Department of Accounting and Information Systems (AIS)

Faculty of Business Studies

Bachelor of Business Administration (BBA) Program
3102: Cost Accounting-I
Comprehensive Exam-2014
Time:

Three hours

Full Marks:60

Any four questions are to be attempted.

Show computations, where necessary.
Answer must be brief, relevant, neat and clean.
Start answering each question from a fresh sheet.

Q. No. 1.
CASE COST STATEMENT
Hector P. Wastrel, a careless employee, left some combustible materials near an open
flame in Salter Companys plant. The resulting explosion and fire destroyed the entire
plant and administrative offices. Justin Quick, the companys controller, and Constance
Trueheart, the operations manager, were able to save only a few bits of information as
they escaped for the roaring blaze.
What a disaster, cried Justin. And the worst part is that we have no records to use in
filing an insurance claim. I know, replied Constance. I was in the plant when the
explosion occurred, and I managed to grab only this brief summary sheet that contains
information on one or two of our costs. It says that our direct labor cost this year has
totaled $180,000 and that we have purchased $290,000 in raw materials. But Im afraid that
doesnt help much; the rest of our records are just ashes.
Well, not completely, said Justin. I was working on the year-to-date income statement
when the explosion knocked me out of my chair. I instinctively held onto the page I was
working on, and from what I can make out, our sales to date this year have totaled
$1,200,000 and our gross margin rate has been 40% of sales. Also, I can see that our goods
available for sale to customers have totaled $810,000 at cost.
Maybe were not so bad off after all, exclaimed Constance. My sheet says that prime
cost has totaled $430,000 so far this year and that manufacturing overhead is 80% of
conversion cost. Now if we just had some information on our beginning inventories
Hey, look at this, cried Justin. Its a copy of last years annual report, and it shows what
our inventories were when this year started. Lets see, raw materials was $28,000, work in
process was $75,000, and finished goods was $45,000.

Super, yelled Constance. Lets go to work.

Required:
Determine the amount of cost in the raw materials, work in process and finished goods inventory
as of the date of fire and also identify the total amount that the company can claim from the
insurance company.
[Marks: 15]
Q. No. 2.
DOEL, a manufacturing firm, produces plastic swimming pool. The following information has
been taken from the companys production, sales and cost records for the just completed month.
Cost data for the month:
Purchase of raw material : 8,000 pounds @ 10 per pound
Direct labor
:?
Indirect Material
: $5,200
Royalty for production patent
: $2,500
Advertisement
: $5,400
Rent
: $6,000
Utility, factory
: $4,500
Salary, office
: $10,000
Depreciation
: $4,000
Maintenance, factory
: $1.25 per unit produced
Inventories:

Raw material
Work in process
Finished goods

Beginnin
g
$5,000
$600
$0

Ending
$8,500
$6,000
$7,020

Other data:
(a) Sales for the month $1, 44,300.
(b) Rent 60% and depreciation 80% is for factory.
(c) Prime cost for the month $89,500.
(d) Total manufacturing overhead cost is 60% of conversion costs.
Requirements:
1. Prepare a schedule of goods manufactured for the month.
2. Prepare an income statement for the month.
3. Find out how many units produced during the month.

4. Calculate number of units sold during the month.

5. Calculate selling price per unit.

[15]

Q. No. 3.
Calculate the required values based on the given information:
Annual Demand = 36,000 units
Lost size
Carrying cost = 3% of material cost
(units)
Ordering cost = $20 per order
Discount
Material cost = $50 per unit

Discount offer (per unit):

Up to
4,000
Nil

4,001
6,000
0.25

6,001
8,000
0.50

8,001
10,000
1.00

Above
10,000
1.50

If the company wants to purchase all the required units by 4 orders in a year, compute:
Order Size
Average Inventory
Material cost per unit
Cost of average inventory

Ordering cost for the year

Carrying cost for the year
Total discount benefit
RTC (Oc+Cc-Discount)
[Marks: 15]

Q. No. 4.

Compute wages under different scheme for the following given cases and given information:
Basic Information: The minimum wage for a worker is the base rate, which is also paid for any
downtime when the workers machine is under repair or there is no work. Workers are paid 150%
of base rates for overtime production in a standard work month of 200 hours. The base rate per
hour is Tk. 60 whereas; the worker is paid at the rate of Tk. 4.00 per piece produced. Standard
expected production for the company is 15 per hour.
a) Mr. P received wages under day wages scheme and produced 3,780 units. He worked 40
hours overtime and faced downtime of 5 hours.
b) Mr. Q received wages under Halsey Scheme and produced 3,900 units. He did not work any
overtime or faced any downtime.
c) Mr. R received wages under Percentage wage plan and produced 4,305 units. He worked 10
hours overtime and faced downtime of 5 hours.
d) Mr. X received wages under Rowan Scheme and produced 4,140 units. He worked 30 hours
overtime and faced downtime of 10 hours during the month.
e) Mr. Y received wages under Straight Piece Rate and produced 3,900 units. He worked 20
hours overtime (when he produced 250 units) and faced downtime of 5 hours during the
month.

f) Mr. Z produced 4,200 units during the month working 200 hours. He faced downtime hours of
10 during the month. Incentive wage plan applicable for Mr. Z is Emerson Efficiency
System, where, a minimum wage is paid for total hours worked. A bonus, calculated from
the following table of rates, is paid when the workers production exceeds 66 % of standard
output or efficiency. The bonus rate is applied only to wages earned during productive hours.
Efficiency

Up to 66 %

66 % - 79%

80 99%

Bonus

0%

10%

20%

100% and
above
45%

[Marks: 15]
Q. No. 5.
A company has three production departments and two service departments. Distribution
summary of overheads is as follows:

Production Departments

A: Tk. 13,600; B: Tk. 14,700; C: Tk. 12,800

Service Departments

X: Tk. 9,000; Y: Tk. 3,000

The expenses of service departments are charged on a percentage basis which is as follows:
A

X Dept.

30%

30%

20%

--

10%

Y Dept.

30%

20%

20%

20%

--

Apportion the cost of Service Departments by using the linear equation method. [Marks: 15]
Q. No. 6.
Write down the short notes:
(a)
Incremental Cost Accounting System.
(b)
Elements of cost.
(c)
Cost center
(d)
Cost unit
(e)
Tender price
(f)
Labor turnover

[Answer any five 10*1.5=15]

(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)

Time booking
Predetermined Factory overhead rate.
Time card Vs. Job Card.
Methods of remuneration.
Methods of store control
Bin card Vs. Store ledger
Comparing ABC and Traditional Costing.
Labor cost control.
THE END