II - 2004-Costr

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
B.COM – II – COST ACCOUNTING
REGULAR
Compiled and Solved by:
Sameer Hussain
Compiled & Solved by: Sameer Hussain
www.a4accounting.weebly.com
a4accounting@hotmail.com
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.
B.Com – II – Cost Accounting – 2004 (Regular) Page 2

 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 (i) The main purpose of cost accounting is to
is to record financial transactions, finding analyze, ascertainment and control of
out profit or loss and financial position. cost.
(ii) Financial accounting presents financial (ii) Cost accounting presents cost information
information at the end of the accounting at frequent intervals.
period.
(iii) Financial accounting is kept compulsory in (iii) Cost accounting generally kept voluntarily
such a way as to meet the requirement of to meet the requirements of the
the Companies Act and Income Tax Act. management.
(iv) Financial accounting records transactions (iv) Cost accounting records transactions in an
in a subjective manner. It means according objective manner. It means the purpose
to the nature of expense. for which the cost is incurred.
(v) Financial accounting is used for internal (v) Cost accounting is used only for internal
and external users. 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

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

M/S. ____________
INCOME STATEMENT
FOR THE PERIOD ENDED ______
Sales 2,400,000
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

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
Gross profit
Number of units sold =
Gross profit per unit
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
Gross profit
448,000
148.4
SOLUTION 3 (b)
Computation of Number of Units Sold When Selling Price Rs.600 (20% More Gross Profit):
20% more gross profit
448,000 x 120%
48.4
Computation of Number of Units Sold When Selling Price Rs.700 (20% More Gross Profit):
20% more gross profit
448,000 x 120%
148.4
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.

(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
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)

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
Producing Department Service Department
Particular Total Factory Material
Mixing Refining Finishing
Office 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

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:
13,333
Mixing department =
10,000
Mixing department = 1.33 per hour
12,000
Refining department =
15,000
Refining department = 0.80 per hour
14,667
Finishing department =
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:
Budgeted production overhead
Overhead absorption rate (OAR) = x 100
Budgeted total of absorption basis
The absorption basis is most commonly units of a product, labour hours, or machine hours.

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:
Estimated factory overhead cost
Pre – determined factory overhead rate = x 100
Material cost
2. Pre – Determined Factory Overhead Rate on the Basis of Direct Labour Cost:
Direct labour cost
3. Pre – Determined Factory Overhead Rate on the Basis of Prime Cost:

Prime cost
4. Pre – Determined Factory Overhead Rate on the Basis of Direct Labour Hours:
Pre – determined factory overhead rate =
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

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
Factory overhead applied 900
(To record the manufacturing cost applied to
production)
(2) Work – in – process 700
Raw material 400
Accrued payroll 200
(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
(To record the manufacturing cost applied to
production)

(2) Factory overhead 700
Raw material 400
Accrued payroll 200
(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.

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):
Total cost of raw material available for use
Average per unit cost =
Units available for use
4,200
Average per unit cost =
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

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:
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: 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 Rs.774,000
75% complete as to conversion cost)
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.

(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 Labour Equivalent Overhead
Equivalent Units Units Equivalent Units
Units completed & transferred to finished 130,000 130,000 130,000
goods
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
PER UNIT COST (PROCESS NO. 3)
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
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

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

II - 2004-Costr

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The workings under the heading of “Additional Working”

are not required according to the requirement of the examiner.

Compiled and Solved by:

COST ACCOUNTING – 2004

Q.No.1 COST ACCOUNTING

Scope of Cost Accounting:

B.Com – II – Cost Accounting – 2004 (Regular) Page 2

Financial Accounting Cost Accounting

Q.No.2 MANUFACTURING CONCERN

B.Com – II – Cost Accounting – 2004 (Regular) Page 3

Computation of Gross Profit:

Computation of Operating Expenses:

Computation of Cost of Goods Sold:

Computation of Finished Goods Ending Inventory:

B.Com – II – Cost Accounting – 2004 (Regular) Page 4

Computation of Total Gross Profit:

Computation of Cost of Goods Sold per Unit:

Computation of Material, Labour and Factory Overhead Cost:

B.Com – II – Cost Accounting – 2004 (Regular) Page 5

Q.No.4 JOB ORDER COSTING

B.Com – II – Cost Accounting – 2004 (Regular) Page 6

B.Com – II – Cost Accounting – 2004 (Regular) Page 7

Computation of Finished Goods:

Q.No.5 DEPARTMENTALIZATION OF OVERHEAD

B.Com – II – Cost Accounting – 2004 (Regular) Page 8

Q.No.6 FACTORY OVERHEAD VARIANCE

B.Com – II – Cost Accounting – 2004 (Regular) Page 9

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

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

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

Computation of Spending Variance:

Computation of Idle Capacity Variance:

B.Com – II – Cost Accounting – 2004 (Regular) Page 10

(b) Differentiate between spoiled, defective and scrap goods.

B.Com – II – Cost Accounting – 2004 (Regular) Page 11

Q.No.8 MATERIAL – INVENTORY SYSTEM

B.Com – II – Cost Accounting – 2004 (Regular) Page 12

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

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

B.Com – II – Cost Accounting – 2004 (Regular) Page 13

Computation of Gross Profit:

Q.No.9 PROCESS COSTING

B.Com – II – Cost Accounting – 2004 (Regular) Page 14

B.Com – II – Cost Accounting – 2004 (Regular) Page 15

B.Com – II – Cost Accounting – 2004 (Regular) Page 16

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