Calculate Economic Ordering quantity: annual usage; 6000 units, Cost of Materials per unit Rs.20; Cost placing and receiving one order Rs.60; annual carrying cost Rs.2 per unit.

Ascertain the labour turnover under separation method;

Employees on 1-1-2003:14,000

Employees on 31-12-2003: 16,000

Employees who left during 2003: 750

What is meant by “Absorption of overheads”?

Fill in the blanks:

a) A cost is ———- if it does not change with change in activity level.
b) Power cost is apportioned on the basis of ———- hours.
c) ———- rate of absorption is suitable for labour oriented manufacturing.
d) Crèche expenses are apportioned on the basis of —————————-.

Write short note on equivalent production units.

What is escalation clause?

A transport service company is running four buses between two towns which are 50kms. Apart. Seating capacity of each bus is 40 passengers. Actual passengers carried were 75% of the seating capacity. All the four buses ran on all the days and of the month if April 2005. Each bus made one round trip per day. Calculate the total kilometers and total passenger kilometers for the month.

Section – B

Answer any five only: 5 x 8 = 40

Explain the merits and demerits of perpetual inventory system.

What is Labour Turnover? Explain its causes and effect. And also suggest the steps to reduce labour turnover.

What is Activity Based Costing? Differentiate it from the traditional costing system. Also state the advantages of ABC.

The following figures have been obtained from the cost records of Manufacturing Company for the year 2004:

Cost of Materials 2, 40, 000

Wages of labour 2, 00, 000

Factory Overheads 1, 20, 000

Distribution Expenses 56, 000

Administration Expenses 1, 34, 400

Selling Expenses 89. 600

Profit 1, 68, 000

A work order has been executed in 1993 and the following expenses have been incurred: cost of Materials Rs.32, 000 and Wages for Labour Rs.20, 000. Assuming that in 2005 the rate for factory overhead went up by 20%, distribution charges went down by 10% and selling and administration charges went up by 12 ½ %, at what price should the product or the job be quoted so as to earn the same (earlier) rate of profit on the selling price?. Show the full working. Distribution, Administration and Selling charges are based on the factory cost.

From the following particulars work out the earnings for the week of a worker under (A) Straight Piece- rate; (B) Taylor’s Differential piece rate; (C) Halsey Premium System; (D) Rowan System.

Number of working hours per week 48.

Wages per hour – Rs.3.75

Normal time per piece – 20 minutes.

Rate per piece – Rs.1.50

Normal output per week – 120 pieces

Actual output for the week – 150 pieces.

(A) Compute the various stock levels from the following data:

Maximum consumption in a month 300 units; Minimum usage in a month 200 units; Average usage in a month 225 units; Time lag for procurement of materials: Maximum 6 months and Minimum 2 months. Reorder quantity 750 units.

(B) From the following particulars, prepare stores ledger by adopting Weighted Average Method of pricing of material issues:

Date Receipts Issues

01.01.90 300 units at Rs.10 per unit

10.01.90 200 units at Rs.12 per unit

12.01.90 400 units at Rs.11 per unit

15.01.90 250 units

16.01.90 150 units

18.01.90 200 units at Rs.14 per unit

20.01.90 300 units

22.01.90 300 units at Rs.15 per unit

25.01.90 100 units at Rs.16 per unit

27.01.90 200 units

31.01.90 100 units.

A product passes through three processes, A, B and C. The normal wastage if each process is as follows; Process A- 3%; B- 5%; C- 8%. The wastage of process A was sold at Rs.0.25 per unit, B at Rs.0.50 per unit and C at Re.1 per unit. 10,000 units were introduced in process A at a cost of Re.1 per unit. The other expenses are:

Process-A Process-B Process-C

Rs. Rs. Rs.

Sundry materials 1,000 1,500 500

Labour 5,000 8,000 6,500

Direct expenses 1,050 1,188 2,009

Actual output (units) 9,500 9,100 8,100

Prepare the process accounts, assuming that there were not opening or closing stocks. Also give the abnormal loss and abnormal gain account, normal loss account.

U construction Ltd. undertook a contract in 1992 for road construction. The contract price was Rs.10, 00,000 and its estimated cost of completion would be Rs.9, 20,000. At the end of 1992 the company received Rs.3, 60,000 representing 90% of work certified. Work not yet certified was Rs.10, 000. Expenditure incurred on the contract during 1992 was as follows:

Materials Rs.50, 000, Labour Rs.3, 00,000, Plant Rs.20, 000, Materials costing Rs.5, 000 were damaged and had to be disposed for Rs.1000. Plant to be depreciated by 25% Prepare contract account for 1992 in the books of U construction Ltd. also show the profit can be reasonable credited to profit and loss account in respect of the contract.

Section – C

Answer any two only. 2 x 20 = 40

The profit as per financial books for the year ended 31^st December,2005 is

Rs.2, 98,000. Following details are ascertained on comparison of cost and financial accounts:

Cost Accounts. Financial Accounts.

Rs. Rs.

Stock on 1-1-2005

Raw Materials 1, 00, 000 1, 20, 000

Work –in-progress 1, 30, 000 1, 40, 000

Finished Goods 90, 000 1, 00, 000

Stock on 31.12.2005

Raw Materials 86, 000 80, 000

Work –in-progress 74, 000 60, 000

Finished Goods 1, 24, 000 1. 18, 000

Direct expenses 60, 000

Purchases 8, 00, 000

Wages 4, 00, 000

Factory Expenses 4, 00, 000 4, 00, 000

Sales 22, 00, 000

Interest Received 32, 000

Office Expenses 46, 000 60, 000

Income Tax 15, 000

Loss on sale if investments 17, 000

Selling expenses 90, 000 80, 000

Prepare a cost sheet showing costing profit and also draw up a reconciliation statement as on 31.12.2005.

A factory has three production departments A, B and C and two service departments X and Y. the budgeted expenditure for the month of march 2002 are given below:

Rs.

Stores overhead 2, 500

Indirect wages 20, 000

Insurance 7, 000

Rent 10, 500

Power 14, 000

Lighting 5, 000

Depreciation 1, 05, 000

Other Overheads 40, 000

The other details are:

Particulars A B C X Y

Direct wages (Rs.) 75,000 40,000 60,000 10,000 15,000

Floor Area (sq.mtrs) 400 500 600 300 300

Value of Machine (Rs) 2,00,000 2,50,000 2,00,000 30,000 20,000

Horse Power 40 50 40 5 5

Direct materials (Rs.) 10,000 20,000 10,000 5,000 5,000

No. of light points 8 7 5 3 2

Service department overheads are apportioned on the following basis:

A B C X Y

Service Dept. X: 50 30 10 — 10

Service Dept. Y: 30 40 20 10 —

Assuming that overheads are recovered as percentage on direct wages, calculate the overhead recovery rates.

The following data are available in respect of process I for February,2000:

Opening stock of work in progress: 800 units at a cost of Rs.4000.

Degree of completion of opening work in progress:

Materials 100%

Labour 60%

Overheads 60%

Input of materials at a total cost of Rs.36,800 for 9200 units.

Direct wages incurred Rs.16,740

Production overhead Rs.8,370

Units scrapped 1,200 units. The stage of completion of these units was:

Materials 100%

Labour 80%

Overheads 80%

Closing work in progress 900 units. The stage of completion of these units was:

Materials 100%

Labour 70%

Overheads 70%

7,900 units were completed and transferred to the next process.

Normal loss is 8% of the total input (opening stock plus units put in)

Scrap value is Rs.4 per unit.

You are required to:

Compute equivalent production.
Calculate the cost per equivalent unit for each element.
Calculate the cost if abnormal loss or gain, closing work in progress and the units transferred to the next process using the FIFO method, and
Show the process account for February 2000.

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