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CMA Intermediate · Cost Accounting · Cost Book-Keeping

Kapoor Engineering uses a non-integral system. Cost ledger data: Opening WIP Rs 1,20,000; materials issued to production Rs 4,00,000; direct wages Rs 2,50,000; factory overhead absorbed at 80% of direct wages; closing WIP Rs 1,70,000. Finished goods are transferred at cost to the finished goods account. What amount is debited to Finished Goods Control A/c?

Overhead absorbed is 80% of Rs 2,50,000, which is Rs 2,00,000. WIP debits total Rs 9,70,000 including opening WIP, materials, wages and overhead. Deducting closing WIP of Rs 1,70,000 leaves Rs 8,00,000 as the cost of goods transferred to Finished Goods Control Account.

  1. ARs 8,00,000
  2. BRs 8,50,000
  3. CRs 8,20,000Correct
  4. DRs 8,70,000

Explanation

Overhead absorbed = 80% of 2,50,000 = 2,00,000. Total debits to WIP = 1,20,000 + 4,00,000 + 2,50,000 + 2,00,000 = 9,70,000. Less closing WIP 1,70,000 gives 8,00,000 transferred. Check: 8,00,000 + 1,70,000 = 9,70,000. Hence the correct figure is Rs 8,00,000, which is option A, not the others.

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