a) Sunk Cost  b) Imputed Cost.

Annual usage                                              90000 units

Buying cost per unit                                   Rs 10

Cost of carrying inventory                        10%cost

Cost per unit                                                Rs 50

The following transactions took place between 1^st and 5^th Jan:

Good received – Rs. 4,600

Good returned – Rs 200

Sales – Rs. 10,500

Returns by customer – Rs. 625

The rate of gross profit is 25% of cost

Prepare a statement to show the valuation of stock as at 31^st Dec.

The following are the expenses per annum of the machine shop:

Rent – 10,000

Rates and water – 4,250

Light and heat – 3,150

Power – A – 5,100; B – 5,000; C – 12,000 and D – 14,500

Administration – 9,500

Running expenses and works sundries etc., – 20,000

Prepare a machine hour rate for each machine assuming 45 hours in a week and 50 weeks a year, 80% utilization and life of machine being 10 years without scrap value.

Supply period – 4 to 6 months

Consumption rate:

Maximum – 600 units per month

Minimum – 100 units per month

Normal – 300 units per month

Yearly – 3,600 units

Storage costs are 50% of stock value, ordering costs are Rs. 400 per order, price per unit of material Rs. 64.  Compute: EOQ, Re-Order level, Minimum Stock Level, Maximum Stock Level and Average Stock Level.

Normal rate per hour  Rs. 12

Standard time per Piece  20 min

In a 9 hour day, “A” produces 26 units and “B” Produces 30 Units.

• Normal working week – 5 days of 9 hours plus 3 late shifts of 3 hours each
• Rate of payment – days work = Re. 1 per hour; late shift = Rs. 1.50 per hour
• Additional bonus payable – Rs. 2.50 per day shift; Rs. 1.50 per late shift
• Average output per operative for 54 hour week, i.e, including 3 late shifts
• Late shifts – 120 articles.

In order to increase output and eliminate overtime it was decided to switch on to a system of payment by results.  The following information is obtained:

Time rate – Re. 1 per hour

Basic time allowed for 15 articles – 5 hours

Piece work rate – add 20% to piece

Premium – add 50% to time

You are required to show: 1) hours worked; 2) weekly earnings; 3) number of articles produced; 4) labour cost per article for one operative under the following systems: a) existing time rate; b) straight piece work; c) Rowan system, d) Halsey system.

Assume that 135 articles produced in a 45 hour week under (b), (c) and (d) and that the worker earned half time saved under Halsey system.  The additional bonus under the existing system will; be discontinued in the proposed incentive scheme.

The stock of finished mixture at the end of 2014 is to be valued at the factory cost of the mixture for that year.  The purchase of raw materials remained unchanged throughout 2014.

Prepare a statement giving the maximum possible information about cost and its break – up for the year 2014.

i)       “All direct costs are variables”

ii)     “Variable costs are controllable and fixed costs are not”

iii)  “Sunk costs are irrelevant when providing decision-making information”

b. During first week of April the workman Mr. Subhas manufactured 300 articles. He receives wages for a guaranteed 48 hours week at the rate of Rs.4 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

i) Rowan Premium Bonus  ii) Halsey Premium Bonus 50% to Workman.

Physical verification on sept 30, 2014 revealed an actual stock of 3,800 units.  You are required to

a)      Indicate the method of pricing employed above.

b)     Complete the above account by making entries you would consider necessary including adjustments, if any, and giving explanations for such adjustments.

Additional information is given as under:

A technical assessment for appointment for the costs of service departments is as under:

You are requested to distribute overheads to various departments and re distribute service department costs to production department. Also compute machine hour rates for production departments A, B and C.

SECTION – D

Cost of materials – 80,000

Wages paid – 1,20,000

Manufacturing expenses – 50,000

Salaries – 60,000

Rent, rates and insurance – 10,000

Selling expenses – 30,000

General expenses – 20,000

Sales – 4,00,000

The company plans to manufacture 1,200 sewing machines in 2014.  Your are required to submit a statement showing the price at which machines would be sold so as to show a profit of 10% on the selling price.  The following additional information is supplied to you:

a)      The price of materials will rise by 20% on the previous years level.

b)      Wages rate will rise by 5%

c)      Manufacturing expenses will rise in proportion to combined cost of materials and wages.

d)     Selling expenses per unit will remain unchanged.

e)      Other expenses will remain unaffected by the rise in output.