ASSIGNMENT – 2 (COST ACCOUNTING)

MAX. MARKS – 10

Follow the following instructions

1. Solve the following questions in your class register
2. Convert it into pdf and
3. then submit your assignment on or before 18th January 2025 at lms.
4. Finally, submit hand-written file to faculty

BREAK-EVEN AND COST VOLUME PROFIT ANALYSIS

Q#1
Define break-even point.

Q#2
What is the contribution margin?

Q#3
State the formula commonly used to determine the break-even point (i) in amount Rs. (ii) in units.

Q#4
How does the break-even point move when changes occur in (i) variable expenses (ii) fixed
expenses.

Q#5
What is the margin of safety?

Q#6
What is meant by the term ‘cost-volume-profit relationship and why is this relationship important in
business management.

Questions from book

Page 1 of 7
Problem 1
Wheeler Corporation’s most recent income statement follows: TOTAL per unit
Sales (8,000 units) $ 208,000 $26
Variable expenses 144000 18
Contribution margin 64000 8
Fixed expenses 56000 NO CHANGE
Net operating income 8000
Required:
Prepare a new contribution format income statement under
each of the following conditions (consider each case
independently):

1. The sales volume increases by 50 units. 8050 UNITS

2. The sales volume declines by 50 units. 7950 UNITS
3. The sales volume is 7,000 units. 7000 UNITS

Problem 2
Last month when Harrison Creations, Inc., sold 40,000 units, total sales were
$300,000, total variable expenses were $240,000, and total fixed expenses were
$45,000.
Required:
1. What is the company’s contribution margin (CM) ratio?
2. Estimate the change in the company’s net operating income if it were to
increase its total sales by $1,500.

Problem 4
Maxson Products distributes a single product, a woven basket whose selling price
is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense
is $5,500.

Required:
1. Solve for the company’s break-even point in unit sales using the equation
method.
2. Solve for the company’s break-even point in sales dollars using the equation
method and the CM ratio.
3. Solve for the company’s break-even point in unit sales using the contribution
margin method.
4. Solve for the company’s break-even point in sales dollars using the contribution
margin method and the CM ratio.

Page 2 of 7
Page 3 of 7
 PROCESS COSTING
Q#1
A company’s department 2 costs for June were:

Cost from Department 1 Rs. 40,000

Cost added in Department 2:
Raw Materials 45,500
Labor 56,000
FOH 58,000

The quantity schedule shows 15,000 units were received during the month from Department 1: 14,000 units
were transferred to finished goods; and 1,000 units in process at the end of June were 50% complete as to
materials cost and 25% complete as to conversion cost.

Required: Prepare a cost of production report.

Q#2
Cost of Production Report; normal spoilage. Wade Company uses process costing. All materials are added at
the beginning of the process. The product is inspected when it is 80% converted, and spoilage is identified only
at that point. Normal spoilage is expected to be 5% of good output.
During March, 13,500 units were put into process. Current costs were Rs. 90,000 for materials, Rs. 80,000 for
labour, and Rs. 31,525 for factory overhead. The 2,000 units still in process at the end of March were
estimated to be 90% complete. A total of 7,000 units were transferred to finished goods.

Required: Prepare a cost of production report for March.

Page 4 of 7
 Full and Variable costing
Q–1
The Jarvis Company’s Cost Department prepares annual income statements based on absorption
costing. Following information have been received from their accounting records for a single product
at the end of December 31st, 2015:

Planned Production in units 50,000

Actual Production in units 45,000
Actual sales in units 40,000

Fixed Costs (Rs.) Variable Costs (Rs.)

Raw Materials 25
Direct Labor 20
FOH 30
Rs. 150,000 under
the absorption costing
Marketing and Administrative Costing Rs. 300,000 Rs. 11 per unit sold

Selling price of each single unit is Rs. 150.

Required
i. Prepare Comparative income statements for the year ended December 31st, 2015 (a) the
absorption costing method and (b) the direct costing method.
ii. An explanation of the difference, if any, in the operating income figures.

Page 5 of 7
 Extra Questions from book
Q#1

Req-
Compute per unit product cost under full and variable costing
Prepare income statement under full and variable costing

Q#2

Page 6 of 7
 OVERHEAD COSTING
Q#1
Define overhead costing and describe the types of overhead costing.

Q#2
Karim and Company applied manufacturing expenses to production by means of a
predetermined rate based upon normal capacity production.

Manufacturing expenses at normal capacity of 400,000 direct labour hours are estimated to
be Rs. 340,000 of which Rs. 120,000 are fixed and Rs. 220,000 are variable expenses. Actual
direct labour hours for the year were 368,000 and the total actual manufacturing expenses
amounted to Rs. 305,000.

Required
a. Under or over applied FOH
b. Spending Variance
c. Idle Capacity Variance

Q#3
Factory overhead for the Kingston Manufacturing Company has been estimated as follows:
Fixed FOH Cost Rs. 15,000
Variable FOH Cost Rs. 45,000
Estimated Direct Labour Hours 20,000 hours
Production for the month reached 75% of the budgeted and actual FOH cost totalled Rs. 43,000.

Required
d. Under or over applied FOH
e. Spending Variance
f. Idle Capacity Variance

Page 7 of 7