Q No. 1 a. How cost accounting is superior over
financial accounting? (10+10)
Cost accounting is superior to financial accounting in many ways. Cost accounting provides more
detailed and comprehensive information about a company’s finances than financial accounting does. For example, cost accounting provides a clearer picture of the actual cost of producing a product or providing a service, whereas financial accounting only provides a general overview of the company’s financial performance. Additionally, cost accounting provides more detailed information about a company’s inventory and cost of goods sold, which is important for decision-making purposes. Cost accounting also provides more detailed information about fixed costs, such as overhead and depreciation, that are not reported in financial accounting. Finally, cost accounting provides detailed data about product and service costs that are not available in financial accounting, such as the cost of materials, labor, and overhead.Dear Student,
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Describe the classification of Costs on the basis of Decision
Making.
1. Controllable Costs: These costs
are those that can be easily managed and controlled by a decision maker.
Examples of controllable costs include wages, rent, and materials.
2. Non-Controllable Costs: These costs
cannot be easily managed and controlled by a decision maker. Examples of
non-controllable costs include taxes, interest, and insurance.
3. Fixed Costs: These costs do
not vary with the level of activity. Examples of fixed costs include rent,
insurance, and depreciation.
4. Variable Costs: These costs
vary with the level of activity. Examples of variable costs include wages,
materials, and utilities.
5. Direct Costs: These costs
can be directly associated with the production of a product or service.
Examples of direct costs include materials, labor, and overhead.
6. Indirect Costs: These costs
are not directly associated with the production of a product or service.
Examples of indirect costs include advertising, marketing, and research and
development.
Q No. 2 (a) What is
meant by the term cost of goods manufactured? Why does this item appears on an
income statement? (20)
Cost of goods manufactured (COGM) is a term used in accounting to
refer to the total cost of producing a company's products or goods. It includes
the direct costs of materials, labor, and manufacturing overhead, as well as
any other costs that are directly related to the production of the goods. COGM
appears on an income statement because it is subtracted from the company's
revenue to determine the gross profit for the period. This helps investors and
management understand how much profit is being generated by the production and
sale of goods, as well as the efficiency of the company's manufacturing
operations.
(b) The following data
relate to the Alibaba Corporation:
|
|
Inventories |
|
|
|
Ending |
Beginning |
|
Finished Goods |
Rs. 95,000 |
Rs. 110,000 |
|
Work in Process |
80,000 |
70,000 |
|
Direct Material |
95,000 |
90,000 |
Cost of goods available for sale Rs. 684,000; Total Manufacturing
Cost Rs. 584,000; Factory overhead Rs.167,000; Direct material used Rs.
193,000. Prepare the Cost of Goods Sold Statement
Solution:
Cost of goods sold statement
Cost of goods available for sale:
Finished goods (beginning inventory) 110,000
Work in process (beginning inventory) 70,000
Direct materials (beginning inventory) 90,000
Total cost of goods available for sale 684,000
Cost of goods manufactured:
Direct materials used 193,000
Direct labor not provided
Factory overhead 167,000
Total manufacturing cost 584,000
Cost of goods sold:
Cost of goods manufactured 584,000
Finished goods (ending inventory) 95,000
Work in process (ending inventory) 80,000
Direct materials (ending inventory) 95,000
Total cost of goods sold 554,000
Q No. 3: The Noor industries had the following inventories balances
as on 1st
September,2014:
Raw materials Rs. 25,000 Work in process- Material Rs. 1,000
Finished goods Rs. 14,000 Work in process- Labour Rs. 15,000
Work
in process- FOH Rs.
6000
During the month
of September, cost of material purchased was Rs. 60,000, wages paid to direct
labour was Rs. 80,000 and wages paid to indirect labour was Rs. 30,000.
On September 30,
2014 inventories were:
Raw materials Rs. 23,000 Work in process- Material Rs.
5,000
Finished goods Rs. 22,000 Work in process- Labour Rs.
9,000
Work
in process- FOH Rs.
4,000
Required: Prepare journal entries on September 30, 2014 to complete
the cost accounting cycle
Solution:
To record the cost of raw materials purchased during the month of
September:
Debit: Raw Materials 60,000
Credit: Accounts Payable 60,000
To record the cost of direct labor wages paid during the month of
September:
Debit: Direct Labor 80,000
Credit: Accounts Payable 80,000
To record the cost of indirect labor wages paid during the month of
September:
Debit: Indirect Labor 30,000
Credit: Accounts Payable 30,000
To record the cost of factory overhead incurred during the month of
September:
Debit: Factory Overhead 30,000
Credit: Accounts Payable 30,000
To record the cost of goods manufactured:
Debit: Work in Process - Material 1,000
Debit: Work in Process - Labor 15,000
Debit: Work in Process - FOH 6,000
Debit: Raw Materials 25,000
Debit: Direct Labor 80,000
Debit: Indirect Labor 30,000
Debit: Factory Overhead 30,000
Credit: Work in Process - Material 5,000
Credit: Work in Process - Labor 9,000
Credit: Work in Process - FOH 4,000
Credit: Raw Materials 23,000
To record the cost of goods sold:
Debit: Cost of Goods Sold
Credit: Finished Goods 14,000
To record the cost of goods available for sale:
Debit: Finished goods 22,000
Credit: Cost of goods available for sale
Q No. 4 Departmental cost of production report indicates the
production and cumulative cost
information. Describe the contents of
such Report. (20)
A departmental cost of production report typically includes the
following information:
Production Information: This section
includes information on the number of units produced, the type of products or
goods produced, and any other relevant production data.
Direct Materials: This section
includes information on the cost of direct materials used in production, such
as raw materials and parts. It may also include information on the quantity of
direct materials used.
Direct Labor: This section
includes information on the cost of direct labor, such as wages and benefits
paid to workers who are directly involved in the production process. It may
also include information on the number of direct labor hours worked.
Manufacturing Overhead: This section
includes information on the cost of indirect materials, indirect labor, and
other indirect costs incurred in the production process.
Total Cost of Production: This section
includes the total cost of production, which is the sum of the direct
materials, direct labor, and manufacturing overhead costs.
Cost per Unit: This section
includes the cost per unit, which is calculated by dividing the total cost of
production by the number of units produced.
Cumulative costs: This section
includes the cumulative costs of production, including the cost of raw
materials, direct labor, and manufacturing overhead. It also includes the total
cost of production and the cost per unit. It will also include the cumulative
cost of goods sold.
Production variances: This section
includes the variances between actual and budgeted costs, such as material
price variance, labour efficiency variance etc.
The report is usually presented in tabular or graphical form, and
it is intended to provide management with detailed information about the costs
of production, which can be used for budgeting, cost control, and
decision-making purposes.
Q No. 5 Nishat Manufacturing Company’s Department 2 costs for May,
2014 were extracted from the cost accounting record as under:-
Cost from
Department 1. Rs. 32,640
Cost incurred by
Department 2.
Materials Rs. 86,830
Labour Rs.112,200
Factory overheads Rs.
58,575
The record shows that 12,000 units were received during the month
from Department 1. The Department 2 transferred 7,000 units to the Finished
Goods Warehouse. The work in process at the end of May were 5,000 units which
were 100% complete as to the material cost but only 25% were complete as to the
conversion cost.
Required: Prepare a cost of production report for department 2.
Solution:
Cost of Production Report for Department 2 for May, 2014:
Materials:
Beginning WIP: 0 units
Received from Department 1: 12,000 units
Total Materials Available: 12,000 units
Ending WIP: 5,000 units
Materials Used: 7,000 units
Cost of Materials Used: Rs. 86,830
Labour:
Conversion Cost Incurred: Rs. 112,200
Factory Overheads:
Factory Overheads Incurred: Rs. 58,575
Total Manufacturing Costs:
Materials: Rs. 86,830
Labour: Rs. 112,200
Factory Overheads: Rs. 58,575
Total: Rs. 257,605
Cost per Unit:
Total Manufacturing Costs: Rs. 257,605
Total Units Produced: 7,000 units
Cost per Unit: Rs. 36.80
Work in Process:
Units: 5,000 units
Percentage Complete as to Material: 100%
Percentage Complete as to Conversion: 25%
Cost Incurred: Rs. (36.80 x 5,000 x 25%) = Rs. 4,350
Cost Transferred to Finished Goods Warehouse:
Units Transferred: 7,000 units
Cost Transferred: Rs. (36.80 x 7,000) = Rs. 257,600
Cost Received from Department 1:
Units Received: 12,000 units
Cost Received: Rs. 32,640
Dear Student,
Ye sample assignment h. Ye bilkul
copy paste h jo dusre student k pass b available h. Agr ap ne university
assignment send krni h to UNIQUE assignment
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0313-6483019
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