COST ACCOUNTING PROBLEMS AND SOLUTIONS

1. Ascertain Cost of Goods Sold from the following figures:

Purchases Rs. 5,000; Opening Stock Rs. 15,000; Closing Stock Rs.7,000.

Solution:

2. Ascertain Gross Profit / Loss form the following figures:

Closing Stock Rs. 1,500; Sales Rs. 14,000; Opening Inventory Rs. 12,000; Net Purchases Rs. 7,500; Rs. Return Inward Rs. 2,500.

Solution:

3. Ascertain Purchases from the following figures:

Cost of Sales Rs. 90,000; Ending Inventory Rs. 7,000; Beginning Inventory Rs. 15,000.

Solution:

4.From the following information extract Gross Profit and Net Profit:

Opening Inventory Rs. Rs. 3,000; Purchases Rs. 14,000; Sales Rs. 22,000; Closing Inventory Rs. 5,500; Sales Return Rs. 1,500; Salaries Rs. 500; Financial Charges Rs. 1,500; Carriage Inward Rs. 150; Salaries Outstanding Rs. 400 ; Carriage Outward Rs. 100.

Solution:

Use the following information of Fatima Malik and Co.

A company just starting business made the following four inventory purchases in June 2016:

June 1                    150 units Rs. 6.60/unit cost          Rs. 990

June 10                  200 units Rs. 6.30/unit cost                1,260

June 15                  200 units Rs. 5.85/unit cost                1,170

June 28                  150 units Rs. 5.20/unit cost                   780

                                                                                    Rs. 4,200

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand.

Requirement (a): Using the periodic LIFO inventory method, the value of the ending inventory on June 30 is?

Solution:

Requirement (b): Using the periodic FIFO inventory method, the amount allocated to cost of goods sold for June is?

 Solution:

From the following calculate   (i) Re-ordering Level and                  (ii) Minimum Level

Minimum usage      100 units per week               Normal usage                 200 units per week

Maximum usage     300 units per week               Re-order period             4 to 6 weeks

Solution:

(i) Re-ordering Level

Re-ordering level= Maximum consumption * Lead Time [maximum]

Re-ordering level= 300 * 6

Re-ordering level= 1,800 Units per week

(ii) Minimum Level

Minimum level= Reorder level – (Average consumption x lead time [Average])

Minimum level= 1,800 – (200 x 5)

Minimum level= 1,000 Units per we

 

Problem # 2:

Calculate Ordering Level, Minimum Level and Maximum Level from the following data:

Re-order quantity                       1,500 units                      Re-order period                    4 to 6 weeks

Maximum consumption            400 units per week       Average consumption        300 units per week

Minimum consumption            250 units per week

Solution:

(i) Ordering Level

Ordering level= Maximum consumption * Lead Time [maximum]

Ordering level= 400 * 6

Ordering level= 2,400 Units per week

(ii) Minimum Level

Minimum level= Reorder level – (Average consumption x lead time [Average])

Minimum level= 2,400 – (300 x 5)

Minimum level= 900 Units per week

(iii) Maximum Level

Maximum stock level= Reorder level – (Min consumption * Lead time [minimum]) + EOQ

Maximum stock level= 900 – (250 * 4) + 1,500

Maximum stock level= 2,400 – (1,000) + 1,500

Maximum stock level= 2,900 Units per week

Problem # 3:

The following information is available in respect of component DP 5:

Maximum stock level                                                 8,400 units

Budgeted consumption- maximum                        1,500 units per month

Budgeted consumption- minimum                         800 units per month

Estimated delivery period                                         Maximum 4 months and minimum 2 months

You are required to calculate Re-order level

  

Solution:

Ordering Level

Ordering level= Maximum consumption * Lead Time [maximum]

Ordering level= 1,500 * 4

Ordering level= 6,000 Units per week

Problem # 4:

From the following date for the last twelve months, compute the Average Stock Level for a component.

Maximum usage in a month           300 units          Minimum usage in a month              200 units

Average usage in a month              225 units            Re-ordering quantity                          750 units

Time lag procurement of material                   Maximum 6 months and Minimum 2 months

Solution:

Average Stock Level

Average Stock Level = Minimum Stock Level + ½ of EOQ

Minimum level= Reorder level – (Average consumption x lead time [Average])

Re-ordering level= Maximum consumption * Lead Time [maximum]

Re-ordering level= Maximum consumption * Lead Time [maximum]

Re-ordering level= 300 * 6

Re-ordering level= 1,800 Units per month

Minimum level= Reorder level – (Average consumption x lead time [Average])

Minimum level= 1,800 – (225 x 4)

Minimum level= 900 Units per month

Average Stock Level = Minimum Stock Level + ½ of EOQ

Average Stock Level = 900 + ½ (750)

Average Stock Level = 1,275 Units per month

Problem # 5: 

Find out Minimum Stock Level, Maximum Stock Level and Ordering Level from the following particulars:

Minimum consumption       100 units per day              Maximum consumption    175 units per day

Normal consumption           125 units per day               Re-order quantity                1,500 units

Minimum period for receiving goods      7 days             Maximum period for receiving goods   15 days

Normal period for receiving goods   10 days

Solution:

(i) Ordering Level

Ordering level= Maximum consumption * Lead Time [maximum]

Ordering level= 175 * 15

Ordering level= 2,625 Units per week

(ii) Minimum Level

Minimum level= Reorder level – (Average consumption x lead time [Average])

Minimum level= 2,625 – (125 x 10)

Minimum level= 1,375 Units per week

(iii) Maximum Level

Maximum stock level= Reorder level – (Min consumption * Lead time [minimum]) + EOQ

Maximum stock level= 2,625 – (100 * 7) + 1,500

Maximum stock level= 3,425 Units per week