LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

FIFTH SEMESTER – NOVEMBER 2010

# BU 5504/BU 5501 – COST ACCOUNTING

Date : 03-11-10                     Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

PART –  A

Explain the following:

1. Equivalent units
2. Opportunity cost
3. Abnormal loss and Abnormal gain
4. Work certified and Retention money
5. State the basis for apportioning the following expenses to different departments:
6. Power
7. Canteen expenses
8. C) Stock insurance
9. d) Crèche expenses
10. The works cost of a product is Rs.8000. factory overheads are Rs.1000, which is 50% of wages. Calculate the value of direct material used.
11. Standard time 10 hours, time taken 6 hours, time rate Rs.5 per hour. Calculate the earnings of a worker under Halsey and Rowan plan.
12. Calculate economic order quantity and the number of orders to be placed in a year from the following data:

Annual consumption 10000 kg; ordering cost per order Rs.50; cost per kg Rs.2; storage expenses 8% per annum on inventory.

1. From the following data compute the cost per unit assuming a batch of 1000 units are produced:

Material – Re 1 per unit. Each unit takes 10 minutes to produce.

Machine operator is paid Rs.12 per hour. The machine hour rate is Rs.1.50.

The setting up time for the machine is 1 hour.

1. Profit as per financial accounts Rs.2000.

Works overheads under  recovered in cost – Rs.12000

Transfer fees in financial accounts – Rs.1000

Calculate the profit as per Cost Accounts.

PART –  B

Answer any FIVE questions:                                                                                                 (5×8=40 marks)

1. What are the benefits obtained by installing a Costing system? What are the practical difficulties in installing the system?

1. What is labour turnover? What are its causes and costs?

1. X Ltd undertook a contract for Rs.6,50,000 on 1st April 2009. The following details relate to the contract for the year ending 31st December 2009.

Materials issued Rs.1,80,000

Wages paid Rs.87,000

Other expenses Rs.38,750

Plant issued to contract Rs.32,000

Total establishment expenses amounted to Rs.40000, out of which 25% is chargeable to the contract. Out of the materials issued, materials costing Rs.4,000 were sold for Rs.5,000. Plant costing Rs.2,000 was damaged on 1st October 2009 and was sold as scrap for Rs.300. Plant is to be depreciated at 10% per annum.

Material at site on 31st December 2009 was Rs.17,500.

Cash received from contractee Rs.3,06,000 which is 90% of work certified.

Work uncertified on 31st December 2009 Rs.30,000.

Prepare the contract account.

1. A transport company runs a bus between two towns which are 100 kms apart. The seating capacity of the bus is 40 passengers. It carries full capacity on the upward journey but only 75% of the capacity on the return journey. Bus runs for 30 days in a month and makes one round trip every day. The following details relate to the month of April 2010:

Wages of driver and conductor                        Rs.9,000

Diesel and oil                                                           Rs.18,000

Repairs and maintenance                                   Rs. 8,000

Garage rent                                                              Rs.2,000

Taxes and insurance                                             Rs.24,000 per annum

The bus costs Rs.4,00,000 and has a life of 10 years with an estimated scrap value of Rs.40,000.

Calculate the cost per passenger km.  Also calculate the fare per passenger kilometer, if the company wants a profit of 50% on the fare.

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 2009, the following are the summarized cost data:

Joint expenses                 Separate expenses

X                             Y

Rs.                          Rs.                          Rs.

Materials                                                                                     29,200                   8,360                     1,780

Labour                                                                                          14,700                   5,680                     2,042

The output for the month was 150 tonnes of X and 50 tonnes of Y and the selling price of X was Rs.500 per tone and that of Y Rs.290 per tone.

Assuming that the profit of Y is estimated at 25% of the selling price, prepare a statement showing the profit made on Product X.

1. The following details relate to the year 2004:

Material Rs.100000

Labor Rs.50000

Direct expenses Rs.20000

Sales Rs.278850

During the year 2005 the company received a work order which requires, Material Rs.8000, Labor Rs.4000 and Direct expenses Rs.1500. What price should the company quote for this order, if it wants the same rate of profit on selling price as was realized in the year 2004? Assume factory overheads are recovered as a percentage of direct labor and administration and    selling overheads as a percentage of works cost.

1. From the following information, calculate a composite machine rate, for a machine whose scrap value is Rs.20,000.
2. Cost of machine 3,80,000
3. Installation charges                 40,000
4. Working life                                 10 years
5. Working hours                                 8000 per year
6. Repair charges                 40% of depreciation
7. Power                 10 units per hour at 40 paisa per unit.
8. Lubricating oil                 4 per day of 8 hours
9. Consumable stores                 10 per day of 8 hours
10. Machine operator’s wages                 20 per day

1. In a factory, there are two Production depts., A and B, and two Service depts., X and Y. the overhead expense of these four depts. are as follows:

A – Rs.6,780; B – Rs.6,020; X – Rs.1,200 and Y Rs.1,000

The expenses of the Service Dept are to be divided between the other departments on the following percentage basis:

Dept. X                       Dept A 50%                         Dept B 30%                         Dept Y 20%

Dept. Y                       Dept A 50%                         Dept B 50%                         –

1. Prepare a statement showing the distribution of the Service dept expenses to the Production dept.
2. Dept A absorbs overheads at a rate per labor hour and Dept B at the rate per machine hour. The estimated labor hours and machine hours in the respective depts. are 2000 hours and 1000 hours respectively.

Calculate the overhead recovery rates for the two departments.

1. Calculate the price to be quoted for a job that requires Rs.500 in material, Rs.200 in wages and uses 6 Labor hours in Dept A and 4 machine hours in Dept B.

The company wants a profit of 50% on selling price.

PART  – C

Answer ANY TWO questions                                                                                                                                      (2×20=40 marks)

1. The following details are supplied by an oil distributing company for the month of October 2009.

Stock on 1st October 2009 – 2000 litres at Rs.5 per litre

Receipts for the month:

7th                 1000 litres at Rs.6 per lt.

15th               2000 litres at Rs.6.50 per lt

Issues during the month:

10th               2500 litres

31st               2200 litres

On 31st October 2009 a shortage of 100 litres was noticed.

Prepare Stores Ledger under:

1. FIFO method
2. Weighted Average method.

1. From the following data calculate: (a) Equivalent production, (b) Cost per unit of equivalent production; and

(c) Statement of apportionment of cost , (d) Prepare the Process A account.

No. of units introduced in the process A                                      4,000 units

No. of units completed and transferred in Process B             3,200 units.

No. of units in process at the end of the period                          620 units.

Stage of completion:

Material                                     80%

Labour                                        70%

Normal process loss at the end of the process                          200 units

Value of scrap                                                                                         Re.1 per unit

Value of raw materials                                                                         Rs.11,228

Wages                                                                                                        Rs.7,228

1. The following figures relate to R Ltd. for the year ending 31st  March 2007:

Financial A/cs (Rs.)                          Cost A/cs (Rs.)

Opening Stock:

Raw material                                                            8000                                                       5000

Work in progress                                                    7000                                                       8500

Finished stock                                                         5000                                                       4500

Closing Stock:

Raw material                                                            3000                                                       4500

Work in progress                                                    3000                                                       4700

Finished stock                                                         6900                                                       6200

Purchases                                                                 40000                                                    40000

Direct wages                                                            20000                                                    20000

Loss on sale of assets                                           1000                                                       –

Interest and dividend received                        1600                                                       –

Sales during the year was Rs.1,20,000.

Calculate the profit in Financial A/cs and Cost A/cs and prepare a statement reconciling the two profits.

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