ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

COST ACCOUNTING (462)

CHECKLIST

SEMESTER: SPRING, 2021

This packet comprises the following material:

1. Course Outlines
2. Assignment No. 1 & 2
3. Assignment Forms (2 sets)

In this packet, if you find anything missing out of the above-mentioned material, please
contact at the address given below:

The Deputy Registrar

Mailing Section, Services Block # 28
Allama Iqbal Open University
H-8, Islamabad
Phone: 051-9057611-12

Prof. Dr. Syed Muhammad Amir Shah

(Course Coordinator)

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 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)

WARNING
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2. Submitting assignment/s borrowed or stolen from other/s as one’s own, will
be penalized as defined in “AIOU Plagiarism Policy”.
3. You are required to solve all questions if you are unable to understand any
question of assignment, do seek help from your concerned tutor. But keep in
mind that tutors are not supposed to solve the assignment questions for you.
Assignment No. 1
(Units 1-4)
Course: Cost Accounting (462) Semester: Spring, 2021
Level: B. Com Marks: 100
Pass Marks for B.A/ B.Com: 40
Pass Marks for A/D/ BS: 50

Q.1 (10+10)
a. ‘Cost accounting is an aid to management’. Discuss the main points in support of
this statement.
b.Define the following key terms: (i) Cost Driver (ii) Value added Costs (iii)
Multiple costing (iv) Direct Cost (v) Differential Cost

Q.2 (20)
The book and record of the Fazal Khan Manufacturing Co. presents the following
data for the month April:

Direct Labour cost Rs. 15,000 (150% of FOH)

Cost of Goods Sold Rs. 56,000; Sales Rs. 75,000.
Inventory accounts showed the following balances:
Inventories April 1 April 30
Finished Goods Rs. 14,000 Rs. 18,000
Work in Process 8,000 12,000
Materials 10,000 8,600
Marketing expenditure Rs. 3,200, General and Administrative expenses Rs. 2,400.
Required: Prepare income statement with supporting schedule showing cost of goods
manufactured and sold statement.

Q.3 (20)

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Saleem Manufacturing Company uses a job order cost system, and compiled the
following data for the month ended on 30th June, 2014:

Material and Supplies Purchased Rs. 242,000

Direct Material Used 190,000
Supplies Used 20,000
Direct Labour 150,000
Other Labour 35,000
Utility Costs for year 65,000
Miscellaneous Overhead 40,000
Depreciation Equipment 22,000
Depreciation Building 8,000
Applied factory Overhead (20% of direct labour costs)
Cost of Goods completed (material, Rs. 170,000; labour Rs. 130,000) 326.000
Sales 500,000
Selling and Administrative Expenses 110,000
Required: Pass Appropriate Journal entries to record the above given information and
calculate the net income.
Q.4 (20)
What is the difference between Job order costing and Process costing? Describe the
components of Process costing.
Q.5 (20)
During July 2014, the Assembly Department received 60,000 units from the Cutting
Department at a unit cost of Rs. 3.54. Costs added in the Assembly Department were:
materials, Rs. 41,650; labour, Rs. 101,700; and factory overhead, Rs. 56,500. There was
no beginning inventory. Of the 60,000 units received, 50,000 were transferred out; 9,000
units were in process at the end of the month (all materials, 2/3 converted) 1,000 lost
units were ½ complete as to materials and conversion costs. The entire loss is considered
abnormal and is to be charged to factory overhead.
Required: Prepare a cost of production report of Assembly Department for July 2014.

Assignment No. 2
(Units 5-9)
Marks: 100
Pass Marks for B.A/ B.Com: 40
Pass Marks for A/D/ BS: 50
Q.1 (20)
The Alpha Manufacturing Company is purchasing a particular material at the cost
of Rs. 300 per unit. Monthly usage is 1,500 units. The ordering cost is Rs. 50 per
order and the annual carrying cost is 16%. Presently the procurement of material
is based on Economic Order Quantity modeling. A supplier has offered the
company for supply of requisite material at 5% discount if the orders in the lots of
3,000 units are placed.

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Required: Evaluate this offer if the company should accept this offer or purchase
the materials on Economic Order Quantity basis.
Q.2 (20)
The Surgical Instrument Company manufactures for stock purposes a number of
high precision instruments which must meet strict specifications. During last month
an order for 200 instruments was executed by the company and following costs
were incurred: -
Material cost Rs. 130,000
Direct labour Rs. 90,000
MOH Applied 120% of Direct labour
The Quality Control Department rejected 15 instruments as they could not comply
with the technical standards as were envisaged. In order to rework for removal of
defects in the defective instruments the additional costs as appended below were
committed to rework:-
Material cost Rs. 6,000
Direct labour Rs. 2,500
MOH Applied 120% of Direct labour
Required: Record the manufacturing costs and additional costs incurred on
removal of defects and rework under each of the following options: -
a) When the rework costs are charged directly to the job from which defects
were noticed.
b) When additional costs incurred on reworking are charged to the overall
periodic production.
Q.3 (20)
Describe the functions of a Time keeping department and various methods used
for controlling the attendance of workers in a factory.
Q.4 (20)
Faizan & Co applied manufacturing expenses to production by means of a
predetermined rate based upon normal capacity production.
Manufacturing expenses at Normal Capacity of 400,000 Direct Labour are
estimated to be Rs. 340,000; of which Rs. 120,000 are Fixed and Rs. 220,000 are
variable expenses. Actual Direct Labour Hours for the year are 368,000 and the
total actual manufacturing expenses amounted to Rs. 305,000.
Required: Calculate (i) Total over or under applied Factory overheads (ii)
Budgeted and Capacity Variance.
Q.5 (20)
The Oxford Garments Industries is comprising four departments. Cutting, Stitching and
Finishing are the Production departments whereas the Procurement is the Servicing
Department. Actual overhead costs for June, 2014 are as under:-
Rent Rs. 200,000 Supervision Rs. 30,000
Repair & maintenance Rs. 12,000 Insurance Rs. 10,000
Depreciation of Plant Rs. 90,000 Lighting Rs. 12,000
Power consumption Rs. 18,000
The following further data is also available in respect of the four departments:-
Particulars Cutting Stitching Finishing Procurement
Square foot area occupied 150 110 90 50
Number of workers 24 16 12 8
Total Wages Rs. 240,000 Rs. 192,000 Rs. 96,000 Rs. 80000
Value of Plant Rs. 200,000 Rs. 600,000 Rs. 100,000 –
Value of Stock Rs. 150,000 Rs. 90,000 Rs. 60,000 –
Required:

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Apportion the overhead costs over various departments on most equitable basis and
prepare the overheads distribution statement