Mirpur University of Science and Technology

(Bhimber Campus)
Name: ____________________ Roll: ____________________
Paper: Cost Accounting Exam: Mid Term
Semester: 5th BBA(Hons) Instructor: Maria Ghaffar
Time Allowed: 6 Hours. Total Marks:45

Q1: Without an effective system of cost accounts it is doubtful whether any business can
survive in the intensely competitive conditions prevailing today. Briefly state how a cost
accounting system can be used by a business entity to gain competitive advantage. (10)
Q2: A company manufactures and retails clothing.
You are required to group costs which are listed below and numbered 1 to 20 in the following
classifications (each cost is intended to belong to only one classification). (10)
i) Direct material
ii) Direct labor
iii) Direct expenses
iv) FOH
v) Research and development costs
vi) Selling and development costs
vii) Administration costs
viii) Finance costs
1. Lubricant for sewing machines
2. Floppy disks for general office computer
3. Maintenance contract for general office photocopy machines
4. Telephone rental plus metered calls
5. Interest on bank overdraft
6. Performing Rights Society charge for music broadcast throughout the factory
7. Market research undertaken prior to a new launch
8. Wages of security guards for factory
9. Carriage on purchase of basic raw material
10. Royalty payable on production of XYZ
11. Road licenses for delivery vehicles
12. Parcels sent to customers

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(Bhimber Campus)

13. Cost of advertising products on television

14. Audit fee
15. Chief accountants’ salary
16. Wages of operatives in the cutting department
17. Cost of painting advertising slogans on delivery vans
18. Wages of storekeepers in a material store
19. Wages of fork lift drivers who handle raw materials
20. Developing a new product in the laboratory.
Q3: classify the following expenses as Fixed, Variable or semi-variable
expenses. Give your reasons for the expenses you classify as semi-variables.
(10)
i) Rent
ii) Direct materials
iii) Depreciation
iv) Social Security Contribution
v) Repairs of machinery
vi) Factory insurance
vii) Indirect labor
viii) Heat, light & power
Q4: The Blue Star Manufacturing Company submits the following
information on December 31, 2019.
Raw material inventory January 1 88,000
Finished goods inventory, January 1 100,000
Material Purchases 1200,000
Raw material inventory, December 31 120,000
Legal expenses 42,000
Direct labor 480,000
Indirect labor 240,000
Depreciation-Factory building 80,000
Postage expenses 465
Depreciation-Office building (50% to office) 60,000

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(Bhimber Campus)

Supplies and Indirect material used 160,000

Power, Heat, Light 3,000
Factory manager’s salary 7400
Advertising 2450
Fire insurance 800
Miscellaneous Manufacturing cost 900
Work in Process, January 1 160,000
Work In Process, December 31 192,000
Finished goods inventory, December 31 72,000
Factory overhead is applied at the rate of 125% of direct labor cost ?
During the year 4080 units were manufactured of which 4000 units were sold at a unit price of
Rs. 730
each.
Other expenses for the year were:
Selling expenses 5% of sales
Administrative expenses 2% of sales
Required: i) Prepare Cost of goods manufactured and sold statement. (5)
ii) Prepare an income statement at year ended December, 31 2019. (5)
Q5: How under applied and over applied FOH is adjusted in cost of goods
sold at normal. (5)

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