Blog: Mgt402 Assignment No. 2 solution

COST AND MANAGEMENT ACCOUNTING (MGT402)

Spring Semester 2011

Assignment # 2 Marks: 20

Question:

Refresh Food Products produces “Squash Cubes” by continuous processing. During April 2011 producing department X received 8,000 cubes from the preceding department W and after processing, transferred 5,500 cubes to next department Y. During the month there was normal loss of 400 cubes; at the end of process, 600 cubes (75% converted) were lost due to negligence of a worker. There was no work in process beginning inventory, the ending inventory was estimated as 60% converted. Following product costs were charged to the department X during April 2011:

Cost from preceding department W Rs.16,400

Direct materials 2,000

Direct labor 3,625

Factory overhead 5,075 Rs.27,100

In department X all materials are added at the start of process.

Required: Cost of production report for April 2011

Note: Complete working is required, it carries marks.


Solution:




Cost of Production Report (CPR)

Unit Completed                                                                       5500

Unit in Process                                                                         1500

Unit Lost (Normal Loss at the end) (60% Converted Cost)      400

Unit Lost (Abnormal Loss) (75% Converted Cost)                  600

   8000    8000

Cost to be accumulated for as Follow

T.C                  U.C

Cost Received                                                  16400              2.05

Cost Added

Material                                                           2000                0.25

Labor                                                               3625                0.50

FOH                                                                 5075                0.70

27100              3.50

Cost to be accumulated for as Follow

Cost of Unit Completed                       (5500 x 3.5)                 19250

Unit Lost (Normal Loss)                      (400 x 3.5)                   1400

W I P Ending Inventory

Proceeding Department                        (1500 x 2.05)               3075

Material                                               (1500 x .25)                 375

Labor                                                   (900 x .5)                     450

FOH                                                     (900 x .7)                     630      1455

Abnormal loss

Proceeding Department                        (600 x 2.05)                 1230

Material                                               (600 x .25)                   150

Labor                                                   (450 x .50)                   225

FOH                                                     (450 x .70)                   315      690

27100