Adv.costing Q B Rev5

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St. Marys College (Autonomous) Thuthookudi-628001

M.Com. - Semester IV

ADVANCED COST ACCOUNTING Sub.code:09PCOC41

QUESTION BANK

PART-A

UNIT I

1. What do you mean by job costing?2. What are the main objectives of job costing?

3. State any four features of job costing.

4. Write about the suitability of job costing.

5. How will you determine EBQ?6. What is batch costing?

7. What is meant by economic batch / lot quantity?8. What is operating costing?

9. What are the objectives of transport costing?

10. What is a job cost sheet?

UNIT II

11. What do you mean by process costing?

12. State the application of process costing.

13. State any four features of process costing.

14. What is meant by process loss?15. What are the objectives of inter process profits?

16. What do you mean by joint products?

17. What is split-off point?

18. Distinguish between joint products and by products.

19. What is meant by by-products?

20. What is meant by abnormal loss?

21. Write short notes on abnormal gain in process costing.

22. How will you treat normal loss in process accounts?

UNIT III

23. What is a cost ledger?

24. State briefly the important cost ledgers.

25. What are control accounts?

26. State the objectives of preparing control accounts.

27. What is meant by integrated accounting system?1


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28. List down any four advantages of integrated accounting.

29. State the disadvantages of integrated accounting.

30. Give the journal entries for materials purchased for special jobs and materials purchased

for immediate repairs under integrated accounting system.

31. Differentiate between interlocking accounting system and integrated accounting system.

UNIT IV

32. What is margin of safety?

33. What is CVP analysis?

34. Differentiate between Contribution and profit.

35. What do you mean by break-even point?

36. State the marginal costing equation.

37. What is meant by P/V ratio?

38. What is meant by margin of safety?

39. Define marginal costing?40. Define marginal cost.

41. What do you mean by key factor?

UNIT V

42. Define Standard costing

43. Distinguish between standard costs and estimated costs.

44. What is material usage variance?

45. What is material yield variance?

46. What is labour idle time variance?47. What do you mean by variance analysis?

48. What do you mean by labour efficiency variance?

49. Define Standard cost.

50. State any four advantages of standard costing.

51. State any four limitations of standard costing.

52. What is meant by calendar variance?

PART-B

UNIT I

1. What are the features of job costing?

2. What is a job cost sheet? Give the specimen of a job cost sheet.

3. From the following information, prepare only an estimate for Job No.150:

Direct materials consumed Rs.1, 000

Direct wages paid Rs.2, 000

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Factory expenses 60% on wages

Office expenses 20% on factory cost

The tender includes a profit of 20% on selling price.

4. A factory follows job costing. The following cost data are obtained from its books for the

year ending 31st Dec.1997:

Rs.Direct materials 90,000

Direct wages 75,000Profit 60,900

Selling and Distribution Overhead 52,500

Administration Overhead 42,000

Factory Overhead 45,000Prepare a job cost sheet and find out overhead recovery rates and percentage of profit on

sales.

5. Differentiate between job costing and process costing.

6. The following information for the year ended Dec.31st 2001 is obtained from the booksand records of a factory\

Completed jobs Work in progressRs. Rs.

Direct materials supplied from stores 1, 00,000 34,000

Wages 1, 00,000 40,000

Materials transferred to work in progress 2, 000 2, 000Materials returned to stores 1,000 -

Factory overheads are 80% of wages and administration overheads 25% of factory cost.

The value of the executed jobs during 2001 was Rs.4, 10,000.Prepare (i)Consolidated completed job accounts showing the profits made or loss

incurred on the job ,(ii)Consolidated work in progress account.

7. The information given below has been taken from the cost records of a factory in respect

of Job No.707:

Direct material Rs.4, 010

Wage details:Department A: 60 hours @Rs.3 per hour

B: 40 [email protected] per hour

C: 20 [email protected] per hour

The variable overheads are as follows:Department A: Rs.5, 000 for 5, 000hrs

B: Rs.3, 000 for 1, 500 hrs.C:Rs.2, 000 for 500 hrs

Fixed expenses estimated at Rs.20, 000 for 10, 000 working hours .Calculate the cost of

the Job No.707 and the price of the Job to give a profit of 25% on selling price.

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8. The annual demand for a product is 24, 000 units. It is produced in batches and the

largest size of a single batch is 6, 000 units. After each batch is complete, the set up cost

is Rs.750.The annual carrying cost is 2.25per unit.Assume average inventory as one-half of the number of units made in each batch.

Selecting 4,6,8,12,24 batches per annum, determine annual costs of each and state the

optimum number of batches to minimize the total costs.

9. The demand of an item is uniform at a rate of 25 units per month. The set up cost is Rs.30

each time a production is made. The production cost is Rs.3per item and the inventorycarrying cost is 50 paise per unit per month. If the shortage cost is Rs.3 per item per

month Determine how often to make a production run and of what size ?Also calculate

re-order level.

10. Component Z is made entirely in cost centre 100. Material cost is 6 paise per componentand each component takes 10 minutes to produce. The machine operator is paid 72 paise

per component and the machine hour rate is Rs.1.50. The setting up of the machine to

produce the component Z takes 2 hours 20 minutes.

On the basis of this information, prepare a cost sheet showing the production and settingup cost, both in total and per component, assuming that batch of: (a) 100 components and

(b) 1000 components is produced.

11. X Ltd.is committed to supply 24,000 bearings per annum to Y Ltd. on a steady basis. It is

estimated that it costs 10 paise as inventory holding cost per bearing per month and thatthe set up cost per run of bearing manufacture is Rs. 324.

i. What would be the optimum run size for bearing manufacture?

ii. Assuming that the company has a policy of manufacturing 6,000 bearings

per run, how much extra costs the company would be incurring ascompared to the optimum run?

iii. What is the minimum inventory holding cost?

UNIT II

12. Explain the treatment of process losses and gains in process costing.13. Explain the features of process costing.

14. A product passes through three distinct process to completion. These processes are

numbered respectively I, II and III .During the week ended 15th Jan 2001,500 units areproduced .The following information is obtained:

Process I Process II Process III

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Direct materialsDirect Labour

Rs.

3,500

2,500

Rs.

1,600

2,000

Rs.

1,500

2,500

The overhead expenses for the period were rs.1, 400 apportioned to the process onthe basis of wages. No work in progress or process stocks existed at the beginning

or at the end of the week. Prepare process accounts.

.

15. In Process A100 units of raw materials were introduced at a cost of Rs.1,000.The otherexpenditure incurred by the process was Rs.602.Of the units introduced 10% are

normally lost in the course of manufacture and they possess a scrap value of Rs.3 each.

The output Process A was only 75 units. Prepare Process A Account and abnormal lossaccount.

16. The following data are available pertaining to a product after passing through twoprocesses A and BOutput transferred to Process C from Process B 9,120 units for Rs.49, 263

Expenses incurred in Process C:

Sundry materials - Rs.1, 480Direct labour - Rs.6, 500

Direct expenses -Rs.1, 605

The wastage of Process C is sold at Re.1.00/unit. The overhead charges were 168% of

direct labour .The final product was sold at Rs.10.00 /unit fetching a profit of 20%onsales .Find the percentage of wastage in process C and Prepare process C account.

17. In Process B,75 units of a commodity were transferred from Process A at a cost of Rs.

1,310.The additional expense incurred by the process were 190.20% of the units enteredare normally lost and sold @Rs.4 per unit. The output of the Process was 70 units.

Prepare Process B Account and Abnormal Gain Account.

18. The following has been extracted from the books of M/s East India Coke Co. Ltd

Joint Products Coke

Coal

Tar

Benzol Sulphate

ofAmmonia

Gas Total

Yeild in lbs. of

recovered products

per ton of coal1,420 120 22

26

412 2, 000

The price of coal is Rs.80 per ton. Direct labour and overhead cost to split off point are

Rs.40 and Rs.60 respectively per ton of coal. Calculate the material, labour, overhead and

total cost of each product on the basis of weight.19. The joint costs of making 40 units of product A,120 units of product Band 140 units of

Product C is Rs.2,250.The selling prices of products A,B and C are Rs.2, Rs.3 and Rs.4

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respectively. The products did not require any further processing cost after split off point.

You are required to apportion the joint costs (a) on sales price basis (b) on sales value

basis.Explain the treatment of by-products in cost accounts.

20. Differentiate between joint products, main products and by- products.

21. Explain various methods of apportioning the joint costs among the joint products.

UNIT III

22. The following transactions took place for the month of March in ABC Co. Ltd. Enter the

transactions in the cost books under integral system of accounting.

Rs.Materials Purchased:

(a) Credit purchases 3,000

(b) Cash Purchases 1,000(c) Credit purchases for a special job 500

Returned to suppliers 250Direct materials issued to jobs 2,000Indirect materials issued to jobs 500

Materials returned from jobs to stores 200

Materials transferred from

Job No.10 to Job No.20 50

23. The following are the extracts of balances of M. & Co. Ltd., in its integrated Ledger on

31st March, 2000.

Dr.

Rs.

Cr.

Rs.Stores Control Account 3,600

Finished Goods Account 2,600Work-in-Progress Account 3,400

Creditors Account 1,600

Cash at Bank 2,000

Debtors Account 2,400Fixed Assets Account 11,000

Profit and Loss Account 6,400

Depreciation Provision Account 1,000Share Capital Account 16,000

25,000 25,000Transactions for the year ending 31st March, 2001 were:

Wages Indirect

Direct

Rs.1,000

17,400

Stores Purchased on Credit 20,000Stores Issued to Production 22,000

Stores issued to repair order 4006


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Goods finished during the period at cost 43,000

Goods sold at cost 44,000

Goods sold at sale value (on credit) 60,000Production Overhead Recovered 9,600

Production Overhead Paid for

Administration Overhead bySelling and Distribution Overhead cheque

8,000

2,4002,800

Depreciation (Works) 260

Payment from Customers 58,000Payment to Suppliers 20,200

Purchases of fixed assets in cash 400

Fines paid 100

Income Tax 4,000Charitable Donations 200

Rates prepaid included in production overhead incurred 60

Interest on bank loan 20

You are required to write up the accounts in Integral Ledger and take out a Trial Balance.

The Administration Overhead is written off to Profit and Loss Account.

24. What are the advantages of integrated accounting?

25. What are the essential features of integrated accounting?26. From the following information you are required to pass journal entries and prepare

necessary accounts under the system of integrated accounts:

Rs. Rs.

Materials purchased on credit 29,600 Work expenses charged toproduction 17,200

Wages paid 33,600 Administrative expenses paid 8,800

Wages Productive 29,600 Administrative expenses charged to

production 8,700

Wages Unproductive 4,000 Selling expenses charged tosales 9,000

Materials issued to production 25,600 Sales 78,000

Work expenses incurred 13,000 Finished goods at cost 60,000

27. Arun enterprises operates an integral system of accounting. You are required to pass

journal entries for the following transactions that took place for the year ended31-3-2011.(Narration is not required.)

Raw material purchased ( 50% on credit ) Rs. 6,00,000

Materials issued to production Rs. 4,00,000Factory overheads incurred Rs 80,000

Sales (50% credit) Rs. 7,50,000

Receipts from Debtors Rs.2,50,000

Payments to Creditors Rs. 2,00,00028. Discuss Integrated accounting system.

UNIT IV

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29. What is CVP Analysis? State the assumptions underlying it.

30. What are the circumstances under which production can be continued when Selling price

below the marginal cost?31. Calculate P/V ratio from the following information:

(i)Given: Selling price Rs.10 per unit .Variable cost per unit Rs.6

(ii)Given profits and sales of 2 periods are as under:

Year Sales Profit

2000 Rs. 1, 50,000 20,0002001 Rs. 1, 20,000 25,000

32. From the following particulars calculate i)Contribution ii)P/V ratio iii)B.E.P in units and

in rupees iv)What is the selling price per unit if the selling price is brought down top

25,000 units?Rs.

Fixed Expenses 1, 50,000

Variable cost per unit 10

Selling price per unit 15A company has fixed expenses of Rs.90,000 with sales at Rs.3,00,000 and a profit of

Rs.60,000 during the first half year .If in the next year ,the company suffered a loss ofRs.30,000, Calculate a)The P/V ratio ,break-even point and margin of safety for the first half

year. b)The break even point and margin of safety for the whole year.

33. A.G.Ltd., furnishes you the following information related to the year 2006

First half of the year Second half of the year

Rs. Rs.

Sales 45,000 50,000

Total cost 40,000 43,000Assuming that there is no change in prices and variable cost and that the

fixed expenses are incurred equally in the two half year period, calculate for the year

2006

i. The profit volume ratio.

ii. Fixed cost.

iii. Break even sales and

iv. Margin of Safety ratio.

34. The selling price of a product was Rs.200 per unit ,as against its variable cost of Rs. 100

per unit. The total fixed costs were Rs. 2,00,000 .Calculate the effect of a reduction inprice by Rs.40 on the P/V ratio ,Break even point and margin of safety ,if 4,000 units

were produced and sold.35. A radio manufacturing company finds that while it costs Rs. 6.25 each to make component

X273Q the same was available in the market at Rs. 5.75 each with an assurance of continued

supply.

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The breakdown of cost is

Materials Rs. 2.75 each

Labour Rs. 1.75 each

Other Variable Rs. 0.50 eachDepreciation and other fixed cost Rs. 1.25 each

Rs. 6.25

1. Should you make or buy?

2. What would be your decision if the supplier offered the component at Rs. 4.85 each?

36. From the following information, calculate

i. Break Even Point

ii. Number of units that must be sold to earn a profit of Rs.60,000 per year.

iii. Profit / loss when sales are Rs.2,00,000

Selling price - Rs.20 per unit

Variable cost - Rs.16 per unit

Fixed cost - Rs.79,200

37. K Ltd. purchases a variety of products, each having a number of component parts.B takes5 hrs to process on a machine working to full capacity.B has a selling price of Rs.50 and

marginal cosr of Rs.30 per unit A-10component part used for Product A could be made

on the same machine in 2 hours for a marginal cost of Rs.5 per unit. The suppliers price isRs.12.50.Should K Ltd. make or buy A-10? Assume that machine hour is the limiting

factor.38. PQ Ltd.has been offered a choice to buy a machine between A and B. You are required tocompute:

a) BEP for each of the machines

b) Level of sales at which both the machines earn equal profits

c) Range of sales at which one is more profitable than the other.Relevant data are given below.

Machine A B

Annual output in units 10,000 10,000

Fixed cost 30,000 16,000

Profit 30,000 24,000

Market price of the above product is expected to be Rs. 10 per unit.

UNIT - V

39. From the following particulars calculate:a)Total Material Variance

b)Material Price Variance

c) Material Usage Variance

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The standard material required to manufacture one unit of product X is 10 kg and

the standard price per kg. of material is Rs.2.50. The cost accounts records, however ,

reveal that 11,500 kg. of materials costing Rs.27,600 were used for manufacturing 1000

units of product X. Calculate material variances40. Differentiate between Standard Costing and Budgetary control

41. From the following information, calculate the material variance.s

Materials Standard ActualA 200 units @Rs.12 160 units @Rs.13

B 100 units @Rs.10 140 units @Rs.10Due to shortage of material A, it was decided to reduce consumption of A by 15% andIncrease that of material B by 30%.

42. Using the following information Calculate labour variance

Gross direct wages Rs.3000

Standard hours produced 1600 hrsStandard rate per hour 1.50

Actual hours paid 1500 hrs out of which hours not worked (abnormal idle time) are 50

43. From the following data, calculate labour mix variance or gang composition variance.

Standard Labour

100 skilled workers @Rs.3.50p.m.200 semi-skilled @Rs.200 p.m

Actual Labour

110 skilled workers @Rs.350p.m.340 semi-skilled @Rs.225 p.m

Due to shortage of skilled it was decided to reduce the no. of skilled workers by

10% and increase that of semi-skilled workers by@5%.

44. From the following data Calculate overhead variances:

10

A

B

C

Standard Actual

Units Price(Rs.) Units Price(Rs.)

1,010

410

350

1.0

1.5

2.0

1,080

380

380

1.2

1.8

1.9
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Budgeted Actuals

Variable overhead Rs.2,50,000 Rs. 2,60,000

Output in units 25,000 20,000Working hours 1,25,000 1,10,000

45. Calculate Material variances from the following.

S Q S P (Rs.) A Q A P (Rs.)A 12 40 12 30

B 18 60 20 68

46. Calculate labour variances from the following:

Standard Hours Rate(Rs.) Amount (Rs.)

Men 800 3 2,400

Women 200 2 400

Actual Hours Rate(Rs.) Amount (Rs.)

Men 600 2.5 1,500

Women 500 2 1.000

47. Calculate overhead variances from the following:

Budgeted Actual

Variable overhead (Rs.) 2,50,000 2,60,000Output in units 25,000 20,000

Working Hours 1,25,000 1,10,000

48. From the following particulars calculate i)Material Price Variance ii) Material Usage

Variance and iii) Material Cost Variance

Material purchased - 3,000 kgs at Rs.6 per kg.

Standard quantity of material fixed

for one unit of finished product - 25 kgs at Rs.4 per kg.

Opening stock of material - Nil.

Closing stock of material -500 kgs.

Actual output during the period - 80 units

SECTION- C

UNIT I

1. A factory uses job costing. The following cost data is obtained from its books for the year

ended 31st December, 1998:

Direct Materials Rs. 90,000; Direct Wages Rs.75, 000; Profit Rs.60, 900; Selling andDistribution Overheads Rs.52, 500; Administrative Overheads 42,000 and Factory

Overheads Rs.45, 000.

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(a) Prepare a Job Cost Sheet indicating Prime Cost, Work Cost, Cost of Production, Cost of

sale and the sales value.

(b) In 1999, the factory receives an order for a number of jobs. It is estimated that directmaterials required will be Rs. 1,20,000; and direct labour will cost Rs.75,000.What

should be the price for these jobs if the factory intends to earn the same rate of profit on

sales assuming that selling and distribution overheads has gone up by15%? The factoryrecovers factory overheads as a percentage of direct wages and administration and selling

and distribution overheads as percentage of works cost, based on cost rates prevailing in

the previous year.2. The following information is extracted from the job ledger ,in respect of Job Mo:707:

Materials Rs.3, 400

Wages:

Dept. A: 80 hours at Rs.2.50 per hourB: 60 hours at Rs.4 per hour

Variable Overheads:

Dept. A: Rs.5, 000 for 4,000 direct hours

B: Rs.6, 000 for 3,000 direct hoursFixed Overhead:

Rs.7, 500 for 10,000 hours of normal working time of the factory. Calculate the cost ofJob No: 707 and estimate the percent of profit if the price quoted is Rs.4,750.

3. A work order for 200 units of a commodity has to pass through four different machines ofwhich the machine hour rates are: Machine No. I Rs. 1.25, Machine No. II Rs. 2.50,

Machine No. III Rs. 3, Machine No. IV Rs. 2.25.

The following expenses have been incurred on the work order:

Materials Rs.8, 000 and wages Rs.500.

Machine No. I has been engaged for 200 hours, Machine No. II for 160 hours, Machine

No. III for 240 hours and Machine No. IV for 132 hours.

After the work order has been completed, materials worth Rs. 400 are found to be surplus

and are returned to stores.

Office overheads used to be 40 % of works cost, but on account of all-round rise in the

cost of administration, distribution and sale, there has been a 50 % rise in the office

overhead expenditure. Moreover, it is known that 10 % of the production will have to be

scrapped as not being up to the specification and the sale proceeds of the scrapped output

will be only 5% of the cost of sales.

If the manufacturer wants to make a profit of 20 % on the total cost of the work order,

find out the selling price of a unit of commodity ready for sale.

4. The following information is available for Job 4,321 ,which is being produced at the

request of the customers.

Dept A Dept.B Dept.C

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Materials consumed (Rs.) 4,000 1,000 1,500

Direct Labour:

Wage rate per hour ((Rs.) 3 4 5Direct labour hours 300 200 400

In accordance with the company policy the following are chargeable to jobs :

Fixed production overheads Rs. 5 per direct labour hourFixed administration overheads 80%of works cost

Profit mark up - 20% margin on selling price

Required:(i)Calculate the total cost and selling price of Job4, 321

(ii)Assume that shortly after the job is completed the original customer goes bankrupt and

the job is not delivered. The only other possible customer is prepared to pay

Rs.9000.Briefly indicate with reasons whether you would accept the offer of Rs.9000.

5. From the following data, calculate the cost per mile of a vehicle:

Value of vehicle Rs.15,000

Road license for the year Rs. 500

Insurance charges for the year Rs.100Garage rent per year Rs. 600

Drivers wages per month Rs.200

Cost of petrol per litre Re. 0.80Miles per litre 8

Proportionate charge for tyre and maintenance per mile Re 0.20

Estimated life 1,50,000 miles

Estimated annual mileage 6,000miles

Ignore interest on capital.

6. Mr. H owns a fleet of taxis and the following information is available from the recordsmaintained by him:

No of taxis 10

Cost of each taxi Rs. 54,600Salary of Manager Rs. 700 p.m

Salary of accountant Rs. 500 p.m

Salary of cleaner Rs. 200 p.m

Salary of mechanics Rs. 400 p.mGarage rent Rs. 600 p.m

Insurance premium 5% p.a

Annual tax Rs. 900 per taxi

Drivers salary Rs. 350 p.m per taxiAnnual repairs Rs. 1,000 per taxi

Total life of a taxi is about 2,00,000 kms. A taxi runs, in all 3,000 kms. in a monthand 30% of this distance has to be run without any passenger. Petrol consumption is one

litre for every 10 kms. @ Rs. 4.41 per litre. Oil and other sundries are Rs.10.50 per 100

kms.

Calculate the cost of running a taxi per km.

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7. Work out in appropriate cost sheet the unit cost per passenger km. for the year 1984-85 for a

fleet of passenger buses run by a transport company from the following figures extracted from the

books:

5 passenger buses costing Rs.50,000, Rs.1,20,000, Rs.45,000,Rs.55,000 and Rs.80,000

respectively. Yearly depreciation of vehicles - 20% of the cost. Annual repairs, maintenance andspare parts 80 % of depreciation. Wages of 10 drivers @ Rs. 100 each per month, wages of 20

cleaners @ Rs. 50 each per month. Yearly rate of interest @4 % on capital. Rent of six garages@ Rs. 50 each per month. Directors fees @ Rs. 400 per month, office establishment @ Rs.

1,000 per month, Licence and taxes Rs.1,000 every six months, Realization by sale of old tyres

and tubes @ Rs.3,200 every six months. 900 passengers were carried over 1,600 kms. during the

year.

UNIT II

8. The product passes through three distinct processes to completion .They are known as

A,B and C. From past experience it is ascertained that loss is incurred in each process as:

ProcessA-2%, ProcessB-5%and Process C-10%.

In each case the % of loss is computed on the number of units entering the processconcerned. The loss of each process possesses a scrap value .The loss of processes A and

B is sold at Rs.5 per 100 units. The output of each process passes immediately to the

next process and the finished units are passed from process C to stock.Process A Process B Process C

Rs. Rs. Rs.

Materials consumed 6,000 4,000 2,000Direct Labour 8,000 6,000 3,000

Manufacturing expenses 1,000 1,000 1,000

20,000 units have been issued to process A at a cost of Rs.10, 000. The output of eachprocess has been as under:

Process A19, 500; Process B- 18,800 Process C 16,000

There is no work in progress in any process. Prepare Process Accounts.

Calculations should be made to the nearest rupee.9. A certain product passes through 3 processes before it is completed. The output of each

process is charged to the next process at a price calculated to give a profit of 20% on

transfer price (i.e.25% on cost price).The output of Process III is charged to finishedstock account on a similar basis .There was no work-in-progress at the beginning of the

year and overheads have been ignored. Stock in each process has been valued at prime

cost of the process. The following data are obtained at the end of 31st March, 2001.Process I Process II Process III Finished Stock

Rs. Rs. Rs. Rs.

Direct materials 4,000 6,000 2,000 -

Direct wages 6,000 4,000 8,000 -Stock on 31st March 2,000 4,000 6,000 3,000

Sale during the year - - - 36,000

From the above information prepare(a) Process cost accounts showing the profit element at each stage ;

(b) Actual realized profits; and

(c) Stock valuation as would appear in the balance sheet.

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10. Bengal Chemical Ltd .produced three chemicals during the month of July, 1998 by three

consecutive processes. In each process 2% of the total weight put in is lost and 10% is

scrap which from process(1) and (2) realizes Rs. 10 a ton and from Process (3)Rs.20 a tonThe products of three processes are dealt with as follows:

Process 1 Process 2 Process 3

Passed on to the next process 75% 50% -Sent to warehouse for sale 25% 50% 100%

Expenses incurred:

Process 1 Process 2 Process 3Rs. Tons Rs. Tons Rs. Tons

Raw materials 1, 20,000 1,000 28,000 140 1, 07,840 1,348

Manufacturing Wages 20,500 - 18,520 - 15,000 -

General Expenses 10,300 - 7,240 - 3,100 -Prepare process cost accounts showing the cost per ton of each product.

11. The product manufactured by S chemicals Ltd. passes through processes I, II and III. Thefollowing costs have been incurred for the month of September 2001:

Particulars Process I Process II Process III

1.

2.

3.

Materials Consumed

Direct Wages

Direct ExpensesTotal

40,000

22,500

20,500

7,500

10,000

2,250

5,000

10,000

2,505

83,000 19,750 17,505

4.5.

6.

7.

8.

OutputFinished Process Stock :

(i)01.09.2001

(ii)30.09.2001Stock valuation on 01.09.2001

(Rs. per unit)

Percentage of loss

Net Realizable value of loss perunit(Rs.)

(units)

3,900600

500

24.50

2

13.50

(units)

3,850550

800

31.00

5

16.25

(units)

3,200800

-

37.00

10

21.00

4,000 units of raw materials were introduced in Process No.1at a cost of Rs.20, 000.Stocks arevalued and transferred to subsequent processes at weighted average cost. The percentage of loss

is computed on the number of units entering the process concerned Prepare (i)Process a/cs(ii)Process Stock a/cs (iii)Normal Loss a/c (iv)Abnormal Loss/Gain or Effective a/c.

12. X Ltd. manufactures product A which yields 2 by-products B and C. In the period the

amount spent up to the point of separation was Rs. 20, 600. Subsequent expenses are:

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A (Rs) B (Rs) C (Rs)

Materials 300 200 150

Wages 400 300 200

Overheads 300 270 280

1000 770 630

Gross sale value of product A, B, C was Rs. 15000, Rs. 10000, and Rs. 5000. It wasestimated that the net profit as a percent of sales in B and C is 25% & 20% respectively. Find

out the profit earned by A.

13. A company operates a chemical process which produces 4 products: K, L, M, and N for

the basic raw material. The company budget for the is as under:

Raw material consumption Rs. 17,250

Initial processing wages Rs. 16,240

Initial processing overheads Rs. 16,240

Product Production(kg)

Sales(kg)

Additional processingafter split off (Rs. )

K 16000 109600 28800

L 200 5600 -

M 2000 30000 16000

N 360 21600 6600

The company presently intends to sell product L at the point of split off without further

processing. The remaining products K, M, N are to be further process and sold. However the

management has been advised that it would be possible to sell the product at the split offwithout further processing and if the course was adopted, the selling price would be under:

Products K L M NSelling price per kg 4.00 28.00 8.00 40.00

The joint costs are to be apportioned on the basis of sales value realization at the point of

split off.

a. .Prepare the apportionment of joint cost.

b. Present a statement showing the product wise and the total budgeted profit or loss

based on proposal to sell product L at split off and K M N after further processing

c. Present a statement showing the product wise and the total budgeted profit or loss

if the alternative strategy to sell all the products at split off stage.

14. In manufacturing the main product A, a company processes the resulting waste material

into two by-products, M1 and M2. Using the method of working back from sales value to

an estimated cost, you are required to prepare a comparative profit and loss statement of

the three products from the following data:

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Total cost up to separation point was Rs. 1,36,000.

A M1 M2

Sale Rs.3,28,000 Rs.32,000 Rs.48,000

Cost after separation Rs. - Rs.9,600 Rs.14,400

Estimated net profit %to sales value - 20 % 30 %

Estimated selling expensesas a % of sales value 20% 20 % 20 %

15. Differentiate between job costing and process costing.

16. X Ltd.is committed to supply 24,000 bearings per annum to Y Ltd. on a steady basis. It isestimated that it costs 10 paise as inventory holding cost per bearing per month and that

the set up cost per run of bearing manufacture is Rs. 324.

i. What would be the optimum run size for bearing manufacture?ii. Assuming that the company has a policy of manufacturing 6,000 bearings

per run, how much extra costs the company would be incurring as

compared to the optimum run?iii. What is the minimum inventory holding cost?

17. A certain product passes through two processes desired before it is transferred to finishedstock. The following information is obtained for the month of March2001:

Process I Process II Finished Stock

Rs. Rs. Rs

Opening Stock 7,500 9,000 22,500Direct material 15,000 15,750

Direct Wages 11,200 11,250

Production Overheads 10,500 4,500Closing Stock 3,700 4,500 11,250

Profit% on transfer price to the

next process 25% 20%Inter process profit for opening stock - 1,500 8,250

Stocks in processes are valued at prime cost and finished stock has been valued at the

price at which it was received from Process II. Sales during the period were Rs.1, 40,000.

Prepare and compute(a)process cost accounts showing profit element at each stage ;

(b) actual realized profit ;and

(c) stock valuation for balance sheet purposes.

UNIT III

18. In the absence of the Chief Accountant, you have been asked to prepare a Batchs cost

accounts for a company which operates a batch costing system fully integrated with the

financial accounts. The following relevant information is provided to you.

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Rs.

Balances at the beginning of the month:

Stores Ledger Control account 25, 000Work-in-Progress Control account 20, 000

Finished Goods Ledger Control account 35, 000

Production overhead brought from previous month 3, 000

Transactions during the month:

Materials purchased 75,000

Materials issued:

To Production 30,000

To Factory Maintenance 4,000

_______ 34,000

Materials transferred between batches 5,000Total wages paid:

To Direct workers 25,000

To Indirect workers 5,000_______ 30,000

Direct wages charged to batches 20,000

Recorded non-productive time of direct workers 5,000

Selling and Distribution Overhead incurred 6,000Production Overhead incurred 12,000

Sales 1,00,000

Cost of Finished Goods Sold 80,000

Cost of finished goods completed and transferred to finished goods account 65,000Physical value of work-in progress at the end of the month 40,000

The production overhead absorption rate is 150% of direct wages charged to WIP.Prepare for the month (i) Stores Ledger Control Account (ii) Work in- Progress

Control Account (iii) Finished Goods Control Account (iv) Production Overhead Control

Account (v) Cost of Sales Account (vi) Profit and Loss Account.

19. From the following details show the necessary accounts in the cost ledgersOpening balance Closing balance

Rs. Rs.

Materials 8,000 11,000Work-in-progress 5,000 9,000

Finished Goods 10,000 12,000Transactions during the period: Rs.Materials purchased 25,000

Wages paid (including Rs. 20,000 10,000

Indirect wages)Overhead incurred 8,000

Overhead( recovered 9000)

Sales 50,000

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20. Journalise the following transactions assuming that the cost and financial records areintegrated:

Rs.

Raw materials purchased 2,00,000Direct materials issued to production 1,50,000

Wages paid (30% indirect) 1,20,000

Wages charged to production 95,000

Manufacturing expenses incurred 84,000

Manufacturing overheads charged to production 92,000Selling and distribution costs 20,000

Finished product (at cost) 2,00,000

Sales on credit 2,90,000

Closing stock Nil

Receipts from debtors 69,000Payments to creditors 1,10,000

21. The following balances were extracted from the companys integrated ledgers as on 31st

December, 2001:

Rs. Rs.Stores control a/c 3,600

Work-in-progress 3, 400

Finished stock control a/c 2, 600

Creditors account 1,000Cash at bank 2,000

Debtors account 2, 400Fixed Assets account 11, 000Profit and Loss account 6, 400

Depreciation Provision account 1,000

Share Capital account 16,000------------- -----------

25,000 25,000

------------- ------------Further transactions took place during the following quarter as follows:

Rs.

Factory Overhead-allocated to WIP 11,786

Goods finished at stock 36,834Raw materials purchased 22,422

Direct Wages- allocated to WIP 18,370

Cost of goods sold 4 2,000Raw materials- issued to production 17,000

Raw materials-credited by suppliers 1,000

Inventory audit-raw material losses 1,300WIP rejected 1,800

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Customers returns (at cost) of finished goods 3,000

22. Journalise the following transactions assuming that the cost and financial records areintegrated:

Rs.

Raw materials purchased 20000Direct materials issued to production 15000

Wages paid (30% indirect) 12000

Wages charged to production 9500

Manufacturing expenses incurred 8400

Manufacturing overheads charged to production 9200Selling and distribution costs 2000

Finished product (at cost) 20000

Sales on credit 29000

Closing stock Nil

Receipts from debtors 6900

Payments to creditors 11000

UNIT IV

23. Assuming that the cost structure and selling price remain the same in Periods I and II find

out:

a)Profit Volume Ratio

b) Fixed Costc)Break Even Point for sales

d) Profit when sales are of Rs.1, 00,000e) Sales required to earn a profit of Rs.20, 000f) Margin of safety at a profit of Rs.15, 000

g) Variable cost in Period II

Period Sales Cost(Rs.) (Rs.)

I 1, 20,000 1, 11,000

II 1, 40,000 1, 27,000

24. Tarus Ltd. produced three products: A,B, and C from the same manufacturing facilities.

The cost and other details of the three products are as follows:

A B C

Selling price per unit (Rs.) 200 160 100

Variable cost per unit (Rs.) 120 120 40

Fixed expenses per month (Rs.)2,76,000

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Maximum production per month (Units) 5,000 8,000 6,000

Total hours available for the month(Hours)

200

Maximum demand for the month Units) 2,000 4,000 2,400

The processing hours cannot be increased beyond 200 hours per month. You are requiredto calculate the most profitable product mix and the maximum possible income.

25. An umbrella manufacturer makes an average profit of Rs. 2.50 per unit on a selling price

of Rs. 14.30 by producing and selling 60,000 units at 60 per cent of potential capacity.The cost of sales per unit is as follows:

Direct Material Rs. 3.50

Direct Wages Rs. 1.25

FactoryOverhead

Rs. 6.25(50% fixed)

Sales Overhead Rs. 0.80(25% variable)

During the current year, he intends to produce the same number but estimates that his fixed

cost would go up by 10 per cent while the rate of direct wages and direct materials will

increase by 8% & 6% respectively. However the selling price cannot be changed.

Under this situation he obtains an offer for a further 20% of his potential capacity.

What minimum price would you recommend for acceptance of the offer to ensure the

manufacture the overall profit of Rs. 1, 67,300?

26. Following information has been made available from the cost record of United

Automobiles limited manufacturing spare parts.

Direct Materials Per Unit

X Rs. 8

Y Rs. 6

Direct wages

X 24 hours @ 25 paise per hour

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Y 16 hours @ 25 paise per hour

Fixed overheads 150% of wages

Selling Price

X Rs. 25

Y Rs. 20

The directors want to be acquainted with the desirability of adopting any one of alternative

sales mix in next period

1. 250 units of x and 250 units of Y

2. 400 units of Y only

3. 400 units of X and 100 units of Y

4. 150 units of X and 350 units of Y

State which alternative you would recommend to the management.

27. Small Tools Factory has a plant capacity to provide 19,800 hours of machine use. The

plant can produce all A type tools or B type tools or the mixtures of both the types. The

following information is relevant:

Per type A B

Selling Price Rs. 10 Rs. 15

Variable cost Rs. 8 Rs. 12

Hours require to produce 3 4

Market conditions are such that no more than 4000 A type tools 3000 B type tools can be

sold in a year. Annual fixed costs are Rs. 9900. Compute the product mix that will maximize

the net income to the company and find that maximum net income.

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Documents

Adv.costing Q B Rev5