Ce diaporama a bien été signalé.
Le téléchargement de votre SlideShare est en cours. ×

# assigemnt no 2.docx

Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Prochain SlideShare
Cost & Management Accounting
Chargement dans…3
×

## Consultez-les par la suite

1 sur 4 Publicité

# assigemnt no 2.docx

Cost Accounting Assignment

Cost Accounting Assignment

Publicité
Publicité

## Plus De Contenu Connexe

Publicité

### assigemnt no 2.docx

1. 1. Name:Muhammad Zohaib Father Name:Muhammad Khalid ID:08NAD00543 Roll No:408103067 Program:B.Com Course Code:462/5410 Semester : Spring 2022 Assignment No:02 Contact No:00966590356020 Email:abbasimz@live.com Country : Saudi Arabia City:Riyadh Question No 1 Solution Alpha Manufacturing company If company accept this offer EOQ=√𝐴𝑅𝑋2𝑋𝑂𝐶 CC EOQ=√18000unitsX2X50 285X16% =√1,800,000 45.6 =√39,474 =199units And if Alpha Manufacturing company purchase material on EOQ basis. EOQ=√ARX2XOC CC EOQ=√18000unitsX2X600 300X16% =√21,600,000 48 =√450,000 671units Note:Requirement No 2 can’t completed due to the in-completed Data. Question no 2 Answer First in First Out (FIFO) Method This method is based on the assumption that materials which are purchased first are issued first. It uses the price of the first lot of material purchased for all issues of units until the lot is fully exhausted. Then the issue of material from the next lot is taken up and accordingly the cost from the second lot is adopted for assigning the cost to the material so issued and this principle remains in practice continuously. In other words, the materials are issued at the oldest cost listed in the store ledger card and the material left in the store is valued at the price of latest purchase. The following advantages are claimed from the application of FIFO method a) It is based on the natural flow assumption because the materials are issued in the sequence of receipts. b) The issued materials are charged to the production at actual cost thus no unrealized profit/loss arises from application of this method. c) Valuation of ending inventory is mostly equal at the prevailing cost of inventories. d) This method is easy to understand and simple to operate. FIFO costing method disadvantages a) As the oldest cost is charged to the production, therefore, the production cost may lag behind the current economic values. b) The lower cost of production may indicate higher profitability and greater amount of tax liability.
2. 2. c) When the prices of materials are fluctuating, this method involves cumbersome calculations to assign the cost to the material consumed and the material available in the ending inventory. Last in first out (LIFO) Costing Method This method operates just in reverse sequence of FIFO method. The LIFO method is based on the assumption that the material purchased through last lot (most recent) are the First material issued to production. Thus the cost of the last lot of materials purchased is used first for all issuance until all the units from this lot have been exhausted. Thereafter, the cost of the previous lot of material purchased is used for issuance of materials if in the mean time no fresh lot of material is purchased. This results in leaving the old items of material inventory in stock. The LIFO method of application may have the following advantages a) The cost of material is charged to production at the most recent cost. Thus during rising costs of material, the product costs will be matching to the current prices and the residual profit will be more realistic. Conversely in case of falling costs of materials, the profitability would be greater if no change in the sale price is effected. b) This method also does not result into any unrealized profit likewise FIFO method as the relevant costs of material are charged to the product cost and selling prices are then fixed. c) The LIFO method is also quite simple to operate particularly when prices are fairly steady. d) This method is often favoured from tax consideration as in view of material cost escalation, which is a usual phenomenon in our country, the resultant profit may be declining and lower liability of tax is assumed. The LIFO costing method may also have certain disadvantages as enumerated below:- a) This method is not realistic as it does not conform to the physical flow of materials. b) The ending inventories are valued at old prices, usually, lower than current prices, in view of price escalation trend. Therefore, this method does not represent the current economic values of inventories in the balance sheet. c) Likewise FIFO costing method, the LIFO costing method may also indicate different costs of material for similar jobs being carried out simultaneously because Mate rials were issued from different lots and at different costs. Thus cost comparison of jobs renders it difficult Question 3 Solution Millat Tractors Company Group Bonus Days Hours worke -d Productio- n in units Standard Producti -on Excess Productio- n Percentag -e increase Percentage to Decimal Hourly Bonus Rate Each day Weekly Weekly Earning Monday 80 4450 4000 450 11% 0.11 14.85 1188 8316 9504 Tuesday 74 4050 3700 350 9% 0.09 12.15 899 6294 7193 Wednes day 80 4510 4000 510 13% 0.13 17.55 1404 9828 11232 Thursda y 76 4370 3800 570 15% 0.15 20.25 1539 10773 12312 Friday 72 4180 3600 580 16% 0.16 21.6 1555 10886 12442
3. 3. Question 04 Solution Basharat Production Industries For the year of 2014 Budgeted factory overhead Rs. 5000,00 Predetermined Rate=Estimated foh/Estimate capacity level 40% Actual Factory Overheads Rs. 455,000 Applied Overhead Cost=Actual Capacity X Overhead Rate 4,800 Budgeted Machine Hours 12,500 Hours Over/Under Absorbed FOH=Budgeted FOH - Actual FOH 45,000 (over Applied FOH because Budget is grater than Actual) Actual Machine Hours 12,000 Hours Journal Entries Debit Credit A) Factory Overhead 4,800 Voucher Payable 4,800 B) Work in process A/C 4,800 FOH Applied A/C 4,800 C) FOH Over Applied A/c 45,000 CGS A/C 45,000 Question 05 Solution Petiwal Production Company Proration of Service Departments Overheads Using the Step Method Particulars Total Producing Department P1 P2 Servicing Departments S1 S2 FOH before distribution of servicing Department Rs.600,000 200,000 238,000 72,000 90,000 Distribution of S1 Department 28,800 36,000 (72,000) 7200 Distribution of S2 Department 32,400 64,800 - 97,200 Total Rs. 600,000 261,200 338,800 - -
4. 4. Proration of Service Departments Overheads Using the Algebraic Method Particulars Total Producing Department P1 P2 Servicing Departments S1 S2 FOH before distribution of servicing Department Rs.600,000 200,000 238,000 72,000 90,000 Distribution of S1 Department 45,000 56250 (112,500) 11,250 Distribution of S2 Department 20,250 40,500 40,500 101250 Total Rs. 600,000 265,250 334,750 - -