Assignment: 2
Marks: 50 [will be converted into 30] [as equivalent to final term exam]
Assignment type: Individual (handwritten)
Submission deadline: 05.05.2021
• Your assignment will be checked carefully. If it is found to be plagiarized and matched
with other assignment, it will be strictly dealt with.
• Answer all the questions.
Instructions for the assignment: You should solve the assignment on your script, take an image
of the answers, convert it into pdf and upload the pdf file on google form. You must prepare a
front page mentioning your name, ID, Course Code, Section, faculty particulars etc. Your front
page should appear as the first page. You may use ‘camscanner’ apps to take images. File size:
Maximum 10 MB.
Joint products and by products
Q. No. 1.
(a) Contrast between scrap, by products and Joint products.
(b) Nestle manufactures chocolates and distributes chocolate products. It purchases cocoa
beans and processes them into two intermediate products:
•
Chocolate-powder liquor base
•
Milk-chocolate liquor base
These two intermediate products become separately identifiable at a single splitoff point. Every
500 kg of cocoa beans yields 50 litres of chocolate-powder liquor base and 75 litres of milkchocolate liquor base.
The chocolate-powder liquor base is further processed into chocolate powder. Every 50 litres of
chocolate-powder liquor base yield 200 kg of chocolate powder. The milk-chocolate liquor base is
further processed into milk chocolate. Every 75 litres of milk-chocolate liquor base yield 340 kg of
milk chocolate.
An overview of the manufacturing operations at Nestle Chocolates follows:
Production and sales data for August are:
•
Cocoa beans processed, 5,000 kg
•
Costs of processing cocoa beans to split off point (including purchase of beans) = Tk.
5,00,000
Chocolate powder
Milk Chocolate
Production
2000 Kgs
3400
Sales
2000 Kgs
3400
Selling price
Tk. 200 per Kg.
250 per Kg
The August separable costs of processing Chocolate powder liquor base into Chocolate powder
are Tk. 2,12,500. The August separable costs of processing Milk chocolate liquor base into Milk
chocolate are Tk. 4,37,500.
Nestle fully processes both of its intermediate products into Chocolate powder or Milk chocolate.
There is an active market for these intermediate products. In August, Nestle could have sold the
Chocolate powder liquor base for Tk. 420 a litre and the Milk Chocolate liquor base for Tk. 520
a litre.
Required:
(i) Calculate how the joint cost would be allocated under the following methods:
(1) Physical measure
(2) NRV
(3) Constant gross margin % NRV
(ii) What are the gross margin percentages of the Chocolate powder and Milk chocolate
liquor bases under each of the methods in above requirements?
Process Costing
Q. No. 2.
ABC Limited manufactures a product ‘2X’ by using the process normally R. T. for the month of
May 2015, the following data is available. 30 Process R. T.
Material Introduced
Transfer to next process
Work-in-Process
At the beginning of the month (4/5 completed)
At the end of the month(2/3 completed)
16,000 units
14,000 units
4,000 units
3,000 units
Cost records:
Work-n-Process at the beginning of the month Material Rs. 30,000
Conversion cost Rs. 29,200
Cost during the month
Materials Rs. 1,20,000
Conversion cost Rs. 1,60,800
Normal spoiled units are 10% of goods finished output transferred to next process.
Defects in these units are identified in their finished state. Materials for the product is put in the
process at the beginning of the cycle of operation, whereas labour and other indirect cost flow
evenly over the year. It has no realizable value for spoiled units.
Required: Prepare a cost of production report.
Inventory Management
Q. No. 3.
Best Electronics (BE) is thinking to run megastore specially sports cloths. It uses an EOQ
decision model to make inventory decisions. They are now considering inventory decisions for
its Manchester United (ManU) football jerseys. This is a highly popular item. Data for 2012 are:
Expected annual demand for Man U jerseys
- 8,000 nos.
Ordering cost per purchase order
- Tk. 200.00
Carrying Cost per year per jersey
The purchasing lead time
- Tk. 7.00
- 7 days (BE is open 365 days a year)
Actually United Garments (UG) manufacturing the Man U jerseys that BE sells to its customers.
UG has recently installed computer software that enables its customer to conduct “One stop
Purchase” using state-of-the-art website technology. Then BE’s ordering cost per purchase order
will be reduced to Tk. 30.00 using this online technology.
Required:
(i) Compute the EOQ
(ii) Compute the number of order that will be placed in a year.
(iii) Compute the reorder point.
(iv) Calculate the EOQ for the Man U jerseys using the reduced ordering cost assume no
change in carrying cost.
(v) Suppose UG will allow BE’s customer to order directly from the UG website. UG ships
directly to those customers. UG would pay Tk. 10 to BE for every jerseys purchased by one
BE customer. Comment qualitatively on how this offer would affect inventory management
at BE.
Standard Costing
Q. No. 4.
“Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year,
but our production people did a good job in controlling costs as well,” said Kim Clark, president
of Martell Company. “Our Tk. 18,300 overall manufacturing cost variance is only 1.2% of the
Tk. 1,536,000 standard cost of products made during the year. That’s well within the 3%
parameter set by management for acceptable variances. It looks like everyone will be in line for a
bonus this year.”
The company produces and sells a single product. The standard cost card for the product follows:
Standard Cost Card—per Unit of Product
Direct materials, 2 feet at Tk. 8.45 per foot . . . . . . . . . . . . .. . . . . . . . . . . . . . . .
Direct labor, 1.4 direct labor hours at Tk. 16 per direct labor-hour . . . .. . . . . . . .
Variable overhead, 1.4 direct labor-hours at Tk. 2.50 per direct labor-hour .. . . .
Fixed overhead, 1.4 direct labor-hours at Tk. 6 per direct labor-hour . .. . . . . . . .
Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .
Tk. 16.90
22.40
3.50
8.40
Tk. 51.20
The following additional information is available for the year just completed:
(a) The company manufactured 30,000 units of product during the year.
(b) A total of 64,000 feet of material was purchased during the year at a cost of Tk. 8.55 per
foot. All of this material was used to manufacture the 30,000 units. There were no
beginning or ending inventories for the year.
(c)
(d)
The company worked 43,500 direct labor-hours during the year at a direct labor cost of Tk.
15.80 per hour.
Overhead is applied to products on the basis of standard direct labor-hours. Data relating to
manufacturing overhead costs follow:
Denominator activity level (direct labor-hours) . . . . . . . . . . . . . . . . . .
35,000
Budgeted fixed overhead costs (from the overhead flexible budget)..
Tk. 210,000
Actual variable overhead costs incurred . . . . . . . . . . . . . . . . . . . . . . .
Tk. 108,000
Actual fixed overhead costs incurred . . . . . . . . . . . . . . . . . . . . . . . . .
Tk. 211,800
Required:
(1) Compute the direct materials price and quantity variances for the year.
(2) Compute the direct labor rate and efficiency variances for the year.
(3) For manufacturing overhead compute:
(i)
The variable overhead spending and efficiency variances for the year.
(ii)
The fixed overhead budget and volume variances for the year.
(4) Total the variances you have computed, and compare the net amount with the Tk. 18,300
mentioned by the president. Do you agree that bonuses should be given to everyone for good
cost control during the year? Explain.
Allocation of Support Department Costs
Q. No. 5.
(a) The Meghna Company is divided into four departments: A, B and C are production
departments and D is a Service department. the actual costs for a period are as follows:
Particulars
Rent and Rates
Repairs to plant
Depreciation of plant
Supervision
Fire Insurance
Electric power
Employer’s Liability Insurance
Stores overhead
Subsidy to canteen
First aid post
Premium for worker’s compensation
Other Information:
Description
Area Sq. ft.
Number of Employees
Horse power of machines
Dept. A
1500
20
800
Amounts
Tk.10,000
6,000
5,000
15,000
5,000
9,000
1,500
5,400
1,500
1,200
600
Dept. B
1100
15
500
Dept. C
900
10
200
Dept. D
500
15
-
Direct Labor
60,000
40,000
30,000
Cost of plant
2,40,000
1,80,000
1,20,000
Value of stock
1,50,000
90,000
60,000
Light points
40
30
20
Value of materials used
90,000
80,000
60,000
Apportion the costs of the various departments by the most equitable method.
20,000
60,000
10
40,000
(b)
Alif manufacturing co. has three production departments and two service departments. In July
2010 the production overhead were as follows:
Production departments
Tk.
Tk.
A
B
C
Total
10,000
8,000
12,000
30,000
Service departments
E
F
Total
Total overhead= Tk.30,000+Tk.5340
Tk.
2340
3000
Tk.
5340
= Tk.35340
The Service department expenses are charged out on a percentage basis vizService dept.
E
F
A
20%
25%
Production dept.
B
25%
25%
C
35%
40%
Service dept.
10%
20%
-
You are required to show due total overhead changeable to three production departments by
using:
a) Repeated distribution method
b) Simultaneous Equation method