The Professionals’ Academy Of Commerce

Certificate in Accounting and Finance Stage Examinations

Test # 01 October 14, 2022
Section: B (Sir Nasir Abbas) 21 Marks – 40 Mins

Cost & Management Accounting

Question . 1

SCH Limited is a manufacturer of electric goods. The company uses perpetual inventory recording
system and weighted average method for inventory valuation. The following information pertains to
a raw material for the month of March, 2022:

1st March 1000 opening units having cost Rs. 452,000

March – 9 Imported 8000 units from USA for Rs.4,160,000. Following expenses were
incurred in bringing the material to company’s warehouse.
Import duties and taxes were 25% of Import value in PKR and of which 60%
were refundable. Transport and handling charges were Rs. 60,000. Transit
insurance was Rs. 12,000 and company’s warehouse insurance was Rs. 10,000
per annum.
March – 10 3500 units were issued to production.
March – 15 Sold 1000 slightly damaged units not suitable for production at a price of Rs.
350 per unit.
March – 20 2nd Shipment of 4500 units imported from UK for Rs.2,520,000. Following
expenses were incurred in bringing the goods to company’s warehouse.
Refundable and non refundable Import duties and taxes were 20% & 10%
respectively of Import value in PKR. Transport and handling charges were Rs.
60,000. Transit storage was Rs. 5,000.
March – 22 2000 units were issued to production.
March – 25 500 units issued on 10th March returned from production.
March – 30 Issued 2800 units to production.
March – 31 For control purposes physical count was carried on 31st March and found 4500
units in warehouse. Any shortage as compared to ledger would be treated as
loss and be written off.
Required:
Prepare inventory ledger card using continuous weighted average
(14 marks)
Question. 2

Following costs relate to the factory of Rusty Limited (RL) in respect of year ended December 31,
2021:

Rs.
Insurance premium 50,000
Electricity charges 120,000
Repairs and maintenance 94,000
Salaries and wages 1,500,000
Depreciation 1,400,000
Direct material cost 2,000,000
Rent 1,200,000
Other factory overheads 1,000,000

Additional information:
(i) Electricity charges comprise of certain fixed annual charge and Rs. 8 per unit consumed.
During 2021, total 12500 units of electricity were consumed.
(ii) Repairs and maintenance comprise of annual overhaul of all factory assets and small part
replacement of machines. Each part replacement costs Rs. 8,000 and takes place after every
2000 machine hours. During 2021 production machines were used for 6000 hours.
(iii) Salaries and wages comprise of permanent staff salaries and direct wages of production staff.
Average production wage rate is Rs. 80 per unit of product. During 2021 total 15,000 units of
product were produced.
(iv) Depreciation on production machines is charged at Rs. 100 per machine hour. Depreciation on
all other factory assets is charged on straight line basis.
(v) Other factory overheads include variable overheads costing Rs. 50 per unit of product.

Required:
Calculate “total variable costs” and “total fixed costs” for the year ended December 31, 2021.
(07 marks)

(THE END)
 Suggested Solution CMAC-NA Test 1
Question - 1 SCH Limited
Inventory ledger card (Weighted average method) Marking
Date Particulars Receipts Issue Balance
Units Rate Amount Units Rate Amount Units Rate Amount
1-Mar Opening balance 1,000 452.00 452,000 1.00
9-Mar Purchases 8,000 581.00 4,648,000 9,000 566.67 5,100,000 3.50
(W-1)
10-Mar Issue to production 3,500 566.67 1,983,345 5,500 566.67 3,116,655 1.00
15-Mar Sale of damaged units 1,000 566.67 566,670 4,500 566.67 2,549,985 1.00
20-Mar Purchases 4,500 630.44 2,837,000 9,000 598.55 5,386,985 3.50
(W - 2)
22-Mar Issue to production 2,000 598.55 1,197,100 7,000 598.55 4,189,885 1.00
25-Mar Issue return (500) (567) (283,335) 7,500 596.43 4,473,220 1.00
30-Mar Issue to production 2,800 596.43 1,670,004 4,700 596.43 2,803,216 1.00
31-Mar Loss due to shortage 200 596.43 119,286 4,500 596.43 2,683,930 1.00
14.00

W-1 Purchase Cost of 1st Shipment W-2 Purchase cost of 2nd shipment

Purchase price 4,160,000 Purchase price 2,520,000

Import duties (4160000 x 25% x 40%) 416,000 Import duties (2,520,000 x 10%) 252,000
Transport & handling charges 60,000 Transport & handling charges 60,000
Transit insurance 12,000 Transit storage 5,000
4,648,000 2,837,000
Question 2 Rusty Limited
Marking
Variable Cost Fixed Cost
Scheme
Insurance premium 50,000 0.5
Electricity charges (W-1) 100,000 20,000 1
Repairs and maintenance (W-2) 24,000 70,000 1.5
Salaries and wages (W-3) 1,200,000 300,000 1
Depreciation (W-4) 600,000 800,000 1
Direct material cost 2,000,000 0.5
Rent 1,200,000 0.5
Other factory overheads (W-5) 750,000 250,000 1
Total 4,674,000 2,690,000
7
Workings:

W-1 Electricity charges

Variable charges (8 X 12,500) 100,000
Fixed annual charges (bal.) 20,000
Total 120,000

W-2 Repair and Maintainance

Part replacement (8000 X 6000/2000) 24,000
Annual overheads (bal.) 70,000
Total 94,000

W-3 Salaries
Production wages (80 X 15000) 1,200,000
Permanent staff salaries (bal.) 300,000
Total 1,500,000

W-4 Depreciation
Variable depreciation (100 X 6000) 600,000
Fixed depreciation (bal.) 800,000
Total 1,400,000

W-5 Other factory overheads

Variable overheads (50 X15000) 750,000
Fixed overheads 250,000
Total 1,000,000