MGT402 Solved Subjective

Q35. Barley Ltd produces a certain food item in a manufacturing process. On 1st November there was no opening stock in process. During November, 700 units of material were put in to process, with a cost of Rs, 20,000. Direct labor cost in November was Rs.15; 000.production overhead is absorbed at the rate of 300% of direct labor costs. Closing stock on 30th November consisted of 200 units which were 100% completed as to materials and 80% completed as to labor and over head. (3 marks)

Required: Calculate the quantity of units completed and transfer-out

SOLUTION:

Units of opening work in process =700units Units put into the process= 200units Units completed and transfer out =700 - 200=500units

Q36. The higher rate of labor turnover results in increased cost of production. Discuss the Effect of Labor Turnover (5 marks)

Effect of Labor Turnover

The higher rate of labor turnover results in increased cost of production:

(i) Increased cost of new recruitment, training, (ii) Interruption of production, (iii) Decrease in production due to inefficiency and inexperience of newly recruited workers, (iv) The new workers are more accident prone and are liable to cause more damage to machinery, tools than old employees, (v) Losses due to wastage, spoilage and defectives, (vi) Increased number of accidents causing loss of output and increase in medical expenses and cost of repairs, (vii) Lack of cooperation and coordination between old and new employees resulting fall in output and increased cost of production,

Q37. Units Units transferred to next department (5 marks)

40,000 Units still in process (all material, 2/3 labour & FO H) 8,000 Abnormal loss (1/2 complete as to material, Labour and FOH) 1,000

Following costs were added during the process. Materials Rs.40,500 Labour 101,700 50,500

Required:

C

49000 40000 8000

and FOH)

1000___ 49000

Direct material=40000+(8000*100%)+(1000*1/2)=RS48500 Direct labor =40000+(8000*2/3)+(1000*1/2)=RS45833.33333 F.O.H=40000+(8000*2/3)+(1000*1/2)=RS RS45833.33333

Calculation Of Per Unit Cost:

= Total Cost/Equivalent Units Produced Material=40,500/48500 unit

Material=0.83505 per unit

Labor=101700/45833.33333 unit

Labor=2.2189 per unit

Foh=50500/45833.3333 unit

FOH=1.101818 per unit

Q35. 50, 000 units were received from preceding department, 9,000 units were still in process at the end of month (complete all material, 75% Labour & FOH). 500 lost units were 60% complete as to material and conversion costs. This loss is considered as abnormal and is to be charged to factory overhead. (3 marks)

Required: You are required to calculate equivalent units of material, labour and factory overhead.

50000 40000 9000

and FOH)

500___ 49000

Q36. Irfan Industries Limited has two production departments A and B and two mutually interdependent service departments X and Y. Cost of service departments is apportioned on the basis of following %ages: (5 marks)

A · B · X · Y

Service department X 50% 30% 20% Service department Y 40% 50% 10%

Following figures of departmental costs are available after the primary distribution:

Department A 15,750 Department B 7,500 Department X 11,750 Department Y 5,000

Calculate total factory overhead of production department by preparing a work sheet showing the secondary distribution using Repeated apportionment method.

Solution · Irfan Industries Limited · Work Sheet showing secondary distribution · Repeated apportionment method · Production department · Service department Particulars · A · B · X · Y

Departmental Cost after RS RS RS RS Primary distribution 15,750 7,500 11,750 5,000

Secondary distribution

Service department X 5,875 3,525 (11,750) 2,350 Service department Y 2,940 3,675 (7,350) Service department X (735) Service department Y (147) Service department X (15) Service department Y (3)

Total · 25,000 · 15,000