COST OF GOODS MANUFACTURES B.COM. PART II

COST OF GOODS MANUFACTURES B.COM. PART II

Q#1 Following are the balances appear on the Trial Balance of SAMREEN & Co. for the year ended April 30, 1980. Inventory of Goods in Process April, 01 Rs.109,000 Inventory of Raw Material April, 01 Rs.136,000 Purchases of Raw Material Rs.872,000 Transportation in Rs. 23,000 Direct Labour Rs 186,000 Indirect Labour Rs.214,000 Factory Lease Expenses Rs. 43,000 Occupancy cost Rs. 32,000 Repair & Maintenance Cost Rs. 45,000 Taxis & Insurance (factory Building) Rs. 19,000 Depreciation of Machinery Rs. 35,000 Purchases Return & Allowances Rs. 36,000 Purchases Discount Rs. 27,000 Inventory of Goods in Process April, 30 Rs.125,000 Inventory of Raw Material April, 30 Rs. 98,000 Prepare a Statement of Cost of Goods Manufactured. Q#2 The following information was taken from the books of Mansoor Manufacturing Company. Inventories November 01, 1995 November 30, 1995 Raw Material Rs.253,000 Rs.196,000 Goods in Process Rs.117,000 Rs.185,000 Finished Goods Rs.217,000 Rs.271,000 Purchase of Raw Material Rs.2,292,000 Transportation in Rs. 278,000 Factory overhead (control) Rs. 845,000 Direct Labour Rs.1,018,000 Raw Material Purchases discount Rs. 23,000 Raw Material Purchases Return Rs. 24,000 Prepare a Statement of Cost of Goods Manufactured. Prepare a statement of Cost of Goods sold. 2

Q#3 The following data relate to the operations of Khalid Manufacturing Co. for the year ended December 31, 1990. Inventories January 01, 1992 December 31, 1992 Raw Material Rs.100,000 Rs.120,000 Work in Process Rs.180,000 Rs.200,000 Finished Goods Rs.480,000 Rs.340,000 Other Data: Direct Labour Rs.1,717,500 Purchases of Raw Material Rs.1,000,000 Transportation in Rs 20,000 Purchase return & allowance Rs. 5,000 Purchase Discount Rs. 5,000 Indirect Labour Rs. 672,500 Power light and heat Rs. 48,000 Fire Insurance Rs 42,000 Depreciation(Factory Building) Rs. 70,000 Sales Revenue Rs.5,000,000 Sales Returns & Allowances Rs. 25,000 Selling Expenses (control) Rs. 4,00,000 General Expenses (control) Rs. 5,00,000 Prepare a Statement of Cost of Goods Manufactured. Prepare a Income Statement. Q#4 Zahid Manufacturing Co. Show the following information on Dec 31, 2001. Direct Factory Labour Rs. 2,900,000 Raw Material Used Rs. 4,400,000 Indirect Factory Labour Rs 460,000 Power light and heat Rs. 42,600 Repair to machinery Rs 58,000 Depreciation of Plant Rs. 47,000 Miscellaneous F.O.H Rs. 290,000 Inventory of Work in process Jan, 01 Rs. 412,000 Inventory of Finished Goods Jan, 01 Rs. 343,000 Inventory of Work in process Dec, 31 Rs. 425,000 Inventory of Finished Goods Dec, 31 Rs. 315,000 During the year 180,000 units were completed. Prepare a Statement of Cost of Goods Sold. The unit cost of goods manufactured. 3

Q#5 Unzila Manufacturing Co. Submits the following information on Dec 31, 1980. Inventories at the beginning of the year Raw Material Rs.38,000 Work in Process Rs.46,000 Finished Goods Rs.59,000 Inventories at the end of the year Raw Material Rs.43,000 Work in Process Rs.62,000 Finished Goods Rs.92,700 Direct Labour Rs. 673,500 Purchases of Raw Material Rs.1,370,000 Transportation in Rs. 40,000 Purchase return & allowance Rs. 10,000 Factory overhead one held of direct labour Marketing Expenses Rs. 231,150 General Expenses (control) Rs. 176,500 Sales Revenue Rs. 3,140,000 Prepare a Statement of Cost of Goods Manufactured. Prepare a Income Statement. Q#6 The records of the Jamil Manufacturing company for the year ended December 31,1985 provided the following data: Inventories January 01,1992 December 31,1992 Raw Material Rs. 360,000 Rs. 400,000 Work in Process Rs. 150,000 Rs. 120,000 Finished Goods Rs. 34,000 Rs. 20,000 Factory Supplies Rs. 26,000 Rs. 28,000 Factory Repair Parts Rs 120,000 Rs. 140,000 Other data: Raw Material Purchased Rs 580,000 Fuel Purchase Rs. 52,000 Direct Labour Rs.831,000 Miscellaneous Factory Overhead Rs. 23,000 Purchase of Repair Parts Rs. 42,000 Depreciation of Plant Rs. 27,000 Superintendence Rs. 22,000 Indirect Factory Labour Rs.20,000 Prepare a Statement of Cost of Goods Manufactured and Sold. 4

Q#7 The records of the Umair Manufacturing company for the year ended December 31,1998 provided the following data: Other data: Inventories January 01,1992 December 31,1992 Raw Material Rs.1,170,000 Rs. 416,000 Work in Process Rs. 304,000 Rs. 513,800 Finished Goods Rs.1,135,000 Rs.1,213,000 Factory Supplies Rs. 3,200 Rs. 5,600 Direct Labour Rs.4,010,000 Indirect Labour Rs. 69,000 Power light Rs. 32,000 Heat Rs. 17,500 Fire Insurance Rs. 6,000 Superintendence Rs. 112,000 Depreciation(Machinery) Rs. 38,000 Depreciation(Factory Building) Rs. 11,000 Tool Expenses Rs. 16,450 Factory Supplies Purchased Rs. 31,000 Raw Material Purchased Rs.3,140,000 Compensation Expenses Rs. 19,000 Prepare a Statement of Cost of Goods Manufactured. Prepare a statement of Cost of Goods sold. Q#8 The following Balances have been taken from the Books of Akhtar Manufacturing Co. for the year ended December 31,2001. Inventory of Goods in Process Jan, 01 Rs. 440,000 Inventory of Raw Material Jan, 01 Rs. 260,000 Inventory of Finished Goods Jan, 01 Rs. 600,000 Purchases of Raw Material Rs.1,950,000 Freight in Rs. 12,000 Purchases Return & Allowances Rs. 100,000 Sales Revenue Rs.3,986,000 Sales Returns & Allowances Rs. 71,000 Direct Labour Rs 558,000 Forman Salaries Rs. 90,000 Factory Insurance Rs. 60,000 Heat Light & Power Rs. 70,000 Machine Repair & Maintenance Cost Rs. 86,000 Indirect Labour Rs. 100,000 Data for adjustment: 1) Inventories at Dec,31, 2001. Raw Material Rs. 278,000 Goods in process Rs. 268,000 Finished Goods Rs. 850,000 2) Depreciate factory building by Rs.40,000 and Plant and Machinery by Rs.100,000. 5

3) Insurance premium on factory was paid on July 1, 2001. for one year. 4) Wages for the last week of December 2001 amounting to rs.16,000 have not been paid. Prepare a Statement of Cost of Goods Manufactured. Partial Income Statement for the year ended Dec 31, 2001.showing Gross Profit. Q#9 The adjusted trial balances taken from the balance of Mehran & Co. On April 30, 1980, the end of the fiscal year given below: Debited Credited Cash 373,000 Account Receivable 592,000 Allowance for Bad Debts 29000 Inventory of Work in Process April, 01 138,000 Inventory of Raw Material April, 01 153,000 Inventory of Finished Goods April, 01 75,000 Prepaid Expense 32,000 Factory Machinery 2,430,000 Accumulated Depreciation (F.M) 728,000 Sales and Office Equipment 1,423,000 Accumulated Depreciation(S & O.E) 474,000 Research and Development Cost 142,000 Accounts Payable 306,000 Accrued Expenses 235,000 Income Tax Payable 274,000 Ordinary Share Capital 2,000,000 Share Premium 500,000 Retained Earnings April 01, 1980 447,000 Dividend 220,000 Sales Revenue 7,712,000 Sales Return 57,000 Raw Material Purchases 1,667,000 Purchases Return 83,000 Transportation in 278,000 Direct Labour 2,354,000 Factory overhead (control) 1,215,000 Selling Expenses (Control) 724,000 General Expenses (Control) 641,000 Provision for Income Tax 274,000 Inventory on April 30, 1980: Raw Material Rs.161,000 Work in Process Rs.145,000 Finished Goods Rs. 67,000 12,788,000 12,788,000 Statement of Cost of Goods manufactured. Income statement Balance Sheet 6

Q#10 The adjusted Trial balances taken from the balance of Zaheer & Co. On November 30, 1986, the end of the fiscal year given below: Debited Credited Cash 92,000 Account Receivable 236,800 Allowance for Bad Debts 11,600 Inventory of Work in Process November, 01 55,200 Inventory of Raw Material November, 01 61,200 Inventory of Finished Goods November, 01 30,000 Prepaid Expense 12,800 Factory Machinery 972,000 Accumulated Depreciation (F.M) 291,200 Sales and Office Equipment 569,200 Accumulated Depreciation(S & O.E) 189,600 Patents 56,800 Accounts Payable 122,400 Accrued Expenses 94,000 Income Tax Payable 125,816 Ordinary Share Capital 800,000 Retained Earnings November 01, 1986 378,800 Dividend 88,000 Sales (Net) 3,004,800 Raw Material Purchases 666,800 Purchases Return 33,200 Transportation in 111,200 Direct Labour 941,600 Factory overhead (control) 486,000 Selling Expenses (Control) 289,600 General Expenses (Control) 256,400 Provision for Income Tax 125,816 Inventory on November 30, 1986: Raw Material Rs. 64,400 Work in Process Rs. 5,8000 Finished Goods Rs. 26,800 Statement of Cost of Goods manufactured. Income statement Balance Sheet 5,051,416 5,051,416 7

Q#11 The amount shown below were taken from the adjusted trail balance of the Nadeem Company of March 31, 1995. Inventory of work in process March 1, 1995 460,000 Direct Labour 4,250,000 Indirect Labour 1,375,000 Inventory of Raw Material March 1, 1995 1,655,000 Raw material Purchase 6,218,000 Maintenance and Repair 150,000 Heat, Light and Power 215,000 Property Taxes ( factory building and equipment) 190,000 Depreciation Expense (factory building) 477,000 Insurance of Manufacturing Operations 60,000 Amortization of Patents 123,000 Other factory Expense 172,500 Inventory of Raw material March 31, 1995 1,148,000 The factory superintendent reports that Raw Material costing Rs 273,000 and Direct Labour of Rs 560,000 are applicable to un completed product in process at the close of business on March 31, 1995. Compute the factory overhead rate based on Direct Labour cost. Determine the cost of the March 31, 1995 inventory of work in process. Prepare a statement of cost of goods manufactured for March 31, 1995. Q#12 The Accounts show below appear on the book of the Saleem Manufacturing Company at the close of its current year ending on December 31, 1995. All amounts relate solely to manufacturing activities. Direct labour 1,688,000 Heat, Light and Power 156,000 Purchase of Raw Material 1,172,000 Research and Development cost 197,000 Property Taxes & Insurance 67,000 Transportation In 103,000 Maintenance & Repair expense 125,000 Inventory in Work in Process Jan 1,1995 338,000 Indirect Labour 347,000 Supervisory Salaries 185,000 General Factory Expenses 42,000 Inventory of Raw Material Jan 1, 1995 253,000 Depreciation Expense (building) 93,000 Depreciation Expense (equipment) 54,000 Raw Material return & allowances 59,000 Inventory of Raw Material Dec 31, 1995 242,000 The factory superintendent reports that Raw Material costing Rs 206,000 and Direct Labour of Rs 172,000 are applicable to un completed product in process at the close of business on Dec 31, 1995. Compute the factory overhead rate based on Direct Labour cost. Determine the cost of the Dec 31, 1995 inventory of work in process. Prepare a statement of cost of goods manufactured for Dec 31, 1995. 8

Q#13 Imran Manufacturing Co. Submits the following information on Dec 31, 1997. Inventories at the beginning of the year Raw Material Rs.546,000 Work in Process Rs.324,000 Finished Goods Rs.482,000 Inventories at the end of the year Raw Material Goods in Process Finished Goods Materials 581,000 129,000 435,000 Labour ------- 42,000 270,000 Overhead -------? 216,000 Data for the year ended December 31, 1997: 581,000? 921,000 Cost of Goods Manufactured 8,128,000 Factory overhead 1,784,000 The Company also paid transportation costs on materials purchased of Rs.277,000 & its received credit of Rs.163,000 for materials returned to suppliers. On the basis of the above information and missing date which can be derived form it, prepare a statement of costs of goods manufactured of the year ended December 31.1997. Q#14 The following information was taken from the books of Mehboob Manufacturing Company for November 30, 1995 Direct Labour cost Rs. 300,000 Cost of goods sold Rs 1,110,000 Factory overhead is applied at the rate of 150% of direct labour cost. Other data: Inventories November 01,1995 November 30,1995 Raw Material Rs. 70,000 Rs. 74,000 Goods in Process Rs. 96,000 Rs.130,000 Finished Goods Rs.150,000 Rs.175,000 Marketing Expenses 141,000 General & Administrative Expenses 229,000 Sales for the month 1,820,000 An income statement with schedule showing cost of goods manufactured and sold. 9

Q#15 The following Balances have been taken from the Books of Khalid Manufacturing Co. for the year ended December 31,1980. Inventory of Goods in Process Jan, 01 Rs. 131,000 Inventory of Raw Material Jan, 01 Rs. 99,000 Inventory of Finished Goods Jan, 01 Rs. 139,000 Purchases of Raw Material Rs. 510,000 Purchases Return & Allowances Rs. 19,000 Sales Revenue Rs. 1,514,000 Direct Labour Rs 543,000 Cost of Raw Material used Rs. 481,000 Factory overhead (control) Rs. 200,000 Cost of goods manufactured Rs. 1,199,000 Gross profit of sales Rs. 291,000 Data for adjustment: 1) Compute the Inventories of Dec 31, 1980. Raw Material Goods in process Finished Goods 2) Prepare statement of cost of goods manufactured and statement of cost of goods sold. Q#16 The records of the Fahad Manufacturing company for the year ended December 31,1987 provided the following data: Inventories January 01,1987 December 31,1987 Direct Material Rs. 900,000 Rs. 950,000 Work in Process Rs. 700,000 Rs. 800,000 Finished Goods Rs. 1,110,000 Rs. 950,000 Cost incurred during the period: Cost of goods available for sales Rs.6,840,000 Total manufacturing cost 5,840,000 Factory overhead 1,670,000 Direct material used 1,930,000 Statement of cost of goods sold including all beginning and ending inventories. 10

Q#17` Faisal Manufacturing Co. three different models of equipment. During the month of April, the following information on unit costs was applicable to these three models. Product Raw Material Direct Labour Model A Rs. 450 Rs. 750 Model B Rs. 650 Rs.1,000 Model C Rs. 800 Rs.1,250 The manufacturing costs for April were as follows. Raw material Used Direct Labour Factory overhead Rs.25,455,000 Rs.26,600,000 Rs.21,280,000 Inventories at the beginning of the April Raw Material, April,1 Rs.2,295,000 Raw Material, April,30 Rs.2,130,000 Work in Process, April,1 Rs. 655,000 Work in Process, April,30 (Fully complete as to? Material and 50% complete as to Direct Labour and Factory Overhead) Model A 100units Model B 75units Model C 50units Finished Goods, April, 1 Rs.4,190,000 Finished Goods, April, 30 Model A 250units Model B 300units Model C 200units Factory overhead is allocated to products on the basis of its relation to Direct Labour. Compute the cost of the April 30 inventories of Goods in Process and Finished Goods. Determine the cost of Goods Manufactured for April. Prepare a statement of cost of goods Sold for April. Q#18 a) From the following account balances, prepare the entries required to close the manufacturing accounts at the end of the year. Include an entry to close the manufacturing account to the Income Summary Account. End of the year beginning of the year Inventory of Raw Material 15,000 17,500 Inventory of Work in Process 23,500 19,200 Purchases of Raw Material (Net) 80,000 Direct Labour 72,000 Factory overhead 39,800 b) From the account balances of Mamoon Corporation, determine factory overhead rate based on direct labour cost. Direct Factory Labour Rs. 200,000 11

Raw Material Used Rs. 240,000 Indirect Factory Labour Rs 49,000 Other factory overhead costs Rs. 25,500 Maintenance & Repair Rs 26,000 Depreciation of Plant Rs. 19,500 Selling expenses (control) Rs. 40,000 General expenses (control) Rs. 60,000 Interest expenses Rs. 10,000 Q#19 Ahmed Manufacturing Co. two products namely Capstan and Gold Leaf. The Unit cost of each product is as under. Product Direct Material Direct Labour Capstan Rs. 10 Rs. 16 Gold Leaf Rs. 15 Rs. 20 The manufacturing costs for November 1986 were as follows. Raw material used Rs.50,000 Direct Labour Rs.80,000 Factory overhead Rs.40,000 Inventories at the beginning of the November Raw Material, November, 1 Rs. 4,000 Raw Material, November, 30 Rs. 4,600 Work in Process, November, 1 Rs.12,000 Work in Process, November,30(Fully complete as to? Material and 50% complete as to conversion cost) Capstan 160units Gold Leaf 200units Finished Goods,November, 1 Rs.28,600 Finished Goods,November, 30 Capstan 700units Gold Leaf 400units Overhead is allocated to products on the basis of its relation to direct labour. Compute the cost of the November 30, 1986 inventories of Goods in Process and Finished Goods. Determine the cost of Goods Manufactured for November 30, 1986. Prepare a statement of cost of goods Sold for November 30, 1986. 12

Q#20 The records of Dawlance Refrigerator Company show the following information for the three months ended July 31, 1995. Material purchased Rs19,467,000 Inventories May 1, 1995: Material Rs 2,680,000 Finished Goods (100 refrigerators) Rs 430,000 Direct Labour Rs21,258,000 Factory overhead Rs 7,640,000 Marketing Expenses Rs 5,160,000 General Expenses Rs 4,610,000 Sales (12,400 refrigerators) Rs.66,340,000 Inventories July 31, 1995: Material Rs 1,670,000 Finished goods (200 refrigerators) costed at Rs 3,950 each No unfinished goods on hand Prepare a statement of cost of goods Sold. The number of units manufactured. The unit cost of refrigerator manufactured. Income Statement. The Net Income per unit sold. The gross profit per unit sold. The ratio of gross profit to sales. The net income to sales percentage. Q#21 From the following Partial information completes the Income Statement. Sales? Less: Cost of goods Sold: Opening inventory of Finished goods 60,000 Add: Cost of goods Manufactured? Less: Finished goods Inventory (ending)? Cost of Goods Sold? Gross Profit (41.25% of sales)? Less: Operating Expenses? Net Income 26 2/3% of Sales 640,000 The other information is as under: Raw Material used Rs 5,30,000, Direct Labour Rs.4,50,000, Factory overhead 50% of Prime Cost. The work in process were opening Rs.1,20,000, Closing Rs. 1,10,000. Determine the missing figures and complete the Income Statement.(show computation). 13

Q#22 Khalid Manufacturing Company produces a household appliances that sells for Rs.900. The basic patents is held by the inventor who is paid a royalty of Rs.50 on each unit sold. The royalty is considered as selling expense. The data taken from books and other records of the company on December 31, 2005 are shown below. Inventories January 01,2005 December 31,2005 Raw Material Rs.34,200 Rs.71,300 Work in Process Rs.81,590 Rs.40,020 Finished Goods Rs.45,840 Rs.75,180 Other Data: Direct Labour Rs. 625,220 Purchases of Raw Material Rs. 905,630 Freight-in Rs. 4,770 Indirect Labour Rs. 50,260 Fire Insurance Rs 42,000 Depreciation(Factory Equipment) Rs. 21,350 Sales Revenue Rs.3,870,000 Miscellaneous Factory Expenses Rs. 179,080 Rent Rs. 50,000 Royalties Paid Rs. 215,000 Sales Salaries Expenses Rs. 280,000 Freight-out Rs. 18,600 Miscellaneous Marketing Expenses Rs. 113,800 Office Salaries Expenses Rs. 217,900 Bad Debts Expenses Rs. 2,800 Miscellaneous general Expenses Rs. 87,000 Interest earned Rs. 1,300 Purchases Discount Rs. 8,400 There were 120 finished units in the inventory of finished goods on January 1, 2005 and 179 in the inventory on December 31, 2005. all units held on January 1, 2005 were sold during the year. Rent is to be apportioned 80% to manufacturing, 10% to marketing and 10% to general. An income statement for the year ended December 31, 2005 supported by a schedule of cost of goods sold. Figures to prove the cost of the inventory of finished goods on December 31, 2005. Q#23 From the following information determine. a) PRIME COST b) CONVERSION COST c) COST OF GOODS SOLD d) COST OF GOODS MANUFACTURED For the month of November 30, 2006. 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 14

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 factory overhead was Rs. 1,82,000. under or over applied factory overhead is to be adjusted in C.G.S. Q#24 The following information have been taken from the Ledger of Naila & Co. for the year ended on June 30, 2002. Stock of materials, June 30, 2002 Rs. 15,700 Stock of materials, July 01, 2001 Rs. 12,000 Materials purchased during the year Rs. 46,250 Carriage outward Rs. 1,075 Carriage inward Rs. 1,786 Salaries-factory Rs. 1,625 Salaries-office Rs. 3,150 Discount expenses Rs. 725 Bad Debts written off Rs. 1,628 Repair of Plant (machinery & tools) Rs. 1,113 Rent & Insurance-factory Rs. 2,125 Rent & Insurance-office Rs. 500 Sales Rs.115,275 Traveling expenses Rs. 525 Traveler s salaries and commission Rs. 1,925 Productive wages Rs. 31,500 Depreciation of machinery and tools Rs. 1,625 Depreciation of office furniture Rs. 75 Director s fees Rs. 1,500 Gas & Water- factory Rs. 300 Gas & Water- office Rs. 100 Manager salary (¾ factory, ¼ office) Rs. 2,500 General Expenses Rs. 850 Prepare a statement giving the following information a) Material consumed. b) Prime cost c) Factory overhead and percentage on wages d) Factory cost e) Total cost f) Net profit g) Administrative overhead and percentage on factory cost. 15

Q#25 Khalid Manufacturing Co. produces a single product. The following information has been taken from the Company s records for the year ended on June 30, 2001. Production in units 30,000 Sales in units? Ending finished goods in units? Sales (Rs.25/- per unit ) 6,50,000 Costs Advertising 90,000 Direct Labour 1,60,000 Raw materials purchased 80,000 Building rent (production uses 80% of the space administration & sales offices use the rest) 50,000 Utilities-factory 35,000 Maintenance-factory 25,000 Depreciation on factory equipment is estimated at Rs. 0.10 per unit produce? Selling & Administrative salaries 1,00,000 Other factory overheads costs 11,000 Other selling and administrative expenses 20,000 Inventories January 01,2001 December 31,2001 Raw Material Rs.20,000 Rs.10,000 Work in Process Rs.30,000 Rs.40,000 Finished Goods -------? The finished goods inventory is being carried at average unit production cost for the year. Prepare statement of cost of goods manufactured for the year. Compute the following a) The number of units in finished goods inventory at December 31. b) The cost of the units in finished goods inventory at December 31 Prepare an Income statement for the year. 16