COST AND MANAGEMENT ACCOUNTING

Final Term
Date 14.07.20 Time 1.00 to 4.00 pm

Question no 1 marks 20 (15+5)

Gomel engineering works on April 5,19xx started production of 100 lawn mower of model
EG-72 ordered by Capital Development Authority, Islamabad, vide Order No: 2119-M
dated April 1, 19xx at a price of Rs.3,600 per lawn mower.
Production planning Department allotted Job No. J-832-LM and instructed the factory to
complete production by April 20, 19xx. However, the factory completed production on
April 18. 19xx.
On April 11, weekly Materials Requisitions Summary No. MRS-16 and weekly Labour Cost
Analysis sheet No.LAS-16 showed following charges to Job No.832-LM.
Department 101 Department 111
Direct materials Rs. 58,500 Rs.11,700
Direct labour Rs. 13,500 Rs. 15,750 (900 hours)
Materials Requisitions summary No. MRS-17 and Labour Cost Analysis Sheet No. LAS-
17 prepared on April 18 revealed following direct costs for the job.
Department 101 Department 111
Direct materials Rs. 71,500 Rs. 14,300
Direct labour Rs. 16,500 Rs. 19,250(1100 hours)
In department 101 factory overhead is applied @50% of direct labour cost and in
department 111 @ Rs.12 per direct labour hour Marketing and administration expenses
chargeable to the job were respectively 7.5 % and 5% of the sale price. The lawn mowers
were delivered to customer on April 22,19xx.

Required:
i. Prepare a Job cost sheet for Job No. J-832-LM.
ii. Assuming that J-832-LM was the only job worked on during the two
weeks period, pass control account entries in General Journal from to
record:
(a) Cost incurred on the job;
 (b) Completion of the job; and
(c) Sale of the job.

Part 2
A. Define Process Costing and also explain advantage and disadvantage of process costing
B. Normal loss & abnormal loss in process costing.
Difference b/w normal & abnormal losses.

Question no 2 marks 10
Hemming Co. reported the following current year purchases and sales data for its only
product.

Units Acquired Units Sold

Date Activities
at Cost at Retail

Jan. Beginning
135 units @ $11.40 = $1,539
1 inventory

Jan.
Sales 125 units @ $41.40
10

Mar.
Purchase 285 units @ $16.40 = 4,674
14

Mar.
Sales 175 units @ $41.40
15

July
Purchase 435 units @ $21.40 = 9,309
30

Oct. 5 Sales 265 units @ $41.40

Oct.
Purchase 635 units @ $26.40 = 16,764
26

$32,28
Totals 1,490 units 565 units
6
Determine the costs assigned to ending inventory and to cost of goods sold using using
FIFO.

Question no 3 marks (15+5) 20

A local TV repairs shop uses 36,000 units of a part each year (A maximum consumption
of 100 units per working day). It costs Rs. 20 to place and receive an order. The shop
orders in lots of 400 units. It cost Rs. 4 to carry one unit per year of inventory.

Requirements: 

(1) Calculate total annual ordering cost

(2) Calculate total annual carrying cost

(3) Calculate total annual inventory cost

(4) Calculate the Economic Order Quantity

 (5) Calculate the total annual cost inventory cost using EOQ inventory Policy

 (6) How much save using EOQ

 (7) Compute ordering point assuming the lead time is 3 days

Part 2

Define

Economic Order Quantity

Ordering cost

Carrying cost