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Indian Institute of Management, Bangalore

PGP, February 2009


Management Accounting
Test-1

Marks 35 Answer all Questions Time: 1 hour 45 minutes

NAME: Roll Number: Section:

Instructions:

• Answer all the questions


• Post the answers in the respective blocks against each question
• You may use the extra sheets for workings and attach the working sheets also with the
main answer sheet
• Write only in Pen
• You may round off the calculations to the second decimal point if required
• You are permitted to use calculators
• This is a closed book examination
• This booklet consists of Six pages

1
Problem-1 (Marks 5) Stanley Company, a manufacturing firm, has supplied the following information
from its accounting records for the year 2006(in dollars):

Direct Labor cost 31,500

Purchases of raw materials 45,000

Factory insurance 1,050

Sales Commission 7,500

Factory supervision 6,675

Advertising 2,400

General administration 6,025

Rent: Factory building 3,500

Depreciation :Factory Equipment 6,425

Salary, sales personnel 3,250

Work-in-process inventory, December 31, 2005 37,500

Work-in-process inventory, December 31, 2006 42,750

Materials inventory, December 31, 2005 10,425

Materials inventory, December 31, 2006 28,500

Finished goods inventory December 31, 2005 20,055

Finished goods inventory December 31, 2006 12,750

You are required to calculate:

Prime cost

The cost of goods manufactured

The cost of goods sold

Period Cost

Conversion cost

2
Problem-2 (Marks 8) Aussie yarn Co. is a producer of woolen yarn made from wool imported from
Australia .Raw wool is processed, spun, and finished before being shipped out to knitting and weaving
companies. Material is added in the beginning of processing and conversion costs are added evenly
throughout processing.

Aussie began the month of August with 10,000 units in process that were 100 percent complete as to
materials and 80 percent complete as to labor and overheads. They introduced 70000 units in
production during the month. At the end of the month 20,000 remained in ending inventory, where
material is 100% complete and 50 percent complete as to conversion cost. The cost data are as follows:

Beginning work
Current costs
in progress

Direct
Material 18000 142000

Direct Labor 7800 62200

Overheads 23400 186600

You are required to calculate:

The following by assuming weighted average cost method:

Equivalent units of Material

Equivalent units of conversion costs

Cost per equivalent unit of Conversion costs

Value of finished product

Value of closing WIP

3
Problem-3 (Marks 5) Mats Farms produces strawberries and raspberries. Annual fixed costs are
$15,600. The variable cost is $0.75 per box of strawberries and $0.95 per box of raspberries.
Strawberries sell for $1.10 per box and raspberries for $1.45 per box. Two boxes of strawberries are
produced and sold for every box of raspberries.

You are required to calculate:

1) Weighted average contribution margin per unit :

2 ) Number of boxes of strawberries and Strawberry:


raspberries produced and sold at the break-even
point assuming sales mix remains unchanged Raspberries :

3 ) The break-even number of raspberry boxes if


only raspberries are produced :

Problem-4 (Marks 8) Bouncer Company sells its product at Rs.15 per unit. In a period, if it produces and
sells 8000 units, it incurs a loss of Rs.5 per unit .If the volume is raised to 20,000 units, it earns a profit of
Rs. 4 per unit.

You are required to calculate:

The variable cost per unit

The total fixed cost

The break-even point ( in units)

The margin of safety if the volume is 20000 units (in %)

The Volume required to earn a profit of Rs.1,00,000 (in units)

The profit if the volume is 27,000 units

4
Problem-5 (Marks 9) Lowder Inc. builds custom conveyor systems for warehouses and distribution
canters.

Beginning balance s as on July 1 were as follows:

Raw materials 6,070

Work in process (for job #703) 10,700

Finished goods (for job # 700) 8,000

During the month of July, the following occurred:

a) Materials were purchased for $42,230.

b) Direct Labor wages rate is $ 14 per hour

c) Overhead is charged to production at the rate of $10 per direct labor hour.

d) Job #703 was completed and transferred to finished goods.

e) Job # 704, which was started during July, remained in process at the end of the month

f) Job #700 which had been completed in June was sold on account for cost plus 30%.

g)
Direct material requisition during July $

Job # 703 12,500

Job # 704 13,600

h)

Direct Labor hours hours

Job # 703 700

Job # 704 1100

5
1) You are required to calculate:

The ending balance of : Raw material

The ending balance of: work in process

The ending balance of : finished Goods

The value of cost of goods sold in July :

2) The actual overhead incurred in July is $19,100. The over applied/under applied overhead is adjusted
by the firm in the same month. Calculate the following treating the amount of under applied/over
applied overhead and apportioning it to the appropriate inventory accounts and Cost of Goods Sold on
the basis of value.

The value of cost of goods sold in July

The Value of WIP

The Profit in July

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