Mid Term Examination

Managerial Accounting
Bassu Manufacturing Co. (BMC) manufactures several product of varying level of design and
models. It uses a single overhead recovery rate based on direct labour hours. The overheads
incurred by BMC in the half of the three years are as under:
Machine Operation expenses 10,12,500
Machine maintenance expenses 187,500
Salaries of technical staff 637,500
Wages and salaries of stores staff 262,500
On the basis of apportionment the overhead given above were assigned to actvities. During this
period, BMC introduced activity based cosing system and following significant activites were
identified and their FOH are given below :
Activities Cost Drivers Overheads (Rupees)
Receiving materials and components Number of Reciepts 540,750
Setup of machines for prodcution Number of setups 13,68,000
runs
Qulality inspections Number of Inspection 191,250
The consumption activities during the period under review are as under:
 Direct labour hours worked 40,000
 Direct Wage rate “Your roll number” per hour (For Example if your roll number
is 10 then Rate per labor will be Rs10, if your Roll number is 31 then Rs 31 per
hour labour and if your Roll number 112 then rate Will be Rs 112.
 Production set ups 2040
 Material and component consignments received from suppliers 1960
 Number of quality inspection carried out 1280
The data relating to two product manufactured by the BMC during the period are as under
Product P Product Q
Direct material cost (Rs) 6,000 4,000
Direct Labour hours 960 100
Direct material consignments received 48 50
Production runs 36 24
Number of qulaity inspection done Your Roll Your Roll #
#
Quantity produced units 15,000 5,000
Required:
I. Calculate product cost of P & Q based on existing system of single overhead recovery
rate.
II. Determine cost of P & Q using Activity Based Costing.

Question 2:
Omega company produce a product with following information given below
Selling Price Your Roll number + 20 % Margin on cost
Direct Material $15 p/unit
Direct Labour $10 p/unit
Variable Overhead $5 p/unit
Fixed Costs $7,500
Budgeted Output & Sales 1,000 units
Actual Output 1,000 units
Actual Sales 900
Marginal Costing Value of Opening Stock of 200 $6,000
units
Absorption Costing Value of Opening Stock of 200 $7,500
units

I. Calculate the profit for the period using absorption costing.

II. Calculate the profit for the period using marginal costing.
III. Reconcile the profit under (i) with that under (ii)