unit 1 introduction of cost accounting and cost...

B.V. Patel Institute of Business Management, Computer & Information

Technology, Uka Tarsadia University

Question Bank 030100304: Fundamentals of Cost Accounting

Unit 1 Introduction of Cost Accounting and Cost Sheet

Answer the following. (1 mark)

1. List the components of prime cost.

2. Which method of costing would be most appropriate for printing press?

3. Which is the other name of factory overhead?

4. Which method of costing is used in a Refinery?

5. What is the other mane of office overhead?

6. Which method of costing would be most appropriate for transport?

7. Which types of cost unit is used in Taxtiles Industries?

8. Total cost or cost of sales = cost of production +?

9. Work or factory cost = prime cost +?

10. Which types of cost unit is used in an automobile industry?

Briefly answer the following. (2 marks)

1. Define cost accounting.

2. List out any four features of cost accounting.

3. List down any two objectives of cost accounting.

4. What is cost sheet?

5. List down the methods of costing.

6. List out the techniques of costing.

Answer the following (limit 250 words). (5 marks)

1. Difference between cost accounting and management accounting.

2. Explain Limitation of cost accounting.

3. Explain methods of costing.

4. Explain techniques of costing.

5. The books of Adarsh manufacturing company present the following data for the

month of April, 2007. Direct labour cost Rs. 17,500 being 175% of the works

overhead; cost of goods sold excluding administration expenses Rs. 56,000.

Inventory accounts showed the following opening and closing balances:

Particulars April 1st April 30

th

Raw materials Rs. 8,000 Rs.10,600

Work-in-progress Rs. 10,500 Rs. 14,500

Finished goods Rs. 17,600 Rs. 19,000

Other data are:-

Selling expenses Rs. 3,500

General and administration expenses Rs. 2,500

Sales for the month Rs. 75,000

Prepare statement of cost sheet.




6. Modern manufacturing company submits the following information on March 31 :

Particulars Rs.

Sales for the year 2,75,000

Inventories at the beginning of the year

Finished goods

Work in progress

7,000

4,000

Purchase of materials for the year 1,10,000

Raw materials at the beginning of the year 3,000

Raw materials at the end of the year 4,000

Direct labour 65,000

Factory overhead was 60% of the direct labour cost

Inventories at the end of the year

Work in progress

Finished goods

6,000

8,000

Other expenses for the year

Selling expenses 10% of sales

Administrative expenses 5% of sales

Prepare statement of cost sheet.

7. Electronics ltd. Furnishes the following information for 10,000 TV valves

manufactured during the last year

Particulars Rs.

Materials 4,50,000

Direct wages 3,00,000

Power and consumable stores 60,000

Factory indirect wages 75,000

Lighting of factory 27,500

Normal defective work (cost of rectification) 15,000

Clerical salaries and management expenses 1,67,500

Selling expenses 27,500

Sale proceeds of scrap 10,000

Plant repairs, maintenance and depreciation 57,500

The net selling price was Rs. 158 per unit and all units were sold.

Prepare a cost sheet.

8. ABC is manufacturing refrigerators and the following details are furnished in respect

of its factory operations for the month ended 31st march.

Particulars Rs.

Work-in-progress in the beginning

At prime cost

Manufacturing expenses

51,000

15,000

Work-in-progress at the end

At prime cost

45,000




Manufacturing expenses 9,000

Stock of raw materials in the beginning 2,25,000

Purchase of raw materials 4,77,000

Direct labour 1,71,000

Manufacturing expenses 84,000

Closing stock of raw materials 2,04,000

On the basis of above data, prepare a statement showing the cost of production. Also

indicate separately the amount of manufacturing expenses which enter into the cost of

production.

9. Work out in cost sheet form the unit cost of production per ton of special paper,

manufactured by a paper mill in January, from the following data.

Direct materials:

Paper pulp : 500 tons @ Rs. 1,000 per ton

Other materials : 100 tons @Rs. 600per ton

Direct labour:

80 skilled men @ Rs. 60 per day for 25 days

40 skilled men @ Rs. 40 per day for 25 days

Direct expenses:

Special equipment Rs. 60,000

Special dyes Rs. 20,000

Works overhead:

Variable @100% on direct wages

Fixed @ 60% on direct wages

Administration overhead @10% and selling and distribution overhead @15% on works

cost.

400 tons of special papers were manufactured and a sum of Rs. 16,000 was realized by

selling of waste material during the course of manufacture. The scrap value of the special

equipment after utilization in manufacture is nil.

10. Inter Co. Ltd. has received an enquiry for supply of 10,000 steel folding chairs. The costs

are estimated as under:-

Raw material: 1, 00,000 kgs at Rs. 8 per kg.

Direct wages: 10,000 hours at Rs. 8per hour

Variable overheads: factory Rs.4.80 per hour

Selling and distribution Rs. 35,000

Fixed overheads: factory Rs. 15,000

Selling and distribution: Rs. 40,000.

Prepare a statement showing the per chair price to be fixed which will result in

profit of Rs. 20% on selling price.




11. The following extract of costing information relates to commodity „A‟ for the half year

ending 31st December, 2006.

Particulars Rs. Particulars Rs.

Purchases of Raw materials 1,20,000 Stock (31st Dec. 2006)

Works overheads 48,000 Raw materials 22,240

Direct wages 1,00,000 Finished products (2000 tons) 32,000

Carriage on purchases 1,440 Work-in-progress (1st July,

2006)

4,800

Stock(1st July , 2006); Work-in-progress (31

st Dec.,

2006)

16,000

Raw materials 20,000 Sales finished product 3,00,000

Finished products (1000

tons)

16,000

Selling and distribution overheads are Rs. 1 per ton sold 16,000 tons of commodity were

produced during the period.

You are required to prepare statement of cost sheet.

12. Following information has been obtained from the cost records of Aditya chemicals Ltd.

For 2006:


Finished goods on 1-1-2006 50,000 Heat, light and power 20,000

Raw materials on 1-1-2006 10,000 Factory insurance and taxes 5,000

Work-in-progress 1-1-2006 14,000 Repairs to plant 3,000

Direct labour 1,60,000 Factory supplies 5,000

Purchase of raw materials 98,000 Depreciation -factory building 6,000

Indirect labour 40,000 Depreciation - plant 10,000

Other information made available is-

Factory cost of goods produced in 2006 Rs. 2, 80,000

Raw material consumed in 2006 Rs. 95, 000

Cost of goods sold in 2006 Rs. 1 60,000

No office and administration expenses were incurred during the year 2006. Prepare a

statement of cost for the year ending 2006 giving maximum possible information and its

break-up.




13. Calculate prime cost, factory cost, cost of production, cost of sales and profit from the

following particulars :


Direct materials 1,00,000 Depreciation

Direct wages 30,000 Factory plant 500

Wages of foreman 2,500 Office premises 1,250

Electric power 500 Consumable stores 2,500

Lighting : factory 1,500 Manager‟s salary 5,000

office 500 Directors „ fees 1,250

Repairs and renewals: Office stationery 500

Factory plant 3,500 Telephone charges 125

Office premises 500 Postage and telegrams 250

Transfer to reserves 1,000 Salesmen‟s salaries 1,250

Discount on shares written off 500 Travelling expenses 500

Dividend 2,000 Advertising 1,250

Storekeeper‟s wages 1,000 Warehouse charges 500

Oil and water 500 Sales 1,89,500

Rent factory 5,000 Carriage outward 375

Rent office 2,500 Income tax 10,000

14. Prepare the cost sheet to show the total cost of production and cost per unit of goods

manufactured by a company for the month of July, 2006. Also find the cost of sales and

profits.


Stock of raw materials 1-7-2006 3,000 Factory rent and rates 3,000

Raw materials purchased 28,000 Office rent 500

Stock of raw materials 31-7-

2006

4,500 General expenses 400

Manufacturing wages 7,000 Discount on sales 300

Depreciation on plant 1,500 Advertisement expenses to be

charged fully

600

Loss on sale of a part of plat 300 Income tax paid 2,000

Sales 50,000

The number of units produced during July, 2006 was 3,000.

The stock of finished goods was 200 and 400 units on 1-7-2006 and 31-7-2006

respectively. The total cost of the units on hand on 1-7-2006 was Rs.2, 800. All these

had been sold during the month.




15. In a factory two types of radios are manufactured, viz., Orient and Sujon Models.

From the following particulars prepare a statement showing cost and profit per radio

sold. There is no opening or closing stock.

Particulars Orient (Rs.) Sujon (Rs.)

Materials 27,300 1,08,680

Labour 15,600 62,920

Works overhead is charged at 80% on labour and office overhead is taken at 15% on

works cost. The selling price of both radios is Rs. 1,000. 78 Orient radios and 286 Sujon

radios were sold.




Unit 2 Material Accounting


1. List down the methods of valuing materials issue.

2. Give full form of LIFO method.

3. Give full form of FIFO method.

4. Write down the formula for calculating weighted average price for issuing materials

5. How is danger level of materials calculated?

6. Re-order level = maximum level ×?

7. Draw the diagram of EOQ.

8. Write down the formula of Minimum stock level.

9. Write down the formula of Average stock level.

10. Write down the formula of Maximum stock level.

11. Define material turnover ratio.

12. If the minimum stock level and average stock level of a material are 5,000 and 7,000

units respectively, find out its re-order quantity.

13. From the following information. Find out Material turnover ratio.

Opening stock 1,400 kgs. , purchase 23,000 kgs. , closing stock 400 kgs.


1. State the difference between Bin card and Stores ledger.

2. Draw a specimen of a bin card.

3. About 50 items are required everyday for a machine. A fixed cost of Rs. 50 per order

is incurred for placing an order. The inventory carrying cost per item amounts to Rs.

0.02 per day. The lead period is 32 days. Compute: (1)Economic order quantity(2)

Re-order level

4. From the following information calculate Economics order quantity:

Annual consumption 9,000 units

Cost per unit Rs.30

Cost of placing an order Rs. 15

Cost of storing unit 10%

5. From the following information calculate (a) Economics order quantity (b) the

number of orders to be placed in one quarter of the year:

Quarterly consumption of material 2000 kgs.

Cost of placing one order Rs.50

Cost per unit Rs. 40

Storage and carrying cost 8% on average inventory




6. Calculate EOQ from the following:

Consumption during the year 600 units

Ordering cost Rs. 12 per order

Carrying cost 20%

Price per unit Rs. 20.

7. From the following particulars, calculate the economic order quantity.

Annual requirements 1,600 units

Cost of materials per unit Rs. 40

Cost of placing and receiving one order Rs. 50

Annual carrying cost of inventory 10% of inventory value.

8. From the following information find out material turnover rate:-

Opening stock Rs. 1, 20,000

Closing stock Rs. 84,000

Purchase of material Rs. 3, 95,000

Generally stock are valued at cost price plus (+) 20%

9. From the following data, you are required to determine E.O.Q and also state how

many times during the year order should be placed:

Bi- monthly consumption 1,500 units



Per unit cost of annual storage expenses 10%.

10. EOQ units 1,500, price per unit Rs.10, order cost per order Rs.30 carrying cost per

unit (Annual) Rs. 1.50.

Find out:

(a) Usage per annum

(b) No. of orders per year

11. EOQ 200 units


Annual carrying cost 10%

Price per unit Rs. 130

Compute:

(a) Weekly consumption of material

(b) Number of orders to be placed in a year

12. From the following information of March 2010 of Saloni Co. Ltd.:

Find out the purchase of that month

Inventory Turnover: 3

Average stock: Rs. 15,000

Closing stock was double the amount of opening stock.




13. From the following information. Calculate the economic ordering quantity.

Monthly consumption units 12,000


Ordering cost Rs. 25

Cost of placing an order 15%

14. From the following particulars calculate the Economic Order Quantity and state how

many times during the year order should be placed:

Bi-monthly consumption 600 units

Cost of placing an order Rs. 1,000

Carrying cost 5%

Selling price per unit Rs.400

15. From the following data obtained in respect of an item of store, calculate the

economic ordering quantity for the item:

(a) Total annual consumption 10,000 kgs.

(b) Cost of carrying inventory: 10%

(c) Ordering cost Rs. 8

(d) Purchase price per kg. 40 paise.


1. Explain the concept of “ABC” analysis as a technique of inventory control.

2. Write a brief note – Bin card.

3. Write a brief note – stores ledger.

4. Record the following transactions in the stores ledger account. The issues are priced at

the weighted average price

1-4-2006 Balance 1,000 units @Rs. 5 per unit Rs. 5,000.

2-4-2006 Issued 250 units

6-4-2006 Received 4,000 units @Rs. 6 per unit.

7-4-2006 Issued 1,500 units

8-4-2006 Returned to stores 100 units, issued on April 2.

10-4-2006 Received 1,500 units @Rs. 7.50 per unit.

15-4-2006 Issued 1,600 units

18-4-2006 Received 500 units @Rs. 7.50 per unit.

21-4-2006 Issued 600 units

23-4-2006 Returned to vendor 200 units, received on April 18.

25-4-2006 Received 1,000 units @Rs. 7.50 per unit.

29-4-2006 Issued 1,250 units




5. The following information is provided by SUNRISE INDUSTRIES for the month of

April

Stock on 1st April 100 units at Rs. 5 per unit.

Purchases:

5th

April 300 units at Rs. 6

8th

April 500 units at Rs.7

12th

April 600 units at Rs. 8

Issues:

6th

April 250 units

10th

April 400 units

14th

April 500 units

Required calculate using FIFO and LIFO method of pricing issues.

6. Show the stores ledger entries as they would appear when using;

(a) The weighted average method

(b) The LIFO method

Of pricing issues, in connection with the following transactions:

Date Particulars Units Value (Rs.)

1-4-2008 Balanced in hand 300 600

2-4-2008 Purchased 200 440

4-4-2008 Issued 150 -

6-4-2008 Purchased 200 460

11-4-2008 Issued 150 -

19-4-2008 Issued 200 -

22-4-2008 Purchased 200 480

27-4-2008 Issued 250 -

7. The following is a history of the receipts and issues of materials in a factory during

February, 2007.

Date Particulars Quintals Value (Rs.)

1-2-2008 Balanced in hand 500 @Rs.25

3-2-2008 Issued 70 -

4-2-2008 Issued 100 -

8-2-2008 Issued 80 -

13-2-2008 Received from vendor 200 @Rs. 24.50

14-2-2008 Refund of surplus from a work order 15 @Rs.24

16-2-2008 Issued 180 -

20-2-2008 Received from vendor 240 @Rs.24.375

24-2-2008 Issued 304 -

25-2-2008 Received from vendor 320 @Rs.24.315




26-2-2008 Issued 112 -

27-2-2008 Refund of surplus from a work order 12 @Rs.24.50

28-2-2008 Received from vendor 100 @Rs. 25

Issues are to be priced on the principle of “FIFO” method. The stock verifier of the

factory noted that on 15th

he had found a shortage of 5 quintals and on 27th

another

shortage of 8 quintals.

Write on the complete Stores Ledger Account in respect of the above materials.

8. At the beginning of October, 2006, quality Brush Company had in stock 10,000

brushes valued at Rs. 10 each. Further purchases were made during the month as

follows:

7th

October 4,000 Brushes @Rs. 12.50

14th

October 6,000 Brushes @ Rs. 15

24th

October 8,000 Brushes @ Rs. 16.50

Issues to shop floor were as follows:-

16th

October 16,000 Brushes

28th

October 10,000 Brushes

You are required prepare stores ledger account under the LIFO, FIFO and Weighted

average method.

9. Shriram enterprises manufacture a special product „ZED‟ the following particulars are

collected for the year.

Cost of placing an order Rs.100

Annual carrying cost per unit Rs. 3.25

Normal usage 50 units per week

Minimum usage 25 units per week

Maximum usage 75 units per week

Reorder period 4 to 6 weeks

Compute from the above

(a) Reorder level (b)Maximum level

(c)Minimum level (d)Average stock level

(e)Reorder quantity




10. Receipts and issues of goods of Ashok Traders were as follows. Prepare stock

register on weighted average method. The stock on 1st April 2008 was 6 dozones

at Rs. 8per piece.

Date Receipts Qty.

(doz.)

Rate per

piece (Rs.)

Date Issues Qty.

(pieces)

2-4-2008 Purchases 16 9 10-4-2008 Issued to jobs 180

6-4-2008 Purchases 18 10 17-4-2008 Issued to jobs 120

14-4-2008 Purchases 240

(pieces)

Rs.144 per

doz.

22-4-2008 Shortage 15

21-4-2008 Purchases 20 8 25-4-2008 Issued to jobs 14 doz.

26-4-2008 Purchases 324 Rs.132 per

doz.

27-4-2008 Issued to jobs 46

29-4-2008 Return from

job (from

issue of 27)

6 piece 30-4-2008 Shortage 20

11. A company uses three raw materials in the production of its sole product. The

following information is available:

Raw

materials

Usage per unit

of product

Reorder

quantity

Price

per kg.

Delivery

period

Order

level

Minimum

level

Kg. Kgs. Rs. Weeks Kgs. Kgs.

A 5 5,000 10 1 to 3 4,000 ?

B 2 2,500 30 3 to 5 2,375 ?

C 3 5,000 15 2 to4 ? 1,000

Weekly production varies from 80 to120 units, averaging 100 units. You are required to

find out:

(1) Minimum stock of A (2) Maximum stock of A and B

(3) Reorder level of C (4) Average stock level of A.

12. From the following information calculate:

(1) EOQ

(2) Re-order level

(3) Minimum level

(4) Danger level

(5) Average stock level

Maximum stock level 6,450 units

Minimum consumption 100 units per day

Average consumption 300 units per day

Minimum time 3 days

EOQ is 50% of Re-order stock level

Maximum time for emergency purchase 2 days.




13. The following figures are taken from the records of a co. for the year 2006. The

valuation of inventory is Rs. 2.00 per kg.

Materials Opening stock Purchases Closing stock

X 2,800 kgs. 46,000 kgs. 800 kgs.

Y 4,000 kgs. 7,200 kgs. 4,800 kgs

Calculate the material turnover ratio of the above two materials and express in number of

days the average inventory is held.

14. In manufacturing its product, Vina Company uses two types of raw materials „A‟

and „B‟. information is given as under:

Raw materials Reordering

level units

Delivery

period days

Average

consumption

per day units

E.O.Q. units

„A‟ 8,000 4 to 6 1,200 2,500

„B‟ 2,800 3 to 5 700 1,500

Maximum delivery period for emergency purchase of „A‟ material is one day: find

out:

(1) Minimum level of „A‟

(2) Average stock level of „A‟

(3) Danger level of „A‟

(4) Maximum level of „B‟

(5) Safety stock level of „B‟

15. Write short notes on: LIFO method.




Unit-3 Labor Cost


1. Define labour turnover rate.

2. What is time wage system?

3. What is piece wage system?

4. Which formula used to find out labour turnover according to replacement method?

5. Which formula used to find out labour turnover according to separation method?

6. List down various labour costs.

7. Which formula used to find out labour turnover according to flux method?

8. List down the methods of labour turnover rate?

9. Average number of employees for the year 500 and No. of employees replaced during the

year 17 and No. of employees resigned during the year 8. Labour turnover rate as per flux

method is 10% find out the number of employees dismissed during the year.


1. Write any two advantages of Halsey premium plan.

2. Write any two advantages of Rowan plan.

3. From the following data provided to you find out the Labour Turnover Rate by applying :

(a) Replacement method (b) Separation method

No. of workers at the beginning of the month 500

No. of workers at the end of the month 600

During the month, 5 workers left, 20 persons were discharged and 75 workers were

recruited. Of these, 10 workers were recruited in the vacancies of those leaving, while the

rest were engaged for an expansion scheme.

4. Calculate total wages earned(including bonus) by a worker for a working day of 8 hours

under Halsey and Rowan plans:

Standard production per hour : 6 units

Total production during the day : 64 units

Rate of wages : Rs. 2 per hour

5. Find out wages under piece rate method and Halsey plan.

TA = 15 minutes, T = 10 minutes and R = Rs.2 per hour.

6. The following is the details of workers of Devsar Cotton Mill for the month of March

2007. Find out No. of workers recruited in the mill.

Number of employee at the beginning of the month 1,900

Number of employee at the end of the month 1,100

Number of employee at the beginning of the month 950

Number of employee who left the mill 180




Rate of labour turnover as per flux method 23.6%.

7. Dipesh has taken 20 hours to complete a job. The wage rate per hour is Rs. 8. If he

has received Rs. 192 as total wages according to Rowan plan, what would be the

amount of wages earned by him according to Halsey Plan and Piece wage plan?

8. Following information has been obtained from personnel department of a factory

for the year 2004:-

Number of workers as on (1-1-2004) 270

Number of workers resigned 27

Number of workers dismissed 6

Number of workers retired 3

Number of workers newly appointed 96 (including 72 workers employed due to

expansion scheme) Calculate labour turnover rate: (1) By Replacement method

(2) By Separation method

9. Shri Ashok takes 40 hours time to finish job work. Wage per hour Rs. 15. He

receives Rs. 900 under Rowan plan. Calculate wages under Halsey plan.

10. A job can be done in 15 minutes by an average worker. Give three different

methods of payment by results and show the cost per article for each method if the

job is done in 10 minutes. Time rate of Rs. 3 per hour. Calculate wages as per

(a) Rowan premium plan (b) Halsey premium (40%)

11. The following particulars apply to a job. Standard time 50 hours, time taken 40

hours, material cost of a product is Rs. 150. Factory cost Rs. 300. Factory

overheads are recovered at Rs.1.50 per hour of actual time taken. Calculate direct

wages and rate of wage per hour under Halsey plan.


1. State how Rowan scheme is batter than Halsey scheme.

2. The following information is extracted from the record of Bharat & Company Ltd. for

the month of March 2003:

Number of employee at the beginning of the month 950

Number of employee at the end of the month 1,050

Number of employees resigned 10

Number of employees discharged 30

Number of employees replaced in the vacancies 20




Number of employees appointed due to expansion scheme 120

Calculate labour turnover rate: (1) By Replacement method (2) By Separation method

(3) Flux method.

3. The following information available from the personnel department of Chikhli Cotton

Mills Ltd. calculate labour turnover rate: (1) By Replacement method (2) By

Separation method (3) Flux method.

Number of workers on 1-3-2007 5,360


During the month of March 2007




Number of workers newly appointed 500 (of which 40% workers were taken under

expansion plan)

4. The number of workers in shyam ltd. was 765 on 1st January 2003. The number of

workers who left the factory was 105 up to 30th

June, 2003 and new employees

recruited were 75. Between 1st July, 2003 and 31

st December, 2003 90 workers left

the factory and 80 workers were recruited (out of which14 workers were recruited due

to expansion scheme.

Calculate labour turnover rate by replacement method for first six months and by

separation method for the remaining six methods.

5. From the information of Arpit Ltd. for the month April 2010. Find out labour turnover

rate: (1) By Replacement method (2) By Separation method (3) Flux method.

Workers on 1-4-2010 4,500

Separated by resignation 300

Workers suspended 500

Workers on 30-4-2010 5,500

Workers retired 600

Workers newly appointed 700 (out of the new appointment 60% of the works are

appointed under expansion plan)

6. The following information available from the personnel department of virag Silk

Mills Ltd. calculate labour turnover rate: (1) By Replacement method (2) By

Separation method (3) Flux method.



During the month of April 2010




Number of workers newly appointed 500 (of which 140 workers were taken under

expansion plan)




7. A worker is allowed 150 hours to complete a job. He completed the job in 130 hours.

Basic rate of wages is Rs. 12.50 per hours. The material cost Rs. 6,500 and the factory

overheads are recovered at 150% of total direct wages. Calculate the factory cost of

the product under:

(a) Time wage method (c) Piece wage method

(b) Halsey premium plan (d) Rowan premium plan

8. During first week of April 2007 the workman Mr. Kalyan manufactured 300 articles.

He receives wages for a guaranteed 48 hour week at the rate of Rs. 4.5 per hour. The

estimated time to produce one article is 10 minutes and under incentive scheme the

time allowed is increased by 20%.calculate his gross wages according to:

(a) Piece work with a guaranteed weekly wage

(b) Rowan premium plan

(c) Halsey premium plan

(d) Time wage method

9. A worker takes 9 hours to complete a job on daily wages and 6 hours on a scheme of

payment by result. His daily rate is 75 paise an hour: the material cost of the product

is Rs. 4 and the overheads are recovered at 150% of the total direct wages. Calculate

the factory cost of the product under: (1) Piece rate method (2) Rowan premium

plan (3) Halsey premium.

10. From the following information calculate wages as per week (a) Rowan premium plan

(b) Halsey premium (40%) (c) Time wage system (d) Piece rate method

Working hours per week 48

Wage rate per hour Rs. 3.75

Normal tine for preparing 1 unit 24 minutes

Normal production per week 120 units

Actual production per week 150 units

11. One of the workers, Mr. Raja is allowed 10 minutes as standard time to produce one

unit. He takes 10 hours to produce 120 units. He is paid Rs. 10 per hour find out his

wages as per (a) Rowan premium plan (b) Halsey premium (40%) (c) Time wage

system (d) Piece rate method

12. Find out total incomes of Nilkumar under following circumstances:

Rowan premium plan

40 % Bonus under Halsey Premium plan

Rate per hour 60 paise

Standard time for preparing 1 dozen units 2 hours.

Actual time taken for preparing 25 dozen unit 40 hours




If price of material is Rs. 20 and factory overhead is recorded at 150 % of direct

wages.

13. Calculate the earnings of a worker under (a) Rowan premium plan (b) Halsey

premium (40%) (c) Time wage system (d) Piece rate method

Hourly rate of wages Rs. 0.75

Standard time for producing 1 dozen articles is 3 hours. Actual time taken by the

worker to produce 20 dozen articles is 48 hours.

14. A workman‟s wage for a guaranteed 44 hour week is Rs. 0.19 per hour. The estimated

time to produce one article is 30 minutes and under incentive scheme the time allowed

is increased by 20%. During one week the workman manufactured 100 articles.

Calculate his gross wages under each of the following methods of remuneration:

(a) Time rate

(b) Piece work with a guaranteed weekly wage

(c) Rowan premium plan

(d) Halsey premium plan

15. Calculate the earnings of a worker from the following information:

1. Time wage system

2. Piece rate method 3. Halsey plan

4. Rowan plan

Standard time 30 hours and Time taken 20 hours

Hourly rate of wages is Rs. 1 per hour plus a dearness allowance @ 50 paise per

hour worked.




Unit-4 Overhead Accounting


1. Define overhead.

2. What is machine hour rate?

3. Define fixed overhead.

4. Define variable overhead.

5. What is the basis of apportionment of depreciation on plant?

6. List down element wise overhead.

7. List down behavior wise overhead.

8. List down functional overhead.

9. What is the basis of apportionment of canteen expense?

10. What is the basis of apportionment of power expense?

11. What is the basis of apportionment of general lighting?

12. Which formula used to find out depreciation according to machine hour rate?

13. State the ratio of rent and rates incurred by the factory.


1. Write any two differences between allocation and apportionment.

2. Classify the following into Fixed, Semi Fixed and Variable cost.

Cost of materials, salary of foremen, wages of regular workers, rent of factory.

3. Mention the basis of apportionment of following expenses of departments.

Employees State Insurance scheme

Supervisor‟s salary

4. Classify the following items of overhead by function.

Foremen‟s salary

Depreciation of office furniture

Salesmen salary

Printing and stationery

5. Write any two advantages of machine hour rate.

6. Calculate Machine Hour rate from the following:

Cost of machine Rs. 19,200

Estimated scrap value Rs. 1,200

Average repairs and maintenance charges per month Rs. 150.

Standing charges allocated to machine per month Rs. 50.

Effective working life of machine 10,000 hours

Running time per month 166 hours

Power used by machine: 5 units per hour @ 19 paise per unit.




7. Calculate from the following data the Machine Hour Rate for a machine.

Cost of machine Rs. 10,500

Estimated scrap value Rs. 500

Effective working life 20,000 Hours

Running time of 4 weekly period 200 Hours

Weekly payable maintenance expenses Rs. 50

Standing charges for 4 week Rs. 100

Power used: 5 units per hour, Rate Rs. 3 per unit


1. Define machine hour rate. Write down advantages and disadvantages of machine hour

rate

2. Explain the following items:- (a) Cost apportionment (b) cost allocation

3. Explain fixed overhead, variable overhead and semi variable overhead.

4. Draw a chart of classification of overhead. Explain functional overhead.

5. Discuss the difference between direct and indirect expense.

6. Compute the machine hour rate from the following data :

Particulars Rs.

Cost of machine 1,00,000

Installation charges 10,000

Estimated scrap value after the expiry of its life (15 years) 5,000

Rent and rates for the shop per month 200

General lighting for the shop per month 300

Insurance premium for the machine per annum 960

Repairs and maintenance expenses per month 1,000

Power consumption 10 units per hour -

Rate of power per 100 units 20

Estimated working hours per annum 2,200 hours

This includes setting up time of 200 hours

Shop supervisor‟s salary per month 600

The machine occupies 1/4th

of the total area of the shop. The supervisor is expected to

devote of his time for supervising the machine.

7. Calculate Machine Hour Rate from the following:

Particulars Per annum (Rs.)

Rent of the department (space occupied by machine of the

department)

18,000

Lighting (number of men in the department 24, three men engaged on

this machine)

1,200

Insurance (three months) 200

Cotton, waste, oil etc.(annual) 600




Salary of foremen ( of the foremen‟s time is occupied by this

machine and the remainder equally by the other two machines)

18,000

The cost of the machine is Rs. 72,000 and it has an estimated scrap value Rs. 6,000.

It is assumed from past experience:

(a) That the machine will work for 2,000 hours per annum.

(b) That it will incur an expenditure of Rs. 22,000 in respect of repairs and maintenance during

Its entire life.

(c) That it consumes 5 units of power per hour at a cost of 40 paise per unit.

(d) That the working life of the machine will be 22,000 hours.

8. A machine costing Rs. 20,000 is expected to run for ten years at the end of which its

scrap value is estimated to be Rs.2, 000. Installation charges are Rs.200. Repairs during

the entire ten years‟ life of the machine are estimated to be Rs. 1,800 and the machine is

expected to run for 2,190 hours in a year.

Its power consumption would be 15 units per hour at Rs. 5 per 100 units. The machine

occupies of the area of the department and has two points out of a total of ten for

lighting.

The foreman has to devote about of his time to this machine.

The rent for the department is Rs. 300 per month and charges for lighting Rs. 80 per

month. Foreman is paid a salary of Rs. 960 per month.

Find out the hourly rate assuming that insurance is @ 1% per annum of the capital cost of

the machine and the expenses on oil, etc., are Rs. 9 per month.

9. The following information relates to a machine:

Particulars Rs.

Cost of machine (including installation charges of Rs. 5,000) 50,000

Estimated scrap value (at the end of effective working life of 10

years)

10,000

Supervisor‟s salary per month 1,000

General lighting of the shop per month 100

Rent and rates of the shop per quarter 1,500

Insurance premium for the machine per annum 300

Estimated repairs and maintenance charges for the machine per

annum

500

Power 10 units per hour

Rate of power per 100 units Rs.5

Estimated working hours of the machine per annum 2000 hours

The machine occupies of the total floor area of the factory. The supervisor is

expected to devote of time for supervising the machine. General lighting

expenses are to be apportioned on the basis of the floor area. Calculate machine hour

rate.

10. Calculate the Machine Hour Rate from the following details :-

Value of machine Rs. 2, 00,000

Useful life of machine 20 years




The annual working hours of machine 1,000

Electricity of factory (Annual) Rs. 1,600

Annual sundry expenses allocated to the machine Rs. 2,080

Annual factory rent Rs. 2,400

Annual insurance premium of machine Rs. 1,000

Repairs of machine during its life Rs. 40,000

1. The consumption of power in the machine is 2 units per hour. The rate of power is

Rs. 0.40 per unit.

2. The machine occupies th space in the factory.

3. of the total employees work on this machine.

The electricity of the factory is to be distributed on the basis of number of

employees.

11. The following data were obtained from the books of light engineering company for

the half year ended 31st March, 2007:

Particulars Production department Service department

P1 P2 P3 S1 S2

Direct wages (Rs.) 7,000 6,000 5,000 1,000 1,000

Direct Materials (Rs.) 3,000 2,500 2,000 1,500 1,000

Employees (Nos.) 200 150 150 50 50

Electricity (kwh.) 8,000 6,000 6,000 2,000 3,000

Light points (Nos.) 10 15 15 5 5

Asset values (Rs.) 50,000 30,000 20,000 10,000 10,000

Area occupied

(sq.meters)

800 600 600 200 200

The expenses for 6 months were: stores overhead Rs. 400 ; Motive power Rs.

1,500 ; Electric light ; Rs. 200 ; Labour Rs. 3,000 ; Depreciation Rs. 6,000 ; Repairs

and Maintenance Rs. 1,200 ; General overheads Rs. 10,000 ; Rent and Taxes

Rs.600.

From the above information, apportion the expenses among departments on suitable

basis.

12. PH. Ltd. is a manufacturing company having three production departments A,B,

and C and two service departments E and F. The following is the budget for

December, 2007:

Particulars Total

(Rs.)

Production department Service department

A B C E F

Direct material 1,000 2,000 4,000 2,000 1,000

Direct wages 5,000 2,000 8,000 1,000 2,000

Factory rent 4,000

Power 2,500

Depreciation 1,000

Other overheads 9,000




Additional information A B C E F

Area (sq. ft.) 500 250 500 250 500

Capital value of

assets(Rs.)

20,00,000 40,00,000 20,00,000 10,00,000 10,00,000

Machine hours 1,000 2,000 4,000 1,000 1,000

Horse power of machines 50 40 20 15 25

Prepare a statement showing distribution of overheads to various departments.

13. In a factory, there are three production department A, B, and C and two service

department D and E. The details of the expenses during February, 2009 are as

under:

Indirect wages Rs. 3,000

Insurance Rs. 1,500

Canteen expenses Rs. 4,500

Lighting Rs. 2,000

Rent and rates Rs. 3,800

Contribution to ESI Rs. 1,000

Depreciation Rs. 12,000

Power Rs. 22,500

Other information:

Particulars A B C D E

Lighting points 6 4 4 3 3

Direct wages (Rs.) 6,000 5,000 4,000 3,000 2,000

Cost of machine (Rs.) 72,000 48,000 36,000 12,000 12,000

Horse power of machine 6 6 3 - -

Space occupied (Sq. feet) 600 400 500 200 200

Number of workers 5 6 4 2 1

Prepare statement showing: distribution of overheads to various departments

14. The modern company is divided into four departments: P1, P2, P3 are producing

departments and S1 is a service department. The actual costs for a period are as

follows:


Rent 1,000 Supervision 1,500

Repairs to plant 600 Fire insurance in respect of stock 500

Depreciation of plant 450 Power 900

Employer‟s liability for

insurance

150 Light 120

The following information is available in respect of the four departments:

Particulars Dept. P1 Dept. P2 Dept. P3 Dept. S1

Area (sq. metres) 1,500 1,100 900 500

Number of Employees 20 15 10 5

Total wages (Rs.) 6,000 4,000 3,000 2,000

Value of plant (Rs.) 24,000 18,000 12,000 6,000




Value of stock (Rs.) 15,000 9,000 6,000 -

H.P. of plant 24 18 12 6

Apportion the costs to the various departments on the most equitable basis.

15. ABC Ltd. has three production departments P1, P2, and P3 and two service

departments S1 and S2. The following figures are extracted from the records of the

company:

Rs. Rs.

Rent and rates 5,000 General lighting 600

Indirect wages 1,500 Power 1,500

Depreciation of machinery 10,000 Sundries 10,000

Following further details are available:

Particulars Total P1 P2 P3 S1 S2

Floor space (sq.meters) 10,000 2,000 2,500 3,000 2,000 500

Light points 60 10 15 20 10 5

Direct wages (Rs.) 10,000 3,000 2,000 3,000 1,500 500

H.P. of Machinery 150 60 30 50 10 -

Value of Machinery (Rs.) 2,50,000 60,000 80,000 1,00,000 5,000 5,000

Apportion the costs to various departments on the most equitable basis by preparing a

primary departmental distribution summary.

unit 1 introduction of cost accounting and cost...

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