Course Name Cost Accounting Class BA,AD,B.

COM BS,
BEd, MA/MSc,
MEd, MPhil and
PhD

Course Code 462 Semester Spring 2025

Assignment No 2 Due Date 12-06-2025

om
Total Assignment 2 Last Date 20-08-2025

Www.EduTestPoint.BlogSpot.COM

t.c
‫ب‬
‫ اسائ من ٹ ورک ا ی ک فراڈ ہے لہ ذ ا اس فراڈ سے چ ی ں ۔۔۔‬: ‫ن وٹ‬

po
gs
lo
.b
nt
oi
tP
es
uT
Ed
w.
w

—-------------------------------------------------------------------------------------
W
Q. 1: Journal Entries for Loss from Spoiled Dresses

(A) If the loss from spoiled dresses is charged to the relevant job (Job No. 15):

1.​ To record the cost of spoiled dresses:​

om
○​ The total cost of the spoiled dresses is calculated as:​

t.c
■​ Cost per dress = Direct Material + Direct Labour +

po
Factory Overhead = 200 + 120 + 160 = Rs. 480​

gs
■​ Cost of spoiled dresses = 20 dresses * Rs. 480 = Rs.

lo
9,600​
.b
nt
2.​Journal Entry:​
oi
tP

○​ Debit: Work in Process (Job No. 15) Rs. 9,600​

es

○​ Credit: Spoiled Goods Expense Rs. 9,600 (To record the loss
uT

from spoiled dresses charged to Job No. 15)​

Ed
w.

3.​To dispose of the spoiled dresses as seconds:​

w

○​ Proceeds from the sale of spoiled dresses = 20 * Rs. 150 =

W

Rs. 3,000​

4.​Journal Entry:​
 ○​ Debit: Cash Rs. 3,000​

○​ Credit: Spoiled Goods Expense Rs. 3,000 (To record the

proceeds from the sale of spoiled dresses as seconds)​

5.​To record the net loss on spoiled dresses:​

om
○​ The net loss is:​

t.c
po
■​ Net loss = Cost of spoiled dresses - Proceeds from sale

gs
= 9,600 - 3,000 = Rs. 6,600​

6.​Journal Entry:​
lo
.b
nt
○​ Debit: Spoiled Goods Expense Rs. 6,600​
oi
tP

○​ Credit: Work in Process (Job No. 15) Rs. 6,600 (To record the
es

net loss from spoiled dresses charged to Job No. 15)​

uT
Ed

(B) If the loss from spoiled dresses is charged to all production:

w.

1.​ To record the total cost of spoiled dresses:​

w

○​ The total cost of spoiled dresses = 20 * Rs. 480 = Rs. 9,600​

W

2.​Journal Entry:​

○​ Debit: Work in Process Rs. 9,600​

 ○​ Credit: Spoiled Goods Expense Rs. 9,600 (To record the total
cost of spoiled dresses charged to all production)​

3.​To dispose of the spoiled dresses as seconds:​

○​ Proceeds from sale of spoiled dresses = 20 * Rs. 150 = Rs.

om
3,000​

t.c
4.​Journal Entry:​

po
○​ Debit: Cash Rs. 3,000​

gs
lo
○​ Credit: Spoiled Goods Expense Rs. 3,000 (To record the
.b
proceeds from the sale of spoiled dresses as seconds)​
nt
oi

5.​To record the net loss on spoiled dresses:​

tP
es

○​ The net loss is:​

uT

■​ Net loss = 9,600 - 3,000 = Rs. 6,600​

Ed
w.

6.​Journal Entry:​
w

○​ Debit: Spoiled Goods Expense Rs. 6,600​

W

○​ Credit: Work in Process Rs. 6,600 (To record the net loss from
spoiled dresses charged to all production)​
Q. 2: Three Methods of Costing Material Issuance to Production

1.​FIFO (First-In-First-Out):​

○​ Description: The materials purchased first are used up first.

om
In FIFO, the oldest inventory is issued to production first.​

t.c
○​ Advantages:​

po
■​ More accurate reflection of current inventory costs.​

gs
lo
■​ Reduces the risk of obsolete inventory.​
.b
nt
■​ Suitable for industries with time-sensitive or perishable
oi

goods.​
tP
es

○​ Disadvantages:​
uT

■​ In periods of inflation, FIFO may lead to higher taxable

Ed

income because older, cheaper inventory is used first.​

w.

2.​LIFO (Last-In-First-Out):​
w
W

○​ Description: The most recently purchased materials are used

first. The newest inventory is issued to production first.​

○​ Advantages:​
 ■​ In inflationary periods, LIFO can reduce taxable income
as the more expensive materials are used first.​

■​ Matches current costs with current revenues.​

○​ Disadvantages:​

om
■​ Not allowed under certain accounting standards (e.g.,

t.c
IFRS).​

po
■​ Can result in undervaluation of inventory on the

gs
balance sheet.​

lo
.b
3.​Weighted Average Cost (WAC):​
nt
oi

○​ Description: A weighted average cost is calculated for all

tP

materials in inventory, and the same cost is used for all units
es

issued to production.​
uT

○​ Advantages:​
Ed
w.

■​ Simple to apply and avoids the issues of FIFO and LIFO.​

w

■​ Works well for industries with homogeneous materials.​

W

○​ Disadvantages:​
 ■​ Does not accurately reflect the flow of materials, as
costs are averaged.​

Advantages and Disadvantages of FIFO and LIFO Costing Methods

om
1.​FIFO:​

t.c
○​ Advantages:​

po
gs
■​ Provides a better representation of current financial

lo
position, especially when prices are rising.​
.b
nt
■​ Reduces the risk of inventory becoming obsolete.​
oi

○​ Disadvantages:​
tP
es

■​ In inflationary periods, FIFO may result in higher profits

uT

and hence higher taxes.​

Ed

2.​LIFO:​
w.
w

○​ Advantages:​
W

■​ Reduces taxable income during inflationary periods by

using the more expensive inventory.​
 ■​ Matches current costs with revenues, making it better
for companies with rising material prices.​

○​ Disadvantages:​

■​ Not allowed under some accounting standards (e.g.,

om
IFRS).​

t.c
■​ Can cause inventory to be undervalued on the balance

po
sheet, leading to potentially misleading financial

gs
statements.​

lo
.b
nt
Q. 3: Timekeeping Department Functions and Methods of Controlling Worker
oi

Attendance
tP

(a) Functions of the Timekeeping Department:

es

The Timekeeping department is responsible for managing the

uT

attendance and working hours of employees in a factory. Its functions

Ed

include:
w.

1.​Recording Working Hours: Ensuring accurate tracking of the

w

number of hours worked by each employee.​

W

2.​Leave Management: Keeping a record of employee leave, such as

sick or vacation leave.​
 3.​Overtime Calculation: Monitoring overtime worked and ensuring
accurate compensation.​

4.​Payroll Data Submission: Providing attendance data to the payroll

department for wage processing.​

om
5.​Attendance Reports: Generating reports on employee attendance,
tardiness, and absenteeism.​

t.c
po
Methods of Controlling Attendance:

gs
1.​ Manual Timecards: Employees manually punch in and out, and these

lo
cards are processed later for payment.​
.b
nt
2.​Biometric Systems: Fingerprint or face recognition technology is
oi

used to record attendance.​

tP

3.​Swipe Cards: Employees use ID cards to swipe in and out at entry

es

and exit points.​

uT
Ed

4.​Online Timesheets: Employees log in and record their hours using

w.

online systems.​
w
W

(b) Differential Piece Rate Work System:

In this system, workers are paid based on the number of units they
produce, with different rates depending on whether they meet a
standard output level.
Given:

●​ Standard output: 10 units per hour​

●​ Normal wage rate: Rs. 70 per hour​

om
●​ Differential rate: 80% for below standard, 120% for at or above
standard​

t.c
●​ Work hours: 9 hours​

po
gs
●​ Abrar: 100 units​

lo
●​ Badar: 80 units​
.b
nt
oi

Earnings Calculation:
tP

For Abrar (100 units):

es
uT

●​ Standard output = 10 units/hour * 9 hours = 90 units​

Ed

●​ Units completed = 100 units (above standard)​

w.

●​ Piece rate = Rs. 70 * 120% = Rs. 84 per unit​

w
W

Earnings = 100 units * Rs. 84 = Rs. 8,400

For Badar (80 units):

 ●​ Standard output = 90 units​

●​ Units completed = 80 units (below standard)​

●​ Piece rate = Rs. 70 * 80% = Rs. 56 per unit​

om
Earnings = 80 units * Rs. 56 = Rs. 4,480

t.c
po
Q. 4: Factory Overhead Cost Calculation

gs
Given:

lo
.b
●​ Fixed overhead: Rs. 500,000​
nt

●​ Variable overhead: Rs. 250,000​

oi
tP

●​ Normal operating capacity: 250,000 machine hours​

es
uT

●​ Actual machine hours: 240,000​

Ed

●​ Actual factory overhead: Rs. 730,000​

w.
w

1.​Fixed Portion of Factory Overhead Rate: Fixed overhead rate = Rs.

W

500,000 / 250,000 machine hours = Rs. 2 per machine hour​

2.​Variable Portion of Factory Overhead Rate: Variable overhead

rate = Rs. 250,000 / 250,000 machine hours = Rs. 1 per machine
 hour​

3.​Over or Under-Applied Factory Overhead: Applied overhead =

(Fixed rate + Variable rate) * Actual machine hours Applied
overhead = (Rs. 2 + Rs. 1) * 240,000 = Rs. 720,000 Over or
under-applied overhead = Actual overhead - Applied overhead

om
Over or under-applied overhead = Rs. 730,000 - Rs. 720,000 = Rs.
10,000 (under-applied)​

t.c
po
4.​Spending Variance: Spending variance = Actual overhead - (Fixed

gs
overhead + (Variable rate * Actual machine hours)) Spending
variance = Rs. 730,000 - (Rs. 500,000 + Rs. 1 * 240,000) = Rs.

lo
730,000 - Rs. 740,000 = Rs. -10,000 (unfavorable)​
.b
nt
5.​Idle Capacity Variance: Idle capacity variance = (Normal machine
oi

hours - Actual machine hours) * Fixed overhead rate Idle capacity

tP

variance = (250,000 - 240,000) * Rs. 2 = Rs. 20,000 (favorable)​

es
uT
Ed

Q. 5: Overhead Cost Apportionment

w.

Given data includes the actual overheads and the parameters for four
w

departments: Cutting, Stitching, Finishing, and Procurement. Based on

W

this data, the overheads will be apportioned to each department using

equitable bases like square foot area, wages, and number of workers.
This would involve calculating the overhead costs for each department,
using the appropriate allocation method and then preparing the
overheads distribution statement.
W
w
w.
Ed
uT
es
tP
oi
nt
.b
lo
gs
po
t.c
om