Chapter # 2

Accounting for
Manufacturing Operation

Sameer Hussain

www.a4accounting.weebly.com
Accounting for Manufacturing Operation
Chapter # 2

SYLLABUS ACCORDING TO UNIVERSITY OF KARACHI:

 Accounting for manufacturing concern.
 Statement of cost of goods manufactured.
 Income Statement.
 Closing entries.

WHAT THE EXAMINER USUALLY ASK?

 Computation of:
o Prime cost.
o Conversion cost.
o Manufacturing cost.
o Raw material used.
o Net purchases of raw materials.
o Opening inventory of raw material.
o Ending inventory of raw material.
o Opening inventory of goods in process.
o Ending inventory of goods in process.
o Opening inventory of finished goods.
o Ending inventory of finished goods.
o Per unit cost.
o Factory overhead rate.
 Statement of Cost of Goods Manufactured.
 Income Statement.
 Closing entries.

Page 14
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2

COST OF GOODS MANUFACTURED

The total production cost of the finished goods transferred from the production facility of an
organization during an accounting period. It is made up of the total expenditure for the period
on direct materials, direct labours, direct expenses, and manufacturing overheads adjusted by
the opening and closing stocks of raw materials and the work in process at the beginning and
end of the period.

STATEMENT OF COST OF GOODS MANUFACTURED

Name of Business
Statement of Cost of Goods Manufactured
For the Period Ended __________________
Raw Material Used:
Raw materials (opening) XXX
Add: Net Purchases of Raw Materials:
Purchases of raw materials XXX
Add: Transportation-in XXX
Delivered purchases of raw materials XXX
Less: Purchase discount (XXX)
Less: Purchase return and allowances (XXX)
Net purchases of raw materials XXX
Raw materials available for use XXX
Less: Raw materials (ending) (XXX)
Raw materials used XXX
Add: Direct labour XXX
Prime cost XXX
Add: Factory Overheads:
Indirect materials XXX
Indirect labours XXX
Factory maintenance and repair cost XXX
Heat, light and power XXX
Water, gas XXX
Factory supervisor salary XXX
Factory foreman salary XXX
Depreciation – factory XXX
Factory insurance expense XXX
Factory rent XXX
Other overheads XXX
Total factory overheads XXX
Manufacturing cost XXX
Add: Work – in – process (opening) XXX
Total work – in – process during the period XXX
Less: Work – in – process (ending) (XXX)
Cost of goods manufactured XXX

Page 15
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2

INCOME STATEMENT
Name of Business
Income Statement
For the Period Ended _______
Sales XXX
Less: Sales discount XXX
Less: Sales returns and allowances XXX (XXX)
Net sales XXX
Less: Cost of Goods Sold:
Finished goods (opening) XXX
Add: Cost of goods manufactured XXX
Merchandise available for sale XXX
Less: Finished goods (ending) (XXX)
Cost of goods sold (XXX)
Gross profit XXX
Less: Operating Expenses:
Administrative expenses XXX
Selling expenses XXX
Distribution expenses XXX
Total operating expenses (XXX)
Net profit/Loss XXX/(XXX)

SOME BASIC FORMULAE

The cost of direct materials and direct labor.

Prime Cost:
Direct material + Direct labour

The total direct labor cost plus the overhead cost.

Conversion Cost:
Direct labour + Factory overhead

Manufacturing Cost: Direct material + Direct labour + Factory overhead

Cost of Goods
Manufacturing cost + Work in process (beg) – Work in process (end)
Manufactured:

Raw material (beginning) + Net purchases of raw material –

Direct Material Used:
Raw material (ending)

Net Purchases of Raw Purchases of raw material + Transportation in – Purchase discount –

Material: Purchase return & allowance

Finished goods (beginning) + Cost of goods manufactured – Finished

Cost of Goods Sold:
goods (ending)

Per Unit Cost: Cost of goods manufactured

Number of units manufactured

Factory Overhead Rate Factory overhead X 100

Direct labour

Page 16
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2

ILLUSTRATION # 1: (COST OF GOODS MANUFACTURED STATEMENT &

INCOME STATEMENT)
ABC Company manufactures leather bags. The information on the cost 31 December 1989 is as
under:
Raw material (beginning) Rs.40,000
Raw material (ending) Rs.60,000
Raw material purchased Rs.200,000
Direct labour used Rs.170,000
Factory overhead Rs.130,000
Goods in process (beginning) Rs.100,000
Goods in process (ending) Rs.70,000
Finished goods (beginning) Rs.20,000
Finished goods (ending) Rs.30,000
Sales Rs.600,000
Operating expenses Rs.40,000
REQUIRED
(a) Prepare a statement of cost of goods manufactured.
(b) Prepare income statement.

SOLUTION # 1:
ABC Company
Statement of Cost of Goods Manufactured
For the Period Ended 31 December 1989
Raw Material Used:
Raw materials (opening) 40,000
Add: Net purchases of raw materials 200,000
Raw materials available for use 240,000
Less: Raw materials (ending) (60,000)
Raw materials used 180,000
Add: Direct labour 170,000
Prime cost 350,000
Add: Factory overheads 130,000
Manufacturing cost 480,000
Add: Goods – in – process (opening) 100,000
Total goods – in – process during the period 580,000
Less: Goods – in – process (ending) (70,000)
Cost of goods manufactured 510,000

ABC Company
Income Statement
For the Period Ended 31 December 1989
Sales 600,000
Less: Cost of Goods Sold:
Finished goods (opening) 20,000
Add: Cost of goods manufactured 510,000
Merchandise available for sale 530,000
Less: Finished goods (ending) (30,000)
Cost of goods sold (500,000)
Gross profit 100,000
Less: Operating expenses (40,000)
Net profit 60,000

Page 17
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2

ILLUSTRATION # 2: (UNIT COST AND MISSING INVENTORIES)

The following data relate to a manufacturing company for the year 1999:
Raw material purchased Rs.300,000
Raw material used Rs.360,000
Direct labour cost Rs.250,000
Factory overhead Rs.270,000
During the year 180,000 units were manufactured and 190,000 units were sold. Selected
information concerning inventories during the year is as follows:
(in Rupees) Dec. 31st Jan. 1st
Raw materials ? 80,000
Work in process 50,000 70,000
Finished goods (25,000 units beginning) ? 100,000
REQUIRED
(a) Cost of goods manufactured. (b) Average unit cost.
(c) Cost of goods sold assuming FIFO method
(d) Ending inventories of:
(i) Material (ii) Finished goods

SOLUTION # 2:
M/S. ________________
Statement of Cost of Goods Manufactured
For the Period Ended 31 December 1999
Raw material used 360,000
Add: Direct labour 250,000
Prime cost 610,000
Add: Factory overheads 270,000
Total manufacturing cost 880,000
Add: Work – in – process (opening) 70,000
Total work – in – process during the period 950,000
Less: Work – in – process (ending) (50,000)
Cost of goods manufactured 900,000

Computation of Unit Cost:

Average unit cost = Cost of goods manufactured
Number of units manufactured
Average unit cost = 900,000
180,000
Average unit cost = Rs.5

Computation of Raw Material Ending Inventory:

Raw material opening inventory 80,000
Add: Purchase of raw material 300,000
Raw material available for use 380,000
Less: Raw material used (360,000)
Raw material ending inventory 20,000

Computation of Finished Goods Ending Units:

Finished goods opening units 25,000
Add: Units manufactured 180,000
Units available for sale 205,000
Less: Units sold (190,000)
Finished goods ending units 15,000

Page 18
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
Computation of Cost Finished Goods Ending Inventory:
Finished goods ending inventory = Finished goods ending in units x Average unit cost
Finished goods ending inventory = 15,000 x 5
Finished goods ending inventory = Rs.75,000

M/S. ________________
Cost of Goods Sold
For the Period Ended 31 December 1999
Finished goods beginning inventory 100,000
Add: Cost of goods manufactured 900,000
Good available for sale 1,000,000
Less: Finished goods ending inventory (75,000)
Cost of goods sold 925,000

Page 19
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2

PRACTICE QUESTIONS
Question # 1: 2006 – Regular (Cost Accounting) – UOK
A manufacturer presents the following details about the various expenses for the month of June
2006.
Purchase 80,000 Depreciation – Office furniture 200
Opening stock of raw material 5,000 Repair of plant and machinery 1,300
Carriage – in 3,000 Salesman’s expenses 500
Import duty 7,000 Advertising expenses 5,000
Closing stock of raw material 15,000 Direct wages 46,000
Factory rent 3,000 General manager’s salary 18,000
Bad debts 500 Factory manager’s salary 13,000
Printing and stationary 700 Depreciation plant and machinery 1,400
Carriage – out 1,700 Audit fees 1,300
Indirect material 800 Research and development cost 3,000
Power 4,000 Legal expenses 800
REQUIRED
Classify the above expenses under the various elements of costs, showing separately the total
expenditure.

Question # 2: 1995 – Private (Advanced & Cost Accounting) – UOK

The following information has been taken from the ledger of Aslam Brothers Jodia Bazar, Karchi,
for the year ended on June 30, 1995:
Stock of materials, 30 June 1995 15,700
Stock of materials, 1 July 1994 12,000
Materials purchased during the year 46,250
Carriage outward 1,075
Carriage inward 1,786
Salaries – Factory 1,625
Salaries – Office 3,150
Discount expense 725
Bad debts written off 1,628
Repairs of plant, machinery and tools 1,113
Rent and insurance – Factory 2,125
Rent and insurance – Office 500
Sales 115,275
Travelling expenses 525
Traveler’s salaries & commission 1,925
Productive wages 31,500
Depreciation of machinery & tools 1,625
Depreciation of office furniture 75
Director’s fees 1,500
Gas and water – Factory 300
Gas and water – Office 100
Manager’s salary (3/4th factory, 1/4th office) 2,500
General expenses 850
REQUIRED
Prepare a statement giving the following information:
(a) Materials consumed (b) Prime cost
(c) Factory overhead and percentage on wages (d) Factory cost
(e) Administrative overhead and percentage on factory cost
(f) Total cost (g) Net profit

Page 20
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
Question # 3: 1989 – Regular & Private (Advanced & Cost Accounting) – UOK
Charmi Bag Company manufactures leather bags. The information on the cost for the first
quarter of 1989 is as under:
Raw material consumed 60,000
Direct labour used 40,000
Factory overhead applied 32,000
Goods in process (beginning) 7,000
Goods in process (ending) 4,000
REQUIRED
Prepare a statement of cost of goods manufactured.

Question # 4: 1987 – Regular & Private (Advanced & Cost Accounting) – UOK
The following information is collected from the books of Saleem Manufacturing Company for the
month of January 1986:
Raw material inventory January 1 9,000 Direct labour used 54,000
Raw material inventory January 31 9,500 Factory overhead cost incurred 22,000
Raw material returned to suppliers 1,500 Cost of goods manufactured 110,000
Work in process inventory January 1 13,000 Finished goods inventory Jan. 1 13,000
Work in process inventory January 31 27,000 Finished goods inventory Jan. 31 8,000
Raw material purchased 50,000 Sales 150,000
Direct raw material used 48,000 Gross profit on sales 35,000
REQUIRED
Prepare a statement of cost of goods manufactured and income statement.

Question # 5: 1998 – Regular & Private (Advanced & Cost Accounting) – UOK
The following data have been taken from the books of Saleem Manufacturing Company Ltd. for
the year 1997 – 98:
Inventories 1 July 1997 (Rs.) 30 June 1998 (Rs.)
Raw materials 16,000 18,000
Goods – in – process 24,000 22,000
Finished goods 12,000 26,000
Data for the year: Rs.
Sales 480,000
Purchases of raw materials 110,000
Purchase discount 2,000
Direct labour 90,000
Factory overhead 98,000
Operating expenses 70,000
REQUIRED
(a) Statement of cost of goods manufactured
(b) Income statement (c) Closing entries

Question # 6: 2012 – Private (Advanced & Cost Accounting) – UOK

The following data have been taken from the books of Mehmood Manufacturing Ltd. for the year
2010 – 2011:
Inventories July 1st June 30th
Raw material 16,000 20% more than the beginning inventory
Goods in process 24,000 10% less than the beginning inventory
Finished goods 12,000 26,000
Data for the Year:
Sales Rs.480,000
Purchased raw material 110,000

Page 21
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
Purchases discount 2,000
Direct labour 90,000
Factory overhead 98,000
Operating expenses 70,000
REQUIRED
Prepare:
(a) Statement of Cost Of Goods Manufactured.
(b) An Income Statement.
(c) Closing Entries.

Question # 7: 1991 – Regular & Private (Advanced & Cost Accounting) – UOK
The books of Jan Manufacturing Company included the following data for the year ended 31
December 1990:
In Rupees: 1 January 1990 31 December 1990
Raw materials 30,000 40,000
Goods – in – process 50,000 75,000
Finished goods 70,000 90,000
Purchases of raw materials 215,000
Purchase discount 10,000
Freight inward 15,000
Heat, light and power 30,000
Factory machine repairs 5,000
Factory insurance 4,000
Indirect labour 10,000
Indirect materials 10,000
Direct labour 90,000
Sales 560,000
Sales return & allowances 20,000
Selling and administrative expenses 88,000
REQUIRED
(a) Statement of cost of goods manufactured
(b) Income statement

Question # 8: 2005 – Regular (Cost Accounting) – UOK

The accounting department of Mirza Manufacturing Company provided the following data for
May 2005:
Sales Rs.825,000; Marketing expenses 10% of sales; Administrative expenses 5% of sales;
Purchases Rs.375,000; Factory overhead 2/3 of direct labour; Direct labour Rs.156,000.
Inventories Beginning Ending
Finished goods Rs.90,000 Rs.100,000
Work in process 80,000 105,000
Materials 70,000 85,000
REQUIRED
(i) Cost of goods manufactured statement.
(ii) Income statement.

Question # 9: 2008 – Private (Advanced & Cost Accounting) – UOK

Moon Co. has provided following for the year ended December 31, 2007:
Sales 655,000
Advertising expense 65,000
Direct labour cost incurred 148,000
Direct material purchased 225,000
Building rent: 60% allocated to manufacturing and 30% to administrative & selling 95,000

Page 22
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
functions
Utilities – factory 50,000
Maintenance – factory 32,000
Selling and administrative salaries 95,000
FOH applied at the rate of 90% of direct labour
Inventories Jan. 1, 2007 Dec. 31, 2007
Raw material 21,000 10,000
Work in process 28,000 42,000
Finished goods 42,000 45,000
REQUIRED
(i) Prepare a Statement of Cost of Goods Manufactured for the year ended December 31, 2007.
(ii) Prepare an Income Statement.

Question # 10: 2009 – Private (Advanced & Cost Accounting) – UOK

Following information was taken from the accounting record of Al-Rehman Industries:
1.1.2009 31.12.2009
Finished goods 25,000 29,000
Work in process 40,000 48,000
Material 2,000 30,000
During the year the following transactions were performed:
Material purchases 350,000
Direct labour cost 120,000
Indirect factory labour cost 60,000
Depreciation – Factory building 20,000
Depreciation – Salesroom & office (share equally) 15,000
Utilities (60% to factory, 20% to office & 20% to salesroom) 50,000
Other indirect manufacturing cost 40,000
Sales person’s salaries 40,000
Office salaries 24,000
Sales on account 730,000
REQUIRED
(a) Statement of Cost of Goods Manufactured.
(b) Income Statement.

Question # 11: 1997 – Regular (Advanced & Cost Accounting) – UOK

The following data relates to the operations of Hassan Manufacturing Company for the year
ended 31 December 1996:
Inventories at 1 January 1996: Rupees:
 Raw materials 26,000
 Goods in process 44,000
 Finished goods 60,000
Purchase of raw materials 195,000
Purchase return and allowances 8,000
Sales 408,600
Sales return and allowances 3,600
Purchase discount 2,000
Sales discount 3,000
Freight – in 4,000
Machine repairs 7,000
Heat, light 15,000
Factory insurance 6,000
Indirect labour 9,000

Page 23
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
Factory supplies 10,000
Administrative expenses 20,000
Direct labour 58,000
Data for adjustment on 31 December 1996: Rupees:
(1) Inventories on 31 December 1996:
Raw materials 38,000
Goods in process 27,000
Finished goods 82,000
(2) Make allowance for depreciation on:
Factory building 4,000
Factory machinery 2,000
Office building 5,000
(3) Insurance premium on factory was paid on 1 July 1996 for one year.
(4) Productive wages (direct labour) payable 2,000
(5) Factory supplies on hand 2,000
(6) Amortization on patents 1,000
REQUIRED
(a) A Statement of Cost of Goods Manufactured for the year ended 31 December 1996.
(b) Income Statement for the year ended 31 December 1996.

Question # 12: 1998–Regular & 1995–Regular (Advanced & Cost Accounting) – UOK
Kamran Company produces various types of fertilizers. No beginning units in process of finished
were on hand on 1 January 1996. 30,000 finished units were on hand on 31 December 1996 and
95,000 units were sold during the year. There were no units in work in process inventory on 31
December 1996. The materials put into production cost Rs.300,000 (75% were direct
materials). There was no beginning or ending materials inventory. Labour costs were
Rs.350,000 (40% was for indirect labour). Factory overhead costs, other than direct materials
and direct labours were the following:
Heat, light and power Rs.115,000
Depreciation 78,000
Factory taxes 65,000
Repairs and maintenance 42,000
Selling expenses were Rs.80,000, general and administrative expenses were Rs.50,000.
REQUIRED
Compute:
(a) Cost of goods manufactured (b) Total cost (c) Unit cost
(d) Prime cost (e) Conversion cost

Question # 13: 1996 – Regular (Advanced & Cost Accounting) – UOK

The accounting records of Alladen Manufacturing Company include the following information
relating to the year ended 31 December 1996:
31 December 1 January 1996
1996 (Rs.) (Rs.)
Material inventory 60,000 47,500
Goods – in – process inventory 18,750 20,000
Finished goods inventory (January 1: – 5,000 units) ? 95,000
Raw material purchases 142,500
Direct labour cost 97,500
Factory overhead cost 221,150
The company manufactured a single product during 1996, 22,500 units were manufactured and
20,000 units were sold.

Page 24
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
REQUIRED
(a) Prepare a statement of cost of finished goods manufactured for 1996.
(b) Compute the cost of producing a single unit during 1996.
(c) Compute the cost of inventory of finished goods at 31 December 1996 assuming that the
FIFO method of inventory costing is used.
(d) Compute the cost of goods sold during 1996, assuming that the FIFO inventory costing is
used.

Question # 14: 2009 – Regular (Advanced & Cost Accounting) – UOK

The following extract of costing information relates to commodity ‘A’ manufactured by Ribbi
Engineering Company for the half year ended 31st December 2008:
Purchase of raw material 250,000
Sales (all on account) 300,000
Factory overhead (20% of direct labour) 25,000
Carriage on purchases 3,000
Stock (July 1, 2008)
Raw material 28,000
Finished goods (1,200 units) 3,000
Work in process 45,000
Stock (December 31, 2008)
Raw material 17,000
Finished goods (1,000 units) ?
Work in process 91,500
Selling and distribution overheads are Rs.3 per unit sold. During the period 29,800 units were
produced.
REQUIRED
(1) Compute cost of material used.
(2) Calculates the amount of direct labour used.
(3) Prepare Statement of Cost of Goods manufactured.
(4) Prepare Statement of Cost of Goods Sold.

Question # 15: 2004 – Private & 2011 –Private (Advanced & Cost Accounting) – UOK
The following data relate to a manufacturing company for the year 2003:
Purchase of direct material Rs.440,000
Direct material used Rs.450,000
Direct labour paid during the year Rs.325,000
Direct labour assigned to production Rs.350,000
Manufacturing overhear Rs.400,000
During the year 122,000 units were manufactured and 125,000 units were sold. Selected
information concerning inventories during the year is as follows:
Dec. 31st Jan. 1st
Materials Rs. ? Rs.50,000
Work in process Rs.70,000 Rs.90,000
Finished goods (15,000 units beginning) Rs. ? Rs.135,000
REQUIRED
(a) Cost of goods manufactured.
(b) Average unit cost.
(c) Cost of goods sold assuming FIFO method.
(d) Ending inventories of:
(i) Material (ii) Finished goods

Page 25
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
Question # 16: 2008 – Regular & 1996–Private (Advanced & Cost Accounting) – UOK
The following data relate to Waseem Co. for the year 2007:
1. Purchase of direct material Rs. 88,000
2. Direct material used 90,000
3. Direct labour paid 65,000
4. Direct labour assigned to production 70,000
5. Factory overhead cost incurred 80,000
During the year 24,400 units were manufactured and 25,000 units were sold. Selected
information concerning inventories during the year is as follows:
Jan. 1, 2007 Dec. 31, 2007
Material Rs.10,000 ?
Work in process Rs.18,000 Rs.14,000
Finished goods 3,000 units Rs.27,000 ?
REQUIRED
(1) Cost of goods manufactured during 2007.
(2) Average unit cost produced during 2007.
(3) Cost of goods sold assuming FIFO basis.
(4) Cost of ending inventories of:
(i) Materials (ii) Finished goods. Also pass the necessary entries.

Question # 17: 2003 – Regular & Private (Cost Accounting) – UOK

Record of Nasir and Mazkoor Corporation show the following information:
Sales (500 T.V sets) Rs. 100,000
Material purchased 30,000
Direct labour ?
Factory overhead (2/3 of direct labour) 20,000
Selling expense 5% of sales
General expense 10% of sales
Inventories January 1, 2003
Material Rs. 5,000
Finished goods (50 T.V sets) 7,000
Inventories December 31, 2003
No unfinished work on hand
Finished goods (70 T.V sets) ?
Material Rs. 7,000
REQUIRED
(1) The number of units manufactured.
(2) An income statement for the period ended Dec. 31, 2003.
(3) Unit cost of TV manufactured.
(4) Finished goods ending inventory using FIFO flow of cost.
(5) Gross profit per unit.

Question # 18: 2000 – Regular & Private (Advanced & Cost Accounting) – UOK
Microsoft Company produces a single product. The following information has been taken from
the company’s records for the year 1999:
Production in units 30,000
Sales in units ?
Ending finished goods in units ?
Sales (Rs.25/- per unit) 650,000
Costs:
Advertising Rs.90,000
Direct labour 160,000
Raw materials purchased 80,000

Page 26
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
Building rent (production uses 80% of the space,
administration & sales offices uses the rest) 50,000
Utilities, factory 35,000
Maintenance, factory 25,000
Depreciation on factory equipment is estimated at Rs.0.10 per unit produce ?
Selling and administrative salaries 100,000
Other factory overhead costs 11,000
Other selling and administrative expenses 20,000
Inventories Jan. 1, 1999 Dec. 31, 1999
Raw material Rs.20,000 Rs.10,000
Work in process 30,000 40,000
Finished goods --- ?
The finished goods inventory is being carried at average unit production cost for the year.
REQUIRED
(1) Prepare statement of cost of goods manufactured for the year.
(2) Compute the following:
a) The number of units in finished goods inventory at December 31.
b) The cost of the units in finished goods inventory at December 31.
(3) Prepare an income statement for the year.

Question # 19: 2007 – Regular (Advanced & Cost Accounting) – UOK

The following information is taken from the financial statements of M/S. Adnan & Brothers Ltd.
at the end of the year 06.
Goods in process inventory ……………………………………………........ Rs.600,000
Cost of raw materials used ……………………………………………........ Rs.3,120,000
Cost of goods manufactured ……………………………………………........ Rs.7,444,000
Factory overhead, 75% of direct ……………………………………………........ Rs.1,800,000
labour
REQUIRED
Compute the cost of goods in process inventory at January 1, 2006.

Question # 20: 1994 – Regular & Private (Advanced & Cost Accounting) – UOK
The following information is taken from the financial statements of Jagir & Co. at the end of the
year 1993. Rupees
Goods in process inventory ending …………………………………… 30,000
Cost of raw materials used …………………………………… 156,000
Cost of goods manufactured …………………………………… 372,000
Factory overhead, 75% of direct labour …………………………………… 90,000
REQUIRED
Compute the cost of goods in process inventory at January 1, 1993.

Question # 21: 2013 – Private (Advanced & Cost Accounting) – UOK

The information below is taken from the financial statement of Craftsman Products at the end of
the year 2012:
Goods in process inventory – ending Rs.50,000
Cost of raw material used 260,000
Direct labour ?
Factory overhead (250% of direct labour cost) 250,000
Cost of goods manufactured 602,000
REQUIRED
(a) Compute the cost of goods in process at the beginning of the year 2012.
(b) Prepare statement of cost of goods manufactured.

Page 27
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
Question # 22: 2006 – Private (Cost Accounting) – UOK
The following data relates to the operation of Salman Manufacturing Company for the year
ended December 31, 2005.
Sales 608,600 Selling & administrative expenses 35,000
Machinery repair expenses 7,500 Purchases discount 2,500
Sales return & allowances 8,000 Direct labour 90,000
Factory insurance 7,000 Freight in 5,000
Purchase of raw material 315,500 Factory supplies expenses 1,300
Bad debts expense 1,500 Import duty 3,000
Purchases return & allowances 13,000 Office supplies expense 500
Factory rent & taxes 20,200 Foreman’s salary 30,000
Sales discount 2,600 Indirect labour 15,000
Inventories 1.1.2005 31.12.2005
Raw material 30,000 68,000
Goods in process 40,000 ?
Finished goods 70,000 56,000
Factory manager estimated work in process as follows:
Raw material 20,000
Direct labour 30,000
The company assigns FOH on the basis of direct labour cost.
REQUIRED
(a) Determine FOH rate.
(b) Compute the cost of W.I.P. on December 31, 2005.
(c) Prepare statement of cost of goods manufactured & income statement for 2005.

Question # 23: 1992 – Private (Advanced & Cost Accounting) – UOK

The following balances have been taken from the general ledger of Fano Manufacturing
Company:
Raw material inventory (1 December 1991) 37,950
Raw material purchase 189,600
Raw material returns 8,800
Carriage inwards 15,700
Direct labour 254,400
Indirect labour 59,250
Depreciation (Machinery) 30,850
Heat, light and power 25,400
Factory rent & taxes 31,450
Factory repairs expense 19,350
Foreman’s salary 24,500
Raw materials inventory (31 December 1991) 57,500
Work in process inventory (1 December 1991) 53,400
The foreman estimates that Rs.31,800 of raw materials and Rs.24,800 of direct labour are to be
allocated to the unfinished goods in process on 31 December 1991.
REQUIRED
(a) Determine the factory overhead rate based on direct labour cost.
(b) Compute the cost of 31 December 1991 inventory of goods in process.
(c) Prepare statement of cost of goods manufactured for 31 December 1991.

Page 28
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
Question # 24: 2012 – Regular (Advanced & Cost Accounting) – UOK
Faraz Motors Ltd. started and completed 100 motor cycles during the year at a cost of Rs.26,000
per unit. 88 of these completed motor cycles were sold for Rs.40,000 each. In addition the
company had 10 partially completed motor cycles in its factory at year end. The total costs
incurred during the year were as under:
Direct material used Rs.700,000
Direct labour applied to production Rs.800,000
General & admin. Expense Rs.480,000
Manufacturing overhead 160% of direct labour cost
Selling expense Rs.500,000
REQUIRED
Compute for the current year:
(a) Total manufacturing cost charged to work in progress
(b) Cost of goods manufactured (c) Cost of goods sold
(d) Gross profit on sales (e) Net profit
(f) Ending inventory of work in process and finished goods

Question # 25: 2006 – Regular (Cost Accounting) – UOK

The following information was taken from the books and records of the Standard Manufacturing
Company for the year ended Dec. 31, 2005.
Units Costs
Sales during the year 8,000 ?
Opening inventory of finished goods 1,800 14,500
Closing Inventory
Work in process 100 ?
Finished goods 2,000 ?
Manufacturing Costs
Direct material 30,000
Direct labour 20,000
Factory overhead 16,000
The foreman has submitted the following costs for the closing work in process.
Inventory
Material cost 2,700
Direct labour cost 1,000
The company’s past experience showed that FOH cost tends to fluctuate closely in production to
direct labour cost.
REQUIRED
(1) Determine the number of units manufactured during the year.
(2) Compute the estimated cost of work in process.
(3) Determine cost of each unit.
(4) Determine the ending inventory of finished goods and the cost of sales.

Question # 26: 1994 – Regular & Private (Advanced & Cost Accounting) – UOK
Factory overhead is 30% of cost of goods manufactured. Direct labour is 20% of sales or 40% of
cost of goods manufactured. Ending raw materials inventory is Rs.8,000 more than beginning
raw materials inventory. Sales totaled Rs.200,000 for the year.
REQUIRED
Compute the net cost of raw materials purchased during the year.

Page 29
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
Question # 27: 2007 – Regular (Advanced & Cost Accounting) – UOK
From the following information compute the net cost of raw materials purchased during the
year:
Factory overhead is 30% of cost of goods manufactured. Direct labour is 20% of sales and 40%
of cost of goods manufactured. Ending raw materials inventory is Rs.40,000 more than
beginning raw materials inventory. Sales totaled Rs.1,000,000 for the year.

Question # 28: 1993 – Private (Advanced & Cost Accounting) – UOK

The following data appeared in the books of Al-Imran Industries as on 30 June 1993:
Sales Rs. 406,000
Raw material inventory, 1 January 1993 Rs. 20,000
Raw material purchased Rs. 260,000
Raw material returned to suppliers Rs. 10,000
Goods in process inventory, 1 January 1993 Rs. 10,000
Direct labour Rs. 110,000
Cost of goods manufactured Rs. 380,000
Gross profit on sales Rs. 60,000
Raw materials consumed Rs. 237,500
Indirect manufacturing cost Rs. 60,000
Transportation – in Rs. 3,000
Finished goods inventory, 1 January 1993 Rs. 45,000
REQUIRED
(a) Determine the closing inventories of:
(1) Raw material (2) Goods in process (3) Finished goods
(b) Prepare entries to close manufacturing accounts at the end of June 1993.

Question # 29: 1992 – Regular (Advanced & Cost Accounting) – UOK

The following data appeared in the books of Ali Industries Ltd. as of 31 March 1992:
Sales Rs. 203,000
Raw material inventory, 1 January 1993 Rs. 10,000
Raw material purchased Rs. 5,000
Raw material returned to suppliers Rs. 5,000
Goods in process inventory, 1 January 1993 Rs. 130,000
Direct labour Rs. 45,000
Cost of goods manufactured Rs. 185,500
Gross profit on sales Rs. 25,000
Raw materials consumed Rs. 118,750
Indirect manufacturing cost Rs. 29,250
Transportation – in Rs. 1,250
Finished goods inventory, 1 January 1993 Rs. 22,500
REQUIRED
(a) Determine the closing inventories of:
(1) Raw material (2) Goods in process (3) Finished goods
(b) Prepare entries to close manufacturing accounts at the end of month, include an entry to
close the manufacturing account to the income summary account.

Page 30
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
Question # 30: 1993 – Regular (Advanced & Cost Accounting) – UOK
Maroof Manufacturing Company showed beginning and ending inventories balances for 1992:
Inventory Account 31 December 1992 1 January 1992
(Rs.) (Rs.)
Raw material 30,000 26,000
Goods in process 9,000 12,000
Finished goods 35,000 39,000
The amounts debited and credited during the year to the accounts used in recording
manufacturing costs are summarized below:
Accounts (in Rupees) Debit Entries Credit Entries
Raw material 200,000 ?
Direct labour 60,000 68,000
Manufacturing overhead 85,000 85,000
Goods in process inventory ? ?
Finished goods inventory ? ?
REQUIRED
(a) Compute the amounts for 1992:
(1) Direct material purchased.
(2) Direct materials used.
(3) Direct labour payroll paid during the year.
(4) Direct labour cost assigned to units manufactured.
(5) The year-end liability for direct wages payable.
(6) The overhead application rate, assuming that overhead costs are applied to units
manufactured in proportion to direct labour cost.
(7) Total manufacturing cost debited to goods in process inventory.
(b) Prepare statement of cost of goods sold for 1992.

Question # 31: 2002 – Regular & Private (Cost Accounting) – UOK

From the following information determine (a) Prime cost (b) Conversion cost (c) Cost of goods
sold (d) Cost of goods manufactured for the month of November, 2002.
Product A Product B
Production 10,000 units 8,000 units
Beginning inventory 1,000 units 900 units
Ending inventory 2,000 units 100 units
Unit cost applicable to inventories and production:
Direct material Rs.4 per unit Rs.3 per unit
Direct labour 10 per unit 20 per unit
Factory overhead 7 per unit 14 per unit
Actual factory overhead was Rs.182,400, under or over applied factory overhead is to be
adjusted in cost of goods sold.

Question # 32: 2002 – Regular & Private (Cost Accounting) – UOK

The Aslam and Asghar Corporation had the following data:
Inventories Jan. 1, 2003 Dec. 31, 2003
Material Rs. 10 Rs. 20
Finished goods 50 15
Work in process – material 5 15
Work in process – labour 20 15
Work in process – factory overhead 30 15
During January, the company purchased materials for Rs.200, direct labour cost incurred was
Rs.100 of which Rs.75 was paid. Factory overhead applicable to production was 150% of the
direct material cost.
REQUIRED

Page 31
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
T account showing the flow of the cost of goods manufactured and sold, using three accounts of
work in process.
(Note: Statement of cost of goods manufactured is not required).

Question # 33: 2004 – Regular (Cost Accounting) – UOK

From the following partial information completes the income statement:
Sales ?
Less: Cost of Goods Sold:
Opening inventory finished goods 60,000
Add: Cost of goods manufactured ?
Less: Finished goods inventory, ending ?
Cost of goods sold ?
Gross profit (41.25% of sales) ?
Operating expenses ?
Net income 26 2/3% of sales 640,000
The Other Information is as under:
Raw material used Rs.530,000, direct labour Rs.450,000, Factory overhead 50% of prime cost.
The work-in-process was opening Rs.120,000, closing Rs.110,000.
REQUIRED
Determine the missing figures and complete the income statement, show computation.

Question # 34: 2011 – Regular (Advanced & Cost Accounting) – UOK

The accounting records of Asim Corporation contain the following information:
Inventories July 1, 2011:
Raw material Rs.132,000 Goods-in-process Rs.97,200 Finished goods Rs.144,600
Inventories at July 31, 2011
Items Raw Material Goods-in-Process Finished Goods
Raw materials Rs.144,000 Rs.38,700 Rs.130,500
Labour Rs.24,000 Rs.90,000
Overhead ? Rs.72,000
Totals Rs.144,000 Rs. ? Rs.292,500
Data for the month ended July 31, 2011:
Cost of goods manufactured Rs.2,430,000, Factory overhead (80% of direct labour) Rs.535,200.
The company also paid transportation costs of Rs.90,000 on materials purchased. It received
credit of Rs.48,900 for material returned to suppliers.
REQUIRED
Prepare a statement of cost of goods manufactured for the month ended July 31, 2011. Some
information needed for this statement is not listed above but can be computed from the data
given.

Question # 35: 2005 – Private (Cost Accounting) – UOK

The following information has been taken from the accounting records of Latif Manufacturing
Company:
Inventories (Jan. 1, 2004) Raw material Rs.27,300.
Goods-in-process Rs.16,200.
Finished goods Rs.24,100.
Inventories (Mar. 31, 2004)
Items Raw Material Goods-in-Process Finished Goods
Material Rs.29,050 Rs.6,450 Rs.21,750
Labour 2,100 13,500
Overhead ? 10,800
Totals Rs.29,050 Rs. ? Rs.46,050

Page 32
Sameer Hussain www.a4accounting.weebly.com
 Accounting for Manufacturing Operation
Chapter # 2
Data for the three months ended on March 31, 2004:
Cost of goods manufactured ........................................... Rs.406,440.
Factory overhead .................................................................... Rs.89,200.
The company also paid transportation costs on materials purchased of Rs.13,850, it received
credit of Rs.8,150 for materials returned to suppliers.
REQUIRED
On the basis of the above information and the missing data, which can be derived from it,
prepare a statement of cost of goods manufactured for the three months ended on March 31st
2004.

Question # 36: 2013 – Regular (Advanced & Cost Accounting) – UOK

Following data have been extracted from the books of Shadab Manufacturing Co.:
Finished goods inventory (opening) Rs.120,000
Work in process (opening) 10,000
Freight in 5,000
Factory overhead (80% of direct labour) 120,000
Raw material inventory (opening) 10,000
Purchase of raw materials ?
Material returned to supplier 3,000
Work in process (ending) 80,000
Gross profit (20% of sales) 60,000
Cost of goods manufactured 300,000
Raw material inventory (ending) 12,000
REQUIRED
(a) Prepare statement of cost of goods manufactured and cost of goods sold.
(b) Compute sales revenue.

Question # 37: 2010 – Regular (Advanced & Cost Accounting) – UOK

Aslam started business with a name of PM Industries on April 1 and produced by the end of the
month of June 40,000 units of its single product. The product requires three basic raw materials.
A, B and C, which were purchased during the first three months at the following prices and
quantities:

Particulars Purchases Price (Rs.) Quantities Purchased Quantity on Hand June 30

(Units) (Units)
Material ‘A’ 0.35 per unit 35,000 4,000
Material ‘B’ 0.30 per unit 10,000 6,000
Material ‘C’ 0.60 per unit 8,000 5,000

Factory wages and other salaries paid and outstanding were:

Particulars Paid Outstanding
Direct labour Rs.18,000 Rs.750
Indirect labour 2,625 175
Supervision 3,000 ---
Marketing & administrative 8,200 1,800
salaries

Page 33
www.a4accounting.weebly.com Sameer Hussain
Accounting for Manufacturing Operation
Chapter # 2
Other overhead consisted of:
Particulars Factory Overhead Marketing & Administrative Expenses
Supplies Rs.700 Rs.800
Repairs 450 400
Maintenance 500 350
Depreciation 870 310
Utilities 280 280
Insurance --- 2,460
There were no ending inventories of W.I.P. However finished goods inventories contained 1,500
units. The company was sold 38,500 units at an average sale price of Rs.2.25 per unit.
REQUIRED
(i) Prepare Statement of Cost of Goods Manufactured & Statement of Cost of Goods Sold.
(ii) Prepare an Income Statement for the period ended June 30, 2010.
(Show all your computations).

Page 34
Sameer Hussain www.a4accounting.weebly.com