St.

Joseph’s College of Commerce, Bangalore (Autonomous)

PROBLEMS ON MODULE 2
COST SHEET
1. Generally, for the purpose of cost sheet preparation, costs are classified on the basis of:
Functions Variability Relevance Nature
2. Which of the following does not form part of Prime Cost?
Cost of packing Cost of transportation GST paid on raw Overtime premium
paid to bring materials (input paid to workers
materials to factory credit can be
claimed)
3. A Ltd. received an order for which it purchased a special frame for manufacturing, it is part of:
Direct Material Direct Expense Factory Overheads Administrative
Overheads
4. Salary paid to plant supervisor is a part of:
Direct Expense Factory Overheads Quality Control Cost Administration Cost
5. Depreciation of director’s laptop is treated as part of:
Administration Factory Overheads Direct Expenses Research and
overheads Development Cost
6. A manufacturer has set-up a lab for testing of products for compliance with standards. Salary
of this lab staffs are part of:
Works Overheads Quality Control Cost Direct Expenses Research and
Development Cost
7. Audit fees paid to auditors is part of:
Administration Cost Production Cost Selling and Not shown in cost
Distribution Cost sheet
8. Salary paid to factory store staff is part of:
Factory Overheads Production Cost Direct Expenses Direct Material Cost
9. Canteen expenses for factory workers are part of:
Factory Overheads Administration Cost Marketing Expenses None of these
10. A Company pays royalty to State Government on the basis of production, it is treated as:
Direct Material Cost Factory Overheads Direct Expenses Administrative Cost

11. From the following particulars prepare a Cost Sheet showing the total cost per tonne for the
period ended 31st December, 20X1.
Rs. Rs.
Raw Materials 33,000 Rent and Taxes (Office) 500
Productive Wages 38,000 Water supply (Works) 1,200
Unproductive Wages 10,500 Factory Insurance 1,100
Factory Rent and Taxes 7,500 Office Insurance 500
Factory Lighting 2,200 Legal Expenses 400
Factory heating 1,500 Rent of warehouse 300
Motive Power 4,400 Depreciation of:
Haulage (Works) 3,000 - Plant and Machinery 2,000
Director’s fees (Works) 1,000 - Office Building 1,000
Director’s fees (Office) 2,000 - Delivery Vans 200
Factory cleaning 500 Bad Debts 100

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 St. Joseph’s College of Commerce, Bangalore (Autonomous)

Sundry Office expenses 200 Advertising 300

Estimating Expenses (Works) 800 Sales Department’s salaries 1,500
Factory stationery 750 Upkeep of delivery vans 700
Office stationery 900 Bank charges 50
Loose tools written off 600 Commission on sales 1,500
The total output for the period has been 14,775 tonnes.

12. The accounts of Z manufacturing Company for the year ended December, 20X2 show the
following:
Rs. Rs.
Factory Office Salaries 6,500 Travelling Expenses 2,100
General Office Salaries 12,600 Traveler’s Salaries and 7,700
Commission
Carriage Outward 4,300 Productive Wages 1,26,000
Carriage on Purchases 7,500 Depreciation on Plant, 6,500
Machinery and Tools
Bad Debts written off 6,500 Depreciation on Furniture 300
Repairs of Plant, Machinery 4,100 Director’s Fees 6,000
and Tools
Rent, Rates, Taxes and Gas and Water:
Insurance:
- Factory 8,500 - Factory 1,200
- Office 2,000 - Office 400
Sales 4,61,100 Manager’s Salary (3/4 Factory 10,000
and 1/4 Office)
Stock of Materials: General Expenses 3,400
- 31st Dec, 20X1 62,800 Income Tax 2,500
- 31 Dec, 20X2
st 48,000 Dividend 2,000
Materials Purchased 1,85,000
Prepare statement giving the following information:
Material Consumed Prime Cost Factory Cost
Cost of Production Total Cost Net Profit

13. A manufacturing concern requires a statement showing the result of its production operation
for September, 20X1. Cost records give the following information:
1st September, 20X1 (Rs.) 30th September, 20X1 (Rs.)
Raw Material 1,00,000 1,23,500
Finished Goods 71,500 42,000
Work-in- progress 31,000 34,500
Transactions during the month of September, 20X1:
Rs.
Purchases of Raw Materials 88,000
Direct Wages 70,000
Work Expenses 39,500
Administrative Expenses 13,000

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 St. Joseph’s College of Commerce, Bangalore (Autonomous)

Sale of Factory Scrap 2,000

Selling and Distribution Expenses 15,000
Sales 2,84,000

14. From the following particulars, prepare a Cost Statement showing the components of Total Cost
and Profit for the year ended 31st December, 20X1.
1st January, 20X1 (Rs.) 31th December, 20X1 (Rs.)
Raw Material 40,000 50,000
Finished Goods 6,000 15,000
Work-in- progress 15,000 10,000

Rs. Rs.
Purchases of Raw Materials 4,75,000 Sales for the year 8,60,000
Carriage inwards 12,500 Income Tax 500
Wages 1,75,000 Dividend 1,000
Works Manager’s Salary 30,000 Debenture Interest 5,000
Factory employee’s salaries 60,000 Transfer to Sinking Fund for 10,000
replacement of machinery
Factory rent, taxes and 7,250 Goodwill written off 10,000
insurance
Power expenses 9,500 Payment of Sales Tax 16,000
Other production expenses 43,000 Selling Expenses 9,250
General expenses 32,500

15. A Company furnishes the following information relating to the manufacture of a standard
product during the month of April, 20X1:
Raw Materials Consumed Rs. 15,000
Direct Labour Charges Rs. 9,000
Machine Hours worked 900
Machine Hour Rate Rs. 5
Administrative Overheads 20% of Works Cost
Selling Overheads Re. 0.50 per unit
Units produced 17,100
Units sold 16,000 at Rs. 4 per unit
You are required to prepare a Cost Sheet from the above, showing:
The cost of production per unit Profit per unit sold
Profit for the period

16. Bangalore Ltd. furnishes the following information for the year 20X1:
Output 4,000 tons
Rs.
Materials:
- Purchases 8,60,000
- Opening Inventory 40,000
- Closing Inventory 1,00,000

Mr. Jayakumar Nair B. Com., FCA. Page 3

 St. Joseph’s College of Commerce, Bangalore (Autonomous)

Wages 4,80,000
Production Overheads 3,20,000
Administrative Overheads 1,60,000
Selling and Distribution Overheads 40,000
Rate of profit is 25% on Selling Price.
It is estimated that production can be increased in the year 20X2 by 50% due to space capacity.
Raw Material Price will increase by 20%. The rate of profit will remain the same. 50% of all
overheads are fixed and the other 50% are variable. The wages will increase by 10%.
Prepare a statement showing:
Cost Profit Sales

17. The following data relates to the manufacture of a standard product during the month of April,
2018.
Raw Materials Rs. 1,80,000
Direct Wages Rs. 90,000
Machine hours worked (hours) 10,000
Machine hour rate (per hour) Rs. 8
Administration Overheads Rs. 35,000
Selling Overheads (per unit) Rs. 5
Units produced 4,000
Units sold 3,600
Selling Price per unit Rs. 125
You are required to prepare a Cost Sheet in respect of the above showing:
a) Cost per unit.
b) Profit for the month.

18. The following information has been obtained from the records of ABC Corporation for the period
from June 1 to June 30, 2018.
Particulars 1st June, 2018 30th June, 2018
(Rs.) (Rs.)
Cost of Raw Materials 60,000 50,000
Cost of work-in-progress 12,000 15,000
Cost of stock of finished goods 90,000 1,10,000
Purchase of raw materials during June, 2018 4,80,000
Wages paid 2,40,000
Factory overheads 1,00,000
Administrative overheads (related to production) 50,000
Selling and Distribution Overheads 25,000
Sales 10,00,000
Prepare a statement giving the following information:
a) Raw Materials Consumed;
b) Prime Cost;
c) Factory Cost;
d) Cost of goods sold; and

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 St. Joseph’s College of Commerce, Bangalore (Autonomous)

e) Net Profit.
19. The books of Adarsh Manufacturing Company present the following data for the month of April,
2019:
Direct labour cost Rs. 17,500 being 175% of works overheads.
Cost of goods sold excluding administrative expenses Rs. 56,000.
Inventory accounts showed the following opening and closing balances:
Particulars 1st April (Rs.) 30th April (Rs.)
Raw Materials 8,000 10,600
Work-in-progress 10,500 14,500
Finished goods 17,600 19,000
Other data are:
Particulars (Rs.)
Selling Expenses 3,500
General and Administration Expenses 2,500
Sales for the month 75,000
You are required to:
a) Compute the value of materials purchased.
b) Prepare a cost statement showing the various elements of cost and also the profit earned.

20. A Ltd. Co. has capacity to produce 1,00,000 units of a product every month. Its works cost at
varying levels of production is as under:
Level Works Cost per unit (Rs.)
10% 400
20% 390
30% 380
40% 370
50% 360
60% 350
70% 340
80% 330
90% 320
100% 310
Its fixed administration expenses amount to Rs. 1,50,000 and fixed marketing expenses amount
to Rs. 2,50,000 per month respectively. The variable distribution cost amounts to Rs. 30 per unit.
It can sell 100% of its output at Rs. 500 per unit provided it incurs the following further
expenditure:
a) It gives gift items costing Rs. 30 per unit of sale;
b) It has lucky draws every month giving the first prize of Rs. 50,000; 2nd pize of Rs. 25,000; 3rd
prize of Rs. 10,000 and three consolation prizes of Rs. 5,000 each to customers buying the
product;
c) It spends Rs. 1,00,000 on refreshments served every month to its customers;
d) It sponsors a television programme every week at a cost of Rs. 20,00,000 per month.

It can market 30% of its output at Rs. 550 per unit without incurring any of the expenses referred
to in (a) to (d) above.

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 St. Joseph’s College of Commerce, Bangalore (Autonomous)

Prepare a cost sheet for the month showing total cost and profit at 30% and 100% capacity level.

21. Prepare the Cost Sheet with as many details as possible and ascertain the selling price per unit of
the product.
1. Direct Materials 12.5% 4. General 100% of Factory Cost
Administration
Overheads
2. Direct Labour 17.5% 5. Profit (Rs. 750 per 15% of Sales
unit)
3. Production 1/3rd of prime cost
overheads
You may ignore direct expenses, quality control cost, R & D costs and Administrative OH
attributable to production.

22. From the following particulars, prepare a Cost Statement showing the component of Total Cost
and the Profit for the year ended 31st December.
Particulars On 1st Jan (Rs.) On 31st December (Rs.)
Stock of Raw Materials 4,00,000 5,00,000
Stock of Finished Goods 60,000 1,50,000
Stock of WIP 1,50,000 1,00,000

Particulars Rs. Particulars Rs.

Raw Materials purchased 47,50,000 Sales for the year 90,00,000
Carriage Inwards 1,25,000 Selling expenses 92,500
Wages 17,50,000 General expenses 3,20,000
Works Manager’s Salary 3,00,000 Debenture interest 50,000
Salary – Factory Employees 3,00,000 Dividend paid 10,000
Salary – Office Staff 2,00,000 Income tax provision 5,000
Salary – Salesmen 1,00,000 Goodwill written off 1,00,000
Factory rent and insurance 72,500 Sales tax paid 1,60,000
Power expenses 95,000 Transfer to machinery 1,00,000
replacement fund
Other Production expenses 4,20,000 Interest on loan 75,000
Bad debts written off 15,000 Bank charges 5,000
Loose tools written off 10,000 Discount allowed 27,000
Quality Control Cost 15,000 Research and Development 15,000
cost

23. A fire occurred in the factory premises on 31st October of a year. The accounting records have
been destroyed. Certain accounting records kept in another building, reveal the following for the
period 1st September to 31st Oct.
Particulars Rs. Particulars Rs.
Direct Material purchased 2,50,000 Sale revenue 7,50,000
Work in progress Inventory 40,000 Direct labour 2,22,250
on 1 September
st

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 St. Joseph’s College of Commerce, Bangalore (Autonomous)

Direct Material Inventory on 20,000 Prime costs 3,97,750

1st September
Finished Goods inventory on 37,750 Cost of goods available for 5,55,775
1st September sale
Indirect Manufacturing costs 40% of Gross margin percentage 30%
conversion cost based on revenues
The loss is fully covered by insurance. The insurance company wants to know the historical cost
of the inventories as a basis for negotiating a settlement, although the settlement to be based on
replacement cost, not historical cost. You are required to compute the following items as on 31st
October:
a) Finished goods inventory
b) Work in Progress inventory
c) Direct Materials Inventory.

24. ML Auto Ltd. is a manufacturer of auto components and the details of its expenses for the
previous year are given below:
Rs.
1 Opening Stock of Materials 1,50,000
2 Closing Stock of Materials 2,00,000
3 Purchase of Materials 18,50,000
4 Direct Labour 9,50,000
5 Factory Overheads 3,80,000
6 Administrative Overheads related to Production activity 2,50,400
During next year, the company has received an order from a Car Manufacturer where it estimates
that the cost of material and labour will be Rs. 8,00,000 and Rs. 4,50,000 respectively. ML Auto
Ltd. charges Factory overheads as a percentage of Direct Labour and Administrative Overheads
relation to production as a percentage of factory cost on previous year’s cost. Cost of delivery of
the components at customer’s premises is estimated at Rs. 45,000.
You are required to:
a) Calculate the overhead recovery rates based on actual costs for the previous year.
b) Prepare a detailed cost statement for the order received in the next year, and the price to be
quoted if the company wants to earn a profit of 10% on sales.

25. Vinayak Ltd. is planning to submit a tender for a new job that requires Material Costing Rs. 20,000
and Labour Costing Rs. 12,000. For estimation of OH, the company furnishes the following data
in respect of the previous year:
Materials consumed = Rs. 2,91,200; Wages paid = Rs. 1,98,800; Works OH = Rs. 43,736,
Administrative Oh related to production = Rs. 35,524.
What should be the quotation for the new job if the company desires a profit of 25% on Total
Cost? (Absorb Production OH on direct labour and Administrative OH based on Works Cost).

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Mr. Jayakumar Nair B. Com., FCA. Page 7