ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)
[

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Course: Cost Accounting (5410) Semester: Autumn, 2024
Level: ADC / BS

ASSIGNMENT No. 1
Total Marks: 100 Units: (1–4) Pass Marks: 50
Q. 1 What are the objectives of cost accounting? What are its advantages and limitations?
(6)
(a) Describe the various techniques of costing in detail. (7)
(b) Enlist the various classifications of costs and describe them. (7)

Q. 2 The following data are extracted from the books of Usman & Brothers Corporation
for the period ended on 31st December 2023. You are required to (a) Prepare Cost
of goods manufactured and sold statement and (b) Income statement. (20)
(Amounts in Rs. “000”)
Sales 1,075,400 Factory Overheads:
Direct Labour 180,400 Factory Insurance 18,000
Purchases 288,000 Heat & Light Costs 9,600
Office Expenses 60,000 Depreciation on Machinery 13,200
Advertisement Expenses 72,000 Factory Rent 34,000
Inventories at 1 January Inventories at 31 December
2023: 2023:
Raw Materials 76,800 Raw materials 67,200

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 Work in Process 60,000 Work in process 57,600
144,80
Finished Goods 125,200 Finished goods
0
Q. 3 Roshan Milling Corporation manufactures a product requiring processing in three
departments, with all materials put into process in the first department. During
December 220,000 units were completed in department 1 at the total cost of Rs.
352,000 and were transferred to the next department. From this lot, department 2
completed and transferred out 170,000 units incurring direct labour cost of Rs.
52,360 and factory overhead cost of Rs. 26,180. The December 31, work in
process inventory of department 2 is 44,000 units which were 25% complete as to
direct labour and factory overhead cost. The spoilage occurs at the end of the
process and is considered as normal loss. (20)
Required:
Prepare a cost of production report for department 2.

Q. 4 (a) Describe the Job Order costing system and the nature of industries which can
make use of it.
(b) Dell Company uses Job Order Cost System. The manufacturing operations
for the year ended December 31, 2022 were as follows: (20)
i. Purchased raw materials on account Rs.140,000.
ii. Materials issued to factory of Rs.120,000 of which Rs.20,000 was
indirect materials.
iii. Direct labour cost incurred Rs.90,000 and Rs.10,000 indirect labours.
iv. Factory overhead application rate was 90% on direct labour cost.
v. Factory overhead cost incurred on account Rs.80,000.
vi. Cost of jobs completed Rs.250,000.
vii. Cost of goods sold Rs.180,000
viii. Sales on account Rs.230,000.
Required:
Record all the above transactions in the General Journal & give an entry to
close the factory overhead account

Q. 5 Yale Manufacturing Industries is considering setting up some suitable inventory

procurement yardsticks so as to ensure continuous availability of materials but at
least costs. The following data of Material “A” was gathered from the records: (20)
A) Monthly requirement of material “A” is 1850 units at cost of Rs. 10 each.
B) Ordering cost is Rs. 200 per order.
C) Carrying cost is 15 % of the average inventory investment.
Required:
1) Calculate the Economic Order Quantity.
2) Compute the number of orders needed per year.
3) Frequency of order placement in days.
4) Annual Ordering Cost.
5) Annual Carrying Cost.
6) Annual Inventory Cost.

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 ASSIGNMENT No. 2
(Units: 6–9)
Total Marks: 100 Pass Marks: 50

Q. 1 The following information is available regarding procurement and issuance of material

inventory for the month of October, 2023 of a manufacturing company: (20)
01.10.2023 Opening inventory of 800 units at Rs. 65 each.
06.10.2023 Purchases 200 units at Rs. 75 each.
09.10.2023 Issued 400 units to production.
12.10.2023 Issued 150 units to production.
16.10.2023 Purchased 300 units at Rs. 80 each.
24.10.2023 Issued 400 units to production.
27.10.2023 Issued 250 units to production.
Required:
Compute the cost of materials issued to production and the value of 31 October
2023 inventory using perpetual inventory system under each of the following
methods: -
a) First in First Out method.
b) Moving Average method.

Q. 2 Gujrat Fan Manufacturing Industry has received a special order for manufacturing
and supply of 250 specially designed bracket fans of A Grade. The following costs
were incurred by the company for execution of the order: - (20)
Direct material cost Rs. 50,000
Direct labour cost Rs. 150,000
Factory Overhead is applied at 60% of direct labour cost.

After completion of the production it was noticed during testing by the Quality
Control Department that 30 fans were found technically defective for which the
following additional costs were incurred in order to remove the defects: -
Direct material cost Rs. 2,400
Direct labour cost Rs. 6,000
Factory overhead applied at 60% of direct labour cost.
Required:
Prepare necessary general journal entries to record execution of the special order in
the following prospects: -
a) When relevant job is charged with the additional cost of defective works.
b) When the relevant Job is not charged with the additional cost of defective works.

Q. 3 (a) Describe the functions of a Time keeping department and various methods
used for controlling the attendance of workers in a factory. (20)
(b) A pharmaceutical company is considering introducing Halsey Premium or
Rowan Plan of incentives scheme for their employees. The standard time of

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 production is 10 hours and the Hourly rate is Rs. 100. In order to carry out a
comparative study that which of the two incentive plans is cost effective for
payment of wages to workers, the company estimates that the time taken for
production of a Batch may be 9 Hours, 8 Hours and 7 Hours.
Required:
Advise the company for adopting suitable incentive plan supported by
workings and total labor cost per Hour under each incentive plan of Halsey
Premium and Rowan.

Q. 4 The following data has been extracted from the record of Basharat Production
Industries for the year 2014: (20)
a) Budgeted factory overheads Rs.500,000
b) Actual factory overheads Rs.455,000
c) Budgeted machine hours 12,500 hours
d) Actual machine hours 12,000 hours
Required:
Work out the following: -
a) Predetermined overhead absorption rate per machine hour.
b) Applied overhead cost.
c) Over or under absorbed factory overhead cost.

Q. 5 Wilson Pharmaceutical Company uses the direct method of allocating

servicing departments overhead costs to the producing departments. The
following data is available concerning the activities: - (20)
Particulars Producing Department Servicing Department
Mixing Finishing Procurement Factory Admin
Budget FOH cost Rs. 410,000 Rs. 304,000 Rs. 100,000 Rs. 50,000
Number of
90 210 20 28
employees
Machine Hours 64,000 16,000 — —
Direct Labour
35,000 100,000 — —
Hours
The costs of Procurement Department are allocated on the basis of number of
employees while the costs of Factory Administration are prorated on the basis of
machine hours.
Required:
1) Prepare a statement of overhead cost allocation.
2) Calculate predetermined overhead rates for each of the producing
departments on the basis of machine hours for the mixing department while
direct labour hours for the finishing department.

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