Matzusry9theditionsolutions 131114003908 Phpapp01 140411230630 Phpapp01

COST ACCOUNTING 9TH EDITION
MUHAMMAD SHAHID
MBA (FINANCE)
UOS
Digitally signed by Muhammad Shahid

DN: CN = Muhammad Shahid, C = US, O = 3S Inc
Location: Sargodha
Date: 2008.05.16 07:42:29 +0500
Page 1 of 16

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
$ 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
$ 15
180000
Fixed factory Over head
$ 6
72000
Total Cost
$ 73
876000
b)
Sale Level of
8000 Units
Cost
Item
Direct Material
Direct Labour
Fixed factory Over head
Variable marketing
Fixed marketing
Total
Cost
Estimated Unit
Cost
$ 32
$ 20
$ 15
$ 6
$ 3
$ 4
$
80
Total
Cost
256000
160000
120000
48000
24000
32000
640000
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

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
1
2
3
Payroll Control
WIP
2412000
3204000
Closing
196000
2608000
3204000
FOH Control
1885600 WIP
1885600
Opening
WIP
Finished Goods
620000
7494600 CGS
Closing
8114600
4
1885600
1885600
opening
Material
Labour
FOH
6
7547200
567400
8114600
Total Manufacturing Cost

Cost of Goods Manufactured
Cost of Goods Sold
WIP
3204000
3204000
Work in Process
129800
2412000 F.Goods
3204000
1885600 Closing
7631400
7494600
136800
7631400
Cost of Goods Sold
F. Goods
7547200
(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

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
P.R
Amount
Debit($) Credit($)
24500
4500
29000
44000
Income Tax Withheld

FICA Tax
Accrued Payroll
Payroll Recorded and deductions made
b-2
Accrued Payroll
7000
3300
33700
33700
Voucher Payable
Voucher of Payroll made
Voucher Payable
33700
33700
Bank
Payment of Payroll is made
c

FOH Control
Sales Salaries
Payroll
Distribution of payroll is made
FOH Control
Sales Expenses Contorl
SUI Contribution
FUI Contribution
FICA Contribution
Employers Contribution recorded
33700
30000
6000
8000
44000
4932
1096
2376
352
3300

FOH Applied
FOH is charged to production
22932
Finished Goods
60000
22932
Work in process
Control
Cost of Production completed recorded
g
Material Control
60000
50000
Voucher Payable
50000
Material Purchased
h-1
Cost of Goods Sold
20000
Finished goods
Cost of Goods Sold recorded
h-2
Accounts Receivables
20000
26000
Sales
26000
Page 4 of 16

Finished Goods Shipped to Customers
5. Journal entries for the cost accountng Cycle.

MultiElectro Incorporated
Date
a
b-2
b-3
Description
Material Control
Voucher Payable
Direct Material Purchased
P.R
Amount
Debit($) Credit($)
120000
120000
Payroll Control
Income Tax Withheld
FICA Tax
Accrued Payroll
90000
Accrued Payroll
Voucher Payable
67500

FOH Control
Sales Salaries
Admin Salaries
Payroll
45000
9000
15000
21000
Material Control
Voucher Payable
Indirect Material & Supplies Purchased
26250
FOH Control
Admn Expenses Control
SUI Contribution
FUI Contribution
FICA Contribution
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
15750
6750
67500
67500
90000
26250
6156
1710
2394
2790
720
6750
60000
15000
4500
79500
900
900
142500
142500
Page 5 of 16

h
FOH Control
Accumulated Depreciaton
Depreciation on Factory Building recorded
1000
FOH Control
Voucher Payable
Sundry FOH recorded as Liability.
6900
1000
6900

FOH Control
Actual FOH is charged to Production
38056
Finished Goods
126000
38056
126000
Cost of Goods Sold

Finished goods
l-1
96000
96000
Sales
l-2
150000
150000
Exercise 2.6
6. Journal entries for the cost accountng Cycle.
Romer Company for month of February
Date
Description
Work in Process Control

FOH Control
Material Control
Direct & Indirect Material issued
18500
2800
Finished Goods
Work in Process Completed and transferred to Finished
goods
51800
Material Control
Voucher Payable
Material Purchased and received
32000
Payroll Control
FICA Tax
Federal Income Tax
State Income Tax
Accrued Payroll
50000
Accrued Payroll
Voucher Payable
50000
d-2
P.R
Amount
Debit($) Credit($)
21300
51800
32000
3750
8750
2500
35000
50000
Page 6 of 16

e
i-2

FOH Control
Marketing Salaries
Admin Salaries
Payroll
27500
9000
8500
5000
50000
FOH Control
SUI Contribution
FUI Contribution
FICA Contribution
5001
1165
685
2700
400
3750
FOH Control
Accumulated Depreciation
Prepaid Insurance
Vouchers Payable
FOH Expenses Recorded
11300
9450
600
1250

FOH Applied
28100.5
28100.5
Cost of Goods Sold

(92120*100/140)
Finished goods
65800
Sales
Sale of Finished Goods Recorded
92120
Bank
76000
65800
92120
Accounts receivables collected
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
Add Purchases
Direct Labour Cost
1 Total Manufacturing Cost
16200
20000
36200
17000
19200
16500
8580
44280
3600
Page 7 of 16

2 Cost of Goods manufactured
47880
7120
40760
Exercise 2.8
8. Cost of Goods Sold Statement.
Pensacola
Corporation
For the Period ended on 31st, December
Description
Amount
$
Direct Material
Add Purchases
Add Freight on Material
Total Cost of Purchases
Direct Material
Used
Direct Labour Cost
Other FOH
Depreciation
Cost of goods to be
manufactured
Cost of goods available for
sale
3 Cost of Goods Sold
$
88000
366000
6600
372600
460600
64000
396600
523600
468400
104400
572800
1493000
29800
1522800
38800
1484000
54200
1538200
66000
1472200
Page 8 of 16

Problems Chapter-2
2.1 Cost of Goods manufactured; Prime and Conversion costs.
Mat Company's
Cost of Goods Manufactured & Sold Statement
Description
Amount
$
Direct Material
Add Purchases
Cost of Material Available
for use
Direct Material
Used
Direct Labour Cost
Cost of Goods Sold
2.2
20000
110000
130000
26000
104000
160000
80000
344000
40000
384000
36000
348000
102000
450000
105000
345000
Income Statement relationships.
Company A
Description
Amount
$
Sales
Cost of Goods Sold
Cost of Goods manufactured
Less Closing Finished Goods Inventory
Cost of Goods Sold
Gross Profit
$
4,000,000
3,800,000
600,000
4,400,000
1,200,000
3,200,000
800,000
Company B
Description
Amount
$

Less Closing Finished Goods
Inventory
Cost of Goods Sold
1,490,000
190,000
1,300,000
Company C
Page 9 of 16

Description
Amount
$
Sales
Cost of Goods Sold
Cost of Goods manufactured
Add Opening Finished Goods
Inventory
Less Closing Finished Goods
Inventory
Cost of Goods Sold
Gross Profit
$
834000
340000
450000
790000
52000
738000
96000
2.3 Cost accounting Cycle in T Accounts

Crockett Company
1
Opening
Purchases
Material Control
20000
65000
WIP
70000
Closing
15000
85000
85000
3
supplies
ind labour
Depreciation
Insurance
Misc
5
Opening
WIP
FOH Control
20000 WIP
55000
10000
2000
13000
100000
Finished Goods
34000
346000 CGS
Closing
380000
Sales
Receivables
180000
(1)
(3)
opening
Material
Labour
FOH
V/P
c/b
Payment of Payroll
o/b
Direct
184000 Labor
9000
193000
180000
(2)
180000

7000
70000 F.Goods
180000
100000 Closing
357000
346000
(4)
11000
357000
100000
6
350000
30000
380000
(5)
F. Goods
500000
(6)
500000
13000
180000
10
o/b
Sales
Cost of Goods Sold

350000
8
V/P
c/b
WIP
180000
4
100000
Payroll
Controll
Accounts Payable
o/b
77000 Materials
6000
83000
18000
65000
83000
54000
500000
193000
554000
Cash
c/b
532000
22000
554000
(7)
Page 10 of 16

1
2
3
4
5
6
70000
180000
100000
346000
350000
77000
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
7
8
532000
184000
2.4 Journal Entries for the cost accounting cycle.

Waterlux Company
1
Opening
Purchases
Material Control
17000
91000
WIP
Closing
108000
3
2
84000
50000
24000
108000
50000
Facotory Overhead Control

35000 WIP
35000
35000
5
Opening
WIP
Finished Goods
28000
157000 CGS
Closing
185000
Payroll Control
4
opening
Material
Labour
FOH
WIP

12000
84000 F.Goods
50000
25000 Closing
171000
50000
50000
157000
14000
171000
35000
6
140000
45000
185000
F. Goods
Cost of Goods Sold

140000
Journal Entries
Date
a
Description
Description
P.R
Debit($)
Amount
Credit($)
Material Control
Voucher Payable
91000

Material Control
Direct Material Charged to
Production
84000

Payroll Control
Direct Labour Charged to
Production
50000
Accrued Payroll
50000
91000
84000
50000
Page 11 of 16

Voucher Payable
50000
FOH Control
35000
Voucher Payable
35000

FOH Control
Actual FOH is charged to
Production
35000
35000
Finished Goods
Work in process
Control
Cost of Production completed
recorded
157000
Cost of Goods Sold

Finished goods
145000
157000
145000
2.5 The Cost Accounting Cycle.

Montana Company
Date
a
Description
Material Control
P.R
Debit($)
Amount
Credit($)
92000
Voucher Payable
b
FOH Control
120000
18500
Voucher Payable
c-1
Payroll Control
18500
86000
Income Tax
Withheld
SUI Tax
FUI Tax
FICA Tax
Accrued Payroll
c-2
Accrued Payroll
8170
2322
688
6450
68370
68370
Voucher Payable
c-3
c-4

FOH Control
Sales Salaries
Admin Salaries
Payroll Control
FOH Control
68370
60500
12500
8000
5000
86000
8030
Page 12 of 16

SUI Contribution
FUI Contribution
FICA Contribution
d
880
550
2322
688
6450

FOH Control
Material Control
Direct and Indirect Material Issued
82500
8300

FOH Control
47330
90800
47330
Finished Goods
188000

g
g-2
188000
Cost of Goods Sold

Finished goods
185500
Sales
241150
185500
241150
208662
4258
Bank/Cash
Discount Allowed
Accounts
Receivables
Accounts Receivables Collected subject to 2% Discount
212920
Ledger Accounts
1
Opening
h
Closing
228662
3
O/B
a
Material Control
10000 d
92000 d
Closing
102000
5
Opening
f
Cash Account
20000
208662
Finished Goods
9500
188000 g
Closing
197500
O/b
g
228662
228662
Closing
266150
4
82500
8300
11200
25000 h
241150
opening
c-3
d
e
Work in Process
4500 f
60500
82500
47330 Closing
194830
212920
53230
266150
188000
6830
194830
102000
6
185500
12000
197500
Cost of Goods Sold

185500
Page 13 of 16
Machinery
Opening
40000
Closing
40000
Accrued Payroll
O/B
40000
40000
Closing
10
Accounts Payables
O/B
a
b
194370 c-2
194370
Accumulated
Depreciation
2250
O/B
Closing
Closing
11
Closing
2250
2250
2250
Common Stock
O/B
60000
13
b
c-3
c-4
d
15
12
Income Tax with

Held
c-1
21250
14
17
8170
8170
c-1
86000
19
c-2
86000
16
86000
86000
SUI Tax
8170
c-1
c-4
2322
2322
4644
4644
8170
18
FUI Tax
688
688
1376
1376
1376
Accurued Payroll
68370 c-1
68370
Closing
20
FICA Contribution
c-1
c-4
12900
12900
6450
6450
12900
Sales
g
Closing
0
c-4
4644
c-1
c-4
Closing
21250
Payroll
Control
Closing
Closing
21250
21250
60000
Factory Over Head Control

18500 e
47330
12500
8030
8300
47330
0
10000
Retained Earnings
O/B
Closing
60000
10000
10000
10000
60000
15500
92000
18500
68370
194370
241150
241150
241150
241150
Page 14 of 16

21
c-3
c-4
22
Sales Expenses Control

8000
880
c-3
c-4
Admn Salaries Control

5000
550
Closing
Closing
8880
23
h
8880
0
5550
5550
5550
Discount Allowed
4258
Closing
4258
4258
4258
Montana Company
Trial Balance
As on
P/R
Debit
S.No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Description
Cash Account
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
228662
53230
11200
6830
12000
185500
40000
194370
2250
10000
60000
21250
8170
4644
1376
12900
241150
8880
5550
4258
556110
556110
2.6 Cost of goods sold statement; Income Statement

Mandmeyer Company
Income Statement
19b
Description
Amount
$
Sales
Direct Material
Add Purchases
$
56000
4250
18000
22250
4000
18250
Page 15 of 16

Direct Labour Cost
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
2800
1120
560
35850
20150
4480
15670
Page 16 of 16
Chapter 3
Page 17

CHAPTER 3 Exercises
1. Manufacturing Costs
1 FOH Rate to Direct Labour
Direct Labour=
800000
FOH =
640000
FOH Rate=
80%
Work in Process Ending =

Less Direct Labour=
FOH 80% of Labour
Direct Material Cost
140000
50000
40000
90000
50000
Direct Material Cost=
Direct Labour Cost=
FOH Costs
Indirect Labour=
80000
Indirect Material=
20000
Other FOH=
124000
Total Manufacturing Costs=
FOH Rate=FOH/DL
Rate of Direct Labour =
Closing Finished Goods=
Less Direct Material Cost=
Conversion cost=
Labour Cost=
FOH Cost
280000
320000
224000
824000
224000/320000
0.7 or 70%
176000
40000
136000
95200
40800
Working
TMC=DM+Dl+OH
TMC=DM+CC
CC=DL+FOH
170=100+70
DL=136000/170*100=95200
FOH=136000/170*70=40800
Televane
Company
Cost of goods Manufactured and Sold Statement
19b
Description
Amount
$
$
Direct Material
75
1
Add Purchases
336
411
85
326
Chapter 3
Page 18

Direct Labour
Cost
Cost of Goods
2 manufactured
Cost of goods available for
sale
Cost of Goods
3 Sold
225
135
686
80
766
30
736
90
826
110
716
Krieger Company
1
2
3
4
Material Cost=
Direct Labour Cost=
Factor Over Head =
Molding Department=2.7* 1000=
Decorating Department=
Estimated Cost to Produce=
Mark Up=
Bid Price=
Estimate Prime Cost=
Estimate Coversion Cost=
13000
15000
2700
2100
4800
32800
14760
18040
28000
19800
5. Income Statement
Hansford Inc.
Income Statement
For the Period ended on 30th, September
Description
Amount
$
Sales
Direct Material
Add Purchases
Direct Labour Cost
Factory over head
Cost
Chapter 3
$
182000
7000
42300
49300
7400
41900
30000
45000
116900
9600
126500
13000
113500
15000
128500
Page 19

Cost of Goods Sold at Normal
FOH Variance
Add/Less
Cost of Goods Sold at actual
Gross Profit
Marketing Expenses
Admn Expenses
Total Expenses
Net Profit
17500
111000
3200
114200
67800
14100
22900
37000
30800
6. Job Order cost Sheet.

Wadsworth Machine Works
Job Order Cost Sheet
Direct Material Cost
9/14 Issued
9/20 Issued
9/22 Issued
Total
600
331
200
1131
Direct Labour Cost

week of Sept 20
90 Hrs
week of Sept 26
Total
70 Hrs
Factory Overhead
week of Sept 20
week of Sept 26
Total
@$6.20
Hrs
@$7.30
Hrs
558
511
1069
90 Hrs
70 Hrs
@$5 Hrs
@$5 Hrs
450
350
800
Total Cost of Manufacturing

Mark UP 40%
Sale Price
3000
1200
4200
7. Job Order Costing
Date
Description
Work in Process Job 36

Material Control
Direct Material issued to Production

Chapter 3
P.R
Job Cost
Sheet
Job Cost
Sheet
Job Cost
Sheet
Amount
Debit($) Credit($)
44000
34000
32000
Store Ledger Card
Job Cost
Sheet
Job Cost
Sheet
Job Cost
Sheet
110000
40000
48000
42000
Page 20

Payroll Control
Payroll distributed to work in process
c
Pay roll sheet
Job Cost
Sheet
Job Cost
Sheet
Job Cost
Sheet

FOH Applied
FOH applied to Production
130000
24000
28800
25200
FOH analysis
Job Cost
Sheet
Job Cost
Sheet
Finished Job 36
Finsihed Job 37
78000
144000
128800
Job Cost
Sheet
Job Cost
Sheet

Job No 36 & 37 Completed
144000
128800
8. Job Order Costing.

Date
Description
Work in Process Job
97
Work in Process Job
98
Work in Process Job
99
Material Control
Direct Material issued to
Production
Work in Process Job
97
Work in Process Job
98
Work in Process Job
99
Payroll Control
Payroll distributed to work in process
Work in Process Job
97
Work in Process Job
98
Work in Process Job
99
FOH Applied
FOH applied to Production
Finished Job 97
Finsihed Job 98
Job No. 36 & 37 Completed
Cost of Sales Job No.
97
Finished Job 97
Cost of Sale of Job No 97 recorded
Chapter 3
P.R
Debit($)
Credit($)
36000
30000
40000
106000
72000
70000
80000
222000
36000
35000
40000
111000
240000
135000
240000
135000
240000
240000
300000
Page 21

Sales
Job No. 97 Sold on account
300000
9. Journal entries for the Cost Accounting cycle: Predetermied Overhead rate
Ledger Accounts
1
Opening
Finished Goods
40000
WIP
CGS
375000
Closing
55000
430000
O/b
Material
Labour
FOH
390000
430000
3
Material
O/B
WIP
90000
Closing
10000
100000
5
15000
405000
Factor Over Head Control

Applied
120000
117000
3000 CGS
Closing
0
120000
120000

600000
375000 FOH
Sundry
CGS
95000
390000
4
5000
Purchases
Work in Process
35000
90000 F.Goods
160000
120000 Closing
405000
100000
Applied FOH
Opening
WIP
400000
120000
O/B
F.Goods
520000
Closing
520000
Closing
520000
Closing
975000
6
O/B
F.Goods

600000 foh
375000
Closing
Closing
975000
Date
Description
3000
972000
975000
P.R

Material Contorl
Payroll Control
FOH Applied
Material Labour & FOH Charged to Production
Finished Goods
Work in Process Completed and transferred to Finished
goods
Cost of Goods Sold
Finished Goods
Cost of Goods Sold Recorded
FOH Applied
Cost of Goods Sold
Under applied FOH Recorded
Material Control
Chapter 3
Amount
Debit($)
Credit($)
370000
90000
160000
120000
390000
390000
375000
375000
3000
3000
95000
Page 22
975000
975000

Voucher Payable
95000
Problems Chapter 3
3.1 Manufacturing Costs

Hulse Company
Description
Amount
$
Direct Material
Add Purchases
Direct Material
Used
Direct Labour Cost
Grinding
Department
8000*5.6
Machining
Department
4600*6
Grinding
Department
8000*6
Machining
Department
4600*8
3 Cost of Goods Sold
Coversion Cost
Cost of Material Purchased
$
20000
58000
78000
18000
60000
44800
27600
72400
48000
36800
84800
217200
15000
232200
17600
214600
22000
236600
17000
219600
157200
58000
3.2 Manufacturing Costs
Ledger
Accounts
1
Opening
Finished Goods
70000
CGS
(5)
Chapter 3
2
O/b
230000
FOH app
Work in process
50000
75000
F Goods
220000
(4)
Page 23

WIP
220000
Closing
290000
3
O/B
a
Material Control
10000 WIP
60000
290000
100000
35000
260000
Closing WIP=
5000+15000+20000
4
F.Goods
FOH
Cont
35000
50000
Closing
Payroll
material
Closing*
5
Payed
Closing
5000
25000
C/B
235000
235000
60000
Accrued Payroll
140000 Opening
Direct Lab
10000
100000
20000
160000
50000
150000
Ind Lab
6
Acc Dep
Payroll
Sundry
acc
FOH Controal
10000 FOH App
50000
20000
CGS
FOH
Cont
FOH Applied
75000
WIP
75000
75000
55000
Closing
15000
70000
75000
80000
Accounts Payables
O/B
Cash
75000
5000
80000
7
(3)
Cost of Goods Sold

230000
235000
60000
40000
260000
Purchases
20000
50000
70000
Problem 3-3
1)
Cost of goods sold section
Columbus Company
For the Period ended on 31st October
Description
Direct Material
Add Purchases
Cost of Material Available for
use
Direct Labour Cost
Chapter 3
Amount
$
40700
24800
65500
35700
29800
18600
27450
75850
4070
79920
4440
75480
9800
75180/20400
3.7
Page 24

85280

9250
76030
(2800+2040020700)
2500
2. Income Statement for

October
Columbus
Income Statement
For the Period ended on 31st October
Description
Amount
$
Sales
Less returns
Net Sales
Gross Profit
143600
76030
67570

Marketing Expenses
Paid
Dep Building
Dep Equipment
Admn Expenses
Paid
Dep Building
Dep Equipment
Total Expenses
Net Profit
$
144900
1300
25050
360
192
25602
19700
240
288
20228
45830
21740
Over /Under Applied FOH

FOH Control Account
V/P
Material Control
Dep on Building
Dep on M & Equip
Indirect Laobur
20100
3950
1800
9600
4400
FOH Applied
27450
CGS
12400
39850
39850
Problem 3-4
Description
Sales
Chapter 3
Morrisville Canning
Income Statement
For the Period ended on 31st, December 19
A
Amount
$
$
60000
Page 25

Direct Material
Add Purchases
Direct Material
Used
Direct Labour Cost
Cost of goods to be
manufactured
FOH Variance
Add/Less
Gross Profit
Marketing
Expenses
Admn Expenses
Total Expenses
Net
Profit
4000
15000
19000
2000
17000
9000
9000
35000
2000
37000
1000
36000
6000
42000
4000
38000
2000
40000
20000
6000
9000
15000
5000
Cash Account
O/B
Sales
5000
60000
65000
Assets
Cash
Finished Goods
Work in Process
Materials
Prepaid expenses
Property Plant etc
Less Depreciation
Chapter 3
Material
Labour
FOH
(9000+2000-3000)
Admn Exp
Marketing Exp
15000
9000
8000
C/B
19000
46000
6000
8000
Morrisville Canning Company

Balance Sheet
As on 31st December, 19A
$
Liabilities & Equities
19000 Current Liabilites
10000 Common Stock
4000 Retained Earnings
10000
1000 Profit
5000
2000
500
30000
4000
26000
62500
$
17500
30000
15000
62500
Page 26
Chapter 3
Page 27
Chapter 3
Page 28

CHAPTER 4 EXERCISES
1. Equivalent Production
Department B
Cost of Production Report
1
Quantity Schedule:
Units Received from Last Depatment:
Units completed and transferred out:
Units still in process(60% Conversion)
Total Units Accounted For
Cost Charged by the Department

Cost received from last department
20000
15000
5000
20000
Total
Cost
39000
Cost Added by the department

Material
Conversion
Total Cost Added by department
Total Cost to be Accounted for
3
Cost Accounted for as follows:

Cost of Units completed and transferred out:
2.775
15000
Work in Process Closing Inventor
Adjusted cost from preceding Department
1.95 X
5000
Material
0.325
5000
Conversion
0.5 X
3000
Total Cost Accounted For
6500
9000
15500
54500
Unit Cost
1.95
0.325
0.5
2.775
41625
=
=
=
9750
1625
1500
54500
Additional Calculations:
Equvilant Production Report
Units Completed and transferred out
Units still in process
Equvilant Production
Unit Cost
Material
15000
5000
20000
Conversion
15000
3000
18000
0.325
0.5
2. Costing of units transferred; lost units.

Rude Inc.
Department A
1
Quantity Schedule:
Units started in process:
Units still in process(100% M, 50% Con)
Units Lost in process
Chapter 3
10000
7000
2000
1000
10000
Page 29

2
Total
Cost
27000
40000
67000
Cost Added by the department

Material
Conversion
8 x
Material
3 x
Conversion
5 x
Unit Cost
3
5
8
7000
56000
2000
1000
=
=
6000
5000
67000
Material
7000
2000
9000
Conversion
7000
1000
8000
Unit Cost
3. Cost of Production report; no lost

units.
A Company
Department 2
1
Quantity Schedule:
Units still in process(M:50%, Con:25%)
12000
7000
5000
12000

Cost received from Department 1:
Cost added by Department 2:
Material
Labour
F.O.H
19.83 x
Cost charged by department 1:
1.36 x
Material
4.57 x
Labour
6.8
FOH
7.1 x
Chapter 3
7000
5000
2500
1250
1250
Total
Cost
16320
Unit Cost
1.36
43415
56100
58575
174410
4.57
6.8
7.1
19.83
138810
6800
11425
8500
8875
35600
174410
Page 30

4
Material
7000
2500
9500
Labour
7000
1250
8250
FOH
7000
1250
8250
4.57
6.8
7.1
Unit Cost
4. Cost of Production report; Normal Spoilage.

Wade Company
Department 1
1
Quantity Schedule:
Units Put in to process
Units still in process(90%)
Units Lost in process (Up to 525 Normal)

Material
Labour
F.O.H

12.6 x
Material
5.25 x
Labour
4.1
FOH
3.25 x
10500
7000
3000
500
10500
Total
Cost
52500
39770
31525
123795
7000
3000
2700
2700
Unit Cost
5.25
4.1
3.25
12.6
88200
15750
11070
8775
35595
123795
Unit Cost
Material
7000
3000
10000
Labour
7000
2700
9700
FOH
7000
2700
9700
5.25
4.1
3.25
5. Cost of Production report; Normal Loss.

Lauren Chemical Inc.
Department 2
1
Quantity Schedule:
Chapter 3
55000
Page 31

Units still in process(1/3 Conversion)

Adjusted cost from Last Department
Material
Labour
F.O.H
2.98 x
39500
1.98 x
10500
Material
Labour
0.64
3500
FOH
0.36 x
3500
39500
10500
5000
55000
Total
Cost
99000
27520
15480
142000
Unit Cost
1.8
1.98
0.64
0.36
2.98
117710
20790
0
2240
1260
24290
142000
Material
Unit Cost
Labour
39500
3500
43000
FOH
39500
3500
43000
0.64
0.36
6. Cost of production report; normal spoilage.

Alabama Milling Company
Department 2
1
Quantity Schedule:

Material
Labour
Chapter 3
110000
85000
22000
3000
110000
Total
Cost
176000
26245
Unit Cost
1.6
1.6448598
0.29
Page 32

F.O.H
3

2.07486 x
85000
1.64486 x
22000
Material
Labour
0.29
5500
FOH
0.14 x
5500
12670
214915
0.14
2.0748598
176363.08
36186.916
0
1595
770
38551.916
214915
Material
Unit Cost
Labour
85000
5500
90500
FOH
85000
5500
90500
0.29
0.14
7. Cost of production report; spoilage at end of process.

Norman Company
Department 2
1
Quantity Schedule:

Material
Labour
F.O.H
Adjusted Cost for Lost Units
2500*2.23/123000
0.045325
0.045325+
2.23 x
123000
1.75 x
34500
Material
Labour
0.32 x
17250
Chapter 3
160000
123000
34500
2500
160000
Total
Cost
280000
Unit Cost
1.75
45680
22840
348520
0.32
0.16
2.23
279865
60375
0
5520
Page 33

FOH
0.16
4
17250
2760
68655
348520
Material
Unit Cost
Labour
123000
2500
17250
142750
FOH
123000
2500
17250
142750
0.32
0.16
8. Cost of production report; Units lost at end, all normal.

Rogers Milling company
Department 2
1
Quantity Schedule:
Material
Labour
F.O.H
Adjusted Cost for Lost Units
3000*2.02/85000
0.071294
0.056471+
2.02 x
85000
1.6 x
22000
Material
Labour
0.28
5500
FOH
0.14 x
5500
110000
85000
22000
3000
110000
Total
Cost
176000
Unit Cost
1.6
26180
13090
215270
0.28
0.14
2.02
177760
35200
0
1540
770
37510
215270
Material
Unit Cost
Chapter 3
Labour
85000
3000
5500
93500
FOH
85000
3000
5500
93500
0.28
0.14
Page 34
9. Cost of production report; Abnormal Loss

Assembly Department
1
Quantity Schedule:
Units Received from Cutting Depatment:
Units still in process(100% M, 2/3 Con)
50000
9000
1000
60000

Material
Labour
F.O.H
7.04 x
50000
Transferred to FOH (Cost of abnormal Loss)
3.54 x
1000
Material
0.7 x
500
Labour
1.8 x
500
FOH
1 x
500
3.54 x
Material
0.7 x
Labour
1.8 x
FOH
1 x
60000
9000
9000
6000
6000
Total
Cost
212400
Unit Cost
3.54
41650
101700
56500
412250
0.7
1.8
1
7.04
352000
=
=
=
=
3540
350
900
500
31860
6300
10800
6000
54960
412250
Unit Cost
Material
50000
500
9000
59500
Labour
50000
500
6000
56500
FOH
50000
500
6000
56500
0.7
1.8
10. Cost of production report; addition of materials
Chapter 3
Page 35

Oloroso Inc.
Third Department
1
Quantity Schedule:
Units added by the department
Total Units in department
32000
8000
40000

Material
Labour
F.O.H
1.40847 x
32000
0.75 x
Material
0.214634 x
Labour
0.246575 x
FOH
0.19726 x
20000
20000
40000
8000
9000
4500
4500
Total
Cost
30000
8800
9000
7200
55000
Unit Cost
1.5
0.75
0.2146341
0.2465753
0.1972603
1.4084698
45071.032
6000
1931.7073
1109.589
887.67123
9928.9676
55000
Unit Cost
Material
32000
Labour
32000
FOH
32000
9000
41000
4500
36500
4500
36500
0.2146341
0.2465753
0.19726
11. Cost of Production report; addition of materials:

Cresent Corporation
Department No. 2
1
Quantity Schedule:
Units added by the department
Total Units in department
Chapter 3
20000
10000
30000
Page 36

24000
6000
30000
Total
Cost
60000

Material
Conversion
5 x
24000
2 x
Material
1 x
Labour
2 x
6000
6000
3000
3
2
30000
54000
1
2
144000
120000
12000
6000
6000
24000
144000

4
Unit Cost
Unit Cost
Chapter 3
Material
24000
Conversion
24000
6000
30000
3000
27000
Page 37

CHAPTER 4 PROBLEMS
4-1 Equivalent Production:
1) The Number of Equivalent Units of Raw Material in all Inventories.
Departments
Assembly
Fabrication
6000*25%
10000*100%
10000
1500
Packing
Shipping
3000*100%
3000
8000*100%
8000
2) The Number of Equivalent units of Fabrication Department direct Labour in all Inventories.
Departments
Assembly
Fabrication
6000*40%
2400
10000*100%
10000
Packing
Shipping
3000*100%
3000
8000*100%
8000
3. The Number of equivalent units of Packaging Department Material and Direct Labour in the
Packaging Department Inventory/
Material
Labour
3000*60%
1800
3000*75%
2250
2) Quantity & Equivalent Production Schedules: Lost Units.

Fleming Laboratories Inc.
1) Quantity Schedule for each of the three departments
a)
Blending Department:
Units Started in Process
Units Completed & Transferd to Testing Department
Units Still in Process( 100% M, 1/3 Labour & FOH)
Units Lost in Process
Total Units accounted for
b)
Testing Department:
Units received from Blending Department
Units Completed & Transferd to Terminal Department
c)
Terminal Department:
Chapter 3
Units
Units
8000
5400
2400
200
8000
Units
Units
5400
3200
1800
400
5400
Units
Units
Page 38

3200
Units received from Testing Department

Units Completed & Transferd to Finished Goods Store Room
2100
900
200
3200
2) Equvilant Production Schedule for each of the three departments.

a)
Blending Department:
Units Completed and Transferred to Testing Department
Equivilant Production Quantity
b)
Labour
5400
800
6200
FOH
5400
800
6200
Material
3200
1800
5000
Labour
3200
600
3800
FOH
3200
600
3800
Material
2100
900
3000
Labour
2100
600
2700
FOH
2100
600
2700
Testing Department
Units Completed and Transferred to Terminal Department
c)
Material
5400
2400
7800
Terminal Department:
Units Completed and Transferred to Store Room
3) Unit Cost of FOH in Blending Department.

Units Completed and Transferred to Testing Department
FOH
5400
800
6200
Cost Added by the Blending Department=

Equvillant Prodcution Quantity of Blending Department=
Unit Cost =
5580
6200
0.9
4) Adjusted Cost from Proceeding Department in Testing Department if the unit cost transferred
in from the Blending Department is $ 5.35
Total Cost received from Blending Department( 5.35 x5400)=
No of Good Unist in testing Department=
Adjusted Cost in Testing Department=
28890
5000
5.778
4-3. Cost of Production report: Spoilage at end of process, both normal and Abnormal.
Dallas Company
Department No.1
1
Quantity Schedule:
Chapter 3
Page 39

Units Started in the Process
Units Lost in Process Normal
Units Lost in process (Abnormal)
10000
8000
1200
460
340
10000
Total
Cost

Cost added by Department No.1
Material
Conversion
Adjustment for loss:
460*10/8000=

0.575+ 10
x
10 x
Material
Con
5
5
x
x
50000
45500
5
5
95500
0.575
10
8000
84600
340
3400
1200
300
6000
1500
7500
95500

4
Unit
Cost
Material
8000
340
460
1200
10000

Units Lost in process(abnormal)
Units Lost in process(normal)
Unit Cost
Conversion
8000
340
460
300
9100
5
4-4 Cost of production report: normal & abnormal spoilage.

Menninger Inc.
Department No.2
1
Quantity Schedule:
Units Received from Department 1
Units Lost in Process Normal(25000*3%)
Chapter 3
30000
25000
4200
750
50
30000
Total
Cost
Unit
Cost
Page 40
Cost received from Department 1
135000
4.5

Material
Conversion
12500
139340
0.5
5
286840
10

10
x
25000
Cost of Normmal Loss Charged to Finished Goods
Last Dept Cost= 750*4.5=
Conversion 720*5=
Preceding Dept Cost= 50*4.5=
Conversion
5 x
48
4200 x
4.5
Material
0.5 x
0
Con
5 x
2100
250000
3375
3600
6975
225
240
465
18900
0
10500
29400
286840

4
Material
25000
(50*96%)
(750*96%)
25000
Unit Cost
0.5
Conversion
25000
48
720
2100
27868
5

Yares Company
Department No.2
1
Quantity Schedule:
Units Received from Department 1

Cost received from Department 1
Material
Chapter 3
14000
8000
5000
400
600
14000
Total
Cost
140000
12000
Unit
Cost
10
1.5
Page 41

Conversion

19
x
8000
Cost of Normmal Loss Charged to Finished Goods
Last Dept Cost= 400*10=
Conversion 360*7.5=
Preceding Dept Cost= 600*10=
Conversion
7.5 x
540
5000 x
10
Material
1.5 x
0
Con
7.5 x
3000
89250
7.5
241250
19
152000
4000
2700
6700
6000
4050
10050
50000
0
22500
72500
241250

4
Material
8000
(600*90%)
(400*90%)
8000
Unit Cost
1.5
Conversion
8000
540
360
3000
11900
7.5

Neltner Company
Department No.1
1
Quantity Schedule:
Units Started in Process

Material A
Material B
Labour
FOH
Chapter 3
10000
7000
2000
450
550
10000
Total
Cost
13370
4500
37580
46975
102425
Unit
Cost
1.337
0.5
3.834694
4.793367
10.46506
Page 42

3
Adjustment for Loss= 450 * 10.46506/7000=

0 10.46506 x
7000
Cost of Normal Loss to Finished goods
Material A
450 x
1.337
Material B
0 x
0.5
Labour
405 x
3.834694
FOH
405 x
4.793367
Material A
550 x
1.337
Material B
0 x
0.5
Labour
495 x
3.834694
FOH
495
4.793367
Work in Process Closing Inventory:

Material A
2000 x
2000 x
Material B
Labour
1900 x
FOH
1900
4
1.337
0.5
3.834694
4.793367
73255.43
601.65
0
1553.051
1941.314
4096.015
735.35
0
1898.173
2372.717
5006.24
2674
1000
7285.918
9107.398
20067.32
102425

Unist lost in process (Normal)
Unit Cost
Material
A
7000
550
450
2000
10000
Material
B
7000
1.337
2000
9000
Labour
7000
495
405
1900
9800
FOH
7000
495
405
1900
9800
0.5
3.834694
4.793367

Farniente Company
Department B.
1
Quantity Schedule:
Units Received From Department A:
Units still in process(95% Con, 100% Mat)

Cost Received from Department A
12000
9000
2000
450
550
12000
Total
Cost
84000
Unit
Cost
7
Chapter 3
Page 43

Material
Labour & FOH
18000
45200
147200

12.46687 x
9000
Cost of Normal
Loss
7
x
450
3.830508 x
405
550 x
Last Dept Cost
7
Conversion
495 x
3.830508
1.636364
3.830508
12.46687
112201.8
=
=
3150
1551.356
3850
1896.102
5746.102

Last Deptt:
2000 x
Cost Added
2000 x
Material
Conversion
1900 x
4
14000
1.636364
3.830508
3272.727
7277.966
24550.69
147200
Material
A
9000

Unist Lost in Process (Normal)
2000
11000
Unit Cost
1.636364
Conversion
9000
495
405
1900
11800
3.830508
4-8 Cost of Production Report: addition of material

Ferry Inc.
Department 1
1
Quantity Schedule:
Units started in process
Units still in process(1/3 Con, 100% Mat)
Units Lost in Process Normal

Material
Labour
FOH
Chapter 3
300000
180000
45000
75000
300000
Total
Cost
90000
39000
7800
136800
Unit
Cost
0.4
0.2
0.04
0.64
Page 44

3

0.64
x
180000

Cost Added
Material
45000 x
Labour
15000
FOH
15000 x
4
0.4
0.2
0.04
115200
18000
3000
600
21600
136800
Material
180000
45000
225000
Laobur
180000
15000
195000
FOH
180000
15000
195000
0.4
0.2
0.04
Unit Cost
Ferry Inc.
Department 2
1
Quantity Schedule:
Units Received in
Units Added by Department
Units still in process(40% Con, 100% Mat)
180000
45000
195000
30000
225000
Total
Cost
115200

Cost received from Deptt 1
Adjusted Cost from Deptt 1
Material
Labour
FOH

x
1.112
67500
41400
20700
244800
195000

Adjusted Cost 30000*0.512=
Cost Added
Material
30000 x
Labour
12000
FOH
12000 x
4
225000
Unit
Cost
0.64
0.512
0.3
0.2
0.1
1.112
216840
15360
0.3
0.2
0.1
9000
2400
1200
27960
244800
Chapter 3
Page 45

Unit Cost
Chapter 3
Material
195000
30000
225000
Laobur
195000
12000
207000
FOH
195000
12000
207000
0.3
0.2
0.1
Page 46
Chapter 7
Page 48

CHAPTER 7 EXERCISES
Exercises 1
Item
Pepto
Lenco
Bilco
Total
Weight
450
600
750
1800
Total freigh charges $
Cost
1125
1350
1575
4050
Freight Allocated
on
Weight
Cost
40.5
45
54
54
67.5
63
162
162
162
Exercises 2
Date
01-Jan
06-Jan
10-Jan
15-Jan
25-Jan
27-Jan
Date
01-Jan
06-Jan
10-Jan
Store Ledger Card Under Average Costing Method

Received
Issued
Qty Rate
Amount Qty
Rate Amount Qty
500
1.2
600
500
200
1.25
250
700
400
1.3
520
1100
560 1.245
697.5
540
500
1.4
700
1040
400
1.32
527.9
640
960
1225
640
Store Ledger Card Under FIFO Costing Method
Received
Issued
Qty Rate
Amount Qty
Rate Amount Qty
500
1.2
600
500
200
1.25
250
500
200
400
1.3
520
15-Jan
500
60
500
200
400
1.2
1.25
1.3
600
250
520
140
400
1.25
1.3
175
875
500
140
400
500
1.25
1.3
1.4
175
175
700
27-Jan
140
1.25
175
140
260
1.3
338
500
960
1188
640
Store Ledger Card Under LIFO Costing Method
Received
Issued
Qty Rate
Amount Qty
Rate Amount Qty
500
1.2
600
500
200
1.25
250
500
200
1.3
1.4
182
700
882
01-Jan
06-Jan
10-Jan
400
Chapter 7
1.3
700
600
75
Balance
Rate
Amount
1.2
600
1.2
600
1.25
250
25-Jan
Date
1.4
1.2
1.25
Balance
Rate
Amount
1.2
600
1.2143
850
1.2455
1370
1.2455 672.55
1.3198 1372.5
1.3198 844.64
844.64
520
500
200
400
Balance
Rate
Amount
1.2
600
1.2
600
1.25
250
1.2
1.25
1.3
600
250
520
Page 49

15-Jan
25-Jan
400
160
500
1.4
1.3
1.25
520
200
700
27-Jan
400
1.4
960
560
1280
500
40
1.2
1.25
600
50
500
40
500
1.2
1.25
1.4
600
50
700
500
40
100
640
1.2
1.25
1.4
600
50
140
790
Exercises 3
Date
01-Oct
03-Oct
04-Oct
08-Oct
09-Oct
11-Oct
13-Oct
21-Oct
23-Oct
27-Oct
29-Oct
Date
01-Oct
03-Oct
04-Oct
08-Oct
Store Ledger Card Under Average Costing Method

Received
Issued
Balance
Qty
Rate Amount Qty
Rate Amount Qty
Rate
Amount
700
5
3500
700
5
3500
400
5
2000
300
5
1500
300
5.2
1560
600
5.1
3060
300
5.2
1560
900 5.1333
4620
500 5.133 2566.67
400 5.1333 2053.33
300 5.133
1540
100 5.1333 513.333
1000
5.1
5100
1100
5.103 5613.33
400
5.5
2200
1500 5.2089 7813.33
600 5.209 3125.33
900 5.2089
4688
800 5.209 4167.11
100 5.2089 520.889
300
5.6
1680
400 5.5022 2200.89
2600
13399.1
400
2200.89
Store Ledger Card Under FIFO Costing Method
Received
Issued
Balance
Qty
Rate Amount Qty
Rate Amount Qty
Rate
Amount
700
5
3500
700
5
3500
400
5
2000
300
5
1500
300
5.2
1560
300
5
1500
300
5.2
1560
300
5.2
1560
300
300
300
5
5.2
5.2
1500
1560
1560
09-Oct
300
200
5
5.2
1500
1040
100
300
5.2
5.2
520
1560
11-Oct
100
200
5.2
5.2
520
1040
100
5.2
520
13-Oct
1000
5.1
5100
100
1000
5.2
5.1
520
5100
21-Oct
400
5.5
2200
100
1000
400
5.2
5.1
5.5
520
5100
2200
500
5.1
2550
23-Oct
Chapter 7
100
5.2
520
Page 50

27-Oct
29-Oct
300
5.6
500
5.1
2550
400
5.5
2200
500
300
5.1
5.5
2550
1650
100
5.5
550
100
300
400
5.5
5.6
550
1680
2230
1680
2600
Date
01-Oct
03-Oct
04-Oct
08-Oct
13370
Store Ledger Card Under LIFO Costing Method

Received
Issued
Balance
Qty
Rate Amount Qty
Rate Amount Qty
Rate
Amount
700
5
3500
700
5
3500
400
5
2000
300
5
1500
300
5.2
1560
300
5
1500
300
5.2
1560
300
5.2
1560
300
300
300
5
5.2
5.2
1500
1560
1560
09-Oct
300
200
5.2
5.2
1560
1040
300
100
5.2
5.2
1560
520
11-Oct
100
200
5.2
5.2
520
1040
100
5.2
520
13-Oct
1000
5.1
5100
100
1000
5.2
5.1
520
5100
21-Oct
400
5.5
2200
100
1000
400
5.2
5.1
5.5
520
5100
2200
23-Oct
400
200
5.5
5.1
2200
1020
100
800
5.2
5.1
520
4080
27-Oct
800
5.1
4080
100
5.2
520
5.2
5.6
13460
100
300
400
520
1680
2200
29-Oct
300
5.6
1680
2600
Exercise 7.13
Normal
1
W.I.P
60900
D.M
Payroll
FOH
FOH
24000
18000
18900
2750
WIP
3
Spoiled goods
WIP
Chapter 7
2
2750
2500
3
2500
Abnormal
W.I.P
60000
D.M
Payroll
FOH
Spoiled
goods
2500
WIP
Finished
Goods
58400
WIP
24000
18000
18000
2500
58400
Page 51

4
Finished Goods
WIP
55650
55650
55650
5500
Per Unit Cost=
Per Unit
Cost=
10.12
58400
5500
10.62
Exercise 7.14
Normal
1
W.I.P
50000
D.M
Payroll
FOH
FOH
1650
WIP
3
4
1
20000
16000
14000
2
1650
Spoiled goods
WIP
Finished Goods
WIP
2100
3
2100
Abnormal
48000
W.I.P
D.M
Payroll
FOH
Spoiled
goods
WIP
Finished
Goods
WIP
20000
16000
12000
2100
2100
45900
45900
46250
46250
46250
3700
Per Unit Cost=
Per Unit
Cost=
12.50
45900
3700
12.41
Problem7.7
Normal
1
W.I.P
Abnormal
96000
D.M
Payroll
FOH
2
FOH
4800
Spoiled goods
Finished Goods
D.M
Payroll
FOH
Spoiled goods
WIP
Finished Goods
WIP
4800
2400
WIP
3
2400
90400
40000
32000
18400
240
240
90160
90160
88800
WIP
Per Unit Cost=
Chapter 7
W.I.P
40000
32000
24000
WIP
3
88800
88800
7400
12.00
Per Unit Cost=
90160
7400
12.18
Page 52
Chapter 8 (Revised)
2-May-08
Cost Accounting
Page 1 of 10
Chapter 8 (Revised)
Cost Accounting
EXERCISES
Exercise 8.1
Jan Production Schedue
Feb ..
March .
Desire Inv Level of March: (75% of Jan (5600))
Total To be Provided
Less:
Quantity on Hnad
On order for jan
. Feb
Total
Qty to order for march
Exercise 8.2
1 Forecast Usage
Jan
Feb
March
Add:
Desired Inv or Safety Stock
To be Provided
Less: Schedule Supply
Jan & Feb Inv
Add
On oreder for jan & Feb
Total Qty to order
Units
5,000
4,950
5,550
4,200
Units
19,700
5,600
4,100
5,100
14,800
4,900
Units
4,800
5,000
5,600
Units
15,400
4,800
20,200
6,000
8,400
(14,400)
5,800
2
Add:
Less:
(a).
Add:
Less:
(b).
Exercise 8.3
(K)
Jan Inv
On order for jan
Forecasted use for jan & Feb
March 1, Inv
To order for March
Forecasted usage for march
March 31, Inv
cc=Annual Cc(20%)*mfg Cst ($50) * Avg Annual Inv.
Production Initiation=# of runs * Cost to initiate (300)
Current Situation:
2 Production run of 3000 units per run
Avg Inv=3000/2=1500 Units
Present Cost
cc=0.20*$50*1500
Production Initiation=2*300
Proposed Situation:
Production Qty=EOQ= (2*Ar*OC/UC*CC)^.5
Avg Inv=600/2
# of run= 6000 / 600
Proposed cost
C.C.=0.20*$50*300
Production initaion cost=10*$300
Expected Annual Saving
($1560-$6000)
2-May-08
Units
6,000
8,400
14,400
(9,800)
4,600
5,800
10,400
(5,600)
4,800
15,000
600
15,600
600
300
10
Units
run
$3,000
$3,000
$9,600
Page 2 of 10
Chapter 8 (Revised)
Exercise 8.3-f
UC
$20
AR
48000
Int
10%
CC
$0.40
OC
$10
CC$=CC+INT
EOQ=
AOC=
ACC=
Cost Accounting
$2.00
633 Units
AR*OC/800
400*CC$
(UC*Int%)
$600
$960
Answers
A
B
c
d
e
f
g
h
i
j
k
11
100
300
300
500
633
2500
2000
462
49
9600
15
600
960
26
55.5
360
67.5
Exercise 8.4
Data:
Unit cost
Monthly usage
O.C
C.C
Reqd:
1 EOQ
sqrt(2*AR*OC/UC*CC)
1225
2
$3
1500
$50
40%
1560
Units
AR
18000
EOQ
(Units)
1225
15
$3
1.20
612
Given
(Units)
2000
9
2.85
1.14
1000
$
54000
735
$
51300
450
735
55470
1140
52890
Units
Order size
# of Order per year (=AR/EOQ)
Price Per Unit
CC=UC*CC%
Avg Inv
(EOQ/2)
Purchase Price ( AR*Purchase Price per Unit)

Cost of Placing Order
Carrying Cost
(avg inv*(UC*40%))
Total Cost
Company should place order of 2000 units to avail discount

because it minimizes its cost.
2-May-08
Page 3 of 10
Chapter 8 (Revised)
Exercise 8.5
Data:
Unit cost
Annual usage
O.C
C.C
Reqd:
2 EOQ
sqrt(2*AR*OC/UC*CC)
1510
3
Cost Accounting
$5
3000
$380
$1
Units
20%
1
Total Odering
cost
$2,280
AR/Q*OC
Total CC
$250
Q/2*CC
Ordering Cost
$755
Carrying Cost
$755
EOQ
(Units)
1510
2.0
$5.00
$1.00
755
Given
(Units)
3000
1.0
$4.75
$0.95
1500
$
$15,000
755
$
$14,250
380
755
16510
1425
16055
Units
Order size
Price Per Unit
CC$
Avg Inv
(EOQ/2)
Inventory Cost (AR*UC)

Carrying Cost
(avg inv*(UC*CC%))
Total Cost
Company should order 3000 Units

Exercise 8.6
Saftety Stock & Order Point
Order point=opening Inv+on order=Lead Time qty (ie.Normal use*LT)+Safety Stock Qty
Order point =
I+DQ=LTQ+SSQ
Normal Usage
7200 Units
Daily Usage=
7200/240
Data:
Working days
240 days per year
30
Normal LT.
20 days
Max LT.
45 days
Solution:
Units
Daily usage
30
LTQ+SSQ=ROP
* LT (max)
45
975+X= 1530
1350
X= 375
Order Point
975
a Less: Normal LTQ
Normal LT= (Max LT-Min LT)/2
SSQ
375
32.5
Exercise 8.7
1
EOQ=
AR= 500*250
2
Less:
2-May-08
1500
125000
Units
Units
Units
600
500
100
Safety Stock(Max)=100*5
Units
Safety Stock:
Max use per day
Normal ..
500
Page 4 of 10
Chapter 8 (Revised)
Cost Accounting
Order Point =(Normal Use * Lead Time)+Safety Stock

(500 * 5) + 500
3000 Units
Normal Max Inv

Order Point
Normal Use During L.T (500*5)
On Hand @ the ime of order
Qty Ordered (EOQ)
Normal Max Inv.
Absolute Max Inv.

Order Point
Min Use During L.T (500*5)
On Hand @ the ime of order
Qty Ordered (EOQ)
Absolute Max Inv.
Units
3,000
(2,500)
500
1,500
2,000
3,000
(500)
2,500
1,500
4,000
Avg Inv= EOQ / 2 +Safety stock

= 1500/2+500
=
1250 Units
Exercise 8.8
SSQ
10
20
40
80
Annual #
of Orders
Probabilty
of Stock
out
Expected
Annual
Stock out
5 *
0.4
=
2
5 *
0.2
=
1
5 *
0.1
=
0.5
5 *
0.05
=
0.25
Recommeded Level of Safety Stock is 40
Cost Per
Stck out ($)
*
*
*
*
75
75
75
75
Annual
Stock out
Cost
=
=
=
=
150
75
37.5
18.75
Annual
Stock out
Ordering
Cost
Annual
Combined
Cost
+
+
+
+
10
20
40
80
=
=
=
=
160
95
77.5
98.75
Exercise 8.9
Data
n
=
df=n-1
(X-X')2 =
(X-X') =
LT
=
9
8
2888
0
1
Solution
=[(X-X')2 -((X-X'))2/n]/(n-1)
=
SSQ=
=
=
Order Point=LTQ+SSQ
=
=
19
(df * *L)-((X-X')2 *L/n)

(2.306*19*1)-(0*1/9)
43.814
Units
262+44
306
Units
Exercise 8.10
ABC PLAN
2-May-08
Page 5 of 10
2-May-08
% of Total
Cost
21.44
14.58
10.94
10.52
7.49
6.89
6.78
5.47
5.46
4.99
3.59
1.86
100.00
57.48
Total
Cost ($)
58,800
40,000
30,000
28,860
20,550
18,900
18,600
15,000
14,970
13,680
9,840
5,100
274,300
32.09
Unit
cost ($)
10.50
20.00
30.00
3.25
2.50
2.50
1.00
0.50
1.50
2.00
2.00
0.25
10.43
% of
total
Usage
4.52
1.61
0.81
7.16
6.63
6.10
15.00
24.19
8.05
5.52
3.97
16.45
100.00
59.97
Quarterly
Usage (Units)
5,600
2,000
1,000
8,880
8,220
7,560
18,600
30,000
9,980
6,840
4,920
20,400
124,000
25.94
Material
Stock #
26
24
27
30
35
29
28
33
34
32
31
25
Total
Cost Accounting
14.10
Chapter 8 (Revised)
Page 6 of 10
Chapter 8 (Revised)
Cost Accounting
PROBLEMS
Problem 8-1
AR
OC
CC
1
QTY
5000
2500
1250
800
500
250
100
EOQ
$5,000
$250
$4
OC
$250
$250
$250
$250
$250
$250
$250
SQRT(2*AR*OC/CC)
Problem 8-2
UC
Avg Use
Lead Time
OC
CC
1
2
$12
100
1
$50
25%
791
Annual OC
$250
$500
$1,000
$1,563
$2,500
$5,000
$12,500
Annual CC
$20,000
$10,000
$5,000
$3,200
$2,000
$1,000
$400
Total
$20,250
$10,500
$6,000
$4,763
$4,500
$6,000
$12,900
Units
per order
units per month
month
of avg inv
EOQ=
SQRT(2*AR*OC/CC)
200 units
Order Point=Average use during Lead Time
1200*1
1200
Units or 100 units per month
Problem 8-3
AR
480,000
1 case contains 24 cans
UC
$4.80
INT Rate
10%
OC
$15.00
CC
$0.08
1
Units
per order
per unit per order
CC
# of Order
$4
1
$4
2
$4
4
$4
6
$4
10
$4
20
$4
50
EOQ =
20,000
per case
$0.20
per can
40%
cases
Per Can
Units
Order size
Price Per Unit
CC$
UC*CC%
Add Int
UC*INT%
(EOQ/2)

Cost of Placing
Carrying Cost
Total Cost
2-May-08
SQRT(2*480000*15/.08+.1*4.80/24)
or 500 Cases
12000 cans
12000
Avg Inv
cans
$0.08
$0.02
EOQ
(cans)
Given
(Cans)
12,000
40.0
$0.20
72,000
7
$0.18
$0.10
$0.09
6,000
$
96,000
600
600
97,200
0.072
0.018
36,000
$
86,400
100
3,240
89,740
Page 7 of 10
Chapter 8 (Revised)
Cost Accounting
Problem 8-4
1
2
per
UC
$12 carton
AR
15000 cartons
Cash Disct
5% in excess of 1000 cartons
OC
$64.80
CC
20% of avg inv
EOQ (without considering disct)
EOQ=
SQRT(2*AR*OC/CC)
900 cartons
900
Units
EOQ
Given
(CARTONS (CARTONS
)
)
Order size
900
5000
17
3
Purchase Price Per Unit
$12.00
$11.40
CC$=UC*CC%
$2.40
$2.28
Avg Inv
(EOQ/2)
450
2500
$
Cost of Placing Order: (# of ord
Carrying Cost=(Avg Inv*CC)
Total Cost
180,000
1,080
1,080
182,160
* OC)
172,800
194
5,760
178,754
3000*12+12000*11.4
0
500*2.40+2000*2.28
Problem 8-5
AR
15000 units or 1000 Lots
OC
$20 per order
CC
25%
UC
$5 per unit
1 Annual OC=AR*OC/EOQ
$300
Annual CC= UC*CC*EOQ/2
$625
SQRT(2*AR*OC/CC)
3 EOQ=
693 units
Ord.Size
250
500
750
1000
1250
1500
4
Order size
Price Per Unit
Inventory Cost
2-May-08
AR
15000
15000
15000
15000
15000
15000
# of
Order
60
30
20
15
12
10
annual
OC
1200
600
400
300
240
200
Annual
CC
156
313
469
625
781
938
EOQ
Given
693
$5.00
3000
$4.75
75,000
71,250
Total
1356
913
869
925
1021
1138
EOQ
Page 8 of 10
Chapter 8 (Revised)
Cost Accounting
433
100
Carrying Cost
433
1,781
75,866
73,131
Problem 8-6
1 # of Production Run=100,000/X
AC=$144(100,000/X)+(.20/2)X
AC=144(100,000)X-1+.01X
Taking Derivative
d(AC)/dx=d/dx (144*100000X-1+0.10X)
d/dX (AC)=
-144*100000X-2+0.1
where
2
Total CC=
Optimum Qty
-144(100,000x-2)+0.10=0
144(100,000x-2)=0.10
1/x2 =14400000/.10
x2 =
12000
0.20X/2
Total OC=
144(100,000/X)
Units
Problem 8-7
1 EOQ=sqrt(2*24000*$1.20/(10*.1))
240
2 # of Orders=AR/EOQ
24000/240
100
3 Annual OC=
100*$1.20=
$120
Annual CC=
10*0.1*240/2
$120
Total Cost=
120+120
$240
4 # days for order=
360/no of order
360/100
3.6 days
No days supply left=
units in inv*no of days in each order/EOQ
200/240*3.6
3 days left
Days before next order should place=
supply days left-LT
3days -3 days
0 days
5 Inv usage does not remain constant which is the base of EOQ.
EOQ requires estimation of AR, OC,UC, CC which is very difficult to estimate
Problem 8-8
AR
400*250
OC
$20
1.
EOQ 4000
2.
2-May-08
Units
Orders
100,000
ROP=Max Usage during LT

600*8
4800
ROP=LTQ+SSQ
=Normal Usage During LT+SSQ
SSQ=ROP-LTQ
=4800-(400*8)
=1600
OR
Max Usage 600
Normal Usage 400
Page 9 of 10
Chapter 8 (Revised)
* SS (Max)
SSQ
3.
Cost Accounting
200
8 .
1600
ROP=d*L+SSQ.
400*8+1600
4800
Order Point
Less: Normal usage during LT
(400*8)
4.
Add: Order Size

5.
4800
-3200
1600
4000
5600
Order Point
Less: Minimum Usage During LT
(100*8)
4800
- 800
4000
Add: Order Size
4000
8400
Avg Normal Inventory=EOQ/2+SSQ=4000/2+1600 =
3600
Problem 8-9
SSQ
(a)
10
20
30
40
50
55
2-May-08
# of
Order
(b)
Probability
5
5
5
5
5
5
0.5
0.4
0.3
0.2
0.1
0.05
Equvalent
Stockout
(d=b*c)
2.5
2
1.5
37.5
0.5
0.25
Stockout
cost Per
Unit
(e)
80
80
80
80
80
80
Total
Stockout
cost
(f=d*e)
200
160
120
3000
40
20
Inv Cost
(g)
20
40
60
80
100
110
Total
Cost
(h=f+g)
220
200
180
3080
140
130
Page 10 of 10
Chapter 11
Page 63

Chapter 11
Exercise 1
Month
Machine
Hours
January
February
March
April
May
June
2500
2200
2100
2600
2300
2400
1250
1150
1100
1300
1180
1200
Total
Average
14100
2350
7180
1196.666667
2600
2100
500
1300
1100
200
High
Low
Difference
Maintenance
Expenses ($)
Variable
Cost
Fixed
Cost
990
890
840
1040
920
940
260
260
260
260
260
260
1040
840
260
260
Variable Rate= 200/500
0.4
Exercise 3
Veriable
Fixed
Total Cost of Calles=

Variable rate=
Fixed Cost=
No of Calls in a week=
Cost of Calls=
Cost of Calls=
500000/6250
87000/1450
80
60
20
200
60*200
20*200
12000
4000
$
16000
Exercise 4
Month
Machine
Hours
x
January
4500
February
4700
March
4000
April
5000
May
4100
June
4600
July
4900
August
3700
September
4700
October
3900
November
3400
December
4100
Total
51600
Average
4300
Variable Rate
Fixed Cost
1090 =a+
Chapter 11
Maintenance
Expenses ($)
xmeanx
y-meany
Sqrt(xmeanx)
Sqrt(ymeany)
(xmeanx)(ymeany)
Variable
Cost
Fixed
Cost
10
20
-40
110
-30
30
80
-70
40
-50
-90
-10
0
40000
160000
90000
490000
40000
90000
360000
360000
160000
160000
810000
40000
2800000
100
400
1600
12100
900
900
6400
4900
1600
2500
8100
100
39600
2000
8000
12000
77000
6000
9000
48000
42000
16000
20000
81000
2000
323000
506
516
456
606
466
526
576
426
536
446
406
486
594
594
594
594
594
594
594
594
594
594
594
594
y
1100
1110
1050
1200
1060
1120
1170
1020
1130
1040
1000
1080
13080
1090
323000/2800000
200
400
-300
700
-200
300
600
-600
400
-400
-900
-200
0
0.115357
4300*.115357
Page 64

1090
a=
Fixed Cost
=a+
593.9643
594
496.0357143
FOH
Actual
June
9000
0
9000
-800
8200
Budget
Budgeted
Volume
applied
9000
7500
1500
Variable Rate
FOH for august
Fixed
Variable
Chapter 11
700
500
200
7.5
July
7500
-500
7000
0
7000
august
5900
850
6750
-750
6000
5250
3750
3750
3750
3750
3000
6750
Page 65
Chapter 12
Page 66

CHAPTER 12
Exercise 1
Material
Labor
FOH
Ending WIP
Less: Material
Conversion Cost
Less: DL
FOH
Exercise 2
1
$ 23,800
20,160
15,840
59,800
W.I.P
Finish Goods
Ending Balance
59,800
11,200
(4,560)
6,640
(3,718.43)
2,921.57
Applied Rate=FOH/DL
Applied Rate=15840/20160
Applied Rate=
0.7857
CC=DL+FOH
178.57%=100%+78.57%
$6,640
Work Force=
150 People
Days per week= 5 days
Normal Capacity Direct Labur Hours=
Work Force=
150 People
Days per week= 4 days
Normal Capacity Direct Labur Hours=
Exercise 3
Expected FOH=
Output=
Material Cost=
Direct Labour Hours=
Direct Labour cost=
Machine Hours=
FOH Based On
Output=
Material Cost=
Direct Labour Hours=
Direct Labour cost=
Machine Hours=
Exercise 4
Normal Capacity=
Actual Capacity=
expected actual capacity=
Fixed Cost=
Fixed Rate=
1 Variable Rate=
a Foh rate
$
Units
$
Hours
$
Hours
Hours per day= 8 Hours

Total Weeks= 47 weeks
150*8*5*47
= 282000 Hours
Hours per day= 10 Hours
Total Weeks= 47 weeks
150*10*4*47 = 282000 Hours
276000
47500
400000
28750
276000
23000
276000/47500
276000/400000
276000/28750
276000/276000
276000/23000
50000
43000
40000
$200000
$200000/50000
5.81 Per unit

0.69 Per $
9.6 Per Hour
1 Per $
12 Per Hour
Direct Labour Hours

Hours
Hours
$4
$ 6.69
$ 10.69
Variable Cost=
Total Cost
FOH Rate=
or
$6.69*50000
$200000+$334500
$534500/50000
Fixed FOH Rate
$ 4 per hour
Capacity Variance
Foh Budgeted for actual
Fixed Cost
$ 200000
Variable Cost 6.69*43000
$ 287670
Applied FOH 43000*$ 10.69
Capacity Variance Unfavourable=
or
Capacity Variance Unfavourable=
(50000-43000)*$4
Chapter 12
$ 48,600
11,200
$ 334500
$ 534500
$ 10.69
$ 487670
$ 459670
$ 28000
$28000
Page 67

2 a Fixed Cost= $ 200000
Fixed Rate= $ 200000/40000 $ 5
Variable Rate=
$ 6.69
FOH Rate
$ 11.69
or
Variable Cost=
$6.69*40000
Total Cost
$200000+$267600
FOH Rate=
$467600/40000
b
Fixed FOH Rate
$ 267600
$ 467600
$ 11.69
$ 5 per hour
Exercise 5
Budgeted FOH=
$ 255,000
Budgeted Volume=
100,000 Hours
Actual FOH=
$ 270,000
Actual Volume=
105,000 Hours
Applied FOH Rate= $255000/100000
Applied FOH=
2.55*105000
Actual FOH=
FOH Under Applied=
$ 2.55 Per Hour

$ 267750
270000
$ 2250
Exercise 6
Production Volume=
Estimated FOH=
Indrect Material=
Indirect Labour=
Light& Power=
Depreciation=
Miscellaneous=
30000
$ 220000
240000
30000
25000
55000
$ 570000
FOH applied Rate= 570000/30000

1
Work in process
29000*19
FOH Applied
FOH Applied
FOH Control
Mixers
$ 19 per Unit
551000
551000
551000
551000
Actual FOH=
559,600.00
Applied FOH=
551,000.00
FOH Under applied= 8,600.00
Exercise 7
Normal Capacity=60000 Units per Year or 5000 Units per Months
Applied Rate=
3.00
Spending Variance
Actual FOH
$ 15,500
Less: Budgeted FOH @ actual Cap
Fixed FOH
2,500
Variable Rate * Act cap
12,000
$ 14,500
4800*2.50
Unfavourable
$ 1,000
Idle Capacity Variance
Budgeted FOH @ act cap
$ 14,500
Less: Applied FOH @ act cap
4800*3
$ 14,400
Unfavourable
$
100
Exercise 8
Normal Capacity=36000 DLH per year or 3000labor hrs per month
Chapter 12
Page 68

Fix FoH= Total/12= $ 1410
Applied Rate=
2.57
Spending Variance
Actual FOH
Fixed FOH
2700*2.10
Unfavourable
2700*2.57
Unfavourable
$ 7,959
1,410
5,670.00 7,080
879
$7,080
6,939
141
Exercise 9
Normal Capacity=200,000
Applied Rate=
$ 3.00
Variable Rate=
$1
Fixed FOH=
$ 600000*2/3
Spending Variance
Actual FOH
Fixed FOH
210000*1
Unfavourable
210000*3
favourable
Exercise 10
1 Fixed Rate
300000/150000
2 Variable Rate
150000/150000
FOH Rate
FOH Applied=
=$ 3*140000
FOH Budgeted For actual
Fixed Cost=
Varable Cost=
$ 400,000
$ 631,000
$ 400,000
$ 210,000 $ 610,000
$ 21,000
$ 610,000
$ 630,000
$ (20,000)
2 per hour
1 per hour
3 per hour
$ 420000
140000*1
$ 300000
$ 140000
$ 440000
Overall Variance
Actual FOH
Less: Applied FOH@ actual Cap
Applied rate * Act cap
3*140000
Unfavourable
Spending Variance
Actual FOH
Fixed FOH
140000*1
favourable
140000*3
Unfavourable
Chapter 12
$ 435,000
420,000.00
$ 420,000
$ 15,000
435,000
300,000
140,000.00
440,000
(5,000)
440,000
420,000
20,000
Page 69

Exercise 11
Spending Variance
Actual FOH (2)
Unfavourable
Budgeted FOH @ act cap (1)
favourable
Overall Variance
Actual FOH
Less: Applied FOH@ actual Cap
favourable
Chapter 12
15,847
14,968
879
14,968
16,234
1,266
15,847
16,234
(387)
Page 70
Problems
Problem 12.6
June:
capacity variance=
Spending Variance=
Actual FOH=
Capacity Level or actual cap=
July:
capacity variance=
Spending Variance=
Actual FOH=
August:

Actual FOH=
Budgeted FOH=
JUNE( capacity level of 700 Tons)
Spending Variance
Actual FOH
Less: Budgeted FOH
$800
0
$9,000
700
$0
$500
$7,500
500
400
$5,900
$6,000
Favourable
Tons
Unfav
Tons
Tons
$
9,000.
9,000
0.00

Budgeted FOH
Less: Applied FOH
favourable
9,000
9,800
$800
JULY ( capacity level of 500 Tons)

Spending Variance
Actual FOH
Less: Budgeted FOH
Unfavourable
$
7,500
7,000
500

Budgeted FOH
Less: Applied FOH
7,000
7,000
$0
AUGUST ( capacity level of 400 Tons)

Spending Variance
$
Actual FOH
5,900
Less: Budgeted FOH
6,000
favourable
500
Budgeted FOH
6,000
Less: Applied FOH
(400*$14)
5,600
Unfavourable
$400
Note: when idle capacity vaiance is zero it means actual and normal capacities are the same, Thus
Budgeted and applied FOH will be equal implies that applied rate is equal to actual rate
Working
Calculation of applied rate
Since july idle cap variance is zero, implies that june normal cap and actual cap are equal.
applied rate = budgeted FOH/Normal capacity
=
7,000.00
/ 500
=
$ 14
Problem 12.7
June:
July:
Chapter 12
capacity variance=
Spending Variance=
Actual FOH=
$0
$600
$7,000
Capacity Level or actual cap= 800
capacity variance=
$800
Spending Variance=
$0
Actual FOH=
$5,600
Unfav
Tons
Unfav
Tons
Page 71

August:
Actual FOH=
JUNE( capacity level of 800 Tons)
Spending Variance
Actual FOH
Less: Budgeted FOH
Unfav
Budgeted FOH
Less: Applied FOH
Tons
$7,100
$
7,000
6,400
600
6,400
6,400
0
JULY ( capacity level of 600 Tons)

Spending Variance
Actual FOH
Less: Budgeted FOH
Unfavourable
Budgeted FOH
Less: Applied FOH
Unfav
$
5,600
5,600
0
5,600
4,800
800
AUGUST ( capacity level of 900 Tons)

Spending Variance
$
Actual FOH
7,100
Less: Budgeted FOH (3200+(900*4)
6,800
Unfav
300
Budgeted FOH
6,800
Less: Applied FOH
(900*$8)
7,200
favourable
(400)
Note: when idle capacity vaiance is zero it means actual and normal capacities are the same, Thus
Budgeted and applied FOH will be equal implies that applied rate is equal to actual rate .however, we need
budgeted FOH and actual are given:
Working
Calculation of Budgeted FOH
Capacity
Expanse
June
800
$ 6,400
V.FOH Rate=$800/200
=$4
July
600
$ 5,600
(800)
(600)
200
$ 800
FOH
$6400 $ 5600
V.OH
$3200 $ 2400
Fix FOH
$3200 $ 3200
Budgeted FOH for Aug = Fix FOH + (Actual Capacity*Variable Rate) = $3200+(900*$4) = $6800
Applied Rate = $ 6400/800 = $ 8
As the idle cap variance for June is zero thus applied rate is computed on that basis.
Chapter 12
Page 72
Chapter 15
Page 73

CHAPTER 15 EXERCISES
EXERCISE 1
Whatley Borthers
Sales Budget
For the period 19 A
Average
Product
Barb
Shir
Bett
Sales
Sale Price
Total Sale
Cost of
Cost of
(In Pound)
10000
7500
7500
25000
Per Pound
30
18
23
Price
300000
135000
172500
607500
Sale/Pound
21
16
21
Sales
210000
120000
157500
487500
Gross
Profit
Per
Pound
9
2
2
Total
Gross
Profit
90000
15000
15000
120000
Whatley Borthers
Sales Budget
For the period 19 B
Average
Sale Price
Sales
Product
Barb
Shir
Bett
(In Pound)
20000
10500
7500
38000
Per Pound
37
18.72
23.92
Total Sale
Cost of
Cost of
Gross Profit
Price
740000
196560
179400
1115960
Sale/Pound
28
18
23.1
Sales
560000
189000
173250
922250
Per Pound
9
0.72
0.82
Total
Gross
Profit
180000
7560
6150
193710
Exercise 2
Swisher Company
Sales Budget
For the Period Year 5
Press
Model
Number
222
333
444
Year1
100
100
100
Year2
110
120
95
Sales in Units
Year3
Year4
120
130
160
240
85
70
Year5
140
400
50
Swisher Company
Production Budget
For the Period Year 5
Press
Model
Number
222
333
444
Sales
140
400
50
Units
Opening
Inventory
Desired
Ending
Inventory
4
5
5
Production
Required
2
5
4
142
400
51
Exercise 3
Schwankenfelder Company
Production Budget
Chapter 15
Page 74

Product
Model
Sales
Ceno
Nepo
Teno
21000
37500
54300
For the Next Year

Units
Desired
Opening
Ending
Inventory
Inventory
6200
5800
10500
11000
12200
14500
Production
Required
21400
37000
52000
Exercise 4
Product
Model
Sales
Moon Glow
Enchanting
Day Dream
250000
175000
300000
Magic Enterprises
Production Budget
For the Next Year
Units
Finished Goods
Desired
Opening Production
Ending
Inventory Required
Inventory
15000
16000
249000
10000
12000
173000
20000
25000
295000
Work in process
Ending
Opening
Production
Required
4200
2000
6000
2000
1800
6400
251200
173200
294600
Exercise 5
Product
Model
Sales
1001
1002
1003
2001
2002
2003
Product
Model
1001
1002
1003
2001
2002
2003
Total
200
150
425
175
325
215
Magic Enterprises
Production Budget
For Next six months
Units
Desired
Opening
Ending
Inventory
Inventory
40
25
60
20
35
20
Production
Required
50
25
75
15
35
20
Magic Enterprises
Material Purchase requirement
For Next six months
Material
x
Units
Material
Production in
Total
Production
Required
1 Unit
Material Required
190
150
410
180
325
215
5
7
10
4
6
8
950
1050
4100
720
1950
1720
10490
190
150
410
180
325
215
190
150
410
180
325
215
y
Material
in
1 Unit
2
2
3
1.5
2
2.5
Total
Material
380
300
1230
270
650
537.5
3367.5
Units
Chapter 15
Page 75

Material
X
Y
Production
Requirement
10490
3367.5
Desired
Ending
Inventory
7000
1500
Opening
Inventory
Purchase
Required
5000
2000
12490
2867.5
Exercise 6
Provence Company
Production Budget
Product
Model
Sales
Tribolite
Polycal
Powder X
Units
Opening
Inventory
Desired
Ending
Inventory
80000
40000
100000
6000
2000
8000
Production
Required
5000
4000
10000
81000
38000
98000
Provence Company
Material Purchase requirement
Material
A
Product
Model
Tribolite
Polycal
Powder X
Total
Production
Required
Material
A
B
Material in
1 Unit
81000
38000
98000
Units
Total
Production
Material Required
1
2
0
Production
Require-
Desired
Ending
ment
157000
260000
Inventory
12000
15000
81000
76000
0
157000
Units
Opening
Inventory
10000
12000
Material in
1 Unit
81000
38000
98000
2
0
1
1
2
0
x
x
x
0.2
0.2
0.2
Unist to be manufactured
Cost of Material A in Total
B
159000
263000
Unist to be manufactured
Chapter 15
x
x
x
0.1
0.1
0.1
Total Purchase
Price
31800
26300
58100
Unit Cost
0.2
0.1
Polycal
Pwdr X
0.2
0.4
81000
16200
2
0
1
162000
0
98000
260000
Purchase
Required
Provence Company
Manufacturing Cost Budget
Tribolite
Material
A
Total
Material
38000
15200
0
98000
0
0.2
0
81000
38000
0.1
98000
Page 76

Cost of Material A in Total
Total Cost of Material
16200
32400
0
15200
9800
9800
Hour per Unit

Units to be produced
Labour Hours
0.05
81000
4050
0.125
38000
4750
0.0125
98000
1225
Rate per Hour

Direct Labour Cost
8
32400
8
38000
8
9800
4050
6
24300
89100
4750
6
28500
81700
1225
6
7350
26950
Labour Cost
FOH Cost
Labour Hours Required
FOH Rate
Total Cost by Products
Total Variable Manufacturing Cost
Fixed manufacturing cost (Not allocted to
products)
197750
40000
237750
Exercise 7
Sandersen Inc.
Projected Cost of Goods Sold Statement
For the Period Ended on
Materials:
Add
Less
Add
Add
Add
Less
Add
Less
Beginning Inventory
Purchases
Material Available for use
Ending Inventory
Cost of Material Used
Labour
Factory Overhead
Total Factory Cost
Beginning Work in process inventory
Cost of Goods to be manufactured
Ending work in process inventory
Cost of goods Manufactured
Opening Finished Goods inventory
Cost of Goods available for Sale
Closing Finished Goods Inventory
Cost of Goods Sold
(5)
$
500000
2400000
2900000
400000
2500000
4340000
1840000
8680000
100000
8780000
300000
8480000
800000
9280000
1000000
8280000
Workings;
Earnings(6% of $20000000= $1200000)
Chapter 15
10
% of
Sales
Page 77

Marketing, administrative, and financial expenses
21
31
Cost of goods sold($8280000)
69
100
Cost of Goods
sold +
Cost of goods
manufactured+
8480000
Total
manufacturing
cost-
8680000
Cost of
materials
consumed+
2500000
Ending
Finished
Goods
InventoryEnding Work
in process
inventory-
Beginning
Finished
goods
Inventory
$800000
Beginning
work in
process
inventory
300000
100000
Labour(50%
of
manufacturing
cost)-
Cost of
materials
consumed
4340000
2500000
Ending
materials
inventory400000
Beginning
Materials
Inventory
% of
Sales
% of
Sales
% of
Sales
% of
Sales
Cost of goods
Manufactured
=
8480000
total manufacturing
cost(materials,
labour,and factor
overhead)
8680000
factory
ovehed
1840000
=
500000
Material
purchases
2400000
Exercise 8
Starnes Company
Budgeted Income Statement
For the Second Quarter
$
Less
Sales
(70%)
Cost of Goods Sold
Gross Profit
Operating Expneses
Marketing Expenses
72000
Variable
Bad Debts
14400
Total Variable Marketing expe
Fixed Marketing
48000
Expenses
Depreciation
5000
Total Fixed Marketing Expenses
Total Marketing Expenses
Admn Expenses
Variable
34200
Fixed Admn expenses
Depreciation
5000
Total Admn Expenses
Total Expenses
Net profit before taxes
Chapter 15
$
720000
504000
216000
86400
53000
139400
21600
39200
60800
200200
15800
Page 78

Exercise 9
Sales
CGS
Assumed
Units
1
1.05
Units
Price
1
1.1
1
1.155
1.155
1
1.04
1
1.092
1.092
Price
1
1.05
Calcor Company
Income Statement
For the Year ended 19B
$
Net Sales
Expenses
8400*1.155
Cost of Goods Sold
6300*1.092
Marketing expenses 780+420
Administrative Expneses
Interest Expenses
140+30
Total Expenses
Income before Income Tax
Income Tax
Net Income
Chapter 15
9702
6879.6
1200
900
170
9149.6
552.4
220.96
331.44
Page 79
Chapter 16
Page 80

Problem 16-1
1
_______________Co
Cash Disbursement Budget
For the Month June
$
June Payments
May Payments
54%
46%
38,000
wages and Salaries

15% of
sale
Marketing exp
51,300
Less: Dep
(2,000)
$342000
*
CGS
$20
_______________Co
Cash Collection Budget
For the Month May
$
97%
211,266
April Collection
60%
April Collection
25%
90,750
9%
31,860
March Collection
333,876
Total Cash Receipt

3
_______________Co
Purchase Budget
For the Month July
Units
11,400
Production reqd for july

Add: end inv for july
15,860
130% of Aug
27,260
Inv needed
Less: op Inv
(15,600)
130% of july
11,660
Purchase Required
Problem 16-2
1
6,840,000
6,927,300
Total Cash Disbursement

2
49,300
_______________Co
Cash Collection Budget
For the Month July
July Collection
80%
June Collection
18%
98%
548,800
108,000
Total Cash Receipt
656,800
Cash Collection For Sep from Aug Sale
126,000
Chapter 16
Page 81

3
Aug Ending Inv=25% next month Sale
100,000
_______________Co
Purchase Budget
For the Month June
Units
CGS
80% of sales
480,000
Add: end inv for july
25% of july sale
175,000
655,000
Inv needed
Less: op Inv
25% of june sale
(150,000)
505,000
Purchase Required
Problem 16-4
_______________Co
Cash Budget
For the Month of Sep
$
13,000
Op Cash Bal
Add: Expected Cash Receipts
40,000
cash Sales
ON ACCOUNT
Current Month Sales
Aug month Sale
38750
48000
July Sales
10000
Total cash available

Less: Expected Cash Payements
cash Purchases
Payment to ON ACCOUNT
expanses Paid
96,750
149,750
20000
92000
46500
Total
158,500
Financing Required
(8,750)
_______________Co
Cash Budget
For the Month of OCT
$
(8,750)
Op Cash Bal
Add: Expected Cash Receipts
cash Sales
ON ACCOUNT
Current Month Sales
Sep month Sale
Aug Sales
Total cash available
Less: Expected Cash Payements
cash Purchases
Chapter 16
60,000
47500
31000
12000
90,500
141,750
20000
Page 82

Payment to ON ACCOUNT
expanses Paid
86000
10000
Total
116,000
Expected cash Balance After Payments
25,750
Sep A/P
opening
10000
purchases
100000
ending
(12,000)
disct
(6,000)
Payments
92000
Chapter 16
OCT A/P
12000
80000
(9,000)
3,000
86000
Page 83

Exercise 16.1
Salvey Company
Budgeted Cash Receipts for April
$
Feburary Sales( 40000 x 12%)=
March Sales (70000x97% x 60%)
March Sales (70000x x 25%)
Total=
Exercise 16.2
1 Budgeted Cash Collections in May
May Sales(150000 x 20%)
April Sales(180000 x 50%)
March Sales( 100000 x 25%)
Total Cash Collections
4800
407404.7
17500
429704.7
30000
90000
25000
145000
Balance of Accounts Receivable on April 30th

April Receivable(180000 x 80%)
1440000
March Receivable(100000 x 30%)
30000
Less Bad Debts (100000 x 5%)
-5000
Receivalbes on April 30th
1465000
Balance of Accounts Receivable on May 31st

May Receivable(150000 x 80%)
April Receivable(180000 x 30%)
Less Bad Debts (180000 x 5%)
Receivalbes on April 30th
Exercise 16.3
Marketing, General, and Admn Expenses
Fixed
(71000-40000)
Variable
(700000*15%)-(700000*1%)
1200000
54000
-9000
1245000
$
31000
98000
129000
490000
10000
629000
Cost of Goods Sold(700000*70%)

Increase in Inventory during the month
Estimated June cash disbursement
Exercise 16.4
Production requriement of Par in July
July Sale Requirement=
Closing Stock requried=
Total Stock
needed=
Opening Stock=
Units to be
produced
Units of Tee required for production of par in july=
30000
3000
33000
3000
30000
30000*3=
90000
Purchase requirment of
Tee
Chapter 16
Page 84

Production requirement in
july=
Closing inventory
required=
Total Inventory required=
Less available opening
Stock
Units to be
purchaes
Cost of July Purchases
90000
11000
101000
14000
87000
87000*5=
435000
Dollars
Production requriement of Par in June

June Sale Requirement=
Closing Stock requried=
Total Stock
needed=
Opening Stock=
Units to be
produced
50000
3000
53000
5000
48000
Units of Tee required for production of par in july=
48000*3=
Purchase requirment of
Tee
Production requirement in
june=
Closing inventory
required=
Total Inventory required=
Less available opening
Stock
Units to be
purchaes
Cost of July Purchases
144000
144000
14000
158000
20000
138000
138000*5=
690000
Cash required in July for purchase of Tee

Payment of June Purchases= 690000*98%*1/3
Payment of July Purchases=435000*98%*2/3
Total Cash
required
Dollars
225400
284200
509600
Exercise 16.5
Crockett Company
Cash Budget
For the Month of
July
Opening Balance
Exepected Receipts
Current Receivalbe
Last Month Receivable
Total Cash Available
Expected Payments
Income Tax
Payment of Payables
Chapter 16
5000
20000
14700
34700
39700
1600
Page 85

Current payable
Last Month Payable
Marketing & Admn Expenses
Dividneds
Total Expected Payments
Balance after payments
Fianacing required
Desired Closing Balance
3750
7500
11250
10000
15000
36250
3450
1550
5000
Direct Materials
Direct Laobur
Supervision
Indirect materials
Property tax
Maintenance
Power
Insurance
Depreciation
Flexible Budget at 100% Capacity

Fixed
Variable
Total
cost
Cost
Cost
20000
20000
11250
11250
500
0
500
250
1500
1750
300
0
300
600
1000
1600
200
100
300
175
0
175
1600
0
1600
Direct Materials
Direct Laobur
Supervision
Indirect materials
Property tax
Maintenance
Power
Insurance
Depreciation
Flexible Budget at 192% Capacity

Variable
Total
Cost
Fixed
Cost
18400
18400
10350
10350
500
0
500
250
1380
1630
300
0
300
600
920
1520
200
92
292
175
0
175
1600
0
1600
Exercise 16.12
Exercise 16.13
The Birch
Company
Assembly department
Flexible Budget for one month
Units
3800
Direct Labour Hours
3200
Direct Material
Direct Labour
Fixed Factor Overhead
Supplies
Indrect labour
Other Charges
Total
Chapter 16
60% Capcity
2280
75%
Capacity
2850
1920
2400
2856
17280
670
441
2160
345
23752
3570
21600
670
552
2700
432
29524
Page 86

Cost per Unit
10.42
10.36
Exercise 16.14
Units
Albanese Inc.
Flexible Budget for one month
60%
of N.C
1440
80%
of N.C
1920
960
1280
1600
2880
6048
960
240
1008
432
11568
8.03
3840
8064
960
320
1344
576
15104
7.87
4800
10080
960
400
1680
720
18640
7.77
Direct labour Hours

Direct Material
Direct Labour
Fixed Factor Overhead
Supplies
Indrect labour
Other Charges
Total manufacturing Cost
Manufacturing cost per unit
Chapter 16
Normal Capacilty
(N.C)
2400
Page 87
Chapter 17
Page 88

Exercise 1
Std Cost Per Unit
Actual Qty
Purchased
Actual Puchase
Price
Actual Qty Used
Std Qty
$13.50
4500
Pounds
$60,975
3900 Pounds
3800 Pounds
$
13.55
Actual Rate
Material Purhase Price Variance
Actual Qty Purchased @ actual Rate
$60,975
Actual Qty Purchased @ Std Rate

Unfav Variance
$60,750
$225
Less:
Price Usage Variance

Actual Qty Used @ actual Rate
$
52,845
Less:
Actual Qty Used @ Std Rate
Unfav Variance
$
52,650
$
195
Quantity Variance
Actual Qty Usd @ Std Rate
$
52,650
Less:
Std Qty Used @ Std Rate
Unfav Variance
$51,300
$1,350
Exercise 2
Labor Rate Variance
Actual Hrs @ Std Rate
Act Hrs @ actual Rate
Favorable
$
6,500
$
6,435
$
65
Efficiency
Variance
Actual Hrs used @ std rate
Std Hrs Used @ Std Rate
Unfavorable
$
6,500
$
6,000
$
500
Overall Labor Variance

Actual Hrs @ Act Rate
Std Hrs used @ std rate
Unfav
Chapter 17
$
6,435
$
6,000
$
Page 89

435
Exercise 3
Material Purhase Price Variance
Actual Qty Purchased @ actual Rate
$5,700
Actual Qty Purchased @ Std Rate

fav Variance
$6,000
$300
Less:
Price Usage Variance

$
5,130
Actual Qty Used @ actual Rate

Less:
$
5,400
Actual Qty Used @ Std Rate

fav Variance
270
Quantity Variance
$
5,400
Actual Qty Usd @ Std Rate

Less:
Std Qty Used @ Std Rate
Unfav Variance
$4,080
$1,320
Labor Rate Variance

$
3,720
$
3,751
$
(31)
Actual Hrs @ Std Rate

Act Hrs @ actual Rate
unFavorable
Labor Efficiency Variance
$
3,720
$
4,080
Actual Hrs used @ std rate

Std Hrs Used @ Std Rate
favorable
Exercise 4
Normal Capacity
Std Rate
Budgeted FIX FOH
Variable Rate
Actual Capacity
Actual FOH
Std Capacity Attained
12000
$12.50
$96,000
$4.50
12500
$166,000
11000
CONTROLBLE VARIANCE
ACTUAL FOH
Less: Budgeted@ std
Fix FOH
$96,000
Variable FOH
Std cap*v.rate
11000*4.50
$49,500
Unfavaorable
Chapter 17
360
MHR
Per MHR
Per MHR
MHR
MHR
$166,000
$145,500
$20,500
Page 90

VOLUME VARIANCE
Normal Capacity
Less: Std Capacity
Capacity not utilized
* FIX RATE
UNFAVORABLE
12000
11000
1000
$8
$8,000
MHR
MHR
MHR
Reconciliation of Variances
Actual FOH
$166,000
Less:Std Cap*Std
Rate
$137,500
Unfav
$28,500
20500+8000
$28,500
EXERCISE 4
Normal Cap
Std Rate
Budgeted FIX
16000
$10.40
$64,000
Variable Rate
Actual Cap
Actual FOH
Std Cap Attained
$6.40
15000
$157,000
15300
Spending Variance
Actual FOH
Less: Budgeted FOH@ Act Cap
FIX FOH
$64,000
Variable
$96,000
Fav
Normal Cap
Less: Actual Cap
Excess of std
overactual
* Fix Rate
Unfav
Overall Variance
Actual FOH
Std cap * Std Rate
15300*10.4
Fav
DLH
Per DLH
PER
DLH
DLH
DLH
$157,000
$160,000
$3,000
16000
15000
DLH
DLH
1000
$4
$4,000
DLH
$157,000
$159,120
$2,120
Exercise 17.10
Mix Variance
Material
A
B
C
Total
Chapter 17
Pounds
20
5
25
50
Std
Cost
14
2
5
Amount
280
10
125
415
Page 91

Price of Input
415/50
8.3
Price of Out put
415/40
10.375
Input/Output ratio
40/50
4/5
Actual quantities at standard price

Std
Cost
Material
Pounds
A
230000
14
B
50000
2
C
220000
5
Total
500000
Amount
3220000
100000
1100000
4420000
Actual Quantity at weighted

average price 500000*8.3
4150000
Mix Variance
270000
unfaverable
Yield Varience
Actual input quantity at weighted average of standard material cost=
Actual output quantity at weignther average of standard material cost=
390000*10.375
or
390000*5/4*8.3
4046250
Exercise 17.11
1 Tone=
1 Tonne=
1 Kg=
1 Ton=
Mix Variance
Material
Cocoa
Milk
Sugar
Total
Out Put
1000
0.9842
2.2046
2170
Pounds
800
3700
500
5000
2170
Std
Cost
0.45
0.5
0.25
103750
Amount
360
1850
125
2335
lbs
2335/5000
0.467
Price of Out put
2335/2170
1.076037
Input/Output ratio
2170/5000
217/500
Actual quantities at standard price

Std
Cost
Material
Pounds
A
225000
0.45
B
1400000
0.5
C
250000
0.25
Total
1875000
Chapter 17
4046250
kg
Ton
lbs
lbs
Price of Input
Actual Quantity at weighted

average price 1875000*.467
4150000
Amount
101250
700000
62500
863750
875625
Page 92
Unfaverable

Mix Variance
11875
faverable
Out Put
387*2170
839790 lbs
Yield Varience
Actual input quantity at weighted average of standard material cost=
Actual output quantity at weignther average of standard material cost=
839790*1.076037
875625
903645
28020
Chapter 17
Page 93
Faverable
Chapter 20
Page 94

Exercise 20.1
Woliver Company
Fixed Cost
C.M Per Unit
2*60%
6000
1.2
Break Even in Units=
6000/1.2
5000
Break Even in Dollars=
6000/.6
10000
Exercise 20.2
Sales
Variable Cost
1 Contribution Margin
Fixed Cost
Profit
Units
Dollars
$
7640000
4736800
2903200
2451000
452200
Contribution Margin Ratio
2903200/7640000
Break Even point in Dollars
2451000/.38
2.5
1.675
0.825
.825/2.5
4290
Break Even Point in Dollars=
4290/.33
13000
Break Even Pint in Units=
4290/.825
5200
Target Sales=
4290+8250/.825
33
38000
Dollars
Units
Dollars
5
3
2
2/5
0.4
26000
Break Even Point in Dollars=
26000/.4
65000
Dollars
Break Even Pint in Units=
26000/2
13000
Units
Target Units to be sold=
26000+10000/2
18000
Units
Target Sales=
26000+10000/.4
90000
Dollars
Exercise 20.9
At 100 Capacity Units=
Variable Cost=
Chapter 20
6E+06
Exercise 20.3
Sale Price per unit
Variable Cost
Contribution Margin
Fixed Cost
Exercise 20.4
Sale Price per unit
Variable Cost
Contribution Margin
Fixed Cost
38
350
742
Page 95

Variable Cost at 90%=
Fixed Cost
Total Cost
667.8
1008
1675.8
Unit Cost
5.32
315
Units
per
Unit
Exercise 20.10
Fixed Cost
Fixed FOH
Fixed Marketing Exp
Fixed Admn Exp
Total Fixed Cost
990
1000
1000
Direct Labour
Direct Material
Variable FOH
Variable Marketing
Variable Admin
Total Variable Cost
1500
1400
1000
1000
500
2990
Variable Cost
5400
Sales
10000
Contribution
4600
C.M Ratio
46
65
Units
Break Even Point in Units
2990/46
Incrase in Sales
Increase in Variable Cost
Contribution Margin
Fixed Cost
Profit
10000*125%
5400*125%
12500
6750
5750
2990
2760
Break Even Point in Dollars
2990+690/.46
8000
Exercise 20.5
Margin of Safety=
Margin of Safety
Ratio
2000000-1500000
Dollars
500000
(20000001500000)/2000000*100
Exercise 20.6
Fixed Cost=
CM Ratio=
25
9300
62%
Break Even Sales=
9300/.62
15000
Dollars
Actual Sales=
15000*100/75
20000
Dollars
Profit For The Month=

Sales
Variable Cost
Chapter 20
Dollars
20000
7600
Page 96

Contribution Margin
Fixed Cost
Profit
12400
9300
3100
Or
Profit Ratio= Margin of safety Ratio* CM Ratio
20000*15.5%
3100
Exercise 20.7
Fixed Cost=
CM Ratio=
15.500%
30000
60%
Break Even Sales=
30000/.6
50000
Dollars
Actual Sales=
50000*100/80
62500
Dollars
Profit For The Month=

Sales
62500
Variable Cost
25000
Contribution Margin
37500
Fixed Cost
30000
Profit
7500
Or
Profit Ratio= Margin of safety Ratio* CM Ratio
62500*12%
7500
Exercise 20.8
Sales
Variable Cost
Contribution Margin
Fixed Cost
Planned Profit
12.000%
A
100000*4
B
400000
280000
200000*3
600000
480000
Total
1000000
760000
240000
100000
140000
Exercise 20.11
Table
Sale Price of Package
60*1
Variable Cost of Package
35*1
Contribution Margin of Package
Total Fixed Cost
C.M Ratio
45/120
675000/.375
Break Even point in Units
675000/45
Tables
Chairs
Chair
60
35
37.5
30*2
20*2
1800000
15000
30000
60
40
Total
120
75
45
675000
15000
60
30
Dollars
Package
900000
900000
1800000
Exercise 20.12
L
Sale Price of Package
20*2
Variable Cost of Package
12*2
Contribution Margin of Package
Total Fixed Cost
Chapter 20
M
40
24
15*3
10*3
Total
45
30
85
54
31
372000
Page 97

C.M Ratio
31/85
36.47059
0.364706
372000/.3647
Break Even point in Units
372000/31
L
M
Target Sales
372000+93000/.364
Target Units
372000+93000/31
L
M
Chapter 20
1020000
24000
36000
12000
20
15
1275000
30000
45000
15000
20
15
Dollars
Package
480000
540000
1020000
Dollars
Packages
600000
675000
1275000
Page 98
Chapter 21
Page 99

Exercise 21.1
1
Normal Capaciity
Fixed Cost
Variable cost
75000
225000
10
Cost at 90 % of Normal Capacity

Fixed Cost
Variable Cost
Total Cost
Cost at 80 % of Normal Capacity
Fixed Cost
Variable Cost
Total Cost
Units
Dollars
per Units
67500
225000
675000
900000
60000
225000
600000
825000
Differential Cost between 80% &90 of Capacilty
75000
2
a
The differntial Production cost of 5000 Units

Fixed Cost
10000
Variable Csot
50000
Total Cost
Per Unit total Production
cost
Fixed Cost
Actual
225000
Extended
10000
Total
Variable Cost
80000*10
Total Cost of Production
60000
235000
800000
1035000
Unit Cost of Production(80000)

c
Per Unit differential Cost of 5000 Units

Cost
Units
Differential Cost
12.9375
60000
5000
12
Exercise 21.2
Saugus Insecticide Company
Income Statement for New Business
For the Month Ended---Sales(1.8*5000)
Cost to Manufacture
Direct Material (.6+.01)*5000
Direct Labour(.5*5000)
Factory Over Head
Indrect labour(.2*5000)
Power(600/30000)*5000
Supplies(.02*5000)
Maintenance and Repair(.027*5000)
Depreciation(3000/24)
Chapter 21
9000
3050
2500
1000
100
100
135
125
Page 100

Insurance (.007*5000)
35
Payroll Taxes
210
Total FOH
Total Manufacturing Costs
Gross Profit Contribution
Administrative Expenses
Profit Contribution form accepting new business
Exercise 21.4
Mininum Selling Price
Direct Material
Direct Labour
Variable Factory over head
Shipping expneses
Minimum Selling Prince should be
greater than or equal to $13
1705
7255
1745
150
1595
4
5
2
2
13
Exercise 21.5
Current Cost of Manufacturing 10000 Units
Cost of Purchasing 10000
Units
Cost Purchase
Fixed Cost
190000
10000*18
Less Saving in
Cost
Rent of facilities
Cost of Purchasing 10000
Units
Loss on Purchase
180000
30000
210000
15000
195000
5000
Exercise 21.3
Income statement at 10000 units level
Sales
10000*15
Cost of Sales
Direct Material
Direct Labur
Variable FOH
Fixed FOH
Varialbe Marketing & Admn Exp
Fixed Marketing & Admn Exp
Total Cost of sales
Profit
1
150000
10000*2
10000*3.5
10000*1.5
15000*1
20000
35000
15000
24000
10000
13000
117000
33000
The company should accept the special order because the proposed $9 sale price covers all
variable
Sale Price
Direct material
Direct Labour
Variable factory overhead
Total
Chapter 21
9
2
3.5
1.5
7
Page 101

Less Variable Marketing & Admn Expenses
Current
Special order
1
0.3
1.3
Profit per unit on special order

Total Profit on accepted order
5000*.7
8.3
0.7
3500
Combined Income statement will be as follows

Sales
10000*15
5000*9
Total Sales
Cost of Sales
Direct Material
Direct Labur
Variable FOH
Fixed FOH
Special order Marketing & Admin Exp
Total Cost of sales
Profit
2
150000
45000
195000
15000*2
15000*3.5
15000*1.5
15000*1
30000
52500
22500
24000
15000
13000
1500
158500
36500
If Total Plant Capacity is 13000 Units

Sales
8000*15
5000*9
120000
45000
Total Sales
165000
Cost of Sales
Direct Material
15000*2
30000
Direct Labur
15000*3.5
52500
Variable FOH
15000*1.5
22500
Fixed FOH
24000
15000*1
15000
13000
Special order Marketing & Admin Exp
1500
Total Cost of sales
158500
Profit
6500
So there is loss of profit if the total plant capacity is 13000 units and 5000 units are
accepted at 9 per unit
Exercise 21.6
Current Cost of Manufacturing 100000
Direct Material
260*1000
Direct Labour
100*1000
Varialbe FOH
120*1000
Fixed FOH
160*1000
Total Cost
Cost of Purchasing 100000 Units
Cost Purchase
1000*600
Fixed Cost(160000-90000-50000)
Profit on Purchase
Chapter 21
260000
100000
120000
160000
640000
600000
20000
620000
20000
Page 102

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COST ACCOUNTING 9TH EDITION

Digitally signed by Muhammad Shahid

COST ACCOUNTING 9TH EDITION

3) Determine the estimated total varialbe cost per unit.

COST ACCOUNTING 9TH EDITION

Total Manufacturing Cost

Cost of Goods Sold

COST ACCOUNTING 9TH EDITION

Income Tax Withheld

Work in process Control

Work in process Control

Cost of Goods Sold

COST ACCOUNTING 9TH EDITION

5. Journal entries for the cost accountng Cycle.

Work in process Control

COST ACCOUNTING 9TH EDITION

Work in process Control

Cost of Goods Sold

Work in Process Control

COST ACCOUNTING 9TH EDITION

Work in process Control

Work in process Control

Cost of Goods Sold

COST ACCOUNTING 9TH EDITION

COST ACCOUNTING 9TH EDITION

Income Statement relationships.

Cost of goods available for sale

COST ACCOUNTING 9TH EDITION

2.3 Cost accounting Cycle in T Accounts

Work in Process Control

Cost of Goods Sold

COST ACCOUNTING 9TH EDITION

Material Issued to production

2.4 Journal Entries for the cost accounting cycle.

Facotory Overhead Control

Work in Process Control

Cost of Goods Sold

Work in process Control

Work in process Control

COST ACCOUNTING 9TH EDITION

Work in process Control

Cost of Goods Sold

2.5 The Cost Accounting Cycle.

Work in process Control

COST ACCOUNTING 9TH EDITION

Work in process Control

Work in process Control

Work in process Control

Cost of Goods Sold

Cost of Goods Sold

COST ACCOUNTING 9TH EDITION

Income Tax with

Factory Over Head Control

COST ACCOUNTING 9TH EDITION

Sales Expenses Control

Admn Salaries Control

2.6 Cost of goods sold statement; Income Statement

COST ACCOUNTING 9TH EDITION

COST ACCOUNTING 9TH EDITION