Cost and Management Accounting MCQ Lesson No.3
(Question 2-a)
From the following information calculate
the Maximum stock level, Minimum
stock level, Re-ordering level and Danger stock level;-
(a) Average consumption 300
units per day
(b)
Maximum consumption 400 units per day
(c)
Minimum consumption 200
units per day
(d) Re-order quantity 3,600
units
(e)
Re-order period 10 to 15 days
(f) Emergency Re-order period 13 days
(1.25x4=5)
Solution:
Order Level =
Maximum Consumption x Lead Time (maximum)
= 400 x 15 = 6,000
Maximum
level =Order level – (Minimum
consumption x Lead time) + EOQ
=
6,000 – (200 x 10) + 3,600 = 7,600
Minimum Level = Order level— (Average consumption x lead time)
= 6,000 –
(300 x 12.5) = 2,250
Danger Level =
Average consumption x Emergency time
=
300 x 13 = 3,900
Following data are available with respect
to a certain material.
|
Annual requirement |
1200 units |
|
Cost to place an order |
Rs 3.00 |
|
Annual interest rate |
5% |
|
Per unit cost. |
Rs 5.00 |
|
Annual carrying cost per unit |
Rs
0.25 |
Required:
(1) Economic
order quantity
(2) Number
of orders per year
(3) Frequency
of orders
(2+1.5+1.5=5)
Solution:
(1) EOQ =
(2 x 1200 x 3/0.25 + 5% of 5)1/2
=
120 units
(2) No of order = Annual order/order size
=
1200/120
=
10
(3) Frequency of orders= No of days in a
year / No of order
= 360/10
= 36days
Solution
(a) GOGO
Manufacturing Company
Income
Statement
For
the period ended June 30, 2006.
|
Descriptions |
Rs. |
Rs. |
Rs. |
|
Sales |
|
|
250000 |
|
Less: Cost of Goods Sold |
|
|
|
|
Opening Inventory of Raw Material |
10000 |
|
|
|
Add: purchases |
150000 |
|
|
|
Cost of material available for used |
160000 |
|
|
|
Less: Closing inventory of Raw Material |
20000 |
|
|
|
Cost of Material Used/Consumed |
|
140000 |
|
|
Add: Direct Labour Cost |
|
20000 |
|
|
Prime Cost |
|
160000 |
|
|
Add: Factory overhead
applied(20000*50/100) |
|
10000 |
|
|
Total Factory Cost/Cost of Manufacturing |
|
170000 |
|
|
Add: Opening Inventory of W.I.P. |
|
10000 |
|
|
Total Cost put into process |
|
180000 |
|
|
Less Closing Inventory of W.I.P. |
|
20000 |
|
|
Cost of Goods Manufactured (at normal) |
|
160000 |
|
|
Add: Opening Inventory of Finished Goods |
|
10000 |
|
|
Cost of goods available for sale |
|
170000 |
|
|
Less: Ending Inventory of Finished Goods |
|
20000 |
|
|
Cost of Goods Sold (At Normal) |
|
150000 |
|
|
Add: Under applied FOH |
|
789 |
|
|
Cost of Goods Sold (At Actual) |
|
|
150789 |
|
Gross Profit |
|
|
99,211 |
|
Less: Operating Expenses Selling Expenses Administrative expenses |
|
5000 4000 |
9000 |
|
Net Income |
|
|
90,211 |
Calculation of under or over applied FOH
|
Applied FOH |
|
10000 |
|
Actual FOH Power, heat and light 500 Indirect material consumed 500 1000 Depreciation of plant 2000 3000 10 500 Indirect labor 2000 Other manufacturing expenses 500 |
2500 2500 3000 2000 1000 |
11000 |
|
Under
applied FOH |
|
1000 |
|
|||
|
|||
Q1.
S.P Johns Corporation is a manufacturing concern. Following is the receipts
& issues record for the month of January, 2006.
Date Receipts Issues
Jan
1 Opening Balance 100@ 40
Jan
8 200
units @ Rs. 45/unit
Jan
11 150
units
Jan 13
Inventory lost 50 units
Jan
16 50
units @ Rs. 60/unit
Jan
18 100
units @ Rs. 70/unit
Jan 20 150
units
Required: Find
the value of ending inventory by preparing Material Ledger card under Perpetual
and Periodic inventory system based on the above information using each of the
following methods:
|
DATE |
RECEIPTS |
ISSUES |
BALANCE |
||||||
|
|
Qty |
Rate |
Amount |
Qty |
Rate |
Amount |
Qty |
Rate |
Amount |
|
Jan 1 |
100 |
40 |
4,000 |
|
|
|
100 |
40 |
4,000 |
|
Jan 8 |
200 |
45 |
9,000 |
|
|
|
100 |
40 |
4,000 |
|
|
|
|
|
|
|
|
200 |
45 |
9,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 11 |
|
|
|
100 |
40 |
4,000 |
|
|
|
|
|
|
|
|
50 |
45 |
2,250 |
150 |
45 |
6750 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 13 |
|
|
|
50 |
45 |
2,250 |
100 |
45 |
4,500 |
|
Jan 16 |
50 |
60 |
3,000 |
|
|
|
100 |
45 |
4,500 |
|
|
|
|
|
|
|
|
50 |
60 |
3,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 18 |
100 |
70 |
7,000 |
|
|
|
100 |
45 |
4,500 |
|
|
|
|
|
|
|
|
50 |
60 |
3,000 |
|
|
|
|
|
|
|
|
100 |
70 |
7,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 20 |
|
|
|
100 |
45 |
4500 |
100 |
70 |
7,000 |
|
|
|
|
|
50 |
60 |
3,000 |
|
|
|
|
|
|
|
7,000 |
|
|
7,500 |
|
|
7,000 |
|
DATE |
RECEIPTS |
ISSUES |
BALANCE |
||||||
|
|
Qty |
Rate |
Amount |
Qty |
Rate |
Amount |
Qty |
Rate |
Amount |
|
Jan 1 |
100 |
40 |
4,000 |
|
|
|
100 |
40 |
4,000 |
|
Jan 8 |
200 |
45 |
9,000 |
|
|
|
300 |
43.33 |
13,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 11 |
|
|
|
150 |
43.33 |
6500.5 |
150 |
43.33 |
6500.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 13 |
|
|
|
50 |
43.33 |
2166.5 |
100 |
43.34 |
4334 |
|
Jan 16 |
50 |
60 |
3,000 |
|
|
|
150 |
49 |
7334 |
|
Jan 18 |
100 |
70 |
7,000 |
|
|
|
250 |
57.3 |
14,334 |
|
|
|
|
|
|
|
|
|
|
|
|
Jan 20 |
|
|
|
150 |
57.3 |
8595 |
100 |
57.39 |
5739 |
|
|
|
|
|
|
|
|
|
|
5739 |
Actual FOH
Rs. 2,00,000
Less
Applied FOH
2,25,000
|
Over applied
(ii)
Capacity Variance
Applied/Absorbed
factory overhead Rs.
2,25,000
Less Budgeted
factory overhead for capacity attained 2,05,000
Favorable 20,000
(iii)
Budget Variance
Budgeted
factory overhead for capacity attained Rs.
2,05,000
Less Actual factory overhead 2,00,000
Favorable 5,000
Applied FOH
Applied FOH x Actual hours
1,80,000 / 20,000 x 25,000 = 2,25,000
Budgeted FOH for capacity attain
Fixed FOH Rs.
80,000
Variable FOH
1,00,000 / 20,000 x 25,000 = 1,25,000
|
Solution
Assignment – 4
JV
Company
Income statement -Direct costing
For the year ending, 19A
|
Rs. |
Rs. Rs. |
|
Sales (80,000 units @7.00) |
560,000 |
|
Direct material
(100,000 units @1.50) |
150,000 |
|
Direct labor (100,000 units @1.00) |
100,000 |
|
Variable FOH (100,000 units@0.50) |
50,000 |
|
Variable cost of
goods manufactured |
300,000 |
|
Beginning
inventory |
---------- |
|
Variable cost of
goods available for sale |
300,000 |
|
Ending inventory
(20,000 units @3.00) |
(60,000) |
|
Variable cost of goods sold |
(240,000) |
|
Gross contribution
margin |
320,000 |
|
Variable marketing and admin expenses |
|
|
(80,000 units @0.50) |
(40,000) |
|
Contribution margin |
280,000 |
|
Less fixed
expenses: |
|
|
Factory Overhead |
150,000 |
|
Marketing and
admin expenses |
80,000 |
|
Total fixed
expenses |
(230,000) |
|
|
|
|
Operating income |
50,000 |
Requirement # 1
Unit cost of the finished goods inventory, December 31:
Per unit Cost=Cost of Goods Manufactured (W-1) ÷
Units Manufactured (W-2)
Rs.706, 600 ÷ 4000 units
= Rs.176.65
Requirement # 2
Total Cost of the Finished Goods Inventory, December 31
Units
in Finished Goods Inventory x Unit Cost (Requirement
01)
420
Units x Rs.176.65
= Rs.74, 193
Requirement # 3
Cost of Goods Sold:
Cost
of Goods Manufactured (Working
-1) Rs.706,
600
Add:
Opening Finished Goods Inventory 48,600
------------------------------
Cost
of goods available for sale Rs.755,200
Less:
Closing Finished Goods Inventory 74,193
------------------------------
Cost of Goods Sold Rs.681,
007
Requirement #4
Gross Profit Total and the Gross Profit Per Unit:
Sales
(3880 units x Rs.220) Rs.853,
600
Less:
Cost of Goods Sold Rs.681,
007
-------------------------------
Gross Profit Rs.172,
593
-------------------------------
Gross Profit per
Unit = Gross Profit ÷ Units Sold
Gross Profit per Unit = Rs.172,
593 ÷ 3880 units = Rs.44.483
WORKING NOTES:
(W-1)
Cost of Goods Manufactured:
Direct
Materials:
Opening Material Inventory Rs.34,
200
Add: Material Purchased 364,000
Add: Freight in 8,600
------------
372,600
Less: Purchases Discount 5,200
------------
Net Purchases 367,400
---------------
Materials available for use 401,600
Less: Closing Material Inventory 49,300
--------------
Direct Material Used Rs.352, 300
Direct
Labour Rs.162,
500
Factory
Overhead:
Depreciation – Factory Equipment 21,350
Indirect Labour 83,400
Misc. Factory Overhead 47,900
------------
Total
Factory Overhead Rs.152, 650
-------------------
Total
Current Manufacturing Cost Rs.667, 450
Add:
Opening work in process inventory 81,500
------------------
Cost
of goods available for manufacturing Rs.748, 950
Less:
Closing work in process inventory 42,350
-----------------
Cost of Goods
Manufactured Rs.706, 600 ----------------
W-2
Units Manufactured:
Units
Sold 3880
Add:
Units in Closing Finished Goods Inventory 420
--------
Total
Units to be accounted for 4300
Less:
Units in Opening Finished Goods Inventory 300
--------
Units Manufactured 4000
JV Company
Income statement –Absorption costing
For the year ending, 19A
Rs. Rs. Rs.
|
Sales (80,000 units @7.00) |
560,000 |
|
Direct
material (100,000 units@1.50) |
150,000 |
|
Direct labor (100,000 units@1.00) |
100,000 |
|
Variable FOH (100,000 units@0.50) |
50,000 |
|
Fixed FOH |
150,000 |
|
Cost of goods
manufactured |
450,000 |
|
Beginning
inventory |
--------- |
|
Cost of goods
available for sale |
450,000 |
|
Ending
inventory (20,000 units@4.50) |
(90,000) |
|
Cost of goods sold at actual |
(360,000) |
|
Gross profit |
200,000
|
|
Marketing and
admin expenses: |
|
|
Fixed Marketing and Admin expenses |
80,000 |
|
Variable Marketing and Admin expenses |
|
|
(80,000 units @0.50) |
40,000 |
|
|
(120,000) |
|
Operating income |
80,000 |
Segregation of Fixed and Variable cost is as
follow:
|
Variable Cost |
Fixed Cost |
|
19,600 |
4900 |
|
3731 |
1599 |
|
1080 |
120 |
|
----- |
55,000 |
|
1250 |
11250 |
|
----- |
50000 |
|
2000 |
----- |
|
2254 |
960 |
|
4500 |
----- |
|
5600 |
1400 |
|
5500 |
----- |
|
3150 |
3150 |
|
48665 |
128385 |
a).
Cost includes both fixed and variable cost. Variable cost varies with the level
of production. So variable cost will be different at cost and at break even
point.
b). Break even sales / Sales price per unit
= 2,11,333 / 800 = 264 students
c). Fixed cost / *Contribution margin ratio
= 1,28,385 / 1- 48,665 / 1,24,000 =
1,28,385 / 0.6075
= Rs. 2,11,333
d). Fixed cost + Desired Profit /
*Contribution margin per unit = 1,28,385
+ 25000 / 800 – * 314
= 315 students
e). Sales – B.E (S) / Sales x 100 = 1,24,000 – 2,11,333 / 1,24,000 x 100 =
(70.43)
*Contribution
Margin Ratio = 1- Variable cost / Sales
*Contribution
Margin per unit = Sales price per unit - Variable cost per unit
*Variable
cost per unit = 48,665 / 155 = Rs. 313
1.
UNITS
MANUFACTURED DURING YEAR:
|
|
Units |
|
Units sold
during year |
8,000 |
|
Add: Ending
finished goods units |
2,000 |
|
Less: Opening
finished goods units |
1,800 |
|
Units
manufactured during year |
8,200 |
2.
Complete
The Foreman’s Estimate Of The Cost Of Work In Process
Proportion of FOH from direct labor = (16,000/20,000) x 100 = 80%
Value of FOH for Work in process ending
Inventory = 1,000 x 80% = Rs. 800
Calculation
for Work in Process ending Inventory:
|
Direct
material cost |
Rs. 2,700 |
|
Direct Labor
cost |
Rs. 1,000 |
|
FOH |
Rs. 800 |
|
Work in Process Ending Inventory |
Rs. 4,500 |
3.
PREPARE
A MANUFACTURING STATEMENT FOR THE YEAR
|
Particulars |
Amount (Rs.) |
|
Direct
material |
30,000 |
|
Direct Labor |
20,000 |
|
FOH |
16,000 |
|
Total
manufacturing cost |
66,000 |
Solution:
|
Date |
Receipts |
|
Value
of Stock |
Average
Cost. |
||
|
7-Nov |
200
units @ Rs. 150/unit |
|
200 x 150 = |
30,000 |
30,000 / 200
= |
150 |
|
9-Nov |
-- |
75 x
150 = 11,250 |
30,000
- 11,250 = |
18,750 |
18,750 / 125
= |
150 |
|
13-Nov |
150
units @ Rs. 100/unit |
|
15,000
+ 18,750 = |
33,750 |
33,750 / 275
= |
122.7 |
|
15-Nov |
100
units @ Rs. 175/unit |
|
33,750
+ 17,500 = |
51,250 |
51,250 / 375
= |
136.7 |
|
18-Nov |
-- |
250 x
136.7 = 34,175 |
51,250
- 34,175 = |
17,075 |
17,075 / 125
= |
136.6 |
|
20-Nov |
|
100 x
136.6 = 13,660 |
17,075
- 13,660 = |
3,415 |
3,415 / 25
= |
136.6 |
|
22-Nov |
300
units @ Rs.125/unit |
|
37,500
+ 3,415 = |
40,915 |
40,915 / 325
= |
125.9 |
|
24-Nov |
-- |
300 x
125.9 = 37,770 |
40,915
- 37,770 = |
3,145 |
3,145 / 25
= |
125.8 |
|
27-Nov |
200
units @ Rs. 150/unit |
|
3,145 +
30,000 = |
33,145 |
33,145 / 225
= |
147.3 |
|
30-Nov |
-- |
125 x
147.3 = 18,412.5 |
33,145
- 18,412 = |
14,733 |
14,733 / 100 = |
147.3 |
Value of Closing stock=14,733
Question
# 02 (Marks:
05)
The ABC Company provides the following
information:
Estimated requirements for next
year: 2400
units
Per unit Cost:
Rs. 1.50
Ordering Cost (per order): Rs.
20
Carrying Cost: 10%
From the above information you are required to
calculate:
(a) Economic Order Quantity
(b) Prove your answer
Solution
EOQ=
(2 X AR X OC/C)
= (2 X 2400 X 20/10% OF 1.5)1/2
= 800 UNITS
(b)
Average order
Qty= order Qty/2
|
Order qty |
Required Units |
No of orders |
Total ordering cost |
Total carrying cost |
Total cost |
|
600 |
2400 |
4 |
80 |
45 |
125 |
|
800 |
2400 |
3 |
60 |
60 |
120 |
|
1000 |
2400 |
2 |
40 |
75 |
115 |
