problems

1. Q 1:
On December 31, 2009, the Sea Isle company provides the following assets and liabilities
Cash $5000
Accounts receivable 10000
Finished goods 6000
W.I.P. 2000
Materials 4000
Prepaid Expenses 500
Property plant and equipment 30,000
Current liabilities 17500
Common stock 30000
During the year the retained earnings account increased by 50% as a result of current year
business no dividends were paid during the year. Balances of account receivable, prepaid
expenses, current liabilities and common stock were remained the same. Inventories were
reduced by exactly 50%, except for finished goods which were reduced by 40%. Depreciation of
Plant was $4000. Sales were on account of finished goods costing $37000. Direct labour cost
was 9000. FOH was applied at the rate of 100% of D.L.Cost leaving $2000 under applied that
was closed to CGS. Total marketing and administrative expenses amounted to $6000 and $9000.
Marketing expenses were 10% and administrative expenses were 15% of sales.
Required:
1. Balance sheet
2. Income statement with CGS and sales calculation.
Q2
The Davidson Corporation manufactures a kitchen appliance which cost $200. Last year the
company realizing a gross profit $100,000 which is 20% of selling price. The cost consists of
material 40% and labor 45%.
During the coming year, it is expected that material and labor cost will increase by 20% each per
unit and FoH increase by 10%. to meet these rising cost a new selling price must be set.
Required : a) Number of units sold last year
b) The number of units that must be sold to realize the same total gross profit as in
the last year, if the selling price is set at $325 and $350.
Q3
The Seitz Company had the following inventories on September 1,2005
Materials…………..$60,000 w.i.p. labor………………$36000
w.i.p. FoH………….27000 w.i.p. material…………….30000

2. F.G…………………50000
During September, the cost of materials purchased was $200000, direct labor cost incurred was
$100000 and factory overhead was applied was 75% of direct labor cost. The September 30
inventories were as follows:
Materials…………..$30,000 w.i.p. labor………………$20000
w.i.p. FoH………….27000 w.i.p. material…………….12000
F.G…………………47000
Required : T accounts showing the flow of cost of goods manufactured and sold, using three
work in process accounts.
Q4
Journalize the following transactions
1. Material purchased on account $33000
2. Direct material $22000 were requisitioned, along with indirect materials of $6500 and
$2500 of supplies.
3. Total payroll was $30000. The head office deducted FICA tax 6.5%, and 10% income
tax. The payroll consist of sales salaries $8000, admin salaries $3000, indirect labor
$4000 and direct labor cost of $15000.
4. Employer payroll taxes were, state unemployment tax 2.1% and federal unemployment
tax is 0.7%
5. Factory overhead was applied at a rate 110% of direct labor cost.
6. Material costing $275 were defective and returned to supplier.
7. Payment to vendors on account $31500
8. Various factory overhead expenses $2000 including depreciation $400 were paid
9. Goods completed totaled 48000
10. Goods costing 45000 were sold for $65000.
Q5
The Seitz Company had the following inventories on September 1, 2005
Materials…………..$60,000 w.i.p. labor………………$36000
w.i.p. FoH………….27000 w.i.p. material…………….30000
F.G…………………50000

3. During September, the cost of materials purchased was $200000, direct labor cost incurred was
$100000 and factory overhead was applied was 75% of direct labor cost. The September 30
inventories were as follows:
Materials…………..$30,000 w.i.p. labor………………$20000
w.i.p. FoH………….27000 w.i.p. material…………….12000
F.G…………………47000
Required: T accounts showing the flow of cost of goods manufactured and sold, using three work
in process accounts.
Q6
a) Absorption costing assumes fixed cost as inventoriable cost (i.e. product cost), while
Marginal Costing treats fixed cost to be period cost: explain this statement using an
example. Marks 5
b) Define Management Accounting, and who are the users of cost & management
accounting information? What is the difference between cost and management
accounting? Marks 5
c) What are the assumptions of Cost Volume Profit analysis? Marks 5
d) Differentiate between budget and standard cost. Marks 5
Q7 Sales = $ 50,000
Margin of Safety ratio = 25%
Budgeted profit = $ 2,500
a) Prepare projected Income statement for both level of sales
b) Calculate breakevenpoint Marks10
Q8
Sales 1000 units x $ 8 8000
Variable cost 1000 units x $ 6 6000
Contribution margin 2,000
Fixed cost 1,000
Profit 1000
Calculate the margin of safety and MoS Ratio Marks05
Q9
Selling price $ 100 per unit
Units produced 9,000
Units sold 10,000
Opening stock 1000
Variable cost
Direct material $ 20 per unit

4. Direct labor $ 10 per unit
F.O.H $ 15per unit
Selling & administrative expenses $ 2 per unit
Fixed cost
F.O.H $ 80,000
Selling & administrative expenses 30,000
Required: Prepare the income statement using
1. Marginal costing
2. Absorptioncosting. Marks10
Q10
The Soroco Company is preparing its master budget for 2005. Relevant data pertaining to its
sales and production budgets are as follows:
1. Sales: Sales for the year are expected to total 1,200,000 units. Quarterly sales are 20%,
25%, 30%, and 25% respectively. The sales price is expected to be $50 per unit for the
first three quarters and $55 per unit beginning in the fourth quarter.
2. Sales in the first quarter of 2006 are expected to be 10% higher than the budgeted sales
volume for the first quarter of 2005.
3. Production: Management desires to maintain ending finished goods and inventories at
25% of the next quarter's budgeted sales volume.
INSTRUCTIONS
Prepare the salesbudgetandproductionbudgetbyquartersfor2005. Marks 05
Q11
e) Absorption costing assumes fixed cost as inventoriable cost (i.e. product cost), while
Marginal Costing treats fixed cost to be period cost: explain this statement using an
example.
f) Define Management Accounting, and who are the users of cost & management
accounting information? What is the difference between cost and management
accounting?
Q12 Selling price $ 100 per unit
Budgeted profit 100,000
Fixed FoH 40 000
Fixed Marketing 20 000
Fixed Admin. 20 000
Variable cost 30% of selling price
Calculate breakeven point sales and targeted sales
Q13 The following data is provided by XYZ Corporation
Annual Demand 40,000 units
Order cost $400

5. Per Unit $20
Carrying cost 10% of Unit Cost
Required:
1. EOQ
2. No. of orders
3. Total cost (ordering cost + carrying cost)
Q14 Differentiate between Job order costing and Process costing?
Q15
Selling price $ 100 per unit
Units produced 9,000
Units sold 10,000
Opening stock 1000
Variable cost
Direct material $ 20 per unit
Direct labor $ 10 per unit
F.O.H $ 15per unit
Selling & administrative expenses $ 2 per unit
Fixed cost
F.O.H $ 63,000
Selling & administrative expenses 30,000
Required: Prepare the income statement using
Marginal costing
Absorption costing.
Q16 From the records of Xyz Company following data were extracted for worker A.
Hours worked 60 hours
Normal working hours 48 hours
Normal wage rate 50/hr
Over time 12 hours
Over time scheme 1
1-5 hours 1-1/2 time (1.5)
Next hours 2 time
Over time scheme 2
Week day overtime = 1-1/2 time
Week-end & Sunday = 2 times
Week day overtime = 8 hours
Week-end & Sunday = 4 hours
Required:
1. Calculate total wagesforworkerA
2. Overtime premium

6. Q17 Pass the journal entries for the following data of Maseeh and company provides the
Following transactions and 3 ledgers for W.I.P, F.G. and CGS
1. Purchase materials direct and indirect $25000 and $5000.
2. Requisition received from production department for $10000, and $2000 indirect
materials,
3. Returned to store direct materials $3000 and indirect materials $500.
4. Total payroll was recorded in the head office $30,000 of which $2000 was deducted for
income tax and 1000 for group insurance. Cash sent to factory for payment. Distribution
of payroll $25000 direct labour cost and remaining is indirect labour.
5. FoH applied to production on the basis of direct labour hours. Actual hours worked 5000.
And FoH rate was $4 per hour.
6. Various expenses incurred in the factory, rent expired 2000, insurance expired 1000,
depreciation expense 4000, property tax 3000, and fuel expenses 2500
7. Goods completed were $30,000 and the remaining was in work in process.
8. Goods completed were shipped to customer for $45000.
Q18. What are the advantages and disadvantages of using perpetual Inventory system?
Q19. Describe the merits and demerits of periodic Inventory system?
Q20. From the records of Xyz Company following data were extracted for worker A.
Hours worked 60 hours
Normal working hours 40 hours
Normal wage rate 50/hr
Over time 12 hours
Over time scheme 1
1-5 hours 1-1/2 time (1.5)
Next hours 2 time
Over time scheme 2
Week day overtime = 1-1/2 time
Week-end & Sunday = 2 times
Week day overtime = 8 hours
Week-end & Sunday = 4 hours
Required:
3. Calculate total wagesforworkerA
4. Overtime premium
Q21 Pass the journal entries for the following data of Maseeh and company provides the
Following transactions and 3 ledgers for W.I.P, F.G. and CGS
9. Purchase materials direct and indirect $25000 and $5000.
10. Requisition received from production department for $10000, and $2000 indirect
materials,
11. Returned to store direct materials $3000 and indirect materials $500.

7. 12. Total payroll was recorded in the head office $30,000 of which $2000 was deducted for
income tax and 1000 for group insurance. Cash sent to factory for payment. Distribution
of payroll $25000 direct labour cost and remaining is indirect labour.
13. FoH applied to production on the basis of direct labour hours. Actual hours worked 5000.
And FoH rate was $4 per hour.
14. Various expenses incurred in the factory, rent expired 2000, insurance expired 1000,
depreciation expense 4000, property tax 3000, and fuel expenses 2500
15. Goods completed were $30,000 and the remaining was in work in process.
16. Goods completed were shipped to customer for $45000.
Q22 The following data is provided by XYZ Corporation
EOQ 8,000 units
Order cost $400
Per Unit $10
Carrying cost 10% of Unit Cost
Required:
4. Annual Demand
5. No. of orders
6. Total cost (ordering cost + carrying cost)
Q23
James & company is a manufacturing concern. Following is the receipts & issues record for the
month of January, 2012
Date Receipts Issues
Jan 1 Opening Balance 50 @ $10
Jan 8 200 units@ $ 11/unit
Jan 11 150 units
Jan 13 150 units@ $ 12/unit
Jan 18 100 units @ $ 13/unit
Jan 20 200 units
Prepare Inventory sheets (Bin Card) by Average Method in perpetual and Periodic.
Q24.
For a Car manufacturing company which produces Corolla, Indicate which cost is
Variable/Fixed
a. Cost of Tiresfor Corolla
b. Salaryof HR Manager of Factory
c. Annual DinnerExpensesof Corolla Dealers
d. Salaryof Engineer
e. Freightof cars from Factoryto Warehouse
f. Electricitybill of wholefactoryandoffice
g. Wagesof temporaryworkersin assembly duringhighproductiontime

8. h. Annual Depreciationforthe whole plant
Q25
The information relating cost department of BETA Corporation is as follow
Inventory Jan 1 Dec 31
Material 34,000 49,000
Work in process 84,000 40,000
Finish goods 42000 ?
Finish goods inventory Jan 1: 100 units Dec 31:300 units
Units completed/manufactured during the year 2000units
Selling price $250 per unit.
Material Purchase $360,000
Conversion cost(Lab+FoH) 214,400
Freight In 8,600
Purchase discount 8,000
Admin expenses 35000
Marketing expenses 65000
Prepare
1. Income statement
2. Costof Goods Sold Statement
3. Unit cost
Q26
Differentiate between fixed and variable cost with help of examples and diagram.
Q27
Sony, Inc. manufactures laptops. The manufacturing costs incurred during its first
year of operations are shown as follows:
Direct materials purchased $400,000
Direct materials used 385,000
Direct labor assigned to production 350,000
Manufacturing overhead 425,000
Cost of goods manufactured (100 laptops) 900,000

9. During the year, 100 completed laptops were manufactured, of which 90 were sold.
No beginning inventories for Raw materials, W.I.P. and finished goods.
Compute each of the following and show all computations:
1. The unit cost of goods manufactured.
2. The cost of goods sold (CGS).
Q 28: Sony, Inc. manufactures laptops. The manufacturing costs incurred during its first year
of operations are shown as follows:
Direct materials purchased.................................................................... $400,000
Direct materials used............................................................................. 385,000
Direct labor assigned to production ...................................................... 350,000
Manufacturing overhead ....................................................................... 425,000
Cost of goods manufactured (100 laptops) ........................................... 900,000
During the year, 100 completed laptops were manufactured, of which 90 were sold. No
beginning inventories for Raw materials, W.I.P. and finished goods.
Compute each of the following and show all computations:
1. The average per-unit cost of manufacturing a completed.
2. The cost of goods sold during the year.
3. Ending Finished Goods Inventory, ending wip, ending RM
Q29. Classify the following cost into fixed and variable
 Indirectmaterial
 Repairsto machinery
 Electricity
 Material
 Labour
 Fuel charges
Q30: The following data is provided by XYZ Corporation
EOQ 4,000 units
Order cost $200
Per Unit $20
Carrying cost 10% of Unit Cost
Required:
7. Annual requirement
8. No. of orders
9. Total cost (ordering cost + carrying cost)