HCCS EDUCATIONAL SYSTEM

(B.Com Part- II)

COST ACCOUNTING
Roll No: _____________

Total Marks: 100 Time Allowed : 3Hrs

Pass Marks : 50

Q.1 Ibraheem Industries provides you the following data for the month of June 20 ___:
Inventories June 1 June 30
Materials Rs. 55000 Rs. 50,000
Work in process --- Materials Rs. 75000 Rs. 70,000
Work in process --- Labour Rs. 45000 Rs. 37,600
Work in process --- Factory Overhead Rs. 33600 Rs. 25,900
Finished Goods Rs. 120,000 Rs. 135,000
Manufacturing costs for the month are as follows:
Direct Material Used Rs. 595,000
Direct Labour:
Assembly department @ Rs. 6 per hour Rs. 249,600
Finishing department @ Rs. 7.5 per hour Rs. 168,000
Factory overhead is applied according to following rates:
Assembly department @ Rs. 5.00 per direct Labour hour.
Finishing department @ Rs. 4.50 per direct Labour hour.
Required: Prepare a cost of goods manufactured and sold statement for the month.

Q.2 Muzammil Enterprises had a fire on March 31, 20B, while completely destroyed its plant and some of its
accounting records. Accountant of the factory on the basis of his past experience and from records that could be
saved provides you following information:
Prime cost: 60% of cost of goods manufactured
Gross profit: 40% of net sales
Factory overhead: 2/3 of conversion cost
Cost of goods available for sale Rs. 672,000
Direct material purchased 224,400
Work in process inventory, December 31, 20A 24,000
Materials inventory, December 31, 20A 42,000
Finished goods inventory, December 31, 20A 48,000
Sales 1,020,000
Direct Labor 158,400
The inventories were insured. The insurance company wants to know approximate cost of inventories lost by fire
to settle the claim.
Required:
Calculate the cost of:
a) Finished goods inventory lost by fire.
b) Work in process inventory lost by fire.
c) Raw materials inventory lost by fire.
Q.3 For December, the Production Control Department of Carola Chemical, Inc., reported the following production
data for Department 2:

Transferred in from Department 1 55,000 liters

Transferred out to Department 3 39,500liters
In process at the end of December (with 1/2 labor and factory overhead) 10,500 liters
All materials were put into process in Department 1. The cost department collected following figures for
department 2:
Unit cost for units transferred in from department 1 $1.80
Labor cost in department 2 $27,520
Applied factory overhead $15480
Required: A cost of production report for department 2 for December.

Q.4 During February, the Assembly department received 60,000 units from Cutting department at a unit cost of $3.54.
Costs added in the Assembly department were: materials, $41,650; labor, $101,700; and factory overhead. $56,500.
There was no beginning inventory. Of the 60,000 units received, 50,000 were transferred out; 9,000 units were in
process at the end of the month (all materials, 2/3 converted); 1,000 lost units were 1/2 complete as to materials
and conversion costs. The entire loss is considered abnormal and is to be charged to factory overhead.
Required: Cost of production report.

Q.5 A. Following data are available with respect to a certain materials.

Annual requirement 56,250 units
Cost to place an order Rs. 50
Annual interest rate 10%
Annual carrying cost per unit Rs. 5
Per unit cost Rs. 50
Required:
1) Economic order quantity.
2) Number of orders per year.
3) Frequency of orders.
4) Proof with the help of table that EOQ is the best order size.

B. It is estimated that during the coming year Shahbaz Auto Industry will buy 50,000 units of a certain
component at a price of Rs. 30 per unit. Annual storage cost per unit is estimated as Rs. 1.90 per unit. It is
policy of the company to impute 15% interest on capital invested in inventory. Ordering cost is expected
to be Rs. 400 per order. Presently the company buys in four quarterly orders of 12,500 units.
Required:
1) Economic order quantity
2) Savin for the coming year if the company buys in economic order quantity.

--- x--- x --- GOOD LUCK --- x --- x ---

 Carola Chemical Inc.
Department 2
Cost of Production Report
For the Month of December. 19____

Quantity Schedule:
Units received from preceding department 55,000
======
Units transferred to next department 39,500
Units still in process (1/3 labor and overhead) 10,500
Units lost in process 5,000 55,000
------- ======
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month $99,000 $1.80
-------- ------
Cost added by the department:
Labor [39,500 + (1/3 × 10,500) = 43,000 units] $27,520 $0.64
Factory overhead $15,480 $0.36
-------- ------
Total cost added $43,000 $1.00
Adjustment for lost units $0.18*
-------- ------
Total cost to be accounted for $142,000 $2.98
======= =====
Cost Accounted for as Follows:
Transferred to next department (39,500 × $2.98) $117,710
Work in process - ending inventory:
Cost from preceding department (10,500 × $1.98) $20,790
Labor (10,500 × 1/3 × $0.64) 2,240
Factory overhead (10,500 × 1/3 × $0.36) 1,260 24,290
-------- -------
Total cost accounted for $142,000
======
 ASSEMBLY DEPARTMENT
COST OF PRODUCTION REPORT
FOR THE MONTH OF APRIL, 19|____

Quantity Schedule:
Units received from preceding department 60,000
======
Units transferred to next department 50,000
Units still in process (All materials - 2/3 labor and overhead) 9,000
Units lost in process (Abnormal loss - 1/2 materials, labor, and
overhead) 1,000 60,000
------- ======
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month (60,000 units) $212,400 $3.54
-------- ------
Cost added by the department:
Materials $41,650 $1.70
Labor $101,700 $1.80
Factory overhead $56,500 $1.00
-------- ------
Total cost added $199,850 $3.50
-------- ------
Total cost to be accounted for $412,250 $7.04
======= =====
Cost Accounted for as Follows:
Transferred to next department (50,000 × $7.04) $352,000
Transferred to Factory Overhead:
From preceding department (1,000 × $3.54) $3,540
Materials (1,000 × 1/2 × $0.70) 350
Labor (1,000 × 1/2 × $1.80) 900
Factory overhead (1,000 × 1/2 × $1.00) 500 5,290
--------
Work in process - ending inventory:
Cost from preceding department (9000 × $3.54) $31,860
Materials (9,000 × 0.70) 6,300
Labor (9,000 × 2/3 × 1.80) 10,800
Factory overhead (9,000 × 2/3 × 1.00) 6,000 54,960
-------- -------
Total cost accounted for $412,250