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Topic to be tested:

  • Costing in manufacturing business and valuation of stock

 

Learning Objectives:

  • To understand the concepts used in the preparation of cost of goods sold statement and valuation of stock

 

DISCUSSION SCENARIO:

Home Comforts is dealing in the manufacturing of wood products since last two decade in more than 5 cities of Pakistan. The company uses First in First out (FIFO) method for costing its raw materials. On 1st January 2015, the stocks of raw material, work in process and finished goods were Rs. 20,000, Rs. 8,000 and Rs. 3,000 respectively. During the year, material was purchased on 10th January and 15thJuly at Rs. 100,000 and Rs. 60,000 respectively with total freight inward of Rs. 1,000. Direct Labor cost was Rs. 50,000 and marketing manager salary was of Rs. 70,000 while conversion cost was recorded as Rs. 80,000.

At the year end, no inventories were found in hand except work in process which was twice of the balance as on 31st December 2014.

 

Required:

  1. Calculate the following:
    1. Cost of material consumed
    2. Total factory cost
    3. Factory overhead cost
  2. Describe the impact on total factory cost determined by the Home Comforts if we use Last in First out (LIFO) method.

Views: 3445

Replies to This Discussion

sir f.o.h cost mai labor aur conversion cost add krty hai

Good Job Gladiator, i am confused in 2nd part where LIFO to be used instead of FIFO, how we can describe this, please help...

Dear Aftab, its simple last purchasing raw material is 60,000 by using LIFO method, direct cost will be less if you calculate total factory cost so you can minus 60,000 from total factory cost and you will get your answer if you are using LIFO method.

please correct me if i am wrong.

60,000 minus ku ho ga total factory cost me se

yes u r totally wrong.................lifo mein koi  60,000 minus nahin hoo ga 

ok #Zahid & #Sahiba, mein wrong hoin tu ap hi batado kia sahi hai ? jo mein souch raha tha wo bataya mene ,,,, aap sahi batado 

I think eska koi impact ni ho ga ku k factory cost to utni e honi h na chahy lifo ho ya fifo

yes i think sahiba u r right .....friends fifo ya lifo ka impact hamesha closing stock par parta hain ....aur yahan par closing stock hai hi nahin hai.....so i think answer is ...... the result is same if we use fifo method or lifo method there is no impact of using  lifo method  on total factory cost.

anybody attempt this GDB question no. 2?  i am still confused please help guys...

Faraz koi impact ni parta t.factory cost pe chahy ap lifo use kro ya fifo actually ye to jxt closing pe dependent h konsa method use krty h lifo ya fifo but jb hm production krty h tabi to total factory cost ati h or es me chahy material pehly wala aey ya bad wala production cost same hoti h ku k factory cost me selling ya marketing ka koi concern ni h it is related only with production.

thanks a lot #Sahiba....

welcome

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