The Professionals’ Academy Of Commerce
Pakistan’s Leading Accountancy Institute
Certificate in Accounting and Finance Stage Examinations
Mid-Term Examination Spring-2023
Section: B, REC, LS-B
(Additional reading time - 15 minutes)
December 08, 2022
100 marks – 3 hours
Cost and Management Accounting
Instructions to examinees:
(i) Answer all NINE questions.
(ii) Answer in black pen only.
SECTION A
Q.1
Mars Manufacturing Limited (MML) factory consists of two manufacturing departments and one service
departments. The company applies FOH to production as follows:
MD-A: 70% of direct labor cost
MD-B: Rs. 40 per direct labor hour
Following information relates to the month of May 2022:
Direct materials (Rs.)
Direct labor cost (Rs.)
Direct labor hours
Number of employees
Floor space (Sq. ft.)
NBV of assets (Rs.)
Overheads for the month:
MD-A
MD-B
Maintenance
433,800 313,800
388,800 259,200
3,500
4,000
140
220
40
1,500
1,500
750
250,000 250,000
100,000
Indirect labor (directly proportional to direct labor
cost)
Depreciation
Food expenses
Factory building expenses
Other overheads of Maintenance department
Rs.
217,400
43,200
45,000
54,000
112,800
Maintenance department’s support is proportional to direct labor hours.
Required:
Calculate under/over applied overheads for each department for the month of May 2022.
Q.2
(10)
Alpha and Beta are produced in Process-I in ratio of 2:1. Alpha is sold immediately but Beta is transferred
to Process-II where it is converted into a final product Beta Plus. Following information relates to two
processes for the month of June 2022:
Process I
Process II
(units)
(units)
Opening WIP
7,000
Normal loss
5% of output
Abnormal loss
300
Closing WIP
3,600
2,500
During the month 12,200 units of Beta Plus were sold whereas opening and closing finished goods
inventories of Beta Plus were 1,500 units and 800 units respectively.
Required:
Calculate Input quantity of Process-I for the month of June 2022.
Q.3
(05)
Junaid Shoes (JS) is engaged in manufacturing of standard size leather shoes used by labor in various
factories. During the year ended December 31, 2021 following costs were incurred:
Cost and Management Accounting |Page 2 of 4
Leather purchases (including 17% refundable sales tax)
Direct labor cost
Rent (50% factory, 30% marketing office, 20% admin office)
Salaries and benefits of marketing staff
Other manufacturing overheads
Other admin expenses
Packing material consumed in production
Depreciation of factory assets
Rs.
1,404,000
950,000
800,000
325,000
120,000
190,000
90,000
250,000
Additional information:
(i)
Leather inventory was valued at Rs. 150,000 and Rs. 210,000 at start and end of 2021 respectively.
(ii) Finished goods inventory is measured using weighted average costing method.
(iii) During the year 2021 2,000 pairs of leather shoes were produced whereas 1,830 pairs of leather shoes
were sold. As at January 1, 2021, 200 pairs of leather shoes were held in inventory valued at a total
cost of Rs. 284,000.
(iv) There was no work in process inventory at start or end of 2021.
Required:
Calculate total cost of leather shoes closing inventory as at December 31, 2021.
Q.4
(10)
JK Enterprises produces a single product. For the month of August 2022, the books of account show the
following:
Rs.
Raw material purchases (400kgs)
500,000
Direct labour
120,000
Selling costs
100,000
Depreciation on plant and machinery
225,000
Distribution costs
160,000
Factory manager’s salary
300,000
Indirect labour
645,000
Indirect material consumed
780,000
Other production overheads
60,000
Other accounting costs
110,000
Other administration overheads
90,000
Other information are as under:
(i)
2.5 kgs of raw material is required to produce 1 unit of finished product. 150 units were produced
during the month.
(ii) There were 75 kgs of raw material worth Rs. 270,000, on 1 August 2022.
(iii) Work-in-progress at the start of the month amounted to Rs. 175,000, whereas that at the end of the
month amounted to Rs. 86,000.
(iv) JK uses FIFO to value its raw material inventory.
Required:
Calculate the cost of goods manufactured during August 2022.
Q.5
(09)
Given below is information about the remuneration of three different employees for the month of May:
(a) Pay on an hourly basis at a rate of Rs. 500 per hour. Overtime is paid for any hours over and above
160 in a month at a premium of 40% of the basic rate. During the month Mr. A worked for 184
hours.
(b) Pay on a piece rate basis for the number of units produced. The rates are Rs. 10 per unit for the first
1,000 units in a month, Rs. 15 for the next 500 units and Rs. 20 for any units over 1,500. In the
month Mr. B produced 1,640 units. However 30 units did not pass quality inspection and were
rejected.
(c) Pay on an hourly basis at a rate of Rs. 160 per hour. Worker is also eligible for a monthly bonus
based upon the time saved on manufacture of products compared to the standard time for
manufacturing i.e. 1.8 hours per unit. This time saving is split equally between the employer and the
Cost and Management Accounting |Page 3 of 4
employees. During the month Mr. C worked for 300 hours and produced 200 units. The bonus that he
earns is based upon his normal hourly rate of pay.
Required:
Calculate the gross wage for each of the employees.
Q.6
(09)
Habib Limited (HL) produce two products, Vita and Zita. Both products are processed through two
production departments, P-01 and P-02. The following budgeted data relates to the production department:
Allocated and apportioned overheads
Direct Labour Hours Per Unit in each department:
 Vita
 Zita
P-01
Rs. 252,000
P-02
Rs. 360,000
3.00
2.40
4.00
5.20
The budgeted production is 15,000 units of Vita and 13,000 units of Zita. Departmental overheads are
allocated between both products on the basis direct labor hours.
Required:
Calculate overhead absorption rate per unit for Vita and Zita.
(07)
SECTION B
Q.7
Following data relates to activities in process 2 of Habib Industry for the month of June:
1) Opening work in progress:
Quantity
3,500 Kgs (40% complete)
Process 1 (i.e. Chemical X) cost
Rs. 150,000
Chemical Y cost
Conversion cost
Rs. 75,000
2) Chemical X transferred in process 2 from process 1:
Quantity
80,000 Kgs
Total cost
Rs. 1,600,000
3) Chemical Y was added to process 2 when it was 50% complete:
Quantity
40,000 Kgs
Total cost
Rs. 1,200,000
4) Closing work in progress:
Quantity
2,700 Kgs (60% complete)
5) Rejection is identified when process is 30% complete. 2% of input is considered to be quite normal
rejection. Recovery value of defective units is Rs. 8 per Kg. Actual rejection during the month was
2,000 kgs.
6) Conversion cost incurred during the month amounts to Rs. 1,250,000.
Required:
Prepare equivalent production, per unit cost and statement of evaluation using FIFO method.
Q.8
(20)
Sigma Garments (SG) is engaged in selling ready-made garments. These garments are processed through
three production departments. SG's production facility also has two service departments. Following
information relates to budgeted production overheads for the year ending December 31, 2019:
Depreciation (building)
Depreciation (P&M)
Indirect labor
Insurance (building)
Power
General lighting
Repairs (P&M)
Rs. million
40.00
18.00
54.00
22.00
96.00
14.00
36.00
Cost and Management Accounting |Page 4 of 4
Other relevant budgeted information for 2019:
Direct material [Rs. million]
Direct labor [Rs. million] [Rs.
800 per hour]
Indirect labor [Rs. million]
Area covered (sq. yards)
Cost of P&M [Rs. million]
KWH consumption
Machine hours
Light points (no.)
Basis of OAR
Cutting
94.00
Stitching
102.00
Finishing
Maint. Canteen
50.00
-
45.00
11.00
1500
240
10000
24000
20
Labor
hours
32.00
12.00
1200
360
25000
36000
20
24.00
13.00
800
120
10000
12000
15
Machine hours
Labor hours
10.00
500
5
-
8.00
400
10
-
Service departments provide support as follows:
Maintenance
Canteen
Cutting
25%
30%
Stitching
45%
30%
Finishing
30%
35%
Maint.
5%
Canteen
-
Required:
a) Calculate OAR for year 2019 for each production department.
b) Calculate actual total overheads of SG for the year if, for the year ending December 31, 2019:
Actual labor hours
Actual machine hours
(Over) / Under applied FOH [Rs. million]
Q.9
Cutting
51000
22000
(4.30)
Stitching
40000
34000
9.00
Finishing
31000
13200
3.75
(16)
Quality Products Limited (QPL) manufactures two products Alpha and Beta. Both the products are
produced in a joint process and afterwards each is processed further in separate finishing departments.
Following data relates to process 1 of QPL for the month of April:
Opening work in  3,000 units (40% complete)
process
 Cost of opening work in process comprises of Direct
material Rs. 84,000 and Conversion Rs. 70,000.
Cost
incurred  Direct material cost (20,000 units) Rs. 600,000
during April
 Conversion cost Rs. 1,230,000
Closing work in  4,700 units (60% complete)
process
Loss
 Losses are estimated when process is 30% complete
 Expected losses are 1% of input
 Recovery value of scrap units Rs. 10 per unit
Completed
and  Alpha 12,000 units
transferred
out  Beta 6,000 units
units
 Joint costs are allocated on the basis of units produced
Required:
Prepare “Process 1 account” for the month of April using FIFO method.
(The End)
(14)