Assignment (marks 15)

a.
b.
c.
d.
e.
f.

Assignment should be hand written.

Quote the proper question number
Highlight the final answer of the numerical
Last date of submission 4th February 2015.
Hard copies should be submitted
Attempt five questions each from the theory and problems.

Section A: Theory questions (attempt any five)

1. Define and explain the following terms with suitable examples:
a. Cost
Cost: - Cost can be defined as the expenditure (actual or notional)
incurred on or attributable to a given thing. It can also be described as
the resources that have been sacrificed or must be sacrificed to attain a
particular objective. In other words, cost is the amount of resources
used for something which must be measured in terms of money. For
example Cost of preparing one cup of tea is the amount incurred on
the elements like material, labor and other expenses; similarly cost of
offering any services like banking is the amount of expenditure for
offering that service.
b. Costing
Costing: - Costing may be defined as the technique and process of
ascertaining costs. According to Wheldon, Costing is classifying,
recording, allocation and appropriation of expenses for the
determination of cost of products or services and for the presentation
of suitably arranged data for the purpose of control and guidance of
management. It includes the ascertainment of every order, job,
contract, process, service units as may be appropriate. It deals with the
cost of production, selling and distribution.
c. Cost Accounting
Cost Accounting: - Cost Accounting primarily deals with collection,
analysis of relevant of cost data for interpretation and presentation for
various problems of management. Cost accounting accounts for the
cost of products, service or an operation. It is defined as, the
establishment of budgets, standard costs and actual costs of

operations, processes, activities or products and the analysis of

variances, profitability or the social use of funds.
d. Cost Accountancy
Cost Accountancy: - Cost Accountancy is a broader term and is
defined as, the application of costing and cost accounting principles,
methods and techniques to the science and art and practice of cost
control and the ascertainment of profitability as well as presentation of
information for the purpose of managerial decision making.
e. Cost Centre
Cost Center is defined as, a production or service, function, activity
or item of equipment whose costs may be attributed to cost units. A
cost center is the smallest organizational sub unit for which separate
cost allocation is attempted. A cost center is nothing but a location,
person or item of equipment for which cost may be ascertained and
used for the purpose of cost control. For example, a production
department, stores department, sales department can be cost centers.
Similarly, an item of equipment like a lathe, fork-lift, and truck or
delivery vehicle can be cost center, a person like sales manager can be
a cost center.
f. Cost Unit
Cost Unit is a device for the purpose of breaking up or separating
costs into smaller sub divisions attributable to products or services.
Cost unit can be defined as a Unit of product or service in relation to
which costs are ascertained. The cost unit is the narrowest possible
level of cost object. It is the unit of quantity of product, service of
time (or combination of these) in relation to which costs may be
ascertained or expressed. We may, for instance, determine service cost
per ton of steel, per tonne-kilometre of a transport service or per
machine hour.
2. Explain classification of cost on various basis.
3. Define Marginal Cost. Discuss the importance of classifying expenses into
variable and fixed.
4. Distinguish between cost accounting and financial accounting. (Or emphasis
of cost accounting is different from financial accounting.
5. What is cost audit? What are the objectives and advantages of cost audit?

6. Explain the following concept with reference to overheads, with suitable

example:
a. Classification
b. Allocation
c. Apportionment
d. Absorption
e. Under and over absorption
Section B : Problems (solve any five)
Q. 1) ABC Ltd. provides the following information for 10,000 cookers
manufactured during the last year:
PARTICULARS
AMOUNT (Rs.)
Material
450,000
Direct Wages
300,000
Power and consumables
60,000
Lighting of factory
117,500
Clerical Salaries and Mgmt. Expenses
168,000
Selling expenses
27,000
Sales proceeds of factory scrap
10,000
Plant, repairs, maintenance and depreciation
57,500
The net selling price was Rs.158 per unit and all units were sold.
From 1st January of the current year, the selling price was reduced to Rs.150 and it
Estimated that production could be increased by 50% in the current year due to
increased spare capacity.
Prepare:
a) A cost sheet for the last year.
b) A cost sheet for the current year if 15000 units were Produced and sold. The
Factory overheads are recovered as a percentage of direct wages and office and
Selling expenses as a percentage of works cost.
Q.2) A firm has purchased a plant to manufacture a new product, the cost data for
which is given below: Estimated annual sales 24,000 units
Estimated Costs:
Materials
Labour
Factory Overheads
Admn. Expenses

Rs.4 per unit

Rs.0.60 per unit
Rs.24, 000 per year
Rs.28, 800 per year

Selling expenses
15% of sales
Calculate the selling price if profit per unit is Rs.1.02
Q.3) The following information relates to a company
Stock

Opening

Closing

Finished goods
WIP
Raw Material

110,000
70,000
90,000

95,000
80,000
95,000

a) Cost of goods produced Rs.684, 000.

b) Factory cost Rs.654, 000.
c) Factory overheads Rs.167, 000.
d) Direct Material consumed Rs.193, 000.
Calculate:
1) Raw material purchased.
2) Direct labour cost.
3) Cost of goods sold

Q.4) The budgeted sales of the products of a company are as follows:

Products Budgeted
Budgeted
Budgeted
Budgeted
Budgeted
sales in unit
sales in unit variable cost selling price fixed
per unit
per unit
expenses
X
Y
Z

10,0000
15,000
20,000

10,0000
15,000
20,000

2.5
3
3.5

4
4
4

12,000
9,000
7,500

From the above information, you are required to compute the following for each
product:
a. The Budgeted Profit
b. The Budgeted break even sales
c. The Budgeted margin of safety in terms of sales value
Q.5) From the following particulars, you are required to calculate:
(i)P/V Ratio

(ii)BEP for sales;

(iii)Margin of Safety;
(iv)Profit when sales are Rs.2, 00,000
(v)Sales required to earn a profit of Rs.40, 000
Year Sales
Profit
I
Rs. 2,40,000 Rs.18,000
II
Rs. 2,80,000 Rs.26,000
You may make plausible assumptions. Also evaluate the effect on II years profit
when,
(a) 20% decrease in sales quantity.
(b) 20% decrease in sales quantity accompanied by 10% increase in sales price and
reduction of Rs. 3,500 in fixed costs
Q.6) A Japanese Soft Drink Company is planning to establish a subsidiary
company in India to produce mineral water. Based on the estimated annual sales of
40,000 bottles of the minerals water, cost studies produced the following estimates
for the Indian subsidiary.
Total
Cost

Annual Percentage of Total Annual

Cost which is variable

Material
2,10,000
100%
Labour
1,50,000
80%
Factory overheads
92,000
60%
Administration
40,000
35%
expenses
The Indian Production will be sold by the manufacturers representatives who will
receive a commission of 8% of the sales price. No portion of the Japanese office
expenses is to be allocated to the Indian subsidiary.
Required:
1. Compute the sales price per bottle to enable the management to realize an
estimated 10% profit on sale proceeds in India
2. Calculate the Break-even point in Rupee sales as also in number of bottles for
the Indian subsidiary on the assumption that the sales price is Rs.14 per bottle.

Q.7) An Umbrella manufacturer makes an average net profit of Rs.2.50 per

piece on a selling price of Rs.14.30 by producing and selling 60,000 pieces or

60% of the potential capacity. His cost of sales is as follows:
Direct material Rs.3.5
Direct wages Rs. 1.25
Work overheads Rs. 6.25 (50% fixed)
Sales overheads Rs. 0.80 (25% variable)
During the current year, he intends to produce the same number of units but
anticipates that his fixed charges will go up by 10% while the direct labour
and direct materials will go up by 8% and 6% respectively. But he has no
option of increasing the selling price under this situation. He obtains an offer
for further 20% of his capacity.
What minimum price will you recommend for acceptance of offer to ensure
the Manufacturer an overall profit of Rs.1, 67,300?