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MGT402 Cost & Management Accounting Assignment 1 Solution Spring 2014

Following data relates to Foodmart Corp Company:

                                                                            Rs.

Sales                                                                700,000

Cost of goods sold                                           392,500

Direct Labor                                                      70,000

Administrative expenses                                      56,000

Depreciation of building                                        9,000

Bad debts                                                            2,500

Decrease in material inventory                             20,000

Increase in WIP inventory                                   15,000

Decrease in finish goods inventory                       40,000

FOH is 150% of direct labor cost but 40% of prime cost.

 

Required:

(i) Calculate Direct material  cost                                                                                            (1)

FOH is 150% of Labour Cost

 

= 70000×150%= 105,000/=

 

FOH is 40% of Prime Cost

 

=105,000 x 100/40 =  262,500

So FOH = 105,000

& Prime Cost = 262,500

As We Knew that

Prime Cost = DM + DL

In this condition we have the  Prime Cost =262500 & DL Cost  =70000

So DM = PM – DL

DM = 262500 – 70000

Direct Material = 192500

(ii) Prepare cost of Goods sold Statement to calculate amount of Net Purchases                     (4)

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