Unit-1

2 MARK
1. Define cost accounting.

2. What is functional classification of cost?

3. Define the term ‘cost units’ and ‘cost cent.

4. Define profit centres

5. List out different methods of costing.

6. What are elements of cost?

7. What are direct material.

8. Explain the meaning of prime cost.

9. What do you understand by overhead’?

10. What is a ‘cost sheet’?

16 MARK
1. Explain the objectives of cost accounting.

2. Explain the various methods and techniques of cost

accounting .

3. Explain the essential characteristics of a good costing system.

4. Explain the functions of cost accounting.

5. Discuss the various elements of cost

6. Explain the classification of costs

PROBLEMS

PROBLEM NO: 1 (Simple cost sheet)

The following information relates to AG manufacturing company for the 3 months ending 31-3-2012.

Direct materials consumed 36,000 Factory overheads 12,000

 Administrative overheads

Direct labour paid 24,000 Selling & distribution overheads 9,000

Direct expenses 8,000 5,000

1,000 units of toy gun are produced during the period and all the units produced are sold at `55 per unit.
Prepare a cost sheet showing (a) Prime cost, (b) Factory cost, (c) Cost of production, (d) Cost of sales and
(e) Profit or loss.

PROBLEM NO: 2

You are required to compile a statement showing cost and profit from the information given, showing
clearly: (a) Material consumed, (b) Prime cost, (c) Work cost, (d) Cost of production, (e) Cost of sales, (f)
Profit and (g) Sales.

Material purchased 4,00,000 Opening stock of materials 80,000

Wages 2,00,000 Closing stock of material 1,20,000

Direct expenses 40,000

Factory overhead is absorbed at 20% on wages. Administration overhead is 25% on the works cost.
Selling and distribution overhead are 20% on the cost of production. Profit is 20% on sales.

PROBLEM NO: 3

During the year 2012, X Ltd., produced 50,000 units of a product. The following were the expenses:

Stock of raw materials on 1-1-12 10,000 Direct expenses 25,000

Stock of raw materials on 31-12-12 20,000 Factory expenses 37,500

Purchases 1,60,000 Office expenses 62,500

Direct wages 75,000 Selling expenses 25,000

You are required to prepare a cost sheet showing cost per unit and total cost at each stage.

PROBLEM NO: 4(Cost sheet – With details of overheads)

The following information has been obtained from the cost records of Modern Works Ltd., for three
months ending 31st March, 2012 during which 100 units are produced and all the units are sold @ `3,000
per unit.

Stock of raw materials on 1-1-2012 18,000 Indirect labour 9,000

 Stock of raw materials on 31-12-2012 21,000 Direct labour 28,000

Material Purchases 1,62,000 Depreciation on furniture 3,000

Carriage paid on purchase 3,000 Printing & stationery 1,500

Depreciation on plant 6,000 Office salaries and allowances 14,500

Repairs to plant 2,000 Warehouse rent 2,400

Factory rent, taxes and insurance 7,000 Advertising 2,000

Indirect materials 11,000 Salesmen’s salary and commission 2,600

Prepare statement showing the following information: (a) Prime cost, (b) Work cost, (c) Cost of
production, (d) Cost of sales and (e) Profit.

PROBLEM NO: 5

The following details have been obtained from the cost records of Raja sekhar Ltd.,

Stock of raw materials on 1-12-12 75,000 Depreciation of plant and machinery 3,500

Stock of raw materials on 31-12-12 91,500 Expenses on purchases 1,500

Direct wages 52,500 Carriage outwards 2,500

Indirect wages 2,750 Advertising 3,500

Sales 2,11,000 Office rent and taxes 2,500

Work-in-progress 1-12-12 28,000 Traveler’s wages and commission 6,500

Work-in-progress 31-12-12 35,000 Stock of finished goods 1.12.12 54,000

Purchases of raw materials 66,000 Stock of finished goods 31.12.12 31,000

Factory rent, rates and power 15,000

Prepare a cost sheet giving the maximum possible break up of costs and profit.
PROBLEM NO: 6

From the following particulars prepare cost sheet:

Particulars `

Direct Materials 8,000

Direct Wages 6,000

Direct Expenses 2,500

Administrative Overheads 5,000

Factory Overheads 40,000

PROBLEM NO: 7

The following cost data are available from the books for the year ended 31.12.1995

Particulars `

Direct Material 9,00,000

Direct Wages 7,50,000

Profit 6,09,000

Selling and Distribution 5,25,000

overheads
4,20,000
Administrative overheads
4,50,000
Factory overheads

Prepare a cost sheet indicating the prime cost, works cost, production cost, cost of sales and sales value.

PROBLEM NO: 8

You are required to compile a statement showing cost and profit from the information given, showing
clearly: a) material consumed b) Prime cost c) Works cost d) Cost of production e) Cost of sales f) Profit
and g) Sales.

Particulars `

Materials purchased 2,00,000

Wages 1,00,000
 Direct expenses 20,000

Opening stock of materials 40,000

Closing stock of materials 60,000

Factory overheads are absorbed at 20% on wages. Administration overhead is 25% on the works
cost. Selling and distribution overhead are 20% on the cost of production. Profit is 20% on sales.

PROBLEM NO: 9

Prepare a cost sheet from the following data:

Particulars ` `

Direct material consumed 50,000

Direct wages paid 40,000

Chargeable expenses 10,000

Indirect materials:

Used in factory 8,000

Used in office 12,000

Used in selling 6,000

Used in distribution 4,000 30,000

Indirect Labour:

In factory 15,000
In office 20,000
In selling 18,000
In distribution 12,000 65,000

Indirect expenses:

Relating to factory 6,000

Relating to office 3,000
Relating to selling 1,000 10,000

You are required to prepare a cost sheet showing cost per unit and total cost at each stage.

PROBLEM NO: 10
Draw a statement of cost from the following particulars:

Particulars `

Opening Stock (1) Materials 2,00,000

(2) Work in Progress 60,000

(3) Finished goods 5,000

Closing Stock (1) Materials 1,80,000

(2) Work in Progress 50,000

(3) Finished goods 15,000

Materials purchased 5,00,000

Direct wages 1,50,000

Manufacturing expenses 1,00,000

Sales 8,00,000

Selling and distribution expenses 20,000

Cost sheet – with details of Overheads:

PROBLEM NO: 11
Material used `62,600; Direct Labour charges `55,400; Work overhead `72,000; Establishment expenses
`24,000; Selling expenses `9,000. Calculate: (a) Total cost, (b) Percentage of works cost to price cost, (c)
Percentage of administration overheads on works cost, (d) Percentage of selling overheads on work cost.

PROBLEM NO: 12

The accounts of a machine manufacturing company disclose the following information for six months
ending 31st December 1978.

Particulars `

Materials used 1,50,000

Direct wages 1,20,000

Factory overheads 30,000

Administrative expenses 15,000

Prepare cost sheet for the half year and calculate the price which the company should quote for the
manufacture of a machine requiring materials valued at ` 1,250 and expenditure in productive wages `
750, so that the price might yield a profit of 20% on the selling price.

PROBLEM NO: 13
The accounts of ABC Co., Ltd., show the following

Material used 7,00,000 Works overheads expenses 1,62,000

Direct wages 5,40,000 General expenses 1,12,160

Prepare a statement showing the following: (a) Works cost, (b) Total costs, (c) Percentage of works
overhead to direct wages and (d) Percentage of general overheads to works cost. What price should the
company quote to manufacture a machine which will require an expenditure of `1,000 on materials and
`800 as wages, so that it will yield a profit of 20% on the sale price?

Unit-2
2 MARK
1. What is inventory control?

2. What is bin card?

3. Explain perpetual inventory system.

4. What is EOQ?

5. Mention the advantages of material control

6. What is ‘centralized purchasing’?

7. What are the advantages of centralized purchasing?

8. Mention the objectives of material control

9. What are the departments involved in the organization for material control?

10. What is meant by decentralized purchasing?

16 MARK
1. What are the objectives of material control?

2. What are the salient features of material cost control?

3. Explain the terms ‘Minimum level’, ‘Maximum level’ and ‘Ordering level’ with regard to

maintenance of stock.

4. Write a short note

i. JUST IN TIME INVENTORY

ii. VED ANALYSIS
iii. AUTOMATIC ORDER SYSTEM
iv. ORDERING CYCLE PERIOD
v. MINI- MAX METHOD
vi. INVENTORY TURNOVER RATIO
vii. INPUT OUTPUT ANALYSIS

5. Write a note on

1. FIFO METHOD
2. LIFO METHOD
3. SPECIFIC PRICE METHOD
4. BASE STOCK METHOD
5. HIFO METHOD

PROBLEMS
PROBLEM: 1

Calculate Economic Order Quantity from the following information: Annual usage: 600 units;
Cost of placing an order: `12; Price of material per unit: `20; Cost of storage: 20%.

PROBLEM: 2

From the following data, find out economic order quantity: Annual usage 6,000 units; Cost per
unit `0.30; Buying cost `7 per order; Carrying cost 15% of average inventory holding.

PROBLEM: 3

From the following particulars, prepare stores ledger adjustment account under FIFO method.

Date Particulars Unit ` P.U. Date Particulars Units `

s P.U.

Mar. 2 Purchases 200 200 Mar. Issued 220 --

18
Mar.4 Issued 150 -- Purchases 150 230
Mar.
Mar. 6 Purchases 200 220 Issued 190 --
 Mar.10 Issued 100 -- 24 Issued 30 --

Mar. 16 Purchases 200 210 Mar.

25

Mar.
28

PROBLEM: 4

The stock in hand of a material as on 1 st September was 500 units at `10 per unit. The following
purchases and issues were subsequently made. Prepare the store ledger account showing how the value
of the issue would be recorded under FIFO method.

Date Particulars Units ` Date Particulars Units

P.U.

Sep. 6 Purchases 100 11 Sep. 9 Issues 500

Sep. 20 Purchases 700 12 Sep. 22 Issues 500

Sep. 27 Purchases 400 13 Sep. 30 Issues 500

Oct. 13 Purchases 1,000 14 Oct. 15 Issues 500

Oct. 20 Purchases 500 15 Oct. 22 Issues 500

Nov. Purchases 400 16 Nov. 11 Issues 500

17

PROBLEM: 5

The stock of a material as on 1 st April 2009 was 200 units at `2 each. The following purchases
and issues were made subsequently. Prepare store ledger account showing how the value of the issues
would be recorded under LIFO method.

Date Particular Units ` P.U. Date Particular Units

s s

April 5 Purchases 100 2.20 April 7 Issues 100

April 10 Purchases 150 2.40 April 12 Issues 100

 April 20 Purchases 180 2.50 April 28 Issues 200

April 2 Issues 150 --

PROBLEM: 6

From the following particulars write up the priced store ledger under LIFO

Date Particulars Date Particulars

Dec. Stock in hand 500 units at Dec. 6 Issued 300 units

1 `20
Dec. 6 Returned to store 10 units (issued on 4th Dec.)
Dec. Issued 200 units
Dec. 7 Issued 100 units
3
Purchased 150 units at `22
Dec. 8 Issued 50 units
Dec.
Issued 100 units
3
Purchased 200 units at `25
Dec.
4

Dec.
5

On 10th it was noticed that there is a shortage of 10 units.

PROBLEM:7 (Simple Average method)

The following particular have been extracted in respect of material X. Prepare ledger account
showing receipts and issue pricing material issued on the basis of simple average method.

Date Particulars Unit ` P.U. Date Particulars Units

s

Oct. 3 Purchases 500 4 Oct. 5 Issues 400

Oct. 13 Purchases 900 4.3 Oct. Issues 600

15
Oct. 23 Purchases 600 3.8 Issues 600
Oct.
25
PROBLEM: 8 (Weighted average method)

The following particular have been extracted in respect of material X. Prepare ledger account
showing receipts and issue pricing material issued on the basis of weighted average method.

Date Particulars Unit ` P.U. Date Particulars Units

s

Oct. 3 Purchases 500 4 Oct. 5 Issues 400

Oct. 13 Purchases 900 4.3 Oct. Issues 600

15
Oct. 23 Purchases 600 3.8 Issues 600
Oct.
25

PROBLEM: 9 (Various stock levels)

From the following information, calculate: a) Maximum stock level; b) Minimum stock level; 3)
Re-order level.

Minimum 240 units per day Re-order quantity 3,600 units

consumptions
300 units per day Re-order period 10 to 15 days
Normal consumption
420 units per day Normal order period 12 days
Maximum consumption

Unit-3
2 MARK
1. Write a short note on Labour Turnover.

2. What are the methods of measuring labour turnover?

3. Explain ‘Flux method’ of measuring ‘Labour Turnover ‘.

4. Enumerate the ‘Replacement costs’ of labour turnover.

5. What is merit rating?

6. Write a note on ‘Idle time’.

7. Write a note on overtime.

8. What is Job Evaluation?

9. What are the advantages of Job Evaluation?

10. Mention the objectives of Time-keeping.

16 MARKS
1. Explain the methods of wages payment.

2. Explain the various incentive of payments to workers.

3. Explain the procedure for recording of Labour time and ideal time.

4. Enumerate the causes and effects of labour turnover.

PROBLEMS
PROBLEM: 1

The extracts from the payroll of Mr. Santhosh & Bros. is as follows: calculate labour turnover by
applying.

 Separation method
 Replacement method
 Flux method

Number of employees at the beginning of 2005 150

Number of employees at the end of 2005 200

Number of employees resigned 20

Number of employees discharged 5

Number of employees replaced 20

PROBLEM: 5

From the following particulars, you are required to prepare a statement of labour cost showing the cost
per day of 8 hours.
 a) Monthly salary `200

b) Leave salary 5% of salary

c) Employer’s contribution to Provident fund 8% of (a) and (b)

d) Employer’s contribution to State Insurance 2.5% of (a) and (b)

e) Pro-rata expenditure on amenities to labour `17.95 per head, per month

f) No. of working hours in a month 200

PROBLEM: 6

The output of a worker X is 100 units in 40 hours per week. Graduated time rate is `4 per hour.
Ordinary piece rate is `2 per unit. Show the earnings of the worker under piece rate and time rate
system.

PROBLEM: 7

With the help of the following information ascertained the wages paid to the worker X and Y
Taylor’s Differential piece rate system. Standard time allowed: 40 units per hour; Simple time rate: Rs.4
per hour. Differential piece rate to be applied: 75% of piece rate – When below standard; 125% of piece
rate – When at and above standard. The workers have produced in a day of 8 hours as follows: X – 300
units, Y – 420 units.

PROBLEM: 8

Calculate the earning of workers A, B and C under Merrick’s differential piece rate system when
basic piece rate is guaranteed below standard and the workers get 108% of basic piece rate between
100% to 120% efficiency and 120% of basic piece rate above 120% efficiency.

Given: Basic piece rate = 50 paise per piece; Production of worker A = 2,000 Numbers per day; B = 1,800
Number per day; C = 2,400 Numbers per day; standard production per day = 1,920 Numbers.

PROBLEM: 9
 The following are the particular applicable to a work process: Time rate `5 per hour; High task 40
units per week; Piece rate above the high task `6.5 per unit.

In a 40 hour week, the production of the worker was as follows: A – 35 units; B – 40 units; C – 41 units; D
– 52 units. Calculate the wages of the workers under Gantt’s task bonus plan.

PROBLEM: 10

A worker is paid at 25 paise per hour for completing a work within 8 hours. If he completes the
work within 6 hours, calculate his wages under Halsey plan when the rate of premium is 50%. Also
ascertain the effective hourly rate of earning by the worker.

PROBLEM: 11

Calculate earnings of a worker under Halsey-weir scheme. The bonus is 33.33% of time saved.
Time allowed – 48 hours; Time taken – 36 hours; Rate per hour – `10.

PROBLEM: 12

Calculate the wages due under the Rowan plan with the following details: Standard time – 9
hours; Time taken – 6 hours; Normal rate – 0.75 paise per hour. Overhead recovered 150% of the direct
wages.

PROBLEM: 13

Standard time allowed for a job is 20 hours, time taken for completion 16 hours. Rate per hour
is `20. Find total earnings as per Bedaux scheme.

PROBLEM: 14

Calculate earnings of a worker under Barth plan if the time allowed is 48 hours, time taken is 40
hours and rate per hour is `10.

PROBLEM: 15

Standard output per day of 8 hours is 16 units. Actual output of a worker for 8 hours is 20 units.
Rate per hour is `10. Calculate the wages payable to the workers according to the Emerson’s efficiency
plan.