Chapter 2 - Cost Concepts, Information Systems

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 Companys expected operating

income or loss for 19B.
19B
Sale decease to 15%
Rs
BusinessFellows.Biz | Copyrights: Mr Salman Yousaf
19950,000 15%
1950,000 2992500
16957500
Less:CGS
Fixed cost
7623000
Variable cost (W)
9835350
1745835
Net loss
(500850)
Variable cost varies with sales

VC
Sales
19A
11571000
1950,000
19B
16957500
1950,000 x = (1157100) (1695750)

x = 9835350
E- 3:
Crockett Company
Cost Of Goods Sold Statement
For The Year Ended On Dec , 31B
Rs
Rs
Rs
Direct Material
Material Opening
176000
Add: purchases (Net)

Add: Freight in
2400,000
32000 2432000
Material available for use
2608000
Less: Material Ending
196000
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
Less: Finished goods ending

567400 Cost of goods sold
7547200
E- 4 Prepare journal entries for above transactions.

JOURNAL
Rs
Rs
1- Work - in process A/C

24500
Factory overhead A/C
4500
Material A/C
29000
_____________________________
2- Payroll A/C
44000
Accrued payroll A/C
33700
Income tax withheld
7000
FICA tax at 7.5%
33000
Accrued payroll A/C
33700
Cash A/C
33700
___________________________
3- Work- in process
30,000
FOH
6000
Marketing expenses
8000
Payroll A/C
44000
4932
Marketing expenses
1096
Unemployment Insurance
2376
Fedral unemployment
352
FICA Tax P/A
3500
Working
Total cost =2376+352+3500 =6028
FOH (direct & indirect labour)
=6028+36000/44000 =4932
Marketing expenses
=60288000/44000=1096
4- Factory overhead
7500
Voucher payable
7500
____________________________________
5- Work - in process
22932
Factory overhead applied

22932
____________________________________
6- Finished goods
60,000
Work - in process
60,000
____________________________________
7- Material
50,000
Voucher P/A
50,000
____________________________________
8- Cost of goods sold
20,000
Finished goods
20,000
A/C Receivable
26000
Sales
26000
_____________________________________
E-5
Dr
Cr
Date
(a)
Particulars
Material A/C
$
120,000
Account payable A/C
(b)
Payroll A/C
120,000
90,000
FICA Tax
6750
Income Tax
15750
Accrued payroll
675000
Work in process A/C
45,000
9,000
Marketing expenses A/C
15,000
Administrative expenses A/C
21,000
Payroll A/C
(c)
Material A/C
90,000
26250
Account payable A/C
26250
(d)
Factory overhead
6156
1710
2394
2790
State unemployment
720
Federal unemployment
6750
FIACA Tax
(working)
Total cost = 10260
W.I.P = 10260(54000)/90,000
=6156
Mark. Exp = 10260(15000)/90,000
=1710
Admin exp = 1026(21000)/90,000
=2394
(e)
Work in process A/C
60,000
15,000
4,500
79500
Material A/C
(f)
Account payable A/C
900
Material A/C
900
(g)
Account payable A/C
75000
Accrued payroll A/C
67500
Cash A/C
(h)
142500
1000
Accumulated Dep-
1000
Machinery
(i)
9600
Account payable A/C

(j)
Finished goods A/C
9600
126000
Work in process A/C

(k)
Cost of goods sold A/C
126000
96000
Finished goods A/C

Account receivable A/C
96000
150,000
Sales A/C
(l)
Factory over head A/C
150,00
0
38056
Account payable A/C
38056
E-6
Dr
Date
(a)
Particulars
Work in process A/C
18500
2800
Material A/C
(b)
Finished goods A/C
Material A/C
51000
51000
32000
Account payable A/C

(d)
21300
Work in process A/C

(c)
Cr
Payroll A/C
32000
50,000
FICA Tax
3750
Federal Income Tax
8750
State Income Tax
2500
Accrued payroll
35000
(working)
Let total payroll = 100
Accrued payroll = 100- 7.5- 17.5-5
=70%
Accrued payroll A/C
35,000
Cash A/C
(e)
Work in process A/C
35000
27500
9000
8500
5,000
Payroll A/C
(f)
50,000
5000
1165
685
FICA A/C
3750
Federal
400
unemployment tax
2700
State
unemployment tax
(working)
Total = 6850
F-O-H = 685036500/50,000
=5,000
Marketing exp = 68508500/50,000
= 1165
Admin exp = 68505,000/50,000
= 685
10
(g)
11300
Accumulated Dep-
9450
Equipt
600
Prepaid insurance
1250
Account payable A/C

(h)
Work in process A/C

Factory over applied
(i)
Account receivable A/C
28100.5
0
92120
Sales A/C
(j)
Cost of goods sold A/C
92120
65800
(92120100/140)Finished goods A/C

Cash A/C
28100.50
65800
76000
Account receivable
76000
A/C
11
E-7
Tuornton Company
Cost of goods manufactured statement
For the month of October, 19A
Direct Material
Opening Inventory
16200
+purchases
29,000
Cost of material available
36200
- closing Inventory
17000
Cost of material used
19200
Add:
Direct labour
16500
Prime cost
35700
Add: Factory overhead

Current manufacturing cost
8580
44280
Add: Work in process

(opening Inventory)
3600
47880
Less: Closing inventory
7120
40760
E-8
12
Pensacola Corporation
Cost goods sold statement
For the year ended.
Direct material
Opening inventory
88,000
+ Net purchases
366,000
+Direct expenses
6,600
460,600
-closing inventory
64,000
396600
Direct labour
523600
+prime cost
920200
Factory overhead
+Dep. Manufacturing
572800
Current Manufacturing cost
149300
Work in process
+Opening inventory
Cost of goods to be manufactured
29800
1522800
-closing inventory
38800
1484000
Finished goods
13
+opening inventory
54200
1538200
-closing inventory
66000
Cost of goods sold
1472200
P-1
Mat.Company
Cost of goods manufactured statement
14
For the month of March,

$
Direct Material
Opening inventory
20,000
+purchases
110,000
Cost of material available for use
130,000
-closing material used
26,000
Direct material used
104,000
Direct Labour:
+Direct Labour cost
160,000
Prime cost
264,000
Factory overhead:
80,000
+F-O-H cost
344,000
Work in process:
+Opening inventory
40,000
384,000
-closing inventory
36,000
348,000
Finished good:
+Opening inventory
102,000
15
-closing inventory
450,000
Cost of goods sold
105,000
345000
(Working)
F-O-H = 50% of direct labour
= direct labour50/100
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
____________________________________________________________
16
P-2
Company A
$
380000
Finished goods:
+opening inventory
600,000

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
$
1490,000
Less: Finished goods closing
190,000
Cost of goods sold
13,00,000
17
P 2 (cont.)
Company-C
$
Sales
429,000
Less: cost of goods sold
333,000
Gross profit
96,000
(Working)
$
340,000
+Finished goods opening
45,000
385,000
_ Finished goods closing
52,000
Cost of goods sold
333,000
P-3
Req(1)
Material A/C
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
100,000
19
13000
100,000
Total F-O-H = 100,000

Req(4)
W-I-P A/C
Bal.b/d
7000
Fin goods
172,000
Material
70000
Payroll(lab)
6000
F-O-H
100,000
Bal.c/d
11000
183000
183000
Cost of goods manufactured = 172000
Req(5)
Finished goods A/C
Bal.b/d
34000
W-I-P
172000
C.GS
176000
Bal.c/d
30,000
20
206,000
206,000
Cost of goods sold = 176000

Req(6)
A/P A/C
Cash
77000
Bal. c/d
6000
83000
Bal.b/d
18000
Material
65000
83000
Payment of A/P = 77000

Req(7)
A/R A/C
Bal.b/d
54000
Sales
500,000
554000
Cash
532000
Bal.c/d
22000
554000
Amount collected from account receivable =

548000
Req(8)
21
Accrued payroll A/C

Cash
10,000
Bal.c/d
9000
19000
Bal.b/d
13000
Payment A/C
6000
19000
Payment to A/P = 10,000
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
________________________________
22
4- For Factory Overhead

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
84,000
Direct Labour
+Direct labour cost
50,000
Prime cost
134000
23
Factory overhead
+FOH
25000
Current Material cost
150,000
W/P
+ Opening inventory
12000
71,000
_Closing inventory
141000
57,000
Finished Goods
+opening inventory
29,000
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
24
Bal b/d
20,000
Accrued payroll
74820
A/P A/C
179379
A/P A/C
104000
Bal c/d
20559
199379
199379
2A/C Account Rec
Bal b/d
25000
Sales A/C
228800
253800
Cash A/C
179379
Discount A/C
3661
Bal c/d
70760
253800
3Finished Goods
Bal b/d
9500
W/P
188000
CGS
176000
197500
197500
Bal c/d
21500
4BusinessFellows.Biz | Copyrights: Mr Salman Yousaf
25
W/P A/C
Bal b/d
45000
Payroll
60500
Material
82500
FOH applied
47330
F. goods
188000
Bal.c/d
6830
194830
194830
5A/P A/C
Cash
104000
Bal c/d
160000
264000
Bal b/d
15500
Material
92000
FOH A/C
18500
Mark exp
18000
Admin exp
120000
264000
6Material A/C
26
Bal b/d
10,000 A/P A/C
92000
102000
W/P
82500
FOH
8300
Bal c/d
11200
102000
7Accrued payroll A/C

Cash
74820
Bal c/d
2250
77070
Bal b/d
2250
Payroll
74820
77070
8Machinery A/C
Bal b/d
40,000
Bal c/d
27
40,000
40,000
40,000
9Depreciation A/C
Bal c/d
10,000
10,000
Bal b/d
10,000
10,000
10Common stock
Bal c/d
60,000
60,000
Bal b/d
60,000
60,000
11Retained Earnings
28
Bal c/d
21250
21250
Bal b/d
21250
21250
12With Holding
Bal c/d
8170
8170
Payroll A/C
8170
8170
13State unemployment
Bal c/d
2322
2322
Payroll
2322
2322
14FOH
29
A/P A/C
18500
Payroll
12500
FIAC Tax
5475
Material
8300
Bal c/d
44775
44775
44775
15Marketing exp
Payroll
8000
FIAC tax
600
A/P A/C
18000
Bal c/d
26600
26600
26600
30
16Admin exp A/C

Payroll
5000
FIAC Tax
375
A/P A/C
120,000
Bal c/d
125375
125375
125375
17FIAC Tax
FOH
5475
Bal c/d
6450
6450
Mark exp
600
Admin exp
375
6450
18FOH Applied
Bal c/d
W/P
47330
31
47330
47330
47330
19C.G.S
FG
176000
176000
Bal c/d
176000
176000
20Sales A/C
Bal c/d
228800
228800
A/C A/R
228800
228800
21Discount A/C
32
A/R A/C
3661
Bal c/d
3661
3661
3661
22Payroll A/C
W.H.Tax
8170
W/P
60500
State unemp tax

2322
FOH
12500
Federal unemp tax

688
Mark exp
8000
Accrued payroll
74820
Admin exp
5000
86000
86000
33
P 5 (cont.)
TRAIL BALANCE
SR
#
A/C
TITLE
Dr
Cr
34
1-
Cash
20559
2-
A/R A/C
70760
3-
F G A/C
21500
4-
W/P A/C
6830
5-
A/P A/C
6-
Material A/C
7-
Accrued payroll A/C
8-
Machinery A/C
9-
A/C Depreciation A/C
10,000
10
-
Common stock
60,000
R.E A/C
21250
W.E Tax A/C
8170
State unemp tax
2322
Fedral unemp tax
688
11
12
-
160,000
11200
2250
40,000
13
14
-
35
15
16
17
18
19
20
-
Marketing exp
26600
Admin exp
125375
FICA Tax
6450
FOH Applied A/C
47330
C.G.S
176000
Sales A/C
28800
Discount A/C
Payroll A/C
FOH A/C
3661
_
44775
21
22
23
547260
547260
36
P- 5 (cont.)
JOURNAL ENTRIES
Rs
A. Material A/C
A/P A/C
Rs
93,000
93,000
B. FOH A/C
18500
A/P A/C
C. Payroll A/C
18500
86000
With holding tax
8170
State un employment tax
2322
Federal un employment tax
688
Accrued payroll
74820
Accrued payroll
Cash
74820
74820
37
W/P A/C
60500
FOH A/C
12500
Marketing expenses
Payroll A/C
8000
86000
FOH A/C
5475
Marketing expenses
FICA Tax
600
D.Work in process A/C
6450
82500
8300
FOH A/C
Material
E. W/P A/C
90800
47330
FOH Applied A/C

F. Finished goods
47330
188000
W/P A/C
G.Cost of goods sold
188000
176000
176000
Finished goods
A/R A/C
228800
228800
Sales A/C
H.Cash A/C
179379
Discount A/C (1830402%)

A/R A/C (22880080%)
3661
183040
38
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
22,000
_closing inventory
4250
Direct material used

17750
Direct Labour
+Direct labour
7500
Prime cost
225250
FOH
39
+FOH Applied
5000
30250
WIP
+Opening inventory
4000
34250
_Closing inventory
7500
26750
Finished Goods
+Opening inventory
3500
30250
_closing inventory
5700
Cost of goods sold
25150
________________________________________
40
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
41
Marketing expenses
2800
560002%
Administration expenses
(3920)
1120
560002%
Operating Income
26,930
Less: Other expenses
(560)
56000 1%
NET INCOME
26,370
__________________________________________________________________
_
42

Chapter 2 - Cost Concepts, Information Systems

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Chapter 2 - Cost Concepts, Information Systems

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Cost Concepts, Information System

Determine Mercaldo Companys expected operating

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Variable cost (W)

Variable cost varies with sales

1950,000 x = (1157100) (1695750)

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Add: purchases (Net)

Material available for use

Less: Material Ending

Direct Material used

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Less: Finished goods ending

E- 4 Prepare journal entries for above transactions.

1- Work - in process A/C

Factory overhead applied

Account payable A/C

Work in process A/C

Factory overhead A/C

Marketing expenses A/C

Administrative expenses A/C

Account payable A/C

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Marketing expenses A/C

Administrative expenses A/C

Work in process A/C

Factory overhead A/C

Marketing expenses A/C

Account payable A/C

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Account payable A/C

Accrued payroll A/C

Factory overhead A/C

Factory overhead A/C

Account payable A/C

Finished goods A/C

Work in process A/C

Cost of goods sold A/C

Finished goods A/C

Factory over head A/C

Account payable A/C

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Work in process A/C

Factory overhead A/C

Finished goods A/C

Account payable A/C

Work in process A/C

Federal Income Tax

State Income Tax

Work in process A/C

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Factory over head A/C

Marketing expenses A/C

Administrative expenses A/C

Factory over head A/C

Marketing expenses A/C

Administrative expenses A/C

BusinessFellows.Biz | Copyrights: Mr Salman Yousaf

Factory overhead A/C

Account payable A/C

Work in process A/C

Account receivable A/C

Cost of goods sold A/C