100

Sales T2,55,000 x85 3,00,000

ILLUSTRATION 5. Following figures are extracted from the Trial Balance of Gogetter Co. on

30th September, 2012:

Debit Balances Debit Balances

Opening Inventories : Repairs and Upkeep-Factory 14,000
Finished Stock 80,000 Heat, Light and Power 65,000
VRaw Materials 1,40,000 Rates and Taxes 6,300
Work-in-Progress 2,00,000 Miscellaneous Factory Expenses 18,700
Ofice Appliances 17,400 Sales Commission 33,600
Plant&Machinery 4,60,500 Sales Travelling 11,000
Building 2,00,000 Sales Promotion
Sales Return and Rebates 22,500
Materials Purchased 14,000 Distribution Dept.-Salaries and Expenses 18,000
Freight incurred on Materials 3,20,000 Office Salaries and Expenses 8,600
Direct Labour 16,000 Interest on Borrowed Funds
Indirect Labour 1,60,000 2,000
Credit Balances
Factory Supervision 18,000 Sales
10,000 Purchase Returns 7,68,000
Further details are 4,800
available as
() Closing Inventories: follows:
Finished GoodsR
(i) Accrued expenses 1,15,000;
on
Raw
MaterialsR 1,80,000;
1,80,000; Work-in-Progress 1,92,000.
Work-in-Progress?
(i) Direct Lgbour 8,000; Indirect 1,92,000.
Depreciation
Office to be provided on: Laboúr 7 1,200: Interest on
(iu) Appliances
Distribution of the5%; Plant and Machinery Borrowed Funds Z,000.
Heat, Light
and following costs 10% ;
Buildings 4%.
Rates and TaxesPower Faptory,
to

Depreciation two-thirds to Qmce and

With the help of Buildings to Factory and one-third
on Distribútion in thee ratio of8:1:1.
of 8:1:
() a
statement
the above Façtory, Office to Office. 1
(ii) a of cost information, you are and Seling in the ratio of
statement of profit.showing
elementsrequired
various to
of cost prepare
8
:1:1.
andd
 Net Profit

obtained from the cost records of Adityaa

ILLUSTRATION 6. Following information has been
Chemicals Ltd. for 2012

Finished Goods on 1-1-2012 50,000 Heat, Light and Power 20,000

Raw Materials on 1-1-2012 10,000 Factory Insurance and Taxes 5,000
Work-in-Progress 1-1-2012 14,000 Repairs to Plant 3,000
Direct Labour 1,60,000 Factory Supplies 5,000
98,000 Depreciation--Factory Building 6,000
Purchase of Raw Material
Indirect Labour 40,000 Depreciation-Plant 10,000
made available i s -
Otherinformation
2012 2,80,000
Factory cost of goods produced in
Raw material consumed in 2012 95,000
Cost of goods sold in 2012 1,60,000
incurred during the year 2012. Prepare a
No office and administration expenses were
information and its break-up.
Statement of Cost for the year ending 2012 giving maximum possible
sOLUTION
Aditya Chemicals Ltd.
 is metal and wood cutting manutactürer, selmng
ILLUSTRATION 7. Popeye Company
a
data for the month of October,
home construction market. Consider the following
nroducts to the
2012 1-1-2012 31-10-2012

1,00,000 1,25,000
Direct Materials
2,50,000 3,75,000
Finished Goods
25,000 35,000
Work-in-process
month
Transactionsduring the 10,000
5,000 Property taxes on plant & equipment
Sand paper 7,500
Material-handling costs 1,75,000 Fire Insurance on plant & equipment
Direct materials purchased 11,50,000
Lubricants and Coolants 12,500
Miscellaneous indirect manufac- Sales revenue 34,00,000
Marketing promotions 1,50,000
turing labour 1,00,000
Direct manufacturing labour 7,50,000 Marketing salaries 2,50,000
Plant-leasing costs 1,35,000 Distribution costs 1,75,000
Depreciation-plant & equipment 90,000 Customer-service costs 2,50,000
Required
income statement with a separate supporting schedule of cost of goods
(i) Prepare an
manufactured.
basically a variable cost
(i) For all manufacturing items, indicate by V or F whether each is
or

a fixed cost (where the cost object is a product unit)

SOLUTION
Popeye Company
COST SHEET
 Operating lnco1 ,000
fire occurred in the tactory premises on October 31. 2010
LUSTRATION 8. A The
records were
ere kept in anothe
kept another
records have been desUrOyed.ertain accounting building.
accounting
following for the period September 1,
2012 to October 31, 2012:
They reveal the
) Direct materials
purchased 2,50,000
1-9-2012 40,000
(i) Work in process inventory,
(iii) Direct materials inventory, 1-9-2012 20,000
(iv) Finished goods inventory, 1-9-2012 37,750
(v) Indirect manufacturing costs 40% of conversion cost
(vi) Sales revenues 77,50,000
(vii) Direct manufacturing labour 2,22,250
(viii) Prime cost F3,97,750
(ix) Gross margin percentage based on revenues 30%
(x) Cost of Goods available for sale 5,55,775
The loss is fully covered by insurance. The insurance company wants to know the historical
cost of the inventories as a basis for negotiating a settlement, although the settlement is actually to
be based on replacement cost, not historical cost.
Required : (i) Finished goods inventory, 31-10-2012 ; (i) Work-in-process inventory, 31-10
2012: (ii) Direct materials inventory, 31-10-2012. (CA-PE-II
 ILLUSTRATION9. The books and records of the Anand Manufacturing Company
present the following data for the month of August, 2012
Direct labour cost 16,000 (160% of factory overhead)
Cost of goods sold 56,000
Inventory accounts showed these opening and closing balances:
August 1 August 31

Raw Materials 8,000 8,600

Work-in-Progress 8,000 12,000
Finished Goods 14,000 18,000
Other data:
Selling Expenses 7 3,400; General and Administration Expenses 72,600 ; Sales for
the month 7 75,000.
You are required to prepare statement showing cost of goods manufactured and sold
and profit earned. (B. Com. Panjab & C.A Inter)
sOLUTION
STATEMENT OF COST AND PROFIT
for the maonth of August, 2012
 by
companyproduoon
in
requirod
You nro marho mount ponditure lHaud
the open
4 pernetre. he sold in lolow,

for the
to
oloth laglvon
i n f o r m n t l o n

Malon Dopot
Relevant

cloth.
Rupenditure H e a d
awnulituro on
10,00,0000 Mauhlnon (0)
Doproclaton
of
10,00,000
B0,000Mian, Oion wpanditur
Cotton Connumod

r OMen
in Factory Computor
Direct
Labour
4,00,000
'urohano of Vurnlturn and
Carriage Inward 'urohanan of
in F'actory Mian, Omee
Indirect
Labour
and Mauhinen or
Workn
Diroctor 9,00,000
Salary of 6,00,000 ividondn jpald
in Factory
Other Staff (Pnctory) Diretorn' V'aon
Local Taxon 10,00,000
Water,
Powor,
Advertining and
P'ubliety
Dyeing, Blenching, ote. 2,00,000
ommlanion pald on
Anlon
Depreciation (W'nctory) 00,00,000
other T'axon
on
Production

1,00,000
(lommnalon pald to Vorlgn
Excine and
Misc. Expennon (Factory) 10,00,000 uyorn
(on Balam)
OMce Salarien 1,0,000 V'aoklng anol Vorwarding ui
Director n falr raturn f
Managing () Th0 0ompany owpeata
Snlary of ia made avallalble i
further information outatAdng ara 1,00,000
Following 1,00,00,000. (0) MArkoling xpenaon
is Mhoat In oolumnnr frm
paid-upcapital which
market prlce nflor preparimg # Coal Analyala

Suggest the open

metre]
Ans. I 9-80 per As followWH
of product A in made up
16. The cost of sale
G0,000 Adminlatratlon Expena
Materials used in manufacturing
Materials used in primary packing 10,000 Depraolatlon on Offloe
1,500 Huilding and Squlpmønt 760
Materials used in selling tho product
760 Dapreclation on l'nctory Bullding
Materials used in the factory
Materials used in the office 1,250 Helling lxponues ,600
10,000 Pyelght on matorlala purchamad
Labour required in producing
Labour required for factory supervision 2,000 Advertislng ,260
Indirect Expenses-Pactory 1,000
Assuming that all the products manufactured Are Bold, wlhat should b» the nolling price ty altain a
profit of 20% on selling price ?
Ans. Selling price 7 1,25,000]
Hints: Prime cost 85,000; Works cost t 00,600; Cost of production 93,760 ; Cust of aales
1,00,000; Profit 25,000
16. Following inventory data relate to XYZ Ltd. Inventortes

Finished Goods
Beylnnng inding
1,10,000 95,009
Work-in-Progress 70,000 H0,000
Raw materials
90,000 96,000
Additional information:
Cost of goods available for sale
Total
6,84,000 Vactory overhonds 1,87,000
goods processed during the period 6,64,000 Direct materlals usod
Requirements: 1,93,000
i) Determine raw materials
(ii)
purchases.
Determine the direct labour cost incurrod.
(iii) Determine the cost of
Ans. ((i) 1,98,000 (ii) goods sold. LB.Com. (lona.) Delhi
17.
2,24,000 (il) ? 5,89,000]
On June 30, 2012 a flash flood damaged the warehouse
destroying the work-in-progre88 inventory, There was noand fnctory of ABC
finished goods inventories. A physical verificatlon damage to øithorCorporation completely
the raw matarials r
valuations. taken after the flood revealed the
following
 Ans. [T 9:80 per metre]
made up follows :
The cost of sale of product A is
as
15.

Materials used in manufacturing

60,000 Administration Expenses 1,250
10,000 Depreciation onOffice
Materials used in primary packing
Materials used in selling the product 1,500 Building and Equipment 750
Materials used in the factory 750 Depreciation on Factory Building 1,750
Materials used in the office 1,250 Selling Expenses 3,500
Labour required in producing 10,000 Freight on materials purchased 5,000
Labour required for factory supervision 2,000 Advertising 1,250
Indirect Expenses-Factory 1,000
Assuming that all the products manufactured are sold, what should be the selling price to obtain a
profit of 20% on selling price ?
Ans. Selling price7 1,25,000]
Hints: Prime cost T 85,000; Works cost 7 90,500 ; Cost of production 7 93,750 Cost of sales
1,00,000; Profit F 25,000]
16. Following inventory data relate to XYZ Ltd.: Inventories

Finished Goods
Beginning Ending
T1,10,0000 95,000
Work-in-Progress 70,000 80,000
Raw materials
90,000 95,000
Additional information:
Cost of goods available for sale
Total goods processed during the
6,84,000 Factory overheads 1,67,000
period T6,54,000 Direct materials used 1,93,000
Requirements:
(i) Determine raw materials purchases.
(ii) Determine the direct labour cost
incurred.
(ii) Determine the cost of
Ans. [i)F 1,98,000 (ii) goods sold. [B.Com (Hons.) Delhi
72,24,000 (ii) F 5,89,000]
17. On June
30, 2012 a flash flood damaged the etely
warehouse and factory of ABC Corporation
destroying the work-in-progress inventory. There was no cole or
e a g0ods inventories. A physical verification taken damage eitherrevealed
after theto flood the raw the
materia
followis
valuations.
coST-ANALYSIS, CONCEPTS AND CLASSIFICATIONS V2-33

The inventory on Jan. 1, 2012 consisted ofthe following:

Raw Materials 62,000 Raw Materials 30,000
Work-in-Progress 0 Work-in-Progress 1,00,000
Finished Goods 1,19,000 Finished Goods 1,40,000
A review of the books and records disclosed that the gross profit margin historically approximated
25% ofsales. The sales for the first six months of 2012 were 3,40,000. Raw material purchases were
71,15,000. Direct labour costs for this period were 80,000 and manufacturing overhead has
historically been 50% of direct labour.
Compute the cost of work-in-progress inventory lost at June 30, 2012 by preparing a statement of cost
and profit. (B.Com Hons. Delhi)
Ans. IClosing WIP 69,000; Profit 85,000]
18. Vindhyachal Industries manufacture a Product X.
On 1st January, 2012, there were 500 units of finished product in stock. Other stocks on 1st January,
2012 were as under:
Work-in-Progress5,740; Raw MaterialsM620.
The information available from cost records for the year ended 31st December, 2012 was as follows:

Indirect Labour 12,160 Work-in-Progress on 31-12-2012 7,820

Direct Labour 32,640 Sales-15,000 units 3,60,000
5,570 Indirect Materials 21,390
Freight on Raw Material Purchased
Stock of Raw Materials on 31-12-2012 ,640 Total Manufacturing Cost Incurred 1,94,080
Other Factory Expenses 31,730
There are 1,500 units of product in finished goods stock on 31st December, 2012. You are required
to: i) Prepare a statement of cost for 2012 giving all details of cost and their break up, and (ii)
Determine the unit cost at which finished goods stock is to be properly valued at the beginning and at
the end of 2012 (assuming the same cost used for both).
Ans. [Prime cost 7 1,28,800 ; cost of goods manufactured F 1,92,000 ;F12 per unit cost of stock,
Profit 1,80,000]
(Hint: Raw Materials purchased 88,610].
data for the month of April,
19. The books of Adarsh Manufacturing Company presents the following
2012. Direct labour cost 7 17,500 being 175% of the
works overhead; cost of goods sold excluding
administration expenses 56,000.
and closing balances
Inventory accounts showed the following opening April 30
April 1

Raw materials 8,000 10,600

10,500 14,500
Work-in-progress 19,000
Finished goods 17,600
Other data are: month 75,000.
Selling expenses 3,500; General
and administration expenses R2,500; Sales for thestatement
to: (i) Compute the value of materials purchased.
(ii) Prepare a of cost
You are required
cost and also the profit.
showing the various elements of 61,400 ; Cost of Goods Manufactured
Works Cost
Ans, [(i) F 36,500 ; (ii) Prime Cost 61,400;
7 13,000]
57,400; Cost of Sales 62,000; Profit