The Professionals’ Academy Of Commerce

Pakistan’s Leading Accountancy Institute

Certificate in Accounting and Finance Stage Examinations
Mid-Term Examination Spring-2023 December 08, 2022
Section: B, REC, LS-B (Additional reading time - 15 minutes) 100 marks – 3 hours

Cost and Management Accounting

Instructions to examinees:
(i) Answer all NINE questions.
(ii) Answer in black pen only.
SECTION A
Q.1 Mars Manufacturing Limited (MML) factory consists of two manufacturing departments and one service
departments. The company applies FOH to production as follows:
MD-A: 70% of direct labor cost
MD-B: Rs. 40 per direct labor hour
Following information relates to the month of May 2022:
MD-A MD-B Maintenance
Direct materials (Rs.) 433,800 313,800 -
Direct labor cost (Rs.) 388,800 259,200 -
Direct labor hours 3,500 4,000 -
Number of employees 140 220 40
Floor space (Sq. ft.) 1,500 1,500 750
NBV of assets (Rs.) 250,000 250,000 100,000
Overheads for the month:
Rs.
Indirect labor (directly proportional to direct labor 217,400
cost)
Depreciation 43,200
Food expenses 45,000
Factory building expenses 54,000
Other overheads of Maintenance department 112,800
Maintenance department’s support is proportional to direct labor hours.
Required:
Calculate under/over applied overheads for each department for the month of May 2022. (10)
Q.2 Alpha and Beta are produced in Process-I in ratio of 2:1. Alpha is sold immediately but Beta is transferred
to Process-II where it is converted into a final product Beta Plus. Following information relates to two
processes for the month of June 2022:
Process I Process II
(units) (units)
Opening WIP 7,000 -
Normal loss 5% of output -
Abnormal loss 300 -
Closing WIP 3,600 2,500
During the month 12,200 units of Beta Plus were sold whereas opening and closing finished goods
inventories of Beta Plus were 1,500 units and 800 units respectively.
Required:
Calculate Input quantity of Process-I for the month of June 2022. (05)

Q.3 Junaid Shoes (JS) is engaged in manufacturing of standard size leather shoes used by labor in various
factories. During the year ended December 31, 2021 following costs were incurred:
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Rs.
Leather purchases (including 17% refundable sales tax) 1,404,000
Direct labor cost 950,000
Rent (50% factory, 30% marketing office, 20% admin office) 800,000
Salaries and benefits of marketing staff 325,000
Other manufacturing overheads 120,000
Other admin expenses 190,000
Packing material consumed in production 90,000
Depreciation of factory assets 250,000
Additional information:
(i) Leather inventory was valued at Rs. 150,000 and Rs. 210,000 at start and end of 2021 respectively.
(ii) Finished goods inventory is measured using weighted average costing method.
(iii) During the year 2021 2,000 pairs of leather shoes were produced whereas 1,830 pairs of leather shoes
were sold. As at January 1, 2021, 200 pairs of leather shoes were held in inventory valued at a total
cost of Rs. 284,000.
(iv) There was no work in process inventory at start or end of 2021.
Required:
Calculate total cost of leather shoes closing inventory as at December 31, 2021. (10)
Q.4 JK Enterprises produces a single product. For the month of August 2022, the books of account show the
following:
Rs.
Raw material purchases (400kgs) 500,000
Direct labour 120,000
Selling costs 100,000
Depreciation on plant and machinery 225,000
Distribution costs 160,000
Factory manager’s salary 300,000
Indirect labour 645,000
Indirect material consumed 780,000
Other production overheads 60,000
Other accounting costs 110,000
Other administration overheads 90,000
Other information are as under:
(i) 2.5 kgs of raw material is required to produce 1 unit of finished product. 150 units were produced
during the month.
(ii) There were 75 kgs of raw material worth Rs. 270,000, on 1 August 2022.
(iii) Work-in-progress at the start of the month amounted to Rs. 175,000, whereas that at the end of the
month amounted to Rs. 86,000.
(iv) JK uses FIFO to value its raw material inventory.
Required:
Calculate the cost of goods manufactured during August 2022. (09)
Q.5 Given below is information about the remuneration of three different employees for the month of May:
(a) Pay on an hourly basis at a rate of Rs. 500 per hour. Overtime is paid for any hours over and above
160 in a month at a premium of 40% of the basic rate. During the month Mr. A worked for 184
hours.
(b) Pay on a piece rate basis for the number of units produced. The rates are Rs. 10 per unit for the first
1,000 units in a month, Rs. 15 for the next 500 units and Rs. 20 for any units over 1,500. In the
month Mr. B produced 1,640 units. However 30 units did not pass quality inspection and were
rejected.
(c) Pay on an hourly basis at a rate of Rs. 160 per hour. Worker is also eligible for a monthly bonus
based upon the time saved on manufacture of products compared to the standard time for
manufacturing i.e. 1.8 hours per unit. This time saving is split equally between the employer and the
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employees. During the month Mr. C worked for 300 hours and produced 200 units. The bonus that he
earns is based upon his normal hourly rate of pay.
Required:
Calculate the gross wage for each of the employees. (09)
Q.6 Habib Limited (HL) produce two products, Vita and Zita. Both products are processed through two
production departments, P-01 and P-02. The following budgeted data relates to the production department:
P-01 P-02
Allocated and apportioned overheads Rs. 252,000 Rs. 360,000
Direct Labour Hours Per Unit in each department:
 Vita 3.00 4.00
 Zita 2.40 5.20
The budgeted production is 15,000 units of Vita and 13,000 units of Zita. Departmental overheads are
allocated between both products on the basis direct labor hours.
Required:
Calculate overhead absorption rate per unit for Vita and Zita. (07)

SECTION B
Q.7 Following data relates to activities in process 2 of Habib Industry for the month of June:
1) Opening work in progress:
Quantity 3,500 Kgs (40% complete)
Process 1 (i.e. Chemical X) cost Rs. 150,000
Chemical Y cost -
Conversion cost Rs. 75,000
2) Chemical X transferred in process 2 from process 1:
Quantity 80,000 Kgs
Total cost Rs. 1,600,000
3) Chemical Y was added to process 2 when it was 50% complete:
Quantity 40,000 Kgs
Total cost Rs. 1,200,000
4) Closing work in progress:
Quantity 2,700 Kgs (60% complete)
5) Rejection is identified when process is 30% complete. 2% of input is considered to be quite normal
rejection. Recovery value of defective units is Rs. 8 per Kg. Actual rejection during the month was
2,000 kgs.
6) Conversion cost incurred during the month amounts to Rs. 1,250,000.
Required:
Prepare equivalent production, per unit cost and statement of evaluation using FIFO method. (20)
Q.8 Sigma Garments (SG) is engaged in selling ready-made garments. These garments are processed through
three production departments. SG's production facility also has two service departments. Following
information relates to budgeted production overheads for the year ending December 31, 2019:
Rs. million
Depreciation (building) 40.00
Depreciation (P&M) 18.00
Indirect labor 54.00
Insurance (building) 22.00
Power 96.00
General lighting 14.00
Repairs (P&M) 36.00
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Other relevant budgeted information for 2019:

Cutting Stitching Finishing Maint. Canteen
Direct material [Rs. million] 94.00 102.00 50.00 - -
Direct labor [Rs. million] [Rs.
800 per hour] 45.00 32.00 24.00 - -
Indirect labor [Rs. million] 11.00 12.00 13.00 10.00 8.00
Area covered (sq. yards) 1500 1200 800 500 400
Cost of P&M [Rs. million] 240 360 120 - -
KWH consumption 10000 25000 10000 - -
Machine hours 24000 36000 12000 - -
Light points (no.) 20 20 15 5 10
Basis of OAR Labor - -
hours Machine hours Labor hours
Service departments provide support as follows:
Cutting Stitching Finishing Maint. Canteen
Maintenance 25% 45% 30% - -
Canteen 30% 30% 35% 5% -
Required:
a) Calculate OAR for year 2019 for each production department.
b) Calculate actual total overheads of SG for the year if, for the year ending December 31, 2019:

Cutting Stitching Finishing

Actual labor hours 51000 40000 31000
Actual machine hours 22000 34000 13200
(Over) / Under applied FOH [Rs. million] (4.30) 9.00 3.75
(16)
Q.9 Quality Products Limited (QPL) manufactures two products Alpha and Beta. Both the products are
produced in a joint process and afterwards each is processed further in separate finishing departments.
Following data relates to process 1 of QPL for the month of April:
Opening work in  3,000 units (40% complete)
process  Cost of opening work in process comprises of Direct
material Rs. 84,000 and Conversion Rs. 70,000.
Cost incurred  Direct material cost (20,000 units) Rs. 600,000
during April  Conversion cost Rs. 1,230,000
Closing work in  4,700 units (60% complete)
process
Loss  Losses are estimated when process is 30% complete
 Expected losses are 1% of input
 Recovery value of scrap units Rs. 10 per unit
Completed and  Alpha 12,000 units
transferred out  Beta 6,000 units
units  Joint costs are allocated on the basis of units produced
Required:
Prepare “Process 1 account” for the month of April using FIFO method. (14)

(The End)