B.COM 2 PRIVATE COST ACCOUNTING B.com-2 PRIVATE Annual Examination 20 COMPILED & SOLVED BY: Jahangeer Khan 20
Q.1: MANUFACTURING CONCERN: Consider the following information taken from the books of SAHAB Industries, for the quarter ended December 31, 20. INVENTORIES OCTOBER 01, 20 December 31, 20 Material Rs.40,000 Rs.30,000 Finished Goods (7,500 Units) Rs.60,000 (1,500 units) Rs.? OTHER INFORMATION: Material Purchased Rs.290,000 Direct Labour Cost 75% of Material used Factory Overhead Cost 0% of Prime Cost Sold 80,000 Units @ Rs.24 each Operating Expenses 45% of Gross Profit REQUIRED: (a) Number of units manufactured during the period. (b) Cost of ending Finished Goods Inventory under FIFO. (c) Gross Profit. (d) Net Income per unit sold. SOLUTION 1 (a): COMPUTATION FOR NUMBER OF UNITS MANUFACTURED Finished Goods Ending Units 1,500 Add: Units Sold 80,000 Units Available for Sale 81,500 Less: Finished Goods Beginning Units (7,500) Number of Units Manufactured During the Period 74,000 SOLUTION 1 (b): COMPUTATION FOR ENDING FINISHED GOODS RAW MATERIAL USED Raw Material Beginning 40,000 Add: Raw Material Purchased 290,000 Raw Material Available for Use 330,000 Less: Raw Material Ending (30,000) Raw Material Used 300,000 Add: Direct Labour cost (300,000 x 75%) 225,000 Prime Cost 525,000 Add: Factory Overhead cost (525,000 x 0%) 787,500 Cost of Goods Manufactured 1,312,500 pg. 1
SOLUTION 1 (c): COMPUTATION FOR GROSS PROFIT Sales (80,000 x 24) 1,920,000 Less: Cost of Goods Sold Finished Goods Beginning 60,000 Add: Cost of Goods Manufactured 1,312,500 Goods Available for Sale 1,372,500 Less: Finished Goods Ending (26,610) Cost of Goods Sold (1,345,890) Gross Profit 574,110 SOLUTION 1 (d): COMPUTATION FOR NET INCOME PER UNIT SOLD Gross Profit 574,110 Less: Operating Expenses (574,110 x 45%) (258,350) Net Income 3,760 Q.2: FACTORY LEDGER/GENERAL LEDGER: NOBEL Industries maintains both General Ledger and Factory Ledger. The transactions completed by them during November 20 are: Nov. 4 Purchased raw material for Rs.75,000 with terms 2/10, n/30. Nov. 6 Direct material of Rs.7,500 and indirect material costing Rs.2,750 was issued from store. Nov. 8 Head Office prepared weekly factory payroll of Rs.6,000. This includes Rs.105 excise duty and Rs.245 income taxes. For remaining cash was sent to factory (Of this Rs.3,650 for Direct and remaining for Indirect Labour). Nov. 21 Depreciation on Factory Equipment was recorded Rs.10,500. Nov. 26 The factory completed a job with material cost Rs.2,500 and direct labour cost Rs.3,750. Factory Overhead is applied @120% of direct labour Nov. 26 Other indirect manufacturing expenses paid by Head Office amounted to Rs.750. Nov. 30 The completed goods were sold at 170% of cost on credit. REQUIRED: Entries in proper General Journal form in the books of: (a) General Office. (b) Factory Ledger. pg. 2
SOLUTION 2: Compiled & Solved By: JAHANGEER KHAN NOBEL INDUSTRIES GENERAL LEDGER GENERAL JOURNAL Date Particulars P/R Debit Credit Nov. 04 Factory Ledger 75,000 Voucher Payable 75,000 (To record raw material purchased) Nov. 08 Payroll 6,000 Income Tax (68,400 x 5%) 105 Excise Duty (68,400 x 2% ) 245 Accrued Payroll 5,650 (To record payroll of the month) Nov. 08 Accrued Payroll 5,650 Voucher Payable 5,650 (To record voucher issued for accrued payroll) Nov. 08 Voucher payable 5,650 Bank 5,650 (To record payment of accrued payroll) Nov. 08 Factory ledger 5,650 Payroll 5,650 (To close factory payroll account) Nov. 21 Factory Ledger 10,500 Allowance for Depreciation 10,500 (To record depreciation on factory equipment) Nov. 26 Factory ledger 108,000 Voucher Payable 108,000 (To record voucher issued against indirect manufacturing expenses of factory ) Nov. 26 Voucher Payable 750 Bank 750 (To record payment of indirect manufacturing expenses of factory) Nov. 30 Cost of Goods Sold 10,750 Factory Ledger 10,750 (To record cost of goods sold) Nov. 30 Account Receivable (10,750 x 170%) 18,275 sales 18,275 (To record sale of merchandise on credit) NOBEL INDUSTRIES FACTORY LEDGER GENERAL JOURNAL Date Particulars P/R Debit Credit Nov. 04 Raw Material 75,000 General Ledger 75,000 (To record raw material purchased) pg. 3
Date Particulars P/R Debit Credit Nov. 06 Work in Process 7,500 Factory Overhead 2,750 Raw Material 10,250 (To record direct and indirect use of material) Nov. 08 Work in Process 3,650 Factory overhead 2,350 Raw Material 6,000 (To record direct and indirect use of material) Nov. 08 Accrued Payroll 6,000 General Ledger 6,000 (To record payroll sent to general office) Nov. 21 Depreciation Expense 10,500 General Ledger 10,500 (To record depreciation on equipment) Nov. 26 Finished Goods 10,750 Work in Process 10,750 (To record goods completed and placed in stock) Nov. 26 Factory Overhead 750 General Ledger 750 (To record indirect manufacturing expenses) Nov. 30 General Ledger 10,750 Finished Goods 10,750 (To record cost of goods sold) Q.3: JOB ORDER COSTING: ALEENA Company uses Job Order Cost System. The following information was extracted from their books for the month of December 20: a) Purchased material for Rs.200,000 including for cash Rs.60,000. b) Issued Direct Material to process Rs.100,000. c) Direct Labour cost assigned to production Rs.120,000. d) Overhead is applied @75% of Direct Labour Cost. e) Actual Factory Overhead costs incurred on account Rs.98,000. f) Job with total cost of Rs.240,000 were completed. g) Finished goods costing Rs.210,000 were sold on account for Rs.320,000. REQUIRED: Record General Journal Entries including an entry to close factory overhead account SOLUTION 3: ALEENA COMPANY GENERAL JOURNAL S.no Particulars P/R Debit Credit 1. Raw Material 200,000 Cash 60,000 Accounts Payable 0,000 (To record purchase of raw material) 2. Work in Process 100,000 Raw Material 100,000 (To record material issued to factory) pg. 4
S.no Particulars P/R Debit Credit 3. Work in Process 120,000 Accrued Payroll 120,000 (To record direct and use of labour) 4. Work in Process ((120,000 x 75%)) 90,000 Applied Factory Overhead 90,000 (To record factory overhead applied to production) 5. Factory Overhead 98,000 Accounts Payable 98,000 (To record factory cost incurred on account) 6. Finished Goods 240,000 Work in Process 240,000 (To record goods completed and transferred out) 7. Cost of Goods Sold (5,000 66,000) 210,000 Finished Goods 210,000 (To record cost of goods sold) 8. Accounts Receivable 320,000 Sales 320,000 (To record sold goods on account) 9. Cost of Goods Sold 2,000 Under Applied Factory Overhead 2,000 (To close under applied factory overhead) ALEENA COMPANY GENERAL LEDGERS Factory Overhead 5. Account Payable 98,000 4. Work in Process 96,000 9. Cost of Goods Sold 2,000 98,000 98,000 Q.4: PROCESS COSTING: The following information was taken from CORAL Company for the month of December 20 Cost of Units in process (December 1) Rs.90,000 Cost of Raw Material used Rs.222,000 Direct Labour cost incurred Rs.172,800 Factory Overhead cost incurred Rs.129,600 The data extracted from the production report relating to the above process are as follows: Units in process (December 1),000 (40% completed as to material and 60% as to conversion) Units placed in production during December 39,000 Units completed during December 45,000 Units in process (December 31)? (60% completed as to material and 80% as to conversion) REQUIRED: (a) Equivalent Production in Units (b) Cost per unit (c) Total Cost of Units Completed (d) Cost of Units in Process as on Dec. 31,20 pg. 5
SOLUTION 4 (a): Compiled & Solved By: JAHANGEER KHAN COMPUTATION FOR EQUIVALENT PRODUCTION IN UNITS Particulars Direct Material Direct Labour Factory overhead Units Completed 45,000 45,000 45,000 Less: Beginning Work in process Direct Material (,000 x 40%) (6,000) Conversion (,000 x 60%) (9,000) (9,000) 39,000 36,000 36,000 Add: Ending Work in Process Direct Material (9,000 x 60%) 5,400 Conversion (9,000 x 80%) 7,200 7,200 Equivalent Production Units 44,400 43,200 43,200 Units in Beginning work In Process,000 Add: Units Placed in Production 39,000 Total Units in Process 54,000 Less: Units Completed (45,000) Units in ending Work in Process 9,000 SOLUTION 4 (b): COMPUTATIONS COST PER UNIT Cost Equivalent Units = Unit Cost Direct Material 222,000 44,400 = 5 Direct Labour 172,800 43,200 = 4 Factory Overhead 129,600 43,200 = 3 Cost Per Unit Rs.12 SOLUTION 4 (c): COMPUTATION FOR TOTAL COST OF UNITS COMPLETED Cost of Beginning,000 Units in Process: Cost of Beginning Work in Process 90,000 Add: Cost Added During the Month Direct Material (,000 x 60% x 5) 45,000 Direct Labour (,000 x 40% x 4) 24,000 Factory Overhead (,000 x 40% x 3) 18,000 Total Cost Added During the Month 87,000 Total Cost of Beginning,000 Units in Process 177,000 Add: Cost of Remaining 30,000 Units (30,000 x 12) 360,000 Total Cost of Units Completed 537,000 SOLUTION 4 (d): COMPUTATION FOR COST OF UNITS IN PROCESS AS ON DECEMBER 31,20 Direct Material (9,000 x 60% x 5) 27,000 Direct Labour (9,000 x 80% x 4) 28,800 Factory Overhead (9,000 x 80% x 3) 21,600 Cost of Units in Process as on December 31, 20 77,400 pg. 6
Q.5: STANDARD AND VARIANCE: a) (i) Standard Material Cost Rs.95,000, Material Quantity Variance (unfavourable) Rs.5,000, Material Price Variance (favourable) Rs.7,000. (Find ACTUAL Cost of Material). (ii) Labour Time Variance (favourable) Rs.9,000, Labour Rate Variance (unfavourable) Rs.4.000, Actual Labour Cost Rs.110,000. (Find Standard Labour Cost) (iii) Standard Factory Overhead Cost Rs.5,000, Actual Factory Overhead Cost Rs.180,000. (Find Factory Overhead Variance). b) Record entries in General Journal for i, ii, and iii of above. c) Material Quantity Variance (Unfavourable) Rs.7,000 Material Price Variance (Unfavourable) Rs.5,000 Labour Time Variance (Favourable) Rs.9,000 Labour Rate Variance (Unfavourable) Rs.,000 Factory Overhead Variance (Favourable) Rs.2,000 REQUIRED: (i) Give an entry to close above variances. (ii) Determine the total variance including whether it is favourable or unfavourable. SOLUTION 5 (a-i): COMPUTATIONS FOR ACTUAL COST OF MATERIAL Standard Material Cost 95,000 Add: Material Quantity Variance (Unfavourable) 5,000 100,000 Less: Material Price Variance (Favourable) (7,000) Actual Cost of Material 93,000 SOLUTION 5 (a-ii): COMPUTATIONS FOR STANDARD COST OF LABOUR Actual Labour Cost 110,000 Add: Labour Time Variance (Favourable) 9,000 119,000 Less: Labour Rate Variance (Unfavourable) (4,000) Standard Cost of Labour 1,000 SOLUTION 5 (a-iii): COMPUTATIONS FOR FACTORY OVERHEAD VARIANCE Standard Factory Overhead 5,000 Less: Actual Factory Overhead Cost (180,000) Factory Overhead Variance (Unfavourable) (,000) SOLUTION 5 (b): M/S GENERAL JOURNAL S.no Particulars P/R Debit Credit 1. Work in Process 95,000 Material Quantity Variance 5,000 Material Price Variance 7,000 Raw Material 93,000 (To record actual and standard cost of material and its variances) pg. 7
S.no Particulars P/R Debit Credit 2. Work in Process 1,000 Labour Rate variance 4,000 Labour Time Variance 9,000 Accrued Payroll 110,000 (To record actual and standard cost of labour and its variances) 3. Work in Process 5,000 Factory Overhead Variance,000 Factory Overhead 180,000 (To record actual and standard cost of factory overhead and its variance) SOLUTION 5 (c-i): M/S GENERAL JOURNAL S.no Particulars P/R Debit Credit 1. Labour Time Variance 9,000 Factory Overhead Variance 2,000 Cost of Goods Sold,000 Material Quantity Variance 7,000 Material Price Variance 5,000 Labour Rate Variance,000 (To close variance accounts into cost of goods sold account) SOLUTION 5 (c-ii): COMPUTATIONS FOR TOTAL VARIANCE Labour Time Variance 9,000 Factory Overhead Variance 2,000 Total Favourable Variances 11,000 Less: Unfavourable Variances Material Quantity Variance 7,000 Material Price Variance 5,000 Labour Rate Variance,000 Total Unfavourable Variances (26,000) Total Variance (Unfavourable) (,000) Q.6: INVENTORY VALUATION: ABDULLAH Company uses perpetual basis for recording material inventory. The following information relates to specific type of Material ASN 6182. 20 Dec.1 Balance 900 Units @ Rs. each. Dec.4 Purchased 3600 Units for Rs.50400. Dec.8 Issued 00 Units to the Job. Dec.10 90 defective Units returned to the store room. Issued on December 8. Dec.13 Issued 1800 Units to the Job. Dec.18 Purchased 3000 Units @ Rs. per unit. pg. 8
Dec.24 Purchased 00 Units @ Rs.17 per unit. Dec.27 Issued 00 Units to the Job. Dec.30 Returned to the vendor, 50 Units purchased on December 24. REQUIRED: Prepare Inventory Card using (a) FIFO Method (b) LIFO Method SOLUTION 6 (a): ABDULLAH COMPANY INVENTORY LEDGER CARD PERPETUAL SYSTEM FIFO METHOD FOR THE MONTH OF DECEMBER 20 Date Purchased Issued Balance Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total Dec. 01 900 Dec. 04 3,600 50,400 900 3,600 50,400 Dec. 08 900 3,000 42,000 600 8,400 Dec. 10 (90) (1,260) 3,090 43,260 Dec. 13 1,800 25,200 1,290 18,060 Dec. 18 3,000 48,000 1,290 3000 18,060 48,000 Dec. 24 1,500 17 25,500 1,290 3000 1,500 Dec.27 1,290 18,060 2,790 210 3,360 1,500 Dec. 30 (50) 17 (850) 2,790 1,450 17 17 17 18,060 48,000 25,500 44,640 25,500 44,640 24,650 8,050 ----- 123,050 4,710 ----- 67,260 4,240 ----- 69,290 SOLUTION 6 (b): ABDULLAH COMPANY INVENTORY LEDGER CARD PERPETUAL SYSTEM LIFO METHOD FOR THE MONTH OF DECEMBER 20 Date Purchased Issued Balance Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total Dec. 01 900 Dec. 04 3,600 50,400 900 3,600 50,400 Dec. 08 1,500 21,000 900 2,100 29,400 Dec. 10 (90) (1,260) 900 2,190 30,660 pg. 9
Dec. 13 1,800 25,200 900 390 5,460 Dec. 18 3,000 48,000 900 390 3,000 5,460 48,000 Dec. 24 1,500 17 25,500 900 390 3,000 1,500 17 5,460 48,000 25,500 Dec.27 1,500 17 25,500 900 390 3,000 5,460 48,000 Dec. 30 (50) (800) 900 390 2,950 5,460 47,200 8,050 ----- 123,100 4,710 ----- 70,440 4,240 ----- 66,100 Q.7: DEPARTMENTALIZATION: SHAH TBRAIZ Company has two Service Departments and two Producing Departments. Departmental expenditures for the month of December 20 were as follows: Producing Departments Actual Factory Overhead Costs A Rs.60,000 B Rs.70,000 Service Departments C Rs.20,000 D Rs.10,000 Cost Allocation Plan A : B : D Cost of C to 1 : 4 : 5 A : B : C Cost of D to 8 : 1 : 1 REQUIRED: Using ALGEBRAIC METHOD, prepare a table Showing Distribution of Costs of Service Departments to Producing Departments. SOLUTION 7: COMPUTATIONS 1. TOTAL COST OF DEPARTMENT C: pg. 10
2. TOTAL COST OF DEPARTMENT D: Compiled & Solved By: JAHANGEER KHAN 3. Cost Distribution of Department C: 4. Cost Distribution of Department D: SCHEDULE OF FACTORY OVERHEAD DISTRIBUTION Producing Department Service Department Particulars A B C D Total Overhead Before Distribution 60,000 70,000 20,000 10,000 0,000 Overhead Distribution of Service Department: C 2,210 8,842 (22,105) 11,053 ----- D,843 2,105 2,105 (21,053) ----- Total Factory Overhead 79,053 80,947 ----- ----- 0,000 Q.8: LABOUR COSTING: Following is the weekly payroll summary of GHAZI Associates. Employee Status Regular Hours Overtime Hours Rate Per Hour Irfan Direct 40 8 Rs.50 Karan Direct 40 6 Rs.50 Munawar Direct 40 7 Rs.60 Rashid Direct 40 - Rs.60 Anwer Indirect 40 - Rs.35 Arif Indirect 40 10 Rs.35 Mujeed Indirect 40 - Rs.35 pg. 11
Time and half is paid for overtime. DEDUCTIONS: Provident fund @ 3%. Employee s contributions to group insurance @ 1.25%. REQUIRED: Compute the net pay of each worker. SOLUTION 8: COMPUTATION FOR EACH EMPLOYE WAGES Employee Regular Wages Overtime Total Wages Irfan 40 x 50 = 2,000 8 x 50 x 0% = 600 2,600 Karan 40 x 50 = 2,000 6 x 50 x 0% = 2450 2,450 Munawar 40 x 60 = 2,400 7 x 50 x 0% = 630 3,030 Rashid 40 x 60 = 2,400 ---------- 2,400 Anwer 40 x 35 = 1,400 ----------- 1,400 Arif 40 x 35 = 1,400 10 x 35 0% = 525 1,925 Mujeed 40 x 35 = 1,400 ----------- 1,400 COMPUTATION FOR DEDUCTIONS Employee DEDUCTIONS Provident Fund Group Insurance Irfan 2,600 x 3% = 78.00 2,600 x 1.25% = 32.50 Karan 2,450 x 3% = 73.50 2,450 x 1.25% = 30.63 Munawar 3,030 x 3% = 90.90 3,030 x 1.25% = 37.88 Rashid 2,400 x 3% = 72.00 2,400 x 1.25% = 30.00 Anwer 1,400 x 3% = 42.00 1,400 x 1.25% = 17.50 Arif 1,925 x 3% = 57.75 1,925 x 1.25% = 24.06 Mujeed 1,400 x 3% = 42.00 1,400 x 1.25% = 17.50 COMPUTATION FOR NET PAY OF EACH WORKER Employee Net Pay of Each Worker Irfan 2,600 78.00 32.50 = 2,489.50 Karan 2,450 73.50 30.63 = 2,345.87 Munawar 3,030 90.90 37.88 = 2,901.22 Rashid 2,400 72.00 30.00 = 2,298.00 Anwer 1,400 42.00 17.50 = 1,340.50 Arif 1,925 57.75 24.06 = 1,843.19 Mujeed 1,400 42.00 17.50 = 1,340.50 pg. 12