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Suggested Answers
Intermediate Examinations Autumn 2009
Ans.1
Date
Particulars
1
Work in process A
Work in process B
Work in process C
Work in process D
Raw material
(Issuance of raw material to WIP)
2
Ledger folio
Debit
800,000
1,200,000
1,500,000
600,000
4,100,000
400,000
540,000
240,000
270,000
200,000
300,000
150,000
180,000
830,000
70,000
1,450,000
830,000
900,000
Finished goods A
(1,400,000+800,000+400,000+200,000)
Work in process A
(Job A completed and transferred to finished goods)
2,800,000
Finished goods B
90% of (2,500,000+1,200,000+540,000+300,000)
Work in process C
10% of (2,500,000+1,200,000+540,000+300,000)
Work in process B
(Job B completed and transferred to finished goods,
10% rejected items transferred to Job C)
4,086,000
6,886,000
2,800,000
454,000
4,540,000
2,800,000
4,086,000
Rs.
1/4/2010 10:55:09 AM
Credit
21,506,000 21,506,000
Page 1 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2009
Ans.2
RT LIMITED
Allocation of overheads
(a)
Production Dept.
Service Dept.
P2
P3
S1
S2
---------------- Rupees in thousand ---------------1,250
2,000
1,800
500
750
20%
30%
40%
10%
30%
40%
20%
10%
225
300
150
75
(750)
115
172
230
(575)
58
17
23
11
6
(58)
1
2
3
(6)
358
1,608
P1
(b)
497
2,497
394
2,194
1/4/2010 10:55:09 AM
P1
1,608
P2
2,497
P3
2,194
1,210
1,900
1,210
398
1,900
597
2,400
2,400
(206)
Page 2 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2009
Ans.3
Solvent Limited
Sale units
Sales price per unit
Sales in Rupees
Less: Variable costs
Direct material
Direct labour
Variable overheads
(Note 1)
Contribution margin
Rs.
Contribution margin % to sales
Break even sales :
Total 39,060,000/0.45446
A (Qty) 85,948,699/350,000,000*10,000,000
B (Qty) 85,948,699/350,000,000*6,000,000
Sales in Rs.
Note 1: Variable & fixed overheads:
Total overheads as given
Variable overheads:
- Rent based on space utilized
120,000 * 12
- Indirect labour
60,000,000*20%*30%
45,000,000*20%*30%
- Electricity & fuel
(4,000,000*80%)/16,000,000*10,000,000
(4,000,000*80%)/16,000,000*6,000,000
Variable overheads
Fixed costs (Total overheads-Variable overheads)
1/4/2010 10:55:09 AM
Product A
10,000,000
20
200,000,000
Product B
6,000,000
25
150,000,000
45,000,000
60,000,000
5,600,000
110,600,000
89,400,000
30,000,000
45,000,000
5,340,000
80,340,000
69,660,000
Total
16,000,000
350,000,000
190,940,000
159,060,000
45.446%
85,948,699
2,455,677
1,473,406
49,113,542
36,835,157
35,000,000
15,000,000
50,000,000
1,440,000
2,700,000
3,600,000
2,000,000
5,600,000
29,400,000
1,200,000
5,340,000
9,660,000
10,940,000
39,060,000
Page 3 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2009
Ans.4 (a.i)
Karachi Limited
(nos.)
Purchase cost
Minimum order size
No. of orders
(BC)
Ordering cost
400
390
380
370
360
24,000
24,000
24,000
24,000
24,000
AB
9,600,000
9,360,000
9,120,000
8,880,000
8,640,000
2,000
3,000
4,000
6,000
8,000
12.00
8.00
6.00
4.00
3.00
D 2,000
24,000
16,000
12,000
8,000
6,000
2.00
3.00
4.00
1.00
1.00 + (hired
transport)
12.00
8.00
12.00
12.00
12.00
F15,000
180,000
120,000
180,000
180,000
180,000
(DE)
Transportation cost
8,000
units9
G
1,000
1,500
2,000
3,000
4,000
G 80
80,000
120,000
160,000
240,000
320,000
9,884,000
9,688,000
9,472,000
9,308,000
9146,000
Total cost
Rs.
72,000
(a.ii) The most economical option is to purchase 3 lots of 8,000 footballs each against the existing
Cost saving
(b)
Rs.
9,884,000
9,146,000
738,000
(i)
(ii)
Lead Time:
The time period between placing an order till the receipt of the goods from suppliers is
called lead time.
(iii)
Reorder Point:
The point of time when an order is required to be placed or production to be initiated to
replenish depleted stocks is called reorder point. It is determined by multiplying the lead
time and average usage.
(iv)
Safety Stock:
To minimize stock outs on account of increased demand or delays in delivery etc., a buffer
stock is often maintained. Such a buffer stocks is called Safety stock.
1/4/2010 10:55:09 AM
Page 4 of 7
Ans.5
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2009
SMART LIMITED
Cash budget for the quarter October - December 2009
October
November
Rupees in '000'
Opening cash and bank balances
2,500
1,476
Cash receipts:
Cash sales
1,500
1,980
Collection from debtors
Note 1
5,800
5,800
Total receipts
7,300
7,780
9,800
9,256
Cash payments:
Cash purchases
Note 2
720
792
Creditors
Note 2
5,400
6,480
Marketing expenses Fixed (300/2)
150
150
Marketing expenses - Variable
Note 3
150
198
Admin. Expenses (2% increase per month)
204
208
Purchase of equipment (2,000-300)
1,700
Total payments
8,324
7,828
Closing cash and bank balances
1,476
1,428
December
1,428
2,178
6,960
9,138
10,566
727
7,128
150
218
212
8,435
2,131
28,290
6,000
22,393
28,393
(7,273)
21,120
7,170
Gross profit
Admin. & Marketing expenses:
Marketing expenses - Fixed
Marketing expenses variable
Admin. Expenses
Depreciation
Loss on replacement of machinery {500-(1,250*15%/12=16)-300}
Note 3
Note 4
NET PROFIT
450
566
624
259
184
2,083
5,087
Oct.09
7,500
1,500
6,000
Dec. 09
10,890
2,178
8,712
Jan. 10
10,000
3,000
2,800
2,800
3,000
5,800
1/4/2010 10:55:09 AM
Nov.09
9,900
1,980
7,920
5,800
3,000
3,960
6,960
Page 5 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2009
Note 2 - Purchases:
Sale
Sale price increase
Sales excluding price increase effect
Projected purchases
based on next month sales
Cash purchases 10%
Credit purchases 90%
Payment to creditors (Last months balance of creditors)
7,500
0%
7,500
7,500
9,000*0.80
7,200
720
6,480
(7,500*0.8*0.9)5,400
9,900
10%
9,900/1.10
9,000
9,900*0.80
7,920
792
7,128
6,480
7,500
9,900
300 / 2 150/7,500*9,900
150
198
10,890
10%
10,890/1.10
9,900
9,091*0.80
7,273
727
6,545
7,128
10,890
10,000
10%
10,000/1.10
9,091
150/7,500*10,890
218
Note 4 Depreciation
Fixed assets at cost
Less: Fully depreciated assets 20%
Disposals on Oct. 31 at cost (500,000/40%)
Additions on October 31 at cost
Ans.6
(a)
(b)
(c)
(d)
8,000
(1,600)
6,400
(1,250)
5,150
2,000
7,150
Oct.09
Nov.09
Dec. 09
Jan. 10
80
-
89
89
Toy Limited
Analyses of new wage plan
Raw material consumption and wastage:
Raw material consumption per unit current
Present wastage (5*7/100)
Raw material forming part of finished product
Raw material consumption per unit as revised (4.650/0.97)
Saving in raw material consumption (5.000-4.794)*100,000*40
Labour cost:
Labour hours current
Saving in labour hours due to efficiency (10*70%*20%)
Labour hours revised
Labour cost: Revised wages (8.60*25*1.12)
Premium on hours saved (1.40*18)
Revised labour cost per unit
Increase in labour cost (Rs. 266-250)*100,000
Overheads:
Current overheads per unit
Revised overheads per unit (266*0.55)
Saving in overheads (150-146.3)*100,000
Rejections:
Present rejections {(100,000/0.96)-100,000}
Rejections in the new situation {(100,000/0.97)-100,000}
Present cost of rejections of 4,167 units @ Rs. 450 (600-150)
Revised cost of rejection for 3,093 units:
{(4.794*40)+266+146.30-150}*3,093
1/4/2010 10:55:09 AM
5.000
(0.350)
4.650
4.794
824,000
10.00
(1.40)
8.60
240.80
25.20
266.00
(1,600,000)
150.00
146.30
370,000
4,167.00
3,093.00
1,875,150.00
1,404,408.00
Page 6 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2009
Ans.7
470,742
64,742
10,000
50,000
60,000
48,000
10,000
2,000
60,000
Material
48,000
(10,000)
10,000
48,000
2,000
50,000
Variances:
1)
Qty.
3,100,000
3,100,000
Rate
3)
4)
5)
1,550,000
1,860,000
310,000
3,100,000
3,000,000
Adverse
0.60
0.60
1,860,000
1,800,000
(60,000)
25,000
25,000
Adverse
52.00
50.00
1,300,000
1,250,000
(50,000)
25,000
24,300
Adverse
50.00
50.00
1,250,000
1,215,000
(35,000)
45,000/2
22,500
25,000
13.00
15.00
292,500
375,000
667,500
67,500
Favourable
7)
8)
Amount
600,000
6)
48,000
(6,000)
5,000
47,000
1,600
48,600
0.50
0.60
Favourable
2)
Conv.
Cost
(48,600/2)
25,000
24,300
Adverse
15.00
15.00
375,000
364,500
(10,500)
(48,600/2)
25,000
24,300
Adverse
13.00
13.00
325,000
315,900
(9,100)
(45,000/2)
25,000
22,500
13.00
13.00
325,000
292,500
32,500
Favourable
(THE END)
1/4/2010 10:55:09 AM
Page 7 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
Ans.1
Opening stock
Production during the period
Goods available for sale
Closing Stock
Sale
Cost of goods available for sale:
Opening stock valuation at lower of cost and NRV)
Cost of production for the period
Cost of goods available for sale
Closing stock cost
A & B (W/Avg.):
C & D (FIFO):
Selling expenses - current year
Sales price - per unit
A
B
C
D
E
F
F/BC
G{
E/AC
H
I
CI
H / D C 1.1
B
C
D
------------ Units -----------10,000
15,000
20,000
25,000
50,000
60,000
75,000
100,000
60,000
75,000
95,000
125,000
(5,000) (10,000) (15,000)
(24,000)
55,000
65,000
80,000
101,000
----------------- Rupees ----------------70,000
110,000
180,000
300,000
400,000
600,000
825,000 1,200,000
470,000
710,000 1,005,000 1,500,000
39,167
94,667
60,000
10.0
80,000
12.0
165,000
90,000
12.0
288,000
100,000
12.5
50,000
(6,000)
(900)
43,100
120,000
(13,538)
(1,200)
105,262
180,000
(18,563)
(2,000)
159,438
300,000
(26,139)
(5,250)
268,611
39,167
94,667
159,438
268,611
Ans.2
Purchase departments variable cost:
Rs.
4,224,000
Rs.
422,400
Tons
Tons
Orders
Rs.
78,000
6,500
12
35,200
177
Existing
78,000
6,500
12
3,250
2,000
5,250
422,400
929,250
1,351,650
Computation of EOQ
Demand of CALTIN
Order quantity
No. of orders
Average inventory excluding buffer stock (order quantity / 2)
Buffer stock
Average inventory
Cost of placing orders (Rs 35,200 per order)
Carrying cost ([Avg. Inventory x Rs. 177)
Total costs
Tons
Tons
Tons
Rupees
Rupees
Rupees
EOQ
78,000
5,570
14
2,785
2,000
4,785
492,800
846,945
1,339,745
Rupees
11,905
Marks
Tons
Tons
Page 1 of 7
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COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
WIP opening
Started in process / material added
Received from preceding department
Transferred out to B (664,500-24,000)x100/105
Transferred to finished goods (1,150,000-50,000-61,000-6,100)
WIP closing
Normal loss A (664,500-24,000)x5/105)
Normal loss B (10% x 610,000)
Abnormal loss B (10% x 61,000)
Dept. B
40,000
500,000
610,000
1,150,000
1,032,900
50,000
61,000
6,100
1,150,000
Department A
Material Conversion
610,000
610,000
(64,500)
(38,700)
24,000
16,800
588,100
569,500
Department B
Material
Conversion
1,032,900
1,032,900
(40,000)
(24,000)
3,660
50,000
40,000
1,042,900
1,052,560
Units
Department A
Rate
Amount
Rs.
Rs.
Quantity
Units
Department B
Rate
Amount
Rs.
333,044
22,216
12,956
368,216
1,421,000
464,500
242,800
141,600
2,269,900
WIP-closing costs
From department A
Material
Labour (70%, 80%)
Overheads (70%, 80%)
24,000
16,800
16,800
30.00
15.00
5.00
720,000
252,000
84,000
1,056,000
Rs.
Rupees
51,863,000
(2,269,900)
(368,216)
49,224,884
Page 2 of 7
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COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
Department B
Unit
cost
(Rs.)
Cost (Rs.)
Equivalent
Units
2,184,000
569,500 17,085,000
588,100 8,821,000
588,100 2,940,000
31,030,000
30.00
15.00
5.00
50.00
1,042,900
1,052,560
1,052,560
Cost (Rs.)
2,080,000
29,974,000
9,693,000
6,389,000
3,727,000
51,863,000
Unit
cost
(Rs.)
9.29
6.07
3.54
Amount
(Rs.)
610,000
(61,000)
549,000 *29,974,000
Abnormal loss at 1%
(6,100)
(333,044)
Units after inspection
542,900 29,640,956
Addition of material COY
500,000
1,042,900 29,640,956
*Rs. 31,030,000 (Total cost) Rs. 1,056,000 (Closing WIP) = Rs. 29,974,000
Unit cost
(Rs.)
54.60
54.60
54.60
28.42
Page 3 of 7
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COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
Material X
50,0006
300,000
0
300,00020/365
300,00025/365
kg
Material Y
50,0003
150,000
150,000/30
5,000
16,438 150,00020/365
(20,548) 150,00025/365
kg
295,890
8,219
(10,274)
152,945
295,89050
14,794,500
152,94530
4,588,350
Rs.
95,000
14,889,500
4,588,350.06
Rs.
(275,301)
4,313,049
10,800,000
(1,080,000)
168,0004/7100
50,0001.5150
11,250,000
50,000x2x100
10,000,000
168,0003/7150
10,800,000
450,000
168,0004/7100
9,600,000
400,000
168,0003/7150
Adverse
Favourable
Overheads spending variance:
Actual hours at standard rate-skilled
Actual hours at standard rate-unskilled
Fixed overheads as budgeted
Actual variable overheads
Actual fixed overheads
Spending variance
Overheads efficiency variance:
Standard hours for 50,000 units at
standard rate
Skilled
Unskilled
Actual hours for 50,000 units at
standard rate
Skilled
Unskilled
Unskilled labour
168,000x3/7x100
168,000x4/7x80
4,000,000x1.06
Adverse
Favourable
9,600,000
(480,000)
7,200,000
7,680,000
4,000,000
18,880,000
16,680,000
4,240,000
20,920,000
(2,040,000)
50,000*1.5*100
50,000*2*80
7,500,000
8,000,000
15,500,000
168,000*3/7*100
168,000*4/7*80
7,200,000
7,680,000
14,880,000
620,000
Favourable
Adverse
Page 4 of 7
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COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
Ans.5
Sale price
Less: Variable cost
Material Q at Rs 15
Material S at Rs 20
Labour cost at Rs. 25 per hour
Overheads
Contribution margin per unit
Annual demand
Possible production under each machine:
Processing machine:
Machine hours required per unit
Average CM per hour
Production priority
No. of units that can be produced in
available hours in order of CM priority
(Restricted to annual demand)
Hours required
Contribution margin
Rs
Units
Hours
Rs.
AW
150.00
AX
180.00
AY
140.00
AZ
175.00
30.00
10.00
50.00
37.50
127.50
22.50
5,000
37.50
12.00
56.25
45.00
150.75
29.25
10,000
22.50
8.00
43.75
43.75
118.00
22.00
7,000
26.25
13.00
62.50
56.25
158.00
17.00
8,000
5.00
4.50
2
6.00
4.88
1
8.00
2.75
3
10.00
1.70
4
5,000
25,000
112,500
10,000
60,000
292,500
7,000
56,000
154,000
900
9,000
15,300
Total
150,000
574,300
Production for product Z has to be restricted to 900 units due to limited number of machine hours.
Packing machine:
Machine hours required per unit
Average CM per hour
Production priority
No. of units that can be produced in
available hours in order of CM priority
(Restricted to annual demand)
Hours required
Hours
2.00
11.25
1
3.00
9.75
3
2.00
11.00
2
4.00
4.25
4
5,000
10,000
10,000
30,000
7,000
14,000
8,000
32,000
86,000
Conclusion :
The packing machine can meet the full demand but capacity of processing machine is limited.
Therefore, product mix of processing machine will be manufactured.
Assumption:
It has been assumed that the wage rate per eight hours is divisible.
Page 5 of 7
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COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
Ans.7
Direct labour
Hours (x)
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
50
80
120
40
100
60
450
Overheads
(y)
14,800
17,000
23,800
11,900
22,100
16,150
105,750
(xy)
740,000
1,360,000
2,856,000
476,000
2,210,000
969,000
8,611,000
(x2)
2,500
6,400
14,400
1,600
10,000
3,600
38,500
n(
Page 6 of 7
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COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2010
(THE END)
Page 7 of 7
Dure nayab 3-May-10 - 12:55:54 PM
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2010
A.1
(a) Factory overheads cost per unit based on direct labour hours used:
Beta
20,000
5
100,000
Gamma
45,000
4
180,000
Total
77,000
Alpha
12,000
20
240,000
C
Rs.
Rs. (C / A)
4,379,077
364.92
1,824,615
91.23
3,284,308
72.98
9,488,000
Gamma
Total
520,000
A.2
*1
20,000
8
160,000
400
3
45,000
10
450,000
1,350
4
*2
1,200
1,200
5,400
7,800
63,343
144,000
72,000
140,763
54,000
72,000
395,894
162,000
324,000
600,000
360,000
468,000
160,000
295,601
600,000
140,000
656,892
400,000
100,000
1,847,507
300,000
400,000
2,800,000
1,300,000
104,000
110,769
91,000
73,846
65,000
55,385
260,000
240,000
24,000
720,000
21,000
270,000
15,000
810,000
60,000
1,800,000
480,000
2,773,714
231.14
420,000
2,339,500
116.98
300,000
4,374,786
97.22
1,200,000
9,488,000
Store consumption
Inspected hours
Factory space
utilisation
Machine hours
Actual
Factory space
utilisation
Total overheads
Cost per unit
B
(B/A)
Machinery cost
Factory space
utilisation
Cost of Machinery
Factory space
utilisation
Rs.
Rs.
Journal entries:
5-Jun-2010
6-Jun-2010
12-Jun-2010
15-Jun-2010
17-Jun-2010
Beta
12,000
6
72,000
600
2
Machine hours
- Quality control
- Cleaning and related services
Alpha
Raw material
Account payable (150,000 x 85)
(Cost of material purchased)
Work in process
Raw material
(Issue of raw material to production)
Raw material
Work in process
(Defective material returned from the production)
Raw material
Account payable (150,000 x 88.1)
(Cost of material purchased)
Cash (2,500 x 20)
Factory overheads
Raw material
Debit
77,000
682,000
2,350
Credit
Rupees
12,750,000
12,750,000
12,450,000
12,450,000
415,000
415,000
13,215,000
13,215,000
50,000
165,000
215,000
Page 1 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2010
18-Jun-2010
19-Jun-2010
212,500
212,500
430,050
430,050
20-Jun-2010
21-Jun-2010
30-Jun-2010
Raw material
Account payable (2,500 x 85)
(Goods returned were replaced by the supplier)
Work in process
Raw material
(Issue of raw material to production)
Factory overheads - {500 x (86-30)} (obsolete items)
Factory overheads - (4,000 x 86) (shortages)
Raw material
212,500
212,500
12,900,000
12,900,000
28,000
344,000
372,000
Date
Particulars
01-Jun-2010 Balance
05-Jun-2010 purchases
Balance
06-Jun-2010 Issues
12-Jun-2010 Returned from production
15-Jun-2010 Purchases
Balance
17-Jun-2010 Defective goods sold
18-Jun-2010 Returned to supplier
Balance
19-Jun-2010 Replacement to production
20-Jun-2010 Replacement by supplier
Balance
A.3
Quantity
100,000
150,000
250,000
(150,000)
5,000
150,000
255,000
(2,500)
(2,500)
250,000
(5,000)
2,500
247,500
Receipts /(Issues)
Rate
80.00
85.00
83.00
83.00
83.00
88.10
86.00
86.00
85.00
86.01
86.01
85.00
86.00
Rupees
8,000,000
12,750,000
20,750,000
(12,450,000)
415,000
13,215,000
21,930,000
(215,000)
(212,500)
21,502,500
(430,050)
212,500
21,284,950
Rate
1.30
0.50
1.80
0.11
300,000
240,000
6,923,077
7,463,077
Page 2 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2010
Rs.
3,000.25
Rs.
600.05
A.4
Sales
Cost of goods sold
Opening stock
Production for the year
Closing inventory
Units
Units
21,000
Marginal Costing
Cost per unit
1,100
950
22,150
2,100
300+300+45
648.5
648.5
Absorption Costing
Cost per unit
Marginal Costing
Absorption Costing
Rupees
23,100,000
23,100,000
300+300+45+333.33
648.5+306.09
648.5+306.09
612,750
14,364,275
(1,361,850)
13,615,175
3,315,690
6,169,135
{(21,000x157.89} + 7,000,000
Profit reconciliation:
In absorption costing fixed costs:
- Brought forward from the last year through opening inventory
- Carried forward to the next year through closing inventory
- Rounding of difference
W -2
(70%*10,000,000)
950*333.33
2,100*306.09
929,414
21,144,169
(2,004,639)
20,068,944
3,031,056
10,315,690
6,780,000
7,000,000
(7,610,865)
(7,284,634)
(316,664)
642,789
106
(7,284,634)
(7,284,634)
12,437
296.40
9.50
280.50
14.85
47.25
648.50
157.89
806.39
(6,000,000*1.08)
6,480,000
300,000
6,780,000
6,000,000/18,000
6,780,000/22,150
333.33
306.09
19,000* 5%
21,000*10%
Units
21,000
(950)
2,100
22,150
Page 3 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2010
A.5
Sales price
Direct material cost
Variable overheads
Contribution margin
Machine hours
Contribution margin per hour
Priority based on contribution per machine hour
Units to be produced:
Small size
75.00
(25.00)
(5.00)
45.00
2.00
22.50
1
Small size
100,000
200,000
Medium size
90.00
(32.00)
(7.00)
51.00
4.00
12.75
3
Medium
size
100,000
400,000
Large size
130.00
(35.00)
(8.00)
87.00
5.00
17.40
2
Large size
100,000
500,000
110,000
80,000
210,000
20,000
120,000
A.6
180,000
Qty.
in 000
500
Rate
220,000
400,000
80,000
1,800,000
Amount
Rupees in '000
215
107,500
103,900
3,600
1,100,000
Variance
Fav./(Adv.)
Quantity
Description
Machine
hours
+/(-) in profit
480
600
295,000
288,000
7,000
480
500
215
215
103,200
107,500
(4,300)
950
50
55,000
47,500
(7,500)
950
1,200
50
50
47,500
60,000
12,500
(480 2.5)
Page 4 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2010
100
105,000
99,000
(6,000)
990
960
100
100
99,000
96,000
(3,000)
31,100
500
990
10
25
5,000
24,750
29,750
(1,350)
(4802)
990
960
25
25
24,750
24,000
(750)
(990/2)
480
495
10
10
4,800
4,950
(150)
495
500
10
10
4,950
5,000
A.7
(480 2)
990
(990/2)
Journal entries
Payroll expense
Provision for vacations pay (vacations availed during the month)
Payroll payable (1,635-193+85)
Contribution to provident fund payable (Co. & employees)
Provision for bonus
Provision for vacation pay
Employees income tax payable
Advance against salary
(To record payroll cost, liability and provisions)
Work in process (1,338.88+545.56)
Factory overheads (36.60+109.79)
Payroll expenses
(To allocate payroll cost to WIP and factory overheads)
Advance against salary
Payroll payable
Contribution to provident fund payable (Co. & employees)
Employees income tax payable
Bank
(50)
(3,600)
Debit
Credit
Rupees in 000
2,030.83
85.00
1,527.00
250.00
125.00
145.83
40.00
28.00
1,884.44
146.39
2,030.83
17.00
1,527.00
250.00
40.00
1,834.00
Page 5 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2010
Cost
Payroll cost
Overtime
Employers contribution to PF
Provision for year-end bonus
Provision for paid vacation
(A*0.833)
(A/12)
(A*35/360)
(A*0.833)
Assembly
WIP
1,000.00
75.00
1,075.00
83.33
83.33
97.22
1,338.88
400.00
40.00
440.00
33.34
33.34
38.89
545.56
25.00
83.33
15.00
33.33
108.33
48.33
Tool room
Stores
Overheads
Rupees in '000
25.00
5.00
30.00
2.09
2.08
2.43
36.60
75.00
15.00
90.00
6.25
6.25
7.29
109.79
2.08
6.25
2.08
6.25
Total
1,500.00
135.00
1,635.00
125.00
125.00
145.83
2,030.83
40.00
125.00
28.00
193.00
(THE END)
Page 6 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2011
A.1
91,125,000
20,250,000
64,800,000
40,500,000
10,000,000
(226,675,000)
10,925,000
86,400,000
18,000,000
54,108,000
28,800,000
1,500,000
8,500,000
(197,308,000)
40,292,000
Rupees
237,600,000
Rupees
237,600,000
20 Minutes
6 Minutes
14 minutes
Rs. 8,748,000
Rs. 45,360,000
Rs.54,108,000
Rs. in million
Rs. 12.5
60
9
18
5%
Page 1 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2011
(b) Computation of actual cost of producing one unit of product:
Material cost
Labour cost
(0.22 m Rs. 120)
(0.53 m Rs. 120)
(0.24 m Rs. 120)
Actual overhead cost
Total Cost
Option - 1
No. of hours required per unit (1.5 0.65/ 0.78)
Total no. of hours required (40,000 1.25)
Piece wages (40,000 72)
Variable overhead ( 50,000 75)
Total conversion cost
Option - 2
Labour hours available (250 200)
Overtime hours (10,000 40%)
Total labour hours
Standard hours allowed for the bonus plan (40,000 1.4)
Guaranteed wages (56,000 48)
Variable overhead (54,000 75)
Total conversion cost
Departments
--------------Rupees in million---------A
B
C
80.00
150.00
120.0 0
26.40
5.35
111.75
31.30
4.25
5.35
1.10
63.60
8.90
222.50
62.32
137.39
9.54
8.90
(0.64)
28.80
7.45
156.25
43.77
7.44
7.45
0.01
60,000
50,000
10,000
2,100,000
735,000
2,835,000
4,500,000
7,335,000
1.25
50,000
2,880,000
3,750,000
6,630,000
50,000
4,000
54,000
56,000
2,688,000
4,050,000
6,738,000
Recommendation: By implementing option 1 the conversion cost would be reduced to Rs 165.75 per
unit from the existing Rs. 183.38 per unit. The workers would be paid Rs. 2.880 million which is
better than option 2. The workers would certainly try to earn this amount in the least possible time.
Page 2 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2011
A.4
Therefore, option 1 would be the most economical choice for both the workers and the management.
Calculation of unit price to be quoted to Pearl Limited:
Material (25,000 200)+(53,125 225) + 80,000
Labour (20,000 45 40%) + (210,625 45)
Variable overhead (230,625 Rs. 25)
Incremental fixed cost (22m / 10 1.5)
W-1
W-2
W-1: Material
Input units of material C (150,000 / 96%) 0.5
78,125
W-2: Labour
Labour hours completed units 150,000 x 1.50
lost units {[(150,000 / 0.96) 150,000] 1.5 60%}
A.5
225,000
5,625
230,625
Rs. 845
Rs. in '000
3,120
62,540
65,660
W 1:
W 2:
23,500
25,500
12,000
61,000
126,660
(W2)
17,033,125
9,838,125
5,765,625
3,300,000
35,936,875
8,984,219
44,921,094
299
A
B
C
Factory
overheads
84,660,000
80,580,000
4,080,000
102
25,500,000
Rs. 208
608,942
Selling and
distribution
expenses
26,500,000
25,500,000
1,000,000
25
12,000,000
Rupees
340
170
102
25
637
Page 3 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2011
(b) Minimum price that should be charged if EL wants to sell 650,000 units
Rs. 000
126,660
2,500
129,160
650,000
198.71
637.00
835.71
(b)
Particulars
Factory Ledger
Debit
Credit
Material X
Material Y
General Ledger
(Purchase of material)
2,500,000
5,250,000
Payroll
General Ledger
2,000,000
Particulars
General Ledger
Debit
Credit
Factory Ledger
Trade Creditors
7,750,000
2,000,000
1,000,000
(Payroll accrual)
Factory Ledger
Selling
and
administrative
expenses
Accrued Payroll
Payroll taxes
No Entry
Accrued payroll
7,750,000
2,000,000
Payroll Taxes
Bank
(Payment of payroll &
taxes)
7,750,000
2,760,000
240,000
2,760,000
240,000
3,000,000
Page 4 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2011
Work in process A
Work in process B
Work in process C
Material X
Material Y
(Issuance
of
raw
material to WIP)
1,000,000
2,625,000
1,125,000
Work in process A
Work in process B
Work in process C
Factory overheads
Payroll
(Direct labour cost
allocated to WIP)
450,000
540,000
975,000
35,000
Work in process A
Work in process B
Work in process C
Factory overheads
- applied
(Factory
overheads
applied to WIP)
150,000
225,000
375,000
Factory overheads
General Ledger
700,000
15,000
Finished goods A
Finished goods B
Work in process A
Work in process B
(Jobs A and B
completed and
transferred to finished
goods)
1,600,000
3,390,000
General Ledger
Finished goods A
(Job A delivered and
transferred to cost of
goods sold)
1,600,000
No Entry
1,250,000
3,500,000
2,000,000
750,000
700,000
15,000
1,600,000
3,390,000
1,600,000
No Entry
No Entry
No Entry
Factory Ledger
Bank
Accumulated
Depreciation
(Actual factory
overheads transferred)
Factory Ledger
700,000
15,000
300,000
400,000
15,000
No Entry
1,600,000
Trade Debtors
Sales
( Job A sold to
2,000,000
1,600,000
2,000,000
Page 5 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Spring 2011
customer)
No Entry
Bank
Cash discount
Trade debtors
(Amount realized from
customer)
1,960,000
40,000
No Entry
Selling
and
administrative
expenses
Bank
(Payment of Selling
and admin. Expenses)
500,000
2,000,000
500,000
(THE END)
Page 6 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2011
A.1
Allocation of costs to
cost centres
Area Occupied
Allocation of Electricity
Allocation of rent
Operational cost
Basis
Machine M1 Machine M2
Area
Area
5,500
330,000
220,000
5,500,000
6,050,000
Inspection
4,800
12,000
288,000
192,000
3,200,000
3,680,000
720,000
480,000
1,200,000
A.2
(a)
March 2011
April 2011
May 2011
June 2011
July 2011
August 2011
Cost Rs.000
(y)
900
700
850
950
1,200
1,040
5,640
Units (x)
75
60
65
80
105
95
480
n( xy) - ( x)( y)
( y) b( x)
n( x ) ( x)
2
15,000
37,300
2,238,000
1,492,000
8,700,000
12,430,000
A
5,600
1,400
1,120
2,800
2,800
B
7,500
1,500
1,250
4,875
2,625
TOTAL
2,207,166
1,899,355
579,310
708,861
5,394,692
3,842,834
1,780,645
620,690
791,139
7,035,308
6,050,000
3,680,000
1,200,000
1,500,000
12,430,000
(xy)
Total
900,000
600,000
1,500,000
Packing
2,900
2,370
7,675
5,425
(x2)
67,500
42,000
55,250
76,000
126,000
98,800
465,550
5,625
3,600
4,225
6,400
11,025
9,025
39,900
Direct
1,175
100
1,275
Indirect
Rupees
45
75
120
Total
1,175
145
75
1,395
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2011
Reasons for the allocation:
Normal wages paid for production will be charged to production. The portion of the overtime
wages which is paid in excess of the normal wages should be charged to indirect labour as it
does not give extra production. Idle time wages are unproductive, therefore will be charged to
indirect labour.
A.3
(a) (i)
Materials
A (30/400 192)
B (25/400 192)
Quantity (kg)
14.4
12
26.4
Materials
A
B
Quantity (kg)
16
13
29
Materials
A
B
Quantity (kg)
16
13
29
Amount
Amount
Amount
240
320
230
308
240
320
Materials
A (30/55 29)
B (25/55 29)
Quantity (kg)
15.82
13.18
29
3,456
3,840
7,296
3,680
4,004
7,684
3,840
4,160
8,000
Amount
3,796.80
4,217.75
8,014.55
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2011
(b)
(W-1)
Production Overhead:
Variable
Fixed
Total cost
Actual (30-06-2011)
Budget (30-09-2011)
Rupees
120,000
132,000
75,000
64,350
195,000
196,350
70,000
45,000
310,000
80,080
45,000
321,430
W-1:
The labour hours will increase by 10%. Also there will be increase in labour hours as
production efficiency has decreased by 4%. Therefore, increased total labour hours will
be:
(75,000 4) = 18,750
110 104
= 21,450
100 100
Rate is decreased to Rs. 3. Therefore, direct labour cost will be 21,450 x 3 = Rs. 64,350.
A.4
(W-2)
(W-2)
(W-3)
39,500
10,500
5,000
55,000
55,000
Labour
39,500
3,500
43,000
FOH
39,500
3,500
43,000
99,000
1.80
Total Cost
Unit Cost
Rupees
27,520
15,480
43,000
142,000
0.64
0.36
1.00
0.18
2.98
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2011
(39,500 Rs 2.98)
20,790
2,240
1,260
117,710
24,290
142,000
Equivalent
0.20
0.06
0.0735
0.3335
Labour
43,000
27,520
0.64
(Litres)
(Rs.)
(Rs.)
FOH
43,000
15,480
0.36
Unit cost of lost units = (lost units cost from department 1) / (units from department 1 - lost units)
= (5,000 1.80) / (55,000 units 5,000 units) = Rs 9,000 / 50,000 = Rs 0.18
(i) Optimal Production Plan
Football
0.4
Basketball
0.7
Rugby ball
5,000
2,000
3,500
2,450
0.5
2,000
1,000
Football
295
Basketball
397
Rugby ball
500
0.4
230
2
0.7
120
3
0.5
250
1
38
100
65
203
92
238
50
25
313
84
Total
5,450
3,840
255
75
45
375
125
(Sq. ft.)
3,840
(320)
(910)
(200)
2,410
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2011
Now, the scarce material will be allocated as per ranking.
Leather
Product
Volume
requirements
Rugby ball
Football (balance)
Basketball
1,600
4,025
Nil
0.5
0.4
0.7
Units
Rugby ball
2,000
Football
4,825
Basketball
1,300
Total Contribution
Less: Fixed costs (Note 1)
Profit
A.6
(a)
Rugby ball
Football
Basketball
Total Fixed Costs
Units
800
1,610
-
2,000
5,000
3,500
125
92
84
(2,0001.5)=3,000
(5,0002)=10,000
(3,5001)=3,500
Particulars
Existing
300,000
(240,040
)
59,960
(2,400)
57,560
(17,268)
40,292
-
Balance
unused
2,410
1,610
Contribution
margin
250,000
443,900
109,200
803,100
(66,000)
737,100
Material used
Fixed costs
per D.L Hour
4
4
4
Fixed costs
12,000
40,000
14,000
66,000
Rupees in '000
PI
422,500
PII
527,500
PIII
620,000
(338,040)
84,460
(422,040)
105,460
(496,040)
123,960
(3,863)
80,597
(24,179)
56,418
16,126
18,286
88%
(5,627)
99,833
(29,950)
69,883
29,591
40,335
73%
(7,937)
116,023
(34,807)
81,216
40,925
69,203
59%
300,000
422,500
527,500
620,000
80%
80%
80%
80%
40
40
40
40
240,040
338,040
422,040
496,040
COST ACCOUNTING
Suggested Answers
Intermediate Examinations Autumn 2011
) (b)
Existing
PI
PII
PIII
240,040
338,040
422,040
496,040
/
/
/
/
8
7
6
5
30,005
48,291
70,340
99,208
@ 8%
@ 8%
@ 8%
@ 8%
Carrying
cost
2,400
3,863
5,627
7,937
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2012
A.1 PRESENT SCENARIO
Carrying cost per unit:
Storage costs
Insurance cost
Store keepers salary
Cost relating to final quality check
Opportunity cost of capital (per pair) [ Rs. 1,000 100 x 0.15]
Rupees
80
60
135
275
EOQ =
2( F )( S )
(C )
EOQ =
2 11,000 200,000
=
275
8,000
3,000
11,000
4,400,000,000
275
16,000,000
EOQ = 4,000
Number of orders = 50
IF DISCOUNT IS AVAILED
Carrying cost per unit
Storage costs
Insurance cost
Opportunity cost of capital [ Rs. 900 x (1- 0.03) x 0.15]
Number of orders would be (200,000 / 5,000)
Total relevant costs:
Purchase price [Rs. 900 x (1-.03) x 200,000]
Total ordering cost [ Rs. 11,000 x 40]
Total carrying cost [ Rs. 270.95 x 5,000 /2]
180,000,000
550,000
550,000
181,100,000
80.00
60.00
130.95
270.95
40
174,600,000
440,000
677,375
175,717,375
Conclusion:
Yes. Quantity discount should be availed.
A.2 Let X represent total overheads of department X
And Y total overheads of department Y
Since X received 20% of Ys services
Thus X = 16,500 + 0.2 Y
Likewise Y = 10,600 + 0.1X
Page 1 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2012
Using substitution method of simultaneous equation
X = 16,500 + 0.2 (10,600 + 0.1X)
X = 16,500 + 2,120 + 0.02X
X 0.02X = 18,620
0.98X = 18620
X = 19,000
Y = 10,600 + (0.1 19,000)
Y = 12,500
Overheads charged to production:
Allocated overheads
Share of Xs service (Rs. 19,000 % served)
Share of Ys service (Rs. 12,500 % served)
A
56,000
3,800
5,000
64,800
B
50,000
7,600
2,500
60,100
A.3 Comparative statement showing actual profit and potential profit in absence of labour turnover:
Actual
Rupees
Sales
63,400,000
Less: Costs
Direct material
(15,216,000)
Direct labour
(26,400,000)
Variable overhead
(9,600,000)
Fixed overheads
(6,000,000)
Cost incurred on Appointments
(200,000)
(57,416,000)
Net Profit
5,984,000
C
38,000
5,700
2,500
46,200
Potential
65,600,000
(15,744,000)
(27,060,000)
(9,840,000)
(6,000,000)
(58,644,000)
6,956,000
12,000
4,500
16,500
480,000
(4,500)
475,500
317,000
63,400,000
2,200,000
65,600,000
328,000
15,216,000
528,000
15,744,000
26,400,000
660,000
27,060,000
9,600,000
240,000
9,840,000
Page 2 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2012
A.4 (a) CALCULATION OF BREAK-EVEN POINT OF SALES IN UNITS:
Small pack of product-B
Required Contribution Margin
Annual fixed cost (Rs. 7.6 million x 12)
Less: Estimated contribution margin
Product-A Large pack
[250,000 units x Rs. 120]
Product-A Small pack
[150,000 units x Rs. 45]
Product-B Large pack
[225,000 units x Rs. 150]
Required contribution from small pack of Product-B
Break-even sales in units [Rs. 20,700,000 / Rs. 90)
Rupees
91,200,000
(30,000,000)
(6,750,000)
(33,750,000)
(70,500,000)
20,700,000
Units
230,000
Working Notes
Product-A
Rs. per unit
Large Pack
Sales price [120 / (1-0.75)]
Less: Variable cost [Rs. 480 75%]
Contribution Margin
Small Pack
Sales price [Rs. 480 3/5]
Less: Variable cost [Rs. 360 67.5%]
Contribution margin
Product-B
Large Pack
Sales price [Rs. 150/0.4] OR [225 + 150]
Less: Variable cost [ Rs. 375 Rs. 150] OR [150 x 3/2]
Contribution Margin
Small Pack
Sales price [Rs. 375 x 0.64]
Less: Variable cost [ Rs. 225 x 2/3]
Contribution margin
(b) Sales in units of small pack of product-B to produce net income of Rs. 10,530,000.
Desired net income
Applicable tax rate
Income before tax [ Rs. 10,530,000 / (1- 0.25)]
Add: fixed cost [ 7,600,000 x 12]
Required total contribution margin from all packs of A and B
Less: Contribution margin of both packs of Product-A and large pack of B
Contribution margin from Product-B
Contribution margin per unit of the small pack of product-B
Required number of units of small pack of product-B to earn desired income
480
(360)
120
288
(243)
45
375
(225)
150
240
(150)
90
Rupees
10,530,000
25%
14,040,000
91,200,000
105,240,000
(70,500,000)
34,740,000
90
386,000
Page 3 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2012
(c)
Per unit
Variable
Price
cost
480
360
288
243
375
225
240
150
Rupees
Sales
volume
Sales
250,000
150,000
225,000
386,000
Variable cost
120,000,000
43,200,000
84,375,000
92,640,000
340,215,000
90,000,000
36,450,000
50,625,000
57,900,000
234,975,000
Contribution
margin
30,000,000
6,750,000
33,750,000
34,740,000
105,240,000
Rupees
340,215,000
(234,975,000)
105,240,000
(91,200,000)
14,040,000
(3,510,000)
10,530,000
Pentagon
2,300
Hexagon
1,550
Octagon
2,000
1,666.67
1,052.63
1,358.70
25
37.5
56.25
133.33
85.53
1,825.00
475.00
4.0
118.75
3
1,175.66
374.34
2.5
149.74
2
121.74
1,536.69
463.31
3.0
154.44
1
Volume
9,000
20,000
5,750
Hours required
3.0
2.5
4.0
Hours used
27,000
50,000
23,000
Balance unused
100,000
73,000
23,000
-
Page 4 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2012
(i)
A.6
Contribution margin
4,169,790
7,486,800
2,731,250
14,387,840
(5,000,000)
9,387,840
Mar
100,000
83,800
Rs. in 000
Apr
109,204
68,800
May
104,828
59,400
(47,250)
(13,200 )
(8,800)
(3,000 )
(2,346)
(74,596 )
109,204
(44,250)
(14,400)
(9,600 )
(3,000)
(1,926 )
(73,176)
104,828
(48,000)
(15,600)
(10,400 )
(1,663 )
(75,663)
88,565
Working notes:
W-1: Collections - Jan Sales
Feb Sales
85,000
95,000
Mar
Sales Gross
Collections:
Cash sales
1st month after sale
2nd month after sale
Apr
May
55,000
60,000
65,000
11,000
45,600
27,200
83,800
12,000
26,400
30,400
68,800
13,000
28,800
17,600
59,400
W-2 Purchases:
Sales Gross (June)
Sales Gross
Cost of sales [75% of sales]
Less: Opening stock [80% of cost of sale]
Add: Closing stock [80% of next cost of
sales]
Purchases (A+CB)
Payment to creditors
A.7 (a) (i)
75,000
A
B
C
Feb
95,000
71,250
(57,000)
Mar
55,000
41,250
(33,000)
Apr
60,000
45,000
(36,000)
May
65,000
48,750
(39,000)
33,000
47,250
36,000
44,250
47,250
39,000
48,000
44,250
45,000
54,750
48,000
Kg.
25,000
Rupees
625,000
432,000
288,000
1,345,000
(40,000)
1,305,000
(5,000)
20,000
Page 5 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2012
(ii) Profit per kg of Alpha and Beta:
Rupees
1,305,000
(105,000)
1,200,000
Product
Alpha
Beta
Kg.
15,000
3,000
18,000
Output %
75%
15%
NRV at
Total NRV
split-off
95-30=65
975,000
175
525,000
1,500,000
Joint cost
allocation
780,000
420,000
1,200,000
Total
profit
195,000
105,000
Profit
per Kg.
13
35
Rupees
18,000,000
5,760,000
4,320,000
2,160,000
2,400,000
14,640,000
(2,440,000)
(12,200,000)
(300,000)
6,100,000
(1,500,000)
(800,000)
(2,300,000)
3,800,000
Page 6 of 6
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
Ans. 1 (a)
21,000
9,000
3,000
1,500
2,000
4,000
5,000
195,500
Less:
Under-recovery of production overheads
Under-recovery of administrative overheads
Overvaluation of closing stock in cost accounts
Expenses excluded from cost accounts:
Loss on sale of assets
Interest expenses
Preliminary expenses written off
Income tax
Transfer to reserve fund
Profit as per financial accounts
(b)
Demand
Units
1,000
1,100
1,200
1,300
(11,500)
(18,000)
(4,500)
(1,000)
(2,500)
(12,000)
(8,000)
138,000
Selling
Total
Marginal
Cost per
Marginal
price per
Total Cost
Revenue
Revenue
unit
Cost
unit
--------------------------------------------Rupees-------------------------------------------55
55,000
55,000
29
29,000
29,000
53
58,300
3,300
28
30,800
1,800
52
62,400
4,100
27
32,400
1,600
49
63,700
1,300
26
33,800
1,400
Marginal revenue is greater than Marginal cost at 1,200 units but declines at the
level of 1300 units, therefore profits will be maximised at the selling price of Rs. 52
per unit.
Ans.2
Efficiency
%
60
70
80
90
100
110
120
130
Output
per day
(units)
48
56
64
72
80
88
96
104
Piece Wage
@ Rs.
3/piece
Guaranteed
Time
wages/day
Rs.
144
168
192
216
240
264
288
312
Rs.
168
168
-
20%
Additional
piece wage
30%
Additional
piece wage
Rs.
Rs.
-
43.20
48.00
-
79.20
86.40
93.60
Page 1 of 8
Total
Labour
cost
Rs.
168.00
168.00
192.00
259.20
288.00
343.20
374.40
405.60
Labour
cost per
piece
Rs.
3.50
3.00
3.00
3.60
3.60
3.90
3.90
3.90
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
Notes:
(i) As guaranteed time wage is equal to 70% efficiency, the time wages of Rs. 168 per
day is payable for efficiency up to 70%.
(ii) Normal piece wages are payable at 80% efficiency level.
(iii) For efficiency levels from 90% to 100%, 20% of the piece wages have been added.
(iv) For efficiency levels above 100%, 30% of the piece wages have been added.
Ans.3
(a)
Leaf
(Rs.)
(Rs.)
Direct Materials
20,000
16,000
Direct labour
18,000
24,000
Prime Cost
38,000
40,000
18,000 x
24,000 x
20,000 y
16,000 y
Total Cost
Sales
Less : Profit
Petal 25% on cost or 20% on sales
Leaf 30% on sales
Total Cost
Petal
(Rs.)
65,000
Leaf
(Rs.)
80,000
(13,000)
52,000
(24,000)
56,000
Thus,
Total Cost of Petal is 38,000 + 18000x + 20000y = 52,000
or 18000x + 20000y = 14,000 (i)
Total Cost of Leaf is 40,000 + 24000x +16000y = 56,000
or 24000x + 16000y = 16,000 (ii)
Equation (ii) multiplied by 0.75 and after deducting from equation (i), we get
18000x + 20000y = 14,000
18000x 12000y = 12,000
8000y = 2,000
or y = 0.25 or 25%
Putting value of y in equation (i), we get
18000x + 20000 0.25 = 14,000
or 18000x = 14,000 5,000
or 18000x = 9,000
or x =0.5 or 50%
As the percentage of :
Factory overheads on direct labour = 50 % and
The percentage of administrative overheads on manufacturing cost = 25%
Page 2 of 8
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
Rupees
9,000
12,000
5,000
4,000
Leaf
Idle Time:
It is a time during which no production is carried out because the worker remains
idle even though they are paid. Idle time can be normal idle time or abnormal idle
time. Normal idle time is inherent in any work situation and cannot be eliminated
whereas abnormal idle time arises due to abnormal factors like lack of coordination,
power failure, machine breakdowns, non-availability of raw materials, strikes and
lockouts, etc.
Treatment of idle time
Normal idle time is treated as a part of the cost of production. In the case of direct
workers, an allowance for normal idle time is built into the labour cost rate. In the
case of Indirect workers, normal idle time is spread over all the products or jobs
through the process of absorption of factory overheads.
Abnormal idle time cost is not included as a part of production cost and is shown as
a separate item in the costing profit and loss account.
Ans. 4
Chemical Bee:
Stock as per records [ 1,000 + 420 + 500 560 300 250 500]
Add:
- 150 litres held on behalf of customer
- Inventory received after cut-off date taken in count
- Return from production process not recorded
Less:
- Adjustment for contaminated stock
- Adjustment for incorrect recording
Physical balance
Litres
310
150
250
100
(95)
(180)
535
Chemical Gee:
Stock as per records [ 500 + 450 + 700 + 250 650 300 150 450]
Add:
- Inventory issued after stock count
- No adjustment for stock returned after month end
Less:
- 100 litres were held by supplier on ML's behalf.
- Adjustment for contaminated stock
- Adjustment for incorrect recording
Physical balance
(100)
(105)
(100)
140
310
100
(95)
(180)
135
Page 3 of 8
350
95
0
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
Rate
Cost of closing stock as at 31 May 2012
W-1: Working for rate of closing stock of chemical Bee:
Balance as of 09-05-2012 [1000 560 300]
Add: Actual purchases on 12-05-2012
Less: Issuance on 18-05-2012
Add: Actual purchases on 24-05-2012
(W-1)
Litres
140
240
380
(250)
130
500
630
Rate
50.00
52.00
51.26
51.26
51.26
55.00
54.23
(W-2)
54.23
Rs. 7,321
Amount
7,000
12,480
19,480
(12,816)
6,664
27,500
34,164
350
(105)
(100)
145
116.93
16,955
Litres
500
450
950
950
0
700
(150)
550
150
700
Rate
115
110
112.63
112.63
0
115.00
115.00
115.00
124.00
116.93
95
105
20
50
Amount
57,500
49,500
107000
107000
0
80,500
(17,250)
63,250
18,600
81,850
1,900
5,250
The buying price of the component is Rs. 40 per unit so if resources are readily available
the company should manufacture the component. However, due to the scarcity of
resources during the next 8 months the contribution earned from the component needs to
be compared with the contribution that can be earned from the other products.
Page 4 of 8
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
W-1:
Using Alpha (though any product could be used) the variable overhead rate per hour can
be calculated:
Labour related variable overheads per unit = Rs 1.5
Direct labour hours per unit = Rs 25 / Rs 10 = 2.5 hours
Labour related variable overhead per hours = Rs. 1.5 / 2.5 hour = Rs 0.60 per hour
Machine related variable overhead per hour = Rs. 1.6 / 8 hour = Rs 0.2 per hour
Both material-A and material-B are limited in supply during the next 8 months, but
calculations are required to determine whether this scarcity affects the production plans of
AL. The resources required for the maximum demand must be compared with the
resources available to determine whether either of the materials is a binding constraint.
Total quantity of each product to be manufactured:
Government order
Market demand
Total
------------------------------Units-----------------------------Alpha
200
900
1,100
Beta
300
3,000
3,300
Gamma
400
5,000
5,400
Zeta
0
600
600
All figures in kg:
Resource
Direct material-A
Direct material-B
Available
22,000
34,000
Requirement
18,400
35,200
Alpha
2,200
2,200
Beta
0
9,900
Gamma
16,200
21,600
Zeta
0
1,500
It can be seen from the above that the scarcity of material-B is a binding constraint and
therefore the contributions of each product and the component per kg of material-B must
be compared.
Alpha
Contribution
Contribution /kg of material-B
Rank
17.9
8.95
3
Beta
Gamma
Rupees
36.8
42.3
12.27
10.58
Zeta
14.0
5.60
4
AL should manufacture 120 units of Zeta and continue to purchase 480 units from the
market.
Ans.6
(W-1)
15,000
82,500
97,500
75,000
Page 5 of 8
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
12,500
10,000
97,500
50,000
25,000
12,500
10,000
97,500
(15,000 )
82,500
Material
8,250
4,250
Conversion
50,000
25,000
4,250
10,000
89,250
Rs.
90,000
547,125
(12,375)
624,750
Cost incurred:
Opening W.I.P
During the month (Product X and Y)
Less: Sale of normal loss (8,250 Rs. 1.5)
Total cost to be accounted for (624,750 + 253,875)
Rate per unit of equivalent product
BA
Total per unit cost Rs. (7 + 3)
7.00
50,000
25,000
2,125
7,500
84,625
Rs.
25,000
228,875
253,875
878,625
3.00
10
Rs.
750,000
29,750
6,375
36,125
70,000
22,500
92,500
878,625
Page 6 of 8
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
Ans.7
(W-1)
5 months
70%
7 months
92%
300,000 5 70%
12
300,000 7 92%
12
=87,500 units
=161,000 units
Rs.
2,975,000
(1,050,000)
Rs.
(1,932,000)
(750,000)
(1,288,000)
(312,500)
(525,000)
(262,500)
(2,900,000)
75,000
(437,500)
(966,000)
(472,500)
(5,096,000)
861,000
5,957,000
Ans.8
(a)
(b)
Note
1
2
3
4
5
6
7
Rs.
NIL
8,160
600
2,400
3,250
450
NIL
14,860
Page 7 of 8
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Autumn 2012
Notes:
1.
In case of technical managers meeting with the potential client, the relevant cost
is NIL because it is not only a past cost but also the manager is paid an annual
salary and therefore TL has incurred no incremental cost on it.
2.
Since wire-C is regularly used by TL, its relevant value is its replacement cost. The
historical cost is not relevant because it is a past cost and the resale value is not
relevant since TL is not going to sell it.
3.
Since wire-D is to be purchased for the contract therefore its purchase cost is
relevant. TL only requires 50 kg of wire-D but due to the requirement of minimum
order quantity TL will be purchasing 60 kg of the material and since TL has no
other use for this material, the full cost of purchasing the 60 kg is the relevant cost.
4.
Since the components are to be purchased from the market at a cost of Rs. 80
each. Therefore, the entire purchase price is a relevant cost.
5.
The 100 hours of direct labour are presently idle and hence have zero relevant
cost. The remaining 150 hours are relevant. TL has two choices: either use its
existing employees and pay them overtime at Rs. 23 per hour which is a total cost
of Rs. 3,450: or engage the temporary workers which would cost TL Rs. 3,250
including supervision cost of Rs. 100. The relevant cost is the cheaper of the two
alternatives i.e. Rs. 3250.
6.
The lease cost of machine will be incurred regardless of whether it is used for the
manufacture of motors or remains idle. Hence, only the incremental running cost
of Rs. 15 per hour is relevant.
7.
Fixed overhead costs are incurred whether the work goes ahead or not so it is not
a relevant cost.
(THE END)
Page 8 of 8
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
Ans.1
(a)
Scrap:
Scrap is the discarded material in the production process/ Incidential residue that
may be obtained from manufacture. Scrap cannot be put back into production for
the same purpose as before but may be usable for a different purpose or production
process, or sold to outsiders for a nominal amount.
Defectives:
Units that do not meet production standards and must be processed further in
order to be saleable along with good units, or sold as irregulars.
Defectives can be classified as normal defective and abnormal defective.
Spoilage:
Spoiled Units in manufacturing process cannot normally be made into
standard finished units without incurring uneconomical cost. They do not
meet production standards and are either sold for their salvage value or
discarded. Spoiled units are taken out of the production process and no further
work is performed on them.
Spoilage can either be normal or abnormal.
Accounting treatment for scrap:
No entry is normally made on the books when scrap is returned to the
materials inventory.
Allocated (applied) to specific job:
When scrap is relatively significant and is identifiable with the process or job,
the cost of scrap will be transferred to scrap account and any realisation from
sale of such scrap will be credited to the job or process account and any
unrecovered balance in the scrap account will be transferred to profit and loss
account.
Allocated (applied) to all jobs:
When scrap cannot be linked to a particular product / job / process, the value
of scrap (i.e. net scrap value after deducting any sale related expenses) should
be deducted from the overheads or from the materials cost.
Accounting treatment for defective units:
The accounting treatment of defectives is as follows:
Normal defective:
Cost of rectification of normal defect is charged to good units.
If defect can be identified with specific job, rework cost should be charged to
work in process inventory for the specific job.
If defect cannot be identified with specific job / process, rework cost of
normal defect should be charged to production overheads.
Abnormal defective:
Cost of rectification of abnormal defective units should be transferred to
income statement as a period cost.
Page 1 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
(b)
(i)
Computation of EOQ
(ii)
Rupees
100
22,050
22,150
(3,000)
19,150
18,000
1,150
Page 2 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
Ans.2
(a)
Adv.
30 minutes
Rs. 150
Rs. 160
13,500 hours
14,850 hours
Rs. (202,500)
Rs. (148,500 )
Rupees
175,000
178,200
162,000
(16,200)
Adv.
(b)
2.8 kg
Rs. 6.75
Rs. 6.25
75,600kg
80,640kg
Rs. (34,020)
Rs. 40,320
[(vi) (vii)]
Adv.
252,450
267,300
243,000
270,000
(24,300)
427,450
(178,200)
(270,000)
(448,200)
20,750
(27,000)
Page 3 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
Ans.3
(a)
(b)
= 4 hrs.
= 100,000 hrs.
= 2.08 hrs.
= 2.6 hrs.
= 65,000 hrs.
= 35,000 hrs.
= Rs. 245,000
= Rs. 61,250
(25,000 12 2)
(@ Rs. 7 per hour)
(@ Rs. 10 per hour)
(@ 2% of direct material cost)
Before
Suggestion
(100,000 hrs.)
600,000
700,000
1,000,000
12,000
2,312,000
Ans.4
After
Suggestion
(65,000 hrs.)
600,000
455,000
650,000
12,000
15,000
1,732,000
(Rs.)
580,000
(61,250)
518,750
Rupees
126,000
18,900
118,000
115,000
95,000
30,000
70,000
50,000
65,900
60,000
748,800
Page 4 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
Working: W-1
Ans.5
(a)
Dept. A
Rupees in
000
4,500
1,800
1,500
1,200
9,000
75,000 kg
66,000 kg
65:35
42,900 kg
23,100 kg
2,880hours
200 hours
Rs. 126,000
Hours
220
(20)
(25)
(15)
160
Pollen
Stigma
Rupees in 000
3,861
6,930
(135)
(306)
3,726
6,624
36%
64%
3,240
5,760
Advise to CL whether it should produce Seeds or sell Pollen without further processing:
42,900 kg
12,000 kg
54,900 kg
52,704 kg
Seeds
Rs. in 000
6,588
(W-1)
(3,240)
(1,254)
(180)
1,914
Page 5 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
If Pollen is sold without further processing, then the profitability would be as under:
Net realisable value at split off point [(42,900 90) 135,000 ]
3,726
Less: Joint costs
(3,240)
Profit from Pollen
486
Advise: The companys profit has increased by Rs. 1,428,000 (i.e. Rs. 1,914,000 Rs.
486,000) on further processing of Pollen into Seeds. Therefore, it is advisable to CL to
further process Pollen into Seeds.
Ans.6
218,750
(43,750)
175,000
(30,000)
145,000
Per Unit*
Variable Costs:
Direct material (218,750 5 2)
Direct labour (218,750 2)
Variable overheads (218,750 4)
Less: Defective units sold (43,750 5)
Total variable cost of production
Variable cost per good unit (3,281,250 175,000)
5 20%
Rupees*
10.00 2,187,500
2.00
437,500
4.00
875,000
(1.00) (218,750)
15.00 3,281,250
15 0.8
18.75
1.20
Fixed costs
- Fixed overheads (175,000 3.5)
- Selling expenses 295,000 (145,000 1.2)
- Administration expenses
Total fixed costs
612,500
121,000
101,400
834,900
6.05
138,000
Page 6 of 7
COST ACCOUNTING
Suggested Answers
Intermediate Examination - Spring 2013
Ans.7
25,500
3
8,500
45,000
3.75
12,000
Pillow
Cover
200
Products
Bed
Sheet
1,200
Quilt
Cover
2,000
200
150
550
(750)
200
0.50
400
1
400
300
1,900
(2,000)
100
1.00
100
3
600
450
3,050
(3,500)
450
1.50
300
2
Quantity
Labour
hours used
11,000
11,000
3,500
7,500
5,500
16,500
3,500
Available
hours
25,500
20,000
3,500
-
Rs. in 000
88,000
11,000
3,500
11,000
550
6,050,000
1,900
6,650,000
3,050
33,550,000
Units outsourced
Outsourcing cost per bed sheet
7,500
2,000
15,000,000
(46,250)
(15,000)
(3,300)
(64,550)
23,450
(10,000)
13,450
(THE END)
Page 7 of 7