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(Department of Commerce)
COST ACCOUNTING (462)
CHECK LIST
SEMESTER: AUTUMN, 2010
This packet comprises following material:-
1. Text book (One)
2. Assignment No. 1 & 2
3. Assignment forms (One set)
4. Schedule for submitting the assignments and tutorial meetings
If you find anything missing in this packet, please contact at the address given below:
Director
Admission & Mailing
Allama Iqbal Open University
H-8, Islamabad
051-9057611-12
Syeda Faiza Urooj
Course Coordinator
(Department of Commerce)
1. 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.
2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”.
Course: Cost Accounting (462) Semester: Autumn, 2010
Level: B.A/B.Com Total Marks: 100
ASSIGNMENT No. 1
(Units 1–5)
Q.1 a) What is the difference between “Cost Accounting” and “Financial Accounting”? What are the Limitations of Financial Accounting, due to which Cost Accounting came into existence? (10)
b) From cost control point of view which of the following technique – actual costs or standards costs- would you prefer? Justify you answer with proper examples and reasons. (10)
Q.2 a) Give the method of valuation of ending inventory for the following types of businesses and explain your answer with proper justification: (10)
i) Vegetables business
ii) Steel guarder business
iii) Garments business
iv) Rice Business
b) Calculate the Economic Order Quantity from the given data. (10)
i) Price per unit Rs. 55
ii) Annual consumption 21,000 units
iii) Ordering costs Rs. 500
iv) Carrying cost @10%
Q.3 a) What role the wages and incentives plan play to enhance the efficiency of labor? For a daily wager which plan is preferred: (10)
Justify your answer.
b) Suppose Standard time to complete a job = 10 hrs. (10)
Standard work in standard time = 30 units
Wages per day = Rs. 100.0/ hour.
Actual time taken = 8 hours.
Rate of premium = 33 1/3%
Calculate the total wages of the worker according to Halsey Premium Plan.
Q.4 a) Give a comprehensive definition of Factory Overhead. (05)
b) The ABC manufacturing company’s estimated factory overhead is Rs. 180,000. It is estimated that 50,000 units of product will be produced with material cost of Rs. 400,000 requiring 40,000 man hours with wages amounting to Rs. 120,000. The machines are expected to run for 30,000 hours. (15)
Required: work out pre determined factory overhead absorption rates on each of the following basis:
i) Direct labor hours basis
ii) Units of output
iii) Machine hour basis
iv) Direct material cost basis
v) Prime cost basis
Q.5 Sally machine Works collects its cost data by the job order cost accumulation procedure. For Job 642, the following data are available: (20)
Direct materials Direct Labor
9/14 issued Rs. 1,200 Week of Sep. 20 180 hrs @ Rs.6.20/hr
9/20 Issued 662 Week of Sep. 26 140 hrs @ Rs.7.30/hr
9/22 Issued 480
Factory overhead applied at the rate of Rs. 3.50 per direct labor hour.
Required:
The appropriate information on a job cost sheet.
The sales price of the job, assuming that it was contracted with a markup of 40% of cost.
ASSIGNMENT No. 2
(Units 6–9)
Q.1 a) What are three reasons for an unfavorable direct labor efficiency variance? (10)
b) A furniture manufacturer used Farmica tops for tables. From the following information, find out price variance and usage variance. (10)
Standard quantity of Farmica per table 4 sq.ft
Standard price per sq. ft of Farmica Rs. 5
Actual production of tables 1,000
Farmica actually used 4,300 sq.ft
Actual purchase price of Farmica per sq.ft Rs. 5.5
Q.2 a) Why is net profit always greater in absorption costing than in direct costing? Why cost accountants use two types of costing methods i.e. absorption costing and direct costing? Identify a case where absorption costing yields higher net profit than direct costing. (10)
b) A small company that produces a single product has the following cost structure. (10)
Number of units produced 6,000 units
Variable costs per unit:
Direct materials Rs. 2
Direct labor Rs. 4
Variable manufacturing overhead Rs. 1
Variable selling and Administrative expenses Rs. 3
Fixed costs per year:
Fixed manufacturing overhead Rs. 30,000
Fixed selling and administrative expenses Rs. 10,000
Required:
Compute the unit product cost under absorption costing method.
Compute the unit product cost under variable / marginal costing method.
Q.3 A company’s Department 2 costs for June were: (20)
Cost from Department 1 Rs. 16320
Cost added in Department 2:
Materials 43,415
Labor 56,100
Factory overhead (FOH) 58,575
The quantity schedule shows 12,000 units were received during the month from Department 1; 7,000 units were transferred to finished goods; and 5,000 units in process at the end of June were 50% complete as to materials cost and 25% complete as to conversion cost.
Required: Prepare Cost of production report for the month of June.
Q.4 a) What is the difference between a differential cost and an incremental cost? (10)
b) A company has annual fixed cost of Rs. 425000 and variable cost is Rs. 15 per unit. If the unit price is Rs. 25 how much unit this company should manufacture and sell in order to earn Rs. 120000 profit. (10)
Q.5 Calculate the breakeven quantity and breakeven sale from the given data. (20)
· Fixed cost Rs. 50000
· Variable cost Rs. 2.5 per unit
· Price Rs. 4 per unit
What will be the effect on breakeven point if the following changes take place in the cost structure of the company?
i. Fixed cost increase to Rs. 80000
ii. Variable cost decrease to Rs. 1.80 per unit
iii. Price increase to Rs. 3.5 per unit
Note: Each change is independent.