MGT402 Assignment no 2 Solution 2013

SEMESTER SPRING 2013
COST AND MANAGEMENT ACCOUNTING (MGT402)
ASSIGNMENT NO. 02
DUE DATE: 1ST JULY 2013 MARKS: 30
Learning objectives: To enable the students to prepare cost of production report along with
treatment of normal and abnormal loss.
Assignment:
Superior Products Manufacturer Limited (SPML) manufactures industrial products that go through
three processing departments – molding, assembling and finishing. The information pertains to the
operations of the molding department for May, 20X3 is as follows:
Units started in molding department 18,200
Cost incurred in molding department: Rs.
Direct material 210,000
Direct labor 077,000
Factory overhead 038,500
14,000 units were completed and transferred to the assembling department during the month of May.
There were 3,500 units as to still-in-process (completed up to 100% material and 50% conversion cost).
700 units were lost during processing and it was treated as normal loss.
Following is the information pertaining to the operations of the assembling department:
11,000 units were completed and transferred to the finishing department. 2,200 units were in process
and completed up to 100% material and 70% conversion cost. Cost incurred in the department is as
follows:
Rs.
Direct material 2,200
Direct labor 45,000
Factory overhead 33,000
During final inspection at the end of the process, it was discovered that 800 units were lost owing to
unavoidable spoilage.
9,000 units were completed in the finishing department and transferred to the store room. 1,500 units
were still in process (converted 30%) and 500 units were lost which were 70% converted but not
charged for any direct material. This loss is to treat as abnormal loss. Cost incurred in finishing
department is:
Rs.
Direct labor 52,000
Factory overhead 41,000
Required: Prepare following schedules for all three departments by using the above information:
a) Quantity Schedule (3 Marks)
b) A schedule of cost to be charged by each department (7 Marks)
c) A schedule of total cost accounted for (7 Marks)
d) A schedule of equivalent production (6 Marks)
e) Cost per unit in each department (3 Marks)
f) Working for normal and abnormal loss (4 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
etc.
 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 Post Mid-Term 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

1.Quantity Schedule

Units Started in process                                                            18200

Units transferred to the next Dep                       14000

Units still in process

100% material and 50% Conversion)                3500

Units lost in Process                                          700

                                                                                                18200

Cost Charged To Departement

                                                                        Total                Units   

                                                                        Rs.                   Rs.

Cost Added by the departments

Direct Material                                                 210000            12.0

Direct Labour                                                   77000              4.8

FOH                                                                38500              2.4

                                                                        325500            19.2

Cost Accounted For As                                                          Rs.

Transferred to next department                                     268800

(14000 units * 19.2 Rs.)

Work in process Inventory                                Rs.

Direct Material ( 3500 * 100% * 12 units)        42000

Direct Labour ( 3500 * 50% *4.8)                   8400

FOH    (3500 * 50% * 2.4)                             4200 

                                                                                                51600

Total Cost Accounted For                                                        323400

Equivalent Production

Direct Material ( 14000 + 3500 *100%)                                  17500

Labour and FoH (14000 + 2500 * 50%)                                  15750

Unit Cost

Direct Material                                                 210000 / 17500 = 12.0

Direct Labour                                                   77000 / 15750   = 4.8

FOH                                                                38500 / 15750   = 2.4

                                                                                                  =19.2

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Quantity schedule Unit started and process Unit transfer to the next department          14000 Unit still in process                                           3500 Unit lost in process                                           700 Cost charge to department and cost added by the department  Direct material                             210000 Direct labor                                     77000 FOH                                                  38500  Total                                          325500 Cost accounted for as  follows: Transferred to next department 14000*19.2 Work in process inventory Direct material (3500*100*12)  42000 Direct labor  (3500*50*4.8)        8400 FOH               (3500*50*2.4)         4200 Total cost accounted for as follows: Equivalent production Direct material (14000+3500*100)  17500 Labor and FOH (14000+3500*50)  15750 Unit cost                                       210000/17500  =   12 Direct material                             77000/15750    =  4.8 Direct labor                                   38500/15750    =  2.4 Total                                                                               19.2

18200 18200 12 4.8 2.4 19.23 268800

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         partment no 1:

Quantity schedule:18200

Cost charged to department:

Total cost=115500      unit cost=19.332

Total cost accounted for ---------------------  325479  

Transferred to next department

14000*19.332     ------------------------------   270648

Equivalent units produced:

Direct material= 17500

Factory over head=15750

Direct labor=15750

Cost per Units:

Direct material==12

FOH=2.444

Direct labor=4.888

Department no 02 :

Quantity schedule:14000

Cost charged to department:

                  Total cost=350848      unit cost=26.888

cost charged to dept---------------------------350848  

Transferred to next department

                                                               295768

Total cost accounted for  ----------------------------- 305711.78  

Equivalent units produced:

Direct material= 13200

Factory over head=12540

Direct labor=12540

Cost per Units:

Direct material==0.1666

FOH=2.631

Direct labor=3.588

Calculations may be wrong, but the method is perfectly right. so students can get idea from here and then solve it themselves. 

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