SOLUTIONS MANUAL

CHAPTER
Cost Accumulation
2 and Cost
Assignment

Answers to Review Questions

1 (a) Fixed costs (f) Semi-variable costs
(b) Variable costs (g) Variable costs
(c) Fixed costs (h) Semi-variable costs
(d) Fixed costs (i) Variable costs
(e) Variable costs (j) Semi-variable costs

2 (a) Controllable costs (d) Non-controllable costs

(b) Non-controllable costs (e) Controllable costs
(c) Controllable costs (f) Non-controllable costs

3 RM RM
Raw materials stock at 1 June 201X 28,000
Raw materials purchased 120,000
148,000
Less: Raw materials stock at 31 June 20X1 35,000
Cost of raw materials consumed 113,000

4 (a) Cost elements RM

Direct materials 40,000
Direct labour 18,000
Prime costs 58,000
Manufacturing overheads 32,000
Total product costs 90,000

(b) RM90,000
Cost per unit = RM22.50
4,000
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5 Chester Bhd
Costs of raw materials consumed and costs of goods manufactured statement
Solution RM RM
Raw materials stock at 1 March 201X 16,200
Raw materials purchased 28,000
44,200
Less: Raw materials stock at 31 March 201X 4,600
Cost of raw materials consumed (a) 39,600
Direct labour 40,000
Prime costs (b) 79,600
Manufacturing overheads 72,000
151,600
Work-in-process stock at 1 March 201X 2,400
Less: Work-in-process stock at 31 March 201X 18,000 (15,600)
Cost of goods manufactured for March (c) 136,000

6 Slough Company
Costs of raw materials consumed and costs of goods manufactured statement
Solution RM RM
Raw materials stock at 1 July 201X 80,000
Raw materials purchased 120,000
200,000
Less: Raw materials stock at 31 July 201X 40,000
Cost of raw materials consumed (a) 160,000
Direct labour 87,000
Prime costs 247,000
Manufacturing overheads 96,000
343,000
Work-in-process stock at 1 July 201X 42,000
Less: Work-in-process stock at 31 July 201X 64,000 (22,000)
Cost of goods manufactured for July (b) 321,000

Slough Company
Costs of goods sold statement
Solution RM RM
Finished goods stock at 1 July 201X 46,400
Cost of goods manufactured for July 321,000
367,400
Finished goods stock at 31 July 201X 44,400
Cost of goods sold (c) 323,000
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Slough Company
Income Statement for the month of July
Solution RM RM
Sales Revenue (72 × RM9,500) 520,000
Less@ Cost of goods sold 323,000
Gross margin (d) 197,000

7 Phillips Furniture
Costs of raw materials consumed and costs of goods manufactured statement
Solution RM RM
Raw materials stock at 1 August 201X 17,500
Raw materials purchased 120,000
137,500
Less: Raw materials stock at 31 August 201X 25,000
Cost of raw materials consumed 112,500
Direct labour 75,000
Prime costs 187,500
Manufacturing overheads – indirect labour 15,000
Factory rent 15,500
Depreciation of machinery 22,500
Factory utilities 4,500
Factory supervision 33,700 91,200
278,700
Work-in-process stock at 1 August 201X 4,000
Less: Work-in-process stock at 31 August 201X 5,500 (1,500)
Cost of goods manufactured for August (a) 277,200
Average cost per unit (b) RM277,200
1,500
= RM184.80

Statement of profit and loss for the month of August

RM RM
Sales Revenue (1,250 × RM300) 375,000
Finished goods stock at 1 August 201X 30,000
Cost of goods manufactured for August 277,200
307,200
Finished goods stock at 31 August 201X 42,500
Cost of goods sold 264,700
Gross margin 110,300
Less: Sales commission 67,500
Administration expenses 112,500 180,000
Operating loss (c) (69,700)
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8 Sports Sdn Bhd

Costs of raw materials consumed and costs of goods manufactured statement
Solution RM RM
Raw materials stock at 1 March 7,500
Raw materials purchased 18,500
26,000
Less: Raw materials stock at 31 March 5,000
Cost of raw materials consumed 21,000
Direct labour 15,000
Prime costs 36,000
Manufacturing overheads – indirect labour 5,000
Factory rent 5,500
Depreciation of machinery 12,500
Factory utilities 4,500
Factory supervision 4,700
68,200
Work-in-process stock at 1 March 2,000
Less: Work-in-process stock at 31 March 3,500
Cost of goods manufactured for March (a) 66,700
Average cost per unit (b) RM66,700/500
= RM133.40

Statement of profit and loss for the month of March

Sales Revenue (400 × RM350) 140,000
Finished goods stock at 1 March 6,820
Cost of goods manufactured for March 66,700
Finished goods stock at 31 March 20,460
Cost of goods sold 53,060
Gross margin 86,640
Less: Sales commission 5,500
Administration expenses 2,500
Operating profit (c) 78,640

9 (i) Electricity bill: These are considered semi-variable costs as there is a fixed charge component
regardless of usage followed by a variable cost which is charged based on each unit consumed.
Cost

Volume
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(ii) Supervisor’s monthly salary: This will not change in normal circumstances and is thus
considered fixed costs.
Cost

Volume

(iii) Performance bonus: This is considered a semi-variable cost as the bonus is only paid out after
output hits a certain amount. Once it happens, the person will be paid a fixed amount and
any surplus output will result in an additional bonus payout which is a percentage of that
surplus output. In this case, it is payable when output in a period exceeds 20,000 units. The
bonus amounts in total is RM20,000 plus RM50 per unit for output above 20,000 units.
Cost

Volume

(iv) Sales commission: This considered variable costs as it is based on how much sales the
salesperson brings in. If no sales are brought in, the salesperson does not receive any
commission.
Cost

Volume
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(v) Machine rental with maximum charge: These are considered step costs as the cost starts of as
variable, but has a ceiling cost, after which any further use will not increase the rental.
Cost

Volume