Cost and Management Accounting – Test 1

Suggested Answers
Certificate in Accounting and Finance – Autumn 2022

Note regarding marking scheme:

The marking scheme is given as a guide. Markers also award marks for alternative approaches to a question and
relevant/well-reasoned comments/explanations. Moreover, the available marks in answer may exceed the total marks of a
question.

Answer No. 1
Inventory Reconciliation Statement
Rs. Marks
Inventory at 8th May 2020 72,200
Less: Purchases during this period (21,200) 0.5
Add: Purchases returns 510 0.5
Add: Sales revenue on cost (Rs. 25,740 ÷ 130% x 100%) 19,800 01
Less: Sales return on cost (Rs. 273 ÷ 130% x 100%) (210) 01
Add: Goods taken for personal use 700 0.5
= Inventory at 8th May 2020 71,800
Less: Damaged Inventory on cost (Rs. 390 ÷ 130% x 100%) (300) 01
Less: Decrease in NRV of inventory (400) 0.5
Less: Goods taken on sale or return basis (950) 0.5
Less: Goods already sold but awaiting collection (Rs. 1,560 ÷ 130% x 100%) (1,200) 01
= Correct value of inventory at 8 th May 2020 68,950 0.5

Answer No. 2
Rs. Rs.
Material purchased during June 2020
1) Material inventory 200,000
To Creditors 200,000 (01)

Materials issued for use in production

2) Work in process inventory 150,000
Factory overheads 15,000
To Material inventory 165,000 (01)

Defective materials returned to Storeroom

3) Material Inventory 18,000
To Work in process 15,000
To Factory overheads 3,000 (01)

Defective materials returned to supplier

4) Creditors 18,000
To Material Inventory 18,000 (01)

Payroll
5) Wages expense 145,000
To Wages payable 145,000 (01)

6) Work in process 120,000

To Wages expense 120,000 (01)

7) Factory Overheads 25,000

To Wages expense 25,000 (01)

Actual Overheads
8) Factory overheads 42,000
To Cash 32,000
To Accumulated Depreciation 10,000 (01)

Overheads absorbed
9) Work in process 45,000
To Factory Overheads applied (Rs. 180,000 x 25%) 45,000 (01)
 Cost and Management Accounting – Test 1
Suggested Answers
Certificate in Accounting and Finance – Autumn 2022
Over absorbed overheads
10) Factory overheads 3,000
To cost of sales 3,000 (01)

11) Finished goods 250,000

To Work in process 250,000 (01)

12) Cost of goods sold 210,000

To Finished goods 210,000 (01)

13) Cash 225,000

To Sales 225,000 (01)

14) Trade recievables 75,000

To Sales 75,000 (01)

Answer No. 3
Store Ledger Card – AVCO Method
Date Reciepts Issues Balance
Unit Rate Cost Unit Rate Cost Unit Rate Cost
March 1 150 6 900
March 3 150 6.10 915 300 6.05 1,815 01
March 8 100 6.05 605 200 6.05 1,210 01
March 12 100 6.35 635 300 6.15 1,845 01
March 18 (50) 6.10 (305) 250 6.15 1,538 01
March 24 150 6.15 922 100 6.15 615 01
March 26 (30) 6.15 (185) 130 6.15 800 01
March 30 50 6.15 307 80 6.15 492 01
1,649 492
Total Purchases for the month = Rs. 915 + Rs. 635
= Rs. 1,550 01