Question

(A) Classify each of the following cost as product cost or period cost and indicate whether the cost is a variable or fixed cost, direct cost or indirect cost Product /Period Fixed Variable Indirect Direct/ a Direct materials b Depreciation on corporate jet for sales force c Lubricants for factory machinery d Sales commissions at 5% of sales e Factory Insurance f Product brochures g Factory utilities h President's salary i Employer paid health insurance premium on direct labor personnel GAccounting staff salaries (10 marks)

Answer 1

Classification of cost
	Product / period	Fixed/Variable	Direct / Indirect
Direct material	Product	Variable	Direct
Depreciation on corporte Jet Sales Fprce	Period	Fixed	Indirect
Lubricants for factory machinery	Product	Variable	Indirect
Sales Commission @ 5% sales	Period	Variable	Direct
Factory Insurance	Product	Fixed	Indirect
Product Broucher	Product	Fixed	Indirect
Factory Utilities	Product	Variable	Indirect
President Salary	Period	Fixed	Indirect
Employee paid health Insurance Premium on direct labour	Product	Variable	Direct
Accounting Staff Salaries	Period	Fixed	Indirect

Part 2	Computaion for Machine A
	VARIABLE COST	( Highest Cost- Lowest Cost)/ ( High Output- Low output)
		($210000-$54600)/(24000-4000)
		7.77
	VARIABLE COST $/Square Yard	7.77
	Fixed cost	Total Cost- Variable cost
		$54600-4000*7.77
	Fixed cost $	23520
	Cost Equation ofMachine A
	Y=$23530+$7.77X
	Y = TOTAL COST OF MACHINE
	X= OUTPUT (SQUARE YARD)

Journal Entries
Details	Debit(RM)	Credit (RM)
Raw material	4,000
Account Payable		4,000
Work in progress	200
Raw material		200
( to record issued to production)
Account Payable	4,000
cash		4,000
( to record cash paid for purchase made on account )
Production	3,200
Raw material		3,200
( raw material issued to production)
Labor sew curtains	1,500
Labour for supervisor	1,000
Account Payable		2,500
( to book liability)
Utilities & Miscellaneous	2,000
cash		2,000
( cash paid towards Utilities )
Overhead ( $2500*200%)	5,000
Account Payable		5,000
( Liability booked relates to Overhead)
Depreciation on Equipment	1,000
Accumulated depreciation \		1,000
Depreciation on Car	500
Accumulated depreciation		500
( to record depreciation )

Ans a	predermined Overrate rate	in RM	in RM
	$80000/16000 Unit		5
Ans b	Manufacture Overhead applied
	11000 Unit *$5/ unit		55,000
Ans c	Actual Manufcature overhead
	($9600+10600+10300+9000+10500+3000)		53,000
	Appied		55,000
	Overapplied( $53000-$55000)		2,000
Ans d	Schedule of cost of goods Manufactured
	Opening WIP		16,000
	Opening Raw Material	28,000
	Add - Purchase	56,000
	Less - Ending Inventory	29,000	55,000
	Direct labour		87,000
	Manufacture Overhead		55,000
	Total Manufacturing cost		1,97,000
	Total Manufacturing cost+ Opening WIP-A		2,13,000
	less Ending WIP-B		14,000
	cost of goods Manufactured(A-B)		1,99,000
Ans E	Schedule of cost of goods SOLD
	Opening Finished Goods Inventory	42000
	Add- cost of goods manufactured	1,99,000
	cost of goods SOLD	241000
	Less - Ending Inventory FINISHED Goods	54000
	Cost of goods sold		187000
	less - overapplied (as above)		2,000
	Cost of goods sold final		1,85,000