Khurasan University Faculty of Economics (BBA) : Cost Accounting

Khurasan University
Faculty of Economics (BBA)
Cost Accounting
For 2nd Year, 3rd Semester
Ketabton.com
By: Sir Ihsanullah Khan
Composed By: Hazratullah Ihsas Arab

Mobile: 077-881-7190, 074-446-0915
(c) ketabton.com: The Digital Library
TABLE OF CONTENTS
Chapter One ............................................................................................................................................. 3
Definition of Cost Accounting: ............................................................................................................ 3
Classification of Cost: .......................................................................................................................... 3
Types of Cost: ....................................................................................................................................... 4
Chapter Two............................................................................................................................................. 6
Cost of Goods Sold (C.G.S) Statement ............................................................................................... 6
Chapter Three ........................................................................................................................................ 20
Cost, Concept, Uses and Classification ............................................................................................ 20
Chapter Four .......................................................................................................................................... 27
Process Costing OR Cost of Production Report.............................................................................. 27
Chapter Five ........................................................................................................................................... 36
Controlling and Costing Materials ................................................................................................... 36
Chapter Six ............................................................................................................................................. 42
Joint Cost Allocation .......................................................................................................................... 42
Composed By: Hazratullah Ihsas Arab Page 2 of 46

Chapter One
Definition of Cost Accounting:
Cost Accounting: Accounting for cost is known as a Cost Accounting.
Cost Accounting
Classification of Cost:
Cost
Direct Cost Indirect Cost
Direct Labor Indirect Labor
Direct Material Indirect Material
 Direct Cost: A cost which can be easily traced into a product is called Direct Cost.
Direct Cost
o Direct Labor: A labor which is directly involved in the production of a product is called Direct
Labor.
Direct Labor
o Direct Material: Materials which can be easily traced in full into a product is called Direct
Material.
Direct Material
 Indirect Cost: A cost which cannot be easily traced into a product is called Indirect Cost or Factory
Overhead (FOH).
Indirect Cost
o Indirect Labor: A labor which is not directly involved in the production of a product is called
Indirect Labor.
Indirect Labor
o Indirect Material: Materials which cannot be easily traced in full into a product is called
Indirect Material.
Indirect Material

Types of Cost:
1. Opportunity Cost: The benefits which are sacrificed in favor of alternative decision is called
Opportunity Cost.
Opportunity Cost
2. Sunk Cost: Cost which has already incurred and cannot be changed with the change in decision is
called Sunk Cost.
3. Product Cost: Cost which incurs on production of goods or services is called Product Cost.
Product Cost
4. Period Cost: Cost other than the product cost is called Period Cost.
Period Cost Product Cost
5. Historical Cost: Cost which incurs on the day of transaction is known as Historical Cost.
Historical
Cost
6. Standard Cost: The predetermined cost of a product is called Standard Cost.

Standard Cost

7. Variable Cost: Cost which changes with the change in level of production is called Variable Cost.
8. Fixed Cost: Cost which does not change with the change in level of production is called Fixed
Cost.
9. Step Fixed Cost: Cost which is fixed up to specific range of production and then changes is called
Step Fixed Cost.
10. Semi Variable Cost: Cost which is partly fixed and then variable is called Semi Variable Cost.
11. Implicit Cost: Cost which we do not physically pay.
12. Explicit Cost: Cost which we physically pay.

Chapter Two
Cost of Goods Sold (C.G.S) Statement
Mohammad Usman Manufacturing Company

Cost of Goods Sold Statement
For The Period Ended _______
Raw Material (Opening Inventory) 10,000.00
Add: Net Purchases
Purchases 50,000.00
+ Receiving and Handling Cost 10,000.00
- Discount Received (5,000.00)
- Purchases Return (5,000.00) 50,000.00
Raw Material Available for Use 60,000.00
Less: Raw Material (Closing Inventory) (20,000.00)
Raw Material Consumed 40,000.00
Add: Direct Labor 10,000.00
Prime/Primary Cost 50,000.00
Add: Factory Overhead Cost (FOH) 20,000.00
Total Manufacturing Cost 70,000.00
Add: Work in Process (Opening Inventory) 20,000.00
Cost of Goods to be Manufactured 90,000.00
Less: Work in Process (Closing Inventory) (10,000.00)
Cost of Goods Manufactured 80,000.00
Add: Finished Goods (Opening Inventory) 10,000.00
Cost of Goods Available for Sale 90,000.00
Less: Finished Goods (Closing Inventory) (20,000.00)
Cost of Goods Sold (C.G.S) 70,000.00

Question 2, Page 31:

Manufacturing costs; cost of goods manufactured; cost of goods sold. The December 31, 19B trail
balance of the Balkwell Company showed:
Sales ……………………….. 4,000,500.00 Sales returns and allowances .. 25,200.00

Purchases (net) …………….. 2,400,000.00 Transportation in …………..... 32,000.00
Direct labor ……………..……. 3,204,000.00 Factory overhead ………….... 1,885,600.00
Sales salaries …………….….. 200,000.00 Advertising expenses ……..…. 155,000.00
Delivery expenses ………...….. 65,000.00
Inventories Dec 31, 19B Dec 31, 19A

Finished goods ……………… 467,400.00 620,000.00
Work in process ……………. 136,800.00 129,800.00
Materials …………………… 196,000.00 176,000.00
Required
1. Total manufacturing cost
2. Cost of goods manufactured
3. Cost of goods sold
Balkwell Company
For the period ended: Dec 31, 19B
Raw materials (opening inventory) 176,000.00
Add: Net purchases
Purchases 2,400,000.00
+ Transportation in 32,000.00 2,432,000.00
Raw material available for use 2,608,000.00
Less: Raw materials (closing inventory) (196,000.00)
Raw materials consumed 2,412,000.00
Add: Direct labor 3,204,000.00
Prime cost 5,616,000.00
Add: Factory overhead cost 1,885,600.00
Total manufacturing cost 7,501,600.00
Add: Work in process (opening inventory) 129,800.00
Cost of goods to be manufactured 7,631,400.00
Less: Work in process (closing inventory) (136,800.00)
Cost of goods manufactured 7,494,600.00
Add: Finished goods (opening inventory) 620,000.00
Cost of goods available for sale 8,114,600.00
Less: Finished goods (closing inventory) (467,400.00)
Cost of goods sold 7,647,200.00


Cost of goods sold statement; income statement. The accounting department of the Ruthven
Company provided the following data for May: sales, 72,000; marketing expenses, 5%;
administrative expenses, 1%; other expenses, 0.5% of all sales; purchases, 36,000; factory overhead,
2⁄ of direct labor, direct labor, 15,000.
3
Beginning inventories
Finished goods …………………………..……… 7,000
Work in process ……………………………….. 8,000
Materials ………………………………………. 8,000
Ending inventories
Finished goods …………………………………. 10,200
Work in process ……………………………….. 15,000
Materials ………………………………………. 8,500
Required:
1. Cost of goods sold statement
2. Income statement
Ruthven Company
For the period ended: May 31,
Add: Net purchases 36,000.00
Raw material available for use 44,000.00
Raw materials consumed 35,500.00
Add: Direct labor 15,000.00
Prime cost 50,500.00
Add: Factory overhead cost 10,000.00
Total manufacturing cost 60,500.00
Cost of goods to be manufactured 68,500.00
Cost of goods manufactured 53,500.00
Cost of goods available for sale 60,500.00
Cost of goods sold 50,300.00

Ruthven Company
Income Statement
For the period ended: May 31,
Sales 72,000.00
Less: Cost of goods sold (50,300.00)
Gross income 21,700.00
Less: Operative expenses
Marketing expenses 3,600.00
Administrative expenses 720.00
Other expenses 360.00 (4,680.00)
Net income 17,020.00

Income statement; profit percentage. The Shellkoff Company submits the following information
on December 31, 19--:
Sales for the year …………………………………………………….. 314,000
Inventories at the beginning of the year:
Finished goods …………………………………………………. 5,900
Work in process ………………………………………………. 4,600
Materials ………………………………………………………. 3,800
Purchases of materials for the year ………………………………. 140,000
Direct labor ……………………………………………………….. 67,350
Factory overhead: 50% of labor cost
Inventories at the end of the year:
Finished goods …………………………………………………. 9,270
Work in process ………………………………………………. 6,200
Materials ………………………………………………………. 4,300
Other expenses for the year:
Marketing expenses ………………………………………… 23,115
Administrative expenses …………………………………….. 17,650
Required:
1. An income statement for the year ended December 31, 19--
2. The percentage of income to sales, before income tax

Shellkoff Company
For the period ended: Dec 31, 19--
Shellkoff Company
Income Statement
Sales 314,000.00
Administrative expenses 17,650.00 (40,765.00)
Net Income
Percentage of Income to Sales = x 100
Sales
37,680.00
= x 100
314,000.00
= 12%


Cost of goods sold statement. The following data are provided by the controller of the Metaxen
Corporation.
Cash ……………………………………………………..240,000
Accounts receivable ……………………………………..348,000
Inventories Jan 1 Dec 31

Finished goods 44,200 66,000
Work in process 29,800 38,800
Materials 88,000 64,000
Materials purchased ……………………………………….. 366,000

Sales discount …………………………………………… 8,000
Factory overhead (excluding depreciation) …………………. 468,400
Marketing and administrative expenses (excluding
depreciation) ….…………………………………….. 344,200
Depreciation (90% manufacturing, 10% marketing
and administrative expenses) ……………………….. 116,000
Sales ……………………………………...………………… 1,844,000
Direct labor ………………………………………………523,600
Freight on materials purchased ………………………………… 6,600
Rental income ………………………………………………… 64,000
Interest on bonds payable ………………………………….. 16,000
Required:
Cost of goods sold statement

Metaxen Company
Add: Net purchases
Materials purchased 366,000.00
+ Freight on materials purchased 6,600.00 372,600.00
Add: Factory overhead cost
Factory overhead 468,400.00
+ Depreciation (116000*90%) 104,400.00 572,800.00
Total manufacturing cost 1,493,000.00
Cost of goods to be manufactured 1,522,800.00
Metaxen Company
Income Statement
Sales 1,844,000.00
- Sales discount (8,000.00)
Net sales 1,836,000.00
Less: Cost of goods sold (1,462,200.00)
Depreciation (116000*10%) 11,600.00
Marketing & administrative expenses 344,200.00
Interest on bonds payable 16,000.00 (371,800.00)
Operative income 2,000.00
Add: Other income
Rental income 64,000.00


Income Statement. Crowley, Inc., submits the following data for September:
Direct labor cost, 30,000.
Cost of goods sold, 111,000.
Factory overhead is applied at the rate of 150% of direct labor cost.
Inventory accounts showed these beginning and ending balances:

September 1 September 30
Finished goods ………………………………….. 15,000.00 17,500.00
Work in process …………………………….. 9,600.00 13,000.00
Materials ……………………………………. 7,000.00 7,400.00
Other data:
Marketing expenses ……………………….. 14,100.00
General and administrative expenses …………22,900.00
Sales for the month …………………………. 182,000.00
Required: An income statement with schedule showing cost of goods manufactured and sold.

Crowle y, Inc.
Cost of Goods Sold State me nt
For the period ended: Sep 30, 19--
Less: Raw materials (closing inventory) 7,400.00
Less: Work in process (closing inventory) 13,000.00
Less: Finished goods (closing inventory) 17,500.00
Formula for re ve rse me thod:

Cost of goods available for sale - Finished goods (closing inventory) = C.G.S.
Cost of goods available for sale = C.G.S. + Finished goods (closing inventory)
Cost of goods available for sale = 111000 + 17500
Cost of goods available for sale = 128500
Short me thod for re ve rse me thod:

Add: Unknown figure
Known figure
Known figure
Less Unknown figure

Known figure
Known figure
Known figure
Add: Unknown figure
Known figure
Known figure
Less Unknown figure
Known figure

Crowley, In.
Income Statement
For the period ended: Sep 30, 19--
Sales 182,000.00
General and administrative expenses 22,900.00 (37,000.00)

Cost of goods sold statement. The following data relate to the Brockway Corporation:
Inventories
Ending Beginning
Finished goods …………………………………………95,000.00 110,000.00
Work in process ……………………………………….80,000.00 70,000.00
Direct materials ………………………………………… 95,000.00 90,000.00
Costs incurred during the period:
Costs of goods available for sale ………………………………………..684,000.00
Total manufacturing cost ………………………………………………..584,000.00
Factory overhead …………………………………………………………. 167,000.00
Direct materials used …………………………………………………… 193,000.00
Required: Cost of goods sold statement.
Brockway Corporation
Less: Raw materials (closing inventory) 95,000.00
Less: Work in process (closing inventory) 80,000.00
Less: Finished goods (closing inventory) 95,000.00


Cost of goods sold statement; unit cost. The records of Reinecke, Inc., show the following
information as of March 31, 19B:
Materials used …………………………………………………………. 440,000.00
Direct labor …………………………………………………………… 290,000.00
Indirect labor …………………………………………………………… 46,000.00
Light and power ……………………………………………………… 4,260.00
Depreciation …………………………………………………..………… 4,700.00
Repairs to machinery ……………………………………….………… 5,800.00
Miscellaneous factory overhead ………………………………………… 29,000.00
Work in process inventory, April 1, 19A …………………….…………
41,200.00
Finished goods inventory, April 1, 19A ………………………………34,300.00
Work in process inventory, March 31, 19B …………………….…………
42,500.00
Finished goods inventory, March 31, 19B ………………………………
31,500.00
During the year, 18,000 units were completed.
Required:
(1) A cost of goods sold statement for the year ended March 31, 19B.
(2) The unit cost of goods manufactured.
(3) The amount of over or underapplied factory overhead if the
company applies factory overhead on the basis of 30% of direct
labor cost.
Reinecke, Inc.,
For the period ended: March 31, 19B
Add: Factory overhead cost
Indirect labor 46,000.00
Light and power 4,260.00
Depreciation 4,700.00
Repairs to machinery 5,800.00
Miscellaneous factory overhead 29,000.00 89,760.00

Requirement 2:
Unit Cost = = = 45.47
Units manufactured 18,000.00
Requirement 3:
Under or over applied FoH

Applied FoH (290000x30%) 87,000.00
Less: Actual FoH (89,760.00)
Under applied FoH (2,760.00)

Income statement; cost and profit ratios. The records of the Yukon Refrigerator Company show
the following information for the three months ended March 31, 19--:
Materials purchased…………………………………………. 1,946,700.00
Inventories, January 1, 19--:
Finished goods (100 refrigerators) …………………………..43,000.00
Materials ………………………………………………………. 268,000.00
Direct labor ………………………………………………….. 2,125,800.00
Factory overhead (40% variable) ……………………………… 764,000.00
Marketing expenses (all fixed) …………………………………. 516,000.00
General and administrative expenses (all fixed) ……………………. 461,000.00
Sales (12,400 refrigerators) ……………………………………….. 6,634,000.00
Inventories, March 31, 19--:
No unfinished work on hand.
Finished goods (200 refrigerators), costed at 395 each.
Materials ………………………………………………………. 167,000.00
Required:
(1) An income statement for the period.
(2) The number of units manufactured.
(3) The unit cost of refrigerators manufactured.
(4) The gross profit per unit sold.
(5) The income per unit sold.
(6) The ratio of gross profit to sales.
(7) The income to sales percentage.
(8) The break-even point in sales dollars.

Yukon Refrigerator Company

For the period ended: March 31, 19--
Add: Net purchases 1,946,700.00
Raw material available for use 2,214,700.00
Raw materials consumed 2,047,700.00
Add: Direct labor 2,125,800.00
Prime cost 4,173,500.00
Total manufacturing cost/Cost of goods manufactured 4,937,500.00
Less: Finished goods (closing inventory) (200*395) (79,000.00)
Yukon Refrigerator Company

Income Statement
For the period ended: March 31, 19--
Sales 6,634,000.00
Less: Cost of goods sold (4,901,500.00)
Gross income 1,732,500.00
General and administrative expenses 461,000.00 (977,000.00)
Requirement 2:
Number of units manufactured
Units sold 12,400.00
+ Finished goods (closing units) 200.00
12,600.00
- Finished goods (opening units) (100.00)
Requirement 3:
Unit Cost = = = 395.00 per unit
Requirement 4:
Gross profit 1,732,500.00
Gross profit per unit sold = = = 139.72 per unit

Requirement 5:
Net profit 755,500.00
Net income per unit sold = = = 60.93 per unit
Requirement 6:
Gross profit 1,732,500.00
Ratio of gross profit to sales = X 100 = X 100 = 26.12 %
Sales 6,634,000.00
Requirement 7:
Net income to sales percentage = X 100 = X 100 = 11.39 %
Sales 6,634,000.00
Requirement 8:
Total fixed costs Total variable costs

Marketing expenses (all fixed) 516,000.00 Raw materials consumed 2,047,700.00
General & administrative expenses
(all fixed) 461,000.00 Direct labor 2,125,800.00
Factory overhead (764000*60%) 458,400.00 Factory overhead (40% variable) 305,600.00
1,435,400.00 4,479,100.00
Fixed costs 1,435,400.00

Break-even point = = = 4,430,246.91
1 - Variable / Sales 1-4,479,100.00/6,634,000.00

Chapter Three
Cost, Concept, Uses and Classification
Formulas:
1. Prime Cost = Direct Material1 + Direct Labor
2. Conversion Cost = Direct Labor + Factory Overhead Cost
3. Cost to Produce2 = Direct Material + Direct Labor + FoH3 Cost
4. Bid Price4 = Cost + Profit 5

Bid calculations. The Shepard Company is to submit a bid on the production of 10000 ceramic salad
bowls. It is estimated that the cost of materials will be 7500 and direct labor, 10100. Factory overhead
is applied at 5 per direct labor hour in the Molding Department and at 120% of the direct labor cost
in the Finishing Department. It is estimated that 800 direct labor hours will be required in Molding
and that direct labor cost in Finishing will be 4300. The company wishes a bid price consisting of a
markup of 40% of its total production costs.
Required:
(1) Estimated cost to produce.
(2) Estimated prime cost.
(3) Estimated conversion cost.
(4) Bid price.
Solution:
Requirement 1:
Estimated cost to produce
Direct material 7,500.00
Direct labor 10,100.00
Factory overhead
Molding Dept. (800*5) 4,000.00
Finishing Dept. (4300*120%) 5,160.00 9,160.00
Estimated cost to produce 26,760.00
1
It is also called, Raw material consumed.
2
It is also called, Total production or Total manufacturing cost.
3
It is also called, Factory overhead.
4
It is also called, Sales price.
5
It is also called, Mark-up.

Requirement 2:
Estimated prime cost
Estimated prime cost 17,600.00
Requirement 3:
Estimated conversion cost
Factory overhead cost 9,160.00
Estimated conversion cost 19,260.00
Requirement 4:
Bid price
Cost 26,760.00
Profit (26760*40%) 10,704.00
Estimated bid price 37,464.00
Question 6, page 59:

Cost computations. On October 1, the Florida Company had the following inventories: materials,
24000; work in process, 12000; and finished goods, 36000. During the month, materials purchases
totaled 56000. Direct labor for October was 40000, at a uniform wage of 6.40 per hour. Marketing
and administrative expenses for the month amounted to 10% of net sales. Inventories on October 31
were as follows: materials, 20000; work in process, 8000; and finished goods, 40000. Net sales for
October totaled 200000. Factory overhead is applied on the basis of 8 per direct labor hour.
Required:
(1) Prime cost.
(2) Conversion cost.
(3) Cost of goods manufactured.
(4) Cost of goods sold.
(5) Income from operations.

Solution:
Requirement 1:
Prime cost
Raw material opening inventory 24,000.00
Less: Raw material closing inventory (20,000.00)
Raw material consumed 60,000.00
Requirement 2:
Conversion cost
Factory overhead (40000/6.40) (6250*8) 50,000.00
Conversion cost 90,000.00
Requirement 3:
Cost of goods manufactured
Add: Work in process opening inventory 12,000.00
Less: Work in process closing inventory (8,000.00)
Requirement 4:
Cost of goods sold
Add: Finished goods opening inventory 36,000.00
Less: Finished goods closing inventory (40,000.00)
Requirement 5:
Income statement
Sales 200,000.00
Gross profit 50,000.00
Marketing & administrative expenses (20,000.00)
Net profit 30,000.00


Cost computation. Messersmith, Inc., submits the following data on October 31, 19--: materials put
into process, 42300; direct labor is paid at the rate of 7.80 and 8.40 per hour in Department A and B
respectively; Department A worked 6125 hours and Department B reported 9875 hours. Factory
overhead is applied on the basis of direct labor hours at the rate of 5 per hour in Department A and
4.20 per hour in Department B.
Inventories
Oct. 1 Oct. 31
Finished goods …………………………………. 11300 9400
Work in process ………………………………... 17300 19425
Materials ……………………………………….. 15000 19200
Required: Without preparing a formal income statement, determine:

(1) Prime cost.
(2) Total manufacturing costs.
(3) Cost of goods manufactured.
(4) Cost of goods sold.
(5) Conversion cost.
Solution:
Requirement 1:
Prime cost
Requirement 2:
Total manufacturing cost
Requirement 3:
Cost of goods manufactured
Add: Work in process opening inventory 17,300.00
Cost of goods to be manufactued 262,425.00
Less: Work in process closing inventory (19,425.00)

Requirement 4:
Cost of goods sold
Add: Finished goods opening inventory 11,300.00
Less: Finished goods closing inventory (9,400.00)
Requirement 5:
Conversion cost
Factory overhead cost 72,100.00
Conversion cost 202,825.00

Fire loss calculation. Robidaux Products, Inc., a small manufacturing company, produces a highly
flammable cleaning fluid. On May 31, 19F, the company had a fire which completely destroyed the
processing building and the work in process inventory; some of the equipment was saved.
After the fire, a physical inventory was taken. The materials were valued at 30000, the finished goods
at 60000, and supplies at 5000.
The inventories of January 1, 19F, consisted of:
Finished goods ………………………………………………………………………
70,000.00
Work in process …………………………………………………………………….
50,000.00
Materials …………………………………………………………………………………..
15,000.00
Supplies ……………………………………………………………………………………..
2,000.00
Total ……………………………………………………………………………………….
137,000.00
A review of the accounts showed that the sales and gross profit for the last five years were:
Sales Gross Profit
19A …………………………………………………………………300,000.00 86,200.00
19B …………………………………………………………………320,000.00 102,400.00
19C …………………………………………………………………330,000.00 108,900.00
19D …………………………………………………………………250,000.00 62,500.00
19E …………………………………………………………………280,000.00 84,000.00
Total …………………………………………………………………
1,480,000.00 444,000.00
The sales for the first five months of 19F were 150000; materials purchases were 50000; freight on
purchases was 5000; direct labor for the five months was 40000. For the past five years, factory
overhead was 50% of direct labor cost.
Required: The value of the work in process inventory lost by five.

Solution:
Robidaux
For the period ended: May 31, 19F
Add: Net purchases
+ Purchases 50,000.00
+ Freight on purchases 5,000.00 55,000.00
Work in process
Reverse CGS CGS CGS Statement
CGS
CGS Statement
Gross Profit 444000
Last 5 Years Gross Profit Ratio = X 100 = X 100 = 30%
Sales 1480000
Sales - (Gross Profit X Last 5 Years Gross Profit Ratio) = CGS

150000 - (150000 X 30%) = 105000


Gross profit determination. The Davidson Corporation manufactures a kitchen appliances to sell
for 280. Last year the company sold 2000 of these appliances, realizing a gross profit of 25% of the
cost of goods sold. Of this total cost of goods sold, materials accounted for 40% of the total and
factory overhead for 15%.
During the coming year, it is expected that materials and labor costs will each increase 25% per unit
and the factory overhead will increase 12.5% per unit. To meet these rising costs, a new sales price
must be set.
Required: The number of units that must be sold to realize the same total gross profit in the coming
year as realized last year if the new selling price is set at: (1) 300; (2) 325; (3) 350.
Solution:
Step 1: Step 2: Step 3:

Cost Sales Last year cost of goods sold Current year cost of goods sold
100 125 Materials => (224 x 40%) = 89.6 Materials => 89.6 + (89.6 x 25%) = 112
x 280 Labor => (224 x 45%) = 100.8 Labor => 100.8 + (100.8 x 25%) = 126
280 x 100 FoH => (224 x 15%) = 33.6 FoH => 33.6 + (33.6 x 12.5%) = 37.8
x= = 224
125 Total cost 224 Total cost 275.8
Step 4: Step 5:
Sales 280 Sales - Cost = Gross profit
Less: C.G.S -224 1). 300 - 275.8 = 24.2 => 112000/24.2 = 4628
Gross profit 56 2). 325 - 275.8 = 49.2 => 112000/49.2 = 2276
3). 350 - 275.8 = 74.2 => 112000/74.2 = 1509
Total gross profit = 2000 x 56 = 112000

Chapter Four
Process Costing OR Cost of Production Report
De partme nt A De partme nt B
Q uantity Sche dule Q uantity Sche dule
Units started (produced) 10,000.00 Units received from Dept. A 7,000.00
Units completed & transferred to Dept. B 7,000.00 Units completed & transferred to Dept. C 5,000.00
Units still in process 2,000.00 Units still in process 1,500.00
Units lost (Normal/Abnormal loss) 1,000.00 Units lost (Normal/Abnormal loss) 500.00
Total 10,000.00 10,000.00 Total 7,000.00 7,000.00
C ost Sche dule C ost Sche dule
Cost added in Dept. A T otal cost Per unit cost Cost received from Dept. A T otal cost Per unit cost
Material Cost added in Dept. B
Labor Material
FoH Labor
Total - - FoH
Total - -
C ost accounte d for as follows C ost accounte d for as follows
Cost of units completed (7000x3) 21,000.00 Cost of units completed (5000x3) 15,000.00
Cost of work in process (closing inv.) Dept. A Cost of work in process (closing inv.) Dept. B
Material Material
Labor Labor
FoH FoH
Total - 21,000.00 Cost of work in process (closing inv.) Dept. A
Material
Labor
FoH
Total - 15,000.00

Costing of units transferred; lost units. Read, Inc., instituted a new process in October, during
which it started 10000 units in Department A. Of the units started, 1000 units, a normal number, were
lost during the process; 7000 were transferred to Department B; and 2000 remained in work in process
inventory at the end of the month, 100% complete as to materials and 50% complete as to conversion
cost. Materials and conversion costs of 27000 and 40000, respectively, were charged to the
department in October.
Required: Total cost transferred to Department B.

Department A
Quantity Schedule
Units started 10,000.00
Units completed & transferred to Dept. B 7,000.00
Units still in process 2,000.00
Units lost (Normal loss) 1,000.00
10,000.00 10,000.00
Department A
Cost Schedule
Cost added in Dept. A Total cost Per unit cost
Material 27,000.00 3.00
Conversion 40,000.00 5.00
Cost accounted for 67,000.00 8.00
Equivalent production method:

Material cost 27000
Per unit material cost = = = 3.00
Units completed + in process % 7000 + (2000*100%)
Conversion cost 40000

Per unit conversion cost = = = 5.00
Department A
Cost accounted for as follows
Total cost of units completed (7000x8) 56,000.00
Total cost of work in process (ending inv.) Dept. A
(2000*100%) Material (2000*3) 6,000.00
(2000*50%) Conversion (1000*5) 5,000.00
Cost accounted for 67,000.00
Problem 6-1, Page 138:

Cost of production report; normal spoilage (loss). Malamud Company uses process costing. All
materials are added at the beginning of the process. The product is inspected when it is 80%
converted, and spoilage is identified only at that point. Normal spoilage is expected to be 5% of good
output (completed & in process materials).
During March, 10500 units were put into process. Current costs were 52500 for materials; 39770 for
labor; and 31525 for factory overhead. The 3000 units still in process at the end of March were
estimated to be 90% completed. All spoilage was normal. A total of 7000 units were transferred to
finished goods.
Required: A cost of production report for March.

Department A
Quantity Schedule
Units started 10,500.00
Units completed & transferred to Dept. B 7,000.00
Units lost (Normal loss) (100*5%) 500.00
10,500.00 10,500.00
Department A
Cost Schedule
Cost added in Dept. A Total cost Per unit cost
Material 52,500.00 5.25
Labor 39,770.00 4.10
FoH 31,525.00 3.25

Material cost 52500
Labor cost 39770

Per unit labor cost = = = 4.10
FoH cost 31525

Per unit FoH cost = = = 3.25
Department A
Total cost of units completed (7000x12.6) 88,200.00
(3000*100%) Material (3000*5.25) 15,750.00
(3000*90%) Labor (2700*4.1) 11,070.00
(3000*90%) FoH (2700*3.25) 8,775.00

Cost of production report. A company’s Department 2 costs for June were:
Cost from Department 1 ………………………………….
16,320.00
Cost added in Deparment 2:
Materials ……………………………………… 43,415.00
Labor ……………………………………….. 56,100.00
Factory overhead ………………………………..
58,575.00
The quantity schedule shows 12000 units were received during the month from Department 1; 7000
units were transferred to finished goods; and 5000 units in process at the end of June were 50%
completed as to materials cost and 25% completed as to conversion cost.
Required: Cost of production report.

Department 2
Quantity Schedule
Units received from Dept. 1 12,000.00
Units completed & transferred to finished goods 7,000.00
12,000.00 12,000.00
Department 2
Cost Schedule
Total cost Per unit cost
Cost received from Dept. 1 (16320/12000) 16,320.00 1.36
Cost added in Dept. 2
Material 43,415.00 4.57
Labor 56,100.00 6.80
FoH 58,575.00 7.10

Material cost 43415
Labor cost 56100

FoH cost 58575

Department 2
Total cost of work in process (ending inv.) Dept. 1
(5000*1.36) 6,800.00
(5000*50%) Material (2500*4.57) 11,425.00
(5000*25%) Labor (1250*6.8) 8,500.00
(5000*25%) FoH (1250*7.1) 8,875.00

Cost of production report. Brooks, Inc., uses process costing. The costs for Department 2 for April
were:
Cost from preceding department ………………………….
20,000.00
Cost added by deparment:
Materials ……………………………………… 21,816.00
Labor ………………………………………..7,776.00
Factory overhead ……………………………….. 4,104.00 33,696.00

The following information was obtained from the department’s quantity schedule:
Units received ………………………………………………… 5,000.00
Units transferred out …………………………………4,000.00
Units still in process ………………………………….
1,000.00
The degree of completion of the work in process as to costs originating in Department 2 was: 50%
of the units were 40% complete; 20% were 30% complete; and the balance were 20% complete.
Required: The cost of production report for Department 2 for April.
Department 2
Quantity Schedule
Units received from Dept. 1 5,000.00
Units completed & transferred to Dept. 3 4,000.00
5,000.00 5,000.00
Department 2
Cost Schedule
Cost received from Dept. 1 (20000/5000) 20,000.00 4.00
Material 21,816.00 5.05
Labor 7,776.00 1.80
FoH 4,104.00 0.95

Material cost 21816
Units completed + in process % 4000+(500*40%)+(200*30%)+(300*20%)
(1000*50%=500), (1000*20%=200), (1000*30%=300)
Labor cost 7776
(1000*50%=500), (1000*20%=200), (1000*30%=300)
FoH cost 4104
(1000*50%=500), (1000*20%=200), (1000*30%=300)
Department 2
(1000*4.00) 4,000.00
(500*40%) + Material (320*5.05) 1,616.00
(200*30%) + Labor (320*1.80) 576.00
(300*20%) FoH (320*0.95) 304.00


Equivalent production. During April, 20000 units were transferred in from Department A at a cost
of 39000. Materials cost of 6500 and conversion cost of 9000 were added in Department B. on April
30, Department B had 5000 units of work in process 60% complete as to conversion costs. Materials
are added in the beginning of the process in Department B.
Required:
(1) Equivalent production computations.
(2) The cost per equivalent unit for conversion costs.
Department B
Cost Schedule
Cost received from Dept. A (20000x1.950) 39,000.00 1.950
Cost added in Dept. B
Material 6,500.00 0.325
Conversion 9,000.00 0.500

Material cost 6500
Conversion cost 9000

Per unit conversion cost = = = 0.500
Department B
Total cost of work in process (ending inv.) Dept. B
(5000*100%) Material (5000*0.325) 1,625.00
(5000*60%) Conversion (3000*0.50) 1,500.00
(5000*1.95) 9,750.00


Cost of production report; normal loss. For December, the Production Control Department of
Carola Chemical, Inc., reported the following production data for Department 2:
Transferred in from Department 1 ………………………………………………… 55,000.00 litters
Transferred out to Department 3 ……………………………………………….. 39,500.00 litters
In process at the end of December (with 1/2 labor and factory overhead) …………..
10,500.00 litters
All materials were put into process in Department 1.

The Cost Department collected these figures for Department 2:
Unit cost for units transferred in from Department 1 ……………………. 1.80
Labor cost in Department 2 ………………………………………………. 27,520.00
Applied factory overhead …………………………………………… 15,480.00
Required: A cost of production report for Department 2 for December.
Department 2
Quantity Schedule
Liters received from Dept. 1 55,000.00
Liters completed & transferred to Dept. 3 39,500.00
Liters still in process 10,500.00
Liters lost (Normal loss) 5,000.00
55,000.00 55,000.00
Department 2
Cost Schedule
Total cost Per liter cost
Cost received from Dept. 1 (55000*1.80) 99,000.00 1.80
Labor 27,520.00 0.64
FoH 15,480.00 0.36
Per unit cost increased (99000/50000)-(99000/55000) 0.18

Labor cost 27520
Units completed + in process % 39500 + (10500*1/3)
FoH cost 15480

Units completed + in process % 39500 + (10500*1/3)

Department 2
(10500*1.98) 20,790.00
(10500*1/3) Labor (3500*0.64) 2,240.00
(10500*1/3) FoH (3500*0.36) 1,260.00

Cost of units transferred out; abnormal loss. During February, the Assembly Department received
60000 units from the Cutting Department at a unit cost of 3.54. Costs added in the Assembly
Department were: materials, 41650; labor 101700; and factory overhead, 56500. There was no
beginning inventory. Of the 60000 units received, 50000 were transferred out; 9000 units were in
process at the end of the month (all materials, 2/3 converted); 1000 lost units were ½ complete as to
materials and conversion costs. The entire loss is considered abnormal and is to be charged to factor
overhead.
Required: Cost of production report.
Assembly Department
Quantity Schedule
Units received from Cutting Department 60,000.00
Units completed & transferred out 50,000.00
Units lost (Abnormal loss) 1,000.00
60,000.00 60,000.00
Assembly Department
Cost Schedule
Total cost Per liter cost
Cost received from Cutting Department (60000/3.54) 212,400.00 3.54
Cost added in Assembly Department
Material 41,650.00 0.70
Labor 101,700.00 1.80
FoH 56,500.00 1.00


Material cost 41650
Units completed + in process % + Abnormal loss % 50000+(9000*100%)+(1000*1/2)
Labor cost 101700

Units completed + in process % + Abnormal loss % 50000+(9000*2/3)+(1000*1/2)
FoH cost 56500

Units completed + in process % + Abnormal loss % 50000+(9000*2/3)+(1000*1/2)
Assembly Department
Total cost of work in process (ending inv.) Assembly Department
(9000*100%) Material (9000*0.70) 6,300.00
(9000*2/3) Labor (6000*1.80) 10,800.00
(9000*2/3) FoH (6000*1) 6,000.00
Total cost of work in process (ending inv.) Cutting Department
(9000*3.54) 31,860.00
Abnormal loss added to FoH cost Assembly Department
(1000*1/2) Material (500*0.7) 350.00
(1000*1/2) Labor (500*1.80) 900.00
(1000*1/2) FoH (500*1) 500.00
Abnormal loss added to FoH cost Cutting Department
(1000*3.54) 3,540.00

Chapter Five
Controlling and Costing Materials
Production Department
Purchases Department
4
3 6 1
2 5 Finance Department
Store Room
Go Down/Warehouse
Store Room Store Room

Store Keeper
ABC Company
Material Ledger Card (Bin Card)
For The Month of Jan 2017
Purchases Issues Balance
Date Description
Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount
- - -
- - -
- - -
- - -
- - -
Total - - - - - -
Four methods for data entry in Material Ledger Card:

Store Room FIFO (First In, First Out) Method 1
Store Room LIFO (Last In, First Out) Method 2
Store Room Average Method 3
Most Recent Purchase Price 4


Materials costing methods. The Meltzer Company made the following materials purchases and issues
during January:
Inventory: January 01. 500 units @ 1.20
Receipts: January 06. 200 units @ 1.25
January 10. 400 units @ 1.30
January 25. 500 units @ 1.40
Issues: January 15. 560 units
January 27. 500 units
Required:
The cost of materials consumed and the cost of assigned to the inventory at the end of the month. Using
a perpetual inventory system and:
(1) Average costing, rounding unit costs to the nearest cent.
(2) Fifo costing.
(3) Lifo costing.
1. Fifo costing method:

Meltzer Company
Material Ledger Card
Date Description
1-Jan Balance - - 500.00 1.20 600.00
6-Jan Purchases 200.00 1.25 250.00 - 500.00 1.20 600.00
- - 200.00 1.25 250.00
10-Jan Purchases 400.00 1.30 520.00 - 500.00 1.20 600.00
- - 200.00 1.25 250.00
- - 400.00 1.30 520.00
15-Jan Issues - 500.00 1.20 600.00 140.00 1.25 175.00
- 60.00 1.25 75.00 400.00 1.30 520.00
25-Jan Purchases 500.00 1.40 700.00 - 140.00 1.25 175.00
- - 400.00 1.30 520.00
- - 500.00 1.40 700.00
27-Jan Issues - 140.00 1.25 175.00 40.00 1.30 52.00
- 360.00 1.30 468.00 500.00 1.40 700.00
Total 1,100.00 1,470.00 1,060.00 1,318.00 540.00 752.00
Materials consumed: 1,318.00
Inventory cost: 752.00

2. Lifo costing method:

Meltzer Company
Date Description
1-Jan Balance - - 500.00 1.20 600.00
6-Jan Purchases 200.00 1.25 250.00 - 500.00 1.20 600.00
- - 200.00 1.25 250.00
10-Jan Purchases 400.00 1.30 520.00 - 500.00 1.20 600.00
- - 200.00 1.25 250.00
- - 400.00 1.30 520.00
15-Jan Issues - 400.00 1.30 520.00 500.00 1.20 600.00
- 160.00 1.25 200.00 40.00 1.25 50.00
25-Jan Purchases 500.00 1.40 700.00 - 500.00 1.20 600.00
- - 40.00 1.25 50.00
- - 500.00 1.40 700.00
27-Jan Issues - 500.00 1.40 700.00 500.00 1.20 600.00
- - 40.00 1.25 50.00
Total 1,100.00 1,470.00 1,060.00 1,420.00 540.00 650.00
Materials consumed: 1,420.00
Inventory cost: 650.00

Materials costing methods. The following information is to be used in costing inventory on October
31:
October 1. Beginning balance: 800 units @ 6
October 5. Purchased 200 units @ 7
October 16. Issued 400 units
October 27. Issued 500 units
Required: The cost of materials used and the cost assigned to the October 31 inventory by each of
these perpetual inventory costing methods:
(1) First-in, first-out.
(2) Last-in, first-out.
(3) Average, using a materials ledger card and rounding unit costs to the nearest cent.
(4) Most recent purchase price.

1. First-in, first-out costing method:

Mohammad Usman Company
For The Month of October 2017
Date Description
1-Oct Beginning balance - - 800.00 6.00 4,800.00
5-Oct Purchases 200.00 7.00 1,400.00 - 800.00 6.00 4,800.00
- - 200.00 7.00 1,400.00
9-Oct Purchases 200.00 8.00 1,600.00 - 800.00 6.00 4,800.00
- - 200.00 7.00 1,400.00
- - 200.00 8.00 1,600.00
16-Oct Issues - 400.00 6.00 2,400.00 400.00 6.00 2,400.00
- - 200.00 7.00 1,400.00
- - 200.00 8.00 1,600.00
24-Oct Purchases 300.00 9.00 2,700.00 - 400.00 6.00 2,400.00
- - 200.00 7.00 1,400.00
- - 200.00 8.00 1,600.00
- - 300.00 9.00 2,700.00
27-Oct Issues - 400.00 6.00 2,400.00 100.00 7.00 700.00
- 100.00 7.00 700.00 200.00 8.00 1,600.00
- - 300.00 9.00 2,700.00
- - -
Total 700.00 5,700.00 900.00 5,500.00 600.00 5,000.00
Materials used: 5,500.00
Inventory cost: 5,000.00
2. Last-in, first-out costing method:

Date Description
1-Oct Beginning balance - - 800.00 6.00 4,800.00
5-Oct Purchases 200.00 7.00 1,400.00 - 800.00 6.00 4,800.00
- - 200.00 7.00 1,400.00
9-Oct Purchases 200.00 8.00 1,600.00 - 800.00 6.00 4,800.00
- - 200.00 7.00 1,400.00
- - 200.00 8.00 1,600.00
16-Oct Issues - 200.00 8.00 1,600.00 800.00 6.00 4,800.00
- 200.00 7.00 1,400.00 -
24-Oct Purchases 300.00 9.00 2,700.00 - 800.00 6.00 4,800.00
- - 300.00 9.00 2,700.00
27-Oct Issues - 300.00 9.00 2,700.00 600.00 6.00 3,600.00
- 200.00 6.00 1,200.00 -
- - -
Total 700.00 5,700.00 900.00 6,900.00 600.00 3,600.00

3. Average, using a materials ledger card and rounding unit costs to the nearest cent:
Date Description
1-Oct Beginning inventory - - 800.00 6.00 4,800.00
5-Oct Purchases 200.00 7.00 1,400.00 - 1,000.00 6.20 6,200.00
9-Oct Purchases 200.00 8.00 1,600.00 - 1,200.00 6.50 7,800.00
16-Oct Issues - 400.00 6.50 2,600.00 800.00 6.50 5,200.00
24-Oct Purchases 300.00 9.00 2,700.00 - 1,100.00 7.18 7,900.00
27-Oct Issues - 500.00 7.18 3,590.91 600.00 7.18 4,309.09
Total 700.00 5,700.00 900.00 6,190.91 600.00 4,309.09
Note: Computation formulas for average method:

1. When purchases occur, the formulas are:
Average Quantity = Balance Quantity + Purchases Quantity
Average Amount = Balance Amount + Purchases Amount
Average Rate = Balance Amount / Balance Quantity
2. When Issues occur, the formulas are:

Average Quantity = Balance Quantity – Issues Quantity
Average Rate = Issues Amount / Issues Quantity
Average Amount = Balance Quantity * Balance Rate

4. Most recent purchase price:

Date Description
1-Oct Beginning inventory - - 800.00 6.00 4,800.00
5-Oct Purchases 200.00 7.00 1,400.00 - 1,000.00 7.00 7,000.00
9-Oct Purchases 200.00 8.00 1,600.00 - 1,200.00 8.00 9,600.00
16-Oct Issues - 400.00 8.00 3,200.00 800.00 8.00 6,400.00
24-Oct Purchases 300.00 9.00 2,700.00 - 1,100.00 9.00 9,900.00
27-Oct Issues - 500.00 9.00 4,500.00 600.00 9.00 5,400.00
Total 700.00 5,700.00 900.00 7,700.00 600.00 5,400.00
Note: Computation formulas for most recent purchase price method:

1. When purchases occur, the formulas are:
Balance Quantity = Previous Balance Quantity + Purchases Quantity
Balance Rate = Purchases Rate
Balance Amount = Balance Quantity * Balance Rate
2. When Issues occur, the formulas are:

Balance Quantity = Previous Balance Quantity – Issues Quantity
Balance Rate = Issues Rate
Balance Amount = Balance Quantity * Balance Rate

Chapter Six
Joint Cost Allocation
Joint Product Joint Product
Joint Cost
Joint Cost
By Product
By Product
By Cost
By Cost
Joint Cost
By Cost
Market Value Method

Joint Cost
Per Unit Sale Total Market Joint Cost

Products Units Produced
Price Value Allocation
𝑱𝒐𝒊𝒏𝒕 𝑪𝒐𝒔𝒕
𝑱𝒐𝒊𝒏𝒕 𝑪𝒐𝒔𝒕 𝑨𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏 = 𝑿 𝑬𝒂𝒄𝒉 𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆
𝑻𝒐𝒕𝒂𝒍 𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆

Weighted Average Method

Joint Cost
Per Unit Joint Cost

Products Units Produced Total Weight
Weight Allocation
𝑱𝒐𝒊𝒏𝒕 𝑪𝒐𝒔𝒕 𝑨𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏 = 𝑿 𝑬𝒂𝒄𝒉 𝑾𝒆𝒊𝒈𝒉𝒕
𝑻𝒐𝒕𝒂𝒍 𝑾𝒆𝒊𝒈𝒉𝒕

Joint cost allocation – market value and weighted average methods. The Buildon Company products
three joint products: Buildon, Buildeze, and Buildrite. Total joint production cost for November was
21600.
The units produced and unit sales prices at the split-off point were:
UNIT SALES
PRODUCT UNITS PRICE
Buildon ………………………………. 6,000.00 2.20
Buildeze …………………………….. 8,000.00 1.25
Buildrite ……………………………….10,000.00 1.28
In determining costs by the weighted average method, each unit is weighted as follows:
PER UNIT
PRODUCT WEIGHTING
Buildon ………………………………. 6
Buildeze …………………………….. 4
Buildrite ………………………………. 4
Required: Allocation of the production cost, using:
(1) The market value method.
(2) The weighted average method.

Market Value Method

Joint Cost 21,600.00
Per Unit Sale Total Market Joint Cost

Price Value Allocation
Buildon 6,000.00 2.20 13,200.00 7,920.00
Buildeze 8,000.00 1.25 10,000.00 6,000.00
Buildrite 10,000.00 1.28 12,800.00 7,680.00
Total 36,000.00 21,600.00

Per Unit Joint Cost

Weight Allocation
Buildon 6,000.00 6.00 36,000.00 7,200.00
Buildeze 8,000.00 4.00 32,000.00 6,400.00
Buildrite 10,000.00 4.00 40,000.00 8,000.00
Total 108,000.00 21,600.00


Cost allocation – weighted average method. A department’s equivalent production schedules show
10000 units of Article X and 8000 units of Article Y. Both articles are made from the same raw materials,
but a unit of Article X and Article Y require estimated quantities of materials in the ratio of 3:2,
respectively. Both articles pass through the same conversion process, but Article X and Article Y require
estimated production times per unit in the ratio of 5:4, respectively.
Required: A computation of the unit materials and conversion costs for each product if the total costs
are: materials, 92000; conversion cost, 41000.

Material (Joint Cost) 92,000.00
Per Unit Joint Cost

Weight Allocation
X 10,000.00 3.00 30,000.00 60,000.00
Y 8,000.00 2.00 16,000.00 32,000.00
Total 46,000.00 92,000.00

Conversion (Joint Cost) 41,000.00
Per Unit Time Total Time Joint Cost

Consumed Consumed Allocation
X 10,000.00 5.00 50,000.00 25,000.00
Y 8,000.00 4.00 32,000.00 16,000.00
Total 82,000.00 41,000.00


Joint cost allocation using market value method; sell or process further. The Domecq Company
produces three products, A, B, and C, as the result of initial joint processing plus separable processing
after the split-off point. Records for July show the following:
A B C Total
Materials used ……………………………… - - - 150,000.00
Joint processing cost ………………………. - - - 170,000.00
Separable processing costs …………………. 50,000.00 80,000.00 70,000.00
Units produced ………………………………… 6,000.00 12,000.00 6,250.00
Units sold ……………………………………… 4,000.00 9,000.00 4,250.00
Unit sales price ……………………………. 50.00 37.50 40.00
Required:
(1) The cost assigned to ending inventory for each product and in total, assuming no beginning
inventory and using the market value method for joint cost allocation. In completing this
requirement, disregard the information given in requirement (2).
(2) The difference in operating profit if Domecq accepts an offer from a prospective customer who
would be willing to buy all the output of Product B at the split-off point for 30 per unit.
Market Value Method

Market Ending
Units Per Unit Total Market Separable Joint Cost
Products Value Split- Total Cost Inventory
Produced Sale Price Value Cost Allocation
off Point Cost
A 6,000.00 50.00 300,000.00 50,000.00 250,000.00 100,000.00 150,000.00 50,000.00
B 12,000.00 37.50 450,000.00 80,000.00 370,000.00 148,000.00 228,000.00 57,000.00
C 6,250.00 40.00 250,000.00 70,000.00 180,000.00 72,000.00 142,000.00 45,440.00
Total 800,000.00 320,000.00
Formulas Used in Above Table:

𝑱𝒐𝒊𝒏𝒕 𝑪𝒐𝒔𝒕 𝑨𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏 = 𝑿 𝑬𝒂𝒄𝒉 𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆 𝑺𝒑𝒍𝒊𝒕 − 𝒐𝒇𝒇 𝑷𝒐𝒊𝒏𝒕
𝑻𝒐𝒕𝒂𝒍 𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆 𝑺𝒑𝒍𝒊𝒕 − 𝒐𝒇𝒇 𝑷𝒐𝒊𝒏𝒕
𝑬𝒏𝒅𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 = 𝑼𝒏𝒊𝒕𝒔 𝑷𝒓𝒐𝒅𝒖𝒄𝒆𝒅 − 𝑼𝒏𝒊𝒕𝒔 𝑺𝒐𝒍𝒅
𝑬𝒂𝒄𝒉 𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕

𝑷𝒆𝒓 𝑼𝒏𝒊𝒕 𝑬𝒏𝒅𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑪𝒐𝒔𝒕 = 𝑿 𝑬𝒏𝒅𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
𝑼𝒏𝒊𝒕𝒔 𝑷𝒓𝒐𝒅𝒖𝒄𝒆𝒅
»»» E N D «««
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Khurasan University

Faculty of Economics (BBA)

For 2nd Year, 3rd Semester

By: Sir Ihsanullah Khan

Composed By: Hazratullah Ihsas Arab

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Direct Cost Indirect Cost

Direct Labor Indirect Labor

Direct Material Indirect Material

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6. Standard Cost: The predetermined cost of a product is called Standard Cost.

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11. Implicit Cost: Cost which we do not physically pay.

12. Explicit Cost: Cost which we physically pay.

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Cost of Goods Sold (C.G.S) Statement

Mohammad Usman Manufacturing Company

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Question 2, Page 31:

Sales ……………………….. 4,000,500.00 Sales returns and allowances .. 25,200.00

Inventories Dec 31, 19B Dec 31, 19A

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Question 3, Page 31:

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Question 5, Page 32:

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Question 6, Page 32:

Inventories Jan 1 Dec 31

Materials purchased ……………………………………….. 366,000

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Question 4, Page 32:

Inventory accounts showed these beginning and ending balances:

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Formula for re ve rse me thod:

Short me thod for re ve rse me thod:

Less Unknown figure

Add: Unknown figure

Less Unknown figure

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Question 7, Page 33:

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Question 8, Page 33:

During the year, 18,000 units were completed.

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Under or over applied FoH

Question 12, Page 34:

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Yukon Refrigerator Company

Yukon Refrigerator Company

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Total fixed costs Total variable costs

Fixed costs 1,435,400.00

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Cost, Concept, Uses and Classification

Question 4, Page 58:

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Question 6, page 59: