Q. NO.

01 :

Lexus Company manufactured 30,000 food containers last year while selling 29,000 units for
$15 each. The actual production costs (on a per-unit basis) for the food container were as
follows:
Direct materials.............................. $4.50
Direct labor.................................... 0.75
Variable overhead.......................... 0.75
Fixed overhead...............................  3.25
Total unit cost................................ $9.25
Selling costs included a commission of $1.25 per unit sold and advertising of $55,000.
Administrative expenses, all fixed, totaled $40,000. There were no work-in-process
inventories. There was no beginning finished goods inventory.
Required: [06 marks]
(a) Prepare an absorption-costing income statement.
(b) Which of the two costing method will cause higher net income? Absorption or
Variable? State with proper calculation. Also show the amount by which incomes under
two methods would differ.

Q. NO. 02 :

Samsonite Leather Company is engaged in manufacturing school bags. During the first quarter
of 2019, considering lower sales as compare to last quarter of 2018, the director asked for
detailed accounts data to enquire about reasons behind decline in sales. In the core committee
meeting, accounts department presented the following information :

- Raw material used in the production had a cost of Rs. 450 per unit.
- Direct Labor was paid during the quarter @ Rs. 125/hr. Whereas, total working hours
during the quarter accounted for 630 hrs.
- Factory rent was paid @ Rs. 60,000 per month.
- Machinery and building were depreciated @ Rs. 90,000 and Rs. 100,000 per annum
respectively.
- Firm manufactured 4000 bags in first month, 6000 bags in second month and 5000 bags
in the last month of quarter.
- Inventory at the beginning of quarter was 570 bags and at the end of quarter was 750
bags.
- Each bag manufactured was sold at a price plus 25% mark-up.

Calculate:      
(a) In order to be in a state of making no profit no loss, how many bags must have been
sold during the first quarter.
(b) In order to earn profit of Rs. 10,50,000, do you think if firm sold the required quantity
as per the sales mentioned by accounts department during the first quarter of 2019?
(c) By how much do you think the firm should increase its sales (in units) in order to
increase existing profit by 25% ?

Q. NO. 03 : [06 marks]

The Installer Company produces the product which requires following expenditure to incur :

Production and sales volume (units) 15000

Selling price per unit $75
Page 1 of 2
Raw material usage (kg) per unit 2
Direct labor hours per unit 1
Machine hours per unit 5
No. of production runs per annum 20
No. of purchase orders per annum 40
No. of deliveries to relailers per annum 75

The price of raw material maintained constant throughout the year at $12 per kg. Similarly, the direct
labor cost for the whole workforce was $148 per hour. The annual overhead costs were as follows :

Machine set up cost $265500

Machine running cost $664000
Procurement cost $480000
Delivery cost $543200

Calculate the full cost per unit of the product using activity based costing.

---------- xxxxxxxxxxx -----------

Page 2 of 2