Sir Syed University of Engineering & Technology

ANSWER SCRIPT

Date: 16-11-2020
Roll Number: BBA-029-2018
Section: A
Name: Muhammad Wasif Farooq
Course Name: Cost Accounting
Degree Program: Business Administration
Total number of pages
4
being submitted:

Q#1. I will use some methods which are commonly used in organizations which help in
reduction of production cost. The three methods I will use will be:
1. Reduce supply costs:
I will check out new suppliers so I can buy quality materials at the best possible wholesale
price. I will try to get additional discount from suppliers from whom I get raw materials
consistently and always pay them on time. I can also join with another business and purchase
materials in larger bulk quantities to reduce costs.
2. Modernize marketing efforts with affordable tools:
It’s possible to increase sales just by investing a little money in digital marketing. By creating
an online presence, potential buyers will become familiar with my company and become
interested in it. And the most important part of digital market is that most social platforms are
free so it will be cost free for my company.
3. Reduce vehicle expenses
I will be buying used vehicles in good working order which will save me thousands. I will try
to get fuel-efficient vehicles to save money and vehicles which are generally more
maintenance-free.
By using these methods, I will be saving a lot of money from my production cost and it will
only benefit me in terms of profit maximization. As we know if there’s reduction in product
cost then automatically it will cost you a less and your profit maximization increases.

Q#2

Page 1 of 7
Classify the above expenses under the various elements of Cost showing separately the total
expenditure under each element.

a) Prime Cost:
Raw Material
Consumed 1
50,000
Direct
Wages
95,000
Prime
Cost =
245,000
b) Factory Cost or Work Cost:
Factory overhead:
Carriage
Inward* 5,000
Factory
Rent 8,40
0
Indirect
Material 1,000
Power
5,000
Repairs of Plant &
Machinery 2,300
Factory Manager’s
Salary 25,000
Depreciation on plant and
Machinery 3,000
Total Factory
Overhead 49
,700

Page 2 of 7
Prime
Cost 2
45,000
Factory Cost or Work
Cost 294,700
c) Production Cost:
Office and Administration Overheads:
Printing and
Stationary 920
Legal
Expenses
550
Depreciation on
Furniture 029
Postage
Expenses
600
General Manager’s
Salary 40,000
Audit
Fee
3,000
Total Office and Administration
overhead 45,099
Factory Cost or Work
Cost: 294,700
Cost of
Production 339
,799
d) Total Cost:
Selling & Distribution Overhead:
Carriage
Outward 2,5
00
Page 3 of 7
Bad
Debts
029
Salesmen’s
Expenses 7,40
0
Advertising
1,500
Total Selling & Distribution
Overhead 11,429
Cost of
production 33
9,799
Total Cost

351,
228
Q.3a) Cost of Goods Manufactured for the year ended June 30, 2017.

Direct Material Consumed 15,000

Opening Inventory of Raw Material 2,02000
Add: Raw Material Purchased (20,000)
Less: Net Purchases 2,00000
Raw Material available for use 2,15000
Less: Closing Inventory Raw Material (29,000)
Direct Raw Material Consumed 1,86000
Add: Direct labor 59,000
Prime Cost 2,45000
Add: Factory Overhead
Power, head & light 3,000
Indirect Material 5,000
Depreciation on Plant 4,500
Depreciation on Machinery 6,000
Total Expense 4,500

Page 4 of 7
Indirect Labor 5,000
Fire Insurance 800
Miscellaneous Manufacturing Costs 900
Total Factory Overhead 29,700
Manufacturing Cost per Period 2,74700
Add: Opening Inventory of Work in Process 30,000
Total Cost of Work in Progress 3,04700
Less: Closing Inventory of Work in Process (25,000)
Cost of Goods Manufactured 2,79700

b) Income Statement for the year ended June 30, 2017.

Sales: 450,000
Less: Cost of Goods Sold
Opening Inventory of Finished Goods 70,000
Add: Cost of Goods Manufactured(W-1) 27,9700
Finished Goods Available for Sale 349,700
Less: Closing Inventory of Finished Goods (60500)
Cost of Goods sold (289200)
Gross Profit 160800

Less: Operating Expenses:

Selling Expenses (29 % x 450,000) 130500
General Expenses (29% x 450,000) 130500
Total Operating Expenses (261000)

Total Operating Expenses - Gross Profit = Net Profit.

Net profit: (-
100,200)

Answer 4:
For the period ending:

Page 5 of 7
Raw Material
Consumed 7
0,000
Direct
Wages
85,000
Prime
Cost
155,000.
Factory overhead:
Carriage Inward* 2,000
Factory Rent 2,400
Indirect Material 560
Power 4,600
Repairs of Plant & Machinery 1,200
Factory Manager’s Salary 18,000
Depreciation on plant and Machinery 1,240
Total Factory Overhead 30,000
Factory Cost or Work Cost 185,000.
Office and Administration Overheads:
Printing and Stationary 620
Legal Expenses 350
Depreciation on Furniture 160
Postage Expenses 465
General Manager’s Salary 36,000
Audit Fee 350
Total Office and Administration overhead 37,945
Cost of Production 2,22945.
Selling and Distribution Overhead:
Carriage Outwards 1,540
Bad Debts 440
Salesmen’s Expenses 3,400
Advertising 500
Total Selling and Distribution Overhead 5880
Page 6 of 7
Total Cost 228825.

Page 7 of 7