ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

COST ACCOUNTING (462)

CHECKLIST

SEMESTER: AUTUMN, 2016

This packet comprises the following material:

1. Text Book (one)

2. Assignment No. 1 & 2
3. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material,
please contact at the address given below:

The Mailing Officer

Allama Iqbal Open University
Sector H-8, Islamabad
Ph: 051-9057611-12

Dr. Syed Muhammad Amir Shah

(Course Coordinator)
 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)
[

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Course: Cost Accounting (462)

Level: BA/B.Com Semester: Autumn, 2016
Total Marks: 100 Pass Marks: 40
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.
ASSIGNMENT No. 1
(Units 1-4)
Q.1 Financial accounting procedures are generally designed to ascertain the periodic
profit or loss, but there are important limitations and deficiencies in the system.
Discuss. (20)

Q.2 Tennessee Tack manufactures horse blankets. In 2015, fixed overhead was applied
to products at the rate of Rs. 8 per unit. Variable cost per unit remained constant
throughout the year. In July 2015, income under variable costing was Rs. 188,000.
Julys beginning and ending inventories were 20,000 and 10,400 units,
respectively. (20)
i. Calculate income under absorption costing assuming no variances.
ii. Assume instead that the companys July beginning and ending inventories were
9,000 and 12,000 units, respectively. Calculate income under absorption costing.

Q.3 Wasik Company had the following inventory balances at the beginning and end of
August 2015: (20)
August 1 August 31
Raw Material Inventory Rs. 58,000 Rs. 84,000
Work in Process Inventory 372,000 436,000
Finished Goods Inventory 224,000 196,000
All raw materials are direct to the production process. The following information is
also available about August manufacturing costs:
Cost of raw material used Rs. 612,000
Direct labor cost 748,000
Manufacturing overhead 564,000

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 a) Calculate the cost of goods manufactured for August.
b) Determine the cost of goods sold for August.

Q.4 Explain the terms minimum level, maximum level and ordering level with regard to
maintenance of stocks. What are the factors to be taken into account in fixing these
levels? (20)

Q.5 Insides, an interior decorating firm, uses a job order costing system and apply
overhead to jobs using a predetermined rate of Rs. 17 per direct labor hour. On
June 1, 2015, Job #918 was the only job in process. Its costs included direct
material of Rs. 8,250 and direct labor or Rs. 500 (25 hours at Rs. 20 per hour).
During June, the company began work on Jobs #919, #920 and #921. Direct
material used for June totaled Rs. 21,650. Junes direct labor cost totaled Rs. 6,300.
Job #920 had not been completed at the end of June and its direct material and
direct labor charges were Rs. 2,850 and Rs. 800, respectively. All other jobs were
completed in June. (20)
a) What was the total cost of Job #920 as of the end of June 2015?
b) What was the cost of goods manufactured for June 2015?
c) If actual overhead for June was Rs. 5,054, was the overhead underapplied or
overapplied for the month? By how much?

ASSIGNMENT No. 2
(Units 5-9)
Total Marks: 100 Pass Marks: 40

Q.1 Moon Manufacturing Company discloses the following information of February,

2016; you are required to prepare journal entries to record the transactions in the
general and factory office books: (20)
Total Payroll Cost for the month Rs. 178,000, employees Income Tax withhold Rs.
8,000 deduction for provident fund at the rate of 10% of gross payroll were
recorded to pay.
Payroll analysis sheet revealed the following: Director Labour Rs. 95,000, Indirect
labour Rs. 20,000, Sales Salaries Rs. 35,000 and office Salaries Rs. 28,000.
Employer provident fund contribution (EPFC) is at the same rate. Rate of social
security fund contribution (SSCF) is 5% of gross pay.

Q.2 The Normal annual capacity of Suzuki Motor Company is 60,000 vehicles with
production being constant throughout the year. The April budget shows fixed
factory overheads of Rs. 2,500,000 and variable factory overhead rate of Rs. 2,500
per vehicle. During April, actual output was 4,800 vehicles with a total factory
overheads cost of Rs. 15,500,000. You are required to (i) Computer the under or
over applied factory overheads cost. (ii) Work out the spending Variance. (iii)
Determine the Idle Capacity Variance. (20)

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Q.3 Zoya Manufacturer 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. 75,000 B = Rs. 88,000 X = Rs. 65,000 Y = Rs. 46,000
Service departments render services in the following proportion:

A B X Y
Service dept. X 40% 45% ----- 15%
Service dept. Y 30% 50% 20% -----

Required: Calculate total factory overheads of production departments by

preparing factory overhead distribution sheet.

Q.4 Narrate the sequence in which the major components of the master budget are
prepared. Why is it necessary to prepare the components in such a sequence? (20)

Q.5 Bills Cabinets sells a product for Rs. 360 per unit. The companys variable cost per
unit is Rs. 60 for direct material, Rs. 50 per unit for direct labor and Rs. 34 per unit
for overhead. Annual fixed production overhead is Rs. 74,800 and fixed selling and
administrative overhead is Rs. 50,480.
a) Determine the contribution margin per unit and CM Ratio
b) Calculate the break-even point in units and in Rupees.
c) If Bills Cabinets wants to earn a pre-tax profit of Rs. 51,840, how many
units must the company sell?