mgt-402) Fall Semester 2006 Freight in Miscellaneous factory overhead Purchased discount 8,600 47,900 5,200

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Required: (1) The unit cost of the finished goods inventory, December 31 (2) The total cost of the finished goods inventory, December 31 (3) The cost of goods sold The gross profit total and the gross profit per

Following is the receipts & issues record of Imran & Company for the month of November, 2006. Date November 07 November 09 November 13 November 15 November 18 November 20 November 22 November 24 November 27 November 30 Required: Calculate the Value of closing stock by using Weighted Average Method of stock valuation.
Question # 02 The ABC Company provides the following information: (Marks: 05)

Receipts 200 units @ Rs. 150/unit -150 units @ Rs. 100/unit 100 units @ Rs. 175/unit -300 units @ Rs.125/unit -200 units @ Rs. 150/unit --

Issues -75 units --250 units 100 units 300 units -125 units

Estimated requirements for next year: Per unit Cost: Ordering Cost (per order): Carrying Cost:

2400 units Rs. 1.50 Rs. 20 10%

From the above information you are required to calculate: (a) Economic Order Quantity (b) Prove your answer

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Cost & Management Accounting (Mgt-402) Fall Semester 2006

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The following information was taken from the books and records of the Zahid Textile Mill for the year ended December, 2006. Particulars Sales during the year Opening inventories: Work in process Finished goods Closing inventories: Work in process Finished Goods Manufacturing costs: Direct material cost Direct labor cost Factory overhead cost Units 5,000 1,500 100 2,000 Cost (Rs.) ? 12,150 ? ? 25,000 15,000 5,000

The foreman has submitted the following cost estimate for the closing work in process inventory: Direct material cost (Rs.) Direct labor cost (Rs.) Factory Overhead Cost (Rs.) Required: 800 1,000 2,133

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Calculate the value of Sales in Rupees from the data given above if Gross Profit is 45% of Cost of Goods Sold. Complete the given Material Ledger cards prepared under LIFO & FIFO according to the transactions given below: The following transactions are to be used in costing inventory on November, 2006. Nov 1 Balance on hand 500 gallons @ Rs.20 per gallon Nov 2 Received 1,200 gallons @ Rs.21 per gallon Nov3 Issued 600 gallons Nov 5 Received 1,000 gallons @ Rs.19 per gallon Nov 7 Returned to vendor 200 gallons received on Nov 5 Nov 9 30 gallons deteriorated in quality and transferred to obsolete stock Nov 10 Issued 900 gallons Nov 14 Received 600 gallons @ Rs.20 per gallon Nov 18 Issued 800 gallons Nov 22 Issued 400 gallons Nov 26 Received 1,500 gallons @ Rs.18 per gallon Nov 28 100 gallons were returned from the factory to the store room Nov 29 Issued 700 gallons Nov 30 Excess material is found in stock 80 gallons. It was ascertained that this excess resulted due to wrong measure.

Question 01 Kabul Company produces only one product. Normal capacity is 20,000 units per year and the units’ sales price is Rs. 50. Relevant cost is: Particulars Material Labor FOH Marketing Expense Administrative Expense Compute: 1. The break even point in units of products 2. The break even point in rupees of sales Variable cost per unit (Rs.) 10 12 5 3 Fixed Cost (Rs.) 15,000 5,000 6,000

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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3. The number of units of product that must be produces and sold to achieve a profit of Rs. 10,000 (Marks: 3+2+5) Question 02: Following information relates to a manufacturing company: Selling price Rs. 20 per unit Units produced 30,000 Units sold 20,000 Variable cost Direct material Rs. 5 per unit Direct labor Rs. 3 per unit F.O.H Rs. 1 per unit Selling & Administrative Expenses Rs. 2 per unit Fixed cost F.O.H Rs 120,000 Selling & Administrative Expenses Rs. 15,000 You are required to show the profit statements for the month under: (a) Absorption Costing (b) Marginal Costing

United Company seeks assistance in developing cash and other budget information for May, June and July. On April 30, the company had cash of Rs. 5,500, Accounts Receivable of Rs. 437,000, Inventories of Rs. 309,400 and Accounts payables of Rs. 133,055. The budget is to be based on the following assumptions: Purchases: a. Fifty four percent of all Purchases of Material and a like percentage of marketing, general and administrative expenses are paid in the month Purchases, while the reminder paid in the following month. b. Each month’s units of ending material inventory are equal to 130% of next month’s production requirement. c. The cost of each unit of inventory is Rs. 20. d. Wages and salaries earned each month by employees total Rs. 38,000. e. Marketing, General and Administrative expenses (of which Rs.2,000 is depreciation) are equal to 15% of the current month’s sales. Sales: a. Each month’s Sales are billed on the last day of the month.

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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b. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded at Gross Selling Price. c. 60% of the billings are collected within the discount period; 25% by the end of the month; 9% by the end of second month and 6% prove uncollectible. Actual and projected materials (in units) needed foe production: March…………. 11, 800 April …………. 12,100 May …………… 11,900 June………… 11,400 July ………… 12,000 August……….12,200

Actual and projected Sales (in Rs.) are as follows: March ………….354,000 April …………... 363,000 May ……………. 357,000 June ……….342,000 July ………. 360,000 August ……366,000

Accrued payroll (in Rs.) at the end of each month is as follows: March …………. 3,100 April …………....2,900 May ……………. 3,300 REQUIRED: 1. Budgeted cash disbursement during June (Marks: 10) 2. Budgeted cash collection during May (Marks: 5) 3. Budgeted units of inventory to be purchased during July (Marks: 5) XYZ manufacturing company submits the following information on June 30, 2005. Particulars Sales for the year Raw material inventory, July 1,2004 Finished goods inventory, July 1,2004 Purchases Direct labor Power, heat and light Indirect material purchased and consumed Rs. 480,000 25,000 60,000 100,000 65,000 2,500 4,500 June ……… 3,400 July ………… 3,000 August...….. 2,800

Cost & Management Accounting (Mgt-402) Fall Semester 2006 Administrative expenses Depreciation of plant Selling expenses Depreciation of building Bad debts Indirect labor Other manufacturing expenses Work in process, July 1,2004 Work in process, June 30,2005 Raw materials inventory, June 30,2005 Finished goods inventory, June 30,2005

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21,000 14,000 25,000 7,000 1,500 3,000 10,000 22,000 15,000 21,000 66,000

Calculate: 1. Cost of raw-material consumed 2. Prime cost 3. Conversion Cost 4. Total factory cost 5. Cost of goods manufactured Following estimates relate to the material XY-9: Annual requirement of XY-9 Variable cost to place an order Unit Cost of XY-9 Carrying Cost Required: a) Calculate EOQ from the data given above b) Calculate after how many days an order shall be placed (Marks: 5) Question 02: Consumption forecast of two materials A and B is as follows: Maximum daily consumption Average daily consumption Minimum daily consumption 600 Units 500 Units 400 Units A 4-8 days B 3-5 days 12,000 Units Rs. 10 Rs. 4.80 5%

Lead Time

Cost & Management Accounting (Mgt-402) Fall Semester 2006 Lead Time to get urgent supplies EOQ Calculate for each of the materials: a) b) c) d) Order Level Minimum level Maximum level Danger level 3 days 5000 units

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1 day 3000 units

Following figures are presented to you by Toseef manufacturing Company: Budgeted Figures for operations During 2006 Dept A 2,400,000 1,200,000 1,800,000 100,000 360,000 Actual Figures for operations during January 2006 Dept A 250,000 105,000 9,500 28,000 -

Items

Direct materials (Rs ) Direct Labor (Rs.) Factory overhead (Rs.) Direct labor hours Machine hours

Required: Calculate predetermined factory overhead absorption rates for the departments using five different bases. (Present your answer by enlisting the rates in descending order of approximate frequency of their use). (Marks: 05) Question 02 From the following data calculate the over/under absorption and show how the transactions would be recorded in the production overhead account. Absorption rate Number of direct labor hours Production overhead incurred = Rs.8.00 per direct labor hour = 1,200 = Rs. 6,900

The Imran Manufacturing Company produces a single product which passes through three departments A, B and C. The data related to the production for the month of June, 2006 is as under:

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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Cost Incurred by Departments Material Cost Labor Cost Factory Over Head Cost Units Started in Process Units received from preceding department Units transferred to next department Units transferred to finished goods store room Units still in Process Material 100%, Conversion Cost 75% Conversion cost 25% completed Conversion cost 40% completed Required:

Departments A B C (Rs.) (Rs.) (Rs.) 10,000 9,000 3,625 2,320 4,500 2,175 1,740 1,000 800 700 800 700 500 200 100 200

Prepare the Cost of production report for the month of June, 2006 for Department A. Note: Please format the statement correctly. The allocation of the marks will be as follows: Statement Head Quantity Schedule Cost charged to the department (Total Cost and Unit Cost) Cost accounted for as follows Additional computation Total 1 2 4 5 3 15

90 units of a product are sold for Rs. 100 per unit. Variable cost relating to production and selling is Rs. 75 per unit and fixed cost is Rs. 2,250. Required: Prepare Income Statement and analyze under each of the following conditions: o Management decides to increase its sales by 10 units o Management decides to increase its sales price by 10% o Management decides to decrease its sales price by 10%

Cost & Management Accounting (Mgt-402) Fall Semester 2006

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o Management decides to decrease its sales price by 10% and expects an increase in sales volume by 50%. United Company seeks assistance in developing cash and other budget information for May, June and July. On April 30, the company had cash of Rs. 5,500, Accounts Receivable of Rs. 437,000, Inventories of Rs. 309,400 and Accounts payables of Rs. 133,055. The budget is to be based on the following assumptions: Purchases: f. Fifty four percent of all Purchases of Material and a like percentage of marketing, general and administrative expenses are paid in the month Purchases, while the reminder paid in the following month. g. Each month’s units of ending material inventory are equal to 130% of next month’s production requirement. h. The cost of each unit of inventory is Rs. 20. i. Wages and salaries earned each month by employees total Rs. 38,000. j. Marketing, General and Administrative expenses (of which Rs.2,000 is depreciation) are equal to 15% of the current month’s sales. Sales: d. Each month’s Sales are billed on the last day of the month. e. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded at Gross Selling Price. f. 60% of the billings are collected within the discount period; 25% by the end of the month; 9% by the end of second month and 6% prove uncollectible. Actual and projected materials (in units) needed foe production: March………….11, 800 April ………… 12,100 May …………… 11,900 June………… 11,400 July ………… 12,000 August……….12,200

Actual and projected Sales (in Rs.) are as follows: March ………….354,000 April …………... 363,000 May ……………. 357,000 June ……….342,000 July ………. 360,000 August ……366,000

Accrued payroll (in Rs.) at the end of each month is as follows:

Cost & Management Accounting (Mgt-402) Fall Semester 2006 March …………. 3,100 April …………....2,900 May ……………. 3,300 REQUIRED: June ……… 3,400 July ………… 3,000 August...….. 2,800

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4. Budgeted cash disbursement during June (Marks: 10) 5. Budgeted cash collection during May (Marks: 5) 6. Budgeted units of inventory to be purchased during July (Marks: 5)

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