Costs - Quiz

Costs - problems

Differentiate between

• Cost of Sales & Cost of goods sold• Cost of goods Sold & Cost of Goods

Manufactured• Prime cost & Conversion cost

• Which cost is relevant to measure net margin & which cost is relevant to measure gross margin?

Indicate the following materials as direct or indirect w.r.t final product

• Oil used to lubricating machines• Wire making electric motors• Bottles used for filling soft drinks• Gunny bags used for filling sugar• Ingots used by a foundry making casts• Cushion seats used in passenger cars• Sugarcane used for making sugar• Speakers in radio set• Paper used for printing a book• Nails used in shoe• Milk used for making ice cream

Indicate whether the following labor are direct or indirect w.r.t manufacturing

• Over time premium paid to specific job• Wages paid to piece workers• Wages paid to maintenance workers• Director’s Fee• Sales man’s commission• Salaries paid to sweepers

In a company that manufactures and retails clothing – group the costs listed below

• Telephone rental plus metered calls– Direct material– Direct labor– Direct expenses– Production over head– Office & admin costs– Selling & distribution costs– Finance cost– R & D cost

Wages of security guards for factory

– Direct material– Direct labor– Direct expenses– Production over head– Office & admin costs– Selling & distribution costs– Finance cost– R & D cost

Parcels sent to customers


Development of a new product in laboratory


Wages of forklift truck drivers who handle raw materials


Chief Accountant’s salary


Cost of painting advertising slogans on delivery vans


Auditor’s fee


Cost of advertising on television


Lubricant for sewing machines


Floppy disks and CDs for office computer


Maintenance contract for office photocopy machines


Interest on bank over draft


Market research undertaken prior to new product development


Carriage on purchase of raw materials


Royalty paid on the number of units of a particular product produced


Road tax for delivery vehicles


Amount paid to broadcasting music through out the factory


Donations made to other trusts


Cash discount allowed


Prepare a statement showing cost & profit per unit

• Direct material – Rs. 45000• Direct Labor – 33.33% of the direct material cost• Direct expenses – 20% of the direct material cost & direct

labor cost• Factory overheads – 1/9th of prime cost• Office & Admin expense – 25% of the works cost• Selling & distribution expenses - 10% of COGS• Units produces – 100 • Units produces but unsold – 10% of units produced• Profit – 1/5th of Cost of sales

Prepare a cost sheet showing prime cost, factory cost, cost of goods produced, cost

of goods sold, cost of sales & profit per unit

• Cost of materials @ Rs. 13 per unit• Labor cost @ Rs. 7.50 per unit• Factory overheads are absorbed @ 60% of the labor cost• Administrative overheads are absorbed @ 20% of the factory cost• Selling overheads are charged @ Rs. 2.50 per unit• Opening stock of finished goods – 500 @ Rs. 19.75• Closing stock of finished goods - 250• Sales – 10250 unit at profit of 20% on cost of sales

Prepare a cost sheet• Raw material : O/B : Rs. 29500.00 & C/B: Rs. 36000• WIP – materials: O/B: Rs. 13600 & C/B: Rs. 12000• WIP – wages: O/B: Rs. 11000 & C/B: Rs. 16500• WIP – Works Overhead: O/B: Rs. 6600 & CB: Rs. 9900• Finished goods: O/B 200 units @ Rs. 84 & C/B 1600 unit• Purchase of RM Rs. 190000; Carriage on purchase Rs. 1500, sales of

scrap RM Rs. 5000• Wages: Rs. 297000• Works over head absorbed at 60% of direct labor cost• Admin overheads absorbed @ Rs. 12 per unit produced• Selling & distribution over heads are absorbed @ 20% selling price• Sales – 7600 units @ profit of 10% on sales price

Documents

Costs - Quiz