l (l •,t I\ l l < ) l) N I IN

<• :> 01 1,
1')7

1 1,,, 11111..; s/, 1, A I c ,1,1,iJ ,,,.,1,, . 1

' 1 111 ( 1fl,/111 < / 1
~
1 1
I PIHi I 'tl llllll 1
1 11)() IH ,,'i'l(l
I Ill\
II 'I •' "

I~''111 , ,t '(' "'· ,111 :;11h· 111II,. l 'l 1•q11 ,II 111 11,• 1 1111 I I I
" 11 11 , mil.

It 1,,thn\'ing li~un•s h.,v,• h,•,·11 ,•xti· l<'I•• I f

" ;,, • d · I accounts o f
ro111 lht• fi nanc1a
v aA l ht. for tlw y,•,11' ,•ndinJlt 201h:

l' \lllltl 111111..,) (~)

65,00,000
•fl,,1-: 25,00,000
.... 15,00,000
.\' l )\"l'th'.llh,
10,00,000
,,nd :\dm1nist1\,ti,rn ( )Vl'rlw,H.is 5,50,000
~ ,md J)istn~~u~i()n O~,•rlw,,ds 3,00,000
"~ ~1,,,·l-. ,,1 hnt~lwd <,nods (1 ,200 units) 2,20,000
11 ~ ~l<'<"k <!f IVnrA 111 11n>s re·~~:
' I\ t,,kri,, Is 60,000
I ,1b()ttr 40,000
F.wtory Owrlw~1ds 40,000 1,40,000
c;oodwill writt,'n off 3,30,000
terest l\1id on C.1pitc1l 50,000
In costing records, factory overheads are charged at 100% of Labow,
dJninistration Overheads arc 10% of factory cost and selling overheads are
ged at the r.tte of no per unit sold.
Prepare Profit and Loss Account, Cost Sheet and Reconciliation Statement.
15
Financial Profit & Loss Account
for the ycnr e11ding 2016 Cr.
Pr1rlic11/nrs t Pnrticulnrs
Materials 25,00,000 By Sales 65,00,000
Wages 15,00,000 By Closing Stock:
10,00,000 WIP (6Q,000 + 40,000 + 40,000) 1,40,000
Factory Overheads
5,50,000 Finished Goods 2,20,000
()lfm &Administration Overheads
Selling & Distribution Overheads 3,00,000
Goodwill Written off 3,30,000
Interest Paid 50,000
Net Profit (Balancing figure) 6,30,000
---- 68,60,000
68,60,000
Cost Sheet
ji1r lite ycnr c111iins 2016 - - - - - - - r - - - - : : - - -
----------=--
: - ~.al- - - - - - - -P!1rli~11/11r~
~
-----~----1--:::-;-~~
25,00,000
Maten s 15,00,000
Wages 40,00,000
Prime Cost
 C ::W,:
•

~•Ill\ l l ,\ ', Pl 111 I IJN I\ 11(!, l l ) SI IOI S

11 1
Add I111 tn1y Ovu1ht1,ut11 (lllO'h, ol Wctqt1!l) 40,0() ~
15,00 ~
I vs,\ Work,in,flroqrn~~ ~(tl0.000 1 ,10.000 1 40,000) 55,00,rKJo
(1,40,00()
f nctory Cost
A1M A1Jn11nistrc1tlon Ovorhondi, (10% of hictory Co!l t) 53,60,0Qo
Cost of Product1011 5,36,0oJ
58,96,0Qo
Lllss Clo$Jng Stock of Finished Goods \ 58,
, 0096,000
11~· \ 1' 200 l/1111~ )
( 26 2 1111 2.70,048
Cost of Goods Sold
Add Selling und Distribution Ovorhoads (25,000 x \ 10) 56,25,954'
Total Cost 2.so.000
Profit 58,75,954

~
Sales

~ • Unit ~duccd ~5,000 (S,lll's) + l,2()() (Closing ~loC'J...) ~

Profit as per Cost Account

Reconciliation Statement
Pnrticuln n,

Add: Over-absorption of Factory Overheads (~15,00,000 - ~10,00,000)

Total
Zb,200 units

----- 6,24,046
5,oo,ooo
Less: Under absorption of Administration Overheads (~5.50,000 - ~5,36,000) 11,2(04f
Under absorption of Selling &Distribution Overheads (~3,00,000 - ~2,50,000) 14,000
Goodwill written off 50,000
Interest paid 3,30,000
Over-valuation of Closing Finished Stock (~2.70,046 - ~2.20,000) 50,000
Profit as per Financial Accounts 50,046 4,94,046
6,30,000
Or
(a) State in brief the advantages of Integrated Accounts. 5½
(b) Write a note on Cost Centre. S½
(c) What is Semi-Variable Cost? 4
Ans. (a) See Q. 2, Unit 6. [Page 49
(b) Cost Centre. See Q. l(Or)(b)(ii1), 2018. [Page 179
(c) Semi-variable Cost. Semi-variable cost are also known as semi-fixed costs
or mixed costs. These costs are partly fixed and partly variable. TI1is means
when output increase or decrease semi-variable costs also change but not in the
proportion of change in output. For exnmple, po:"7er cost is a semi variable costs
because when factory is dosed and power is not consumed, minimtim power bill
has still to be paid. It does n_ot become nil. Other examples of semi variable cosll
are insurance cost, salary of supervisor, depreciation, repairs and maintenaoot
cost etc. Different type of semi variable costs behave in different ways and th
is no definite pattern of the behaviour of these costs.

Semi-variable Cost = F + VX F = Fixed Cost

... where V = V.irictble Cost Per Unit
[
X., Total Production in U
□□□□
 of Ih e Pap,·r
2019 (l\lay)
.,.,JPteO f the Coun,«! C,>st Acc.:olJ ... t•
8C ,, •ng
,,tll 3 lwur . om. (H<inr,,)

Attempt All Que5fions Alt

Maxinm11, Murk 7 J
''Limitations
• • of • • a qru•5 l,o11~
f 1nancialwrry ''c{uaf
. mark
Q
I, th•
(a) .
,mpo
rla n ce of cos
.
Ia .«o.~ nt, ng ha v• rna de the managem,nl;
<counting. Comment
st • h s started busines') With fl , ·.
ed are:•
tl•fl . . a •• . 1 of 10 ta,.,, 'fhe varfou• expen..,.
,i¢' of each tax,- f75,000, salary of office s_laff- tl,500 P<•r month; ,,lary of
cpSI •taff- f2,000 per month; rent of garage- ?'!)JOO per month; /Jr,ve,'•
~• (per taxi) f400 per month; Road lax and repairs (per taxiJ- f2,161J per
pt!' . Insurance premium@ 4% of cost per annum.
""'"'\ of a taxi is 3,00,000 km, at !he end of which it is estimated to be wfd
1h' !•~. A taxi runs on an average 4,000 km per month, of whirh 2M, it
if1 fl,, t Petrol consumption is 9 km per litre of petrol cost11,g ?6.30 per
d
~
..,,, vacan other sundry expenses amount lo tl.O per 100 km. C.kulate the
Oil an t of running
. a taxi. per k'l
1 ometre .
10
~.a,ctive )cos
See Q. 3, Umt. 1. (Page 2

-bJ (a
MS, Operating Cost Statement
Particulars
I
Per month
-lued Charges
Office Staff Salary 1,500
Garage Staff Salary 2ff/J
Garage Rent f 10 taxis 1.000 I
4500
F1.ed Cost /Per month) or r taxi (?4,500/10)
Ftxed Charges (per month) pe 450 I

Vrivers Salary ( er taxi) (?2,160/12)

~oad Tax and repairs P

nsurance premJ·um
1
1
4 x 12
U5, ooox 100 J
Total Fixed Cost Per(rtmonthl3,200 km *)1 0.40
Fixed Cost per km ' 280
firiaD1e Cost per km
Oepreciation·2 d Expenses\
Otl and other Sun ry
Petrot•4

---- Cost per km h ta.xi run,; 20

L,ecJu~ t e k
ll \

llt,\;,.g Not,., I a taxi is BO~nnn • 80 • ,.200 "'

• -·"'···· .e runs (km) o month == 't\]\/U 80 • l40,IXXl l,..m
per 3 00 000 km x
- - . . _ i. • e rum (km)life
S I f

ve workmg _ tt5,000 • to.25

000
' ~ Cost • t75 ,w,o i..m•,
2, 40,V\.

199
 ~IIIV DAS DEUII UNTVER51TY SETUF..5

t.,!_ x 4 (1(1, ~m • , ~125

•, C\1 and t ~ Sundrv FXJlC!L• • lOO km 3 20 km

{1110 4,00) ktn

•4 l'ctrol •
9
k.m x '3 .zoo ~ • t O.B'i3 pu Jun
Or
(a) Distinguish between 'cost', 'expenses,I an d 'l os,;,• S
(b) Y & Co. undertook a contract for t15,00,000 on a~ ar:range:.er.' fr.'4• $
of the value of work done as certified by. t~e arc~ted.s ~ ~.: ,a,+-'1-¾,
should be paid immediately and the remammg 2o>io b~ reuir,ed r.;-z:~ fr.:t
contract is completed. .
In 2014 the amounts expended were : Materials tl,80,000; \ '.fa 5es ?1,iiJJ.(.(;
Carriage f6,000; Cartage tl,000; S~dry ~penses ?3~. Tnr= Wu;~ w~
certified for f3,75,000 and 80% of this was paid as agreed.
In 2015, the amounts expended were : Material f2,20,()00; Vlages ?2,3;JJ.((
Carriage f23,000; Cartage f2,000; Sundry expenses f 4,000. Tiuee-fo"?:rfr.s rr, ~
contract was certified as done on 31 December and 8001~ of i~ ;~rive.~
accordingly. The value of work in progress uncertified was as<.e-rtair~ ,~
f20,000.
In 2016, the amounts expended were : Material fl,26.,000; \\ag~ ~ ,741.i.r.
Cartage f6,000; Sundry expenses f3,000 and ~n 30 June the whole con!:ract ...,~
completed.
Show the Contract Account and also the Contractee's Accounl as .,.,((!:Jc
appear for each of years in the books of the contractor assuming th.at bala;-~
due to him was received on completion of the contract. 1:
Ans. (a} Cost is defined by the Institute of Cost Accountant of indi2 a~•~
measurement in monetary terms, the amount of resources used for the v..od;.;::icn .:
goods or rendering of services." This word cost is often used interchar.ge.0;: wi~
the word expense. But the difference between the two that the exper.se ;.:, ,:.a;
portion of the cost which has been consumed or which has expired. T,£
unexpired part of the cost is asset. For example, when a machine is pu;cr.aserl,
then depreciation (expired cost) is an expense and is debited to P & L J../c a:J
value of machine after providing depreciation is an asset and is show:1 ir f.e
Balance Sheet.
Loss is also an expired cost. But it is that part of the cost which has ex7,;ed
· without generating any benefit to the firm. for example, destruction of ar. as:;tt,
say machine, in a fire accident is a loss.
(b) Dr. Contract Account Cr
Particulars < Particulars
2014
To Matenals
To -Mages
1,80,000 By Work Certified
1,70,000
' J E ·-;.

To Carnage 6,000
To Cartage 1,000
To ~ur;-jry E,penses 3,000
lo Notiooal Profit cld __ !s,ooo I
3.75,000 I
 <.:OS I A< < OlJN IINC 201<1 (M,iy)
20J

"~ 4,000
'~ (f 15 000
11
BO%) By Notional Profit bid 15,0<J0
;, 11,000
15,000
15,000

3,75,000 By Work 1n progress·

certified bid .
~ 000) 3,60,000 Work Certified 11 ,25,000
I
Ill reserve
2,20,000 (~15,00,000 {3,75,000)
2,30,000 Work Uncertified 20,000
2,000
4,000
expenses
23,000
profit rJd 3,06,000
11,45,000 11,45,000
1,63,200 By Notional Profit b/d 3,06,000
LAiC
80
I)!, OOO I'. 100 .1
2)
3
-~ !,42,B0q _
_106,000 3,06,000

11,25,000 By Contractee Ale 15,00,000

20,000
1,1r. Profit in reserve {1,42,8002 10,02,200
1,26,000
Materials
wages 1,70,000
catage 6,000
SinlryExpense 3,000
P& LAie 1,92,800
- - - 15,00,000
15,00,000
Cr.
Contractee' s Account
(
( Particulars
Particulars
2014
3,00,000
3,00,000 By Bank
(t3,75,000 X 80/100)
3,00,000
3,00,000 -
2015 3,00.000
9,00,000 By Balance bid 6,00,000
By Bank 9,00,000
9,00,000
2016 9,00,000
15,00,000 By Balance bid 6,00,000
By Bank 15,00,000
1~~.000
 1< t1I IV t,I IW '1
II 1111 pNIVI
., •HII ' ' 111\ ' 4 1 ? ,<pl.ilu l,,icfly lll1'(hod 9 for
, ... I Vl'I l,1•,11 1,1 1
I nl•li111p1l1111 ., o 11
v1•1h1•,11h•. ~
\J, 2 (,1) \\ h,11 !I A 111 i1 11 1,.1,n1lv 1• y 111 , '(~,'11,, lHO. 'l'.1ki11~ into
I }It I,,, ,,111 I I I I '·" 1(II
, lt ◄ •,1tl '""'' w,111 11·covi•n·d ; 11
I
ul•t-llll'tl1111111 ,,i ,.. 11 ,,.,,. 11 '
l\' l'I h•'•" 1 I 1 I 11 I y 11Vl I
I I
(/il r 11,, 11, n ' ,I \\ 111 I, 1111\ 11 , 11w r. I holff'l 11 ' k•·" Wl'"' 2' •n ' HM • , , ow
111 11111 1 WIii
, ltulll 'I Ill' ,1d • 11 .. iH/HUlling lh,,t lw11ld1•\ 7 HO(J
,11, 1111111 1111' ,'
• 1 , I )/, I'' 1 I ,n 111111 1.. , • '
I'''"'"' tum ,1 , 11 lo'4 •' tlw 1111111~11 o 11) ' I •· w1•11· 200 C'<jUiv,,lt•nt unit" in
I 11•1,
",111,11 ',',11 I11111 ,.,., III I ..t, '/ 0110 w1•11• ,m, ,
'
I th,11 r,0% of 1111' t111,1h!-lorlwd
1111ih1 p1111hH ,·d (111 w ,1 , • II w,111 {mW• • •
, <,., 1,,v••"tll~••l111n, ( inclin•ct 111,1tn1,1l ,ind indirect
\\lllk l11-p111g11 14 11 . .• ,
11 1111
In t'ON 1 11 • •
\I , , 011 , 11•,•01011111 1111 ' ' ( ,dory i1u·ffidl'll<'Y• A 1SO g1v1• lht•
m r1 I11•,11 1" \;
11
r 01 1/i w,·n• d,w 1O •
1
I ,1,11111 "'"' th1• ,1•111,d11I ►~ ,, o •' ,nih•d. JO
1:1otil implk,1lion of 1111' ttlt'fhod IH t~:. (). ~ Uriil ~. 11',igc 37
"""· (11) At,.~ ,,,,,,;,,,, 11/ '"1,•r~11·11,/.i1. , ~1 l111/11lstmtlo11 ov,•rh,•,.uJ:
\li,tll'/''""' Ml'll111d:. for< ~/Jlrt' '"" , ' .,•y ron 1111 w1 mdhod fo, c1b~orplio11 of
• ' ' ( ' Hl 'I'll lHIH " V(
I. Pl't n•nl,1~1· of h1cto1 Y O •
,1tt1, l' .ind ,1d111i11blr,1tio11 ovl•rlw.id ,
1lw lt\r mul.i iH11H follow :
/\tl111i11i1, lmli1111 ()vi·rl//'ntl x I 00
QV(•rhcad Rate /'uclory Co,G/

2. Percmtagc of Sales. lls formu ln is:

;\r/111i11 istr11 tioH Ovc-rli<' r, rl x 100
Overhead Ralc = Soles
·1his nwthod is nol common ly used.
~

(b) Actual overhead 4,46,380

LC'ss: Absorbed Overhead (2,93,104 hrs.@ ~1.25) 3,66,380
Under absorbed overhead 80,000
Accounting Treatment. As 50% of Under absorbed o~erhcad (i.e., 50% of
~80,000) ~40,000 is due to i~efficiency is transferred to costing P & L A/c. .
Remaining 50% (i.e., ~40,000) should be charged to output units by a supple-
mentary rate.
~40,000 = {5
Supplementary Rate= (?,B00+ 200 units)
~

Charge to Cost of Sales (7,000 units @{5) 35,000

Charge to Work in progress (200 units @{5) 1,000
Charge to Finished Stock (800 units@ ~5) 4,000
Total 40,000
Effect on Profit. The profit will come down by {35,000 because of increase in
the cost of sale by BS,000. Increase in finished goods by {4,000 and WIP by nooo
will reduce profit by (N000 + 1000) = ~5000. The net reduction in profit will be
(B5,000 - ~5,000) = ~30,000.
Or
(a) What are the methods of secondary distribution of overheads? Explain
these methods briefly for reciprocal services. 5
 COS I ACLOIJN JINC•- 2010,, (May)
171
,.•,, prr hour • < ost of Ma hln1 bcran Val
~ , ,., W ~r~ I If .i;.. uc>
ng I ~ of Madune (I I
•, t
,20,(XX) ,4
000 n lOur )
t..arge M" I In• "" ! 12,00() ' Ilnl • fJ,31
r4,om ,100
i,mall M,ttlllfl• "" hrs . • .,,
' Al
P•J,()(J()

• a_,,, and mulntt'nu,11 ,, ,,er hour· I

• -,- '
i1I<'"
• r,
•
Mal: Ill/lt• •
t4,00()
12,000 hn,. • fO ..J3
Small Machin£> "' _!,_I, 200 •
'J ooo h ro.JJ
•'f puwtr Ptr Hour: J•or L.irgc> June _ 20 urnt"'· r..,
M.11 '. rs.
~ 5 pa1se c fl 7

h,r Small Ma.chine _ 2 unils . •

~ 5 paise = , 0.1 o
c.i
--~-
J, V Ltd. f ~rnished the ( ollowing information for 1~0,000 TV valves
llialll:jO'tllled durmg the year ending 31st March, 2017:
r
Mah~rial 90,000
Direct Wage•<., 60,000
Power and Consumable Stores 12,000
Indirect Wages 15,000
Factory Lighting 5,500
Defective Work (Cost of Rectification) 3,000
Salaries and Management Expenses 33,500
Selling Expenses 5,500
Sale Proceeds of Scrap 2,000
Plant J<cpair and Depreciation 11,500
net selling price was f31.60 per unit sold and all units were sold. As
ht April, 2017, the selling price was reduced to f31 per unit. It was
that production could be increased in 2017-18 by 50% due to spare
. Rates of materials and direct wages will increase by 10%.
.
.
1') Cost sheet for the year 2016-17 showing various elements of cost per unit;
"4 Estimated cost and profit for 2017-18 assuming that 15,000 units will be
produced and sold during the year and factory overheads will be
recovered as a percentage of direct wages and office and selling
expenses as a percentage of works cost. 15
Cost Sheet for the year ending 31-03-2017
Total Per unit
Particulars 10,000 units (r) (r)
90,000 9
60,000 6
1,50,000 15
Prime Cost 12,000 120
Power and Consumable Stores 15,000 1.50
Indirect w~ 5,500 055
Factory Lighting 3,000 030
Rectification Cost 11,500 115
Plant Repair and OepreciatiOn 1970
1,97,000
(2,000) (0 20)
1,95,000 19.50
Worb Colt
- s mv l)A', JJf I JI( UN
JVJ'RSJTY Sf.RJF..S
.•
172 ~ 33,5()0
Offtoo nnd Adm Ov-01/11 1,d f>nloruJs & Monagomont e~pensoo ~~ -~-
1
2,28,500
coil of Production 5 500
o~
51 tJtng -a,hond Soiling t:.xponscs 2,3-1,000
Cost of Sales ~2 'l./J
---t-= ~-
Prorit
Sale! - E ti"
_:....--
t~d Cost and Profit
----~~
3,16,000
----;
31.80

(ii) Statem ent of s ma

for the year 2017-18
Total (f) 1 Per unit
Particul ars
(For 15,000 units) 111

Direct Materials [(15,000 x 9) + 10¾]

1,48.500 9.90
,Direct Wages ((15,000 x 6) + 10%]
99,000 660
Prime Cost 2,47,500 16.50
Factory Overnead (75% of Wages}* 1 74,250 4.95
Works Cost 3,21,750 21A5
•
Office & Administration Overhead (17.18% of Works Co st) 2 55,277 3.69
Cost of Production 3,77,027 25.14
Selling Overhead (2.82% of Works Cost)*3 9,073 0.60
Total Cost 3,86,100 25.74
Profit 78,900 5.26
Sales Working 4,65,000 31.00
Working Notes:
Factory Overhead* x = _H5,000
_ x = %
•1 FactonJ Overhead Rate = . ect W
0 1r ages .
100 t60 000 100 75
,
+
* Factor Overhea d = t(12,000 + 15,000 + 5,500 3,000 + 11,500 - 2,000) = f45,00J
Office Overhead 33
•2 OJJ,ce
lff.' O h dR t
ver ea a e = -Works
- -Cost - - x 100 = t ,soo x 100 _- l7. l8'/.,.
n,95,000
Selling Overhead tS,500
• 3 S 11 · O h d R te
e tng ver ea a = -Works - - - - x 10 = - - - x 100 = 2.82%
Cost n,95,000 .
Or
(a) Distinguish between Job Costing, Contract Costin g and Process costin&,
Name any two industries each in which these costing type would be suitable.i
(b) A constru ction compa ny undert ook a contrac t at an estima ted price
f108 lakh, which include s a budget ed profit of '18 lakh. The releva nt data
the year ended 31st March, 2015 are as under:

Materia l issued to sites (t' 000)

Direct wages paid 5,000
Plant hired 3,800
Site office cost 700
270
Materia ls returne d from site 100
JJin,ct (•xpc•nses 500
Work c1·rtifo!d
1.>rogrcss paymen t received 10,000
7 200
A srecial plant _was purchased specially for this contract at
on this contract till the end of 31st March 2015 ·t ,
lakh. Aft~r ,s
cost of material at site at the end f th , 1 w_as valued at fS lakh ..
0
e year was esttma ted at f18 lakh. Dir
 l
COST ACCOUNTIN G- 2018 (May)

,d as on 31st March, 2015 was tlO 000 p 173

. repare Contract A/c for the
2015 an d compute the, prof't
. ,,L ·
-ft.le
J 11st March,
,,,d,',; 1
to be taken to the Profit
1,0ss f'lc. ·
jl;h Cosltng, Contract Costing and Proc,
IP' ta\ ·t,..,t ascertainment which are applied in d.;t
st. .
C.o mg arc different
~ l~ lc~sting: This method is used in those ind• :.ent types of industric8:
9

(1) Jo . t orders and specific instructions fr us ies where work is dvne

g,1tns om customers A &e t t
3 eet is to be prepared for each job undertaken t0 · . . pera e cos
~11 b all mall . . a5eertam its cost and
profit. Jo s_ are gener _Y s . m size and a company can undertake a
nlllliber of Jobs at a p~cular hme. Industries where job costing is U5ed .
i) Interior decoration
. C and . . (ii) Motor repair sh ops. are.
(
(ii) contract Costing: onn:act costing 1s a variant of job costing in the sense
that here also work 1s done as per the specific instructions and
requirements of the customers. Basic difference between job costing and
contract costing_ is that jobs are g~nerally small and contracts are big in
size. Here also, m order to ascertam the cost and profit on each contract,
a seperate contract account is prepared. Examples of industries where
contract costing can be used are:
(i) Building construction and (ii) Road construction
(iii) Process Costing: Both Job Costing and Contract Costing are applied in
special order industries where work is done against special order from
customers and goods produced are not kept in stores for sale. In contract,
Process costing is used in industries where standard type of goods are
produced without any instructions from customers and goods produced
are kept in store for sale as and when there is a demand. Examples of
industries where process costing is applied are:
(i) Chemical industry and (ii) Sugar industry
Contract Account Cr.
for the year ending 31 st March, 2015
( f '000)
(r 'OOO) Particulars
Particulars 1,800
5,000 By Materials at Site 100
Materials 3,800 By Materials returned
Wages 10 By Work in progress:
Wdges accrued 10,000
500 Certified
Diect expenses 700
Plant hired 300
Plant depreciation (t8 lakhs - t5 lakhs)
270
S'le office cost 1,320
tbonal Profit c/d 11 ,900
11,900
1,320
1,200• By Notional Profit bid
120 1,320
1,320
• lh • pleti·on 15 a it is morr than 92% complete
a e:
TIitNot e,,contract
,f·
· computed as f oll ows:
t kcomto Pro'it' fr Loss A/f 1s
1sbnear
mount o1 pro1
,t to e a e1l 'I' \\\ir Ll'rh•r.ll'll
k ~

• BudgL•tL•d Profit >< C.\:.h R,,tio x c,mtr.id PtiCl'

?7,200 ?10,llOO ., rt 200
., ~ 1,800 x t JU,000 >< t 10,MOO '
 AC

1i4 SHIV OAS DELHI UN IVERSITY SERIES

Q. 4. Rakesh owns a bus which runs according to th e fo!lowing schedule•

(•1 Delhi to Chandigarh and back, the same day; Di 5tance covered: iso
krns. one way; Number of days run each month: 8; Seating capacity
occupied: 900/o .
?
(i11 Delhi to Agra and back, the same day; 1s~ance ~overed: ~20 km&. 0 ~
way; Number of days run each month · lO, Seating capac,ty occupied:
65%.
(iii) Delhj to Jaipur at back, the same day; Distance covered: 270 kms. one w .
Number of days run each month: 6; Seating . ·ty . d
capaa occup1e : 100%.
ay,
The following are the other details:
Cost of the bus t 60/00 000
I

Salary of driver t20,000 p.m.

Salary of conductor t20,000 p.m.
Salary of part time accountant no,ooo p.m
Insurance of the bus t48,000 p.a.
Diesel consumption 4 kms. per litre@ ~40 per litre
Road tax n2,000 p.a
Lubricant oil tl0 per km
Permit fee t4,600 p.m
Repairs and maintenance tl4,400 p.m
Depreciation of the bus @ 20% p.a.
Seating capacity of the bus 50 persons
Passenger tax is 20% of the total_takings. Calculate the bus fare to be charged
from each passenger to earn a profit of 30% on total takings. The fares are to
indicated per passenger for the journeys from:
(iJ Deihl to Chandigarh (it) Delhi to Agra
Hit) Delhi to Jaipur. 15
Sol Operating Cost Sheet
Particulars (r) (f.)
Standing Charges:
Salarf of driver 20,000
Saoaiy of conductor 20,000
Sa:.;ry of accountant 10,000
nsvrance (N8,000/12 months) 4,000
D0ad Tax ({12,000/12 months) 1,000
PramJit Fee 4,600 59,600
Running Expenses:

~. · ( o,040'J ~JTI
u;w.;I 4~m
X NO) 80,400
L.uoncabng Oil (8,040* 1 km x {10) 80,400
Repa rs and maintenance 14,400
(
l
{)&predation {60,00,000 x
20 1 )
x
100 12
1,00,000 2,75,200
Total Cost 3,34,.
Profit (100% of Cost)' 3 3,34,800
Total takings 6,69,.
 COST ACCOUNTING-2018 (May) 175

. 1 0 tal takin
nger km == gs = t6,69,600
. II"' per pas18 Total Passenger km t3,72,000 km*2 == t'1 .80
·· fate for: De~ to Chandigarh= 150 km x n.80 = f 270
~:) fare for: Del~ to A~a = 120 km x n.80 = f 216
~~~ fare for: Delhi to Jaipur = 270 km x n.80 = f 486
(lfl Note· • Calculation of kms travelled = Distance x Return · N0 0 f d
l\'~g 1 to Chandigarh
Delhi = 150 x 2 x 8 = 2i;~ey x · ays
Delhi to Agra = 120 x 2 x 10 = 2'400
Delhi to Jaipur = 270 x 2 x 6 = 3'.240
8,040
• calculation. of passeng_er km = km travelled x No. of passengers x Capacity occupied
2 Delhi to Chandigarh = 2,400 x 50 x 90% = 1,08,000
Delhi to Agra = 2,400 x 50 x 85% = 1,02,000
Delhi to Jaipur = 3,240 x 50 x 100% = 1,62,000
3,72,000
• It is gives that profit is 30% of takings and tax is 20% of takings.
3 :. Total = 50% of takings which is equal to 100% of cost.
Or
(o) find out the equivalent production from the following data under the

i' I I
method: . 4,000 units
Opening work in progress 80 %
Materials
Degree of completion: 60 %
Labour 60 %
Overheads
16,000 units
Units introduced 6,000 units
dosing work in progress 80%
Materials 60 %
Degree of completion:
Labour
Overheads 60%

e there were no process losses. 6

A product passes through two processes. The output of process I becomes
input of process II. The quantity of raw materials introduced in process
is 20,000 kg at no per kg. The cost and output data for the month as
. Process I Process II
Direct materials (<) 60,000 40,000
Direct labour (<) 40,000 30,000
Production overheads (<) 39,000 40,250
Normal loss 8% 5%
Output (in units) 18,000 17,400 •
Loss realisation of t / unit 2.00 3.00
any's policy is to fix the selling price of the end product in such a
• yield a profit of 20% on selling price. Prepare Process A/c and
the selling price per unit of end product. 9
 1/NIVl 'l( ',l I Y Sl'l<ll!S
',IIIV l)fl', l>l 'I Ill
17h
i, 1v,11c•ttl l'rndudlo11
Snl. Sl,1h•t1H'II I II f l' 111
/ ,11/1111, r
,.,,, IIt ,,,,,, .~ ',,,,,,,,, Mt1l1•1/11/
1111 /1,,
1>111•r/ .ut1
11
/111/111 % Ll11f /11
(111 1/11/f ~)
800 40 1,f,00
4,000 10 40 1Ni0
Opt'llillQ WIP
U111ts 1111,oducod nnci 100 10,000 100 10,000 100
u111ts complotnd 10,000 'i,600
80 4,800 60 6()
Closing WIP 6,000
15,600 15,200
Total 20,000
rrocc!lB I Account ( r.
(l1) Pr.
Pr1r/inil11rs kt (r) JJurtlrularR kg, rr,
By Normal Loss @ ~2 1,600 3,200
To Units Introduced @ ~10 kg 20,000 2,00,000
60,000 (8% of 20,000)
To Direct Materials By Abnormal Loss @ r1a.2s 400· 1
To Direct Labour 40,000 7,300
To Production Overhead 39,000 By Process II Ale
(@ ~18.25)'2 18,000
20,000 3,39,000 20,000

Working Notes:
• Ab11or111fll loss (in kg.) • 20,000 - 18,000 - 1,600 ~ 400 kg.
1
• _ ~3,39,ooo - n,200 = ~3,35,soo .. r-is. 25
2 CoS t per kg. - 20,000 kg - 1,600 kg 18,400 kg
----
Dr. Process II Account Cr.
Particulars kg. Particulars kg. (r)

To Process I Ale 18,000 3,28,500 By Normal Loss @ ?3 900 2,700

To Direct Material Ale 40,000 (5% of 18,000)
To Direct Labour Ale 30,000 By Finished Stock Ale 17,400 4,43,700
To Production Overhead 40,250 (@ ?25.50)*4
To Abnormal Gain 7,650
(@ ~25.50)*4
18,300 4,46,400 18,300 4,46,400

Cost price per kg. ~25.50*4

Add: Profit 20% of selling price (or 25% of cost price) ~6.375
Selling Price of the end product ?31.875
Working notes:
• Abnonnal Gflill (i11 kg.)= 18,000 - 17,400 - 900 = 300 kg.
3
{4,38,750- 2,700 {4,36,050
•4 CoS t per kg. = 18,000-900 kg = 17,100 kg = f 2S.SO
Q. 5. The following figures were available for a company for the year ended
31st March, 2017:
Financial A/c Cost A/c
(f) (t)
Opening Stock:
Raw Material 6,000
Work-in-progress 7,000
Finished Stock 5,000
 COST ACCOUNTlNG-201S (Moy) 177

. stoek: 4y,r,
(}0-Glflg • I teriaJ
f{lJW 1v,a 4,000 1,7 ()1)
work•in·Progress 3,000 6 ,21)()
fifUshed Stock 5,900
fill'""''" 40,000
~~~ m~
di!eet wages 3,000
~ry e>P""''" 17,000 2·1,000 (absori>"d )
-
~dJ)1ilU•tr•tion expen<es
1~~
3,000 2,300 (ab>orb>·d )
s,IliPS expenses 4,000 4,500 (absorbed)
FiJlailcial expenses 1,000
wterest received 1,600
pute the profit in Financial Accounts as well as in Cost Accounts and
are
81 Reconciliation Statement showing clearly the reasons for the

• ·ons of the two profit figures. · 15

L Cost Sheet
for the year ending 31-03-2017
Particulars 40,000
5,000
Purchases
Add: Opening stock of raw material (4,300)
LesS: Closing stock of raw material 40,700
Materials consumed 20,000
Direct wages 60,700
Prime Cost
Factory Overhead: 3,000
Add: Indirect wages 21,000 24,000
Add: Factory expenses absorbed 84,700
6,500
(3,700)
87,500
Works Cost 2,300
Administration Overhead (absorbed) 89,800
Cost of Production 4,500
Add: Opening stock of finished goods (6,200)
Less: Closing stock of finished goods 88,100
Cost of Goods Sold 4,500
Add: Selling expenses (absorbed) 92,800
Total cost 17,400
1,10,NO
Sales
1111 •,t it\ 11\r,, ,,, , Ill IINIVI lllll I \ 14111 11 'I

1'1111 II 111111 I IIA" ,\, I 1111111

l', ,,,, //1r l/l'tll 1 11,/111.~ , I/ I )I) I I

,.,,,,,, "''" ' rrJ ,,,,,,,,,,,,,,,.

' •non
111 Or,on1ng t,lnr k ~111 ' ,.noo , t,,oon) lfl,01111 lly t111l11r1 II
To Pun hain,
40,()()() Ily 111l,1111111 111, 1Jlv11t1 I t-1
To Oiriitl Wn~n1 ~!),()()() lly <.l11~l11u 11lq1_k
To lno,rocl Wngo1 1,11,~
To 1-a,1ory exron~os J,01)0 , {4,0t)(} , 1,()()() , 'J.'l()q)
1!,{)f)() II~
To Athninleh allon nxponoo•1 3,()()f)
lo Solhng exponsos 4,0()() l)~I
To Fmonclal oxponsoa 1,000
To Prom (as po, nnanclol Accounts) 18,600
1,24,bOO
Rl•condllation 8lat,•nwnt
Partic11Tars
Profit as per Coat Account
Add· Factory expenses over absorbed (t21 ,000 t1 f,000) (fJ
· Selling expenses over absorbed (t4,500 ~4.000)
Interest received not shown In Financial Accounts 1,000 11.4~
~00
Less· Administration expenses under absorbed (~3.000 - ~2,300)
1,eoo
8,1Ci)
· Financial expenses not shown in Cost Accounts
Opening stock under valued In Cost Accounts:
Raw Material (t6,000 - tS,000)
100
1,000
'~
w1P (n.ooo - ta,soo)
Finished Goods (t5,000 - t4,500) 1,000
Closing stock over valued In Cost Account: soo
Raw Material (t4,300 - t4,000) 500
WIP (~3,700 - ~3.000)
Finished Goods (t6,200 - t5,900)
Profit as per Financial Account
(5,000)
Or 18,500
(a) What is Integrated Accounting? State its ad•antages.
(b) Write short notes on:
(t) Perpetual inventory system 6
(ii) Activity Based Costing
(iii) Idle time.
Ans. (a) Integrated Accounting. See Q.2, Unit 6.
(bl(,) Perpetual inventory system. See Q.6, Unit 2. 9
(i1) Activity Based Costing. See Q.10, Unit 2.
[Page 49
(iii) Idle time. See Q.4 (a), Unit 3. [Page l
[PageM
[Page ll
aaaa
 2018
: 3 J,ours
Att<'mpt al[ Q . Maxim
·nze questions in sections A B & uestzons. um mar~: 75
· C need to b
SECT P attempted toxether
. ION A ~ .
• 1.
(a) What 1s cost accounting' o· .
. iscuss Its ob' .
ess firm. Jectives and advantages in a
A) Explain the treatment of the follow· . .,
,v (ij Pack'1ng expenses mg items in cost accounts:
(it) Holiday with pay
(iit) Research and Development cost
(iv) Overtime
(v) Cash discount.
Ans· (a) Cost Accounting. See Q. 1, Unit l. 10
(b)(t) Packing expenses. See Q. 9(b), Unit 4. [Page :
(it) Holiday with pay. See Q. 7(iv), Unit 4. ~;::: ~
(iii) Research
.
and Development cost. See Q. B(iii',,, Gnit 4. 'P
l age~
~-i

(iv) Overttn:"e. See Q. 5, Unit 3. [Page 31

(v) Cash discount. In cost accounts, cash discounts is generally not included
in cost. This is because cash discount is a form ·of interest on capita] as
it is given because of early payment and it reflects time value of money.
In case, interest on capital is included in cost, cash discount may also be
so included but as interest on capital is generally not included, cash
discount is also not included.
Or
(a) A company buys its annual requirement of 36,000 units in 6 installments.
ch unit cost n and the ordering cost is f25. The inventory carrying cost is
· ted at 20% of unit value. How much money can be saved by employing
ering EOQ? :
{b) Explain the following terms in cost accounts:
(11 Relevant Cost
(it) Controllable Cost
(iit) Cost Centre
. - = (2AB
Sol (a) Economic order Quantity, EOQ ~ CS
h [A = Annua] Consumption
...w ere B = Ordering Cost
c = Cost per unit
S = Storage/ car:I) ing cost

2 Y 36, 000 X 25 == 3,000 units

EOQ= 1 x 20%
·ts
36,000 unt - == 12
No. of order per year == 3, OOo units

179
 IJN JV I H~l I Y ~tRrE5
111 1
~11, v r >A'i " '
um . . 1 of ('m,t
C o111p,1r1 "lOI
~ At m,yit1X in 6 in stalment~
1
"', """''";' o nl,·1 t)1:1111ttf 1, mo ()rd Ni ng CO!ll (6 X t25) a:: ,,?
l )rdt•1111g 'p!.I (( ll~Jt:l {2.:,)" )
'I · )() ,1
100 Carrying cost
)
(1i,~(~0 / 20%) t:
:XJ
6<}()
C 11n 111g I T tal Cost
P'il

1nl,,1 < oi,I

) -

.
== 600
.
°
OQ = t750 - ~600 = ~SO .
7"
)(J
. ,b purchasing 10 E . h . ---
1lwrefoH•, Saving Y t is that which c anges with alt
t ·t
(l,)(i) 1<i-ll'rm11 ens •
Rclevt1nl cos h . ernar
t change by a c ange m decision ·t . ve 1

dn ,c,wn. If a c?st does /1°-£ an article is produced by machin~ I is an

th
irrelevant c~sl. I-or ~xa~~~;,:.nd labour cost ~60. But if the same :~ ~,
if lhc material cost isl thod then the material cost is the same ticle IS
. ?90 This means labour cost h as ch anged With ath~00
d cd by manu a me
pro uc
hut la~o~r cost is d · the article by an alternative method \ cl_nge
m dec1s10n to pro uce h d .t . . ' I IS a
relevan t cost. But material cost has not c ange , l is an urelevant cost.
A relevant cost has two features: . .
• Relevant cost is future cost because cost incurred m the past is not
relevant. . h d
• Relevant costs are those which c ange rm er a1temative decision
(it) Controllable Cost. See Q. 12, Unit 1· . . [Page i2
(iii) Cost Centre. A Cost Centre is often a department wit~ a company. The
manager and employees of a cost centre. are responsible
d . . for its costs but
are not responsible for revenues or m~es~ent _e~1~10ns. According to E.
L. Kohler, ''a cost cent:e is an orgamsatw~al divzswn, de-r:artmen_t or self
division, a group of machines, men or both. It_ includes ~ny. un~t of activity into
which a manufacturing plant or other operating organisation is divided for the
purposes of cost assignment and allocation".
Purposes of cost centre are:
1. Cost centre brings responsibility and, as such, it is also called
Responsibility centre. In other words, for controlling the costs of a
centre, the manager of that cost centre is, no doubt, responsible for
the purposes.
2. Cost centre.helps to recover the overhead expenses.
Types of cost centre are explained as follows: ·
1. Personal cost centre. When a cost centre deals with a person or a
group of persons, it is known as personal cost centre.
2. Impersonal cost centre. When a cost centre deals with a location or
equipment or both, it is called impersanal cost centre.
3. Production cost centre. When a cost centre deals with a product/
manufacturing work, it is called production cost centre.
4. Service cost centre. When a cost centre deals with or is engaged in
rend ering services to the production cost centre, it is called servict
cost centre.
 fO',J ACCOUNTJNC-201s
r, Operation cost centre. Jt 1·5 a . 181
· PP11ca 6le ·
umcrrns. It «,011sisls of machines in case of manufacturing
11
nt liviti :;, or persons which follows similar
6. Process cost centre. It is applicable · .
pro: <·ss ,Jf a manufacturing enterpri~; case of particular or ~pecific
%, Calcu late the earnings of A and B from th f .
11 ~
0, and allocate the labour cost to each job X, a:do;mg particulars for a

Bahk wag(•s (f) A

100 B
160
DA
Contribution to Pf< (on basic wages)
50%
8%
50%
S%
Contribution to ES! (on basic wages) 2% 2%
Overtime 10 hours
The normal working hours for the month are 200. Overtime is paid at double
total of normal wages and DA. Employer's contribution to ESI and PF are
equal rates with employees' contribution. The two workers are employed on
t,, X, Y and Z in the following proportions:
Jobs
X y z
Workn A 40 30 30
Worker B so 20 30
Overtime was done on job Y. 15
Sol. Statement of Earnings of A and B
Particulars A(<) B (f )
Basic wages 100 160
DA 50 80
Contribution to PF 8 12.80
Contribution to ESI 2 3.20
Overtime* 15
175 256
Total Earnings
10 hours x 2(nOO + ~50) = ns
• Earnings of A for overtime = 200 hours

Alloca~on of Labour Cost to each Job X:

. - t160
Worker A- Without overtime -
X
40
100
'
64
so 128
.
Worker B-Without overtime -- t256 X 100
192
Total
ation of Labour CoSt to
•
each Job Y:
= t160 X
30
100
•
48'
Worker A-Without overtime
20 51.20
• e = t256 >< 100
Worker B- Without overhm 15
Overtime 114.20
Total
 JNJVT·RSITY SERIES
..,Ill\ p ,\ 1, p l I ttl l
I~
l ,. ,t' h Job / :
i\l1 1hilio11 ,11 1,, b1111 r ( 11st ,I~ t .thO ,c \0/ 100 48
\ - \\11111,11111\ 1·r 1111 " in; JOO
• f'l~(I ,c 76.so
B-\\1th1,11I ,,,c1t111w H

. 124.So
I ,11,1 I Or
. lars relating to process A in its plant f
• • ng particu or
,\lJ Ltd. si"-'" the to11 O" 1

thl' nH,nlh l,t December 2012:

i ·n, the mon 1
ti 19 soo
i ,
L" ·, mtn'dllu:'l tun !:,
,., T ,d to process
B 18,20O
~"'- : ,,ut. umt--- lr,1n,1--1. c d) 1
tely processe ,400
l rut~ ~rapreti (comp Ie 400 Unit
\\lP (ck"~mg balan~e) ·a1 100%, Labour and Overhead 50%] s
[Dt>gree 0 t completion: Maten s Cost f
_1 _2012 500 units Materials 4,SOO
\\"IP (of.~ning balance) as on 1 2 Labour 3
,200
Overhead~
14,400
--..:.....:.::_
Process costs incurred during the mo~th: r
Matenals 1,86,200
Labour 72,ooo
Overhead 1,06,400
3,64,600
~ormal loss in processing is 5% of total ·input and normal scapped units
fetch n each, prepare:
{t) Statement of equivalent production
(itj Statement showing cost of each element
(iii) Statement of apportlonment of cost
(iv) Process 'A' account 15
SoL (t) Statement of Equivalent Production
inpu: Unit Output Units Material Labour Overhead
I Units % Units % Units %
O:Brung V,~P 500 Completed 18,200 18,200 100 18,200 100 18,200 100
~-;re.iced 19,500 Normal loss @ 5% 1,000 - - - - - -
Abnormal 400 400 100 400 100 400 100
Loss
Closing WIP 400 400 100 200 50 200 50
Total 20,000 Total 20,000 19,000 18,800 18,800
(it) Statement of Cost
Particulars Material (f) Labour{() Overhead(()
()p61Mg MP Costs 4,800 3,200 6,400
/.,'YJProcess costs incurred during month 1,86,200 72,000 1,06,400
To:a costs 1,91,000 75,200 1,12.800
L~S!: S;;le of scrapped units @ t1 each 1,000
io'.al (A) 1,90,000 75,200
Eq~":Valent units (B) 19,000 18,800
Cost per unit (A + B) 10 4
 ( CJ!l I' At< 'Ol JN , ..,
I I NC - 2orn
183
Statement of Art> t'
-~~~~-~-~ or ton nwnt 0f ('
, 1, , 11/,11 ii~ - - - __ ost
1111
Unttl Cornplnhtd j1A,?.ll0 11 ' (10 t 4 t {l)] ----,---
~ •I lo,, 141Xl • f (IO , 4 , 0)1 (r)
CIO'infl Wit'. MAIH1i11I (4110 , ( 10) 3,64,000
I 11bow (1.00 )( t 4) 4,000 8,000
Ovttrhmul (,00 ,I( 70) 800
1,200 6,000
l'rOl''-'RR 'A' Account
- Cr
I l111h (() Porlilllln rs Units ((')
IP i,oo 14,400 By Normal Loss @ ~1 each 1,000 1,000
rial 19,bOO 1,86,20 0 By Abnormal Loss 400 8,000
t,our 72,00 0 By Transfer to Process 8
(Balancing figure) 18,200 3,64,000
1,06,400 By Closing WIP 400 6,000
20,000 3,79,000
-
20,000 3,79,000
SECTION B
3, The following , is the trial balance 0 f prem1er . Construction c
on
d th e cxecutmn of contract no · 747 for th ompanyI
e year en~ed 31st December

, Dr. [Amount (f)J Cr. [Amount (f)J

Co ntractec s account (amount received)
Building 3,00,000
16
Creditors ' 0,000 72,000
Bank balance 35,000
Capital account 5,00,000
w
Materials
ages
i~~
1,80,000
Expenses 47 000
Plant
The /
2,50,000 _
st
work on Contract no. 747 was commenced on 1 January 2012. Materials
g '1,70,000 were sent to the site of the contract but those of ,6,000 were
oyed in an accident. Wages of tl,80,000 were paid during the year. Plant
g ,so,ooo was used to the contract all through the year. Plant with a cost
~ was used from 1st January to 30th September and was then
to the stores. Materials of the cost of , 4,000 were at site on 31st
ber 2012.
contract was for f6,00,000 and the contractee pays 75% of the work
Work certified was 80% of the total contract work at the end of the
Uncertified work was estimated at '15,000 on 31st December 2012.
are charged to contract at 25% of wages. Plant is to be depreciated at

• Contract no. 747 account for the year 2012 and Balance Sheet as on
.,_.,..ber, 2012 in the books of Premier Construction Company. ts
 I·R', I I y Sl· llll•~
Ill I tit tlNl\
,tll\ ll ,\'-
1:;4 ' An·ounl
nu,tr,,d l / / ' JO I}
s,,,. 111 //r1' IJt'III
1·11rl11 1'{
'
.
/lrll 11111/11r~
Pr
~~1',u thi 1l11f:'
... _ _ , \1111 mO By Materials loss, ~---
1,70,00 By Materials at site
To M~tel'IAIS l ,80,000 WIP
To \\\19es s) 45,000 By Certified (~6.00,000 x 80%)
To E\r,ensc (25% of :vage 20,000
To Plant Deproaabon Uncertified
90,000
To Notional Profit c/d ~ooo
45 ,000 By Notional Profit bid
To Profit & Loss Ale
2 75)
(~90,000 X J X 100
To Reserve

. . • alculation of Depreciation on Plant ~

Working note. _c. . 0 000 x 10% 5,00Q
Plant Deprec1ation. ~;,00,000 x 10% x 9/ 12 ~
- ~T~ot~
al~D~e~pr~ec~ia~tio~n~--;--l l i ~ ~ s t ~ t- - - - - - - ~
Balance Sheet
as on 31-12-2012
Liabilities
-=====]§i;;J§~======J~i
A~,5,00,000
n~t.(%<)ki;~;====jA~s~se~ts===~;i~~f1Arnt,
= Capital
Profit 45,000
Plant 2,50,000
(r)
Less: Depreciation (25.000)* 2,25,ooo
Less: Material Loss (B,OOO) Building 1,60,ooo
Unabsorbed Expenses
(N7,000 - t45,000) (2,000) Bank
Unabsorbed Dep. (5,000) 32,000 Materials at site 35,ooo
Creditors 72,000 Materials in store ~(2,00,000 - 1.70,000) 4,000
WIP-Certified 4,80,000 30,000
Uncertified 15,000
4,95,000
Less: Cash received (3,00,000)
Less: Reserve 45,000)
6,04,000 1,50,0QO
6,04,000
Or
(a) AB Enterprises undertake different jobs which require the use of a special
machine and also the use of a computer. The computer is hired and the hire
charges work out to f 4,20,000 p.a. The expenses regarding the machine are
estimated as follows:

Rent for quarter Amt. (f)

17,500
Depreciation p.a. 2,00,000
Indirect charges p.a. 1,50,000
. Duri~g the first month of operations, the following details were taken from the
Job register: .

• Jobs
Number of hours the machine was used· A B C
(a) Without use of the computer .
(b) With use of the computer 600 900
400 600 1,lXXJ
 <()',l A(< (JIJN'I INC-2fn8
185

"fd ,t, ,,quired

th· to compute the machine hour rates f or the furn
. as a whole
JI .,,o,, •
di' wt,en the computer was ui;ed .
~~ wt,en the computer wa~ not u,;ed.
( tfoW do you dic,poM! of t~e under- or over-recove f ? 10
5
Computation of Mac h'me Hour Rate ry o overheads.
_
Per Month
m
arget
17,500/3)
oon (t2,00,000/12) 5,833
charges (t1 ,50,000/12) 12,500
16,667
____________.!::===:==
Standing Charges 35,000

number of machine hours= 600 + 900 + 400 + 600 + 1,000 = 3,500 hours
puter hours = 400 + 600 + 1,000 = 2,000 hours
, U 20 000
ter hire charges per month = ' 1; = t35,000
Total Standing Charges t35, 000
hine Hour Rate for computer = Total H ours - - = n7.50
-hrs.
2,000
. Total Standing Charges t35,000
Hour Rate (without computer)= Total Hours -
3,500 - = no
-hrs.
· Hour Rate (with computer) =n7.50 +no= f27.50
(i) Machine hour rate, when the computer was used= f27.50
QQ Machine hour rate, when the computer was not used= no
See Q. 6, Unit 4. [Page 39
4. (a) A company is considering three . alternatives proposals for
eyance facilities for its sales personnel who have to do considerable
tlling, approximately 20,000 km every year. The proposals are as follows:
(i) Purchase and maintain its own fleet of cars. The average cost of a car
i, n,00,000.
Allow the executive use his own car and reimburse expenses at the rate
of '1.60 per km and also bear insurance costs.
Hire cars from an agency at t20,000 per year per car. The company will
have to bear costs of petrol, taxes and tyres.
following further details are available:
Petrol f .60 per km
Repair and maintenance f .20 per km
Tyres f .12 per km
Insurance f1 ,200 per car per annum
Taxes f800 per car per annum
Life of car 5 years with annual mileage of 20,000 km
letale value t20,000 at the end of the fifth year
Old the relative costs of three proposals and rank them. 10
joint products and by-products and give examples of each. S
 NJYJ:H1'J IY f; IIIO HS
~111\f pA11 pJ!I HI Un,mp,,r,1t1v<'
. <,oRl

1111, ~ j l•1tll'lll () f
~,., ( ·011/JHIII!/ ( (I Y ( )um I ur
l"'' k 111 m 1"'' k111 (t)

Fht1d r/11,gos: , OO ODO ~20,000)

0.80
-
l)l'pi1H'1,1t1on
1
l\s
y~ ~ 20, ooo km
0.04
0.06 0.06
004

1.()
iii, (~800r20.000k111) km
1nsu1,1nce (~ 1,200/20,000 ) 1.60
Hire c11,1rges (~20,000/20,000km) 1.66 1,04
.
Reimbur-sement
- Total Fixed Cost (A)
vsriable charges:
-------t--·-
- 0.90

0.60
0.60
Petrol 0.20 Q12
Repairs & maintenance 0.122
Tyre 0.9 o7
1.82 1.66 176
=i1i~o~t~ti
a~ Va~rla!J~b~l~efCo~~s-tU(:B)==;==~========+==~f¥cFo==f=;p~~=t=--:;- · 2
Total Cost (A + B)
36,400 33,200 3
·
=
_ __!T~ota~I~Co~st~(~Fo~r~20~,00~0~km~-L)- - - - - - t - ,Illi l - r ,---t~S,200

Ranks
I II
[Page 46
(b) See Q. 3(c), Unit 5. Or
A company manufactures radios, which are sold at U,600 per unit. The t t 1
cost is composed of 30% for direct materials, 40% for direct wages and 300/oof a
overheads. An increase in material prices by 30% and_ in wage rates by 10% ~r
expected in the forthcoming year, as a result of winch the profit at cune s
selling price may decrease by 40% of the present profit per unit. nt
You are required
. . to prepare a statement showing current and future proft 1 at

present se11mg pnce.

~~m ~
How much should the selling price be increas~d to maintain the present ra
15
Sol. Statement of Cost: Suppose Cost= x, Profit= y Selling Price - n 600 p.u. I I

Current {f) Increase {{) New (f)

0.30x 0.09x 0.39~
Direct Material 0.04x 0.44x
0.40x
Direct Labour 0.30
0.30x
Overhea~
X 0.13x 1.13x

As we know, Cost + profit Selling Pnce

X + y = 1,600
1.13x + 0.60y = 1,600 ...(ij
Multiply equation (i) by o. 60 and . ...(ii)
0.60x + 0.60y = 960 on solvmg both the equation (z) & (iz), we get
± l.13x ± 0.60y = ±1,600
(-) 0.53x = (-) 640
⇒ - 0.53x 640 x (Current cost) = _O 64 _
⇒ From (i)
= -
y (C 0.53 - t~,208 (approx.)
•, urrent Profit) - tl ,600 - x = n,600 - n,20s = ,392
 ioi1
Nalllt of the Paper Cm,t Auou,1th,Y.
ftilalll' of the Course H,Corn . (ffom,,J '

I ~ 11 I rrt J fj l'/JtJfl. I I

/\ lf1 •11111f 11111/ I u,o 1/111' ,//Im . It/ (ill

I\ II 11111•<, / l/1t1 t, , 11rr,1 l'lfUtd m11rh
1, (a) "Costs can h~ cl,,flsiflcd 1t1 ,, v.u,cty ,,1 v,, ., ,iut,,,fi,, ~ f.l , th,-,,
1
and the inform,1ltort
, , need" ul the m.u,,,u,. r, 111(:11, ,r " 1 1,Jwt , ,H i lJfi a' (;fl;,<
,, ,
, A

....
..,_tement g1v11wn cx.un1>lcfl of tt,,,
..- 1 ,,, ·1· ,. ,
" ,1 S1' 1 fC,1IJ ( 1t11: r t (J tJJrCti fr,r ,!1ff ntr,t

A,S, Ltd. produc,·11 ,1 produd 'HNI' utiiny, tw,, uani,,, 11 ,. 1 ,tt, / ;i, 1,: / ; ~d
.
of 'Red' requJrcN 0,4 kg of X ,rnd OJ, ,k Y, of Y. w,•(·.lt J y pr<,d ,,, tf 1, 1, 1;,t j"',.
S50 units to 450 unilH avcra1gioy; 400 unit•,. o,•JJv,-,y pt-rJ(,tJ f,, 1 r,,,if th"'
ents is 1 to 3 wcekH. The cc11oomi,, MdN qwrntity for/' "· f//J .v~ -1r1d
It 1000 kg. Calculate:
Re-order level of X; (ii) M,1ximw,1 J,--v,-1 ,,f / i
Minimum level of Y.
m the following information, ralcul,1tc cwm,mic ,,r<kr q tMrlt it/ M tJ
ber of orders to be plan•d in on(• quMlc"r ,,f th,· Y''M for pr<,dvtt / .
Quarterly consumption of matcrfol 2,000 kK
Cost of placing onC' order '~()
Cost per unit 7/JO
Storage and carrying coHt HO% on ~w~ragc ir,v<·ntt,ry
Coit. See Q. 7, Unit I. P'rJ;if; ::;
~rder level of X Maximum nm.,umplfon / Maximum 1-'e (;rder pt:rifxi
.,, (450 x OA) x 1 W(•t·k 1•

= 180 x 3 540 kg
Mmmum level of X
f<t•-ord,·r (Minimum / Minimum )
• Re-order level + Quanlity Ct,11,,umplfon /fr r,rrlt-r ,,n11,d

• S40 + 600 _ (0.4 x 350) x 1 week

•1140-('140X1)•1000kg , .
Ju.order level of y • Maximum o,mumptum x Maximum l<c order pcnod
• (0. 6 x 450) x 3 wee kb 270 /. 3 • HW kg

Minimum level of Y
Re-order (Avaage x AtJt•ruge . )
• Ltvel Com1umpticm R,•-ord,·r 11m111/

• 810 - (0.6 x 400) ,c 2 weeks

A • Annual oru umpu n
• 810 - 480 • 330 kg
H • Ord rmg t
{iAlJ ... where C,
(. t pt r unit
IOQ (Economic order Quantity) • V-( s
c.; '-tt,lf&IK ( t

219
 vr R5f r Y 5F RJES
~III V ll1\ S ()I I.Ill L NI
210
8 00,(XX>
•
I
>l'' 1
... .,,
ll00l!:4x,50
'io~ 8(1%
•
'
'
32

. roQ • J~ "" 158 kg. (Approx.) == ~ kg.= 13 orders (Approx.)

b l ced per quarter 158
'\ow, Numh~r of orders to e pa ? Iain the causes of labour turnover and
Q. 2. (,,) What is labour turnover. Exp
tht? method~ of measuring it. . . •t different from traditional method
(b) Explain activity based costing. How is 1
of overhead costing? . h the following working conditions:
(c) A cost centre in a factory furrus es 40 hours
~ormal working week 15
'\ umber of machines t 4 hrs. per machine
:'\umber of weekly loss of hours on maintenance e c.
Estimated annual overheads n,ss,s20
Estimated direct wages rate ~3 per hour
Number of weeks worked per year 48
Actual results in respect of a 4-week period are:
Overheads incurred ns,ooo
Wages incurred ~7,000
Machine hours produced 2,200 hrs.
You are required to:
(i) Calculate the overhead rate per machine hour.
(iz) Calculate the amount of under or over-absorption of both wages and
overheads.
Sol. (a) Labour turnover. It is ofte!l seen that factory workers change from one
employment to another. This is sometimes done for better prospects, sometimes
for better working conditions or sometimes they are forced to leave their jobs.
Such mobility of labour is called Labour turnover. In other words, change in the
labour force in an organisation is called Labour turnover.
• Measurement: Labour turnover can be measured by the following formulae:
. Ra No. of employees
1. Sep aration te = - - - ~ ~ -leaving - ~ x 100
Average no. of employees

!'Jo. at the beginning)+(No. at the end)

(
Further, Average no. of employees = of the period of the period
2
2 R la t Ra No. of employees replaced
· ep cemen te = Average no. of employees x 100
3. Flux Rate = No. of employees leaving + No. of employees replaced or selected
Average no. of employees x 100
Causes of Labour Turnover. Some causes of the labour turnover are avoidable
whereas some are unavoidable.
Avoidable causes may include reasons like:
(1) Retrenchm_ent of ~orkers because of seasonal requirement, shortage of
. raw matenal, fall m demand, lack of plannin t
• g e C.
 COST ACCOUNTING -2021
221
. 1,0w wages
~'1 5ad working conditions
:(il'1 [)isSatisfac~~n with_ t_h~ job
(0) 1,ack of trauung fac_1lities leading to stagnation
oidable causes can include reasons such as·
~1 personal betterment avenues ·
Retirement
Sickness
Accident and death
Personal reasons e.g., pregnancy or marria e
Change of residence g
Negligence,
, • d inefficiency,
C • unauthorised
. . · · 1acts etc.
long abs ence, cnmma
~ctivtty Base. osting. Activity
. based cost allocati'o n. In trad'1tiona
· 1system
Accounting, production, ~dministration and selling/ administration
s are allocated and apportioned to individual products on arbitrary
But such an approach of distribution of overheads has certain limitations
cularly in respect pf accuracy of costs of products or services. In order t~
me these limitations of traditional approach, Activity Based Costing (ABC)
has come into being.
has been defined as "the collection of financial and operations performance
tion tracing the significant activities of the firm to product costs."
ccording to CIMA, London "ABC is the cost attribution to cost units on the basis
ts received from indirect activities, e.g. ordering, setting.up, assuring quality".
was developed by Kaplan and Cooper of Harvard Business School,
Under this system, the main activities are identifi~d and the cost of these
'ties are traced to products according to demand made by the products for
activio/·
· -erence between Activity Based Costing (ABC) and Traditional Method of
erhead Costing:
In traditional method of overhead costing, overheads are allocated, apportioned
absorbed in the cost of the products. ABC is the latest and an alternative
of overhead costing. In ABC, _overheads are distributed to products
on the activities consumed. In ABC system, costs of individual activities
calculated and assigned to cost objects such as products o~ services on the
· of activities undertaken to produce these products or services:
raditional method is old way of thinking on overhead a~counting and may
t in d tin' f certain products and over-costing of some other
un er-cos g O d 1 · al d' ·b · f
ucts. But ABC system provides a ~tter an more ogic 1stri ution o .
resulting in more accurate costmg.