MGT402 Cost & Management Accounting Solved Exercises ( Chapter No 05, 06, 08 & 11)

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MGT402 Cost & Management Accounting Solved Exercises ( Chapter No 05, 06, 08 & 11)

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MGT402 Chapter 5 (inventory turn over ratio)

Inventory Turnover Ratio: 

The formula for inventory turnover:

The formula for average inventory:

A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or shortages. A high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business. Assume cost of sales is $70,000, beginning inventory is $10,000, and ending inventory is $9,000. The inventory turnover equals 7.37 times ($70,000/$9500).

Inventory holding period: 365 / Annual Inventory Turnover—calculates the number of days, on average, that elapse between finished goods production and sale of product.

 

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MGT402 Chapter 6 Excerise Solution

Q. 1

 

Following is the information pertaining to the production cost of Revolving Chair Company for

the year ending on March                                            31 2006;

Direct material consumed                                           440,000

Direct labor                                                                 290,000

Indirect labor                                                               46,000

Light and power                                                          4,260

Depreciation                                                                4,700

Repairs to machinery                                                   5,800

Other factory expenses                                               29,000

Work in process inventory; April 1, 2005                    41,200

Finished goods inventory; April 1, 2005                     34,300

Work in process inventory; March 31, 2006                42,500

Finished goods inventory; March 31, 2006                 31,500

During the year 18,000 units were completed.

Factory overhead cost is applied @ 30% of the direct labor cost.

Required:

1. Cost of goods manufactured statement

2. Cost of goods sold statement identifying at normal and at actual

3. Cost per unit

4. Amount of over or under applied factory overhead cost

 

Solution 

 

1)     cost of goods manufactured:

Direct material consumed                                                   440,000

add Direct labor                                                                 290,000

add direct F.O.H cost  (see note 1)                                      89760

total factory cost                                                                 819760

add Work in process inventory; April 1, 2005                      41,200

cost of goods to be manufactured                                        860960

less Work in process inventory; March 31, 2006                    42,500

cost of goods manufactured                                               818460

 

 

 

 2. Cost of goods sold statement identifying at normal and at actual

Direct material consumed                                                   440,000

add Direct labor                                                                 290,000

add applied factory overhead cost (see note 2)                    87000

total factory cost                                                             817000

 add Work in process inventory; April 1, 2005                    41,200

cost of goods to be manufactured at normal                      858200

less Work in process inventory; March 31, 2006                42,500

cost of goods manufactured   at normal                              815700

add Finished goods inventory; April 1, 2005                        34,300

 cost of goods available for sale at normal                          850000

less Finished goods inventory; March 31, 2006                   31,500

cost of goods sold at normal                                           818500

add under applied (see note 3)                                            2760

cost of goods sold at actual                                            821260

 

 

 

 3. Cost per unit:

 

cost per unit=cost of goods manufactured / number of units manufactured

 

                    =818460/18000

  Cost per unit  = 45.47

 

4. Amount of over or under applied factory overhead cost

 

applied factory overhead cost            87000

actual factory overhead cost              89760

 

under applied                                   2760

 

 

Working notes

 

 

Note 1        actual direct F.O.H cost :

Indirect labor                                                               46,000

Add Light and power                                                    4,260

Depreciation                                                                 4700   

Repairs to machinery                                                   5,800

Other factory expenses                                               29,000

actual direct F.O.H cost                                             89760

 

note 2

applied factory overhead cost:

Factory overhead cost is applied @ 30% of the direct labor cost

           =290000@30%

           = 87000

 

 

note 3

under applied :

applied factory overhead cost            87000

actual factory overhead cost              89760

under applied                                     2760

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Chapter 8 Excerise Solution

Q.2 

 

Raw	Usage per unit of	Re-order	Price	Delivery Period			Re-order  level kg,
material	Product	Quantity	Per kg.
	kg.	kg.		Min	Avg	Max
A	10	10,000	0.1	1	2	3	8,000
B	4	5,000	0.3	3	4	5	4,750
C	6	10,000	0.15	2	3	4	2,000

Weekly production varies from 175 to 225 units, averaging 200 units.

What would you expect the quantities of the following to be:

(a) Minimum stock of A

(b) Maximum stock of B

(c) Re-order level of C

(d) Danger stock level of A

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MGT402-Chapter- 11-Excerise-Solution

 The following figures have been extracted from a trader's records in respect of wages and salaries

for July. Rupees

(i) Wages and salaries (gross) 6,300

(ii) Income tax 1,600

(iii) Employees' pension contributions 600

(iv) Employer's pension contributions 700

 

 

1 What is the total amount the trader will have to pay for wages and salaries for July?

A 4,100

B 4,800

C 6,300

D 7,000

 

 

2 What is the net pay received by employees?

A 4,100

B 4,200

C 4,800

D 5,600

 

Net salary = Gross salary - income tax - employees' pension contributions 

 

 

3  Which of the following does not appear on a payslip?

 

            A. Gross weekly wage for the employee

            B. Tax paid to date by the employee in the tax year

            C. Deductions paid by the employee

            D. Details of the employee's expected pension.

 

 4 Which is the most convenient way for a large employer to pay salaries electronically?

 

                A. BACS

                B. Bank transfer

                C. By cash

                D. By cheque.