b.com – ii – cost accounting · ... and expenses. it has further been divided as direct ... raw...

The workings under the heading of “Additional Working” are not required according to the requirement of the examiner. These are only for understanding the solutions. For more help, visit www.a4accounting.weebly.com

2004

Compiled and Solved by:

Sameer Hussain

B.COM – II – COST ACCOUNTING

REGULAR

http://www.a4accounting.weebly.com/

Compiled & Solved by: Sameer Hussain www.a4accounting.weebly.com

[email protected]

B . C o m – I I – C o s t A c c o u n t i n g – 2 0 0 4 ( R e g u l a r )

COST ACCOUNTING – 2004

REGULAR Instructions: Attempt any five questions.

Q.No.1 COST ACCOUNTING

(a) What are the objectives and scope of cost accounting? (b) Explain briefly the two distinct types of cost accounting system.

OR Differentiate between financial and cost accounting. SOLUTION 1 (a) Objective of Cost Accounting: These are the following important objectives of cost accounting:

Ascertainment of Cost: The primary objective of the cost accounting is to ascertain cost of each product, service, job, operation or service rendered.

Ascertainment of Profitability: Cost accounting determines the profitability of each product, process, job, operation or service rendered. The statement of profit or losses and balance sheet also submitted to the management periodically.

Classification of Cost: Cost accounting classifies cost into different elements such as materials, labours, and expenses. It has further been divided as direct cost and indirect cost for cost control and recording.

Control of Cost: Cost accounting aims at controlling cost by setting standards and compared with the actual, the derivation or variation between two is identified and necessary steps are taken to control them.

Fixation or Selling Prices: Cost accounting guides management in regard to fixation of selling prices of the product. It is also helpful for preparing tender and quotations.

Scope of Cost Accounting:

Determination and Analysis of Cost: Cost accounting records cost and income information for each department, process, job, sales territory and lies order to ascertain cost and evaluate the operating efficiency of each division of the business enterprise.

Control of Cost: In age of competition, the objective of business is to maintain; in costs at the lowest point with efficient operating conditions. It requires examination of each individual item of cost in the light of the service and benefits obtained so the maximum utilization of the money expended on – it may be recovered. This requires planning and use of standard for each item of cost for locating deviations, if any, and taking remedial measures.

Proper Matching of Cost With Revenue: It prepares monthly or quarterly statements to reflect the cost and income data identified with the sale of that period.


[email protected]


Aids to Management: Cost accounting enables a business not only to ascertain what various jobs, products and services have cost to the business but also what they should have cost. It locates losses and wastages for taking corrective measures and to avoid them in future.

SOLUTION 1 (b) Types of Cost Accounting:

Marginal Costing: Marginal costing is a costing and decision-making technique that charges only the marginal costs to the cost units and treats the fixed costs as a lump sum to be deducted from the total contribution, in obtaining the profit or loss for the period.

Standard Costing: Standard costing is a system of cost ascertainment and control in which predetermined standard costs and income for products and operations are set and periodically compared with income generated in order to establish any variances. Standard costing systems are very expensive to develop and maintain; they were also designed for traditional manufacturing systems in which direct labour and direct materials are the most important costs. Recent years have seen decline in the use of such systems as companies become less labour intensive.

OR

Financial Accounting Cost Accounting

(i) The main purpose of financial accounting is to record financial transactions, finding out profit or loss and financial position.

(i) The main purpose of cost accounting is to analyze, ascertainment and control of cost.

(ii) Financial accounting presents financial information at the end of the accounting period.

(ii) Cost accounting presents cost information at frequent intervals.

(iii) Financial accounting is kept compulsory in such a way as to meet the requirement of the Companies Act and Income Tax Act.

(iii) Cost accounting generally kept voluntarily to meet the requirements of the management.

(iv) Financial accounting records transactions in a subjective manner. It means according to the nature of expense.

(iv) Cost accounting records transactions in an objective manner. It means the purpose for which the cost is incurred.

(v) Financial accounting is used for internal and external users.

(v) Cost accounting is used only for internal users.

Q.No.2 MANUFACTURING CONCERN GIVEN From the following partial information completes the income statement: Sales ? Less: Cost of Goods Sold: Opening inventory finished goods 60,000 Add: Cost of goods manufactured ? Less: Finished goods inventory, ending ? Cost of goods sold ? Gross profit (41.25% of sales) ? Operating expenses ?

Net income 26 2/3% of sales 640,000


[email protected]


The Other Information is as under: Raw material used Rs.530,000, direct labour Rs.450,000, Factory overhead 50% of prime cost. The work-in-process was opening Rs.120,000, closing Rs.110,000. REQUIRED Determine the missing figures and complete the income statement, show computation. SOLUTION 2 Computation of Cost of Goods Manufactured: Direct material used 530,000 Add: Direct labour 450,000

Prime cost 980,000 Add: Factory overhead (980,000 x 50%) 490,000

Total manufacturing cost 1,470,000 Add: Work in process opening inventory 120,000

Total work in process during the period 1,590,000 Less: Work in process ending inventory (110,000)

Cost of goods manufactured 1,480,000

Computation of Sales: Sales = Net income ÷ 26 2/3% Sales = 640,000 ÷ 80/3% Sales = 640,000 x 300/80 Sales = 2,400,000 Computation of Gross Profit: Gross profit = Sales x 41.25% Gross profit = 2,400,000 x 41.25% Gross profit = 990,000 Computation of Operating Expenses: Gross profit 990,000 Less: Net income (640,000)

Operating expenses 350,000

Computation of Cost of Goods Sold: Sales 2,400,000 Less: Gross profit (990,000)

Cost of goods sold 1,410,000

Computation of Finished Goods Ending Inventory: Finished goods beginning inventory 60,000 Add: Cost of goods manufactured 1,480,000

Goods available for sale 1,540,000 Less: Cost of goods sold (1,410,000)

Finished goods ending inventory 130,000


[email protected]


M/S. ____________ INCOME STATEMENT

FOR THE PERIOD ENDED ______ Sales 2,400,000 Less: Cost of Goods Sold: Finished goods beginning inventory 60,000 Add: Cost of goods manufactured 1,480,000

Merchandise available for sale 1,540,000 Less: Finished goods ending inventory (130,000)

Cost of goods sold (1,410,000)

Gross profit 990,000 Less: Operating expenses (350,000)

Net income 640,000

Q.No.3 COSTING XYZ Corporation manufactures a product to sell at Rs.560. Last year company sold 4,000 of these units realizing a gross profit of 25% on the cost of sales comprises material 40%, labour 45% and remaining for factory overhead. During the incoming year it is expected that material and labour cost increase by 25% while the factory overhead by 12.5%. To meet the rising cost a new selling price is set at Rs.600 and Rs.700 per unit. REQUIRED

(i) The units that must be sold to realize the same gross profit as last year. (ii) The units that must be sold to realize 20% more gross profit than last year.

SOLUTION 3 (a) Computation of Gross Profit per Unit: Gross profit per unit = 560 x 25/125 Gross profit per unit = Rs.112 per unit Computation of Total Gross Profit: Gross profit = Units sold x Gross profit per unit Gross profit = 4,000 x 112 Gross profit = Rs.448,000 Computation of Cost of Goods Sold per Unit: Cost of goods sold per unit = Sales price per unit – Gross profit per unit Cost of goods sold per unit = 560 – 112 Cost of goods sold per unit = Rs.448 Computation of Material, Labour and Factory Overhead Cost: Direct material = 448 x 40% = Rs.179.2 Direct labour = 448 x 45% = Rs.201.6 Factory overhead = 448 x 15% = Rs.67.2


[email protected]


Computation of Expected Cost per Unit: Material (179.2 x 125%) Rs.224 Labour (201.6 x 125%) Rs.252 Factory overhead (67.2 x 112.5%) Rs.75.6

Per unit cost Rs.551.6

Computation of Number of Units Sold When Selling Price Rs.600 (Constant Gross Profit): Gross profit per unit = Sales price per unit – Cost price per unit Gross profit per unit = 600 – 551.6 Gross profit per unit = Rs.48.4

Number of units sold = Gross profit

Gross profit per unit

Number of units sold = 448,000

48.4 Number of units sold = 9,256 units Computation of Number of Units Sold When Selling Price Rs.700 (Constant Gross Profit): Gross profit per unit = Sales price per unit – Cost price per unit Gross profit per unit = 700 – 551.6 Gross profit per unit = Rs.148.4

Number of units sold = Gross profit


Number of units sold = 448,000

148.4 Number of units sold = 3,019 units SOLUTION 3 (b) Computation of Number of Units Sold When Selling Price Rs.600 (20% More Gross Profit):

Number of units sold = 20% more gross profit


Number of units sold = 448,000 x 120%

48.4 Number of units sold = 11,107 units Computation of Number of Units Sold When Selling Price Rs.700 (20% More Gross Profit):

Number of units sold = 20% more gross profit


Number of units sold = 448,000 x 120%

148.4 Number of units sold = 3,622 units

Q.No.4 JOB ORDER COSTING GIVEN Raza Corporation produces special products to customer’s specifications and uses job order cost system. The following transactions relates to its operations for the month of December 2003:

(i) Purchase of raw material on account Rs.50,000. (ii) Material issued to production Rs.66,000 out of which Rs.6,000 was used indirectly.


[email protected]


(iii) Labour used direct Rs.100,000 indirect Rs.10,000. (iv) Factory overhead cost incurred Rs.80,000. (v) Factory overhead applied 100% of direct labour cost. (vi) Jobs were completed to the extent of 95%. (vii) Goods sold on account Rs.172,500, including G.S.T. @ 15%. (viii) Finished goods inventory valued at Rs.15,000.

REQUIRED Pass necessary journal entries and close the factory overhead account. SOLUTION 4

RAZA CORPORATION GENERAL JOURNAL

Date Particulars P/R Debit Credit

1 Raw material 50,000 Accounts payable 50,000 (To record the purchase of raw material)

2 Work in process 60,000 Factory overhead 6,000 Raw material 66,000 (To record the raw material used)

3 Work in process 100,000 Factory overhead 10,000 Accrued payroll 110,000 (To record the direct and indirect labour assigned)

4 Factory overhead 80,000 Accounts payable 80,000 (To record the factory overhead cost incurred)

5 Work in process (100,000 x 100%) 100,000 Factory overhead applied 100,000 (To record the applied factory overhead)

6 Finished goods 247,000 Work in process 247,000 (To record the goods completed and transferred to

finished goods)

7 Cost of goods sold (247,000 – 15,000) 232,000 Finished goods 232,000 (To record the cost of goods sold)

8 Accounts receivable 172,500 G. Sales tax payable (172,500 x 15/115) 22,500 Sales 150,000 (To record the goods sold to customers on account)

9 Over applied factory overhead 4,000 Cost of goods sold 4,000 (To close the factory overhead account)


[email protected]


Factory Overhead

2 Raw material 6,000 5 Work in process 100,000 3 Accrued payroll 10,000 4 Accounts payable 80,000 9 Cost of goods sold 4,000

100,000 100,000

Computation of Finished Goods: Direct material used 60,000 Add: Direct labour 100,000

Prime cost 160,000 Add: Factory overhead applied 100,000

Total manufacturing cost 260,000 95% completed X 95%

Cost of goods manufactured 247,000

Q.No.5 DEPARTMENTALIZATION OF OVERHEAD A manufacturing company has two service departments and three producing departments. The service departments is Factory Office and Material Handling. The producing departments are Mixing, Refining and Finishing. During the first month of its operation manufacturing expenses incurred were as under:

(a) Indirect labour Rs.20,000 (b) Factory supplies Rs.12,000 (c) Heat, light and power Rs.4,000 (d) Factory rent Rs.2,000 (e) Taxes insurance Rs.500 (f) Depreciation Rs.1,500

(1) The expenses incurred are in equal amount of each department. (2) The cost of factory office apportioned in equal amount to the remaining departments. (3) The cost of material handling department was allocated @ 1/3 : 1/5 : 7/15 in producing

departments respectively. REQUIRED

(a) Allocate the expenses, department wise. (b) Work out producing department overhead if budgeted production hours to be:

10,000 Hours Mixing Department 15,000 Hours Refining Department 20,000 Hours Finishing Department

SOLUTION 5 (a)

FACTORY OVERHEAD ALLOCATION WORK SHEET

Particular Total Producing Department Service Department

Mixing Refining Finishing Factory Office

Material Handling

Indirect labour 20,000 4,000 4,000 4,000 4,000 4,000 Factory supplies 12,000 2,400 2,400 2,400 2,400 2,400 Heat, light and power 4,000 800 800 800 800 800 Rectory rent 2,000 400 400 400 400 400 Taxes insurance 500 100 100 100 100 100 Depreciation 1,500 300 300 300 300 300


[email protected]


Total overhead 40,000 8,000 8,000 8,000 8,000 8,000

Allocation of Cost of Service Department:

Factory office 2,000 2,000 2,000 (8,000) 2,000 Material handling 3,333 2,000 4,667 --- (10,000)

Total overhead 40,000 13,333 12,000 14,667 --- ---

SOLUTION 5 (b) Computation of Factory Overhead Rate of Producing Department:

Mixing department = 13,333

10,000 Mixing department = 1.33 per hour

Refining department = 12,000

15,000 Refining department = 0.80 per hour

Finishing department = 14,667

20,000 Finishing department = 0.73 per hour

Q.No.6 FACTORY OVERHEAD VARIANCE (a) What are the basis of applying factory overhead rate? (b) The annual factory overhead of a company for an expected output of 360,000 units were as: Fixed overhead Rs.72,000 Variable overhead Rs.216,000 Output for the month of January was 20,000 units and actual factory overhead were Rs.15,400. REQUIRED (i) The overhead rate per unit. (ii) Spending variance. (iii) Idle capacity variance. SOLUTION 6 (a) Overheads can also be absorbed into cost units using the following absorption bases:

Units produced.

Machine-hour rate.

Labour-hour rate.

Percentage of prime cost.

Percentage of direct wages.

Percentage of direct material cost. Production overheads are usually calculated at the beginning of an accounting period in order to determine how much cost to assign a unit before calculating a selling price. The overhead absorption rate (OAR) is calculated as follows:

Overhead absorption rate (OAR) = Budgeted production overhead

x 100 Budgeted total of absorption basis

The absorption basis is most commonly units of a product, labour hours, or machine hours.


[email protected]


Departmental Overhead Absorption Rates: It is usual for a product to pass through more than one department during the production process. Each department will normally have a separate departmental OAR.

For example, a machining department will probably use a machine-hour OAR.

Similarly, a labour-intensive department will probably use a labour-hour OAR.

1. Pre – Determined Factory Overhead Rate on the Basis of Direct Material Cost:

Pre – determined factory overhead rate = Estimated factory overhead cost

x 100 Material cost

2. Pre – Determined Factory Overhead Rate on the Basis of Direct Labour Cost:


x 100 Direct labour cost

3. Pre – Determined Factory Overhead Rate on the Basis of Prime Cost:


x 100 Prime cost

4. Pre – Determined Factory Overhead Rate on the Basis of Direct Labour Hours:


Direct labour hours

5. Pre – Determined Factory Overhead Rate on the Basis of Machine Hours:


Machine hours

6. Pre – Determined Factory Overhead Rate on the Basis of Units Produced:


Units produced

SOLUTION 6 (b) Computation of Factory Overhead Rate: Fixed factory overhead rate (72,000/360,000) Rs.0.20 Variable factory overhead rate (216,000/360,000) Rs.0.60

Factory overhead rate Rs.0.80

Computation of Spending Variance: Actual factory overhead 15,400 Less: Budgeted allowance based on actual output: Fixed factory overhead budgeted (72,000/12) 6,000 Variable factory overhead (20,000 x 0.60) 12,000

Budgeted allowance based on actual output (18,000)

Factory overhead spending variance (Favourable) 2,600

Computation of Idle Capacity Variance: Budgeted allowance based on actual output 18,000 Less: Applied factory overhead for actual output (20,000 x 0.80) (16,000)

Factory overhead idle capacity variance (Unfavourable) 2,000


[email protected]


Q.No.7 MATERIAL LOSSES (a) The Sana Company produces many varieties of frocks. One of which was for Tooba Manufacturing Company. The cost upon the completion of the order were: Material Rs.3,000 Labour Rs.2,100 Manufacturing expenses Rs.900 Inspection reveals that a certain part of the work is defective. The defectiveness has removed at the following cost: Material Rs.400 Labour Rs.200 Manufacturing expenses Rs.100 REQUIRED Entries in the books of accounts under each of the following conditions:

(a) When the job is charged with the cost of defective work. (b) When the job is not so charged directly for the defective work.

(b) Differentiate between spoiled, defective and scrap goods. SOLUTION 7 (a) When the job is charged with the cost of defective work:

ABC COMPANY GENERAL JOURNAL


(1) Work – in – process 6,000 Raw material 3,000 Accrued payroll 2,100 Factory overhead applied 900 (To record the manufacturing cost applied to

production)

(2) Work – in – process 700 Raw material 400 Accrued payroll 200 Factory overhead applied 100 (To record the additional cost applied to defective

goods)

(3) Finished goods (6,000 + 700) 6,700 Work – in – process 6,700 (To record the cost of goods manufactured)

When the job is not so charged directly for the defective work:

ABC COMPANY GENERAL JOURNAL


(1) Work – in – process 6,000 Raw material 3,000 Accrued payroll 2,100 Factory overhead applied 900 (To record the manufacturing cost applied to

production)


[email protected]



(2) Factory overhead 700 Raw material 400 Accrued payroll 200 Factory overhead applied 100 (To record the additional cost applied to defective

goods)

(3) Finished goods 6,000 Work – in – process 6,000 (To record the cost of goods manufactured)

SOLUTION 7 (b) Spoiled Goods: The term applied to products that are not acceptable quality and that are sold for reduced prices. Many outlet malls sell “seconds” at prices lower than retail. Those seconds, also called irregulars, are not the same quality as the regular product. Scrap Goods: The leftover materials that are not used in the production of an item. If a product requires a component cut from a four-by-eight-foot sheet of plywood, the pieces of plywood that are cut off are the scrap. Defective Goods: The faulty or substandard finished goods or spoilage are called defective units. Defective goods arise due to sub-standard materials, bad supervision, bad planning of production, poor workmanship, inadequate equipment, careless inspection etc. Defective units can be rectified and turned out as good unit by re-processing. Such re-processing work may need the use of additional material, labor and expenses.

Q.No.8 MATERIAL – INVENTORY SYSTEM The inventory data relating to an industry is as under: Opening balance, January 1, 2004 600 units @ Rs.3. Received, February 2004 300 units @ Rs.4. Issued, March 2004 500 units. Issued, April 2004 200 units. Received, May 2004 200 units @ Rs.6. Other Cost Record Shows: Direct labour Rs.3,000. Factory overhead Rs.2,000. 1,500 units were manufactured out of which 1,100 units were sold @ Rs.15. REQUIRED

(a) Ending raw material inventory on: (i) FIFO, (ii) LIFO, (iii) Moving Average (Periodic Inventory System).

(b) Raw material consumed. (c) Cost of goods manufactured. (d) Gross profit under each method on inventory valuation.


[email protected]


SOLUTION 8 (a) SCHEDULE OF UNITS

FOR THE PERIOD 2004

Date Description Units Cost (Rs.)

January 1 Raw material (opening) @ Rs.3 each 600 1,800 Add: Material Received: February 2004 Received @ Rs.4 each 300 1,200 May 2004 received @ Rs.6 each 200 1,200

Total material received 500 2,400

Total material available for use 1,100 4,200 Less: Material Issued: Total units issued during the period (700)

Raw material (ending) 400

Computation of Cost of Ending Raw Material by FIFO Method (Periodic System): February 2004 Received 200 Units @ Rs.4 each 800 May 2004 Received 200 Units @ Rs.6 each 1,200

400 units Cost of ending raw material inventory 2,000

Computation of Cost of Ending Raw Material by LIFO Method (Periodic System): January 2004 Inventory 400 Units @ Rs.3 each 1,200

400 units Cost of ending raw material inventory 1,200

Computation of Cost of Ending Raw Material by Weighted Average Method (Periodic System):

Average per unit cost = Total cost of raw material available for use

Units available for use

Average per unit cost = 4,200

1,100 Average per unit cost = Rs.3.82 per unit Cost of ending raw material = Unused units x Average unit cost Cost of ending raw material = 400 x 3.82 Cost of ending raw material = Rs.1,527 SOLUTION 8 (b) Computation of Cost of Raw Material Consumed:

Particular FIFO LIFO Weighted Average

Raw material beginning inventory 1,800 1,800 1,800 Add: Purchases of raw material 2,400 2,400 2,400

Raw material available for use 4,200 4,200 4,200 Less: Raw material ending inventory (2,000) (1,200) (1,527)

Cost of raw material used 2,200 3,000 2,673


[email protected]


SOLUTION 8 (c) Computation of Cost of Goods Manufactured:


Direct material used 2,200 3,000 2,673 Add: Direct labour 3,000 3,000 3,000

Prime cost 5,200 6,000 5,673 Add: Factory overhead 2,000 2,000 2,000

Cost of goods manufactured 7,200 8,000 7,673

SOLUTION 8 (d) Computation of Cost of Finished Goods Ending:


Cost of goods manufactured 7,200 8,000 7,673

Units manufactured 1,500 1,500 1,500

Per unit cost Rs.4.8 Rs.5.33 Rs.5.12

Finished goods ending units (1,500 – 1,100) 400 400 400

Cost of finished goods ending 1,920 2,133 2,046

Computation of Gross Profit:


Sales (1,100 x 15) 16,500 16,500 16,500 Less: Cost of Goods Sold: Cost of goods manufactured 7,200 8,000 7,673 Less: Finished goods ending (1,920) (2,133) (2,046)

Cost of goods sold (5,280) (5,867) (5,627)

Gross profit 11,220 10,633 10,873

Q.No.9 PROCESS COSTING GIVEN The following information relates to the goods in process No. 3 of Mustafa Manufacturing for the month of November 2004: Goods in process inventory No. 1 (40,000 units 100% complete as to material and 75% complete as to conversion cost)

Rs.774,000

Cost of 140,000 units transferred in from process No. 2 during November Rs.1,400,000 Manufacturing cost added in process No. 3, during November Direct material Rs.560,000 Direct labour Rs.250,000 F.O.H. Rs.750,000

Rs.3,734,000

On Nov. 30, 50,000 units are still in process No. 3 which are 100% complete as to material and 50% complete as to conversion cost. REQUIRED

(a) Compute: (i) Equivalent units of production. (ii) Cost per unit. (iii) Cost of units transferred out of finished goods using FIFO. (iv) Cost of units in process on Nov. 30, 2004.

(b) General Journal entries to record: (i) Transfer of 140,000 units from process No. 2 to process No. 3.


[email protected]


(ii) Manufacturing cost added in process No. 3 during Nov. (iii) Transfer of 130,000 units from process No. 3 to finished goods warehouse.

SOLUTION 9 (a)

MUSTAFA MANUFACTURING EQUIVALENT PRODUCTION UNITS (PROCESS NO. 3)

FOR THE PERIOD ENDED NOVEMBER 2004

Particulars Material Equivalent Units

Labour Equivalent Units

Overhead Equivalent Units

Units completed & transferred to finished goods

130,000 130,000 130,000

Add: Work in process (ending): (WIP ending units x % of completion) Direct material (50,000 x 100%) 50,000 Direct labour (50,000 x 50%) 25,000 Factory overhead (50,000 x 50%) 25,000

Work in process during the period 180,000 155,000 155,000 Less: Work in process (opening): Direct material (40,000 x 100%) (40,000) Direct labour (40,000 x 75%) (30,000) Factory overhead (40,000 x 75%) (30,000)

Equivalent production in units 140,000 125,000 125,000

MUSTAFA MANUFACTURING

PER UNIT COST (PROCESS NO. 3) FOR THE PERIOD ENDED NOVEMBER 2004

Particular Cost Equivalent Units Per Unit Cost

Cost from process No. 2 1,400,000 140,000 10 Direct material 560,000 140,000 4 Direct labour 250,000 125,000 2 Factory overhead 750,000 125,000 6

Total per unit cost 2,960,000 22


STATEMENT OF UNITS COMPLETED AND TRANSFERRED TO FINISHED GOODS PROCESS NO. 3

FOR THE PERIOD ENDED NOVEMBER 2004 Cost of Work in Process Opening Inventory: Cost b/d from last month 774,000 Add: Cost Applied During This Month From Work in Process Beginning Inventory: (WIP opening units x % of completion x unit cost of element) Direct labour (40,000 x 25% x 2) 20,000 Factory overhead (40,000 x 25% x 6) 60,000

Total cost applied during this month from work in process beginning inventory 80,000

Total cost of work in process beginning inventory 854,000 Add: Remaining Units Completed During This Month: (Units completed – WIP opening units) x Unit cost Total cost of remaining units completed (90,000 x 22) 1,980,000

Total cost of units completed and transferred to finished goods 2,834,000


[email protected]



STATEMENT OF WORK IN PROCESS ENDING INVENTORY (PROCESS NO. 3)

FOR THE PERIOD ENDED NOVEMBER 2004 (WIP ending units x % of completion) x unit cost of element Cost from process No. 2 (50,000 x 10) 500,000 Direct material (50,000 x 100% x 4) 200,000 Direct labour (50,000 x 50% x 2) 50,000 Factory overhead (50,000 x 50% x 6) 150,000

Cost of work in process ending inventory 900,000

SOLUTION 9 (b)

MUSTAFA MANUFACTURING GENERAL JOURNAL


1 Work in process (Process 3) 1,400,000 Work in process (Process 2) 1,400,000 (To record the goods completed and transferred to next

process)

2 Work in process (Process 3) 1,560,000 Raw material 560,000 Accrued payroll 250,000 Factory overhead 750,000 (To record the manufacturing cost of process 3)

3 Finished goods 2,834,000 Work in process (Process 3) 2,834,000 (To record the goods completed and transferred to

finished goods)

b.com – ii – cost accounting · ... and expenses. it has further been divided as direct ... raw...

Documents