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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?

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?

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

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 75,000 Profit 60,900 Selling and Distribution Overhead 52,500 Administration Overhead 42,000 Factory Overhead 45,000 Prepare 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 books and records of a factory\ Completed jobs Work in progress Rs. 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, 000 Materials 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 hours@Rs.2 per hour C: 20 hours@Rs.5 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.


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 inventory carrying 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 component and 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 setting up 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 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? 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 are produced .The following information is obtained:

Process I

Process II

Process III

Rs. Direct materials Direct Labour 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 on the 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 other expenditure 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 loss account. 16. The following data are available pertaining to a product after passing through two processes A and B Output transferred to Process C from Process B 9,120 units for Rs.49, 263 Expenses incurred in Process C: Sundry materials - Rs.1, 480 Direct 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%on sales .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 entered are 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 Coal Benzol Sulphate Gas Total Joint Products Coke Tar of Ammonia Yeild in lbs. of recovered products per ton of coal






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

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.

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 250 Direct materials issued to jobs 2,000 Indirect 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. 3,600 2,600 3,400 2,000 2,400 11,000 6,400 1,000 16,000 25,000 Cr. Rs.

Stores Control Account Finished Goods Account Work-in-Progress Account Creditors Account Cash at Bank Debtors Account Fixed Assets Account Profit and Loss Account Depreciation Provision Account Share Capital Account Transactions for the year ending 31st March, 2001 were: Wages Indirect Direct Stores Purchased on Credit Stores Issued to Production Stores issued to repair order


25,000 Rs. 1,000 17,400 20,000 22,000 400

Goods finished during the period at cost Goods sold at cost Goods sold at sale value (on credit) Production Overhead Recovered Production Overhead Paid for Administration Overhead by Selling and Distribution Overhead cheque Depreciation (Works) Payment from Customers Payment to Suppliers Purchases of fixed assets in cash Fines paid Income Tax Charitable Donations Rates prepaid included in production overhead incurred Interest on bank loan

43,000 44,000 60,000 9,600 8,000 2,400 2,800 260 58,000 20,200 400 100 4,000 200 60 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 to production 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 to sales 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 ended 31-3-2011.(Narration is not required.) Raw material purchased ( 50% on credit ) Rs. 6,00,000 Materials issued to production Rs. 4,00,000 Factory overheads incurred Rs 80,000 Sales (50% credit) Rs. 7,50,000 Receipts from Debtors Rs.2,50,000 Payments to Creditors Rs. 2,00,000 28. Discuss Integrated accounting system.

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 20,000 2001 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 15 A 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 of Rs.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 Rs. Sales Total cost 45,000 40,000 Second half of the year Rs. 50,000 43,000

Assuming 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. ii. iii. iv. The profit volume ratio. Fixed cost. Break even sales and 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 in price 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.

The breakdown of cost is

Materials Labour Other Variable Depreciation and other fixed cost 1. Should you make or buy?

Rs. 2.75 each Rs. 1.75 each Rs. 0.50 each Rs. 1.25 each Rs. 6.25

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

36. From the following information, calculate i. ii. iii. Break Even Point Number of units that must be sold to earn a profit of Rs.60,000 per year. Profit / loss when sales are Rs.2,00,000 Selling price Variable cost Fixed cost - Rs.20 per unit - Rs.16 per unit - Rs.79,200

37. K Ltd. purchases a variety of products, each having a number of component parts.B takes 5 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 is Rs.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 to compute: 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.

39. From the following particulars calculate: a)Total Material Variance b)Material Price Variance c) Material Usage Variance

Standard Units A B C 1,010 410 350 Price(Rs.) 1.0 1.5 2.0 Units 1,080 380 380

Actual Price(Rs.) 1.2 1.8 1.9

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 variances 40. Differentiate between Standard Costing and Budgetary control 41. From the following information, calculate the material variance.s Materials Standard Actual A 200 units @Rs.12 160 units @Rs.13 B 100 units @Rs.10 140 units @Rs.10 Due to shortage of material A, it was decided to reduce consumption of A by 15% and Increase that of material B by 30%. 42. Using the following information Calculate labour variance Gross direct wages Rs.3000 Standard hours produced 1600 hrs Standard 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:

Budgeted Variable overhead Rs.2,50,000 Output in units 25,000 Working hours 1,25,000 45. Calculate Material variances from the following. SQ S P (Rs.) AQ A 12 40 12 B 18 60 20 46. Calculate labour variances from the following: Standard Hours Rate(Rs.) Men 800 3 Women 200 2 Actual Men Women Hours 600 500 Rate(Rs.) 2.5 2

Actuals Rs. 2,60,000 20,000 1,10,000 A P (Rs.) 30 68 Amount (Rs.) 2,400 400 Amount (Rs.) 1,500 1.000

47. Calculate overhead variances from the following: Budgeted Variable overhead (Rs.) 2,50,000 Output in units 25,000 Working Hours 1,25,000

Actual 2,60,000 20,000 1,10,000

48. From the following particulars calculate i)Material Price Variance ii) Material Usage Variance and iii) Material Cost Variance Material purchased Standard quantity of material fixed for one unit of finished product Opening stock of material Closing stock of material Actual output during the period - 25 kgs at Rs.4 per kg. - Nil. -500 kgs. - 80 units - 3,000 kgs at Rs.6 per kg.


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 and Distribution Overheads Rs.52, 500; Administrative Overheads 42,000 and Factory Overheads Rs.45, 000.

(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 direct materials 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 factory recovers 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 hour B: 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 hours Fixed Overhead: Rs.7, 500 for 10,000 hours of normal working time of the factory. Calculate the cost of Job 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 of which 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

Materials consumed (Rs.) 4,000 1,000 1,500 Direct Labour: Wage rate per hour ((Rs.) 3 4 5 Direct 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 hour Fixed 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 Road license for the year Insurance charges for the year Garage rent per year Drivers wages per month Cost of petrol per litre Miles per litre Proportionate charge for tyre and maintenance per mile Estimated life Estimated annual mileage miles Ignore interest on capital. 6. Mr. H owns a fleet of taxis and the following information is available from the records maintained by him: No of taxis 10 Cost of each taxi Rs. 54,600 Salary 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.m Garage rent Rs. 600 p.m Insurance premium 5% p.a Annual tax Rs. 900 per taxi Drivers salary Rs. 350 p.m per taxi Annual 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 month and 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.

Rs.15,000 Rs. 500 Rs.100 Rs. 600 Rs.200 Re. 0.80 8 Re 0.20 1,50,000 miles 6,000

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 and spare 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 process concerned. 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 2,000 Direct 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 each process 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 finished stock 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 st Stock on 31 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.

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 ton The 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 3 Rs. 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. The following costs have been incurred for the month of September 2001: Particulars 1. 2. 3. Materials Consumed Direct Wages Direct Expenses Total Process I 40,000 22,500 20,500 Process II 7,500 10,000 2,250 Process III 5,000 10,000 2,505

83,000 4. 5.



(units) (units) (units) Output 3,900 3,850 3,200 Finished Process Stock : 600 550 800 (i)01.09.2001 500 800 (ii)30.09.2001 6. Stock valuation on 01.09.2001 (Rs. per unit) 24.50 31.00 37.00 7. Percentage of loss 2 5 10 8. Net Realizable value of loss per 13.50 16.25 21.00 unit(Rs.) 4,000 units of raw materials were introduced in Process No.1at a cost of Rs.20, 000.Stocks are valued 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:

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 was estimated 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 Initial processing wages Initial processing overheads Product Rs. 17,250 Rs. 16,240 Rs. 16,240

Production Sales Additional processing (kg) (kg) after 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 off without further processing and if the course was adopted, the selling price would be under: Products K L M N Selling 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:

Total cost up to separation point was Rs. 1,36,000. Sale Cost after separation Estimated net profit % to sales value Estimated selling expenses as a % of sales value A Rs.3,28,000 Rs. 20% M1 Rs.32,000 Rs.9,600 20 % 20 % M2 Rs.48,000 Rs.14,400 30 % 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 is estimated 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 finished stock. 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 22,500 Direct material 15,000 15,750 Direct Wages 11,200 11,250 Production Overheads 10,500 4,500 Closing 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.


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.

Rs. Balances at the beginning of the month: Stores Ledger Control account Work-in-Progress Control account Finished Goods Ledger Control account Production overhead brought from previous month Transactions during the month: Materials purchased Materials issued: To Production To Factory Maintenance Materials transferred between batches Total wages paid: To Direct workers To Indirect workers 30,000 4,000 _______ 25,000 5,000 _______ 34,000 5,000 25, 000 20, 000 35, 000 3, 000 75,000

30,000 Direct wages charged to batches 20,000 Recorded non-productive time of direct workers 5,000 Selling and Distribution Overhead incurred 6,000 Production 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 65,000 Physical 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 ledgers Opening balance Closing balance Rs. Rs. Materials 8,000 11,000 Work-in-progress 5,000 9,000 Finished Goods 10,000 12,000 Transactions 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


Journalise the following transactions assuming that the cost and financial records are integrated: Rs. Raw materials purchased 2,00,000 Direct materials issued to production Wages paid (30% indirect) Wages charged to production Manufacturing expenses incurred Manufacturing overheads charged to production Selling and distribution costs Finished product (at cost) Sales on credit Closing stock Receipts from debtors Payments to creditors 1,50,000 1,20,000 95,000 84,000 92,000 20,000 2,00,000 2,90,000 Nil 69,000 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 1,000 Cash at bank 2,000 Debtors account 2, 400 Fixed Assets account 11, 000 Profit 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 36,834 Raw materials purchased 22,422 Direct Wages- allocated to WIP 18,370 Cost of goods sold 4 2,000 Raw materials- issued to production 17,000 Raw materials-credited by suppliers 1,000 Inventory audit-raw material losses 1,300 WIP rejected 1,800

Customers returns (at cost) of finished goods


22. Journalise the following transactions assuming that the cost and financial records are integrated: Rs. Raw materials purchased 20000 Direct materials issued to production Wages paid (30% indirect) Wages charged to production Manufacturing expenses incurred Manufacturing overheads charged to production Selling and distribution costs Finished product (at cost) Sales on credit Closing stock Receipts from debtors Payments to creditors 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 Cost c)Break Even Point for sales d) Profit when sales are of Rs.1, 00,000 e) Sales required to earn a profit of Rs.20, 000 f) 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.) Variable cost per unit (Rs.) Fixed expenses per month (Rs.) 2,76,000

15000 12000 9500 8400 9200 2000 20000 29000 Nil 6900 11000

200 120

160 120

100 40

Maximum production per month (Units) 5,000 Total hours available for the month(Hours) 200 Maximum demand for the month Units) 2,000





The processing hours cannot be increased beyond 200 hours per month. You are required to 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 Direct Wages Factory Overhead Sales Overhead

Rs. 3.50 Rs. 1.25 Rs. 6.25(50% fixed) 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 X Y Direct wages X

Per Unit Rs. 8 Rs. 6

24 hours @ 25 paise per hour


16 hours @ 25 paise per hour

Fixed overheads 150% of wages Selling Price X Y Rs. 25 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 Selling Price Variable cost Hours require to produce

A Rs. 10 Rs. 8 3

B Rs. 15 Rs. 12 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.