Cost Accounting Past PaperS B.

Com 2
Cost Accountin
Time Allowed: 3 Hours New Course Marks: 100
Note: Attempt any five questions. All questions carry equal marks

2016
Note: Attempt any FIVE questions from the following. All questions carry equals marks.
Question # 1
The records of Bel Cold Refrigerator Company show the following information for the three months ended
March 31, 2015.

Materials purchased Rs. 1,946,700

Inventories, January 1, 2015:
Finished goods (100 refrigerator) Rs. 43,000
Materials Rs. 268,000
Director labour Rs. 2,125,800
Factory overhead Rs. 764,000
Marketing expenses Rs. 516,000
General and administrative expenses Rs. 461,000
Sales (12,400 refrigerators) Rs. 66,34,000
Inventories, March 31, 2015:
No unfinished work on hand xxxxxx
Finished goods (200 refrigerators),
cost at Rs. 395 each materials Rs. 167,000
REQUIRED:

(1) An income statement for the period.

(2) The number of units manufactured.
(3) The unit cost of refrigerator manufactured.
(4) The gross profit per unit sold.
(5) The income per unit sold.
(6) The ratio of gross profit to sale.
(7) The income to sales percentage.
Question # 2
On May 31, 2009 a fire broke out in factory premises of Al-Musawwer Manufacturing Company Limited.
Consequently the processing building and the in process inventory were completely destroyed but the
storeroom could be saved.
After the fire a physical inventory was taken. Raw materials were valued at Rs. 30,000, finish ;d goods at
Rs. 50,000 and supplies at Rs. 5,000.
Inventories on January 1, 2009 consisted of:

Raw materials Rs. 20,000

Work-in-process Rs. 40,000
Finished goods Rs. 60,000
Supplies Rs. 2,000
The financial statements reveal following figures of sales and gross profit for the last five years:

——- Sales Gross Profit

200A Rs. 650,000 Rs. 220,000

200B Rs. 700,000 Rs. 230,000
200C Rs. 750,000 Rs. 250,000
200D Rs. 800,000 Rs. 270,000
200E Rs. 850,000 Rs. 280,000
Sales for the first five months of 200F were Rs. 450,000. Raw materials purchases were Rs. 175,000.
Freight on purchases was Rs. 7,000. Direct labour for the five months was Rs. 80,000. For the past five
years factory overhead was at 60% of direct labour.

REQUIRED:

Compute the value of work in process inventory lost by fire.

Question # 3
Factory overhead absorption rate of Ali Manufacturing Company is Rs. 3 per hour. Budgeted overhead for
10,000 hours per month is Rs. 30,000 and for 16,000 hours per month is Rs. 42,000. Actual factory
overhead for the month is Rs. 44,000 and actual volume is 15,000 hours.

REQUIRED:

(1) Variable factory overhead rate.

(2) Budgeted fixed factory overhead.
(3) The capacity hours at which factory overhead applied rate is computed.
(4) Applied factory overhead.
(5) Under or overapplied factory overhead.
(6) Budget variance.
(7) Capacity variance.
Question # 4
The book and record of the Salman Manufacturing Co. present the following data for the month of
February:

Direct labour cost Rs. 16,000 (160% of F.O.H.)

Cost of goods sold Rs. 56,000.
Inventory accounts showed these opening and closing balances:
——– February 1st February 28th
Materials Rs. 8,000 Rs. 8,600
Work in process Rs. 8,000 Rs. 12,000
Finished goods Rs. 14,000 Rs. 18,000
Marketing expenditure 5% of sales. General expenses and Admin. expenses 10% of sales, sales Rs.
75,000.

REQUIRED:

An income statement with supporting schedule showing cost of goods manufactured and sold statement.

Question # 5
The standard time for the completion of a certain job is fixed at 200 hours. Normal wages are paid to the
workers according to time rate which is Rs. 25 per hour. If the job is completed in lesser time a bonus is
paid to the worker calculated on the following lines:

Upto first 20% saving in time

———– 10% of the corresponding saving in time.
For and within next 20% saving in time
———– 25% of the corresponding saving in time
For and within next 30% saving in time
———– 50% of the corresponding saving in time
For and within next 30% saving in time
———– 30% of the corresponding saving in time
REQUIRED;

Compute total earning and earning per hour of the following workers:

Works Time Taken (Hours)

Arshad 210
Amjad 160
Nazar 120
Naheed 50
Question # 6
During the year 2012 Shammusdeen & Co. Ltd. produced 750,000 units. At this activity level factory
overhead cost were Rs. 1,100,000.

Before the start of 2012 accountant of the company estimated annual activity level as 850,000 units and
factory overhead as Rs. 1,275,000. Thus factory overhead applied rate was Rs. 1.50 per unit 60% of
factory overhead applied rate is composed of variable cost.

REQUIRED:

(1) Budgeted fixed factory overhead.

(2) Under or overapplied factory overhead.
(3) Volume variance.
(4) Budget variance.
Question # 7
An operator engaged in machining certain components receives an ordinary day rate of Rs. 160 per day
of 8 hours, the standard output for machining the components has been fixed at 80 pieces per hour (time
as fixed for premium bonus). On a certain day the output of the worker on this machine is 800 pieces.
Find labour cost per 100 pieces and the wages that would have been actually earned by the workman
under the following:

(a) If paid for on straight piecework basis at the standard rate.

(b) If Halsey premium bonus system is being adopted.
(c) If a bonus of Rs. 23 is paid per 100 units of the extra output.
Question # 8
Explain the difference between periodic inventory system and perpetual inventory system. Which of these
two systems is better?

2015
Q.1. Records of Badar Cold Refrigerator Company show the following information for the three months
ended March 31, 2014.

Materials purchased Rs. 1,946,700

Inventories, January 1, 2014
Finished goods (100 refrigerators) Rs. 43,000
Materials Rs. 268,000
Direct labour Rs. 2,125,800
Factory overhead Rs. 764,000
Marketing expenses Rs. 516,000
General and administrative expenses Rs. 461,000
Sales (125400 refrigerators) Rs. 6,634,000
Inventories, March I, 2014
No unfinished work on hand
Finished goods (200 refrigerators),
costed at Rs. 395 each
Materials Rs. 167,000
Required:
1. An income statement for the period.
2. The number of units manufactured.
3. The unit cost of refrigerators manufactured.
4. The gross profit per unit sold.
5. The income per unit sold.
6. The ratio of gross profit to sales.
7. The income to sales percentage.
Q.2. Following costs were charged to Finishing department of Asia Manufacturing Company during the
month of May:
Cost from preceding department Rs. 94500
Labor Rs. 38468
Factory overhead cost Rs. 9617
During May, Finishing Department received 18,000 units from preceding department. 13,000 units were
transferred to finished goods storeroom. .2,500 completed units were in Finishing Department awaiting
transfer. At the end of May, 2,000 units were in process in Finishing Department These units were 40%
converted.

Required: A cost of production report for Department No. 2 for the month of May.

Q.3. Predetermined factory overhead absorption rate computed by Fazal Industries is Rs. 6 per machne
hour. Budgeted factory overhead for activity level of 150,000 machine hours is Rs. 800,000 and for
activity level of 100,000 machine hours it is Rs. 700,000. Actual factory overhead incurred during the year
is Rs. 710,000 at an actual volume of 120,000. machine hours.

Required:
(i) Variable factory overhead absorption rate.
(ii) Budgeted fixed factory overhead.
(iii) Budgeted activity level on which the absorption rate is based.
(iv) Over or under absorbed factory overhead.
(v) Volume variance.
(vi) Spending variance.
Q.4. Consumption forecast of a particular material is given hereunder:
Maximum daily consumption 600 units
Average daily consumption 500 units
Minimum daily consumption 400 units
Lead time 4 to 8 days
Time to get emergency supplies 3 days
Econofnic order quantity 5,000 units
Required: Determine (a) Order level (b) Minimum level (c) Maximum level (d) Danger level

Q.5. A company had following inventories at the beginning and end of the month:
September 1 September 30
Materials Rs.20000 Rs.25000
Work in process—Materials Rs.9000 Rs.4000
Work in process—Labour Rs.16000 Rs.10000
Work in process—FOH Rs.5000 Rs.6000
Finished goods Rs.12000 Rs.25000
During the month of September, the cost of raw materials purchased was Rs.60,000; direct labour cost
incurred was Rs.80,000 and factory overhead applied to production was Rs.30,000.
Required:
(a) Prepare the necessary journal entries on September 30 to transfer the cost of goods manufactured
and sold to proper summary accounts.
(b) Pass journal entries for sales return with your own figures.
Q.6. Abdullah and Ahmed are two workers in a department of a manufacturing concern. During each day
of the previous week they worked as follow:
Days Hours worked
Abdullah Ahmed
Monday 10 9
Tuesday 11 10
Wednesday 9 9
Thursday 8 10
Friday 9 8
Saturday 8 4
Required: Normal and overtime wages of Abdullah and Ahmed for the week if:
(a) Normal working hours are 8.
(b) Normal rate is Rs. 80 per hour.
(c) Workers are paid at double the normal rate for overtime.
Q.7. Define cost accounting and differentiate between cost accounting and financial accounting.

Q.8. Explain in detail the functional classification of cost.

2014
Question # 1
From the following information prepare an income statement for the year ended December 31, 2013.

Beginning inventory (at sales price) Rs. 65,000

Purchase during the year (at cost) Rs. 450,000

Closing inventory (at sales price) Rs. 75,000

Sales (at sales price) Rs. 590,000

Selling expenses amounted to 3% of sales and general administrative expenses amounted to 2% of

sales.

Required: An income statement for the year 2013

Question # 2
Khubaib manufacturing company uses process cost system. Costs of department 2 for the month of June
were as under:

Cost from preceding department Rs. 20,000

Cost added:
Materials Rs. 21,816

Labor Rs. 7,776

 Factory overhead Rs. 4,104 Rs. 33,696
The following information was obtained from the department’s quantity schedule:

Units received 5,000

Units transferred out 4,000

Units still in process 1,000

The degree of completion of work in process was:

 50% of the units were 40% complete

 20% of the units were 30% complete
 Balance of the units were 20% complete
Required: Prepare cost of production report of department 2 for June.
Question # 3
Gujranwala Enterprises received an order for manufacture of 500 units of their product “y” from Lahore
Company. Following costs were incurred for filling the order:

Direct materials cost Rs. 25,000

Direct labor cost Rs. 50,000

Factory overhead applied was 50% of direct labor cost.

Additional costs incurred for rework on 50 units found defective were as follow:

Direct materials cost Rs. 2,000

Direct labor cost Rs. 2,000

Factory overhead at applied rate

Required:
Prepare journal entries to record completion of the order when:

 Job is charged with the cost of defective work.

 Cost is not so charged. Also calculate cost per unit in both of the cases.
Question # 4
A company has three production departments X, Y & Z, and two service department A & B the expenses
incurred by them during the month are:

 X Rs. 80,000
 Y Rs. 70,000
 Z Rs. 50,000
 A Rs. 23,400
 B Rs. 30,000
 Expenses of service departments are apportioned to the production and to the co-service department on
the following basis:

X Y Z A B
Expenses of A 20% 40% 30% 10%
Expenses of B 40% 20% 20% 20%
Required:
Apportion expenses of A & B departments to X, Y & Z departments with the help of simultaneous
equations method and calculate total factory overhead cost of the production departments.

Question # 5
Following figures are taken from annual budget of ABC manufacturers for the year 2013:

Fixed factory overhead Rs. 4,000,000

Factory overhead absorption rate Rs. 70 per direct labor hour

Variable factory overhead rate Rs. 30 per direct labor hour

Following are a few figures of actual results of year 2013:

Capacity attained 110,000 hours

Factory overhead Rs. 8,000,000

Required:
 Budgeted capacity that was used to compute factory overhead absorption rate
 Analysis of under or over absorbed factory overhead into volume and budget variances
Question # 6
Abdullah and Ahmad are two workers in assembling department of a manufacturing concern. During each
day of previous week their hours worked are as under:

Days Hours Worked

Abdullah Ahmad
Monday 10 9

Tuesday 11 10

Wednesday 9 9

Thursday 8 10

Friday 9 8

Saturday 8 4

Required:
Normal and overtime wages of Abdullah and Ahmad for the week if:

 Normal working hours are 8

 Normal rate is Rs. 80 per hour
 Workers are paid at double the normal rate for overtime.
Question # 7
Following transactions are related to Marium manufacturing company, Lahore. Factory is situated at
Gugrat. Total payroll cost for the month Rs. 800,000; employees’ income tax withheld Rs. 40,000,
deduction for the provident fund at the rate of 10% of gross payroll, voucher for net earnings of
employees was prepared and paid. Payroll analysis sheet revealed the following information:

Direct labor Rs. 450,000

Indirect labor Rs. 100,000

Sales salaries Rs. 150,000

Office salaries Rs. 100,000

Note: Employees provident fund contribution by the employer is at the same rate as the rate of deduction,
rate of social security fund contribution by employer is 5% of gross pay.
Required:
Prepare journal entries to record the above transactions in general office books and factory office books.

Question # 8
Explain the following:

 Process cost method

 Perpetual inventory system
 First in first out method
 Expenditure variance

2013
Question # 1
What are the Principles Bases of the distribution of one head expenses among the departments?

Question # 2
Asad & Company Limited present I you the following facts concerning the company’s operations for the
years 2011.

Beginning inventory (at sales prices) 37,500

Purchases (at cost price) 52,500

Sales (at sales price) 75,000

Ending inventory (at sales price) 50,000

Marketing expenses 16,000

Administrative expenses 6,000

Required: An income statement for the year 2011

Question # 3
AI-Raheem Fabrics, during the month of January 2011, completed the following transactions.

(a) Materials purchased during January, 2011:

Direct materials Rs. 90,000

Indirect materials Rs. 10,000

(b) Materials issued for use in production:

Direct materials Rs. 80,000

Indirect materials Rs. 5,000

(c) Defective materials returned to supplier:

Direct materials Rs. 4,000

Indirect materials Rs. 2 000

(d) Unused material returned by factory to store room:

Direct materials Rs. 2,000

Indirect materials Rs. 1 000

(e) Payroll data for the month as follows:

Direct materials Rs. 60,000

Indirect materials Rs. 10,000

Salaries of marketing staff Rs. 30,000

Salaries of administration staff Rs. 20,000

Deduction (Less from total) of provident fund@ 10% of gross earning Rs. 12,000

Net amount paid Rs.108, 000

Employer also contributes an equal amount towards provident fund.

(f) Factory overhead cost incurred during the month:

Bilk for utilities Rs. 12,000

Factory rent Rs. 16,000

Depreciation of plant Rs 4,000

Insurance of plant expired Rs. 2,000

(g) Factory overhead is applied to production @ 50% of direct labor cost.

(h) Cost of finished output during the moth Rs.150, 000.
(i) Finished goods costing Rs. 130,000 were sold for Rs.170, 000. Sales of Rs. 70,000 were for cash and
of Rs. 100,000 were on credit.
Required:
Pass entries in general journal form to record the above transaction.

Question # 4
Production of an order consisting 800 units requires direct materials of Rs. 350,000 and direct labor or
Rs. 250,000. Factory overhead is applied at the rate of 80% of direct labor cast. After completion of the
order, 16 units are classified as spoiled which can be sold for Rs. 4,000. Customer takes delivery of
remaining 784 good units and paid in cash the contracted prices at the rate of Rs. 1,250 per unit. Spoiled
units are sold and Rs. 4,000 received in cash.

Required:
(1) Journal entries, if the loss is charged to the order.
(2) Journal entries, if the loss is changed to factory overhead.

Question # 5
A worker takes 9 hours to complete a job on daily wages and 6 hours on a scheme of payment by results.
His day rate is Rs. 7.50 per hour. Materials coast of the product is Rs. 400 and overheads are recovered
at 150% of total direct wages.

Required: Calculate factory cost of the product under:

(1) Piece work Plan.
(2) Halsey Plan.

Question # 6
Annual estimated factory overhead of a company for an expected of 1, 80,000 pounds of a product was
as follows:

Fixed overhead Rs 36,000

Variable overhead 1, 08,000

Output was 10,000 pounds in June and actual overhead expenses were 7,700.

Required:
(1) The Overhead Rate per unit
(2) Spending Variance.
(3) Idle Capacity Variance.

Question # 7
Following costs were charged to 2nd department of Muddesser Corporation during the month of
September. Cost of units received from 1 department Rs. 364,000, materials Rs. 327,500, and labor Rs.
221,970, overhead Rs. 80,360.

During the month 2nd department completed operations on 4,700 units and transferred these units to
3rddepartment, 200 units were lost during processing, the loss is considered as unavoidable. At the end of
month 300 units were in process, these units were 2/3 converted. All materials are added in
2nddepartment at the beginning of manufacturing operations.
Required: Cost of production report

Question # 8
Explain the following.

(i) Conversion cost.

(ii) Job order cost system
(iii) Fixed cost.
(iv) Stock turnover
(v) Historical cost

2012
Question # 1
The following data is presented by the Akram Manufacturing Company:

Changes in inventories:
Raw material increased by 15,500

Work in process decreased by 18,900

Finished goods increased by 8,700

Purchases of raw materials 71, 50,000

Purchases returns 2,000

Direct. Labor Cost 1, 25,000

Manufacturing overhead 75,000

Required: From the above information, compute the cost of goods sold.

Question # 2
A Manufacturing Company estimates its carrying cost at 15% and ordering cost at Rs 9 per order. The
estimated annual requirement is 48,000. Units at a price of Rs. 4 per units

Required:
(i) What is the most economical order quantity?
(ii) How, many order need to be placed?

Question # 3
Annual estimated factory overhead of a company for an expected volume of 1, 80,000 pounds of a
product was as follows:

Fixed overhead Rs. 36, 000

Variable overhead Rs. 1, 08, 000

Output was 10, 000 pounds in June and actual overhead expenses were RS.7, 700

Required:
(i) The overhead rate per unit.
(ii) Spending variance.
(iii) Idle capacity variance

Question # 4
Zakir Electrical Industry produces U.P.S. assembling the last producing department during April received
1, 700 units from preceding department at unit cost of Rs 2, 544. During the month, a total of 1, 626 units
were assembled. At the end of month 10 of the assembled units were in the department awaiting transfer.
70 in process unit were estimated to be 4/5 complete as to materials and 3/5 complete as to Lahore and
factory overhead. Remaining units were lost during processing. Direct materials Rs. 3,767,680, direct
labor Rs. 420,336 and factory overhead Rs. 380,304 was charged to the department during April.

There was no work in process beginning inventory.

Required:
(a) Schedule of equivalent production.
(b) Cost of production report.

Question # 5
The standard time for the completion of a certain job is fixed at 200 hours. Normal wages are paid to the
workers according to time rate which is Rs. 25 per hour. If the job is completed in lesser’ time, a bonus is
paid to the worker

Calculated on the following lines:

• Up to, first 20% saving in time 10% of the corresponding saving in time.

• For and within next 20% saving in time 25% of the corresponding saving in time.

• For and within next 30% saving in time 50%Y of the corresponding saving in time.

• For and within next 30% saving in time 30% of the corresponding saving in time.

Required: Compute the total earning and earning per hour of the following workers:.
Workers Time Taken (Hours)
Arshad 210

Amjad 160

Nazar 120

Naheed 50

Question # 6
Following are the transactions in summarized from an Abpara Paper Mill for the month of June, 2011

(a) Direct materials of Rs.1, 40,000 and indirect materials of Rs. 20, 000 were purchased during the
month, out of which direct material of Rs. 5, 000 which returned to supplier
(b) Materials requisition summary for the month showed following issue:
Direct material Rs. 120.000

Indirect material Rs. 15.000

Shipping supplies Rs. 5.000

However direct materials of Rs. 5.000 and indirect materials of Rs. 2.000 were returned back to
storeroom as shown by materials returned notes.

(c) A further purchase of direct materials of Rs. 10,000 was made and on receipt of the consignment it
was directly delivered to factory for use in production.
(d) Gross salaries and wages for the month as shown by payroll register were Rs. 1, 25,000. Deduction of
income tax at .source totaled Rs. 5,000 and of provident fund Rs. 12,500, the company contributes an
equal amount towards provident fund.
Payroll Analysis Sheet showed following distribution:
Direct labor Rs. 70,000

Indirect labor Rs. 20,000

Salaries of marketing department Rs. 20,000

Salaries of administration department Rs..15,000

(e) Factory overhead costs of Rs.50,000 including depreciation of Rs. 10,000 and expired insurance of
Rs. 5,000 for factory machinery and building were recorded.
(f) Depreciation of Rs. 10,000 on office building and furniture was recorded, out of which Rs. 4,000 is
chargeable to marketing department. .
(g) Vouchers totaling Rs. 110.000 excluding payroll voucher were paid at a discount of 2%.
(h) Factory overhead is applied to production at the rate of 100% of direct labor cost.
(i) Cost of finished , output for the month totaled Rs.200,000:
(j) Finished goods costing Rs. 180,000 were sold for Rs.255,000. Sales of Rs. 135,000 were on credit.
(k) One of the credit customers returned goods costing Rs.7,500 for which he was billed at Rs. 12,000.

Required: Pass journal- entries for the above transactions in head books and, factory office hooks using
two parallel columns
Question # 7
The departmentalization of manufacturing concern is an important aid to cost and managerial control.
Why?

Question # 8
Briefly explain the following:

(1) Danger level

(2) Volume variance
(3) Conversion cost.
(4) Perpetual inventory system.
(5) Job Costing.