IIPC Paper 3 Part-I: Cost Accounting - estv.inestv.in/icai/29082017/webcast1/ppt.pdf · CA. Deepak...

IIPC Paper 3 Part-I: Cost Accounting

Dr. N.N. SenguptaCA. Sanjit L Sharma

Live Webcast onOrganised by BoS, ICAI

© The Institute of Chartered Accountants of India

Date: 29-08-2017

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Basic Concepts

Please post your Answer

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:Is Cost object and Cost unit different?

:Give an example of Cost Control technique used in cost accounting.

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Material

Please post your Answer

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:Name the document which can bereferred to verify quantity of materialsreceived in stores.

: If you are required to report nonmoving inventories, which technique ofinventory classification would beappropriate?

Illustration-1A company manufactures 5,000 units of a product per month. The cost of placingan order is Rs.100. The purchase price of the raw material is Rs.10 per kg. The re-order period is 4 to 8 weeks. The consumption of raw materials varies from 100kg to 450 kg per week, the average consumption being 275 kg. The carrying costof inventory is 20% per annum.You are required to calculate(i) Re-order quantity (ii) Re-order level(iii) Maximum level (iv) Minimum level(v) Average stock level

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Labour

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: Time keeping or Time Booking,which one is helpful for performanceevaluation of a worker?

Illustration-2From the following information, calculate Labour turnover rate and Labourflux rate:

No. of workers as on 01.01.2013 = 7,600

No. of workers as on 31.12.2013 = 8,400

During the year, 80 workers left while 320 workers were discharged 1,500 workers were recruited during the year of these, 300 workers were recruited because of exits and the rest were recruited in accordance with expansion plans.

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Overheads

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: What would be the most appropriateoverhead absorption method for aprofessional firm like CA?

Illustration-3A machine costing Rs. 1,00,00,000 is expected to run for 10 years. At the end of this period its scrap value is likely to be Rs. 9,00,000. Repairs during the whole life of the machine are expected to be Rs. 18,00,000 and the machine is expected to run 4,380 hours per year on the average. Its electricity consumption is 15 units per hour, the rate per unit being Rs. 5. The machine occupies one-fourth of the area of the department and has two points out of a total of ten for lighting. The foreman has to devote about one sixth of his time to the machine. The monthly rent of the department is Rs. 30,000 and the lighting charges amount to Rs. 8,000 per month. The foreman is paid a monthly salary of Rs. 19,200. Find out the machine hour rate, assuming insurance is @ 1% p.a. and the expenses on oil, etc., are Rs. 900 per month.

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Operating Costing

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: What would be appropriate costunit for Metro rail Corporation ?

Illustration-4A hotel has three types of suites for its customers, viz., Standard, Deluxe and Luxurious

Following information is given:

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Type of suite Number of rooms

Room Tariff

Standard 100--

Deluxe 50 2.5 times of the Standard suits

Luxurious 30 Twice of the Deluxe suits

Find out total equivalent units of room

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Process Costing

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: A company manufactures three varieties of asingle product which passes through three processes,which would be the appropriate method of costing?

Illustration-5A product passes from Process- I and Process- II. Materials issued to Process- I amounted to Rs. 40,000, Wages Rs. 30,000 and manufacturing overheads were Rs. 27,000. Normal loss anticipated was 5% of input.

There were no opening stocks. Input raw material issued to Process I were 5,000 units.

(i) 4,750 units of output were produced and transferred-out from Process-I (a) Scrap has no realisable value (b) Scrap has realisable value of Rs.2 per unit.

(ii) 4,550 units of output were produced and transferred-out from Process-I. Scrap has realisablevalue of Rs. 2 per unit.

(iii) 4,850 units of output were produced and transferred-out from Process-I. Scrap has realisablevalue of Rs. 2 per unit.

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Illustration-6Opening work-in-process 1,000 units (60% complete); Cost Rs. 1,10,000. Units introduced during the period 10,000 units; Cost Rs. 19,30,000. Transferred to next process - 9,000 units.Closing work-in-process - 800 units (75% complete). Normal loss is estimated at 10% of total input including units in process at the beginning. Scraps realise Rs. 10 per unit. Scraps are 100% complete.Compute equivalent unit, using (i) FIFO Method(ii) Weighted Average Method

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Standard Costing

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: The management of Arnav Ltd. has decidedto prepare a 5 years plan and resolved to use year2012-13 financial data as benchmark forperformance measurement and evaluation.

(i) In these five years company has seen farewell offive marketing managers. Why?

Illustration-7

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Jigyasa Pharmaceuticals Ltd. is engaged in producing dietary supplement ‘Funkids’ for growing children. It produces ‘Funkids’ in a batch of 10 kgs. Standard material inputs required for 10 kgs. of ‘Funkids’ are as below:

Material Quantity (in kgs.) Rate per kg. (in Rs.)

Vita-X 5 110Proto-D 3 320Mine-L 3 460

During the month of March, 2014, actual production was 5,000 kgs. of ‘Funkids’ for which the actual quantities of material used for a batch and the prices paid thereof are as under:

Material Quantity (in kgs.) Rate per kg. (in `)

Vita-X 6 115Proto-D 2.5 330Mine-L 2 405

You are required to calculate the following variances based on the above given information for the month of March, 2014 for JigyasaPharmaceuticals Ltd.:

(i) Material Cost Variance; (ii) Material Price Variance; (iii) Material Usage Variance; (iv) Material Mix Variance;

(v) Material Yield Variance.

Illustration-8

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XYZ Ltd. has furnished you the following information for the month of August, 20X2::

Calculate overhead variances.

Budget Actual

Output (units) 30,000 32,500Hours 30,000 33,000

Fixed overhead Rs. 45,000 50,000Variable overhead Rs. 60,000 68,000Working days 25 26

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Marginal Costing

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: At Break even, Margin ofsafety is?

Illustration-9

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You are given the following data:

Sales Profit

Year 20X3 Rs. 1,20,000 8,000

Year 20X4 Rs. 1,40,000 13,000

Find out –(i) P/V ratio,(ii) B.E. Point,(iii) Profit when sales are ̀ 1,80,000,(iv) Sales required earn a profit of ̀ 12,000,(v) Margin of safety in year 20X4.

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Budget and Budgetary Control

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: Name the budget whichrequires justification withouttaking reference from past results ?

Illustration-10

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RST, Limited is presently operating at 50% capacity and producing 30,000 units. The entire output is sold at a price of ̀ 200per unit. The cost structure at the 50% level of activity is as under:

(Rs)

Direct Material 75 per unit

Direct Wages 25 per unit

Variable Overheads 25 per unit

Direct Expenses 15 per unit

Factory Expenses (25% fixed) 20 per unit

Selling and Distribution Exp. (80% variable) 10 per unit

Office and Administrative Exp. (100% fixed) 5 per unit

The company anticipates that the variable costs will go up by 10% and fixed costs will go up by 15%.You are required to prepare an Expense budget, on the basis of marginal cost for the company at 50% and 60% level of activity and find out the profits at respective levels.

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Thank You

For any query on this subject

Dr. N.N. Sengupta

Faculty, Deputy Director

•E-mail: nnsengupta@icai.in

•Call: 0120-3045 919

CA. Deepak Kumar Gupta

Faculty, Assistant Director

•E-mail: deepak.gupta@icai.in

•Call: 0120-3045 937

CA. Sanjit L Sharma

Faculty, Sr. Executive Officer

•E-mail: sanjit.sharma@icai.in

•Call: 0120-3045 937

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