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Chapter # 3 Cost concepts, Uses and Classifications

Exe# 6 In question direct labor hours is not given, we can find D.Labor hours through this
formula Direct labor cost
= 40000 = 6250 Hours
Per D.Labor hours rate 6.40
(1) Prime Cost
(2) Conversion Cost
Material opening
+ purchase
Material available for use
- Material ending
Material used
+ Direct labor

24000
56000
80000
(20000)
60000
40000

Prime Cost

100000

Direct labor
FOH Applied
6250 Hours@ 8
Conversion cost

(3) Cost of goods manufactured

40000
50000
90000

(4) Cost of goods sold

Prime cost
Applied FOh
6250@8

100000

Total manufacturing cost

+ WIP opening

150000
12000

Cost of Work put into process

- W.I.P ending

162000
(8000)

Cost of goods manufactured

154000

Cost of goods manufactured

+ Finished goods opening

154000
36000

50000
Cost of goods available for sale
- Finished goods ending
Cost of goods sold

( 5) Income statement
Sale
- C.G.S

200000
(150000)

Gross profit

50000

Less; operation expense

Marketing and administrative
Expense (200000*10/100)

(20000)

Net income

30000

Exe 4
Req(1) Estimated cost to produce or Total manufacturing cost
Direct labor
Direct material
FOH
Molding department ( 800*5)
Finishing department =4300*120/100

10100
7500

Total manufacturing cost

26760

4000
5160

190000
(40000)
150000

Req (2) Prime cost

Req (3)

Direct material
Direct labor

7500
10100

Prime cost

17600

Conversion cost
Direct labor
10100
FOH
Molding department (800*5) 4000
Finishing department =4300*120/100 5160
Conversion cost
19260

Req (4) Bid price/ sale price

Direct labor
Direct material
FOH
Molding department ( 800*5)
Finishing department =4300*120/100

10100
7500
4000
5160

Total manufacturing cost

26760

Markup ( 26760*40/100)

10704

Bid price

37464

Problem 31 Direct Material cost

Bid 1
Part to be purchase
550
Material: bar, strip and sheet metal 130
Pig metal
56
Material used

736

Bid 2
900
190
80
1170

Direct labor cost

Bid 1
Foundry Bid 1 ( 6hrs@8.25) Bid 2(8Hrs@8.25)
Machining Bid 1 ( 8hrs@7.50) Bid 2 (20hrs@7.50)
Electroplating Bid 1 (6hrs@8.40) Bid 2 (12hrs@8.40)
Assembly
Bid 1 (40hrs@8)
Bid 2 (70hrs@8)
Installing
Bid 1 (0hrs@ 7)
Bid2 (16hrs@ 7)
Direct labor cost

Bid2

49.5
60

66
150

50.4
320
0

100.8
560
112

479.9

988.8

FOH cost
Bid 1
Foundry Bid 1 ( 6hrs@3.25) Bid 2(8Hrs@3.25)
Machining Bid 1 ( 8hrs@3) Bid 2 (20hrs@3)
Electroplating Bid 1 (6hrs@2.50) Bid 2 (12hrs@2.50)
Assembly
Bid 1 (40hrs@2.60 Bid 2 (70hrs@2.60)
Installing
Bid 1 (0hrs@ 1.80) Bid2 (16hrs@ 1.80)
Foh Cost
Total Manufacturing cost

Bid2

19.5
24

26
60

15
104
0

30
182
28.8

162.5

326.8

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Bid 1

Bid2

Direct labor cost+D.Material cost+ FOH cost

Bid 1(736+479.9+162.2) Bid2 (1170+988.9+326.8)
1378.4
+ Spoilage Bid 1 (736+479.9=1215.9*5/100)
60.79
Bid 2 (1170+988.9= 2158.8*5/100)

2485.6
107.94

Total Manufacturing cost

1439.19

2593.54

+ Marketing and administrative and profit

Bid 1 (1439.19*35/65= 774.95)
Bid 2 (2593.54*35/65=1396.52)

774.95

1396.52

Bid Price

2214

3990

Exe---7
Last Year
Sale price per unit
- Gross profit (25% of C.G.S)280*25/125
Per unit cost

=
=

280
(56)
224

Working for per unit cost 224

Direct material is 40%= 224*40/100= 89.6
Direct labor is 45% = 224*45/100 = 100.8
FoH 15%
= 224*15/100= 33.6
Per unit cost
224
Gross profit=2000 units *56=112000
Coming Year
Material
+ Increase25 %( 989.6*25/100)

89.6
22.4

112

Direct labor
+ increase 25 %( 100.8*25/100)

100.8
25.2

126

FOH
33.6
+ increase 12.5% (33.6*12.5/100) 4.2
Per unit cost

37.8
275.8

Number of units sold to realized gross profit 112000

Req (1) If new sale price is 300
- Per unit cost
(275.8)
Gross profit per unit
24.2
Total Gross profit = 112000 = 4628 units
Per unit gross profit 24.2
Req (2) If new sale price is 325
- Per unit cost
(275.8)
Gross profit per unit
49.3
Req (3) If new sale price is 350

= Total Gross profit = 112000 = 2276 units

Per unit gross profit 49.2

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- Per unit cost
Gross profit per unit

(275.8)
74.2

= Total Gross profit = 112000 = 1509 units

Per unit gross profit 74.2
Exe---5
Note: Whenever Material put into process given in question, it will be material used.
Note; Opening inventory we will record on debit side and ending inventory on credit side
Material
Opening inventory
Purchase? (61500-15000)

15000
46500

- closing inventory
Material used

61500

19200
42300
61500

Work in process
Material used
Direct labor
A=6125@7.80
B=9875@8.40
FOH
A=6125@5
B=9875@4.20
+ W.I.P opening

42300

- W.I.P ending
cost of goods manufactured

(19425)
243000

47775
82950
30625
41475
17300
262425

262425

Finished goods
Cost of goods manufactured
+ Finished goods opening

243000
11300

- Finished goods ending

C.G.S

254300

254300

Req (1) Total manufacturing cost=

Material used
D.labor
FOH
Mgt cost

=42300
=130725
=72100
245125

Req (2) Cost of goods manufactured = 243000

Req (3) Cost of goods sold

9400
244900

= 244900

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Exe8
June
Sale price per unit
Less: Cost
Direct labor
Direct material
Foh(30*100/100)
Gross profit

50
30
30

200

110
90

Gross profit percentage

Gross profit *100
Sale
90 * 100 = 45%
200

July
Direct Material
- decrease (50*5/100)

50
2.5

47.5

Direct labor
+ increase (30*20/100)

30
6

36

FOH
+ increase (30*20/100)

30
6

36

Per unit cost

119.5

Req (1) July sale price?

June sale price * July cost price
June cost price
200 *119.5= 217 sale price
110
Req (2)

July

Material (50-2.5)
Direct labor
+ increase (30*20/100)

47.5
30
6

36

FOH Fixed cost

Variable cost= 20 *36
30

10

Per unit cost

117.5

Sale price * cost price

Cost
200 *117.5 = 213.6 sale price

24

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110
Exe9

Average gross profit base on last five years

Total gross profit * 100=30%

Total sale
Note: In this question W.I.P closing inventory in unknown;
Requirement: 31-May 19F W.I.P closing inventory/55000
Cost of goods sold statement
Material opening
+ plant purchase
+ Freight in
Material available for use
- Material ending

15000
50000
5000

55000
70000
(30000)

Material used/Consumed
+ Direct labor
Prime cost/Basic cost
Applied FOH 50% of D.labor (40000*50/100)

40000
40000
80000
20000

Total manufacturing cost

+ W.I.P opening

100000
50000

Cost of work put into process

- W.I.P ending

150000
(55000)

Cost of goods manufactured

+ Finished goods opening

95000
70000

Cost of goods available for sale

- Finished goods ending

165000
(60000)

Cost of goods sold

105000

19F Sale
- Gross profit(150000*30/100)
Cost of goods sold
Problem 32

= 150000
= 45000
105000

Working
Income statement for 19A
Total

per unit cost

Sale (2000units@600)
Less: C.G.S
(2000untis@180) Material, 450*40/100
(2000@ 180)
D.Labor, 450*40/100
(2000@90)
FOH
450*20/100

1200000

600

360000
360000
180000

180
180
90

Cost of goods sold

900000

450

Gross profit

300000

150

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Less: Marketing and administrative exp(2000@50)
Net income
Req (1)
Income statement 19B

(100000)
200000
Total

(50)
100
per unit cost

2000*40/100=800 (2000-8000)1200 units

Sale

2000 units @

810000

Less: C.G.S
(1200units@216) Material,(180*20/100)=36+180
259200
(1200@225)
Labor (180*25/100)=45+180
270000
FOH
20
216+225=441/80*100=551.25*20/100=11.25(1200@110.25) 132300

675
216
225
110.25

Cost of goods sold

661500

551.25

Gross profit

148500

123.75

Less: Marketing and administrative exp(1200@50)

(60000)

(50)

Net income

88500

73.75

Req(2)
Req (1)

Income statement 19B

Income statement 19B
Total

per unit cost

Sale 1200 units@675

810000

675

Less: C.G.S
(1200units@216) Material,(180*20/100)=36+180
(1200@225)
Labor (180*25/100)=45+180
100000/1200=83.33 FOH fixed cost (1200*83.33)
80000/2000*1200=48000 V.cost=48000/1200=40*1200

259200
270000
100000
48000

216
225
83.33
40

- Cost of goods sold

(677200)

564.33

Gross profit
Less:
Marketing and administrative exp(1200@50)

132800

110.67

(60000)

(50)

Net income

72800

60.67