SHAHEED BENAZIR BHUTTO UNIVERSITY, SHAHEED BENAZIRABAD

Knowledge Commitment Leadership

Subject: _ Cost Accounting Date: 26th July 2020 Final 5th Semester BBA
Roll No.
BBA 18 001
Attempt any FOUR questions in total including Q No 1 which is compulsory
Avoid copying as it is from lecture or internet; use your own words to explain
Q No: 1 (a). Define the following, each definition carries 1 mark (10 Marks)

(Each definition must be about 50 words)

1. Direct Labor
2. Direct Material
3. Manufacturing Over head
4. Opportunity Cost
5. Sunk Cost

Q No: 2 (a).Describe the Cost of Goods Manufactured statement and why it is made (3 Marks)

(150 words)

(b). Draw a format of COGM statement (2 Marks)

Q No: 3 Define various types of Cost with example of each (5 Marks)

Q No. 4 Distinguish between the following (5 Marks)

1. Fixed Cost and Variable Cost

(at least three points for each part)

Q No 5 From the following data of Masood Corporation for last month’s manufacturing, prepare the
followings:

Sales 262,000
Direct Labor Cost 35,000
Raw material purchases 59,000
Selling Expenses 70,000
Administrative Expenses 31,500
MOH applied to WIP 45,000
Actual MOH costs 40,000
Inventories Beginning Ending
Raw Materials 3,500 7,500
Work in Process (WIP) 5,000 2,500
 Finished Goods 10,000 17,500

1. Prepare a schedule of cost of goods manufactured

(5 Marks)

Q No 6 From the following data of Denim Corporation for last month’s manufacturing, prepare the
followings:

Purchases of Raw
materials 60,000
Indirect Materials 10,000
Direct Labour 116,000
MOH applied to WIP 174,000
Under-applied overhead 8,000
Inventories Beginning Ending
Raw Materials 24,000 36,000
Work in Process (WIP) 112,000 130,000
Finished Goods 70,000 84,000

1. Prepare a schedule of cost of goods manufactured

THE END

Q1

Direct labor
direct labour defines the employees and temporary staff work in manufacturing products in the
direct way. Direct labor takes an active and direct part in the production area of a specific
product and services is called direct labor. When a company is identifying the cost of a specific
product the labor cost is to be added because there are important influences in the expense of
the product.

direct material
direct material refers to the raw material which is used in the production process of goods and
services of a company and it is an essential component in finished goods manufactured. direct
materials does not include any material that is consumed which is part of the general overhead
for example air filters for ventilation systems in manufacturing areas.

manufacturing overhead

manufacturing overhead includes all indirect costs which are incurred during the production
process but they are directly related to the manufacturing process. it means we don't include
labor cost and material cost when we determining manufacturing overhead it is the total cost
involved in operating all production facilities of manufacturing business

opportunity cost

opportunity cost represents the benefits an individual or investors skipping when choosing one
alternative over another. It's making a choice between two things either buy or miss out. For
example, a person whose salary is fixed, the opportunity cost of buying a dishwasher or buying
new suits of clothes is known as opportunity cost.

sunk cost

sunk cost refers to the money which has already spent and which can not be recovered. It is a
type of expense which has already incurred that can not be changed. For example if i buy a
phone and use it too much the cost is incurred on a phone that can not be changed or avoided.
This is called sunk cost.

Q2

various type of cost

direct cost

a direct cost that can be directly to the production of goods and services it can be found to be
the cost of product. direct cost is the type of variable cost it can fluctuate according to the
production level.

for example if an employee is hired to work on a project, either exclusively or for an assigned
number of hours, their labor on that project is a direct cost.
indirect cost

indirect cost is used for the multiple activity which can not be assigned to a specific cost object
it is a type of expense that can not trace in a single cost object. During the manufacturing
process, items like products, departments, and customers create costs. These are considered
cost objects because the original manufacturing costs stem from them.

fixed cost

fixed cost does not change with increase or decrease in the amount of goods and services
produced and sold. it is a type of expense that paid by the company

for example

i am living in rent house the amount of house is fixed

sunk cost

sunk cost is a type of cost in which money is already spent in the past that money is not
recovered. In the present this type of cost is known as sunk cost.

for example

i buy a car in past the money is paid the cost is incurred that money is not recovered

total cost

total cost is the mixture of all cost which of goods of manufactured

for example

direct cost

indirect cost

sunk cost

variable
Q3

difference between fixed cost and variable cost

fixed cost

its independent output

these are cost fixed factors

these cost are found only in short period

variable cost

these cost is seen in short and long term period

its is also called prime cost

these cost are become zero and zero level of output

work in progress

it is can not directly sell

it is started from raw material

in this sometime in incomplete product

finished goods

in this product are completed

in this goods are sold

and to finished goods after sell in the market

Q4
 raw material:

opening inventory 21000

purchase raw material available 60000

ending inventory (30000)

cost of raw material used 51000

direct labor 116000

prime cost 167000

manufacturing overhead 8000

manufacturing cost

work in progress (opening 112000

work in progress (ending (130000)

cost of goods manufactured 157000

cost of goods sold

cost

beginning finished goods 70000

cost of goods manufactured 157000

=cost of good available for sale 227000

ending finished goods inventory (84000)

cost of good sold 143000