Practice Questions: TH TH

PRACTICE QUESTIONS
Accounting for Manufacturing Concerns

Q#1
The following balances have been taken from the general ledger for Pak Fan Manufacturing Company:
Raw Materials Inventory (1-07-2015) Rs. 40,000

Raw Material Purchases 190,000
Raw Materials Returns 9,000
Carriage Inwards 15,000
Direct Labour 255,000
Indirect Labour 60,000
Depreciation (Machinery) 30,000
Hear, Light and Power 25,000
Factory Rent and Taxes 31,000
Factory Repairs Expense 19,000
Foreman ‘s Salary 25,000
Raw Material (30-06-2016) 58,000
Work in Process (1-07-2015) 63,000
The foreman estimates that Rs. 32000 of Raw Materials and Rs. 25,000 of Direct Labour are to be
allocated to the unfinished goods in process on 30-06-2016.
Required
i. Determine the FOH Rate based on direct labour cost.
ii. Compute the cost of June 30, 2016 inventory of Goods in Process. Also find prime and
conversion cost
iii. Prepare statement of Cost of Goods Manufactured, and Cost of Goods Sold.
Q#2
The following information has been taken from the Ledger of Aslam Brothers Sadar Bazar, Karachi for
the year ended on June 30, 2015.
Stock of material, June 30 2015 Rs. 15,700

Stock of materials, July 1, 2014 12,000
Material purchased during the year 46,250
Carriage outward 1,075
Carriage inward 1,786
Salaries – Factory 1,625
Salaries – Office 3,150
Discount Expenses 725
Bad debts written off 1,628
Repairs of plant, machineries and tools 1,113
Rent and insurance – Factory 2,125
Rent and insurance – Office 500
Sales 115,275
Travelling Expenses 525
Traveller’s salaries and commission 1,925
Productive wages 31,500
Depreciation of machinery and tools 1,625
Depreciation of office furniture 75
Director’s fees 1,500
Gas, and water – Factory 300
Fas and water – Office 100
Manager’s salary (3/4th factory, 1/4th office) 2,500
General Expenses 850
Required
i. Prime Cost, Conversion Cost, Factory Cost.
ii. Rate of FOH on Wages
iii. Rate of Administrative Overhead on Wages
iv. Net Profit
Q#3
The following transactions relate to the DECENT CORP. for the month of November 2015:
Product - A Product – B
Production 10,000 units 8,000 units
Beginning Inventory 1,000 units 900 units
Ending Inventory 2,000 units 100 units
Unit Cost applicable to inventories and Production
Direct Material Rs. 4 per unit Rs. 3 per unit

Direct Labour Rs. 10 per unit Rs. 20 per unit
Factory Overhead Rs. 7 per unit Rs. 14 per unit
Actual FOH was Rs. 182,400, under or over applied factory overhead is to be adjusted in Cost
of Goods Sold.
Required
You are required to determine
i. Price Cost
ii. Conversion Cost
iii. Manufacturing Cost
iv. Cost of Goods Manufactured
v. Cost of Goods Sold (Adjusted)
Q#4
Kamaran Company produces various types of fertilizer. No beginning units in process or finished units
were on hand on January 1, 2015, 30,000 finished units were on hand on December 31, 2015 and 95,000
units were sold during the year. There were no units in work in process inventory on December 31,
2015. The material put into production cost Rs. 300,000. 75% were direct material. There was no
beginning or ending material inventory. Labour costs were Rs. 350,000, 40% was for indirect labour.
Factory overhead costs, other than indirect materials and indirect labors were the following:
Heat, light and power Rs. 115,000

Depreciation 78,000
Factory Taxes 65,000
Repairs and Maintenance 42,000
Selling Expenses were Rs. 80,000 general and administrative expenses were Rs. 50,000.
Required
You are required to compute
i. Prime Cost
ii. Conversion Cost
iii. Cost of Goods Manufactured
iv. Cost of single unit
Q#5
The estimated unit costs for a company operating at a production and sales level of 12,000 units are as
follows:
Cost Item Estimated Unit
Cost (Rs.)
Direct materials 32
Direct Labor 20
Variable factory overhead 15
Fixed factory overhead 6
Variable marketing 3
Fixed marketing 4
Required
i. Identify the estimated conversion cost per unit.
ii. Identify the estimated prime cost per unit.
iii. Determine the estimated total variable cost per unit
iv. Compute the total cost that would be incurred during a month with a production level of 12,000
units and a sales level of 8,000 units.
Q#5
Fixed and variable costs: In 200A, the Mercaldo Company had sales of Rs. 19,950,000 with Rs.
11,571,000 variable and Rs. 7,623,000 fixed cost. 200B sales are expected to decrease 15% and the cost
relationship is expected to remain constant (the fixed cost will not change).
Required: Determine Mercaldo Company’s expected operating income of loss for 200B.
Q#6
The payroll records of the Uni-lever show payments for labor of Rs. 400,000, of which Rs. 80,000 is
indirect labor. Materials requisitions show Rs. 300,000 for materials used, of which Rs. 280,000
represents direct materials. Other manufacturing expenses total Rs. 124,000. Finished goods on hand at
the end of the period are stated at cost, Rs. 176,000, of which Rs. 40,000 is direct materials cost. Factory
overhead is allocated on the basis of direct labor cost.
Required: Determine the amount of direct labor and the amount of factory overhead in finished goods.
Q#7
The work in process account in the general ledger of Multan Manufacturing Company appears as
follows:
Work in Process Account
Rs. Rs.
Material 11,000 Job Completed 21,000
Payroll 8,000
Applied FOH 6,000
There was only one job in process. The material charged to this job amounted to Rs. 1,900.
Required: Calculate labor and FOH charged to this incomplete job. The FOH is applied to production on
the basis of direct labor cost.
Q#8
The work in process account in the general ledger of Multan Manufacturing Company appears as
follows:
Work in Process Account
Rs. Rs.
Material 15,000 Job Completed 24,000
Payroll 10,000
Applied FOH 5,000
There was only one job in process. The material charged to this job amounted to Rs. 3,000.
Required: Calculate labor and FOH charged to this incomplete job. The FOH is applied to production on

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PRACTICE QUESTIONS

Accounting for Manufacturing Concerns

Raw Materials Inventory (1-07-2015) Rs. 40,000

Stock of material, June 30 2015 Rs. 15,700

Unit Cost applicable to inventories and Production

Direct Material Rs. 4 per unit Rs. 3 per unit

Heat, light and power Rs. 115,000

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