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

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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 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:

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