Elements of COST

MATERIAL
LABOR
OVERHEAD
TYPES OF COST
1 ON THE BASIS OF NATURE
DIRECT COST
INDIRECT COST

1 ON THE BASIS OF NATURE

A FIXED COST 5000 10000 15000

B VARIABLE 10000 10000 20000
C

UNITS OF PRODUCTION 1 10 100

FIXED COST 10,000.00 10,000.00 10,000.00
variable cost 2,000.00 20,000.00 200,000.00

TOTAL COST 12,000.00 30,000.00 210,000.00

PER UNIT T COST 12000 3000 2100

PER UNIT T FIXED COST 10000 1000 100

PER UNIT T VARIABLE COSTCOST 2000 2000 2000

SEMII VARIABLE COST

MIXED COST
Step Cost

Functional classification of the cost

Prime cost

Prime cost = Direct Material Cost + Direct Labour Cost

Conversion Cost = Direct Labour + FOH

Factory Cost= Prime Cost + FOH + Opening stock of Work in Process - Closing s

EXAMPLE Opening stock 15000

Add Purchases 45000
COGAFS 60000
Less Closing stock 10000
COGS 50000
COST OF PRODUCTION
P/U COST

15000
10000
Process - Closing stock of work in process

Manufacture 300 Chairs

Raw Material 50,000
D Lbr 30,000
FOH 10,000
FACTORY COST 90,000

IN COMPLETE CHAIRS 20 3,600

FACTORY COST 86,400

Manufacture 500 Chairs 3,600

Raw Material 50,000
D Lbr 40,000
FOH 20,000
FACTORY COST 113,600

IN COMPLETE CHAIRS 30 4,200

 STATEMENT OF COST OF GOODS SOLD

COST OF GOODS SOLD

OPENING STOCK OF RAW MATERIAL 80,000.00

ADD RAW MATERIAL PURCHASED 580,000.00
RAW MATERIAL AVAILABLE 660,000.00
LESS RAW MATERIAL CLOSING (60,000.00)
RAW MAT RAW MATERIAL USED 600,000.00
Add Direct Labour 100,000.00
PRIME COST 700,000.00

ADD FACTORY OVERHEAD 110,000.00

COST PUT INTO PROCESS 810,000.00

ADD OPENING WIP 30,000.00

COST OF GOODS READY TO BE MANUFACTURED 840,000.00
LESS COSING STOCK OF WIP (40,000.00)
COST OF GOODS MANUFACTURED 800,000.00
ADD Opening stock FINISHED GOODS 20,000.00
COST OF GOODS AVAILABLE FOR SALES 820,000.00
LESS COSING STOCK OF FINISHED GOODS (220,000.00)
COST OF GOODS SOLD 600,000.00
D

FINISHED GOODS
PRODUCTION UN
PRODUCTION UNIT
 Marking Scheme for Summer 2020

First Hourly
10 marks LMS based quiz One week before hourly week
5 marks analytical exam Hourly week

Second Hourly
10 marks LMS based quiz One week before hourly week
5 marks analytical exam Hourly week

Final Exam
15 marks LMS based quiz One week before final exam
15 marks LMS based quiz Final exam week
10 marks analytical exam Final exam week
 CVP-2 https://www.youtube.com/watch?v=EMVs0IL0EfU
CVP-2 https://www.youtube.com/watch?v=aE4JnjAx2Qc

CVP ANALYSIS VIP https://www.youtube.com/watch?v=aE4JnjAx2Qc

variable costing https://www.youtube.com/watch?v=kfJqYGQOLes

Absorption costing https://www.youtube.com/watch?v=fFFH-K3VM_s
 A B

Sales Price 100 100

Cost 80 80
Mat 40 20 35 20
Lbr 30 30
DOH 10 15
80 80
RAW MATERIAL

LBR

RAW MATERIAL
Fllowing are the information provided by ABC Company

Raw Material Opening Balance 10,000

Raw Material Closing Balance 7,000
Raw material Purchased 270,000
Transportation in 2,000
Deffective Raw Material Returned to supplier 1,000
Direct labour used 100,000
Indirect Labour used 5,000
Indirect material used 6,000
Other facory expenses 90,000
Opening Balance of WIP 14,000
Closing Balance of WIP 13,000

Prepare Cost of Goods Manufactured

Find
Prime Cost
Direct material used
Conversion cost
Cost put into process
Cost of goods manufactured
 WORK IN PROGRESS

MATERIAL
LBR
FOH

FINIDHED GOODS
Direct material used 274,000.00
Direct Labor 100,000.00
PRIME COST 374,000.00
FOH 101,000.00 4
CONVERSION COST 475,000.00
WIP OP 14,000.00
COG READY FOR PROD 489,000.00
WIP CLOSING -13000
COST OF GOODS MANUFACTURED 476,000.00
WORK IN PROGRESS

FINIDHED GOODS
 STATEMENT OF COST OF GOODS SOLD

RAW MATERIAL OPENING BALANCE

Add Raw Material Purchased 400,000.00
Less Discount on Raw Material Returned (4,200.00)
Add Delivery Expense 16,000.00
Cost of Raw Material Purchased 411,800.00
Raw Material available 411,800.00
Less Raw Material Closing (24,000.00)
Raw Material used
Add Direct Labour
PRIME COST
FOH
Factory Maintance 38,400.00
Factory Supplies used 22,400.00
Factort power & Heat 19,400.00
Insurance Expense 4,800.00
Depreciation Expense 17,500.00
Indirect labour 20,000.00
Factory Sperintendence 100,000.00
Total FOH
Cost Put into Process
Add Work in process Opening
Cost ready to be manufactured
Less Work in Process Closing
COST OF GOODS MANUFACTURED/ FG
ADD Finished Goods Opening Stock
COST OF GOODS AVAILABLE FOR SALES
LESS CLOSING STOCK OF FINISHED GOODS
COST OF GOODS SOLD

INCOME STATEMENT

SALES 1,100,000.00
Less Sales Return (2,200.00)
Less Sales Discount (1,300.00)
NET SALES
Less COGS
GROSS PROFIT
Interest Income
LESS SGA EXPENSES
Less Administrative Salaries 108,000.00
Bad Debt expense 2,500.00
Advertising exp 8,400.00
Total SGA Expenses
EBIT
lESS Interest EXPENSE
EBT
OLD

387,800.00
180,000.00
567,800.00

222,500.00
790,300
84,000
874,300
-30,000
844,300
37,500.00
881,800.00
(70,000.00)
811800
1,096,500.00
(811,800.00)
284,700.00
1,000.00

(118,900.00)
166,800.00
(1,500.00)
165,300.00
Prepare StatementCost of Goods manufactured
Statement of Cost of Doods Sold
Income Statement

Raw Material opening balance 16,000

Raw Material Closing Balance balance 10,000
Material Purchased during the year 480,000
Transportation cost on material Purchased 6,000
Material Returned to supplier 18,000
Direct labour cost 240,000
Indirect material 18,000
Other F.OH Incurred 67,000
Indirect labour 39,000
Factory rent paid 12,000
Heat & Light charges 9,000
Selling Expenses 75,000
Administrative exxpenses 25,000
Telephone bill 4,000 10 % 0f Factory
Depreciation of Building 20,000 60% of Factory
Opening balance of WIP 15,000
Opening balance of Finished Goods 23,000
Closing Balance of Finished Goods 13,000
Closing Balance of WIP 7,000
Sales 876,000
STATEMENT OF COST OF GOODS MANUFACTURED

RAW MATERIAL OPENING BALANCE

Add Raw Material Purchased 35,000
Less Raw Material Returned
Add Transportation in
Cost of Raw Material Purchased 35,000
Raw Material available 35,000
Less Raw Material Closing + Ind Mat 25000+2000 -27000
Raw Material used 8,000
Add Direct Labour 7,600
PRIME COST 15,600
( Applied) 5067

Cost Put into Process 20,667

Add Work in process Opening 0
Cost ready to be manufactured 20,667
Less Work in Process Closing 0
COST OF Goods MANUFACTURED 20,557
Add Opening inventory of FG 23,000
Cost of Goods available for sales 43,557
Less Closing inventory of FG -13000
COST OF GOODS SOLD 30,557
CONVERSION COST

Direct Labour Cost 100,000

FOH 101,000
CONVERSION COST 201,000
 Months Electricity Direct
Cost Labour Hours
JANUARY 640 34000
FEBRUARY 620 30000
MARCH 620 34000
APRIL 590 39000
MAY 500 42000
JUNE 530 32000
JULY 500 26000
AUGUST 500 26000
SEPTEMBER 530 31000
OCTOBER 550 35000
NOVEMBER 580 43000
DECEMBER 680 48000
1 Mr. Babar Started his Business with cash Rs 10,00,000

2 Purchased Raw Material on cash Rs. 300,000

3 Issued raw material to Factory of Rs. 120,000 including indirect material of Rs. 20,000

4 Paid Direct Labour Rs 80,000

5 Sum of all manufacturing expenses paid Rs. 40,000

6 FOH is applied Rs . 55,000

1 Cash 10,00,000 Work in P
Babar's capital 10,00,000
1 R. Mat used
2 D. Labour paid
2 Raw Material 300000 3 FOH applied
Cash 300000

3 Work in Process 100000

Raw Material 100ooo

4 Work in Process 80000

Payroll 80000

8 Work in Process 55000

FOH ( Applied) 55000

FOH

R. Mat used
Cash

FOH Applied
5 FOH 20000
Raw Material 20000 CORRECT

6 FOH 40000
Cash 40000

7 Work in Process 40000

FOH 40000
Work in Process

100,000
80000
55,000

FOH

20,000 60000
40000
1 Mr. Babar Started his Business with cash Rs 10,00,000

2 Purchased Raw Material on cash Rs. 300,000

3 Issued raw material to Factory of Rs. 120,000 including indirect material of Rs. 20,000

4 Paid to Labour Rs 110,000 90% is direct labour

5 Sum of all manufacturing expenses paid Rs. 59,000

6 FOH is applied is 90 % of Direct Labour

3 WIP 100,000
R. Mat 100,000

3 FOH 20,000
R. Mat 20,000

4 WIP 99,000
Payroll 99,000

4 FOH 11,000
Payroll 11,000

5 WIP 89,100
FOH ( Applied) 89,100

6 FOH 59,000
Cash 59,000
 JOB ORDER COSTING

M/S Salman manufacturing Company provided the following information

1 Purchased raw material Rs. 450,000

2 Material issued for Job No 11234 Direct Rs. 200,000 and Indirect Rs. 30,000
3 Factory payroll totalling Rs. 120,000 of which Rs. 20,000 were paid to indirect labours
4 FOH applied @ 150% of Direct labour cost
5 Factory Heat anf Light charges pair Rs. 23,000
6 Other FOH paid Rs 75,000
7 Job is 100 % Complete and transferred to Finished Goods
1 Raw material 450,000.00
Cash 450,000.00

2 Work in Process 200,000.00

Raw material 200,000.00

2 FOH ( Control) 30,000.00

Raw material 30,000.00

3 Work in Process 100,000.00

Pay roll 100,000.00

3 FOH ( Control) 23,000.00

Payroll 20,000.00

4 Work in Process 150,000.00

FOH ( Applied) 150,000.00

5 FOH ( Control) 23,000.00

Cash 23,000.00
6 FOH ( Control) 75,000.00
Cash 75,000.00

7 Finished Goods 450,000.00

Work In Process 450,000.00
a Raw material 35,000.00
A/c Payale 35,000.00

b Work in Process 8,000.00

FOH ( Control) 2,000.00
Raw material 10,000.00 D. Mat
D. Lbr
FOH APPL

c Work in Process 7,600.00

Pay roll 7,600.00

Balc bf

c FOH ( Control) 1,800.00

Payroll 1,800.00

d FOH ( Control) 1,200.00 TOTAL

Allow. For Dep ( Equipment) 1,200.00
Balance b/d

e Work in Process 5,067.00

FOH ( Applied) 5,067.00
 Finished Goods 4,500.00
Work in Process 4,500.00

f FOH ( Control) 1,250.00

A/c Payable 1,259.00 TOTAL

Balance b/d

7 FOH ( APPLIED) 5,067.00

COGS 1,183.00
FOH ( Control) 6,250.00

Balc bf

TOTAL

Balance b/d
 8000-1450= 6550
7600-1830 5770
5067-1220 3847
16167 IN COMPLETE GOODS

WORK IN PROCESS
0
8,000.00
7,600.00 Finished Goods
5,067.00 Material 1450
Direct Labour 1830
FOH (Applied) 1220

Balance c/d 16167

20667 TOTAL 20667

Balance b/d 1667

FOH ( APPLIED)
 5067
5,067.00

TOTAL

Balance b/d

FOH ( Control)
0

2,000.00 6250
1,800.00
1,200.00
1,250.00
6,250.00

TOTAL

Balance b/d 1667