ACT202 Improvement/Make-up Assignment 30 Marks

The assignment question will be made available in Google Classroom on 12 pm, 12 May. All students who submit the tasks assigned
by 3pm, 12 May will be graded out of 100% of the available marks. The assignment will remain available in Google Classroom till 6pm,
16 May. After that, no submissions will be accepted. Students who submit their assignment after 3pm, 12 May but before 6pm, 16 May
will be graded out of 90% of the available marks.
Name ID Section 3
: : :
Question 1 5+ 5=10 Marks
Dhaka Company uses the weighted-average method in its process costing system. In April, the beginning inventory in the first
processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were:
Cost Percent Complete
Materials costs ................... Tk. 6,400 65%
Conversion costs ............... Tk. 9,500 75%

A total of 8,000 units were started in April and 8,200 units were transferred to the second processing department during the month.

The following costs were incurred in the first processing department during the month:

Materials costs ................... Tk. 56,000

Conversion costs ............... Tk. 99,200
The ending inventory was 85% complete with respect to materials and 70% complete with respect to conversion costs.

Calculate their equivalent units of product for December.

Ending work in process = (500+8000)- 8200=300 units

Equivalent units of product

No. of fully completed products = (Partially completed products left in the Ending working in process X Percentage of completion)

 Equivalent units of product with respect to materials= 8200 + (300 X 85%) = 8455 units

 Equivalent units of product with respect to conversion= 8200+ (300X 70%)= 8410 units

Calculate their cost per equivalent unit.

Cost per equivalent unit:
Cost ∈the begnningWIP +Cost added during
= Equivalent units of
product
 With respect to materials= (Taka 6400+Taka 56000) / 8455 units = Taka 7.38 per equivalent unit

 With respect to conversion = (Taka 9500 + Taka 99200) / 8410 units = Taka 12.93 per equivalent unit

Question 2 5 Marks
Dhaka Company, sells pens for Tk. 10. Variable expenses are Tk. 4 per pen. At the current volume of 100,000 pens sold per year the
company is just breaking even. Calculate their total fixed expense.

At Breakeven Point 
Fixed Expense (FE) = Contribution Margin (CM)
So,
FE = CM per unit X units sold
= (Selling price per unit - Variable Expense per unit) X units sold.
= (Taka 10 per pen – Taka 4 per pen) X 100,000 pens sold
= Taka 600,000/-
Question 3 5 Marks
Why is it necessary to specify a cost object before being able to distinguish between a direct cost and an indirect cost? Explain your
answer with an example. Limit your answer within 200 words.
Before distinguishing direct and indirect costs it is important to determine a cost object because both direct and indirect
cost depend on the cost object Firstly, to its economic importance to the company and secondly, to allocate cost types
to it. A cost object is anything that incurs cost and based on cost object, cost is divided into two main costs direct cost
and indirect cost. Direct costs are directly related to a cost object in an economical manner, they cannot be determined
without it. As well as direct costs, indirect costs are also closely depending on the cost object specification. They
cannot be economically traced, but are allocated in an organized manner. For Example: a very good representation of
how indirect cost can change depending on the cost object. For instance, plant’s depreciation can be directly traceable
to Toyota’s plan, but indirectly to the production of Highlander. So in that situation it is very important to specify a cost
object before being able to distinguish between direct cost and indirect cost.

Question 4 2 x 5 = 10 Marks
Identify whether the following statements are True or False. If True, explain why it is True. If False, explain why it is False. Limit your
explanation for each statement within 100 words.

Statement 1: Process costing is used in those situations where many different products or services are produced each period to
customer specifications.
This statement is false because process costing is used when a single product is produced continuously in large volumes each
product produced is identical to each other. Also, the customer specifications are not taken into account in case of process costing
system. Process costing Usually used for the product that are low value and it produced before an order has been placed.

Statement 2: Manufacturing overhead is an indirect cost with respect to units of product.

This statement is true because we know that manufacturing overhead is further broken down into three sections. Which are
 indirect material: Indirect materials are materials that are used in the production process but that are not directly traceable
to the product. Example: salt for making per packet biriyani.
 indirect labor: Indirect labor is the labor of those who are not directly involved in the production of the products.
Example: labor cost for packaging per packet biriyani.
 other overheads: Overhead cost are those cost that is not related directly on the production activity and are therefore
considered as indirect costs that have to be paid even if there is no production. Example, the utility bills for producing
biriyani

Statement 3: If the activity level increases, then one would expect the variable cost per unit to increase as well.
This statement is false because variable cost is a cost that remains fixed per unit varies in total. In other word, total variable cost is
directly proportional to the activity level. However variable cost per unit remains constant with a change in the activity level. For
example: if 1 Km bike riding is 15 Taka, then the total cost of riding 5 km bike(5X15=75Taka), similarly for 10 km it would be (15X
10= 150 taka). So total variable cost increase with an increase in activity level not in variable cost per unit.
Statement 4: When materials are purchased in a process costing system, a work in process account is debited with the cost of the
materials.
This statement is false because when raw materials are purchased, the raw material account is first debited cost. Then, when the
raw materials are used in the production, the cost of the portion of raw materials used is credited to the raw material account and
then debited to the work in process account.so, When materials are purchased in a process costing system, a raw material account
is debited with the cost of the materials purchased.

Statement 5: Period costs are found only in manufacturing companies, not in merchandising companies.
This statement is false because the difference between a manufacturing company and a merchandising company is that a
manufacturing company produces and sells the products, where as a merchandising company buys the product from some other
manufacturing company and sells it to the customer. Period costs are found in both manufacturing and merchandise companies.