JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER examination –MARCH /april 2015

bbm –iv semester

M1 11 401: COST ACCOUNTING

Duration: 3 Hours Max. Marks: 100

SECTION – A

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

What is ‘Opportunity Cost’?

Mention any four techniques of costing.

Define a cost center.

How will you treat normal loss of material in cost accounts?

The output of worker A is 64 units in a 40 hours week. Guaranteed time rate is Rs. 5 per hour. Ordinary piece rate is Rs. 2 per unit. Show the earnings of worker A under piece rate and time rate systems.

A Company purchases the goods required by it in two lots

500 Units @Rs.1.50 per unit

500 Units @ Rs.2.00 per unit

During the year ,the company sold 500 units.

How will you show the inventory in the Balance Sheet, using Simple Average Price method and under LIFO Method?

How do you calculate Bonus under Halsey Premium Plan and Rowan Plan.

State the reasonable basis for apportionment of following overheads of service departments over production departments :

1.Store keeping Department

2.Welfare Department

3.Purchase Department

4.Pay roll Department

What is meant by Escalation Clause?

10.

State the Causes of Labour Turnover.

SECTION – B

II)

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

11.

A company buys its annual requirement of 36,000 units in 6 installments. Each unit costs Re. 1 and the ordering cost is Rs. 25.The inventory carrying cost is estimated at 20% of unit value. Find out the total annual cost under existing inventory policy .How much money can be saved by Economic Order Quantity ?

12.

Calculate the total monthly remuneration of three workers A,B and C from the following data:

a) Standard Production per month per worker :1,000 units

b) Actual production during the month:

A – 850 units, B-750 Units, C-950 Units

c) Piece Work Rate is 10 paise per unit of production

d) Additional production bonus is Rs.10/- for each percentage of actual production exceeding 80% of standard production.

e) Dearness Allowance fixed @Rs.50 p.m.

13.

Two components A and B are used as follows:

Normal usage: 50 units per week each

Minimum Usage: 25 units per week each

Maximum Usage: 75 units per week each

Reorder Quantity: A: 300 Units

B: 500 Units

Re-Order Period A: 4 to 6 weeks

B: 2 to 4 Weeks

Calculate for each component:

a) Re-order Level

b) Minimum Level

c) Maximum Level

d) Average Stock Level

14.

Calculate the earnings of workers A,B and C under Merrick’s Multiple Piece Rate System from the following particulars:

Normal rate per hour Rs.18

Standard Time per unit 1 Minute

Output per day is as follows :

Worker A : 384 Units

Worker B :450 Units

Worker C: 552 Units

Working hours per day are 8.

15.

A company manufactures a standard product . From the following data, prepare a statement of Cost and Profit:

Raw materials consumed Rs. 45,000

Direct labour Rs. 27,000

Machine hours worked 900

Machine hour rate Rs. 15

Administration overhead 20% on works cost.

Selling cost Rs. 1.50 per unit

Units produced 15,000

Units sold 14,000 at Rs. 12 per unit.

16.

Work out the machine hour rate for the following machine for the month of January:

Particulars	Amount (Rs)
Cost of machines	Rs. 90,000
Other charges, (Freight and installation)	Rs. 10,000
Working life	10 years
Working hours	2,000 per year
Repair charges	50% of depreciation

Power – 10 units per hour @ 10 paise per unit

Lubricating oil @ Rs. 2 per day of 8 hours

Consumable stores @ Rs. 10 per day of 8 hours

Wages of operator @ Rs. 4 per day of 8 hours.

SECTION – C

III)

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

17.

Prashant Cooling Ltd., Harihar manufactured and sold 500 refrigerators in the year ending 31/12/2013 . The summarized Trading and Profit & Loss Account is set below:

Particulars	Amount(Rs)	Particulars	Amount(Rs)
To Cost of Materials	80,000	By Sales	4,00,000
To Direct Wages	1,20,000
To Other Manufacturing Cost	50,000
To Gross Profit	1,50,000
	4,00,000		4,00,000
To Management and Staff Salaries	60,000	By Gross Profit	1,50,000
To office Rent, Rates & Insurance	10,000
To General Expenses	20,000
To Selling Expenses	30,000
To Net Profit	30,000
	1,50,000		1,50,000

For the year ending 31/12/2014 it is estimated that:

(i) Output and sales will be 600 refrigerators.

(ii) Price of materials will go up by 20% on the level of previous year.

(iii) Wages will rise by 5%.

(iv) Manufacturing cost will rise in proportion to the combined cost of materials and wages.

(v) Selling cost per unit will remain unaffected.

(vi) Other expenses will also remain constant.

You are required to submit a statement to the board of Directors showing the price at which the refrigerators should be marketed so as to show a profit of 25% on selling price.

18.

Construction Ltd is engaged on two contracts A and B during the year. The following particulars are obtained at the end of the year (31^st Dec)

Contract A Contract B

Date of commencement April 1 September 1

Rs. Rs.

Contract Price 6,00,000 5,00,000

Materials issued 1,60,000 60,000

Materials at site (31^st Dec) 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 site 80,000 70,000

Value of plant (31^st Dec) 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 contractee 3,78,000 1,25,000

Architects 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 show :

a) Contract Account b) Contractee’s Account and

c) Extract of Balance Sheet clearly showing the calculation of work in progress.

19.

A Company manufactures its product by passing the units of raw material through three distinct processes A,B and C during the month of July 2013 ,1000 units of raw material costing Rs. 12 per unit were introduced in process A. Further details regarding production and costs are given below :

Process	Output	Normal Loss	Cost incurred (Rs.)
	(Units)	(% of input)	Material	Labour	Overheads
A	900	10	8,000	4,000	3,200
B	800	8	7,416	3,600	3,600
C	780	5	1,800	2,000	2,000

There was no work in progress at the beginning or end of the month. The scraps of three processes were sold at Rs. 2 p.u., Rs.3 p.u. and Rs.5 p.u. respectively. Prepare the process accounts and the accounts relating to abnormal gain/loss, if any for the month.

20.

Arun runs a tempo service at Vizag. He furnishes you with the following data and wants you to compute the: i) cost of running per km. and ii) Cost of running per ton(km)

Particulars	Amount (Rs)
Cost of vehicle	15,000
Road licence p.a.	750
Supervisor’s salary p.a.	2,650
Driver’s wages per hour	4
Cost of fuel per litre	3.60
Repairs and maintenance per km.	2.00
Tyre cost per km	0.80
Garage rent p.a.	3,600
Insurance p.a.	500
Kms running per litre	5
Kms run during the year	6,000
Estimated life of the vehicle	75,000 Kms
Tonnes per km. (average)	5

Charge Interest @ 10% p.a. on cost of vehicle.

The vehicle runs 20kms. Per hour on an average

21.

Record the following transactions in the Stores Ledger Account .

15.1.2014 Receipt 250 Units costing Rs. 312.50

21.2.2014 Receipt 100 Units costing Rs.130.00

24.3.2014 Receipt 50 Units costing Rs.67.50

5.4.2014 Issue 55 Units

19.4. 2014 Receipt 50 Units costing Rs.70.00

25.4.2014 Issue 300Units

3.5.2014 Issue 90 Units

The issues on 5.4 2014 and 25.4.2014 were priced at LIFO and FIFO respectively. From 1.5.2014 it was decided to price the issues at Weighted Average Price.

SECTION – D

IV)

Compulsory question (1×15=15)

22.

A Company has three production departments and two service departments. The departmental distribution summary shows the following;

Rs.

Production Departments:

P1: Rs.800; P2: Rs.700 and P3: Rs.500 2,000

Service Departments:

S 1:Rs.234 and S 2: Rs. 300 534

——–

2,534

The estimated working hours of production departments are as follows:

P1 : 900 Hrs

P2: 800 Hrs.

P3: 600 Hrs

The expenses of the service departments are charged out on a percentage basis as follows :

P1 P2 P3 S1 S2

Service Department S1 20% 40% 30% _ 10%

Service Department S2 40% 20% 20% 20% –

Prepare a statement showing the apportionment of the two service departments expenses to production departments by

a) Simultaneous Equation Method

b) Repeated Distribution Method.

c) Calculate the overhead absorption rate per hour in respect of production departments.

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