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Monday, December 3, 2012

MGT 402 SUBJECTIVE SOLVED




MGT 402 SUBJECTIVE FILE SOLVED

Question No: 35        ( Marks: 3 )
Barley Ltd produces a certain food item in a manufacturing process. On 1st November there was no opening stock in process. During November, 700 units of material were put in to process, with a cost of Rs, 20,000. Direct labor cost in November was Rs.15; 000.production overhead is absorbed at the rate of 300% of direct labor costs. Closing stock on 30th November consisted of 200 units which were 100% completed as to materials and 80% completed as to labor and over head.

Required: Calculate the quantity of units completed and transfer-out

SOLUTION:

Units of opening work in process =700units
Units put into the process= 200units
Units completed and transfer out =700+200=900units



Question No: 36        ( Marks: 5 )
The higher rate of labor turnover results in increased cost of production. Discuss the Effect of Labor Turnover
Effect of Labor Turnover


The higher rate of labor turnover results in increased cost of production:


(i) Increased cost of new recruitment, training, (ii) Interruption of production,
(iii) Decrease in production due to inefficiency and inexperience of newly recruited workers,
(iv) The new workers are more accident prone and are liable to cause more damage to machinery, tools than old employees,


(v) Losses due to wastage, spoilage and defectives,
(vi) Increased number of accidents causing loss of output and increase in medical expenses and cost of repairs,
(vii) Lack of cooperation and coordination between old and new employees resulting fall in output and increased cost of production,



Question No: 37        ( Marks: 5 )

Units
Units transferred to next department
40,000
Units still in process (all material, 2/3 labour & FO H)
8,000
Abnormal loss (1/2 complete as to material, Labour and FOH)
1,000

Following costs were added during the process.

Materials
Rs.40,500
Labour
101,700
Factory overhead
50,500

Required: C QUANTITY SCHEDULE:
Unit received from departmet

49000
Unit completed and transfer to next
40000

Unit still in process(all material, 2/3 labour & FO H)
8000

Abnormal loss (1/2 complete as to material, Labour
and FOH)
10007    
49000




III- Calculation of Equivalent Units Produced:
Direct material=40000+(8000*100%)+(1000*1/2)=RS48500
Direct labor =40000+(8000*2/3)+(1000*1/2)=RS45833.33333
F.O.H=40000+(8000*2/3)+(1000*1/2)=RS RS45833.33333

Calculation Of Per Unit Cost:
= Total Cost/Equivalent Units Produced Material=40,500/48500 unit Material=0.83505 per unit

Labor=101700/45833.33333 unit
Labor=2.2189 per unit

Foh=50500/45833.3333 unit
FOH=1.101818 per unit



Question No: 35  ( Marks: 3 )                                                                                                       
50, 000 units were received from preceding department, 9,000 units were still in process at the end of month (complete all material, 75% Labour & FOH). 500 lost units were
60% complete as to material and conversion costs. This loss is considered as abnormal and is to be charged to factory overhead.
Required:   You are required to calculate equivalent units of material, labour and factory overhead. 


QUANTITY SCHEDULE:
Unit received from departmet

49000
Unit completed and transfer to next
40000

Unit still in process(all material, 2/3 labour & FO H)
8000

Abnormal loss (1/2 complete as to material, Labour and FOH)
10007    
49000



Question No: 36    ( Marks: 5 )
Irfan Industries Limited has two production departments A and B and two mutually interdependent service departments X and Y. Cost of service departments is apportioned on the basis of following %ages:


A
B
X
Y
Service department X
50%
30%
-
20%
Service department Y
40%
50%
10%
-

Following figures of departmental costs are available after the primary distribution:

Department A
15,750
Department B
7,500
Department X
11,750
Department Y
5,000

Calculate total factory overhead of production department by preparing a work sheet showing the secondary distribution using Repeated apportionment method.

Solution

Irfan Industries Limited
Work Sheet showing secondary distribution
Repeated apportionment method


Particulars
Production department
Service department
A
B
X
Y



Departmental Cost after
RS
RS
RS
RS
Primary distribution
15,750
7,500
11,750
5,000
Secondary distribution




Service department X
5,875
3,525
(11,750)
2,350
Service department Y
2,940
3,675
735
(7,350)
Service department X
368
220
(735)
147
Service department Y
59
73
15
(147)
Service department X
7
5
(15)
3
Service department Y
1
2
-
(3)
Total
25,000
15,000
0
0

Question No: 37    ( Marks: 5 )
Factory overhead absorption rate of a pharmaceutical is Rs 2.50.     Budgeted Factory overhead at two activity levels is as follows for that period.


Activity level
Budgeted factory overhead
Low
20,000 Hours
Rs. 45,000
High
40,000 Hours
Rs. 75,000
Actual Factory overhead for that period was Rs. 42,000 and actual volume was 25,000
hours.

Required:
i.    Variable factory overhead absorption rate
ii.  Budgeted variable factory overhead at high activity level 40,000 hours. iii. Budgeted fixed factory overhead


Activity level
Budgeted factory overhead
Low
20,000 Hours
Rs. 45,000
High
40,000 Hours
Rs. 75,000
Change
20000  hours
Rs 30000

1. Variable rate= Change in budgeted FOH/ Change in activity level
Variable rate=30000/20000
Variable rate=RS 1.5 PER HOUR

2.Budgeted fixed factory overhead
Total FOH for 40000 machine hours = Rs. 75000
Budgeted variable FOH = 40000 hrs Rs 1.5 = Rs. 60000
Budgeted fixed FOH = Rs 75000 less Rs. 60000 = Rs. 15000


Budgeted Activity Level
Budgeted activity level = Fixed FOH/fixed rate
Budgeted activity level=15000/2.25 less 1.5
Budgeted activity level=20000 hours




Question No: 35  ( Marks: 3 )                                                                                                       
Schlamber Company Factory overhead rate is Rs.2 per hour. Budgeted overhead for
3,000  hours  per month is  Rs.  8,000  and  7,000  hours  is  Rs. 12,000.  Actual factory overhead for the month was Rs.9, 000 and actual volume was 5,000 hours.

Required:
1.   Applied overhead
2.   Over-or under applied overhead.
SOLUTION:


Activity level
Budgeted factory overhead
High
7000 hours
Rs. 12000
Low
3000 hours
Rs. 8000
Change
4000 hours
Rs 4000
1. Variable rate= Change in budgeted FOH/ Change in activity level
Variable rate=4000/4000
Variable rate=RS 1 PER HOUR

2.Budgeted fixed factory overhead
Total FOH for 70000 machine hours = Rs.12000
Budgeted variable FOH = 7000 hrs Rs 1 = Rs. 7000
Budgeted fixed FOH = Rs 12000 less 7000=  RS 5000

Budgeted Activity Level
Budgeted activity level = Fixed FOH/fixed rate
Budgeted activity level=5000/2 less 1
Budgeted activity level=5000 hours

REQUIRMENT NO 1
APPLIED FOH=Actual volume x FOH absorption rate
APPLIED FOH=5000*2
APPLIED FOH=RS 10000


REQUIRMENT NO 2

2.Over-or under applied overhead.  RS
Actual FOH                                     9000
Applied FOH                                 10000
UNDER APPLIED                         1000



  
Question No: 37  ( Marks: 5 )                                                                                                         
PA   limited  operates  a  job  costing  system.  The  company  standard  sale  price  is predetermined Rs. 505 based on cost plus 20% profit margin. The estimated cost for Job
# 141 is as follows:

Direct material
5 meters@ Rs.20 per meter
Direct labor
14 hours@ Rs. 8.00 per hour

Production overhead for the year are budgeted to be Rs.200,000 and are to be recovered on the basis of the total 40,000 direct labor hour for the year.
Required:
Calculate Cost of Goods Sold for job # 141
Calculate amount of profit for job #141
Question No: 35    ( Marks: 3 )
Units  transferred  out  to  next  department  20,000  units.  Units  lost  at  beginning  of production 500 units.  Units in process 2,500 units which were complete as to materials,
1/2 complete as to labor and factory overhead.

Required: Prepare the Quantity Schedule

SOLUTION

QUANTITY SCHEDULE:
Unit received from department

23000
Unit completed and transfer to next
20000

Unit still in process(materials, 1/2 complete as to labor and factory overhead)
2500

UNIT LOST
500
23000




Question No: 36  (Marks: 5)                                                                                                         Patacake Ltd produces a certain food item in a manufacturing process. On 1st November there was no opening stock in process. During November, 500 units of material were put
in to process, with a cost of Rs, 9,000. Units completed and transferred-out were 400
units. Direct labor cost in November was R.3840. Production overhead is absorbed at the rate of 200% of direct labor costs. Closing stock on 30th November consisted of 100


units which were 100% completed as to materials and 80% completed as to labor and over head.

Required: The full production cost of completed units during November?

SOLUTION



PATA CAKE LTD DEPARTMENT NO……
COST OF PRODUCTION REPORT
FOR THE MONTH ENDED ON 30TH NOVEMBER

QUANTITY SCHEDULE:
Unit received from departmet

500
Unit completed and transfer to next
400

Unit still in process(100% completed as to materials and
80% completed as to labor and over head.)
100
500

II-Cost Accumulated in the Department / Process:

Total cost RS
TU RS
Direct Material
9000
18
Direct Labor
3840
8
Factory overhead                                                                            7680                     16
Total cost to be accounted for                                                              20520                     42



III-Calculation of Equivalent Units Produced: (100% of completed units + % of units in process) Material=400+100*100%= 500
Labor=400+100*80%=480
Foh=400+100*80%=480

IV- Unit Cost:
=Total cost / Number of Equivalent units produced
MATERIAL=9000/500units= 18 units LABOR=3840/480 units= 8 units FOH=7680/480 units = 16 units

V- Apportionment of the Accumulated Cost:
No of completed units x Total cost per unit
400                            x     42                           =                                                   16800

Material             100*18                                                                    1800



Labor
80*8
640
Foh
80*16
1280             4200
TOTAL COST ACCOUNTED FOR                                                                        20520





Question No: 37  ( Marks: 5 )                                                                                                         
Ali  Company estimates its factory overhead for the next period at Rs. 64,000.                            It is estimated that 30,000 units will be produced at material cost of Rs. 65,000. Production will require 25,000 direct labor hours at an estimated cost of Rs. 130,000. The machine will run about 18,000 hours.
Required: the predetermined factory overhead rate based on:
i.    Units of production ii.  Direct labor hours iii. Machine hours
iv. Direct labour cost v.   Material cost

Question No: 35    ( Marks: 3 )
What is the justification of spreading the cost of lost units over the remaining goods units?

Solution:
Whenever a loss of units is normal in producing the final units, the good units completed absorb all costs, resulting in a spreading of the cost of lost units over the remaining good units. When abnormal or unusual losses occur, the cost ordinarily assigned to any such lost units might be charged to factory overhead or to a current period expense account. This method results in the assignment of normal (nonloss) costs to remaining good units.

When units are lost in departments subsequent to the first, an adjustment must be made to the unit cost representing work done in preceding departments. The fewer units must absorb the preceding department's costs, resulting in an increase in that department's unit cost.

Ordinarily, there is no difference in completed unit costs whether units are lost at the beginning or during operations. The cost of lost units is spread over remaining good units including those still in process. However, when units are lost at the end of operations, after completion, or are otherwise identified as not pertaining to work in process units, the cost of these lost units is customarily assigned to finished units only. No lost unit cost is assigned to units still in process.


                            

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