Q1.

The Nainoor Industries submits the following information on June 30, 1987

Sales for the year $ 250,000

Raw material inventory July 1, 1986 $ 13,000
Finished Goods inventory July 1, 1986 $ 58,000
Purchases $ 102,000
Purchase Return $ 2,000
Direct Labour $ 39,000
Power, Heat & Light $ 2,000
Indirect Material Consumed $ 4,000
Depreciation
Plant $ 3,500
Machinery $ 6,000
Tool Expenses $ 3,000
Indirect Labour $ 1,000
Fire Insurance $ 250
Miscellaneous Manufacturing Cost $ 500
Work In Process:-
July 1, 1986 $ 12,000
June 30, 1987 $ 16,000
Raw material inventory June 30, 1987 $ 19,000
Finished Goods inventory June 30, 1987 $ 56,500

Other Expenses for the year

Selling Expenses 15% of Sales
General Expenses 5% of Sales

Required : Prepare Income statement for the year ended June 30, 1987.

Cost of Goods Manufactured Statement

Raw Material (Opening) $ 13,000

Add: Net Purchases
Purchases $ 102,000
Less: Purchase Return $ (2,000) $ 100,000
Raw material avaiable to consume $ 113,000
Less: Raw material (Ending) $ (19,000)
Raw material consumed $ 94,000
Add: Direct Labour $ 39,000
Prime Cost $ 133,000
Add: Factory Overhead
Power, Heat and Light $ 2,000
Indirect Material Consumed $ 4,000
Depreciation Plant $ 3,500
Depreciation Machinery $ 6,000
Tools Expense $ 3,000
Indirect Labour $ 1,000
Fire Insurance $ 250
Miscellaneous Manufacturing Cost $ 500 $ 20,250
Manufacturing Cost $ 153,250
Add: Work in Process (Opening) $ 12,000
Total cost put in production $ 165,250
Less: Work in Process (Ending) $ (16,000)
Cost Of Goods Manufactured $ 149,250

Income Statement

Sales $ 250,000
Less: Cost of goods sold
Finished Goods (Opening) $ 58,000
Add: Cost Of Goods Manufactured $ 149,250
Cost of Goods Available for Sale $ 207,250
Less: Finished Goods (Ending) $ (56,500) $ (150,750)
Gross Profit $ 99,250
Less: Operating Expenses
Selling Expense $ 37,500
GeneralExpense $ 12,500 $ (50,000)
Net Income/(Loss) $ 49,250
Q2. The following data have been taken from the books of Saleem Manufacturing Ltd. For the year ended 1997-98

Inventories July, 1 June, 30

Raw Material Rs 16,000 Rs 18,000
Goods in process Rs 24,000 Rs 22,000
Finished Goods Rs 12,000 Rs 26,000

Data for the year

Sales Rs 480,000
Purchases (Raw Material) Rs 110,000
Purchase Discount Rs 2,000
Direct Labour Rs 90,000
Fctory Overhead Rs 98,000
Operating Expenses Rs 70,000

Required:

a) Statement of Cost of Goods Manufactured

b) Income statement
c) Closing Entries

Cost of Goods Manufactured Statement

Raw Material (Opening) $ 16,000

Add: Net Purchases
Purchases $ 110,000
Less: Purchase Discount $ (2,000) $ 108,000
Raw material avaiable to consume $ 124,000
Less: Raw material (Ending) $ (18,000)
Raw material consumed $ 106,000
Add: Direct Labour $ 90,000
Prime Cost $ 196,000
Add: Factory Overhead $98,000
Manufacturing Cost $ 294,000
Add: Work in Process (Opening) $ 24,000
Total cost put in production $ 318,000
Less: Work in Process (Ending) $ (22,000)
Cost Of Goods Manufactured $ 296,000

Income Statement

Sales $ 480,000
Less: Cost of goods sold
Finished Goods (Opening) $ 12,000
Add: Cost Of Goods Manufactured $ 296,000
Cost of Goods Available for Sale $ 308,000
Less: Finished Goods (Ending) $ (26,000) $ (282,000)
Gross Profit $ 198,000
Less: Operating Expenses $ (70,000)
Net Income/(Loss) $ 128,000
Q3. The cost accountant of Faizan Manufacturing Co. has prepared the following summary :-

Inventories at 1st Sep, 1990 Rs. Rs.

Raw Material 40,000
Work in process 12,000
Fuel 2,000
Factory Repair Parts 2,800
Finished Goods 14,000 70,800
Raw Material Purchases 58,000
Fuel Purchases 5,200
Direct Labour 83,100
Miscellaneous Factory Overhead 2,300
Repairs to Factory (Including Purchase of Parts) 4,200
Depreciation of plant 2,700
Superintendence 1,200
Transportation Out 1,100
Purchase Discount 800
Indirect Factory Labour 2000
231,400
Inventories at 30th Sep, 1990
Raw Material 36,000
Work in process 15,000
Fuel 3,400
Factory Repair Parts 2,600
Finished Goods 12,000 69,000
162,400

Required: A statement showing Cost of goods sold in proper form.

Cost of Goods Manufactured Statement

Raw Material (Opening) $ 40,000

Add: Net Purchases $ 58,000
Raw material avaiable to consume $ 98,000
Less: Raw material (Ending) $ (36,000)
Raw material consumed $ 62,000
Add: Direct Labour $ 83,100
Prime Cost $ 145,100
Add: Factory Overhead
Fuel (Opening) $ 2,000
Add: Fuel Purchased $ 5,200
Fuel Available to Use $ 7,200
Less: Fuel (Ending) $ (3,400)
Fuel Used $ 3,800
Miscellaneous Factory Overhead $ 2,300
Factory Repair Parts (Opening) $ 2,800
Add: Factory Repair Parts Purchased $ 4,200
Factory Repair Parts available to use $ 7,000
Less: Factory Repair Parts (Ending) $ (2,600)
Factory Repair Parts used $ 4,400
Depreciation Plant $ 2,700
Superintendence $ 1,200
Indirect Labour $ 2,000 $ 16,400
Manufacturing Cost $ 161,500
Add: Work in Process (Opening) $ 12,000
Total cost put in production $ 173,500
Less: Work in Process (Ending) $ (15,000)
Cost Of Goods Manufactured $ 158,500

Cost Of Goods Sold Statement

Finished Goods (Opening) $ 14,000

Add: Cost Of Goods Manufactured $ 158,500
Cost of Goods Available for Sale $ 172,500
Less: Finished Goods (Ending) $ (12,000)
Cost Of Goods Sold $ 160,500
2.16 The Shim Refrigerator Co. shows the following records for the period ended December 31, 19A

Material Purchased $ 550,000

Inventories, Jan. 1, 19A
Materials $ 20,000
Work in process $ 200,000
Finished goods 1,000 Units
Direct labour $ 1,050,000
Factory overhead (40% variable) $ 750,000
Selling Expenses (all fixed) $ 500,750
General and administrative (all fixed) $ 385,230
Sales (7,500 units at $535)
Inventories, Dec.31, 19A
Materials $ 50,000
Work in process $ 100,000
Finished goods 1,000 units

Assume that the finished goods inventories are valued at the current unit manufacturing cost.
1 Prepare a schedule of cost of goods manufactured.
2 Find the number of units manufactured and unit manufacturing cost.
3 Prepare income statement for the period.
4 Find the total variable and fixed costs.

(a) Cost of Goods Manufactured Statement

Raw material (Opening) $20,000

Add: Net Purchases $550,000
Raw material avaiable to consume $570,000
Less: Raw material (Ending) ($50,000)
Raw material consumed $520,000
Add: Direct Labour $1,050,000
Prime Cost $1,570,000
Add: Factory Overhead $750,000
Manufacturing Cost $2,320,000
Add: Work in Process (Opening) $200,000
Total cost put in production $2,520,000
Less: Work in Process (Ending) ($100,000)
Cost Of Goods Manufactured $2,420,000

(b) Finished goods inventory & Per unit cost

Sales 7,500
Add: Finished Goods (Ending) 1,000
Total Inventory Avaiable for sale 8,500
Less: Finished Goods (Opening) (1,000)
Units Manufactured 7,500

Per Unit Cost = Cost Of Goods Manufactured

Units Manufactured

Per Unit Cost = $2,420,000

7500

Per Unit Cost = $322.67

(c) Income Statement

Sales (7500 x $535) $ 4,012,500.00

Less: Cost of goods sold
Finished Goods (Opening) (1,000 x 322.67) $ 322,667
Add: Cost Of Goods Manufactured $ 2,420,000
Cost of Goods Available for Sale $ 2,742,667
Less: Finished Goods (Ending) (1,000 x 322.67) $ (322,667) $ (2,420,000)
Gross Profit $ 1,592,500
Less: Operating Expenses
Selling Expense $ 500,750
General and Administrative Expense $ 385,230 $ (885,980)
Net Income/(Loss) $ 706,520
2.17 The Montreal Manufacturing Company incurred the following cost for the month of june:

Materials used:
Direct materials $ 6,600
Indirect materials $ 1,200
Payroll Costs Incurred:
Direct labour $ 6,000
Indirect labour $ 1,700
Salaries
Production $ 2,400
Administration $ 5,100
Sales $ 3,200
Other Costs:
Building Rent (Production uses one-half of the building
$ 1,400
space)
Rent for molding machine (*per month, plus $0.50 per unit $ 400
produced)
Royalty paid for the use of production patents
(calculation based on units produced, $0.80 per unit)
Indirect Miscellaneous costs:
Production $ 2,700
Sales and administration $ 1,800

The beginning work in process inventory was $6,000; the ending work in process inventory was $5,000. Assume that 1,000 units
were produced during the month.
1 Prepare a statement of cost of goods manufactured for the month.
2 Compute the cost to mnufacture one unit of product.

(1) Cost of Goods Manufactured Statement

Raw material consumed $6,600

Add: Direct Labour $6,000
Prime Cost $12,600
Add: Factory Overhead
Indirect Material $ 1,200
Indirect Labour $ 1,700
Production Salaries $ 2,400
Building Rent ($1,400/2) $ 700
Rent for molding machine [$400 + (1000*$0.50)] $ 900
Royalty Paid (1000*$0.80) $ 800
Production Misc. cost $ 2,700 $10,400
Manufacturing Cost $23,000
Add: Work in Process (Opening) $6,000
Total cost put in production $29,000
Less: Work in Process (Ending) ($5,000)
Cost Of Goods Manufactured $24,000

(2) Per unit cost of Goods Manufactured

Per Unit Cost = Cost Of Goods Manufactured

Units Manufactured

Per Unit Cost = $24,000

1000

Per Unit Cost = $24.00

2.18 Heaven Consumer Products, Inc., has the following sales and cost data for 19A:

Selling and administrative expenses $ 25,000

Direct material purchased $ 12,000
Direct labour $ 18,000
Sales $ 160,000
Direct Material Inventory, Beginning $ 3,000
Direct Material Inventory, Ending $ 2,000
Work In process, Beginning $ 14,000
Work In process, Ending $ 13,500
Factory Depreciation $ 27,000
Indirect Material $ 4,000
Factory utilities $ 2,000
Indirect labour $ 5,500
Maintainance $ 2,000
Insurance $ 1,000
Fininshed goods inventory, beginning $ 6,000
Fininshed goods inventory, ending $ 4,000

1 Prepare a schedule of cost of goods manufactured for 19A

2 Prepare income statement for 19A
Assume that the company mamufactured 5,000 units during the year. What was the unit cost of direct material? What was the unit
3
cost of factory depreciation? (Assume that the depreciation is computed by the straight-line method.)
4 Repeat the computation done in part 3 for 10,000 units of output. How would the total costs of direct materials and factory
depreciation be affected.

(1) Cost of Goods Manufactured Statement (19A)

Raw Material (Opening) $ 3,000.00

Add: Net Purchases $ 12,000.00
Raw material avaiable to consume $ 15,000.00
Less: Raw material (Ending) $ (2,000.00)
Raw material consumed $ 13,000.00
Add: Direct Labour $ 18,000.00
Prime Cost $31,000
Add: Factory Overhead
Factory Depreciation $ 27,000
Indirect Material $ 4,000
Factory Utilities $ 2,000
Indirect Labour $ 5,500
Maintainance $ 2,000
Insurance $ 1,000 $41,500
Manufacturing Cost $ 72,500
Add: Work in Process (Opening) $ 14,000
Total cost put in production $ 86,500
Less: Work in Process (Ending) $ (13,500)
Cost Of Goods Manufactured $ 73,000

(2) Income Statement

Sales $ 160,000.00
Less: Cost of goods sold
Finished Goods (Opening) $ 6,000
Add: Cost Of Goods Manufactured $ 73,000
Cost of Goods Available for Sale $ 79,000
Less: Finished Goods (Ending) $ (4,000) $ (75,000)
Gross Profit $ 85,000
Less: Operating Expenses
Selling and Administrative Expense $ (25,000)
Net Income/(Loss) $ 60,000
 (3) Per unit cost on 5,000 Units Manufactured

a) Per Unit Direct Material Cost = Direct Material Consumed

Units Manufactured

Per Unit Direct Material Cost = $13,000

5000

Per Unit Direct Material Cost = $2.60

b) Per Unit Factory Depreciation Cost = Factory Depreciation

Units Manufactured

Per Unit Factory Depreciation Cost= $27,000

5000

Per Unit Factory Depreciation Cost = $5.40

(4) Per unit cost on 10,000 Units Manufactured

a) Per Unit Direct Material Cost = Direct Material Consumed (13000/5000*10000)

Units Manufactured

Per Unit Direct Material Cost = $26,000

10000

Per Unit Direct Material Cost = $2.60

b) Per Unit Factory Depreciation Cost = Factory Depreciation

Units Manufactured

Per Unit Factory Depreciation Cost= $27,000

10000

Per Unit Factory Depreciation Cost = $2.70

BONUS : In April stain hard Corp. sold 50 air Conditioner for $200 each, cost include;
Direct Material $50 per unit
Direct Labour $30 per unit
Factory overhead @ 100% Direct labour cost

Effective May 1st material cost decrease 5% per unit, Direct labour cost increases 20% per unit. Assume that expected May sales
voulme is 50 unit the same as for April.

Required:
Calculate sales price per unit that will produce the same ratio of Gross Profit, assuming no change in the rate of factory overhead in
relation to direct labour cost.

April May
Sales Price $ 200.00 100% $ 217.27
Less :Cost
Direct Material $ (50.00) $ (47.50)
Direct Labour $ (30.00) $ (36.00)
Factory Overhead (100% of D.L) $ (30.00) $ (110.00) -55% $ (36.00) $ (119.50)
$ 90.00 45% $ 97.77
Q#1 Abbot corporation prodcues special products to consumer specification and uses job order cost system. The
following data related to its opertion for the month of December, 2008.

a. Purchase raw material on account of $42,000

b. Material issued to factory $33,000 of which $3,000 was used indirectly
c. Labour used direct $50,000 indirect $5,000
d. Factory overhead cost incurred $40,000
e. Factory overhead cost is applied at 100% of direct labour cost
f. Jobs were completed to the extent of 90%
g. Goods sold on account $170,000
h. Finished goods inventory valued at $10,000

Required: Record the above transactions in general journal

Job Order

S.no Particular Debit Credit

1 Raw Material $ 42,000
A/c Payable $ 42,000
Purchase raw material on account
2 Work in process - Material $ 30,000
Raw Material $ 30,000
Direct Material issued to factory
3 F.O.H Control - Material $ 3,000
Raw Material $ 3,000
Indirect Material issued to factory
4 Work in process - Labour $ 50,000
Salaries Payable $ 50,000
Direct Labour used
5 F.O.H Control - Labour $ 5,000
Salaries Payable $ 5,000
Indirect Labour used
6 F.O.H Control $ 40,000
A/c Payable $ 40,000
Factory overhead cost incurred
7 Work in process - F.O.H (100 % of D.L) $ 50,000
Applied F.O.H $ 50,000
Factory overhead cost is applied
8 Finished Goods ($30,000+$50,000+$50,000=$130000*90/100) $ 117,000
Work In process $ 117,000
Jobs were completed
9 A/c Receivable $ 170,000
Sales $ 170,000
Goods sold on account
10 Cost of Goods Sold ($117,000-$10,000) $ 107,000
Finished Goods $ 107,000
Record Cost of Goods Sold
11 F.O.H Applied $ 50,000
Over Applied F.O.H $ 2,000
F.O.H Control $ 48,000
Record Over applied overhead and close F.O.H Control and F.O.H Applied
12 Over Applied F.O.H $ 2,000
Cost of Goods Sold $ 2,000
To close Over applied F.O.H in Cost of Goods Sold
Q#2 Johnson Company uses a job order costing accounting system. the following information was provided
for the month of March.

a. Purchase of direct material during the month amounted to $59,700 on account

b. Material requisition issued by the Production department during the month total to $56,200
c. Time cards of direct worker show 2000 hours worked on various jobs during the month for total direct
labour cost of $30,000
d. Direct workers were paid to $26,300 in March
e. Actual overhead cost for the month amounted to $34,900
f. Overhead is applied to the job at the rate of $18 per direct labour hour
g. Jobs with accumulated cost of $116,000 were completed during the month
h. On March 31st finished goods inventory was valued at $22,000
i. During March finished goods inventory was sold for $128,000 on account

Required: Prepare General Journal Entries For Each Of The Above Transactions

Job Order

S.no Particular Debit Credit

1 Raw Material $ 59,700
A/c Payable $ 59,700
Purchase raw material on account
2 Work in process - Material $ 56,200
Raw Material $ 56,200
Direct Material issued to factory
3 Work in process - Labour $ 30,000
Salaries Payable $ 30,000
Direct Labour used
4 Salaries Payable $ 26,300
Cash $ 26,300
Paid Direct labour wages
5 F.O.H Control $ 34,900
A/c Payable $ 34,900
Factory overhead cost incurred
6 Work in process - F.O.H (2000 Hr x $18) $ 36,000
Applied F.O.H $ 36,000
Factory overhead cost is applied
7 Finished Goods $ 116,000
Work In process $ 116,000
Jobs were completed
8 A/c Receivable $ 128,000
Sales $ 128,000
Goods sold on account
9 Cost of Goods Sold ($116,000 - $22,000) $ 94,000
Finished Goods $ 94,000
Record Cost of Goods Sold
10 F.O.H Applied $ 36,000
Over Applied F.O.H $ 1,100
F.O.H Control $ 34,900
Record Over applied overhead and close F.O.H Control and F.O.H Applied
11 Over Applied F.O.H $ 1,100
Cost of Goods Sold $ 1,100
Adjust Over applied F.O.H in Cost of Goods Sold
Q#3 The Following Data Relates To M/s Michael Company For The Month Of September 2008 Who Maintains Job Order Costing
System. You Are Asked To Pass Necessary Journal Entries To Record The Information Summarised Below.

a. Material purchased on account $120,000

b. Material requisitioned and factory labour used
Material Factory- Labour
Job No.501 $ 13,000 $ 19,000
Job No.502 $ 9,000 $ 15,520
Job No.503 $ 22,400 $ 14,080
Job No.504 $ 17,600 $ 20,800
Job No.505 $ 14,000 $ 7,200
Job No.506 $ 7,000 $ 3,600
For General factory use $ 3,800 $ 7,400

c. Factory overhead cost incurred on account $68,800

d. Depreciation of machinery $10,400
e. The factory overhead rate is 110% of direct labour cost
f. Job completed: 501-503 504 and 506
g. Job number 501-503 and 504 were shipped and customers were billed for $84,000, 85,000 and 100,000.

Job Order

F.O.H
Job No. Material Labour Total
(110% of D.L)
Job No.501 $ 13,000 $ 19,000 $ 20,900 $ 52,900
Job No.502 $ 9,000 $ 15,520 $ 17,072 $ 41,592
Job No.503 $ 22,400 $ 14,080 $ 15,488 $ 51,968
Job No.504 $ 17,600 $ 20,800 $ 22,880 $ 61,280
Job No.505 $ 14,000 $ 7,200 $ 7,920 $ 29,120
Job No.506 $ 7,000 $ 3,600 $ 3,960 $ 14,560
Total $ 83,000 $ 80,200 $ 88,220 $ 251,420

S.No Particular Debit Credit

1 Raw Material $ 120,000
A/c Payable $ 120,000
Purchase raw material on account
2 Work in process - Material $ 83,000
Raw Material $ 83,000
Direct Material issued to factory
3 F.O.H Control - Material $ 3,800
Raw Material $ 3,800
Indirect Material issued to factory
4 Work in process - Labour $ 80,200
Salaries Payable $ 80,200
Direct Labour used
5 F.O.H Control - Labour $ 7,400
Salaries Payable $ 7,400
Indirect Labour used
6 F.O.H Control $ 68,800
A/c Payable $ 68,800
Factory overhead cost incurred
7 F.O.H Control $ 10,400
Allowance for Depreciation $ 10,400
Record Depreciation of Machine
8 Work in process - F.O.H (110 % of D.L) $ 88,220
Applied F.O.H $ 88,220
Factory overhead cost is applied
9 Finished Goods (Job No. 501-503-504-506) $ 180,708
Work In process $ 180,708
Jobs were completed
10 A/c Receivable $ 269,000
Sales (Job No. 501-503-504) $ 269,000
Goods sold on account
11 Cost of Goods Sold (Job No. 501-503-504) $ 166,148
Finished Goods $ 166,148
Record Cost of Goods Sold
12 F.O.H Applied $ 88,220
Under Applied F.O.H $ 2,180
F.O.H Control $ 90,400
Record Over applied overhead and close F.O.H Control and F.O.H Applied
13 Cost of Goods Sold $ 2,180
Under Applied F.O.H $ 2,180
To close Under applied F.O.H in Cost of Goods Sold
Q#4 Hogle Corporation Is A Manufacturer That Uses Job Order Costing. On January 1st The Beginning Of Its Fiscal Year The Company's Inventory Balances Were As
Follows

Raw material $ 20,000

Work-in-process $ 15,000
Finished goods $ 30,000

The company applies overhead cost to the job on the basis of machine hours worked. For the current year the company estimated that it would work 75000 machine-hours
and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a. Raw material were purchased on account $410,000

b. Raw material were requisitioned for use in production, $380,000 ($360,000 direct materials and $20,000 indirect materials)
c. The following cost were accrued for employee services: direct labour $75,000, indirect labour $110,000, sales Commission $90,000 administrator salaries $200,000.
d. Sales travel cost were $17,000
e. Utility cost in the factory were $43,000
f. Advertising cost $180,000
g. Depreciation was recorded for the year $350,000 (80% relates to the factory operation and 20% relates to selling and administrative activities)
h. Insurance expired during the year $10,000 (70% relates to factory operations and the remaining 30% relates to selling and administrative activities)
i. Manufacturing overhead was applied to production. Due to greater than expected demand for its product the company work 80000 machine Hours during the year.
j. Goods costing $900,000 to manufacturer according to their jobs cost sheets were completed during the year.
k. Goods were sold on account to customer during the year for a total of $1,500,000. The goods cost $870,000 to manufacture according to their job Cost sheet.

Required: Prepare journal entries to record the preceeding transactions.

Job Order

S.no Particular Debit Credit

1 Raw Material $ 410,000
A/c Payable $ 410,000
Purchase raw material on account
2 Work in process - Material $ 360,000
Raw Material $ 360,000
Direct Material issued to factory
3 F.O.H Control - Material $ 20,000
Raw Material $ 20,000
Indirect Material issued to factory
4 Work in process - Labour $ 75,000
Salaries Payable $ 75,000
Direct Labour used
5 F.O.H Control - Labour $ 110,000
Salaries Payable $ 110,000
Indirect Labour used
6 Sales Commission Expense $ 90,000
Admin Salaries Expense $ 200,000
Salaries Payable $ 290,000
Sales Commission & Admin Salaries Payable
7 Sales Travel Expense $ 17,000
A/c Payable $ 17,000
Sales travel cost
8 F.O.H Control $ 43,000
A/c Payable $ 43,000
Utilities cost incurred
9 Advertisement Expense $ 180,000
A/c Payable $ 180,000
Advertisement Cost
10 F.O.H Control ($350,000 x 80%) $ 280,000
Depreciation Expense ($350,000 x 20%) $ 70,000
Allowance for Depreciation $ 350,000
Depreciation Expense (80% Factory and 20% Selling & Administrative)
11 F.O.H Control ($10,000 x 70%) $ 7,000
Insurance Expense ($10,000 x 30%) $ 3,000
Prepaid Insurance $ 10,000
Insurance Expense (70% Factory and 30% Selling & Administrative)
12 Work in process - F.O.H ($450,000/75,000*80000) $ 480,000
Applied F.O.H $ 480,000
Factory overhead cost is applied
13 Finished Goods $ 900,000
Work In process $ 900,000
Jobs were completed
14 A/c Receivable $ 1,500,000
Sales $ 1,500,000
Goods sold on account
15 Cost of Goods Sold $ 870,000
Finished Goods $ 870,000
Record Cost of Goods Sold
16 F.O.H Applied $ 480,000
Over Applied F.O.H $ 20,000
F.O.H Control $ 460,000
Record Over applied overhead and close F.O.H Control and F.O.H Applied
17 Over Applied F.O.H $ 20,000
Cost of Goods Sold $ 20,000
To close Over applied F.O.H in Cost of Goods Sold
10.1 The following information relates to Henry company:

Units required per year 30000

Cost of placing an order $ 400
Unit carrying cost per year $ 600

Assuming that the units will be required evenly throughout the year, what is the economic order quantity?

Cost Volume Profit Relationship

a) Economic Order Quantity:

2 x Actual Demand x Ordering Cost

Carrying Cost Per Unit

Annual Demand 30,000

Ordering Cost $ 400
Carrying Cost $ 600

EOQ = 2 x 30,000 x 400

600

EOQ = 200

Actual Demand
b) No. Of Order Per Year =
Economic Order Quantity

30000
No. Of Order Per Year =
200

No. Of Order Per Year = 150

10.4 The Rohney company is a restaurant supplier which sells a number of products to various restaurant in the area. One of
their products is a special meat cutter with a disposable blade.
The blades are sold in packages of 12 blade for $20 per package. After a number of years, it has been determined that the
demand for the replacement blades is at a constant rate of 2,000 packages for month. The packages cost the rohney
company $10 each from the manufacturer and requires a three-day lead time from the date of order to date of delivery.
The ordering cost is $1.20 per order and the carrying cost is 10% per annum of packaging cost.

Calculate:
a) The economic order quantity.
b) The number of orders needed per year.

Cost Volume Profit Relationship

a) Economic Order Quantity:

2 x Actual Demand x Ordering Cost

Carrying Cost Per Unit

Annual Demand (2000*12) 24,000

Ordering Cost $ 1
Carrying Cost $ 1

EOQ = 2 x 24,000 x 1
1

EOQ = 240

Actual Demand
b) No. Of Order Per Year =
Economic Order Quantity

24000
No. Of Order Per Year =
240

No. Of Order Per Year = 100

10.5 The Orphane company buys raw material from an outside supplier at $40 per unit; total annual needs are 6,400 units.
The material is used evenly throughout the year. Order costs are $100 per order and carrying cost for the year are $8
per unit in stock. The firm carries a safety stock of 50 units, has a lead time of one week. And works 50 weeks per year.
Determine the economic order quantity (EOQ) and the reorder point.

10.5 Cost Volume Profit Relationship

a) Economic Order Quantity:

2 x Actual Demand x Ordering Cost

Carrying Cost Per Unit

Annual Demand 6,400

Ordering Cost $ 100
Carrying Cost $ 8
Average Usage (6400/50) 128
Lead time 1
Safety Stock 50

EOQ = 2 x 6,400 x 100

8

EOQ = 400

Actual Demand
b) No. Of Order Per Year =
Economic Order Quantity

6400
No. Of Order Per Year =
400

No. Of Order Per Year = 16

c) Re order Point = Lead time x Avg usage + Safety stock

Reorder Point = 1x 128 +50

Reorder Point = 178

10.6 The purchasing agent responsible for ordering cotton shirts for Ace retail store has come up with the following
information:

Maximum daily usage 100 Packages

Average daily usage 80 Packages
Lead time 9 Days
Economic order quantity 3,500 Packages

a) Compute the safety stock.

b) Calculate the reorder point.

Cost Volume Profit Relationship

Maximum Usage 100

Average Usage 80
Lead time 9

a) Safety Stock = (Max usage - Avg usage) x Lead time

Safety Stock = ( 100 - 80 ) x9

Safety Stock = 180

b) Re order Point = Lead time x Avg usage + Safety stock

Reorder Point = 9x 80 +180

Reorder Point = 900

10.7 The Bolger company has obtained the following costs and other data pertaining to one of its materials:

Working days per year 250

Average use per day 500 Units
Maximum use per day 600 Units
Lead time 2 Days
Cost of placing one order $36
Carrying Cost per unit per year $1

a) Calculate the economic order quantity.

b) Determine the safety stock.
c) Compute the reorder point.

Cost Volume Profit Relationship

a) Economic Order Quantity:

2 x Actual Demand x Ordering Cost

Carrying Cost Per Unit

Average use per Day 500

Working days per year 250
Annual Demand (500*200) 125,000
Ordering Cost $ 36
Carrying Cost $ 1
Lead time 2
Maximum Usage Per Day 600

EOQ = 2 x 125,000 x 36
1

EOQ = 3000

b) Safety Stock = (Max usage - Avg usage) x Lead time

Safety Stock = ( 600 - 500 ) x2

Safety Stock = 200

c) Re order Point = Lead time x Avg usage + Safety stock

Reorder Point = 2x 500 +200

Reorder Point = 1200

10.8 Oakman Sporting goods store buy baseball @ $25 per dozen from its wholeseller. He will sell 35,000 dozen baseball evenly through the year. The
ordering Cost is $10 and carrying cost per year unit is $3.5 .

Calculate:
a) The economic order quantity.
b) The number of orders needed per year.
c) Total Inventory Cost

10.8 Cost Volume Profit Relationship

a) Economic Order Quantity:

2 x Actual Demand x Ordering Cost

Carrying Cost Per Unit

Annual Demand 35,000

Ordering Cost $ 10
Carrying Cost $ 3.5

EOQ = 2 x 35,000 x 10
3.5

EOQ = 447

Actual Demand
b) No. Of Order Per Year =
Economic Order Quantity

35000
No. Of Order Per Year =
447

No. Of Order Per Year = 78

c) Total Inventory Cost = Carrying cost per unit x EOQ + Ordering cost per order x No. of order per year
2

Total Inventory Cost = 3.5 x 447 + 10 x 78

2
Total Inventory Cost = 1565.25
 BUDGETING

Exercise 9-1 SCHEDULE OF EXPECTED CASH COLLECTION

Peak sales for Midwest Products Inc., pccur in August. The company's sales budget for the third quarter showing these Peak sales is given below:

July August September Total

Budgeted Sales $ 600,000 $ 900,000 $ 500,000 $ 2,000,000

From past experience, the company has learned that 20% of months sale are collected in the month of sales, that another 70% is collected in the month following sales,
and that their remaining 10% is collected in the second month following sale.Bad debts are negligible and can be ignored. May sales total $430,000 June sales total
$540,000.

Required:
1 Prepare schedule of expected cash collection from sales by month and in total, for the third quarter.

2 Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the account receivables as on of that date.

SCHEDULE OF EXPECTED CASH COLLECTION

Sales (Month) Amounts

May $ 430,000
June $ 540,000
July $ 600,000
August $ 900,000
September $ 500,000

July August September Total

a) 20% of sales in same month $ 120,000 $ 180,000 $ 100,000 $ 400,000
70% of sales in one month $ 378,000 $ 420,000 $ 630,000 $ 1,428,000
10% of sales in two month $ 43,000 $ 54,000 $ 60,000 $ 157,000
Expected cash Inflow $ 541,000 $ 654,000 $ 790,000 $ 1,985,000

b) General Ledger of Account Receivable

Particular Debit Credit Balance
Opening Balance $ 970,000 $ 970,000
Sales In July $ 600,000 $ 1,570,000
Collection In july 541,000.00 $ 1,029,000
Sales In Aug $ 900,000 $ 1,929,000
Collection In Aug 654,000.00 $ 1,275,000
Sales In Sep $ 500,000 $ 1,775,000
Collection In Sep 790,000.00 $ 985,000
Total $ 2,970,000 1,985,000.00 $ 985,000

Balance as of 30 Sep $ 985,000

Exercise 9-2 PRODUCTION BUDGET

Crystal Telecom has budgeted the sales of its innovative mobile phone over the next four months as follow:

Sales in Units
July 30,000
August 45,000
September 60,000
October 50,000

The company is now in the process of preparing a production budget for a third quarter. Past experience has shown that end of month inventories of finished goods
must equal 10% of the next month sales. The inventory at the end of June was 3,000 units.

Required
1 Prepare a production budget for the third quarter showing the number of units to be produced each month and for the quarter in total.

MATERIAL PURCHASE BUDGET

Sales (Month) Units

July 30,000
August 45,000
September 60,000
October 50,000

Ending Stock June 3,000

July August September Total

a) Sales $ 30,000 $ 45,000 $ 60,000 $ 135,000
Ending Stock (10% of next month sale) $ 4,500 $ 6,000 $ 5,000 $ 15,500
Total Stock In hand $ 34,500 $ 51,000 $ 65,000 $ 150,500
Opening Stock $ (3,000) $ (4,500) $ (6,000) $ (13,500)
Units Produced $ 31,500 $ 46,500 $ 59,000 $ 137,000
 Exercise 9-3 MATERIAL PURCHASE BUDGET

Micro product info solution has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $2 each and are purchased from an
Overseas supplier. Micro products, Inc., has prepared a production budget for the calculator by quarters for Year 2 and for the first quarter of Year 3, as shown :

Year 2 Year 3
First Second Third Fourth First
Budgeted production,
In calculators 60,000 90,000 150,000 100,000 80,000

The chips used in production of calculator is sometimes hard to get, so it is necessary to carry large inventory as precaution against stockouts. For this reason, the
inventory of chips at the end of a quarter must be equal to 20% of the following quarters production needs. Some 36,000 chips will be on hand to start the first quarter
of Year 2.

Requied:
1 Prepare a material purchase budget for chips by quarter and in total for Year 2. At the bottom of your budget, show the dollar amount of purchase for each quarter
and for the year in total.

MATERIAL PURCHASE BUDGET

Year 2 Year 3
First Second Third Fourth First
Budgeted production,
In calculators 60,000 90,000 150,000 100,000 80,000

Opening Stock (in Chip) 36,000

Chip Required in 1 calculator 3

First Second Third Fourth

a) Prodcuction (In Chips) 180,000 270,000 450,000 300,000
Ending Stock (20% of Next Quarter) 54,000 90,000 60,000 48,000
Total Stock In hand 234,000 360,000 510,000 348,000
Opening Stock (36,000) (54,000) (90,000) (60,000)
Units Purchased 198,000 306,000 420,000 288,000

Per unit cost of Chips $ 2.00 $ 2.00 $ 2.00 $ 2.00

Total cost of Chips $ 396,000 $ 612,000 $ 840,000 $ 576,000

Exercise 9-4 DIRECT LABOUR BUDGET

The production department of the riverside plant of Junnen Corporation has submitted the following forecast of units to be produced at the plant for each quarter of
the upcoming fiscal year. The plant produces high-end outdoor Barbecue grills.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Units to be produced 5,000 4,400 4,500 4,900

Each unit require point 0.40 direct labour hour and direct labour hour worker are paid $11 for per hour.

Reuqired:
1 Construct the company's direct labour budget for the upcoming fiscal year, assuming that the direct labour force is adjusted each quarter to match the number of
hours required to produce the forecasted number of units produced.

2
Construct the company's direct labour budget for the upcoming physical year, assuming that the direct labour force is not adjusted each quarter. Instead, assume that
the company direct labour force consists of permanent employees who are guaranteed to be paid for at least 1,800 hours of work each quarter. If the number of
required labour hours is less than this number the worker are paid for 1,800 hours anyway. Any hours worked in excess of 1,800 hours in a quarter are paid at the rate
of 1.5 times the normal hourly rate for direct labour.

DIRECT LABOUR BUDGET

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Units to be produced 5,000 4,400 4,500 4,900

Hours Required per unit 0.40

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

a) Units to be Produced 5,000 4,400 4,500 4,900
Hours Required (0.40 Hr / Units) 2,000 1,760 1,800 1,960
Rate per Hour $ 11 $ 11 $ 11 $ 11
Amount of D.L Budget $ 22,000 $ 19,360 $ 19,800 $ 21,560

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

b) Hours Required (0.40 Hr / Units) 2,000 1,760 1,800 1,960
Regular hour 1,800 1,800 1,800 1,800
Overtime Hour 200 - - 160

Regular Hour Pmt @ $11 $ 19,800 $ 19,800 $ 19,800 $ 19,800

Overtime Pmt @ $11 * 1.5 $ 3,300 $ - $ - $ 2,640
Total D.L Budget $ 23,100 $ 19,800 $ 19,800 $ 22,440
 Exercise 9-5 MANUFACTURING OVERHEAD BUDGET

The Direct labour budget of krispin Corporation for the upcoming fiscal year contains the following detils concerning budgeted direct labour-hours

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Budgeted direct labour-hours 5,000 4,800 5,200 5,400

The company's variable manufacturing overhead rate is $1.75 per direct labour hour and the company's fixed manufacturing overhead is $35,000 per
quarter. The only non cash items included in the fixed manufacturing overhead is depreciation which is $15,000 per quarter.

Required:
1 Construct the company's manufacturing overhead budget for the upcoming fiscal year

2 Compute the companies manufacturing overhead rate including both variable and fixed manufacturing overhead for the upcoming fiscal year. Round of
to the nearest whole cent.

MANUFACTURING OVERHEAD BUDGET

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Budgeted direct labour-hours 5,000 4,800 5,200 5,400

Variable Manufacturing Overhead rate$ 1.75

a) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Variable Manufacturing Overhead Cost $ 8,750 $ 8,400 $ 9,100 $ 9,450 $ 35,700
Fixed Manufacturing Overhead Cost $ 35,000 $ 35,000 $ 35,000 $ 35,000 $ 140,000
Total Manufcaturing Overhead $ 43,750 $ 43,400 $ 44,100 $ 44,450 $ 175,700
Less : Depreciation Expense $ (15,000) $ (15,000) $ (15,000) $ (15,000) $ (60,000)
Cash disbursement for Overhead $ 28,750 $ 28,400 $ 29,100 $ 29,450 $ 115,700

b) Manufacturing overhead rate = Total Manufcaturing Overhead

Total Budgeted direct labour-hours

Manufacturing overhead rate = $ 175,700.00

20,400

Manufacturing overhead rate = $ 8.61

Exercise 9-6 SELLING AND ADMINISTRATIVE BUDGET

The budgeted unit sales of Haerve company for the upcoming fiscal year are provided below:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Budgeted unit sales 12,000 14,000 11,000 10,000

The company variable selling and administrative expenses for unit are $2.75. Fixed selling and administrative expenses include advertisement expense of
$12,000 per quarter, Executive salaries of $40,000 per quarter, and depreciation of $16,000 per quarter. In addition the company will make insurance
payment of $6,000 in the 2nd quarter and $6,000 in the 4th quarter. Finally, property taxes of $6,000 will be paid in the 3rd quarter.

Required:
1 Prepare the Companies selling and administrative expense budget for the upcoming fiscal year.

SELLING & ADMINISTRATIVE EXPENSE BUDGET

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Budgeted unit sales 12,000 14,000 11,000 10,000

Variable selling and administrative expense rate = $ 2.75

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Variable Manufacturing Overhead Cost $ 33,000 $ 38,500 $ 30,250 $ 27,500 $ 129,250
Fixed Manufacturing Overhead Cost
Advertisement Expense $ 12,000 $ 12,000 $ 12,000 $ 12,000 $ 48,000
Executive salaries $ 40,000 $ 40,000 $ 40,000 $ 40,000 $ 160,000
Depreciation Expense $ 16,000 $ 16,000 $ 16,000 $ 16,000 $ 64,000
Insurance Expense $ - $ 6,000 $ - $ 6,000 $ 12,000
Taxes $ - $ - $ 6,000 $ - $ 6,000
Total Fixed Manufcaturing Overhead $ 68,000 $ 74,000 $ 74,000 $ 74,000 $ 290,000
Total Manufacturing Overhead $ 101,000 $ 112,500 $ 104,250 $ 101,500 $ 419,250
 Q1.
Netar incorporation expect sales of $4,000 in March, $6,000 in April, $5,000 in May, $4,000 in June and $5,500 in July. On
average they collect 35% of their monthly sales in cash, 45% in one month, and 19% in 2 months and remaining 1% is
bad debt expense and is never collected. Find Nater's expected cash flow during the month of May June and July.

CASH BUDGET

Sales (Month) March April May June July

Amounts $ 4,000 $ 6,000 $ 5,000 $ 4,000 $ 5,500

Cash collection Sales Month One month after Two month after sales
Percentage 35% 45% 19%

May June July

35% of sales in same month $ 1,750 $ 1,400 $ 1,925
45% of sales in one month $ 2,700 $ 2,250 $ 1,800
19% of sales in two month $ 760 $ 1,140 $ 950
Expected cash Inflow $ 5,210 $ 4,790 $ 4,675

Q2. Bilch's fried chicken is fast food chain. Although its expenses depend primarily on sales, these expenses are not necessarily paid in cash in the
month of the sales. For example, wage expense amount to 25% of the month sales but is paid on the first day of the next month. Chicken is
purchased for the current month, (its cost represent 20% of the sales volume) and is paid for in cash. Frozen french fries, oil and other supplies
cost 30% of a given month sale. They are purchased with cash one month prior to the sales. Finally, bilch has rent expenses totalling $220,000
per month, than expected sales are as follow;

Month August September October November December January

Expected Sales $ 1,000,000 $ 1,200,000 $ 1,100,000 $ 850,000 $ 700,000 $ 950,000

a. Find bilch operating expenses for September, October, November, and December.

b. Bilch is currently experiencing cash flow problem in the month of September and is considering an offer made by the chicken supplier to take
60 days credit with a Credit charge of 2.5 % for this two month. Find bilch expected outflows for September, October, November, and
December.

Sales (Month) August September October November December January

Expected Sales $ 1,000,000 $ 1,200,000 $ 1,100,000 $ 850,000 $ 700,000 $ 950,000

Payment Of Previous Month Salary Current Month Chicken Advance Purchase of Oil & Other

% of Sales 25% 20% 30%

Rent (Fixed) $ 220,000

September October November December

Previous Payment of Salary $ 250,000 $ 300,000 $ 275,000 $ 212,500
Current Payment of Chicken $ 240,000 $ 220,000 $ 170,000 $ 140,000
Advance payment of Oil & Other $ 330,000 $ 255,000 $ 210,000 $ 285,000
Rent $ 220,000 $ 220,000 $ 220,000 $ 220,000
Operating Expenses $ 1,040,000 $ 995,000 $ 875,000 $ 857,500

Sales (Month) August September October November December January

Expected Sales $ 1,000,000 $ 1,200,000 $ 1,100,000 $ 850,000 $ 700,000 $ 950,000

Payment Of Previous Month Salary Advance Purchase of Oil & Other Chicken In 2 Months
% of Sales 25% 30% 20%
Rent (Fixed) $ 220,000
Credit Charges 2.5%

September October November December

Previous Payment of Salary $ 250,000 $ 300,000 $ 275,000 $ 212,500
Advance payment of Oil & Other $ 330,000 $ 255,000 $ 210,000 $ 285,000
Chicken In 2 Months + 2.5% Credit Charge $ - $ - $ 246,000 $ 225,500
Rent $ 220,000 $ 220,000 $ 220,000 $ 220,000
Operating Expenses $ 800,000 $ 775,000 $ 951,000 $ 943,000
Q3. Kouland's jeweller has expected cash inflows, variable cash outflows and fixed cash outflows as follow;

January February March Apil

Inflow $ 600,000 $ 700,000 $ 620,000 $ 500,000
Variable outflows $ 290,000 $ 330,000 $ 270,000 $ 235,000
Fixed outflows $ 320,000 $ 320,000 $ 320,000 $ 320,000

Kouland's has a cash balance of $50,000 as of January 1. Find kouland's expected net cash flow for each of the four
months listed and construct a monthly cash budget for the four months.

(Month) January February March April

Inflow $ 600,000 $ 700,000 $ 620,000 $ 500,000
Variable Outflow $ 290,000 $ 330,000 $ 270,000 $ 235,000
Fixed Outflow $ 320,000 $ 320,000 $ 320,000 $ 320,000

Opening cash $ 50,000

January February March April

Opening Cash $ 50,000 $ 40,000 $ 90,000 $ 120,000
Expected Inflow $ 600,000 $ 700,000 $ 620,000 $ 500,000
Expected Variable Outflow $ (290,000) $ (330,000) $ (270,000) $ (235,000)
Expected Fixed Outflow $ (320,000) $ (320,000) $ (320,000) $ (320,000)
Expected Net Cash Flow $ 40,000 $ 90,000 $ 120,000 $ 65,000

Q4. Following is the cash flow budget for the baxter corporation, a retailing firm, for the last quarter of 2015.

August September October November December

Total Sales $ 720 $ 760 $ 840 $ 920 $ 900
Cash Sales (35%) $ 294 $ 322 $ 315
Collection from
previous month (35%) $ 266 $ 294 $ 322
Collection from 2nd
previous month (30%) $ 216 $ 228 $ 252
Payment of Account Payables $ 172 $ 197 $ 225
Wages and salaries $ 152 $ 165 $ 182
Selling $ 145 $ 151 $ 154
General and Administrative $ 153 $ 159 $ 157
Capital Expenditure $ 18 $ 9 $ 13
Rent $ 120 $ 120 $ 120
Interest $ 17 $ 17 $ 17

Depreciation for the quarter will be $164 and the cost of goods sold generally average about 20% of the sales, tax rate is 34%. Baxter pays its
accounts payable one month after its purchase of inventory; December purchases will be 30% of sales. Construct a proforma income
statement for the last quarter of 2015.

Oct Nov Dec Total

Total Sales $ 840 $ 920 $ 900 $ 2,660
Cost Of Good Sold (20% of Sales) $ (168) $ (184) $ (180) $ (532)
Gross Proft $ 2,128
Less :Operating Expenses
Wages and salaries $ (152) $ (165) $ (182) $ (499)
Selling $ (145) $ (151) $ (154) $ (450)
General and Administrative $ (153) $ (159) $ (157) $ (469)
Rent $ (120) $ (120) $ (120) $ (360)
Depreciation Expense $ (164)
Profit Before Interest and Tax $ 186
Less: Interest $ (17) $ (17) $ (17) $ (51)
Profit Before Tax $ 135
Less :Tax 34% $ (45.90)
Net Profit $ 89.10
 PROCESS COSTING

Q1. On March 31st 2014 Department 2 transferred out 12,000 unit to Department 3. On March 31st, 1000 units were 30% complete in respect of
Material, labour and overhead costs.

Required:
Equivalent units produced during the month of March for Department 2.

Equivalent Production Unit (EPU)

Material Labour Factory Overhead

Units Completed & Transferred 12000 12000 12000
Add :Work In Process (Ending)
Material (1000*30%) 300
Labour (1000*30%) 300
F.O.H (1000*30%) 300
Equivalent Units Produced 12300 12300 12300

Q2. On August 31st 2014 Department B transferred out 15,000 unit to Department C. On August 31st, 3000 units were 40% complete in respect
of Material, and 50% in respect of labour and overhead cost.

Required:
Equivalent units produced during the month of April.

Equivalent Production Unit (EPU)

Material Labour Factory Overhead

Units Completed & Transferred 15000 15000 15000
Add :Work In Process (Ending)
Material (3000*40%) 1200
Labour (3000*50%) 1500
F.O.H (3000*50%) 1500
Equivalent Units Produced 16200 16500 16500

Q3. On April 30, 2014 Department Y transfers out 50,000 units to department Z while on April 30, 10,000 units were 60% completed in respect
of Material and 70% in respect of conversion cost.

The units in hand on April 1, 2014 were 8,000 (50% completed as to material and 60% conversion)

Required:
a Quantity schedule for Department Y.
b Equivalent units produced during the month of April by department Y.

a) Quantity Schedule
Ending Units 10000
Add: Tranfered out Units 50000
Total Units in Production 60000
Less: Opening Units (8000)
Units Received 52000

b) Equivalent Production Unit (EPU)

Material Labour Factory Overhead

Units Completed & Transferred 50000 50000 50000
Less : Work In Process (Opening)
Material (8000*50%) (4000)
Labour (8000*60%) (4800)
F.O.H (8000*60%) (4800)
Add : Work In Process (Ending)
Material (10000*60%) 6000
Labour (10000*70%) 7000
F.O.H (10000*70%) 7000
Equivalent Units Produced 52000 52200 52200
Q4. During June 2014 department Y received 30,000 units from department X while on June 30, 5000 units were 40% completed in respect of material and 60% in
respect of conversion cost.

The units in hand on June 1, 2014 were 6,000 (30% complete as to material and 90% conversion)

Required:
a Quantity schedule for Department Y
b Equivalents units produced during the month of June by Department Y

a) Quantity Schedule
Opening Units 6000
Add: Units Received 30000
Total Units in Production 36000
Less: Ending Units (5000)
Transferred Out Units 31000

b) Equivalent Production Unit (EPU)

Material Labour Factory Overhead

Units Completed & Transferred 31000 31000 31000
Less : Work In Process (Opening)
Material (6000*30%) (1800)
Labour (6000*90%) (5400)
F.O.H (6000*90%) (5400)
Add : Work In Process (Ending)
Material (5000*40%) 2000
Labour (5000*60%) 3000
F.O.H (5000*60%) 3000
Equivalent Units Produced 31200 28600 28600

Q5. Blue Ocean Garments factory manufactures denim jeans, it has two processing department, Stitching and Labelling. Following information is related to
Stitching Department for the month of March 2014.

Units started in Stitching Department 20,000.

Units still in process on March 31st 2014 are 4,000 ( 60% complete as to Material and 50% as to Conversion)
Units in hand on March 01,2014 were 2,000 (70% complete as to Material and 80% Conversion)
Cost of (March 01,2014) 2,000 units was Rs. 500,000/-

Stitching Department incurred following costs during March:

Direct Material Rs 2,375,000

Direct Labour Rs 1,380,000
FOH Rs 920,000

Reuqired:
a Quantity schedule for department Y
b Equivalents units produced during the month of June by department Y

a) Quantity Schedule
Opening Units 2000
Add: Units Started 20000
Total Units in Production 22000
Less: Ending Units (4000)
Transferred Out Units 18000

b) Equivalent Production Unit (EPU)

Material Labour Factory Overhead

Units Completed & Transferred 18000 18000 18000
Less : Work In Process (Opening)
Material (2000*70%) (1400)
Labour (2000*80%) (1600)
F.O.H (2000*80%) (1600)
Add : Work In Process (Ending)
Material (4000*60%) 2400
Labour (4000*50%) 2000
F.O.H (4000*50%) 2000
Equivalent Units Produced 19000 18400 18400

c) Per Unit Cost

Material Per Unit Cost (2375000/19000) Rs 125.00
Labour Per Unit Cost (1380000/18400) Rs 75.00
F.O.H Per Unit Cost (920000/18400) Rs 50.00
Total Per Unit Cost Rs 250.00
Q6. JOJO plastic factory manufactures pet bottles, it has three processing departments Molding, Casting and Finishing,
following information is related to Casting Department for the month of September 2015.

Units started in Molding Department 82,000

Units still in process on September 30, 2015 8,000 (75% complete as to material and 80% as to conversion)
Units in hand on September 01, 2015 were 6,000 ( 90% completed as to material and 60% Conversion)
Cost of (September 01, 2015) 6,000 units war Rs 33,000

Molding Department Incurred following cost during September:

Direct Material Rs 201,500

Direct Labour Rs 165,600
FOH Rs 124,200

Reuqired:
1 Quantity schedule for Molding Department
2 Equivalents units produced during the month of September by Molding Department
3 Per units cost
4 Cost of transferred out units

a) Quantity Schedule
Opening Units 6000
Add: Units Started 82000
Total Units in Production 88000
Less: Ending Units (8000)
Transferred Out Units 80000

b) Equivalent Production Unit (EPU)

Factory
Material Labour
Overhead
Units Completed & Transferred 80000 80000 80000
Less : Work In Process (Opening)
Material (6000*90%) (5400)
Labour (6000*60%) (3600)
F.O.H (6000*60%) (3600)
Add : Work In Process (Ending)
Material (8000*75%) 6000
Labour (8000*80%) 6400
F.O.H (8000*80%) 6400
Equivalent Units Produced 80600 82800 82800

c) Per Unit Cost

Material Per Unit Cost (201500/80600) Rs 2.50

Labour Per Unit Cost (165600/82800) Rs 2.00
F.O.H Per Unit Cost (124200/82800) Rs 1.50
Total Per Unit Cost Rs 6.00

d) Cost Of Transferred Out Units

Transferred out Cost (80000*6) Rs 480,000

Q7. Lucky Flour Mill process wheat to manufacture flour, it has two processing department; Sorting and Grinding, following
information is related to Sorting Department for the month of May 2015;

Units started in Sorting Department 128,000 Kgs

Units still in process on May 31, 2015 20,000 Kgs (45% complete as to Material and 60% as to Conversion)
Units in hand on May 01, 2015 were 12,000 Kgs (75% complete as to Material and 90% as to Conversion)
Cost of (May 01, 2015) 12,000 units was Rs 336,000

Sorting Department incurred following costs during May.

Direct Material Rs 1,800,000

Direct Labour Rs 727,200
FOH Rs 1,090,800

Required:
1 Quantity schedule for Sorting Department
2 Equivalents units produced during the month of May by Sorting Department
3 Per units cost
4 Cost of transferred out units
5 Cost of W.I.P ending units in sorting Department

a) Quantity Schedule
Opening Units 12000
Add: Units Started 128000
Total Units in Production 140000
Less: Ending Units (20000)
Transferred Out Units 120000

b) Equivalent Production Unit (EPU)

Factory
Material Labour
Overhead
Units Completed & Transferred 120000 120000 120000
Less : Work In Process (Opening)
Material (12000*75%) (9000)
Labour (12000*90%) (10800)
F.O.H (12000*90%) (10800)
Add : Work In Process (Ending)
Material (20000*45%) 9000
Labour (20000*60%) 12000
F.O.H (20000*60%) 12000
Equivalent Units Produced 120000 121200 121200

c) Per Unit Cost

Material Per Unit Cost (1800000/120000) Rs 15.00

Labour Per Unit Cost (727200/121200) Rs 6.00
F.O.H Per Unit Cost (1090800/121200) Rs 9.00
Total Per Unit Cost Rs 30.00

d) Cost Of Transferred Out Units

Transferred out Cost (120000*30) Rs 3,600,000

e) Cost Of Work In Process (Ending)

W.I.P (Material) (9000*15) Rs 135,000

W.I.P (Labour) (12000*6) Rs 72,000
W.I.P (F.O.H) (12000*9) Rs 108,000
Total Cost Of W.I.P (Ending) Rs 315,000
 STANDARD COSTING

Q1. TOP PRODUCTS CO. uses standard cost system. Following data are taken from its cost accounting records:

Standard Actual
Raw Material Rate per hour Rs. 6 Rate per hour Rs. 6.20
Total Cost Rs. 54,000 Quantity 9,200 Units

Direct Labour Wage per hour Rs. 11 Wage per hour Rs. 10.50
Total Labour hour 10,000 Total Labour cost 110,250

Factory Overhead 80% of direct labour cost Total cost Rs. 90,000

Required:

a) Calculate:
1) Material Price Variance
2) Material Quantity Variance
3) Labour Wage Variance
4) Labour Usage Variance
5) FOH Variance

b)
Given entries in general journal to record actual and standard costs of direct material, direct labour and FOH and their variances.

a) 1) Material Price Variance = (Actual Price - Standard Price) x Actual Quantity

Material Price Variance = (6.20 - 6.00) * 9200

Material Price Variance = 1840 Unfavourable

2) Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price

Material Quantity Variance = {9200 - (54000/6)} * 6.00

Material Quantity Variance = 1200 Unfavourable

Total Material Variance = Material Quantity Variance + Material Price Variance

Total Material Variance = (1840+1200)

Total Material Variance = 3040

3) Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hour

Labour Rate Variance = (10.50 - 11.00) * (110250/10.50)

Labour Rate Variance = -5250 Favourable

4) Labour Usage Variance = (Actual Hour - Standard Hour) x Standard Rate

Labour Usage Variance = {(110250/10.50) - 10000} * 11

Labour Usage Variance = 5500 Unfavourable

Total Labour Variance = Labour Usage Variance + Labour Rate Variance

Total Labour Variance = (-5250+5500)

Total Labour Variance = 250

5) Factory overhead variance = Acutal FOH - Standard FOH

Factory overhead variance = 90000 - {80% * (10000*11)}

Factory overhead variance = 2000 Unfavourable

b) 1) Work in Process - Material (9000*6) 54000

Unfavourable Variance 3040
Material (9200*6.20) 57040
To Record Material Variance
2) Work in Process - Labour (10000*11) 110000
Unfavourable Variance 250
Salaries Payable (10500*10.50) 110250
To Record Labour Variance
3) Work in Process - F.O.H {80% * (10000*11)} 88000
Unfavourable Variance 2000
A/c Payable 90000
To Record F.O.H Variance
4) Cost of Goods Sold 5290
Unfavourable Variance 5290
To Close all Variances
Q2. AHSAN PRODUCTS CO. uses standard cost system. Following data are taken from its cost accounting records:

Standard Actual
Raw Material Rate per hour Rs. 18 Rate per hour Rs. 18.60
Total Cost Rs. 162,000 Quantity 27,600 Units

Direct Labour Wage per hour Rs. 33 Wage per hour Rs. 31.50
Total Labour hour 30,000 Total Labour cost 330,750

Factory Overhead 80% of direct labour cost Total cost Rs. 270,000

Required:

a) Calculate:
1) Material Price Variance
2) Material Quantity Variance
3) Labour Wage Variance
4) Labour Usage Variance
5) FOH Variance

b) Given entries in general journal to record actual and standard costs of direct material, direct labour and FOH and their variances.

a) 1) Material Price Variance = (Actual Price - Standard Price) x Actual Quantity

Material Price Variance = (18.6 - 18.00) * 27600

Material Price Variance = 16560 Unfavourable

2) Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price

Material Quantity Variance = {27600 - (162000/18)} * 18.00

Material Quantity Variance = 334800 Unfavourable

Total Material Variance = Material Quantity Variance + Material Price Variance

Total Material Variance = (16560+334800)

Total Material Variance = 351360

3) Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hour

Labour Rate Variance = (31.50 - 33.00) * (330750/31.50)

Labour Rate Variance = -15750 Favourable

4) Labour Usage Variance = (Actual Hour - Standard Hour) x Standard Rate

Labour Usage Variance = {(330750/31.50) - 30000} * 33

Labour Usage Variance = -643500 Favourable

Total Labour Variance = Labour Usage Variance + Labour Rate Variance

Total Labour Variance = (-15750-643500)

Total Labour Variance = -659250

5) Factory overhead variance = Acutal FOH - Standard FOH

Factory overhead variance = 270000 - {80% * (30000*33)}

Factory overhead variance = -522000 Favourable

b) 1) Work in Process - Material (9000*18) 162000

Unfavourable Variance 351360
Material (27600*18.60) 513360
To Record Material Variance
2) Work in Process - Labour (30000*33) 990000
Favourable Variance 659250
Salaries Payable (10500*31.50) 330750
To Record Labour Variance
3) Work in Process - F.O.H {80% * (30000*33)} 792000
Favourable Variance 522000
A/c Payable 270000
To Record F.O.H Variance
4) Favourable Variance 1181250
Cost Of Goods Sold 829890
Unfavourable Variance 351360
To Close all Variances
Q3. The standard and actual cost data of Thatta Silk Mills Ltd. are as follows:

Standard Actual
Raw Material 20,000 Units 19,600 Units
At the rate of Rs 4 At the rate of Rs 3.50

Direct Labour 10,000 Hours 12,000 Hours

At the rate of Rs 6 At the rate of Rs 6.50

Required:

a) 1) Material Price Variance

2) Material Quantity Variance
3) Labour Wage Variance
4) Labour Usage Variance

b) Given entries in general journal to record actual and standard costs of direct material and direct labour and their variances.

a) 1) Material Price Variance = (Actual Price - Standard Price) x Actual Quantity

Material Price Variance = (3.50 - 4.00) * 19600

Material Price Variance = -9800 Favourable

2) Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price

Material Quantity Variance = {19600 - 20000} * 4.00

Material Quantity Variance = -1600 Favourable

Total Material Variance = Material Quantity Variance + Material Price Variance

Total Material Variance = (-9800-1600)

Total Material Variance = -11400

3) Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hour

Labour Rate Variance = (6.50 - 6.00) * 12000

Labour Rate Variance = 6000 Unfavourable

4) Labour Usage Variance = (Actual Hour - Standard Hour) x Standard Rate

Labour Usage Variance = (12000- 10000) * 6

Labour Usage Variance = 12000 Unfavourable

Total Labour Variance = Labour Usage Variance + Labour Rate Variance

Total Labour Variance = (6000+12000)

Total Labour Variance = 18000

b) 1) Work in Process - Material (20000*4) 80000

Favourable Variance 11400
Material (19600*3.50) 68600
To Record Material Variance
2) Work in Process - Labour (10000*6) 60000
Unfavourable Variance 18000
Salaries Payable (12000*6.5) 78000
To Record Labour Variance
3) Favourable Variance 11400
Cost Of Goods Sold 6600
Unfavourable Variance 18000
To Close all Variances
Q4. The standard and actual cost data of Thatta Sahalamar Silk Mills Ltd. are as follows:

Standard Actual
Raw Material 40,000 Units 39,200 Units
At the rate of Rs 8 At the rate of Rs 7

Direct Labour 20,000 Hours 24,000 Hours

At the rate of Rs 12 At the rate of Rs 13

Required:

a) 1) Material Price Variance

2) Material Quantity Variance
3) Labour Wage Variance
4) Labour Usage Variance

b) Given entries in general journal to record actual and standard costs of direct material and direct labour and their variances.

a) 1) Material Price Variance = (Actual Price - Standard Price) x Actual Quantity

Material Price Variance = (7.00 - 8.00) * 39200

Material Price Variance = -39200 Favourable

2) Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price

Material Quantity Variance = {39200 - 40000} * 8.00

Material Quantity Variance = -6400 Favourable

Total Material Variance = Material Quantity Variance + Material Price Variance

Total Material Variance = (-39200-6400)

Total Material Variance = -45600

3) Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hour

Labour Rate Variance = (13.00 - 12.00) * 24000

Labour Rate Variance = 24000 Unfavourable

4) Labour Usage Variance = (Actual Hour - Standard Hour) x Standard Rate

Labour Usage Variance = (24000- 20000) * 12

Labour Usage Variance = 48000 Unfavourable

Total Labour Variance = Labour Usage Variance + Labour Rate Variance

Total Labour Variance = (24000+48000)

Total Labour Variance = 72000

b) 1) Work in Process - Material (40000*8) 320000

Favourable Variance 45600
Material (39200*7) 274400
To Record Material Variance
2) Work in Process - Labour (20000*12) 240000
Unfavourable Variance 72000
Salaries Payable (24000*13) 312000
To Record Labour Variance
3) Favourable Variance 45600
Cost Of Goods Sold 26400
Unfavourable Variance 72000
To Close all Variances