International Islamic University Islamabad
Final-term Paper - Spring 2025
Managerial Accounting
Time Allowed: 3 hours
Total Marks: 100
Attempt all questions
Question 1: Cost of Goods Sold (15 Marks)
SunFlour Bakery produces artisan bread. The following data is provided for September
2025:
• Beginning finished goods inventory: $45,000 (1,500 units)
• Units produced: 8,000
• Units sold: 7,500
• Manufacturing costs incurred:
– Direct materials: $70,000
– Direct labor: $55,000
– Variable overhead: $15,000
– Fixed overhead: $35,000
• Ending work-in-process inventory: $8,000
Required:
(a) Calculate the cost per unit for the month.
(b) Prepare a cost of goods sold statement for September 2025 using absorption costing.
(c) If variable costing is used, what would be the cost of goods sold?
Question 2: Job-Order Costing (15 Marks)
PrecisionParts Co. uses a job-order costing system. In October 2025, Job 301 was
completed with the following details:
• Direct materials used: $28,000
• Direct labor hours: 1,000 hours at $25 per hour
• Machine hours: 600 hours
• Predetermined overhead rate: $20 per machine hour
The company had beginning work-in-process inventory of $25,000 for Job 301, and
75% of costs were incurred in October.
Required:
1
(a) Calculate the total cost of Job 301.
(b) If Job 301 produced 400 units, what is the cost per unit?
(c) Explain how over- or under-applied overhead is treated at period-end.
Question 3: Journal Entries in Job-Order Costing (15
Marks)
PrecisionParts Co. continues its job-order costing system for Job 302 in October 2025.
The following transactions occurred:
• Raw materials purchased on account: $55,000
• Materials requisitioned for Job 302: $22,000 (direct) and $3,500 (indirect)
• Direct labor costs for Job 302: 900 hours at $22 per hour
• Indirect labor costs: $2,800
• Other overhead costs (e.g., utilities, depreciation): $6,500
• Predetermined overhead rate: $14 per machine hour; Job 302 used 500 machine
hours
• Job 302 was completed and transferred to finished goods
• Job 302 was sold for $65,000 on account
Required:
(a) Prepare journal entries to record:
i. Purchase of raw materials on account.
ii. Requisition of direct and indirect materials for Job 302.
iii. Direct and indirect labor costs incurred.
iv. Application of manufacturing overhead to Job 302.
v. Actual overhead costs incurred.
vi. Completion and transfer of Job 302 to finished goods.
vii. Sale of Job 302 on account.
viii. Adjustment for over- or under-applied overhead, assuming it is closed to Cost
of Goods Sold.
(b) Explain the effect of over- or under-applied overhead on the income statement.
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Question 4: Process Costing (15 Marks)
ClearSpring Inc. produces purified water using a single process. The following data is for
November 2025:
• Units in beginning work-in-process (30% complete): 4,000
• Units started: 60,000
• Units completed and transferred out: 58,000
• Units in ending work-in-process (50% complete): 6,000
• Costs incurred:
– Direct materials: $140,000
– Conversion costs: $100,000
• Beginning work-in-process costs:
– Direct materials: $8,000
– Conversion costs: $4,000
Required:
(a) Using the weighted-average method, calculate the equivalent units of production.
(b) Compute the cost per equivalent unit for materials and conversion costs.
(c) Prepare a cost reconciliation report for November 2025.
Question 5: Activity-Based Costing (10 Marks)
TechTrend Ltd. manufactures two products: Smart Sensors and Control Units. The
following data is provided:
Product Direct Labor Hours per Unit Annual Production
Smart Sensors 0.4 30,000 units
Control Units 0.8 10,000 units
Additional information:
• Direct materials: Smart Sensors $15/unit, Control Units $20/unit
• Direct labor rate: $30/hour
Activity Cost Pool Activity Measure Estimated Overhead Cost
Machine Setup Number of setups $100,000
• Activity cost pools:
Quality Control Inspection hours $150,000
General Factory Machine hours $250,000
Required:
(a) Compute the activity rate for each activity cost pool.
(b) Determine the unit product cost for each product using the ABC system.
3
Question 6: Cost-Volume-Profit Analysis (10 Marks)
TastyBites Café sells sandwiches at $6 each. The variable cost per sandwich is $2.50, and
fixed costs total $20,000 per month. The café aims to earn a profit of $10,000 per month.
Required:
(a) Calculate the contribution margin per unit and the contribution margin ratio.
(b) Determine the break-even point in units and dollars.
(c) How many sandwiches must be sold to achieve the target profit?
Question 7: By-Product and Joint Product Costing
(10 Marks)
PureBlend Co. produces mango juice as its main product and mango seeds as a by-
product. The following data is for December 2025:
• Joint costs (before split-off point): $110,000
• Main product (mango juice): 12,000 gallons, sold at $10 per gallon
• By-product (mango seeds): 3,000 pounds, sold at $0.50 per pound
• Separable costs for mango juice: $25,000
• By-product revenue is treated as a reduction in joint costs
Required:
(a) Calculate the net joint costs to be allocated to the main product.
(b) Determine the cost per gallon of mango juice using the net realizable value method.
(c) Prepare the journal entry to record the sale of the by-product.
Question 8: Budgeting (15 Marks)
FreshFields Ltd. is preparing its cash budget for the third quarter of 2026. The following
data is provided:
• Cash balance on July 1: $28,000
• Budgeted sales (all on account):
– May 2026 (actual): $240,000
– June 2026 (actual): $270,000
– July 2026: $350,000
– August 2026: $400,000
– September 2026: $360,000
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• Collections: 40% in the month of sale, 55% in the following month, 5% uncollectible
July August September
Cost of goods sold $200,000 $240,000 $220,000
• Budgeted expenses:
Salaries $45,000 $45,000 $45,000
Rent $15,000 $15,000 $15,000
• Payments: 50% of purchases paid in the month of purchase, 50% in the following
month
• Equipment purchase in August: $30,000 (cash payment)
Required:
(a) Prepare a schedule of expected cash collections for July, August, and September.
(b) Prepare a cash budget for the third quarter of 2026.
