Question

Prabjot produces bread in their Company and below refers to the manufacturing activities for year ended 2016. Show the statement of cost of goods manufactured for 31st December 2016 (5 marks) Particulars $ Opening work in progress (10,000 units) 16,000 Closing work in progress (12,000 units) 20,000 Opening stock of raw materials 170,000 Closing stock of raw materials 190,000 Purchases 820,000

1. With the aid of diagrams, explain cost as variable, fixed, or mixed. (2 marks) 2 (a). With detail examples, explain the methods of separating mixed cost into fixed and variable costs (3 marks) (b) Prabjot produces bread in their Company and below refers to the manufacturing activities for year ended 2016. Show the statement of cost of goods manufactured for 31st December 2016 (5 marks) Particulars $ Opening work in progress (10,000 units) 16,000 Closing work in progress (12,000 units) 20,000 Opening stock of raw materials 170,000 Closing stock of raw materials 190,000 Purchases 820,000 (Hire charges of machine@ 0.60 per unit manufactured Direct wages contracted @0.80 per unit Manufactured @0.40 per unit of costing WIP) 220,000 Repairs and maintenance 180,000 Units produced 500,000

Answer 1

PART 1- There are three cost as per Cost Accounting :

• Variable Cost = It refers to cost that directly depends on the Production of units. it increases with the increase in number of units produced. for example Plastic Consumed while manufacturing the Plastic bottles.
• Fixed Cost = It refers to cost that does not changes with the change in level of output. For Example the rent paid for godown does not get effected by the number of units produced.
• Mixed(Semi-Variable) = It refers to cost that remain fixed upto a particular level of production then then changes after that level of production

Fixed cost Variable cost Semi-variable cost Cost Cost Cost Volume of output Volume of output Volume of output

PART 2- [A] In cost accounting, the high-low method is a method to seperate the fixed and variable cost within given data. The high-low method involves the highest level and the lowest level of activity and comparing the total costs at each level of activity

VARIABLE COST = HAC - Lowest Activity Cost/HAU's - Lowest Activity Cost

• HAC= Highest Activity Cost
• HAC's= Highest Activity Units

FIXED COST =HAC−(Variable Cost×HAUs)

[B] Statement Computing Cost of Goods Manufacture for 31^st December 2016

	PARTICULAR	AMOUNT [$]
	Opening Raw Material	170,000
+	Purchases	820,000
	Closing Raw Material	(190,000)
	RAW MATERIAL CONSUMED	800,000
+	Direct Wages [0.80*500,000]	400,000
	PRIME COST	1,200,000
	Manufacturing overhead: · Hire charges [0.6*500,000] · Repair and Maintenance	300,000 180,000
	GROSS FACTORY COST	1,680,000
+	Opening WIP	16,000
-	Closing WIP	(20,000)
	COST OF GOODS MANUFACTURE	1,676,000