Numerical problems 4.

Cost of goods manufactured Direct Materials Direct Labour Add Factory rent Less Depreciation Factory Equip Add cost of goods sold (400 * 28) Cost of goods sold Income Statement Sales Revenue 1,34,400 Less cost of goods sold 97,500 Gross Profit 36,900 Less Office equipment depreciation 1,200 Less Marketing Exp 7,400 Less Adm Exp 12,000 16,300 Prime cost = (Direct material + Direct Labour) Prime cost = (34,500 + 58200) Prime cost = 93,400 Conversion cost = ( Direct lobour + Material overhead) Conversion cost = (58,200 + 86,300) Conversion cost = 1,45,200 Question 5: Absorption Costing Direct Material Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Variable Costing Kamalpreet Student Id: 007 Unit Standard - 1858 5,800 12,900 86300 11,200 97500 34,500 58,900 93,400

Add

12 6 4 12 34

Direct Material Direct Labour Variable Manufacturing Overhead Total Answer : 6 A. Actual Overhead Actual direct labour hours Overhead rate B. Overhead applied Expected direct labour hours Overhead applied 2,800,000 5,45,000 2,800,000/5,45,000=5.13 2,937,550 600,000 2,937,550/600,000 =4.8 So its under applied

12 6 4 22

Answer 8 : Beginning work in progress (50,000) Materials 50,000 (90%) So 10% is left i.e. 10% is 5,000 3,60,000 70% is already finished So 30% is left which amounts to be 21,000 5,000(10%) 360,000(units) 21,000(70%) 386,000 50,000 390,000 440,000 410,000 Conversion 60% is already completed So 40% is left which amounts to be 20,000(40% of 50,000) 3,60,000 50% is already completed So 50% is left which amounts to be 15,000 20,000(40%) 360,000(units) 15,000(50%) 395,000

Units Ending work in progress (30,000) Total

The beginning work in progress Add : started into the production Less : transfer to the next department process

30,000 So equivalent units of production tend to be like this 390,000-30,000=360,000

Answer 9: Kamalpreet Student Id: 007 Unit Standard - 1858

1. Direct material price variance (AP-SP)AQ 2. Direct material Usage or variance (AM-SM)SP 3. Direct labour rate variance (AR-SR)AH 4. Direct labour efficiency variance (AH-SH)SR Answer 12: (A) Cost Of Good Manufactured Beginning Raw Material Add Purchased Raw Materials Less Ending Raw Materials Add Direct Labour Total Add Manufacturing Overhead Indirect Labour Rent Of Factory Factory Supplies Insurance On Factory LESS Factory Depriciation Total ADD Work In Progress In Begining Less Work In Progress At The End Total Cost Of Good Manufactured (B)cost of goods sold Cost of Goods Manufactured Less: ending balance of finished goods

(1.40-1.50)1200 =120 (990-1200)1.50 =315 (12-12)2400 =0 (2400-2400)12 =0

10000 125000 17000 118000 75000 193000 40000 30000 11000 12000 20000 73000 Total Manufacturing 20000 31000 -11000 -11000 255000 73000 266000

255,000 25,000 230,000 Kamalpreet Student Id: 007 Unit Standard - 1858

(C) Selling and administrative expenses are not considered while calculation cost of goods sold as they are not directly related with the production process and is an indirect expense . Answer13: Journal Entries 1. Material Inventory Account Payable (For Raw Material Purchased On Credit ) 2. Work In Progress Inventory Materials Inventory (For Direct Materials Incurred For Production) 3. Manufacturing Overheads Materials Inventory (For Indirect Materials Incurred ) 4. Manufacturing Wages Wages Payable (For The Manufacturing Wages Or Labour Payable ) 5. Work In Progress Inventory Manufacturing Wages (For The Direct Labour Incurred For Production ) 6. Manufacturing Overheads Manufacturing Wages (For Indirect Wages Or Labour Incurred ) 7. Work In Progress Inventory Manufacturing Overheads (For Allocation Of Manufacturing Overheads ) 8. Manufacturing Overheads Factory Depreciation Factory Supplies (For Manufacturing Overheads Incurred ) 9. Finished Goods Inventory Work In Progress Inventory Debit 45,000 Credit 45,000 30,000 30,000 4,200 4,200 42,000 42,000 25,000 25,000 17,000 17,000 20,000 20,000 8,700 8,700

79,600 79,600

Dr

Raw Material Account on March 2007

Cr Kamalpreet Student Id: 007 Unit Standard - 1858

To balance c/d To purchases

7,600 45,000

By Production By manufacturing inventory By balance b/d

30,000 4,200 52,600 Cr 79,600\ 5,200 84,800 Cr 91,100 91,100 Cr 20,000

52,600 Dr work in progress account on march 2007 To balance b/d 9,800 By finished goods To purchases 30,000 To wages 25,000 To factory overheads 20,000 By balance c/d 84,800 Dr Finished Goods Account on march 2007 To balance b/d 11,500 To work in progress 79,600 By balance c/d 91,100 Dr factory Overhead account on march 2007 To depreciation 5,800 By factory overheads To supplies 12,900 (80%) To raw material overheads 4200 To overhead wages 17,000 By Balance c/d 39,900 Answer :14 Contribution Margin= Selling Price per Unit Variable cost Selling price =200 Variable Cost =?=V Contribution Margin =40% Putting these values into the equation We get 200-v=80 V=120 (2) Break Even Point =Fixed Cost /Contribution margin Per Unit 510,000/80=6367

39,900

Answer 16 Sale Less: Variable cost

175 Kamalpreet Student Id: 007 Unit Standard - 1858

Direct materials Direct Labour Less :variable Manufacturing Increase In Variable Cost 45 131 6 17 154 Question 18: Numerical solution 1. Irrelevant as the cost of the car is a sunk cost so it cannot be recovered and therefore can never differ between 2. Relevant as the cost of petrol used for travelling to the Auckland is crucial as if he takes a bus to the Auckland than this cost may be more or less. so the cost difference between the alternatives can prove to be relevant . 3. The annual insurance is not relevant. it is because whether he travels by bus or by car he had to pay his annual insurance premium . 4. The cost of maintenance and repairs is relevant 5. it is not relevant cost as the cost of driving per mile certainly effects the total cost of driving also include many other components of the cost while determining the total cost of travelling . 6. it is relevant because if he drives than he dont have to pay the bus fare. 7. It is relevant cost as its impact cannot be measured in terms of the dollar. 8. It is relevant as if he travels by bus than he dont have to pay the Parking fees otherwise he had to pay for the parking fees and had to look for the parking spaces . 9. It is relevant as it adds to the total cost of travelling to the Auckland if he travels by the car , but not if he travels by the bus . 10. It is relevant as he might be missing out the opportunity of meeting the friends if he travels by bus but if he travels by car he will be having the opportunity of meeting them . 86

Kamalpreet Student Id: 007 Unit Standard - 1858