MGT402 Solved Subjective Set 2

MGT 402 Cost Management Accounting · Composed By Faheem Saqib · A Mega File of Final term Solve Subjective

Q49. The Midnight Corporation budget department gathered the following data for the third quarter: (3 marks)

July

Projected Sales (units) 1,000 Selling price per unit (Rs.) Direct material purchase requirement (units) 1,500 Purchase cost per unit (Rs.) Production requirements (units)

Direct labor hours Rs. 1.5 per unit Direct Labor rate Rs. 2.5 per direct labor hour Fixed FOH is Rs. 2600, included depreciation Rs. 300 Selling and Admin expense 4% of sales

Net Income before tax is as follows

July 8,000 August 10,000 September 8,000

All sales and purchase are for cash and all expenses are paid in the month incurred. Assuming that the opening cash balance on July 01 is Rs. 40,000 and tax rate is 35%,

Requirement:

Prepare cash budget for the month of July.

CASH BUDGET FOR THE MONTH OF JULY · CASH RECEIPTS · JULY (Rs.) · OPENING BALANCE · 40000

SALES 30000 NET INCOME AFTE TAX 2800

TOTAL RECEIPTS · 72800 · CASH PAYMENTS

PURCHASES 22500 3000 FIXED FOH 2300 SELLING AND ADMIN EXP 1200

TOTAL PAYMENTS · 29000 · TOTAL RECEIPTS – · TOTAL PAYMENTS · 43800

Q50. Why is the selection of an appropriate cost allocation method in Joint Products important? (3 marks)

ANSWER

The selection of an appropriate cost allocation method in joint products is important in order to know approximately exact cost of each product. Following are the factors which are more contributing to its importance

(1) To know the profitability of each product

(2) To arrive at decision weather to sell or process further

(3) In order to know the realizable value of each product

Q51. The following information is available for the month of June from the Alpha department of the Greek Corporation: (5 marks)

Units

Work in process June 01 (80% complete as to conversion) 40,000 Started in June 165,000 Work in process June 30 (60% complete as to conversion) 30,000

Materials are added at the beginning of the process in the Alpha department.

Required: Using the average cost method, what are the equivalent units of production for the month of June?

ANSWER

WIP OPENING 40000

ADD UNIT STARTED 165000

TOTAL 205000

LESS CLOSING WIP 30000

UNIT COMPLETED 175000

EQUIVALENT UNITS USING AVERAGE COST METHOD

MATERIAL LABOR FOH