Cost Sheet

Question
1. Define cost accounting and its objectives.
2. What is cost sheet? Why is it prepared?
3. Define direct material; direct labor and direct expenses with example.

Problem
1. From the books of accounts of XYZ Company Ltd., the following details have been extracted
for the year ending March 31, 2018.
13
Particulars Taka Particulars Taka
Inventories on 1st April 2017: Bad debts 10,000
Finished Stock 80,000 Purchase return 8,000
Raw Materials 30,000 Purchase discount 12,000
Work-in-progress 40,000 Dividend Income 15,000
Material purchased during Inventories on 31st
the year 1,100,000 March 2018: 70,000
Direct labor paid 650,000 Finished Stock 40,000
Chargeable expenses 100,000 Raw Materials 60,000
Work-in-
Freight of materials 10,000 progress 15,000
Interest on borrowed fund 25,000 Interest received 18,000
Factory overhead @ 50% of direct labor; Administrative overheads @ 10% of works cost; Selling
overheads @ 10% of sales; Profit 25% of sales.

From the above details you are required to prepare a cost sheet showing:
i) Prime cost;
ii) Net works cost;
iii) Cost of Goods Manufactured;
iv) Cost of Goods Sold and
v) Sales.

2. From the books of accounts of XYZ Company Ltd., the following details have been extracted
for
the year ending December 31, 2015.
Particulars Taka
Stock materials: Opening 188,000
Closing 200,000
Material purchased during the year 832,000
Direct wages paid 238,000
 Indirect wages 16,000
Salaries to administrative staff 40,000
Freight: Inward 32,000
Outward 20,000
Cash discount allowed 14,000
Bad debts written off 18,000
Repairs to plant and machinery 42,000
Rent, rates, taxes: Factory 12,000
Office 6,400
Travelling expenses 12,400
Salesman salaries and commission 33,600
Depreciation written off: Plant and Machinery 28,400
Furniture 2,400
Director fees 24,000
Electricity charges (factory) 48,000
Fuel (for boiler) 64,000
General Manager's salary 48,000

From the above details you are required to prepare a statement showing: i) Prime cost
ii) factory cost and iii) total cost.

CVP Analysis

1. What is meant by the term break-even point?

2. What is meant by the margin of safety and sales mix?

3. Menlo Company distributes a single product. The company’s sales and expenses for last
Month are following:

Total Tk. Per Unit Tk.

Sales 450,000 30
Variable expenses 180,000 12
Contribution margin 270,000 18
Fixed expenses 216,000
Net operating income 54,000

Required:

i. What is the monthly break-even point in units sold and in sales taka?
ii. Without resorting to computations, what is the total contribution margin at the
break-even point?
 iii. How many units would have to be sold each month to earn a target profit of tk.
90,000?
iv. Refer to the original data. Compute the company’s margin of safety in both taka and
percentage terms.

4. Voltar Company manufactures and sells a specialized cordless telephone for high
electromagnetic radiation environments. The company’s contribution format income statement
for the most recent year is given below:
Total Per Unit Percent of Sales
Sales (20,000 units) .....................Tk.1,200,000 Tk.60 100%
Variable expenses .......................... 900,000 45 ?%
Contribution margin ........................ 300,000 Tk. 15 ?%
Fixed expenses .............................. 240,000
Net operating income .....................Tk. 60,000

Management is anxious to increase the company’s profit and has asked for an analysis of a
number of items.

Required:

i. Compute the company’s CM ratio and variable expense ratio.

ii. Compute the company’s break-even point in both units and sales Tk. Use the equation
method.
iii. Assume that sales increase by Tk.400,000 next year. If cost behavior patterns remain
unchanged, by how much will the company’s net operating income increase? Use the CM ratio
to compute your answer.