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Friday, May 3, 2013

(MGT402) ASSIGNMENT NO. 01 Solution 3rd May 2013

SEMESTER SPRING 2013


COST AND MANAGEMENT ACCOUNTING (MGT402) ASSIGNMENT NO. 01

DUE DATE: 2nd MAY 2013                                                          MARKS: 30

Learning objectives: To enable the students to prepare Cost of goods sold statement along with the adjustment for under or over-applied factory overhead.

Assignment:

Lahore  Manufacturing  Ltd.  (LML)  -  a  famous  furniture  manufacture  in  Lahore  is  enjoying  an established reputation in style, well-designed and fine quality home furniture. Mr. Khan - owner of the company is behind this success.

For  the  financial  year  2011-12,  the  company’s  accountant  has  gathered  following  information  to prepare financial statements:

a)  Sales during the year were Rs. 590,000 (450 units);
b) Total labor hours used during the year were reported at 30,000;
c) For charging overhead, the company has estimated FOH at the rate of Rs. 7 per labor hour. The company has the policy to charge FOH variance to the cost of goods sold.
d) Cost incurred during the year are:


Details
Rs.
Purchases – Raw Materials
2,26,500
Direct labor
1,26,400
Indirect labor
70,000
Electricity bills
31,200
Repair & Maintenance
5,000
Salaries of sales staff
4,400
Depreciation – Factory
75,000
Depreciation – Office
1,000
Rent – Office
25,000
Advertising expenses
27,000

e) 75% of the electricity bill and 40% of repair and maintenance is relating to factory. f) Inventories at 1st July, 2011:
Finished goods Rs. 22,000
Work in process           Rs. 35,000
Raw Material    Rs. 10,000

g)  Inventories at 30th June, 2012: Finished goods         ?
Work in process           Rs. 33,000
Raw Material    Rs. 8,000

Note: Finished goods inventory at July 1st 2011 was of 25 units and at June 30th, 2012 was of 32 units.

Requirements:

1.
Cost of Goods Sold Statement for the year ended June 30, 2012;
(10 Marks)
2.
Income statement for the year ended June 30, 2012; &
(15 Marks)
3.
Factory overhead schedule with disposition the variance.
(5 Marks)


IMPORTANT:



24 hours extra / grace period after the due date are usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.



OTHER IMPORTANT INSTRUCTIONS: DEADLINE:

         Make sure to upload the solution file before the due date on VULMS.

         Any submission made via email after the due date will not be accepted.



FORMATTING GUIDELINES:



         Use the font style “Times New Roman” or “Arial” and font size “12”.

         It is advised to compose your document in MS-Word format.

         You may also compose your assignment in Open Office format.

         Use black and blue font colors only.



REFERENCING GUIDELINES:



                     Use  APA  style  for  referencing  and  citation.    For  guidance  search  “APA reference style” in Google and read various website containing information for better understanding or visit http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html





RULES FOR MARKING



Please note that your assignment will not be graded or graded as Zero (0), if:



         It is submitted after the due date.

         The file you uploaded does not open or is corrupt.

         It is in any format other than MS-Word or Open Office; e.g. PowerPoint, PDF.

         It is cheated or copied from other students, internet, books, journals etc.



Note related to load shedding: Please be proactive



Dear students!

As you know that Pre MidTerm semester activities have been started and load shedding problem is also prevailing in our country now a days. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.


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Solution Idea:

COST AND MANAGEMENT ACCOUNTING
                        ASSIGNMENT # 1
                       
ANSWERS:
1: COST OF GOODS SOLD STATEMENT   
                                                LAHORE MANUFACTURING LTD.
                                              COST OF GOODS SOLD STATEMENT
                                               FOR YEAR ENDING 30 JUNE 2012

RUPESS
                 OPENING RAW MATERIAL
10000
ADD :     PURCHASES – RAW MATERIAL
226500
LESS:    CLOSING RAW MATERIAL
(8000)
             RAW MATERIAL CONSUMED
228500
ADD:    DIRECT LABOUR
126400
ADD:    FOH (APLLIED)
210000
             TOTAL FACTORY COST
564900
ADD:    OPENING W.I.P
35000
             COST OF GOODS TO BE MANUFACTURED
599900
LESS:    CLOSING W.I.P
(33000)
              COST OF GOODS MANUFACTURED
566900
ADD:    OPENING FINISHED GOODS
22000
              COST OF GOODS TO BE SOLD
588900
LESS:     CLOSING FINISHED GOODS (W1)
(39680)
              COST OF GOODS SOLD (AT NORMAL)
549220
LESS:     OVER APPLIED FOH
(39600)
              COST OF GOODS SOLD (ACTUAL)
     509620

WORKING 1:
COST OF CLOSING FINISH GOODS = CLOSING FINISHED UNITS x PER UNIT COST
COST OF CLOSING FINISH GOODS = 32 x 1240
COST OF CLOSING FINISH GOODS = 39680

UNIT SOLD = OPENING FINISHED UNITS + UNIT MANUFACTURED – CLOSING FINISHED UNITS
450      =     25 + X – 32
X = 450 – 25 + 32       
X = 457 (TOTAL UNIT MANUFACTURED)
PER UNIT MANUFACTURING COST = COST OF GOODS MANUFACTURED
                                                           TOTAL UNIT MANUFACTURED
PER UNIT MANUFACTURING COST = 566900  = 1240
                                                         457           


2: INCOME STATEMENT
                                             
                                           LAHORE MANUFACTURING LTD.
                                                INCOME STATEMENT
                                    FOR THE YEAR ENDED ON 30 JUNE 2012
PARTICULARS
AMOUNT
AMOUNT
           SALES

590000
LESS: COST OF GOODS SOLD

(509620)
GROSS PROFIT

  80380
LESS: OPERATIING EXPENSE


·        ELECTRICITY BILLS(25% OF 31200)
  7800

·        REPAIR & MAINTENANCE(60% OF 5000)
   3000

·        DEPRECIATION-OFFICE
   1000

·        RENT-OFFICE
   25000

(36800)
 OPERATING PROFIT

43580
LESS: SELLING EXPENSES

4400
LESS: MARKETING & ADVERTISING EXPENSE

27000
           NET PROFIT

12180
                                                        
3: F.O.H. SCHEDULE

  FOH SCHEDULE:
APPLIED F.O.H                                                                    210000
*ACTUAL F.O.H                                                                 (170400)
OVER/(UNDER) APPLIED F.O.H                                    39600

*WORKING FOR ACTUAL F.O.H CALCULATION    
INDIRECT LABOUR                                                70000
ELECTERCITY BILL(75% OF 31200)                     23400
REPAIR & MAINTENANCE(40% OF 5000)          2000
DEPRECIATION-FACTORY                                  75000
ACTUAL F.O.H                                                      170400



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    DUE DATE: 3rd MAY 2013                                                         MARKS: 30










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