LAHORE SCHOOL OF ECONOMICS
COST ACCOUNTING
BBA IV – SECTION B
FINAL EXAM (Subjective)
WINTER 2020
Instructor: Dr. Mehreen Furqan Total Marks: 60 marks
Teaching Associate: Ms. Sameen Rasheed Total Time: 1 hr 30 mins
Question # 1
Assume values for number of units transferred in and their costs. Also assume values for the current
departments Material, Labor and Factory overhead costs. Using assumed values for Finished goods and
Work in process units and their level of completion, prepare the Production Summary sheet for 1st
Month, 2nd Department. Also prepare the journal entries to transfer these costs to production and
transfer the goods into 3rd Department.
Question # 2
With assumed values (clearly identified) prepare Material Cost budget and Labor cost budgets for ABC
company for the months of January, February and March. Clearly identify their material inventory policy
as well.
Question # 3
Rhodes Corporation manufactures a product with the following standard costs:
Direct materials (20 yards @ $1.85 per yard) $ 37.00
Direct labor (4 hours @ $12.00 per hour) 48.00
Variable factory overhead (4 hours @ $5.40 per hour) 21.60
Fixed factory overhead (4 hours @ $3.60 per hour) 14.40
Total standard cost per unit of output $121.00
Standards are based on normal monthly production involving 2,000 direct labor hours (500 units of
output).
The following information pertains to the month of July:
Direct materials purchased (16,000 yards @ $1.80 per yard) $28,800
Direct materials used (9,400 yards)
Direct labor (1,880 hours @ $12.20 per hour) 22,936
Actual factory overhead 16,850
Actual production in July: 460 units
compute the following variances for the month of July, indicating whether each variance is
favorable or unfavorable:
(1) Factory overhead controllable variance
(2) Factory overhead volume variance
Question # 4
(a) Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and
contribution margin per unit for the company’s two products are provided below.
Contribution Margin
Product Selling Price per Unit Variable Cost per Unit per Unit
X $180 $100 $80
Y 100 60 40
The sales mix for products X and Y is 30% and 70%, respectively. Determine the break-even point in
units of X and Y. If required, round answer to nearest whole number.
(b) A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of
$1,000,000.
(i) What is the break-even point in sales dollars?
(ii) What is the operating income?
(iii) If neither the relationship between variable costs and sales nor the amount of fixed costs is
expected to change in the next year, how much additional operating income can be earned
by increasing sales by $110,000?
Question # 5
Using Assumed values for selling price per unit and variable cost per unit for 3 products made by
company XYZ, identified a scarce resource the company has and its measurement (per unit) and
determine in which order the 3 products would be produced.
Question # 6
Dye and Dye, Attorneys-at-Law, each bill 5,000 hours per year and receive pay of $350,000 each. Four
paralegals work for the firm and each receives pay of $80,000 and works 5,000 hours per year.
Overhead of $500,000 is anticipated, of which $250,000 is attorney support, and the rest is paralegal
support. Determine overhead under each of the following circumstances:
a. A simplified cost approach is used based on hours.
b. A simplified cost approach is used based on payroll dollars.
An activity-based costing approach is used. Attorney support is based on labor
c.
costs, and paralegal support is based on hours worked.
