Cost Accounting Solved Paper 2011 Punjab University BCOM ADC II

Cost Accounting Solved Paper 2011 Punjab University BCOM ADC II

The Cost Accounting Solved Paper 2011 Punjab University BCOM ADC II covered crucial topics such as material cost, labor costing, and process costing. It included detailed solutions for calculating Material Costing such as Economic Order Quantity (EOQ) and managing labor costs through time rate and piece rate systems. The process costing section provided step-by-step methods for assigning costs using weighted average, LIFO and FIFOFinancial statement preparation focused on cost sheets and operating expense statements. Additionally, the paper addressed budgeting and variance analysis, demonstrating practical applications to enhance managerial decision-making. These solved examples are essential for mastering cost accounting principles and practices.

Cost Accounting Solved Paper 2010 Punjab University BCOM ADC II

Table of Contents

Cost Accounting Solved Paper 2011 Punjab University BCOM ADC II

Q.1: Define cost accounting. How does it differ from financial accounting?


Cost Accounting

Cost accounting is a branch of accounting focused on capturing a company’s total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as rent expense. The process forms the basis for recording, classifying, analyzing, summarizing and allocating costs associated with an activity (CIMA) or a process as well as working out alternative courses of action to control these costs.

Key Characteristics of Cost Accounting:

Detailed Cost Information: It gives elaborate cost information regarding the production process, departments, and other centers of costs.

Internal Focus: Such methods, of course, are used for internal decision-making purposes, as they would help management in budgeting and cost control as well as in appraising the performance.

Types of Costs: Accounts for various costs like cost, direct overhead, indirect overhead, fixed and variable cost operating outgo etc.

Methods and Techniques: Uses different approaches and tools like standard costing, marginal costing, activity-based costing and job costing to understand as well as control cost.

How Cost Accounting Differs from Financial Accounting:


Cost Accounting: As an offensive measure to assist management in decision making, cost control and performance enhancement.

Financial Accounting: The purpose is to give financials information for the all external stakeholders such as investors, creditors or regulatory authorities.


Cost Accounting: Information which is used internally by managers and staffs of the organization.

Financial Accounting: Use by external parties, such as shareholders, analysts, regulators and creditors.


Cost Accounting: No standardization, it provides flexibility and allows for internal management adaptation.

Financial Accounting: Regulated by standard frameworks like GAAP and IFRS


Cost Accounting: In cost accounting, reports are more specific to segments or departments and processed within the department.

Financial Accounting: In financial accounting reports are prepared at aggregate level periodically which represents the financial position for the overall organization.


Cost Accounting: Focuses on cost-related data and analysis, helping in budget preparation, cost control, and performance evaluation.

Financial Accounting: Focuses on the financial results of the entire organization, including profit and loss statements, balance sheets, and cash flow statements.

Time Orientation

Cost Accounting: Can be both historical (actual costs) and forward-looking (budgets, forecasts).

Financial Accounting: Primarily historical, recording past financial transactions.

By emphasizing internal efficiency and detailed cost analysis, cost accounting helps management make informed decisions to optimize resource allocation and improve profitability, whereas financial accounting ensures transparency and accountability to external stakeholders by providing a clear picture of the company’s overall financial health.

Q.2: Cost accountant of THAL Manufacturing Company has prepared following summary: Inventories at 1st July, 2010…….Required: Prepare a statement of Cost of Goods Sold.

Q.2: Cost accountant of THAL Manufacturing Company has prepared following summary: Inventories at 1st July, 2010:

Raw materials30,000
Work in process18,000
Factory repair parts1,000
Finished goods13,000
During the month following transaction took place 
Raw material purchased130,000
Fuel purchased18,000
Direct labour120,000
Miscellaneous factory overhead4,000
Repairs of factory (including purchase of parts)5,000
Depreciation of plant3,000
Transportation out2,000
Purchase discount lost1,000
Indirect factory labour3,000
Inventories at 31st July, 2010: 
Raw materials32,000
Work in process22,000
Factory repair parts2,000
Finished goods18,000

Required: Prepare a statement of Cost of Goods Sold.


Thal Manufacturing Company

Schedule of cost of goods manufactured and sold

For the month ended 31st July 2010

Direct Material:  
Opening Raw materials30,000 
Add Purchases130,000 
Raw Material Available for use160,000 
Less Closing Raw Material(32,000) 
Raw Material Consumed (1) 128,000
Add Direct labour (2) 120,000
Prime Cost (1+2) 248000
Add Factory Overhead (W1) 33,000
Total Cost of Goods Manufactured 281,000
Add opening WIP 18,000
Cost of Goods to be Manufactured 299,000
Less Closing WIP (22,000)
Cost of Goods Manufactured 277,000
Add Opening Finished Goods Inventory 13,000
Cost of Goods Available for Sale 290,000
Less Closing Finished Goods Inventory (18,000)
Cost of Goods Sold 272,000

Working 1: Calculation of Factory Overhead Cost

Opening Inventory Fuel2000 
Add Fuel purchased18,000 
Fuel Available for used20,000 
Less Closing Inventory Fuel(3000) 
Fuel Consumed17,00017,000
Factory repair parts  
Opening Inventory Factory repair parts1000 
Add Repairs of factory (including purchase of parts) during the year5000 
Repair Parts Available for use6000 
Less Closing Inventory Repair Parts(2000) 
Repair Parts Consumed40004000
Miscellaneous factory overhead4,000 
Depreciation of plant3,000 
Indirect factory labour3,000 
Total Others12,00012,000
Total Factory Overhead 33,000

Q.3: Annual estimated Factory Overhead of a company for an expected volume of 180,000 pounds of a product was as follows: Fixed Overhead Rs. 36,000, Variable Overhead Rs. 108,000, Output was 10,000 pounds in June and actual overhead expenses were Rs. 7,700. REQUIRED: (1) The overhead rate per unit. (2) Spending variance (3) Idle capacity variance.


(1) The Overhead Rate per unit/FOH Applied Rate

\[ \mathbf{FOH\ Applied\ Rate\ = \ }\frac{\mathbf{Estimated\ FOH}}{\mathbf{Expected\ Volume}}\ \]

\[ \mathbf{FOH\ Applied\ Rate\ =}\frac{\left( \mathbf{Fixed\ FOH\ + \ Variable\ FOH} \right)}{\mathbf{Expected\ Volume}}\ \]

\[ \mathbf{FOH\ Applied\ Rate\ =}\frac{\left( \mathbf{36,000\ + \ 108,000} \right)}{\mathbf{180,000}}\ \]

\[ \mathbf{FOH\ Applied\ Rate\ }\mathbf{=}\frac{\mathbf{144000}}{\mathbf{180000}}\mathbf{= 0.8\ Per\ Pound}\ \]

(2) Spending Variance.

Budgeted FOH for Capacity Attained: 
Fixed FOH + (Capacity Attained x Variable Rate) W2 
3000 W2 + (10,000 x 0.6) W19000
Less Actual FOH(7700)

(3) Idle Capacity Variance.

Applied FOH W38000
Less Budgeted FOH for Capacity Attained(9000)

W1: Variable Rate

\[ \mathbf{Variable\ Rate =}\frac{\mathbf{Expected\ Variable\ FOH}}{\mathbf{Expected\ Volume}}\ \]

\[ \mathbf{Variable\ Rate}\mathbf{=}\frac{\mathbf{108000}}{\mathbf{180000}}\mathbf{= 0.6}\ \]

W2: Monthly Fixed Rate

\[ \mathbf{Fixed\ FOH\ Monthly\ Rate =}\frac{\mathbf{36000}}{\mathbf{12}}\mathbf{= 3000}\ \]

W3: Applied FOH

\[ \mathbf{Applied\ FOH = Capacity\ Attained\ \times FOH\ Applied\ Rate}\ \]

\[ \mathbf{Applied\ FOH = 10,000\ \times 0.8 = 8000}\ \]

Q.4: A company received an order for 1,000 instruments at a sales price of Rs. 75 per instrument. Costs incurred to manufacture these instruments were……Required: Entries that would appear in the books under each of the following conditions (i) When reworking costs are charged directly to the job on which they occurred. (ii) When additional costs incurred in reworking are charged to factory overhead account.

Q.4: A company received an order for 1,000 instruments at a sales price of Rs. 75 per instrument. Costs incurred to manufacture these instruments were:

Direct materials Rs. 20 per instrument

Direct labour   Rs. 10 per instrument

Manufacturing overhead was applied @ 200% of direct labour cost.

On final inspection it was found that 200 instruments were defective which were returned to concerned department of factory for rework. The additional costs for this rework were:

Direct labour   Rs. 1000

Manufacturing overhead at applied rate.

Required: Entries that would appear in the books under each of the following conditions:

  • When reworking costs are charged directly to the job on which they occurred.
  • When additional costs incurred in reworking are charged to factory overhead account.

Setup entries in two parallel columns for the following:

  • To record initial cost of manufacturing the order.
  • To record the additional costs for correcting the defective work.
  • To record the completion of the order.
  • To record the shipment of the order to the customer.


(i) When reworking costs are charged directly to the job(ii) When additional costs incurred in reworking are charged to factory overhead
aW.I.P– Materials20,000 aW.I.P– Materials20,000  
 W.I.P–  Labour10,000  W.I.P–  Labour10,000  
 W.I.P–  F.O.H20,000  W.I.P–  F.O.H20,000  
                Materials 20,000                Materials 20,000 
                Payroll 10,000                Payroll 10,000 
                F.O.H Applied 20,000                F.O.H Applied 20,000 
bW.I.P–  Labour1,000 bF.O.H Control3,000  
 W.I.P–  F.O.H2,000                 Payroll 1,000 
                Payroll 1,000                F.O.H Applied 2,000 
                F.O.H Applied 2,000     
cFinished Goods53,000 cFinished Goods50,000  
           W.I.P– Materials 20,000           W.I.P– Materials 20,000 
           W.I.P–  Labour 11,000           W.I.P–  Labour 10,000 
           W.I.P–  F.O.H 22,000           W.I.P–  F.O.H 20,000 
dCost of goods sold53,000 dCost of goods sold50,000  
           Finished Goods 53,000           Finished Goods 50,000 
 Accounts Receivable75,000  Accounts Receivable75,000  
           Sales 75,000           Sales 75,000 

Q.5: Ramdan Company had its factory in Karachi but its head office is in Lahore. On October 1st 2010, the Factory trial balance appeared as follows…….Required: Journal entries to record the above transactions on the general office and on the factory office books.

Q.5: Ramdan Company had its factory in Karachi but its head office is in Lahore. On October 1st 2010, the Factory trial balance appeared as follows:

Work in process80,000 
Finished Goods40,000 
Factory Overhead Control580,000 
Factory machinery240,000 
Accumulated depreciation on factory machinery 72,000
Applied factory overhead 569,000
General Ledger 329,000

The following transactions were complete during October:

  1. Direct materials Rs. 100,000 were purchased on terms 2/10, n/30.
  2. The factory payroll for Rs. 75,000 direct labour and Rs. 15,000 indirect labor was mailed to the home office. The home office payroll was Rs. 20,000 for sales salaries and Rs. 30,000 for general office salaries. Employees’ payroll deductions were recorded at the home office at the following rates:

15% of Gross earnings for Income Tax;

10% of Gross earnings as provident fund contribution by the employees.

  • Materials requisitions were as follows:
Direct materials70,000
Indirect material8,500
Shipping supplies1,500
  • Indirect factory materials and supplies amounting to Rs. 25,000 were purchased.
  • Defective indirect materials returned to the supplier amounted to Rs. 1,000.
  • Sundry factory expensed of Rs. 8,300 were recorded.
  • Depreciation of an annual rate of 10% of the original cost was recorded on the factory Machinery.
  • Accounts payable totaling Rs. 210,000 including the accrued payroll, were paid.
  • Factory overhead was applied to production at the rate of Rs. 6 per direct labour hour; the Factory worked 7,000 hours.
  • Goods completed with a total cost of Rs. 215,000.
  • Goods costing Rs. 200,000 were sold for Rs. 274,000.

Required: Journal entries to record the above transactions on the general office and on the factory office books.


(b) (i)Payroll140,000 
           Income Tax 21,000
           Provident Fund 14,000
           Accrued Payroll 105,000
 (Deductions & Payroll Recorded)  
(ii)Accrued Payroll105,000 
           Voucher Payable 105,000
 (Voucher Payable for accrued payroll)  
(iii)Factory Payroll90,000 
 Selling Expenses20,000 
 Administrative Expenses30,000 
           Payroll 140,000
 (Distribution breakup for total payroll)  
(c)Selling Supplies1500 
           Factory Ledger 1500
 (Shipping Supplies issued from store)  
(d)Factory Ledger25,000 
           Voucher Payable 25,000
 (Indirect Material & Supplies purchased & sent)  
(e)Voucher Payable1000 
           Factory Ledger 1000
 (Defective material returned)  
(f)Factory Ledger8300 
           Voucher Payable 8300
 (factory overhead recorded)  
(g)No Entry  
(h)Accounts Payable210,000 
           Cash 210,000
 (payable amount paid)  
(i)No Entry  
(j)No Entry  
(k)Cost of Goods Sold200,000 
           Factory Ledger 200,000
 (Cost of goods sold recorded)  
 Accounts Receivable274,000 
           Sales 274,000
 (Goods sold on account)  

Factory Office Book

           General Ledger 100,000
 (Material received)  
 F.O.H Control15,000 
           General Ledger 90,000
 (Factory payroll Recorded)  
 F.O.H Control8500 
 General Ledger1500 
           Materials 80,000
 (Material issued from store)  
           General Ledger 25000
 (Indirect material received)  
(e)General Ledger1,000 
           Materials 1,000
 (Defective material returned)  
(f)F.O.H Control8300 
           General Ledger 8300
 (Sundry factory expenses recorded)  
(g)F.O.H Control24,000 
           Factory Machinery 24,000
 (10%Depreciation on machinery recorded)  
(h)No Entry  
           F.O.H Applied 42,000
 (F.O.H Applied 7000 hrs @ 6)  
(j)Finished Goods215,000 
           W.I.P 215,000
 (Finished Goods Cost recorded)  
(k)General Ledger200,000 
           Finished Goods 200,000
 (Cost of goods sold recorded)  

Q.6: Calculate the normal and overtime wages payable to a worker for the following data.

Q.6: Calculate the normal and overtime wages payable to a worker for the following data:

DaysHours worked

Normal working hours were 8 hours per day. Normal rate was Rs. 10.00 per hour. Overtime rate was as follows:

Up to 9 hours in a day at single rate and over 9 hours in a day at double rate or up to 48 hours at single rate and above it at double rate, which is more beneficial to the worker.


DaysHours WorkedNormal Hours Wage Abdullah @ 10Overtime Hours Wage @ 10 upto 9 hrs.Overtime Hours Wage @ 20 more than 9 hrs.Total Wage
Total Weekly Wage 630

Condition 2

Total Weekly Working Hours = 56

Single wage @ Rs. 10 per hour upto 48 hrs. = 48 x 10 = 480

Double wage @ Rs. 20 per hour for 8 hrs. = 8 x 20 = 160

Total Wage = 480 + 160 = 640

Conclusion: Under option 1, total wage is 630 whereas under option 2 total wage is 640 so option 2 is more beneficial for the worker.

Q.7: During January 2010, Department 2 received 20,000 units @ Rs. 19.50 from Department 1. Direct Labour of Rs. 36,284 and factory overhead of Rs. 72,568 were spend to process these units. During Processing 500 units were lost as unavoidable spoilage. 3,500 units estimated to be 80% completed, Were in process at the end of month. Remaining units were passed on to Department 3. Required: Cost of production report of December 2 and 31st January, 2010.


XXX Company Department 2

Cost of Production Report

Month ended 31st Jan 2010

Quantity Schedule:  
Unit received from preceding department 1 20,000
Units completed &transferred out to Department 316000 
Units still in process3500 
Units Lost in process (Abnormal unavoidable Spoilage)500 
Break-up of 3500 units still in process:  
3500 x 0.80 = 2800 units completed  
Cost charged to department:Total CostPer Unit Cost
Cost from preceding department 20,000 x 19.50390,000
Cost added by Department:  
Factory overhead72,568
Total Cost & Total Per Unit Cost49885225.14
Cost accounted for as follows:  
Cost of units completed & transferred out to Department 3 (16,000 x 25.14) 402240
Cost of units still in process:  
Cost of 3500 units received from department 1  
3500 x 19.50 =68,250 
Cost added by the department  
Labor 3500 x 0.80 x 1.885264 
FOH 3500 x 0.80 x 3.761052884,042
Cost of Abnormal unavoidable loss:  
500 x 25.14 12570
Total Cost accounted for 498,852

Working 1: Equivalent Production:

Units Completed16000
Equivalent units WIP 3500 x 0.802800
Units spoiled500
Total completed units19300

Working 2: Per Unit Cost:

Labor 1.88
Factory overhead  (72568/19300)3.76

Q.8: Define the following term: (1) Conversion cost. (2) Job Order Costing (3) Semi-variable cost. (4) E.O.Q Economic Order Quantity. (5) Breakeven point.


Conversion Cost

The total cost of direct labor and manufacturing overhead used to turn raw materials into finished items is known as the conversion cost. Direct material costs are not included in these charges. Wages paid to manufacturing staff as well as factory running costs including maintenance, utilities, and equipment depreciation are included in conversion costs. They are necessary for figuring out how much a product will cost to produce overall and for setting its price. Precise monitoring of conversion expenses aids companies in increasing productivity and efficiently allocating production funds.

Job Order Costing

An accounting technique called “job order costing” is used to monitor expenses related to individual projects or orders. This approach provides comprehensive cost information by allocating direct supplies, direct labor, and manufacturing overhead to each distinct operation. It is especially helpful in businesses like construction, printing, and specialty manufacturing when things are made to order. Job order costing guarantees correct invoicing to clients and assists firms in assessing the profitability of particular services. It also helps to improve cost control and find cost variances.

Semi-Variable Cost

An expense that has both fixed and variable components is referred to as a semi-variable cost, often called a mixed cost. The variable component varies in response to shifts in production volume or consumption, whereas the fixed portion stays constant independent of production or activity levels. A utility bill, which consists of a base price that is fixed and a use charge that is variable, is an example of a semi-variable cost. Businesses may partially manage expenditures with this kind of cost structure and remain flexible enough to adapt to changes in operational activity.

E.O.Q Economic Order Quantity

In inventory management, the Economic Order Quantity (EOQ) formula is used to find the ideal order size that minimizes the overall expenses of placing and maintaining inventory. It seeks to strike a balance between holding costs—the expenses related to keeping and storing inventory—and ordering costs, which are incurred each time an order is placed. Businesses may save inventory costs, prevent stockouts, and enhance overall inventory management efficiency by using the EOQ method. Businesses may attain cost-effective inventory levels and optimize their supply chain processes by figuring out the optimal order quantity.

Formula for Economic Order Quantity

\[ \mathbf{E.O.Q\ or\ Q =}\sqrt{\frac{\mathbf{2}\mathbf{DS}}{\mathbf{H}}}\ \]

Where D is Demand, S is S is ordering Cost and H is Holding or carrying cost

Breakeven Point

The breakeven point is the level of sales at which total revenues equal total costs, resulting in neither profit nor loss. It is a critical financial metric that helps businesses understand the minimum sales volume needed to cover all fixed and variable expenses. At the breakeven point, a company’s total contribution margin (sales revenue minus variable costs) exactly offsets its fixed costs. Calculating the breakeven point aids in decision-making regarding pricing, budgeting, and financial planning, ensuring that a business can determine the viability and profitability of its operations.

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