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MUHAMMAD SHAHID MBA (FINANCE) UOSDigitally signed by Muhammad Shahid DN: CN = Muhammad Shahid, C = US, O = 3S Inc Location: Sargodha Date: 2008.05 07:42:29 +05’00’CHAPTER 2 EXERCISESExercise 2.1) Identify the estimated conversion cost per unit. Direct Labour $ 20 Variable Factory overhead $ 15 Fixed...

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COST ACCOUNTING 9TH EDITION

MUHAMMAD SHAHID MBA (FINANCE) UOS

Page 1 of 16

COST ACCOUNTING 9TH EDITION CHAPTER 2 EXERCISES Exercise 2.1 1) Identify the estimated conversion cost per unit. Direct Labour $ 20 Variable Factory overhead $ 15 Fixed Factory Overhead $ 6 $ 41 2) Identify the estimated Prime Cost per unit. Direct Material $ Direct Labour $ $

32 20 52

3) Determine the estimated total varialbe cost per unit. Direct Material $ 32 Direct Labour $ 20 Variable Factory overhead $ 15 Variable marketing $ 3 Total Variable Cost $ 70 4) Compute the total cost that would be incurred during a month with a production level of a) 12000 Units Cost Item Estimated Unit Cost Total Cost Direct Material $ 32 384000 Direct Labour $ 20 240000 Variable Factory overhead $ 15 180000 Fixed factory Over head $ 6 72000 Total Cost $ 73 876000 b)

Sale Level of 8000 Units

Cost Item Direct Material Direct Labour Variable Factory overhead Fixed factory Over head Variable marketing Fixed marketing Total Cost

Estimated Unit Cost $ 32 $ 20 $ 15 $ 6 $ 3 $ 4 $

80

Total Cost 256000 160000 120000 48000 24000 32000 640000

Exercise 2.2 The Mercaldo Company Income Statement For the Period ended on 31st December, 19B Sales 1995000 X85%= Less Cost of Sales Variable Cost 11571000 X 85%= 9835350 Fixed Cost = 7623000 Total Cost of Sales Loss for the Year

16957500

17458350 (500850)

Page 2 of 16

COST ACCOUNTING 9TH EDITION Exercise 2.3 3. Manufacturing Costs: Cost of Goods Manufactured; Cost of goods sold. Crockett Company 1 Opening Purchases Transport in

Material Control 176000 2400000 32000 2608000

3

5

1 2 3

Payroll Control

WIP

2412000

3204000

Closing

196000 2608000

3204000

FOH Control 1885600 WIP 1885600

Opening WIP

2

Finished Goods 620000 7494600 CGS Closing 8114600

4 1885600 1885600

opening Material Labour FOH

6 7547200 567400 8114600

Total Manufacturing Cost Cost of Goods Manufactured Cost of Goods Sold

3204000

WIP

3204000

Work in Process 129800 2412000 F.Goods 3204000 1885600 Closing 7631400

7494600 136800 7631400

Cost of Goods Sold

F. Goods

7547200

(2412000+3204000+1885600)

7501600 7494600 7547200

OR The Crocket Company Cost of Goods Sold Statement For the Period ended on 31st, December 19B. Description Amount $ Direct Material Opening Inventory of Raw Material Add Purchases Add Transportation In Total Cost of Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost 1: Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2: Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3: Cost of Goods Sold

$ 176000

2400000 32000 2432000 2608000 196000 2412000 3204000 1885600 7501600 129800 7631400 136800 7494600 620000 8114600 567400 7547200

Page 3 of 16

COST ACCOUNTING 9TH EDITION Exercise 2.4 4. Journal Entires for the Cost accounting Cycle. Date a

Description Work in process Control FOH Control Material Control Direct & Indirect Material issued

b

Payroll Control

P.R

Amount Debit($) Credit($) 24500 4500 29000

44000

Income Tax Withheld FICA Tax Accrued Payroll Payroll Recorded and deductions made b-2

Accrued Payroll

7000 3300 33700

33700

Voucher Payable Voucher of Payroll made Voucher Payable

33700

33700

Bank Payment of Payroll is made c

d

e

f

Work in process Control FOH Control Sales Salaries Payroll Distribution of payroll is made FOH Control Sales Expenses Contorl SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded

33700

30000 6000 8000 44000

4932 1096 2376 352 3300

Work in process Control FOH Applied FOH is charged to production

22932

Finished Goods

60000

22932

Work in process Control Cost of Production completed recorded g

Material Control

60000

50000 Voucher Payable

50000

Material Purchased h-1

Cost of Goods Sold

20000

Finished goods Cost of Goods Sold recorded h-2

Accounts Receivables

20000

26000 Sales

26000

Page 4 of 16

COST ACCOUNTING 9TH EDITION Finished Goods Shipped to Customers

5. Journal entries for the cost accountng Cycle. MultiElectro Incorporated Date a

b

b-2

b-3

c

d

e

f

g

Description Material Control Voucher Payable Direct Material Purchased

P.R

Amount Debit($) Credit($) 120000 120000

Payroll Control Income Tax Withheld FICA Tax Accrued Payroll Payroll Recorded and deductions made

90000

Accrued Payroll Voucher Payable Voucher of Payroll made

67500

Work in process Control FOH Control Sales Salaries Admin Salaries Payroll Distribution of payroll is made

45000 9000 15000 21000

Material Control Voucher Payable Indirect Material & Supplies Purchased

26250

FOH Control Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded Work in process Control FOH Control Sales Expense Control Material Control Direct and Indirect Material Issued Voucher Payable Material Control Deffective Shipping Supplies returned to vendors Vouchers Payable Bank Accounts Payable including Salaries paid

15750 6750 67500

67500

90000

26250

6156 1710 2394 2790 720 6750

60000 15000 4500 79500

900 900

142500 142500

Page 5 of 16

COST ACCOUNTING 9TH EDITION h

i

j

k

FOH Control Accumulated Depreciaton Depreciation on Factory Building recorded

1000

FOH Control Voucher Payable Sundry FOH recorded as Liability.

6900

1000

6900

Work in process Control FOH Control Actual FOH is charged to Production

38056

Finished Goods Work in process Control Cost of Production completed recorded

126000

38056

126000

Cost of Goods Sold Finished goods Cost of Goods Sold recorded

l-1

96000 96000

Accounts Receivables Sales Finished Goods Shipped to Customers

l-2

150000 150000

Exercise 2.6 6. Journal entries for the cost accountng Cycle. Romer Company for month of February Date

Description

a

Work in Process Control FOH Control Material Control Direct & Indirect Material issued

18500 2800

Finished Goods Work in Process Control Work in Process Completed and transferred to Finished goods

51800

Material Control Voucher Payable Material Purchased and received

32000

Payroll Control FICA Tax Federal Income Tax State Income Tax Accrued Payroll Payroll Recorded and deductions made

50000

Accrued Payroll Voucher Payable Voucher of Payroll made

50000

b

c

d

d-2

P.R

Amount Debit($) Credit($)

21300

51800

32000

3750 8750 2500 35000

50000

Page 6 of 16

COST ACCOUNTING 9TH EDITION e

f

g

h

i

i-2

j

Work in process Control FOH Control Marketing Salaries Admin Salaries Payroll Distribution of payroll is made

27500 9000 8500 5000 50000

FOH Control Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded

5001 1165 685 2700 400 3750

FOH Control Accumulated Depreciation Prepaid Insurance Vouchers Payable FOH Expenses Recorded

11300 9450 600 1250

Work in process Control FOH Applied Actual FOH is charged to Production

28100.5 28100.5

Cost of Goods Sold (92120*100/140) Finished goods Cost of Goods Sold recorded

65800

Accounts Receivables Sales Sale of Finished Goods Recorded

92120

Bank

76000

65800

92120

Accounts Receivables Accounts receivables collected

76000

Exercise 2.7 7. Cost of Goods Manufactured Statement. TheThornton Company Cost of Goods Manufactured Statement For the Period ended on ----Description Amount $ $ Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost 1 Total Manufacturing Cost Add Opening Work in Process Inventory

16200 20000 36200 17000 19200 16500 8580 44280 3600

Page 7 of 16

COST ACCOUNTING 9TH EDITION Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured

47880 7120 40760

Exercise 2.8 8. Cost of Goods Sold Statement. Pensacola Corporation Cost of Goods Sold Statement For the Period ended on 31st, December Description

Amount $

Direct Material Opening Inventory of Raw Material Add Purchases Add Freight on Material Total Cost of Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Other FOH Depreciation 1 Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3 Cost of Goods Sold

$ 88000

366000 6600 372600 460600 64000 396600 523600 468400 104400

572800 1493000 29800 1522800 38800 1484000 54200 1538200 66000 1472200

Page 8 of 16

COST ACCOUNTING 9TH EDITION Problems Chapter-2 2.1 Cost of Goods manufactured; Prime and Conversion costs. Mat Company's Cost of Goods Manufactured & Sold Statement For the Period ended on 31st, December Description

Amount $

$

Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods Sold

2.2

20000 110000 130000 26000 104000 160000 80000 344000 40000 384000 36000 348000 102000 450000 105000 345000

Income Statement relationships.

Company A Description

Amount $

Sales Cost of Goods Sold Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold Gross Profit

$ 4,000,000

3,800,000 600,000 4,400,000 1,200,000 3,200,000 800,000

Company B Description

Amount $

Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold

$

$

1,490,000 190,000 1,300,000

Company C

Page 9 of 16

COST ACCOUNTING 9TH EDITION Description

Amount $

Sales Cost of Goods Sold Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold Gross Profit

$ 834000

340000 450000 790000 52000 738000 96000

2.3 Cost accounting Cycle in T Accounts Crockett Company

1 Opening Purchases

Material Control 20000 65000

WIP

70000

Closing

15000 85000

85000 3 supplies ind labour Depreciation Insurance Misc

5 Opening WIP

FOH Control 20000 WIP 55000 10000 2000 13000 100000 Finished Goods 34000 346000 CGS Closing 380000

7

2

Sales Receivables

180000

(1)

(3)

opening Material Labour FOH

9

V/P c/b

Payment of Payroll o/b Direct 184000 Labor 9000 193000

180000

(2)

180000

Work in Process Control 7000 70000 F.Goods 180000 100000 Closing 357000

346000

(4)

11000 357000

100000 6 350000 30000 380000

(5)

350000

8 500000 (6)

500000

13000 180000

Cost of Goods Sold

F. Goods

V/P c/b 0

WIP

180000 4

100000

Payroll Controll

10

Accounts Payable o/b 77000 Materials 6000 83000

54000 500000 c/b

554000

83000

Accounts Receivables

o/b Sales

193000

18000 65000

Cash

532000

(7)

22000 554000

Page 10 of 16

COST ACCOUNTING 9TH EDITION 1 2 3 4 5 6

70000 180000 100000 346000 350000 77000

Material Issued to production Direct Labour Total Factory overhead Cost of Goods Manufactured Cost of Goods Sold Payment of Accounts Payable Collection of accounts receivable Payment of payroll

7 8

532000 184000

2.4 Journal Entries for the cost accounting cycle. Waterlux Company

1 Opening Purchases

Material Control 17000 91000

WIP Closing

108000 3

2 84000

50000

24000 108000

50000

Facotory Overhead Control 35000 35000 WIP

35000 5 Opening WIP

Finished Goods 28000 157000 CGS Closing 185000

Payroll Control

4 opening Material Labour FOH

WIP

Work in Process Control 12000 84000 F.Goods 50000 25000 Closing 171000

50000

50000

157000 14000 171000

35000 6 140000 45000

F. Goods

Cost of Goods Sold 140000

185000

Journal Entries Date a

b

c

d

Description Description

P.R

Debit($)

Amount Credit($)

Material Control Voucher Payable Direct Material Purchased

91000

Work in process Control Material Control Direct Material Charged to Production

84000

Work in process Control Payroll Control Direct Labour Charged to Production

50000

Accrued Payroll

50000

91000

84000

50000

Page 11 of 16

COST ACCOUNTING 9TH EDITION Voucher Payable Voucher of Payroll made

50000

FOH Control

e

35000

Voucher Payable Sundry FOH recorded as Liability.

35000

Work in process Control FOH Control Actual FOH is charged to Production

f

g

h

35000 35000

Finished Goods Work in process Control Cost of Production completed recorded

157000

Cost of Goods Sold Finished goods Cost of Goods Sold recorded

145000

157000

145000

2.5 The Cost Accounting Cycle. Montana Company Date

Description

a

Material Control

P.R

Debit($)

Amount Credit($)

92000

Voucher Payable Direct Material Purchased b

FOH Control

120000

18500

Voucher Payable Sundry FOH recorded as Liability. c-1

Payroll Control

18500

86000

Income Tax Withheld SUI Tax FUI Tax FICA Tax Accrued Payroll Payroll Recorded and deductions made c-2

Accrued Payroll

8170 2322 688 6450 68370

68370

Voucher Payable Voucher of Payroll made c-3

c-4

Work in process Control FOH Control Sales Salaries Admin Salaries Payroll Control Distribution of payroll is made FOH Control

68370

60500 12500 8000 5000 86000

8030

Page 12 of 16

COST ACCOUNTING 9TH EDITION Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded d

e

f

880 550 2322 688 6450

Work in process Control FOH Control Material Control Direct and Indirect Material Issued

82500 8300

Work in process Control FOH Control Actual FOH is charged to Production

47330

90800

47330

Finished Goods

188000

Work in process Control Cost of Production completed recorded g

188000

Cost of Goods Sold

185500

Finished goods Cost of Goods Sold recorded g-2

h

185500

Accounts Receivables Sales Finished Goods Shipped to Customers

241150 241150

208662 4258

Bank/Cash Discount Allowed Accounts Receivables Accounts Receivables Collected subject to 2% Discount

212920

Ledger Accounts 1 Opening h

Closing 228662 3 O/B a

Material Control 10000 d 92000 d Closing 102000

5 Opening f

2

Cash Account 20000 208662

Finished Goods 9500 188000 g Closing 197500

O/b g

Closing

228662 228662

266150 4

82500 8300 11200

Accounts Receivables 25000 h 241150

opening c-3 d e

Work in Process 4500 f 60500 82500 47330 Closing 194830

212920

53230 266150

188000

6830 194830

102000 6 185500 12000 197500

g

Cost of Goods Sold 185500

Page 13 of 16

COST ACCOUNTING 9TH EDITION

7

Machinery

Opening

40000

8

Closing 40000

9

40000

Closing

40000

Accrued Payroll O/B

10

Accounts Payables O/B a b 194370 c-2 194370 ...