ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – SEPT/OCT. 2015

B.COM. – III SEMESTER

C1 12 302: COST AND MANAGEMENT ACCOUNTING – I

Duration: 3 Hours Max. Marks: 100

SECTION – A

Answer ALL the questions. Each carries 2 marks. (10×2=20)

Mention any four items which will be classified under Factory Overheads.

What is Batch Costing? When do we use it?

Mention any two distinctions between Job Costing and Contract Costing.

Mention any two distinctions between Fixed Overheads and Variable Overheads.

What are Indirect Materials? Mention any two examples.

Compute the amount to be transferred to Profit & Loss A/c from the following information:

Value of work certified	Rs. 21,00,000
Contract Price	Rs. 45,00,000
Notional Profit	Rs. 7,50,000
Cash Received	Rs. 15,75,000

Calculate E.O.Q from the following particulars:

Annual Consumption	36,000 units
Cost of Materials per unit	Rs. 40
Cost of placing and receiving one order	Rs. 60
Annual Carrying cost of one unit	10% of Inventory Value

Using Taylor’s Plan, calculate Total Earning of worker A and B from the following details:

Normal Rate per hour	Rs. 60
Standard Time per piece	20 Minutes
In a day of 9 hours, A Produced 26 units and B Produced 30 Units
Differentials to be applied:
Below Standard	80% of the piece rate
Above Standard	120% of the piece rate

Mention any two needs of reconciling Costing Profits or Losses with Financial Profit or Losses.

10.

What is Operating Costing? Who uses this method of Costing?

SECTION – B

II)

Answer any FOUR questions. Each carries 5 marks. (4×5=20)

11.

Calculate the Machine Hour Rate from the following details:

1	Bought Machinery worth Rs. 45,000.
2	Installation Charges Rs. 5,000.
3	Life of the Machine = 5 years.
4	Working hours per year = 2,500.
5	Repair charges = 75% of the depreciation.
6	Electric power consumed: 10 units per hour @ 15 paisa per unit.
7	Lubricating oil = Rs. 4 per day of 8 hours.
8	Consumable Stores @ Rs. 10 per day of 8 hours.
9	Wages of Machine Operator @ Rs. 8 per day of 8 hours.

12.

The accounts of a machine manufacturing company disclose the following for the six months ending 31^st Dec., 2014.

	Rs.
Materials used	1,50,000
Direct Wages	1,20,000
Factory overheads	24,000
Office Expenses	17,640

Prepare a Cost Sheet of the machines and calculate the price which the company should quote for the manufacture of a machine requiring materials valued at Rs. 11,250 and the expenditure on productive wages of Rs. 6,750, so that the price may yield a profit of 20% on the Selling Price.

For the purpose of price quotation, charge factory overheads as a percentage of direct wages and charge office overheads as a percentage of works cost.

13.

From the details given below, calculate:

i) Re-ordering level ii) Maximum Level iii) Minimum Level iv) Danger Level

v) Re-order Quantity

Re-ordering quantity is to be calculated on the basis of following information:

Cost of placing a purchase order is Rs. 20.

Number of units to be purchased during the year is 5,000.

Purchase price per unit inclusive of transportation cost is Rs. 50.

Annual cost of storage per unit is Rs. 5.

Details of lead time: Average 10 days, Maximum 15 days, Minimum 6 days. For Emergency purchases 4 days.

Rate of consumption: Average 15 units per day, Maximum 20 units per day.

14.

From the following particulars, prepare a Reconciliation Statement:

	Cost Accounts	Financial Accounts
Profit	?	203,000
Factory Expenses	121,300	105,000
Closing Stock	42,800	40,800
Depreciation	8,000	11,000
Opening Stock	32,600	33,000
Office Expenses	50,000	53,400
Selling Expenses	75,000	71,000

Besides the above information, you are informed that Land Costing Rs. 2,00,000 was sold during the year for Rs. 2,23,400. There was Rs. 5,000 interest received, Rs. 2,400 as discount received.

15.

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

(a) Flux Method b) Replacement Method and c) Separation Method

No. of workers on the payroll:

At the beginning of the month 15,000

At the end of the month 16,000

During the month, 75 workers left, 200 persons were discharged and 575 workers were recruited. Of these, 130 workers were recruited in the vacancies of those leaving, while the rest were engaged for an expansion scheme.

16.

What is Cost Accounting? Mention any four advantages and disadvantages of Cost Accounting.

SECTION – C

III)

Answer any THREE questions. Each carries 15 marks. (3×15=45)

17.

M/S Sellwell Ltd. has furnished you the following information from the financial books for the year ended 31^st December, 2014:

Profit and Loss Account for the year ended 31st December, 2014

Opening Stock of finished goods:		Sales (10,250 units)	3,58,750
500 units @ Rs. 17.50 each	8,750	Closing stock of finished goods:
Material Consumed	1,30,000	250 units @ Rs. 25 each	6,250
Wages	75,000
Gross Profit c/d	1,51,250
Total	3,65,000	Total	3,65,000

Factory overheads	47,375	Gross Profit c/d	1,51,250
Administration overheads	53,000	Interest	125
Selling Expenses	27,500	Rent received	5,000
Bad Debts	2,000
Preliminary Expenses	2,500
Net Profit	24,000
Total	1,56,375	Total	1,56,375

The cost sheet shows:

1	The cost of materials as Rs. 13 per unit
2	The labour cost as Rs. 7.50 per unit
3	The factory overheads are absorbed at 60% of labour cost
4	The administration overheads are absorbed at 20% of factory cost
5	Selling expenses are charged at Rs. 3 per unit
6	The opening stock of finished goods is valued at Rs. 22.50 per unit.

You are required to prepare:

a	The cost sheet showing the number of units produced and the cost of production, by elements of costs, per unit and in total.
b	The statement of profit or loss as per cost accounts for the year ended 31^st December, 2014.
c	The statement showing the reconciliation of profit or loss as shown by the cost accounts with the profit as shown by the financial accounts.

18.

The following figures are extracted from the Trial Balance of Rajesh Co. Ltd. on 30th September, 2015

Inventories:		Rs.
Finished Stock		80,000
Raw Materials		1,40,000
Work-in Process		2,00,000
Office Appliances		17,400
Plant and Machinery		4,60,500
Buildings		2,00,000
Sales		7,68,000
Sales Returns or Rebates		14,000
Materials purchased		3,20,000
Freight incurred on materials		16,000
Purchase Returns		4,800
Direct Labour		1,60,000
Indirect Labour		18,000
Factory Supervision		10,000
Repairs and Upkeep-Factory		14,000
Heat, Light and Power		65,000
Rates and Taxes		6,300
Miscellaneous Factory Expenses		18,700
Sales Commission		33,600
Sales Travelling		11,000
Sales Promotion		22,500
Distribution Dept. Sales and Expenses		18,000
Office salaries and expenses		8,600
Interest on Borrowed funds		2,000
Further details are available as follows:
1) Closing Inventories:
Finished Goods		1,15,000
Raw Materials		1,80,000
Work – in- Process		1,92,000
2) Accrued Expenses on:
Direct Labour		8,000
Indirect Labour		1,200
Interest on Borrowed funds		2,000
3) Depreciation to be provided on:
Office appliances 5 %
Plant and Machinery 10%
Buildings 4%
4) Distribution of the following costs:
Heat, Light and Power to Factory, Office and Selling
in the ratio of 8:1:1.
Rates and Taxes two-thirds to Factory and one-third
to Office.
Depreciation on Building to Factory, Office and Selling
in the ratio of 8:1:1.

From the above mention information prepare a statement of cost for the year ended 31^st Dec.2014.

19.

From the following details, prepare a stores ledger under:

a) FIFO Method assuming Shortage as Normal.

b) Weighted Average Method assuming Shortage as Abnormal.

Date	Particulars	Quantity in Nos.	Rate per unit (Rs.)
01.4.2015	Opening balance	5,000	30
03.4.2015	Purchases	1,000	32
05.4.2015	Issues	4,000	?
10.4.2015	Purchases	3,800	34
14.4.2015	Issues	2,600	?
16.4.2015	Purchases	2,500	36
28.4.2015	Issues	3,000	?

On physical verification, it was found that there is a shortage of 80 units on 22^nd April 2015.

20.

X Construction Ltd. is engaged on two contracts A and B during the year. The following are obtained at the yearend (31^st Dec.,):

Particulars	Contract A	Contract B
Date of Commencement	April 1st	September 1^st
Contract Price	6,00,000	5,00,000
Materials Issued	1,60,000	60,000
Materials Returned	4,000	2,000
Materials on site (Dec. 31^st)	22,000	8,000
Direct Labour	1,50,000	42,000
Direct Expenses	66,000	35,000
Establishment Expenses	25,000	7,000
Plant installed at cost	80,000	70,000
Value of Plant (Dec. 31^st)	65,000	64,000
Cost of contract not yet certified	23,000	10,000
Value of contract certified	4,20,000	1,35,000
Cash received from contractees	3,78,000	1,25,000
Architect’s fees	2,000	1,000

During the period, materials amounting to Rs. 9,000 have been transferred from Contract A to Contract B. You are required to prepare:

a) Contract ‘A’ A/c (7 Marks)

b) Contract ‘B’ A/c (7 Marks)

c) Contractee A’s A/c (1 Marks)

21.

A Company has three production departments and two service departments. Distribution summary of overheads is as follows:

Production Departments			Service Departments
A	B	C	X	Y
Rs. 18,000	Rs. 12,000	Rs. 6,000	Rs. 1,404	Rs. 1,800

The expenses of service departments are charged on a percentage basis which is as follows:

	A	B	C	X	Y
X	20%	40%	30%	0	10%
Y	40%	20%	20%	20%	0

Distribute Service Department Costs to production departments using:

(a) Simultaneous Equations Method.

(b) Repeated Distribution Method.

SECTION – D

IV)

Case Study (1×15=15)

22.

Mr. Anesh, the proprietor of a small engineering workshop producing specialty products by employing 40 skilled workers, is considering the introduction of some incentive scheme – either Halsey Scheme or Rowan Scheme of wage payment for increasing the labour productivity to cope with the increased demand for the product by about 25%.

He feels that if the proposed incentive scheme could bring about an average 20% increase over the present earning of the workers, it could act as sufficient incentive for them to produce more and he has accordingly given this assurance to the workers.

As a result of this assurance, the increase in productivity has been observed as revealed by the following figures for the current month:

Hourly rate of wages (guaranteed)	Rs. 16
Average time for producing 1 piece by one worker at the previous performance. (Mr. Anesh desires that this time be considered as the time allowed for the purpose of incentive scheme).	2 Hours
No. of working days in the month	25
No. of working hours per day for each worker	8
Actual production during the month	5,000

You are required to calculate:

1	Total Earning under Halsey Plan
2	Effective Hourly Rate under Halsey Plan
3	Total Earnings under Rowan Plan
4	Effective Hourly Rate under Rowan Plan
5	Savings of Mr. Anesh in terms of direct labour cost per piece under Halsey plan.
6	Savings of Mr. Anesh in terms of direct labour cost per piece under Rowan plan.
7	Percentage increase in earnings to the workers under Halsey Plan
8	Percentage increase in earnings to the workers under Rowan Plan

GIVE YOUR ADVISE to Mr. Anesh in the selection of the scheme to fulfill his assurance based on the above calculations.

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