Cost Concepts, Information System
E-1
1- Identify the conversion cost per unit
Conversion cost =DL+FOH
= 20 + (15+6) = 41 /- units
2- Identify the prime cost
Prime cost=DM+DL
= 32 + 20 = 52 /-units
3- Determine the estimated total variable cost per unit
= 32+20+15+3 = $70
4- Total cost for production 12,000 units:
TOTAL COST
Rs × Unit
Rs
Direct Material 32 × 12000
=384000
Direct Labour
20 × 12000
=240,000
Variable FOH
15 × 12000
=180,000
Fixed FOH
6 × 12000
=72000
_________
$ 876,000
Total cost for sales 8,000 units
Direct Material 32 × 8,000
= 256,000
Direct Labour
20 × 8,000
= 160,000
Variable FOH
15 × 8,000
= 120,000
Fixed FOH
6 × 8,000
= 48,000
Variable marketing
3 x 8,000
= 24,000
Fixed marketing 4 x 8,000
= 32,000
$ 640,000
E-2
Determine Mercaldo Company’s expected operating
income or loss for 19B.
19B
Sale decease to 15%
Direct Material used
2412000
Direct Labor
3204000
Factory Overhead
188560O
Total current manufacturing cost
7501600
Add: Work - in – process opening
129800
Cost of goods available for manufacturing
7631400
Less: Work - in – process ending
136800
Cost of goods manufactured
7494600
Add: Finished goods opening
620,000
Cost of goods available for sale
8114600
Work in process:
+Opening inventory
Cost of goods to be manufactured
40,000
384,000
-closing inventory
Cost of goods manufactured
36,000
348,000
Finished good:
+Opening inventory
Cost of goods available for sale
BusinessFellows.Biz | Copyrights: Mr Salman Yousaf
102,000
15
-closing inventory
450,000
Cost of goods sold
105,000
345000
(Working)
F-O-H = 50% of direct labour
= direct labour×50/100
Current manufacturing cost = D.M+D.L+F-O-H
344,000 = 104,000+ x +(x × 50/1000)
344,000 – 104,000 = x + 50x/100
240,000 = 100x + 50x/100
240,000 × 100/150 = x
160,000 = x
(a)
(b)
(c)
cost of goods manufactured = 348,000
prime cost = 264,000
conversion cost = labour + F-O-H
= 160,000 + 80,000
= 240,000
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16
P-2
Company – A
$
Cost of goods manufactured
380000
Finished goods:
+opening inventory
600,000
Cost of goods available for sale
4400,000
-closing inventory
1200,000
Cost of goods sold
3200,000
(Working)
Cost of goods sold = sale _ G.P
= 4000,000 _ (4000,000 ×20/100)
= 320,000
Company-B
$
Cost of goods available for sale
1490,000
Less: Finished goods closing
190,000
Cost of goods sold
(Working)
$
Cost of goods manufactured
340,000
+Finished goods opening
45,000
Cost of goods available for sale
385,000
_ Finished goods closing
52,000
Cost of goods sold
333,000
P-3
Req(1)
Material A/C
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18
Bal. b/d
20,000
W-I-P(Bal)
70,000
A/P
65,000
Bal. c/d
15,000
85,000
85,000
Material issue to production = 70,000
Req(2)
Payroll A/C
Accrued payroll
6000
W-I-P
6000
6000
6000
Direct labour cost = 6000
Req(3)
F-O-H A/C
Supplies expA/C
20000
W-I-P (Bal)
100,000
Ind lab exp A/C
55000
Acc: Dep
10000
Prep Ins
2000
Misc: exp
P-4
Water Lux Company
1- For Purchase Of Material
Material A/C
91,000
Account payable A/C
91,000
______________________________________
2- For Use Of Material
Work in process
84,000
Material A/C
84,000
___________________________________
3- For Direct Labour
Work in process
50,000
Payroll A/C
50,000
________________________________
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22
4- For Factory Overhead
Factory overhead A/C
25,000
Account payable A/C
25,000
________________________________
5- For Finished Goods
Finished goods A/C
157,000
Work in process A/C
157,000
_____________________________
6- For Cost Of Goods Sold
Cost of goods sold
140,000
Finished Goods
140,000
_____________________________
P – 4 (Working)
Calculation of purchase, use of material, direct labour,
FOH, Finished goods, cost of goods sold.
Direct Material
$
Opening inventory
17000
+purchases
91,000
Cost of material avail able
108,000
_ closing inventory
24,000
Cost of material used
84,000
Direct Labour
+Direct labour cost
50,000
Prime cost
134000
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Factory overhead
+FOH
25000
Current Material cost
150,000
W/P
+ Opening inventory
12000
Cost of goods to be manufactured
71,000
_Closing inventory
141000
Cost of goods manufactured
57,000
Finished Goods
+opening inventory
29,000
Cost of goods available for sale
185,000
_closing inventory
45,000
Cost of goods sold
140,000
____________________________________________________
1,
1,
P-5
Prepare T accounts with January 1 Balance.
1Cash A/C
I. Marketing expenses
Admin expenses
A/P A/C
J. A/P A/C
18000
120,000
300,000
104000
Cash A/C
104000
P-6
MANDMENEYER COMPANY
COST OF GOODS SOLD STATEMENT
FOR THE YEARB ENDED ON 30-11-19B
Direct Material
$
Opening inventory
+purchases
$
4000
1, 80,000
Cost of material available
22,000
_closing inventory
4250
Direct material used
17750
Direct Labour
+Direct labour
7500
Prime cost
225250
FOH
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+FOH Applied
5000
Current manufacturing cost
30250
WIP
+Opening inventory
4000
Cost of goods to be manufactured
34250
_Closing inventory
7500
Cost of goods manufactured
26750
Finished Goods
+Opening inventory
3500
Cost of goods available for sale
30250
_closing inventory
5700
Cost of goods sold
25150
________________________________________
P -6 (cont.)
MANDMEYER COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED 30-11-19B
Rs
Rs
Net sales
56000
Less: cost of goods sold
(25150)
Gross Profit
30850
Less: Opening expenses
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Marketing expenses
2800
56000×2%
Administration expenses
(3920)
1120
56000×2%
Operating Income
26,930
Less: Other expenses
(560)
56000 ×1%
NET INCOME
26,370
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_