ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce)

COST ACCOUNTING (462)

CHECKLIST

SEMESTER: SPRING, 2013

This packet comprises the following material: 1. Text book (one) 2. Assignment No. 1, & 2 3. Assignment forms (Two sets ) 4. Schedule for submitting assignments and tutorial meetings If you find anything missing in this packet, please contact at the address given below: The Mailing Officer, Allama Iqbal Open University H-8, Islamabad 051-9057611- 12 Dr. S. M. Aamir Shah Course Coordinator

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)
[

WARNING
1. 2. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM OTHER(S) AS ONES OWN WILL BE PENALIZED AS DEFINED IN AIOU PLAGIARISM POLICY. Semester: Spring, 2013 Total Marks: 100 (Units: 14) Note: You are required to solve all questions if you are unable to understand any question of assignment, do seek help from your concerned tutor. But keep in mind that tutors are not supposed to solve the assignment questions for you. Q. 1 a) b) How does Cost Accounting differ from Financial Accounting? Distinguish between: i) Direct cost and Indirect Cost ii) Product costs and Period Costs iii) Prime costs and Conversion Costs (10+10)

Course: Cost Accounting (462) Level: BA/B.Com

ASSIGNMENT No. 1

Q. 2 a)

b)

Flex Ltd. has been buying a given item in lots of 1200 units in a six months supply. The cost per unit is Rs. 12. Ordering cost is Rs. 8 per order and carrying cost is 25%. You are required to calculate the savings per year by buying in economical lot quantities. (10+10) The following data is available of Zeast Inc: Average daily requirements 20 units Time required for receipt 50 days Economical order quantity 1000 units Maximum daily consumption 30 units Minimum daily consumption 10 units Required: Compute (i) Order point (ii) Minimum Limit (iii) Maximum Limit (iv) Danger Limit State the basic points in Halsey Premium Bonus Scheme. What are the advantages and disadvantages of the scheme? Also describe the underlying principles behind employer's sharing a portion of the time saving. (10+10)

Q. 3 a)

b)

Best's Manufacturing's standard production for assembly operation X-15 is 20 units per hour. For the first week in May, a worker's record shows the following: Monday Tuesday Wednesday Thursday Friday Units 140 160 175 180 200 Hours 8 8 8 8 8

Required: Compute the employee's earnings under each of the following conditions. Carry all computation to three decimal places. i. An incentive plan is used with a guaranteed rate of Rs. 9 per hour and a premium of 60% of the time saved on production in excess of standard for each day. ii. A piecework plan with rates of Rs. 0.40 per unit below standard, Rs. 0.48 at standard and up above standard. Each day is computed independently, iii. A 100-percent bonus plan is used with a base rate of Rs. 9 per hour. The bonus is computed based on total production for the week. Q. 4 S & Z Industries has two production departments A and B and two services departments X and Y. Department factory overhead costs after primary apportionment are as follows: (20) A = Rs. 7,520 B = Rs. 8,710 X = Rs. 6,100 Y = Rs. 4,670 Service departments render services in the following proportion: Service dept. X Service dept. Y A 30% 50% B 65% 40% X ---10% Y 5% ----

Required: Calculate total factory overhead of production departments by preparing factory overhead distribution sheet. Q. 5 The December 31, 19B trial balance of Crockett Company showed: Sales Purchases (net) Transportation in Direct labour Sales salaries Rs. 14,500,500 2,400,000 32,000 3,204,000 200,000
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(20) Rs. 25,200 1,885,600 155,000 65,000

Sales returns and allowances Factory overheads Advertising expenses Delivery expenses

Inventories Finished Goods Work in Process Materials

December 31, 19B Rs. 567,400 136,800 196,000

December 31, 19A Rs. 620,000 129,800 176,000

Determine: iv) The total manufacturing cost. ii) The cost of goods manufactured. iii) The cost of goods sold. iv) Net profit

ASSIGNMENT No. 2
(Units: 59) Marks: 100 Q. 1 Plastic Design has its general office in Pakistan, but its plant is in Montgomery. A separate set of records is kept at the home office and at the factory. On November 1, the factory trial balance showed the following: (20) Finished Goods Work in Process Materials General Ledger Total Rs. 6400 7800 3500 ------Rs. 17700

Rs. 17700 Rs. 17700

For November, the following transactions occurred: a) Materials purchased on account Rs. 33000. b) Direct materials of Rs. 22000 were requisitioned, along with indirect materials of Rs. 6500 and Rs. 2500 of supplies, c) Total payroll was Rs. 30000. The home office prepared the payroll and the checks and deducted 6.5% for FICA tax and 10% for federal income tax. The liability for employer payroll taxes is kept on the home office books. The state unemployment insurance tax rate is 2.1%; the federal unemployment insurance tax rate is 7%. The payroll consisted of office salaries of Rs. 3000, sales salaries of Rs. 80000, indirect labor of Rs. 4000 and direct labor of Rs. 15000. d) Factory overhead is applied at a rate of 110% of direct labor cost. e) Materials costing Rs. 275 were defective and were returned to the supplier. f) Payments made to vendors on account Rs. 31500. g) Various factory overhead expenses totaled Rs. 2000, including Rs. 400 depreciation on factory machinery. h) Goods completed totaled Rs. 48300. i) Goods costing Rs. 45000 were sold for Rs. 65000.
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Required: Journal entries in the books of the general office and the factory to record the above transactions. Q. 2 Monnier, Incorporation produces cologne, Mon Roi, which requires processing in three departments. In the third department, materials are added, doubling the number of units. The following data pertain to the operations of department 3 for March: (20) Units received from Department 2 Units transferred to finished goods storeroom The balances of the units are still in process - 100% complete as to materials 50% complete as to labor and overhead. Cost transferred from Department 2 Cost added by the department: Materials Labor Factory overhead There was no beginning work in process inventory. 20000 32000

Rs. 30000 Rs. 8800 9000 7200

Rs. 25000

Required: You are required to prepare a cost of production report for Department 3 for March. Q. 3 The projections of direct materials purchases that follow are for the Stromboli Corporation. (20) December, 2010 January, 2011 February, 2011 March, 2011 Purchases on Account Rs. 40,000 60,000 50,000 70,000 Cash Purchases Rs. 20,000 30,000 25,000 35,000

The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase. Prepare a monthly schedule of expected cash payments for direct materials for the first quarter of 2011. Q. 4 Annual estimated factory overhead of a Company for an expected volume of 180,000 pounds of a product was as follows: (20) Fixed overhead............................................................................Rs. 36,000 Variable Overhead............................................................................108,000 Output was 10,000 pounds in June and overhead expense was Rs. 7,700. Required: (i) The overhead applied rate per unit (ii) Budgeted Variance (iii) Volume Variance
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Q. 5 a)

b)

Columbia Corporation plans sales of Rs. 2,000,000 for the coming period, which top management expects will result in a profit of Rs. 200,000. The break-even point has been determined to be Rs. 1,500,000 of sales. (10+10) Required: Compute the margin of safety and the margin of safety ratio. Rabecca Company plans to market a new product. Based on its market studies, management estimated that it can sell 5,500 units during the first year. The sales price will be Rs. 2 per unit. Variable cost is estimated to be 40% of the sales price. Fixed cost is estimated to be Rs. 6,000. Required: i) Compute the break-even point in dollars and in units. ii) Compute the break-even point in dollars and in units also if management has targeted profit Rs. 10,000. =======