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Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

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 Opening Balance 100@ 40


Jan 8 200 units @ Rs. 45/unit
Jan 11 150 units
Jan 13 Inventory lost 50 units
Jan 16 50 units @ Rs. 60/unit
Jan 18 100 units @ Rs. 70/unit
Jan 20 150 units

Required: 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) Assignment-1

Fall Semester 2006

FIFO Method. Marks (05)


Weighted Average cost Method. Marks (05)

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 Rs. 1.50


Time allowed for the job 16 hours
Time taken 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 Rs. 80,000


Variable FOH cost 1,00,000
Activity Level 20,000 Direct Labor hours

Actual Cost

Fixed FOH cost Rs. 80,000


Variable FOH cost 1,20,000
Activity Level 25,000 Direct Labor hours

Calculate:

1. Over & under applied FOH.


2. Budgeted Variance.
3. Volume variance.

Show all necessary workings.


Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

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 Nature of Cost Amount (Rs)


Electricity bill 80% Variable 24,500

Telephone bill 70% Variable 5,330

Gas bill 90% Variable 1,200

Teaching staff salary 100% Fixed 55,000

Non teaching staff 10% Variable 12,500


salary

Rent of school building 100% Fixed 50,000

Maintenance of 100% Variable 2,000


furniture
Stationary 70% Variable 3,220
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

Printing 100% Variable 4,500

Advertisement 80% Variable 7,000

Library expenses 100% Variable 5,500

Other expenses 50% Variable 6,300

Total Expenses 1,77,050

155 students took admission and fee per student is 1,24,000


Rs. 800 (155 x 800)

Net Loss 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
Units (Rs.)
Sales during the year 8,000 ?
Opening Inventories:
Work in process - -
Finished goods 1,800 ?
Closing Inventories:
Work in process 100 ?
Finished goods 2,000 ?
Manufacturing Cost:
Direct Material 30,000
Direct Labor 20,000
Factory Overhead 16,000
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

The foreman has submitted the following cost estimate for the closing work in
process Inventory:

Direct material cost Rs. 2,700


Direct Labor cost 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. Determine the number of units that were manufactured during the year (1.5)
2. complete the foreman’s estimate of the cost of work in process (1.5)
3. Prepare a manufacturing statement for the year (3.5)
4. Determine the cost of each unit manufactured during the year (1.5)
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) Assignment-1

Fall Semester 2006

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.)
Finished Goods 48,600 ?
Work in process 81,500 42,350
Materials 34,200 49,300
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

Depreciation ------factory equipment Rs. 21,350


Interest earned 6,300

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 Rs. 364,000


Direct Labour 162,500
Indirect labour 83,400
Freight in 8,600
Miscellaneous factory overhead 47,900
Purchased discount 5,200

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) Assignment-1

Fall Semester 2006

(13)
(14)
(15)Question # 02 (Marks: 05)

(16)The ABC Company provides the following information:


(17)
(18)Estimated requirements for next year: 2400 units
(19)Per unit Cost: Rs. 1.50
(20)Ordering Cost (per order): Rs. 20
(21)Carrying Cost: 10%
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006


Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

The cost department of the Alpha Corporation prepared the following data and
costs for the year 19----:

Inventories:

January 01 December 31
(Rs.) (Rs.)
Finished Goods 48,600 ?
Work in process 81,500 42,350
Materials 34,200 49,300

Depreciation ------factory equipment Rs. 21,350


Interest earned 6,300

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 Rs. 364,000


Direct Labour 162,500
Indirect labour 83,400
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

Freight in 8,600
Miscellaneous factory overhead 47,900
Purchased discount 5,200

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 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

Required:

Calculate the Value of closing stock by using Weighted Average Method of


stock valuation.

Question # 02 (Marks: 05)

The ABC Company provides the following information:

Estimated requirements for next year: 2400 units


Per unit Cost: Rs. 1.50
Ordering Cost (per order): Rs. 20
Carrying Cost: 10%

From the above information you are required to calculate:


(a) Economic Order Quantity
(b) Prove your answer
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006


Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006


Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

The following information was taken from the books and records of the Zahid
Textile Mill for the year ended December, 2006.

Particulars Units Cost (Rs.)


Sales during the year 5,000 ?
Opening inventories:
Work in process - -
Finished goods 1,500 12,150
Closing inventories:
Work in process 100 ?
Finished Goods 2,000 ?
Manufacturing costs:
Direct material cost 25,000
Direct labor cost 15,000
Factory overhead cost 5,000

The foreman has submitted the following cost estimate for the closing work in
process inventory:

Direct material cost (Rs.) 800


Direct labor cost (Rs.) 1,000
Factory Overhead Cost (Rs.) 2,133

Required:
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

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:

Variable cost per Fixed Cost


Particulars
unit (Rs.) (Rs.)
Material 10 -
Labor 12 -
FOH 5 15,000
Marketing Expense 3 5,000
Administrative Expense - 6,000

Compute:

1. The break even point in units of products


2. The break even point in rupees of sales
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

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) Assignment-1

Fall Semester 2006

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 June………… 11,400


April …………. 12,100 July ………… 12,000
May …………… 11,900 August……….12,200

Actual and projected Sales (in Rs.) are as follows:

March ………….354,000 June ……….342,000


April …………... 363,000 July ………. 360,000
May ……………. 357,000 August ……366,000

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

March …………. 3,100 June ……… 3,400


April …………....2,900 July ………… 3,000
May ……………. 3,300 August...….. 2,800

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 Rs.
Sales for the year 480,000
Raw material inventory, July 1,2004 25,000
Finished goods inventory, July 1,2004 60,000
Purchases 100,000
Direct labor 65,000
Power, heat and light 2,500
Indirect material purchased and consumed 4,500
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

Administrative expenses 21,000


Depreciation of plant 14,000
Selling expenses 25,000
Depreciation of building 7,000
Bad debts 1,500
Indirect labor 3,000
Other manufacturing expenses 10,000
Work in process, July 1,2004 22,000
Work in process, June 30,2005 15,000
Raw materials inventory, June 30,2005 21,000
Finished goods inventory, June 30,2005 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 12,000 Units


Variable cost to place an order Rs. 10
Unit Cost of XY-9 Rs. 4.80
Carrying Cost 5%

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 600 Units


Average daily consumption 500 Units
Minimum daily consumption 400 Units

A B
Lead Time 4-8 days 3-5 days
Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

Lead Time to get urgent supplies 3 days 1 day


EOQ 5000 units 3000 units

Calculate for each of the materials:

a) Order Level
b) Minimum level
c) Maximum level
d) Danger level

Following figures are presented to you by Toseef manufacturing


Company:

Budgeted Figures Actual Figures


for operations for operations
Items
During 2006 during January
2006
Dept A Dept A
Direct materials (Rs ) 2,400,000 250,000
Direct Labor (Rs.) 1,200,000 105,000
Factory overhead 1,800,000 9,500
(Rs.)
Direct labor hours 100,000 28,000
Machine hours 360,000 -

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 = Rs.8.00 per direct labor hour


Number of direct labor hours = 1,200
Production overhead incurred = 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) Assignment-1

Fall Semester 2006

Departments
Cost Incurred by Departments A B C
(Rs.) (Rs.) (Rs.)
Material Cost 10,000 - -
Labor Cost 9,000 3,625 2,320
Factory Over Head Cost 4,500 2,175 1,740
Units Started in Process 1,000 - -
Units received from preceding department - 800 700
Units transferred to next department 800 700 -
Units transferred to finished goods store room - - 500
Units still in Process
Material 100%, Conversion Cost 75% 200 - -
Conversion cost 25% completed - 100 -
Conversion cost 40% completed - - 200

Required:

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 1
Quantity Schedule 2
Cost charged to the department (Total Cost and Unit Cost) 4
Cost accounted for as follows 5
Additional computation 3
Total 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) Assignment-1

Fall Semester 2006

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 June………… 11,400


April ………… 12,100 July ………… 12,000
May …………… 11,900 August……….12,200

Actual and projected Sales (in Rs.) are as follows:

March ………….354,000 June ……….342,000


April …………... 363,000 July ………. 360,000
May ……………. 357,000 August ……366,000

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


Cost & Management Accounting (Mgt-402) Assignment-1

Fall Semester 2006

March …………. 3,100 June ……… 3,400


April …………....2,900 July ………… 3,000
May ……………. 3,300 August...….. 2,800

REQUIRED:

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)