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    Spring Semester 2002 Cost and Management Accounting

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    s m tayyab
    This document contains sample questions and answers from a Cost and Management Accounting course. It includes questions about cost accounting definitions and classifications, cost estimation for a production bid, productivity measurement, a departmental production and cost report, economic order quantity calculation, and variances from a standard budget.

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    Spring Semester 2002 Cost and Management Accounting

    Uploaded by

    s m tayyab
    36 views4 pages
    This document contains sample questions and answers from a Cost and Management Accounting course. It includes questions about cost accounting definitions and classifications, cost estimation for a production bid, productivity measurement, a departmental production and cost report, economic order quantity calculation, and variances from a standard budget.

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    AIOU Cost A/C Past Paper

    Original Title

    568_spring2002

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    This document contains sample questions and answers from a Cost and Management Accounting course. It includes questions about cost accounting definitions and classifications, cost estimation for a production bid, productivity measurement, a departmental production and cost report, economic order quantity calculation, and variances from a standard budget.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views4 pages

    Spring Semester 2002 Cost and Management Accounting

    Uploaded by

    s m tayyab
    This document contains sample questions and answers from a Cost and Management Accounting course. It includes questions about cost accounting definitions and classifications, cost estimation for a production bid, productivity measurement, a departmental production and cost report, economic order quantity calculation, and variances from a standard budget.

    Copyright:

    © All Rights Reserved
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    You are on page 1of 4

    Spring semester 2002

    Cost and Management Accounting



    Q1) Write down a comprehensive note on the definition, scope and advantages of Cost
    and Management Accounting?

    Ans) refer to chapter #1


    Q2) Enumerate the five parts of the cost of goods section of the income statement. Also
    discuss the various classifications of costs?

    Ans) refer to chapter #2


    Q3) The ABC Company is to submit a bid on the production of 12000 ceramic plates. It
    is estimated that the cost of materials will be Rs 180000, and the cost of direct labor will
    be Rs 29000.

    Factory overhead is applied at Rs 2.67 per direct labor hour in the molding department
    and 55% of the direct labor cost in the decorating department.

    It is estimated that 1200 direct labor hors at the cost of Rs 8000 will be required
    In molding

    The company wishes a markup of 67% of its total production cost.

    Required: determine the following
    a) Estimated cost to produce
    b) Estimated prime cost
    c) Bid price


    Ans) (1) Estimated cost to produce materials:


    Materials Rs 18,000
    Direct Labor
    Molding department 8000
    Decorating department 21000 29000
    Prime cost Rs 47000

    FOH
    Molding Department:1200 x 2.67 3204
    Decorating: 21000 x 55/100 11550 14754
    Cost of production Rs 61754

    (2) Estimated prime Cost
    Materials +direct labor
    Rs 18000 +RS 29000 =Rs 47000
    Bid Price
    Estimated cost to produce =61754
    +Mark up 67 % =41375
    Total = Rs 103,129




    Q4) Define productivity and explain why productivity is important to the firm to workers,
    and to society? Also explain how can labor efficiency be determined or measured?


    Ans) refer to chapter #9 for the solution


    Q5) Department no 2 of ABC Company has reported the following production data for
    J an 2002

    Transferred in from department 1 55000 liters
    Transferred out to department 3 39500 liters
    In process at the end of December (with labor 1/3 and FOH) 10500 liters
    All Materials were put into process in department 1

    The cost department collected these figures for department 2:
    Unit cost for the units transferred in from department 1 1.80
    Labor cost in department 27520
    Applied factory overhead 15480

    Required: Prepare a cost of production report for department 2 for January 2002


    Ans)
    Cost of production report for January 2002


    Quantity schedule

    Transferred from department 1 55000 U
    Transferred from department 3 39500 U
    Units still in process 10500
    Units Lost 5000 55000 U

    Cost charged to the department: Total Unit cost
    Cost transferred from department 1

    99000 1.80
    Cost added by the department
    Labor (39500+1/3 of 10500) 27520 Rs 0.64
    FOH 15480 0.36
    Total cost Added 43000 Rs 1.00
    Adjustment for lost units
    Rs 99000/(55000-5000)
    =Rs 1.98- Rs 1.80 =
    Total cost to be accounted for




    142000


    0.18
    Rs 2.98
    Cost accounted for as follows

    Transferred to Next department@ 2.98 39500 Rs 117,710

    Ending work in process
    Cost from preceding department (10500@
    Rs1.98
    20,790
    Labor (0.64 x 1/3 of 10500)
    FOH (----do----)
    Total cost accounted for
    2240
    1260

    24290
    Rs 142000


    Q6) A particular material is purchased for $3 per unit. Monthly usage is 1500 units, the
    ordering costs are $ 50 per order, and the annual carrying costs is 40%

    Required
    e) compute the economic order quantity
    f) Determine the proper size order size if the material can be based at a 50%
    discount in lots of 2000 units.


    Ans)

    EOQ = 2 x (50) x (18000) = 1225 Units
    (0.40) X ($ 3)



    Total inventory cost if EOQ is followed


    =1.20 (1225/2) +50x (18000/1225)
    =$ 1470


    Total inventory cost if orders in lots of 2000 are placed

    =1.20 x (2000/2) +50 x (18000/2000)
    =$ 1650

    Increased cost =$ 1650 - $1470 =$ 180

    Amount of discount 18000 x $ 3 x 5/100 =$ 2700

    Therefore the company should place their orders in lots of 2000 units


    Q7) The ABC Company was totally destroyed by fire in J une. However, certain
    fragments of its cost records with the favorable data were recovered:
    Idle capacity variance, 1266 favorable, spending variance, 879 unfavorable: and applied
    factory overhead, 16234.

    Required: Determine the budget allowance, based on the capacity utilized and the
    actual factory overhead.


    Ans)

    Actual FOH Budget
    allowance
    Applied FOH Spending
    Variance
    Idle capacity
    Variance
    15847 14968 16234 879 UF 1266 F

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