COST ACCOUNTING 9TH EDITION

MUHAMMAD SHAHID MBA (FINANCE) UOS

Page 1 of 16

COST ACCOUNTING 9TH EDITION

CHAPTER 2 EXERCISES Exercise 2.1
1) Identify the estimated conversion cost per unit. Direct Labour $ 20 Variable Factory overhead $ 15 Fixed Factory Overhead $ 6 $ 41 2) Identify the estimated Prime Cost per unit. Direct Material $ Direct Labour $ $

32 20 52

3) Determine the estimated total varialbe cost per unit. Direct Material $ 32 Direct Labour $ 20 Variable Factory overhead $ 15 Variable marketing $ 3 Total Variable Cost $ 70 4) Compute the total cost that would be incurred during a month with a production level of a) 12000 Units Cost Item Estimated Unit Cost Total Cost Direct Material $ 32 384000 Direct Labour $ 20 240000 Variable Factory overhead $ 15 180000 Fixed factory Over head $ 6 72000 Total Cost $ 73 876000 b) Sale Level of 8000 Units Estimated Unit Cost $ 32 $ 20 $ 15 $ 6 $ 3 $ 4 $ 80 Total Cost 256000 160000 120000 48000 24000 32000 640000

Cost Item Direct Material Direct Labour Variable Factory overhead Fixed factory Over head Variable marketing Fixed marketing Total Cost

Exercise 2.2
The Mercaldo Company Income Statement For the Period ended on 31st December, 19B Sales 1995000 X85%= Less Cost of Sales Variable Cost 11571000 X 85%= 9835350 Fixed Cost = 7623000 Total Cost of Sales Loss for the Year

16957500

17458350 (500850)

Page 2 of 16

COST ACCOUNTING 9TH EDITION

Exercise 2.3
3. Manufacturing Costs: Cost of Goods Manufactured; Cost of goods sold. Crockett Company 1 Opening Purchases Transport in Material Control 176000 2400000 32000 2608000 3 WIP Closing 2412000 196000 2608000 4 1885600 1885600 opening Material Labour FOH 2 Payroll Control 3204000 WIP 3204000

3204000 Work in Process 129800 2412000 [Link] 3204000 1885600 Closing 7631400

3204000

FOH Control 1885600 WIP 1885600

7494600 136800 7631400

5 Opening WIP

Finished Goods 620000 7494600 CGS Closing 8114600

6 7547200 567400 8114600 F. Goods

Cost of Goods Sold 7547200

1 2 3

Total Manufacturing Cost Cost of Goods Manufactured Cost of Goods Sold

(2412000+3204000+1885600)

7501600 7494600 7547200

OR
The Crocket Company Cost of Goods Sold Statement For the Period ended on 31st, December 19B. Description Amount $ Direct Material Opening Inventory of Raw Material Add Purchases Add Transportation In Total Cost of Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost 1: Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2: Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3: Cost of Goods Sold

$ 176000

2400000 32000 2432000 2608000 196000 2412000 3204000 1885600 7501600 129800 7631400 136800 7494600 620000 8114600 567400 7547200

Page 3 of 16

COST ACCOUNTING 9TH EDITION

Exercise 2.4
4. Journal Entires for the Cost accounting Cycle. Date a Description Work in process Control FOH Control Material Control Direct & Indirect Material issued Payroll Control Income Tax Withheld FICA Tax Accrued Payroll Payroll Recorded and deductions made b-2 Accrued Payroll Voucher Payable Voucher of Payroll made Voucher Payable Bank Payment of Payroll is made c Work in process Control FOH Control Sales Salaries Payroll Distribution of payroll is made FOH Control Sales Expenses Contorl SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded Work in process Control FOH Applied FOH is charged to production Finished Goods Work in process Control Cost of Production completed recorded g Material Control Voucher Payable Material Purchased h-1 Cost of Goods Sold Finished goods Cost of Goods Sold recorded h-2 Accounts Receivables Sales 26000 26000 20000 20000 50000 50000 30000 6000 8000 44000 33700 33700 33700 33700 P.R Amount Debit($) Credit($) 24500 4500 29000

44000 7000 3300 33700

4932 1096 2376 352 3300

22932 22932

60000 60000

Page 4 of 16

COST ACCOUNTING 9TH EDITION

Finished Goods Shipped to Customers

5. Journal entries for the cost accountng Cycle. MultiElectro Incorporated Date a Description Material Control Voucher Payable Direct Material Purchased Payroll Control Income Tax Withheld FICA Tax Accrued Payroll Payroll Recorded and deductions made Accrued Payroll Voucher Payable Voucher of Payroll made Work in process Control FOH Control Sales Salaries Admin Salaries Payroll Distribution of payroll is made Material Control Voucher Payable Indirect Material & Supplies Purchased FOH Control Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded Work in process Control FOH Control Sales Expense Control Material Control Direct and Indirect Material Issued Voucher Payable Material Control Deffective Shipping Supplies returned to vendors Vouchers Payable Bank Accounts Payable including Salaries paid P.R Amount Debit($) Credit($) 120000 120000

90000 15750 6750 67500

b-2

67500 67500

b-3

45000 9000 15000 21000 90000

26250 26250

6156 1710 2394 2790 720 6750

60000 15000 4500 79500

900 900

142500 142500

Page 5 of 16

COST ACCOUNTING 9TH EDITION

h FOH Control Accumulated Depreciaton Depreciation on Factory Building recorded FOH Control Voucher Payable Sundry FOH recorded as Liability. Work in process Control FOH Control Actual FOH is charged to Production Finished Goods Work in process Control Cost of Production completed recorded 1000 1000

6900 6900

38056 38056

126000 126000

l-1

Cost of Goods Sold Finished goods Cost of Goods Sold recorded Accounts Receivables Sales Finished Goods Shipped to Customers

96000 96000

l-2

150000 150000

Exercise 2.6
6. Journal entries for the cost accountng Cycle. Romer Company for month of February Date a Description Work in Process Control FOH Control Material Control Direct & Indirect Material issued Finished Goods Work in Process Control Work in Process Completed and transferred to Finished goods Material Control Voucher Payable Material Purchased and received Payroll Control FICA Tax Federal Income Tax State Income Tax Accrued Payroll Payroll Recorded and deductions made Accrued Payroll Voucher Payable Voucher of Payroll made P.R Amount Debit($) Credit($) 18500 2800 21300

51800 51800

32000 32000

50000 3750 8750 2500 35000

d-2

50000 50000

Page 6 of 16

COST ACCOUNTING 9TH EDITION

e Work in process Control FOH Control Marketing Salaries Admin Salaries Payroll Distribution of payroll is made FOH Control Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded FOH Control Accumulated Depreciation Prepaid Insurance Vouchers Payable FOH Expenses Recorded Work in process Control FOH Applied Actual FOH is charged to Production Cost of Goods Sold (92120*100/140) Finished goods Cost of Goods Sold recorded Accounts Receivables Sales Sale of Finished Goods Recorded Bank Accounts Receivables Accounts receivables collected 27500 9000 8500 5000 50000

5001 1165 685 2700 400 3750

11300 9450 600 1250

28100.5 28100.5

65800 65800

i-2

92120 92120

76000 76000

Exercise 2.7
7. Cost of Goods Manufactured Statement. TheThornton Company Cost of Goods Manufactured Statement For the Period ended on ----Description Amount $ $ Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost 1 Total Manufacturing Cost Add Opening Work in Process Inventory 16200 20000 36200 17000 19200 16500 8580 44280 3600

Page 7 of 16

COST ACCOUNTING 9TH EDITION

Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured 47880 7120 40760

Exercise 2.8
8. Cost of Goods Sold Statement. Pensacola Corporation Cost of Goods Sold Statement For the Period ended on 31st, December Description $ Direct Material Opening Inventory of Raw Material Add Purchases Add Freight on Material Total Cost of Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Other FOH Depreciation 1 Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3 Cost of Goods Sold Amount $ 88000 366000 6600 372600 460600 64000 396600 523600 468400 104400

572800 1493000 29800 1522800 38800 1484000 54200 1538200 66000 1472200

Page 8 of 16

COST ACCOUNTING 9TH EDITION

Problems Chapter-2
2.1 Cost of Goods manufactured; Prime and Conversion costs. Mat Company's Cost of Goods Manufactured & Sold Statement For the Period ended on 31st, December Description $ Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods Sold 20000 110000 130000 26000 104000 160000 80000 344000 40000 384000 36000 348000 102000 450000 105000 345000

Amount $

2.2

Income Statement relationships.

Company A Description $ Sales Cost of Goods Sold Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold Gross Profit Amount $ 4,000,000

3,800,000 600,000 4,400,000 1,200,000 3,200,000 800,000

Company B Description $ Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold $ 1,490,000 190,000 1,300,000 Amount $

Company C

Page 9 of 16

COST ACCOUNTING 9TH EDITION

Description $ Sales Cost of Goods Sold Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold Gross Profit Amount $ 834000

340000 450000 790000 52000 738000 96000

2.3 Cost accounting Cycle in T Accounts Crockett Company Payroll Controll 180000 WIP 180000 (2)

1 Opening Purchases

Material Control 20000 65000 85000 WIP Closing 70000 15000 85000 (1)

180000 4 Work in Process Control 7000 70000 [Link] 180000 100000 Closing 357000

180000

3 supplies ind labour Depreciation Insurance Misc

FOH Control 20000 WIP 55000 10000 2000 13000 100000 Finished Goods 34000 346000 CGS Closing 380000

100000

(3)

opening Material Labour FOH

346000 11000 357000

(4)

100000 6 350000 30000 380000 (5) F. Goods Cost of Goods Sold 350000

5 Opening WIP

Sales Receivables

8 500000 V/P c/b (6)

500000

Accounts Payable o/b 77000 Materials 6000 83000

18000 65000 83000

V/P c/b

Payment of Payroll o/b Direct 184000 Labor 9000 193000

13000 180000 193000 o/b Sales

10

Accounts Receivables 54000 500000 554000

Cash c/b

532000 22000 554000

(7)

Page 10 of 16

COST ACCOUNTING 9TH EDITION

1 2 3 4 5 6 7 8 Material Issued to production Direct Labour Total Factory overhead Cost of Goods Manufactured Cost of Goods Sold Payment of Accounts Payable Collection of accounts receivable Payment of payroll 70000 180000 100000 346000 350000 77000 532000 184000

2.4 Journal Entries for the cost accounting cycle. Waterlux Company

1 Opening Purchases

Material Control 17000 91000 108000 WIP Closing 84000 24000 108000

Payroll Control 50000 WIP 50000

50000 4 opening Material Labour FOH Work in Process Control 12000 84000 [Link] 50000 25000 Closing 171000

50000

Facotory Overhead Control 35000 WIP 35000

157000 14000 171000

35000 5 Opening WIP Finished Goods 28000 157000 CGS Closing 185000

35000 6 140000 45000 185000 F. Goods Cost of Goods Sold 140000

Journal Entries Date a Description Description Material Control Voucher Payable Direct Material Purchased Work in process Control Material Control Direct Material Charged to Production Work in process Control Payroll Control Direct Labour Charged to Production Accrued Payroll P.R Debit($) Amount Credit($)

91000 91000

84000 84000

50000 50000

50000

Page 11 of 16

COST ACCOUNTING 9TH EDITION

Voucher Payable Voucher of Payroll made e FOH Control Voucher Payable Sundry FOH recorded as Liability. f Work in process Control FOH Control Actual FOH is charged to Production Finished Goods Work in process Control Cost of Production completed recorded Cost of Goods Sold Finished goods Cost of Goods Sold recorded 2.5 The Cost Accounting Cycle. Montana Company Date a Description Material Control Voucher Payable Direct Material Purchased b FOH Control Voucher Payable Sundry FOH recorded as Liability. c-1 Payroll Control Income Tax Withheld SUI Tax FUI Tax FICA Tax Accrued Payroll Payroll Recorded and deductions made c-2 Accrued Payroll Voucher Payable Voucher of Payroll made c-3 Work in process Control FOH Control Sales Salaries Admin Salaries Payroll Control Distribution of payroll is made FOH Control 60500 12500 8000 5000 86000 68370 68370 86000 8170 2322 688 6450 68370 18500 18500 P.R Debit($) Amount Credit($) 35000 35000 35000 35000 50000

157000 157000

145000 145000

92000 120000

c-4

8030

Page 12 of 16

COST ACCOUNTING 9TH EDITION

Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded d Work in process Control FOH Control Material Control Direct and Indirect Material Issued Work in process Control FOH Control Actual FOH is charged to Production Finished Goods Work in process Control Cost of Production completed recorded g Cost of Goods Sold Finished goods Cost of Goods Sold recorded Accounts Receivables Sales Finished Goods Shipped to Customers Bank/Cash Discount Allowed Accounts Receivables Accounts Receivables Collected subject to 2% Discount Ledger Accounts 1 Opening h Cash Account 20000 208662 Closing 228662 3 O/B a Material Control 10000 d 92000 d Closing 102000 5 Opening f Finished Goods 9500 188000 g Closing 197500 228662 228662 4 82500 8300 11200 102000 6 185500 12000 197500 g Cost of Goods Sold 185500 opening c-3 d e 2 O/b g Accounts Receivables 25000 h 241150 Closing 266150 Work in Process 4500 f 60500 82500 47330 Closing 194830 185500 185500 880 550 2322 688 6450

82500 8300 90800

47330 47330

188000 188000

g-2

241150 241150

208662 4258 212920

212920

53230 266150

188000

6830 194830

Page 13 of 16

COST ACCOUNTING 9TH EDITION

7 Opening

Machinery 40000 Closing 40000 40000 40000 Closing

Accounts Payables O/B a b 194370 c-2 194370 Accumulated Depreciation O/B

15500 92000 18500 68370 194370

Accrued Payroll O/B 2250 2250 Common Stock O/B 60000 60000

10 2250 Closing

10000 10000

10000 10000

Closing

2250 12 60000 Closing 60000 Retained Earnings O/B 21250 21250 21250

11

21250

Closing

13 b c-3 c-4 d

Factory Over Head Control 18500 e 47330 12500 8030 8300 47330 0 Income Tax with Held c-1

14 c-1

Payroll Control 86000 c-4 86000

86000

86000

15

16 8170

SUI Tax c-1 c-4 2322 2322

Closing Closing 8170 8170 FUI Tax c-1 c-4 Closing 1376 1376 688 688 Closing 1376 8170 18

4644 4644 4644

17

FICA Contribution c-1 c-4 12900 12900

6450 6450 12900

19 c-2

Accurued Payroll 68370 c-1

20 68370

Sales g 241150

Closing 0 0

241150 241150

241150

Page 14 of 16

COST ACCOUNTING 9TH EDITION

21 c-3 c-4 Sales Expenses Control 8000 880 22 c-3 c-4 Admn Salaries Control 5000 550 Closing Closing 8880 23 h Discount Allowed 4258 Closing 4258 4258 4258 Montana Company Trial Balance As on P/R Debit 228662 53230 11200 6830 12000 185500 40000 194370 2250 10000 60000 21250 8170 4644 1376 12900 241150 8880 5550 4258 556110 8880 0 5550 5550 5550

[Link] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Description Cash Account Accounts Receivables Material Control Work in Process Finished Goods Cost of Goods Sold Machinery Accounts Payables Accrued Payroll Accumulated Depreciation Common Stock Retained Earnings Income Tax with Held SUI Tax FUI Tax FICA Contribution Sales Sales Expenses Control Admn Salaries Control Discount Allowed Total

Credit

556110

2.6 Cost of goods sold statement; Income Statement Mandmeyer Company Income Statement For the Period ended on 31st, December 19b Description $ Sales Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used $ Amount $ 56000

4250 18000 22250 4000 18250

Page 15 of 16

COST ACCOUNTING 9TH EDITION

Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods Sold Gross Profit Less Operating Expenses Marketing Expenses Admn Expenses Other Expenses Net Profit 7500 5000 30750 7500 38250 4000 34250 5100 39350 3500

35850 20150

2800 1120 560

4480 15670

Page 16 of 16