LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

FIFTH SEMESTER – APRIL 2011

# BU 5504 – COST ACCOUNTING

Date : 19-04-2011              Dept. No.                                          Max. : 100 Marks

Time : 1:00 – 4:00

PART  A

Explain the following:

1. Rowan plan
3. Equivalent units
4. Economic batch quantity
5. Fill in the blanks:
6. By products are always of lower value and importance than the ———–product.
7. Rent of building is apportioned on the basis of ————-.
8. Minimum consumption 150 units per week; maximum consumption 350 units per week; reorder period 2-4 weeks; reorder quantity 1000 units. Calculate maximum level and minimum level.
9. Profit as per financial accounts Rs.4000;

Factory overheads under-absorbed in cost accounts Rs.8000;

Closing stock over-valued in financial accounts Rs.3000.

Calculate profit as per Cost accounts

1. Standard time per unit 12 minutes; standard rate per hour Rs.60; differential to be used 80% and 120%. In a day of 8 hours A produced 50 units. Calculate his earnings under Taylors differential piece rate system.
2. Annual demand for a component is 6000 units. Setting up cost per batch Rs. 20; annual rate of interest 6%; cost of manufacture per unit Rs.100. Calculate Economic Batch quantity.
3. Calculate the amount of profit to be taken to P and L account.

Notional profit Rs.60000; cash received Rs.6,40,000 being 80% of works certified; contract price Rs.16,00,000. Calculate the profit to be credited to P and L account

PART  B

1. a) Distinguish between Bin Card and Stores Ledger.
2. Write a note on ABC stock control.

1. Differentiate between financial accounting and cost accounting.

1. The following annual charges are incurred in respect of a machine in a shop where work is done by means of 5 similar machines.

Rent for the shop Rs.4800

Depreciation on each machine Rs.500

Repairs for 5 machines Rs.1000

Lighting charges for the shop Rs.540.

Sundry supplies for the shop Rs.450

There are two attendants for the 5 machines and they are each paid Rs.60 per month. There is one supervisor for the 5 machines who is paid Rs.250 per month.

Machine uses 10 units of power per hour at 50p per unit.

Calculate the machine hour rate, assuming each machine works for 1200 hours per annum.

1. Fast Roadways run 10 buses between two suburban centres which are 25 kilometres apart. Seating capacity of each bus is 30 passengers. The expenses for the month of March 2010 were as under:

(Rs)

Salaries of drivers and conductors                        60,000

Salaries of mechanical staff                                  36,000

Taxes, insurance, etc.                                            20,200

Repairs and maintenance                                      28,000

Diesel and oil cost Rs.8 per litre. The vehicle runs 16 kms per litre. The cost of the vehicle is Rs.6,20,000. It has a life of 5 years and a salvage value of Rs.20,000 at the end of its life. Seating capacity utilised was 60%. All the buses ran 25 days a month. Each bus made four round-trips daily.

Find out the cost per passenger kilometre and the cost per round trip per passenger.

1. The following are the particulars relating to a contract which has begun on 1st January 2010:

(Rs)

Contract price                                          5,00,000

Machinery                                                     30,000

Materials                                                   1,70,000

Wages                                                       1,48,750

Direct expenses                                              6,330

Outstanding wages                                        5,380

Uncertified  work                                          9,000

Materials returned                                          1,600

Materials on hand 31st December 2010         3,700

Machinery on hand 31st December 2010     22,000

Value of work certified                            3,90,000

Prepare the Contract Account for the year 2010 showing the amount of profit that may be taken to the credit of Profit and Loss A/c of the year. Also show the amount of the work-in-progress as it would appear in the balance sheet of the year.

1. Compute the reorder level, minimum level, maximum level and average stock level for the component A based on the following data:

Maximum consumption per week                        150 units

Average consumption per week                           100 units

Minimum consumption per week             50 units

Reorder period                                                     8 to 12 weeks

Annual consumption                                            4000 units

Ordering cost per order                                         Rs.5

Cost per unit                                                         Rs.2

Storage and carrying cost                                     8% of annual inventory

1. A factory is engaged in the production of a Chemical X and in the course of its manufacture a by-product Y is produced, which after a separate process has a commercial value. For the month of January, the following are the summarised costing data:

Joint expenses                         Separate expenses

(Rs)                                  X (Rs)                    Y (Rs)

Materials                                       19,200                             7,360                                      780

Labour                                           11,700                             7,680                                   2,642

On cost                                            3,450                             1,500                                       544

The output for the month was 150 tons of X and 49 tons of Y and the selling price of Y averaged Rs.280 per ton.

Assuming that the profit on Y is estimated at 50% of the selling price, calculate the profit on X if its selling price is Rs.400 per tonne.

1. Net profits of Mayur Industries for the year ended 31.12.2010 as per Cost Account was Rs.1,60,000. However, financial records showed a different net profit. Scrutiny  of the books of accounts revealed the following information:

Rs.

Interest on investments                                                                                         10,000

Income tax provided                                                                                             48,000

Loss due to obsolescence                                                                                      6,800

Bank interest and transfer fees in financial accounts only as expenditure             1,250

Depreciation charged in financial accounts                                                          18,650

Depreciation charged in cost accounts                                                                 21,250

Works overhead under recovered in cost accounts                                                3,540

Closing stock under-valued in financial accounts                                                  1,410

Prepare a reconciliation statement and show the amount of net profit as per financial accounts.

PART  C

1. Usha Engineering Works Ltd., manufactured and sold 1,000 sewing machines in 2010. Following are the particulars obtained from the records of the company:

Rs.

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

Prepare a statement of Cost and Profit for the year 2010.

The company plans to manufacture 1200 sewing machines in 2011. You 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:

1. The price of materials will rise by 20% on the previous year’s level.
2. Wage rates will rise by 5%.
• Manufacturing expenses will rise in proportion to the combined cost of materials and wages.
1. Selling expenses per unit will remain unchanged.
2. Other expenses will remain unaffected by the rise in output.

20   Prepare Process accounts, Normal Loss, Abnormal loss and Abnormal Gain accounts from the   following details:

Process No.1               Process No.2

Materials  (Rs)                             30,000                            3,000

Labour (Rs)                                 10,000                         12,000

Inputs (units)                               20,000                         –

Output of the process                 17,500                         17,000

Normal loss on input                   10%                             4%

Sales value of scrap per unit       Re.1                             Rs.2

1. In a manufacturing concern there are four departments viz. A, B, C and D.

A and B are Production Departments and C and D are Service Departments. C renders service worth Rs.12,000 to D and balance to A and B in the ratio of 3:2. D renders service to A and B in the ratio of 9:1.

The overhead expenses incurred in a year are as follows:

Depreciation                                  Rs.95,000

Rent, Rates and Taxes                  Rs.18,000

Insurance                                       Rs.   7,600

Power                                            Rs.10,000

Canteen expenses                          Rs.   5,400

Electricity                                      Rs.   2,400

Following further information are given regarding the departments:

A                     B                     C                     D

Direct materials (Rs)                       6,000              5,000              3,000             2,000

Direct  labour (Rs)                        20,000             10,000             10,000             5,000

Floor space occupied (sq.ft)            5,000               4,000               1,000             2,000

Value of assets (in lakhs)                      10                     5                       3                    1

H.P. of machines                             1,000                  500                  400                 100

No. of workers                                   100                    50                    50                   25

Light and fan points                            50                    30                    20                   20

From the above particulars prepare a Statement showing overhead expenses of Production Departments A and B after redistribution of Service Department expenses. Also calculate the overhead recovery rate if it is based as a percentage on labour.

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