MGT402 Cost & Management Accounting No 2 Solution & Discussion Due Date:07-06-2012

[Snipper]

Topic: Process Cost Accounting - FIFO Costing Method
Learning Objectives:
The learning objective of this Assignment No. 02 is to encourage the students for
applying their knowledge about FIFO costing, which they have learned during
lesson No. 01 to 27. This will enhance the understanding of the students about
FIFO costing method.
Learning Outcomes:
After solving this Assignment No. 02 the learners (students) are well aware about
the FIFO costing techniques used for calculating the closing WIP cost and the
finished goods inventory.
The Case
Science Developers – a lab instruments manufacturing and marketing company is working in far
flung hilly areas of world renowned Scientific Country. At present, the company is involved in
manufacturing and marketing of one of its famous chemical brand – Chemical. The Country’s
Government has recently given the company an order for delivering Chemical in 500,000 lbs.
The Company has started its work on the project on 1st February, 2012. The company has the
policy to cost material and units on the FIFO method.
On 30th April, 2012, Mr. Processor – In-charge of processing department, presented following
monthly report to Mr. Chief. This report contains information about inventories, costs and
production as under:
March 30 April 30
Materials 100,000 lbs 80,000 lbs
Materials cost Rs. 100,000 ----
Work In Process Inventories:
All Materials, 40% completed as to labor and FOH 20,000 units
Cost Rs. 84,000
All Materials, 331/3% completed as to labor & FOH 30,000 units
Finished goods inventory 40,000 units 24,000 units
Cost Rs. 448,000
Purchase of Materials 440,000 lbs @ Rs. 1.10 per lb
Transferred to production 460,000 lbs
Production ratio – 2 lbs: 1 of Chemical
Completed during the month 220,000 units
Direct Labor Rs. 1,198,800
Factory Overhead Rs. 421,800
Requirement:
Calculate the following: (6 marks each)
a) Equivalent production units of material, labor and FOH
b) Unit costs of three cost elements
c) Cost of units transferred to finish goods inventory, using FIFO costing method.
d) Cost of the ending Work in process inventory
e) Number of units sold and the cost of the finished goods inventory on April 30, 2012 using
the FIFO method.
Instructions:
Please read the following instructions carefully before preparing the assignment solution:
 All Supporting Formulas and calculations are required as they carry marks.

[muhammad kashif]

a) Equivalent Production Units of Material , Labor and FOH
	Opening		Closing
Material	220,000 + (20,000 x 0%)	220,000	(30,000 x 100%)	30,000	250,000
Labor	220,000 + (20,000 x60%)	232,000	(30,000 x 33.33%)	10,000	242,000
FOH	220,000 + (20,000 x60%)	232,000	(30,000 x 33.33%)	10,000	242,000

[muhammad kashif]

[shumaila nisar]

IN FIFO METHOD 

                          completed unit- o/p inventory+c/s inventory

MATERIAL          220,000-20,000+30,0000 =230,000

LABOR                220,000-20,000+(20,000*60%)+(30,000*33.33%)=222000

FOH                  220,000-20,000+(20,000*60%)+(30,000*33.33%)=222000

[shumaila nisar]

in FIFO method o/p inventory is subtracted from completed units and add c/s inventory

plz explains Ur solution how u fine them

[muhammad kashif]

ok .. aap phir apne solution ka cross check send karain phir...i am little confused....hmmmm 

[muhammad kashif]

b) Unit Costs of Three Cost Elements
	Cost	Unit	Per Unit Cost
Material ( 460,000 x 1.10)	506,000	250,000	2.024
Labour	1,198,800	242,000	4.953719008
FOH	421,800	242,000	1.742975207
Total Per Unit Cost			8.720694215

[muhammad kashif]

c) Cost of units transferred to finish good inventory, using FIFO costing method
Units Transfer	220,000
Total per unit cost	8.720694215
(220,000 x 8.720694215)	1,918,552.73

[muhammad kashif]

d) cost of the ending work in process inventory
Material               (30,000 x 100 % x 2.024)	60,720.00
Labor                    (30,000 x 33.33 % x 4.953719)	49,537.19
FOH                       (30,000 x 33.33 % x 1.742975)	17,429.75

[muhammad kashif]

e) Number of units sold and the cost of the finished goods inventory on April 30, 2012 using the FIFO method

Unit Sold
Reverse Calculation
Units Sold	236,000
Add Opening	40,000
Less Closing	-24,000
Units Produced	220,000

 

Cost of Finish Good Inventory
Finish goods inventory (24,000 x 8.720694)	209,296.656

[muhammad kashif]

Last day aik post ki thi woh is solution ka cross check hay ... 

[Laureate H]

This is it??? the correct answer??? I m so very confused plx help

[muhammad kashif]

Yes in my openion its a correct answers. assignments contains 5 parts and i solved those 5 part. and each part have seprate answer. if you can see my last idea solution you can eassily understand because thats was cross check of this solution. In costing every question have a cross check.