Cost and Management Accounting (5538) ASSIGNMENT NO.1

Cost and Management Accounting (5538) ASSIGNMENT NO.1

ASSIGNMENT No. 1

Q. 1   In an accounting conference, discussion turned to the possibility of preparing financial statements from few accounts together with financial ratios. The Assistant Controller provided the following data:

         

Item	Rs.
Net Income	1,200,000
Rate of return (Income) on Sales	10%
Gross Profit rate on Net Sale	40%
Rate of Marketing expenses to Sales	15%
Total Liabilities	2,000,000
5% Bond payable represents 37.5% of the total liabilities	–

          Required: An Income Statement based on the above information.

Q. 2   Waris Company uses process costing. All materials are added at the beginning of the process. The product is inspected when it is 80% converted, and spoilage is identified only at the point. Normal spoilage is expected to be 5% of good output.

                  During March 10,500 units were put into process. Current costs were Rs.52,500 for materials, Rs.39,770 for labor, and Rs.31,525 for factory overhead. The 3,000 units still in process at the end of March were estimated to be 90% complete. A total of 7,000 units were transferred to finished goods.

          Required: prepare a cost of production report for March.

Q. 3   (a)    A club purchases 6,000 dozens of tennis balls next year, policy manual of the club prescribes to impute 10% interest on average inventory investment. Other costs associated with storage amount to Rs.21.60 per dozen. The cost involved in handling each purchase order is Rs.300, price quoted by the supplier is Rs.360 per dozen.

          Required:

i.            EOQ

ii.          Secretary of the club propose to buy 2,000 dozens tennis balls in each order. Show how much the club can save by buying in economic order quantity.

(b)    Mustafa uses EOQ model to help in the planning and control of its inventory. One of the best items jeans is sold to public for Rs.600 per piece (at a markup of 400% of cost). Mustafa expects to buy and sell 1,200 pieces of this item during the year 2000. The relevant costs are:

        Ordering Cost                    =      Rs.27 per order

        Carrying Cost                     =      15%

        Required: Determine the EOQ and calculate the total ordering cost and carrying cost at this level.

Q. 4   The following information is available.

Normal working day:	8 days
Guaranteed rate of pay (on time basis)	Rs.5.5 per hour
Standard time allowed to produce 1 unit	3 minutes
Piecework price	Re0.1 per standard minutes
Premium bonus	75% of time saved in addition to hourly pay

          Required: For the following levels of out puts produce in a day:

           Æ    80 units

           Æ    120 units

           Æ    210 units

          Calculate the earnings based on:

i.            Piece work, where earnings are guaranteed at 80% of time based pay

ii.          Premium bonus system

Q. 5   The XYZ company factory overhead rate is Rs.2.00 per hour. Budgeted overhead for 3000 hours per month is Rs.8,000 and for 7000 hours is Rs.12,000. Actual overhead for the month is Rs.9,000 and actual volume is 5000 hours.

          You are required to calculate the following from the data given above:

1.      Variable rate

2.      Fixed overhead

3.      Normal volume

4.      Applied FOH

5.      Over or under applied FOH

6.      Capacity variance

7.      Spending varianc