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Cost Accounting PDF
Cost Accounting PDF
University of Karachi
FINAL EXAMINATION, JUNE 2010: AFFLIATED COLLEGES
COST ACCOUNTING: BA (M) – 611
MBA – III
Date: June 27, 2010 Max Time: 3 Hrs
Attempt any FIVE questions Max Marks: 60
Q#1 Waterlux Company incurred $50, 000 direct labor cost in 19A and had the following
selected account balance at the beginning and end of 19A:
January 1 December 31
Finished Goods 28, 000 45, 000
Work in process 12, 000 14, 000
Materials 17, 000 24, 000
Cost of Goods Sold 140, 000
FOH Control 25, 000
Required: Reconstruct the Journal Entries that the recorded the above information in 19A.
Q#3 Selected data concerning last year’s operations of Televans Company are as follows:
Inventories
Beginning Ending
Finished Goods $90 $110
Work in process 80 30
Materials 75 85
Other data:
Materials used $326
Total manufacturing cost charged to jobs during the year (include materials, direct labor,
and factory overhead applied at a rate of 60% of direct labor cost). $686
Cost of goods available for sale $826
Marketing and administrative Expenses $25
Required: Compute the following.
1. Cost of Material Purchased
2. Direct labor cost charged to production
3. Cost of goods manufactured
4. Cost of goods sold.
Conversion costs were 20% complete as to the beginning inventory and 40% complete as to the
ending inventory. All materials are added at the end of the process. Pace uses average costing.
Required:
1. Compute the cost per equivalent unit for conversion cost rounded to the nearest penny.
2. Determine the portion of the total cost of ending inventory attributable to transferred in
cost.
Q#5 Following are eight sets of partial factory overhead data, with favorable variances shown
in parentheses:
│ Actual │Applied │Budget Allowance │ │ Idle
│ Factory │Factory │ (Based on │Spending │ Capacity
│ Overhead │Overhead │Capacity Utilized) │Variance │ Variance
a)│ $30,000 │$29,000 │ $32,000 │ $? │ $?
b)│ ? │ 15,000 │ ? │ 1,000 │ 7,000
c)│ 24,000 │ 24,000 │ ? │ (6,000) │ ?
d)│ ? │ ? │ 18,000 │ 1,000 │ 2,000
e)│ 18,000 │ 20,000 │ ? │ 3,000 │ ?
f)│ 27,000 │ ? │ ? │ (6,000) │ (2,000)
g)│ 16,000 │ 16,000 │ ? │ -0- │ ?
Q#6 The normal capacity of Department-3 is 16,000 direct labor hours per month. At normal
capacity, the standard factory overhead rate is $ 10.40 per direct labor hour, based on $64,000 of
budgets fixed expenses per month and a variable expense rate of $6.40 per direct labor hour.
During November, the department operated at 15,000 direct labor hours, with actual factory
overhead of $157,000. The number of standard direct labor hours allowed for the productions
actually attend is 15,300.
Required: Compute the overall factory overhead variance and analyze it using three-variance
method-A. Indicate whether the variances are favorable or unfavorable.
BEST OF LUCK
KARACHI UNIVERSITY BUSINESS SCHOOL
UNIVERSTIY OF KARACHI
FINAL EXAMINATION, JAN 2010: AFFLIATED COLLEGES
COST ACCOUNTING: BA (M) – 611
MBA – III
DATED: 02-01-2010 MAX MARKS: 60
INSTRUCTION: ATTEMPT ANY FOUR QUESTIONS MAX TIME: 3 HOURS
Q-1. Mat Company’s purchases of materials during March totaled $110,000, and the cost of
goods sold March was $345,000. Factory overhead was 50% of direct labor cost. Other
information pertaining to Mat Company’s inventories and production for March is as follows:
Q-2. Krieger Company is to submit a bid on the production of 11,250 ceramic plates. It is
estimated that the cost of materials will be $13,000 and the cost of direct labor will be $15,000
Factory overhead is applied at 2.70 per direct labor hour in the Molding Department and at 35%
of the direct labor cost in the Decorating Department. It is estimated that 1,000 direct labor hours
at a cost of $9,000 will be required in molding. The company wishes a markup of 45% of its total
production cost.
Required: Determine the following:
1. Estimated cost to produce
2. Estimated prime cost
3. Estimated conversion cost
4. Bid price
September 1 September 30
Finished goods………………………………………… $15,000 $17,500
Work in process……………………………………….. 9,600 13,000
Materials………………………………………………... 7,000 7,400
Other data:
Factory overhead (actual)……………………………………….. $48,200
Marketing expense………………………………………………. 14,100
General and administrative expenses……………………………. 22,900
Sales for the month………………………………………………. 182,000
Required:
Prepare an income statement with a schedule showing the cost of goods manufactured and sold.
Q-4. Escott Corporation is a manufacturer that uses average costing to account for costs of
production. Escott manufactures product that is produced in three separate departments:
Molding, Assembling and Finishing. The following information was obtained by the
Assembling Department for June.
At June 30, 4,000 units were still in work in process with the following degrees of completion
direct material 90%; direct labor 70% and factory overhead 35%.
Required:
Prepare the June cost of production report for the Assembling Department.
Q-5. Fannin Company had a production run of 8,000 pairs of slacks during the last week of
June, at the following costs per pair:
Materials…………………………………………………. $5
Labor……………………………………………………... 4
Factory overhead (includes $ 0.70 allowance
For spoiled work)……………………….. 3
Final inspection revealed 600 pairs as not meeting quality standards, salable as seconds
$ 4 a pair.
Required: Prepare the journal entries to record all related costs if:
1) The loss is to be charged to the production run.
2) The loss is to be charged to the production of the fiscal period.
PAGE 02/02
BEST OF LUCK
KARACHI UNIVERSITY BUSINESS SCHOOL
UNIVERSTIY OF KARACHI
FINAL EXAMINATION, JUNE2 009: AFFLIATED COLLEGES
COST ACCOUNTING: BA (M) – 611
MBA – III
Total Marks: 60
Date: 22-06-2009
Q.2. Determine each of the missing amounts. Using three inventory accounts.
Sales ?
Beginning finished goods inventory 30,000
Cost of goods available for sale ?
Ending finished goods inventory 50,000
Cost of goods sold ?
Gross profit 140,000
Selling, General, and administrative expenses 68,000
Income from operations Rs. ?
Q.3. Job No. 405 called for the making of 3,500 meters of ceramic plates with these unit costs.
When the orders were completed, 175 rejected unit a normal number were sold for Rs.35 each
and remaining standard units at Rs. 70. A separate work in process account is used for each cost
element.
REQUIRED: 1) Prepare all necessary journal entries and show all computations.
2) Calculate per unit cost (in case loss charge to all production.
Q.4. From the following data, collected from the records of a manufacturing unit of a company,
Calculate total daily earning (Regular wages and Bonus) of a group of 20 workers.
Regular wages and bonuses are given on an hourly basis.
In case the production exceeds by 10%, bonus is paid according to the 50%
bonus plan. Following is the production report for the week:
Q.5. The AB & Co produces a chemical which requires processing in three departments.
The following data to the operation of department III for September, 2004.
A. Deptt. B. Deptt.
Beginning work in process (mat. Rs. 400, D/L Rs. 1,176 −0−
Rs. 300 F.O.H. Rs. 476)
Operating Costs:
Direct Material 4,800 _
Direct Labor 7,000 6,500
Factory overhead 2,800 3,900
Beginning work in process: 400 units, 50% processed 15,776 10,400
Units started in A Department: 4,000 units; units in
Ending work in process= 1,000 units.
30% processed, in the A Department and 200 units 25% processed, in the B Department.
Cost received from A Department (Rs. 13,736)
Q.6. The Shahid Company’s under applied factory overhead is Rs. 3,000. Budgeted overhead for
3,000 hours per month is Rs. 16,000 and at 7,000 hours is Rs. 24,000. Actual factory overhead for
the month is Rs. 18,000 and actual volume is 5,000 hours.
REQUIRED:
1. Variable overhead in overhead rate
2. Budgeted fixed overhead
3. Applied FOH
4. FOH rate
5. Spending Variance
6. Idle Capacity Variance
KARACHI UNIVERSITY BUSINESS SCHOOL
UNIVERSTIY OF KARACHI
FINAL EXAMINATION, JANUARY 2009: AFFLIATED COLLEGES
COST ACCOUNTING: BA (M) – 611
MBA – III
Q1. Uni Inc. institute a new process in October, during which it started 10,000 units in
Department A. of the units started, 1000 units, a normal number, were lost during the
process; 7,000 were transferred to Department B; and 2,000 remained in work in process
inventory at the end of the month, 100% complete as to materials and 50% complete as to
conversion cost. Materials and conversion costs of $ 27,000 and $ 40,000, respectively,
were charged to the department in October.
Required: Compute the total cost transferred to Department B.
Q2. 100 percent bonus plan. West-Chester Inc. produces printed circuits for the electronics
industry. The firm has recently initiated a 100 percent bonus plan with standard production
set at 50 units per hour.
The company employs 10 workers on an 8-hour shift at $8 pr hour. Depreciation on plant
equipment is $9.00 per hour, and other overhead is applied at $ 7.00 per hour.
Production for the first week under the 100 percent bonus plan was:
Units
Monday 3,800
Tuesday 4,500
Wednesday 4,600
Thursday 4,500
Friday 4,400
Management is interested in appraising the results of the new incentive wage plan.
Required: A scheduled showing employee earnings, units labor cost. Unit overhead cost and
conversion cost per unit.
Q3. Fine Corporation uses the average process costing method. All spoilage that occurred in
Department 2 during August was normal and applicable to all production.
August cost data for Department 2 were as follows:
August
Beginning Cost
Inventory Incurred
Cost transferred from Department 1 $ 12,000 $ 89,200
Conversion cost 6,000 60,000
The Department 2 beginning inventory (2/3 converted) was 1,200 and 8,000 units were
transferred from Department 1. The ending inventory was 1,000 units (½converted) and
7,800 units were transferred to Department 3.
Required:
Determine the following:
1. Estimated cost to produce.
2. Estimated prime cost.
3. Estimated conversion cost.
4. Bid price.
Q5 (a) Quality Company had a production run of 8,000 pairs of slacks during the last week of
June, at the following costs per pair:
Materials $5
Labor 4
Factory overhead (includes $ 0.70 allowance for spoiled) 3
Final inspection revealed 600 pairs as not meeting quality standards, salable as seconds at
$ 4 a pair.
Required:
Prepare the journal entries to record all related costs if:
a. The loss is to be charged to the production run.
b. The loss is to be charged to all production of the fiscal period.
Q5 (b) Normal annual capacity for Forman Company is 60,000 units, with production being
constant throughout the year. The October budget shows fixed factory overhead of $
2,500 and a variable factory overhead rate of $ 2.50 per unit. During October, actual
output was 4,800 units with a total factory overhead of $ 15,500.
Required: Compute the spending and idle capacity variance and comment whether favorable or
unfavorable.
KARACHI UNIVERSITY BUSINESS SCHOOL
UNIVERSTIY OF KARACHI
Q.1. The following information is available from the accounting records of AB manufacturing
Co. at the end of the current year.
Work in Process Inventory (Beginning Rs. 80,000) (ending) Rs. 75,000
Materials Inventory (ending) 40,000
Materials Inventories (Opening) 50,000
Finished goods inventory (Jan.1) 5,000 units @ Rs. 84 420,000
Purchase of Direct Materials during the year 570,000
Direct Labor Cost 480,000
Manufacturing overhead 915,000
Finished Goods (ending) ?
During the year 22, 5000 units were produced and 20,000 units were sold.
Required:
1) Prepare a statement of cost of goods manufactured showing the cost of direct material used.
2) Compute the average per unit cost.
3) Compute the cost of goods sold, assuming that the FIFO method of inventory costing is used.
4) Compute the cost of inventory of finished goods at December 31 of the current years
assuming that the FIFO method of inventory costing is used.
Q.2 The following ledger accounts of Rasheed Limited summarize the flow of cost during the
current year.
Q.3. a) Before the completed production for “April is recorded, the work in process account for
Ahmed Brothers appears as follows:
Work in Process
Balance April 24,000 │
Direct Material 72,000 │
Direct Labor 60,000 │
Factory overhead 44,000 │
Assume that completed production for April includes jobs 17, 18 and 19 with total costs
of Rs.40, 000, Rs. 80,000, Rs.48, 000 respectively.
Required:
1) Determine the cost of unfinished jobs at April 30, and prepare a journal entry recording
completed production.
2) Make journal entry for sale of Job 17 for Rs. 64,000 on account.
Work in Process
Direct Material 84,000│ Finished Goods 164,000
Direct Labor 56,000│
Factory overhead 42,000│
The company applies overhead to production at a predetermine rate based on direct labor costs.
Assume that the company uses a job order costing system and that job. 11, the only job in process
at the end of the period, has been charged with direct material of Rs. 4,000.
Required: Complete the following cost sheet for the job 11.
Q.4. T Corporation produces liquid detergent in two processes organized in sequential way as
the A Department and B Department. Direct material is added initially in A Department all
other costs in both departments are incurred evenly throughout the processes.
Q.5. Using the same data in Q.4. Prepare cost of production report for B department, showing
quantitative schedule, equivalent production, cost per equivalent unit and cost flow.
Q.6. a) K Co. was totally destroyed by fire during June. However, certain fragments of its cost
records with the following data were recovered: idle capacity variance Rs. 1,266
favorable; spending variance Rs. 879 unfavorable; and applied factory overhead Rs.16, 234.
Required: Determine (1) The budget allowance, based on capacity utilized, and (2) the actual
factory overhead.
b) A Co. uses 100% Bonus plan with a wage rate of Rs.20 per hour and the standard
production is 40 units per hour. Bonus will be given for the time saved. Following is the
data of Mr. X:
Monday 360
Tuesday 400
Wednesday 350
Required: Determine Mr. X’s total earning, time saved, daily earnings and the labor cost per unit.
_________________________________X______________________________
KARACHI UNIVERSITY BUSINESS SCHOOL
UNIVERSTIY OF KARACHI
Production data:
In process, October 1 (labor and factory overhead, ¾ complete) 10,000 gals
Transferred in from preceding department 40,000
Finished and transferred to storage 35,000
In process, October 31 (labor and factory overhead, ½ complete) 10,000
Additional data:
Work in process inventory, Oct. 1
Cost from preceding department $ 38,000
Cost from this department:
Materials 21,500
Labor 39,000
Factory overhead 42,000_
Total Work in process inventory, Oct.1 140,000
Transferred in during Oct.
Required: Prepare journal entries to record correction of the defective units and transfer of the
work in process to finished goods if:
1. The company order is to be charged with the cost of defective units.
2. The cost of correcting the defective work is not charged to the Wisconsin
Wholesale company order.
Sales 405,000
Raw Material Inventory, Oct. 1 15,000
Raw Material Return to supplier 8,000
Work in Process, Oct.1 30,000
Raw Material Purchased 350,000
Direct Labor 200,000
Cost of Goods Manufactured 555,000
Gross Profit 20,000
Raw Material Consumed 300,000
Factory overhead 125% of direct labor
Transportation in 1,500
Finished Goods Inventory, Oct. 1 25,000
K.U.B.S
KARACHI UNIVERSITY BUSINESS SCHOOL
UNIVERSTIY OF KARACHI
Q.1. a) Differentiate between Cost Accounting and Financial Accounting. What are its
objectives?
b) The blaze completely destroyed the plant and its contents. Fortunately, certain accounting
records were kept in another building. They reveal the following for the period from January
1, 2001 to February 26, 2001:
Q-2 There are two direct-cost categories (direct materials and direct labor) and one
indirect-cost pool (manufacturing overhead, allocated on the basis of direct labor costs).
Additional Information:
1. Direct manufacturing labor wage rate was Rs. 15 per hour.
2. Manufacturing overhead was allocated at Rs.20 per direct labor hour.
3. During the year, sales revenues were Rs. 1,090,000 and marketing and
distribution costs were Rs. 140,000.
Required:
1) What was the amount of direct materials issued to manufacturing during 2000?
2) What was the amount of manufacturing overhead allocated to jobs during 2000?
3) What was the cost of jobs completed during 2000?
4) What was the balance of work-in-process inventory on Dec. 31, 2000?
5) What was the cost of goods sold before proportion of under-or- over allocated overhead?
6) What was the under-or over allocated manufacturing overhead in 2000?
Q.4. The following data pertain to the Assembly Department for June 2001:
Q.5. a) Nadeem Inc. manufactures surgical instruments to the exacting specifications of various
customers. During April 2001, job 911 for the production of 4,500 instruments was
completed at the following costs per unit:
Direct Materials: Rs. 60, Direct Labor: Rs.20, F.O.H: Rs.80
Final inspection of job 911 disclosed 100 defective units and 50 spoiled units. The defective
instruments were reworked at a total cost of Rs. 12,000, and the spoiled instruments were sold to
jobber for Rs. 3,000.
Required: 1) What is the initial cost incurred on job 911?
2) What is the total cost of reworking defecting units?
3) What would be the unit cost of the good units produced on job 911?
b) Case 1, 2, 3,
Rs. Rs. Rs.
Actual F.O.H 36,000 54,000 32,000
Applied 40,000 ? 32,000
Budgeted allowance ? ? ?
S.V. 6,000 Unfav. 12,000 fav. 0
I.C.V. ? 14,000 fav. ?
Required: Compute the missing figures.
b) The B. Co. estimates that 36,000 ring binders will be needed next year to serve clients.
Therefore, binders have been ordered as headed a procedure which has not proved satisfactory.
The cost of binders ordered in 100-unit lots or more is Rs. 1.25 each. The Cost Department
estimates a cost of Rs. 5.60 to place and process an order. Further calculations indicate that it
costs about 12% of average inventory cost to carry the inventory. The Purchase Department
believes that the practical limits for ordering binders would be a maximum fo 45 and a
minimum of 10 orders a year.
Required: Most economical order quantity and No. of orders a year.