PG DEPARTMENT Of COMMERCE (CA)

QUESTION BANK

COURSE: B.Com (CA) SEMESTER : IV

SUBJECT CODE: 17UCC410 SUBJECT: Cost Accounting

K1 Level

1. A technique and a process of ascertaining costs is _______

a) Cost b) Costing c) Financing d) Managing

2. The method of accounts in which all costs incurred to carry out activity are allocated is ___

a) Financial Accounting b) Management Accounting c) Cost Accounting d) None

3. The Amount of actual expenditure incurred and the notional expenditure attributable for
given thing is _______

a) Cost b) Expenses c) Liability d) Loss

4. The presentation of accounting information to assist management in decision making is __

a) Financial Accounting b) Management Accounting c) Cost Accounting

d) All of them

5. Accounting for revenues, expenses, assets and liabilities to carry out general business is __

a) Management Accounting b) Cost Accounting c) Financial Accounting

d) both a & c

6. The method of cost applicable for separate jobs, batches or contracts authorized by specific
order is _______

a) Operation Costing b) Specific Order Costing c) Multiple Costing

d) Job Costing

7. The costs collected and accumulated for each job, work order or project separately is ____

a) Job Costing b) Contract Costing c) Batch Costing d) Multiple Costing

8. Cost for big job, spread over long time and has separate account for each individual
contract is _______

a) Batch Costing b) Contract Costing c) Job Costing d) Operation Costing

9. Cost involved for each batch representing number of small jobs passed through the factory
 is __________

a) Job Costing b) Contract Costing c) Batch Costing d) Specific Order Costing

10. Cost suitable for industries where production is continuous is _______

a) Batch Costing b) Process Costing c) Contract Costing d) Job Costing

11. Cost suitable for concerns manufacturing continuous and identical units is _____ costing.

a) Operation Costing b) Service Costing c) One Operation Costing d) Job Costing

12. Cost involved in organisations which provides services instead of producing goods are
__________ costing.

a) Farm Costing b) Service Costing c) Multiple Costing d) Batch Costing

13. The cost that helps to calculate per unit and total cost of farming activities are called
_______ costing.

a) Service Costing b) Operation Costing c) Farm Costing d) Process Costing

14. The manufacturing cost of a number of distinct operations are termed as ______ costing.

a) Multiple Operating Cost b) One Operation Costing c) Operation Costing

d) None of them.

15. The application of more than one methods of costing in respect of same product is said to
be as ________ costing.

a) Service Costing b) Farm Costing c) Multiple Costing

d) Multiple Operation Costing.

16. The sum of direct materials, labour and expenses are called ________

a) Prime Cost b) Factory Cost c) Administrative Cost d) Selling Cost

17. The total of prime cost and works overheads are known as ________

a) Factory Cost b) Prime Cost c) Selling Cost d) Distribution Cost

18. The addition of works cost with administration overheads is ______

a) Cost of Production b) Cost of Sales c) Administrative Cost d) Prime Cost

19. Total cost is also known as _________

a) Total Revenue b) Cost of Sales c) Cost of Production d) Sales Price

20. Cost of production plus selling and distribution overheads is ___________

 a) Total Cost b) Total Revenue c) Sales Overheads d) Selling Cost

21. Difference between cost of sales and selling price is called _______

a) Profit or loss b) Revenue c) Expenditure d) Loss

22. The materials directly enter the production and form a part of finished product is known
as ___________

a) Finished Material b) Direct Material c) Indirect Material d) Raw Material

23. The labour expended in converting raw material into finished goods is known as _______

a) Direct Labour b) Indirect Labour c) Supervisor d) Contract Worker

24. The expenses incurred specifically for a particular product, job etc are termed as _______

a) Indirect Expenses b) Profitable Expenses c) Direct Expenses

d) Non-Profitable Expenses

25. The aggregate cost of indirect materials, labour and expenses not charged equally to
specific units are called as _________ cost.

a) Overheads Cost b) Direct Cost c) Aggregate Cost d) Production Cost

26. The availability of right quality of material in right quantity, time, place and amount is
known as _________

a) Material Availability b) Material Control c) Stock of Material

d) Material Generation

27. The two aspects of material control are operational and ________ aspects.

a) Accounting Aspects b) Production Aspects c) Sales Aspects

d) Inventory Aspects

28. The level of material controlled between maximum and minimum levels are termed as __

a) Danger Level b) Average Stock Level c) Minimum Level d) Re-order Level

29. Maximum Consumption * Maximum Re-order Level = _________

a) Order in Level b) Maximum Level c) Minimum Level d) Danger Level

30. The other name for minimum level is ________

 a) Danger Level b) Safety stock Level c) Re-order Level

d) Minimum Consumption Level

31. Re-ordering Level – (Normal Consumption * Normal Re-order Period) = _________

a) Maximum Level b) Minimum Level c) Average Stock Level d) Danger Level

32. The Minimum quantity of Material to be maintained all times is _________

a) Minimum Level b) Re-order Level c) Danger Level d) Average Stock Level

33. Re-ordering Level + Re-ordering Quantity – (Minimum Consumption * Minimum Re-

ordering Period = ___________

a) Minimum Stock Level b) Maximum Stock Level c) Average Stock Level

d) Danger Level

34.The highest amount of stock maintained at any time is ____________

a) Average Stock Level b) Minimum Stock Level c) Danger Level

d) Maximum Stock Level

35. The normal issue of material stopped and issues are made at specific instruction in
______ level.

a) Average Stock Level b) Danger Level c) Re-order Level d) Minimum Stock Level

36. Average consumption * Maximum Re-Order Period for emergency purchases is ____

a) Average Stock Level b) Minimum Level c) Re-Order Level d) Danger Level

37. EOQ stands for _________

a) Economically Ordered Quality b) Economic Order Quality

c) Essential Order Quantity d) Economic Order Quantity

38. Total acquisition cost added with total ordering cost and total carrying cost gives ____

a) Total Cost of Production b) Total Cost of Materials c) Total Sales d) Total Cost

39. Quantity of material to be ordered at one single time is _____________

a) Re-Order Quantity b) Minimum Quantity c) Maximum Quantity

d) Economic Order Quantity

40. In the formula of EOQ, C Stands for _________

 a) Cost b) Control c) Contract Value d) Consumption

41. In ABC analysis, ABC explains about ___________

a) Always Better Control b) Availability Based Control c) Access Based Control

d) Assumption Based Control

42.In VED analysis, VED stands for __________

a) Value Enabled Deduction b) Vital Essential Desirable

c) Value Enacted Deduction d) Vital Effective Desirable

43. Expansion of LIFO __________

a) Last In-Fresh Out b) Least In-First Out c) Last In-Least Out d) Last In-Last Out

44. Materials received first are issued first in _____________

a) HIFO Method b) LIFO Method c) FIFO Method d) FILO Method

45. The total price of the stock divided by number of prices gives _________

a) Weighted Average Cost b) Simple Average Cost c) Cumulative Cost d) None

46. The total cost of materials in stock divided by total quantity is _____________

a) Simple Average Cost b) Cumulative Cost c) Average Consumption Cost

d) Weighted Average Cost

47. The predetermined price at which receipts and issues are to be valued is ____________

a) Market Price Method b) Inventory Price Method c) Base Stock Method

d) Standard Price Method

48. Materials that are subject to natural wastage are priced at _______

a)Market Price Method b) HIFO Method c) Inflated Price Method d) None

49. The replacement price or the realisable price is _______ price.

a) Market Price b) Inflated Price c) Standard Price d) Cost Plus Price

50. The minimum quantity of stock is ________

a) Base Stock b) Re-Order Quantity c) Average Stock d) Danger Level Stock

51. The second major element of cost is _______

 a) Material Cost b) Direct Expenses c) Indirect Expenses d) Labour Cost

52. The two types of labour are _____________

a) Direct and Indirect Labour b) Short term and Long Term Period Labour

c) Permanent and Temporary Labour d) Skilled and unskilled labour

53. The various items of expenditure incurred on workers by the employers are called
_______ cost.

a) Direct Cost b) Labour Cost c) Monetary Expenses d) Factory Cost

54. The indirect form of employee compensation is _________

a) Fringe Benefits b) Monetary Benefits c) Bonus d) Incentives

55. The percentage change in the labour force of an organisation is _________

a) Skilled Labour b) Addition of Labour c) Discharge of Labour

d) Labour Turnover

56. The process of determining by observation, study and reporting pertinent information of
specific job is _______

a) Job Evaluation b) Job Analysis c) Job Description d) Job Analysis

57. A systematic technique to determine the worth of a job is ________

a) Job Evaluation b) Job Analysis c) Job Description d) None of them

58. The technique used to evaluate the workers actual performance in a job is ________

a) Merit Rating b) Job Analysis c) Performance Analysis d) Job Evaluation

59. The process of recording the time of each worker engaged in a factory is known as ____

a) Time Management b) Time Analysis c) Time Effectiveness d) Time Keeping

60. A method of recording the time spent by each worker on different jobs are called ______

a) Time Keeping b) Time Booking c) Job Cards d) Job Analysis

61. The difference between the time booked for different jobs and get time is known as _____

a) Idle Time b) Idle Management c) Idle Job d) None of them

62. The wastage of time which cannot be avoided is termed as ___________

 a) Idle Wastage b) Normal Idle Wastage Time c) Abnormal Idle Time Wastage

d) Normal Idle Time

63. The wastage of time which can be avoided through proper precautions is ________

a) Normal Idle Time b) Abnormal Idle Time c) Overtime d) Idle Time

64. The work done beyond normal work period is ______________

a) Idle Time b) Overtime c) Abnormal Work Time d) Work Time

65.The system in which a worker is paid hourly, daily, weekly or monthly rate is _________

a) Piece Rate System b) Time Wage System c) Premium Plans

d) Gant’s Tank Plan

66. The system where fixed rate is paid for each unit produced or job completed is ________

a) Rowan’s Premium Plan b) Time Wage System c) Piece Rate System

d) Halsey’s Wage System

67. System in which 3 piece rates are applied for workers with different levels of
Performance is _________

a) Taylor’s Differential piece rate system b) Merricks Multiple piece rate system

c) Straight piece rate system d) Gant’s Task Plan

68. Standard time is fixed and compared with workers actual performance is _________

a) Rowan’s Plan b) Halsey’s Plan c) Gant’s Task and Bonus Plan

d) Straight Piece Rate System

69. T*R+%(S-T)R is the formula of ____________

a) Rowan Plan b) Halsey Plan c) Gant’s Task Plan d) Bonus Plan

70. The total amount remained fixed with changes in the volume of output is known as _____

a) Variable Overheads b) Semi variable Overheads c) Semi fixed Cost

d) Fixed Overheads

71. The cost which is partly affected by fluctuations in the level of activity is __________

a ) Semi Variable Cost b) Variable Cost c) Fixed Cost d) Both B and C

72. The allocation and apportionment of the expenses to cost centres is also known as ______
 a) Departmentalisation of Overheads b) Decentralisation of Overheads

c) Determination of Overheads d) Dispatch of Overheads

73. A single overhead computer for the Factories as a whole is termed as _____________

a) Pre-Determined Overhead Rate b) Centralised Overhead Rate

c) Multiple Overhead Rate d) Blanket Overhead Rate

74. The overhead rate is the pre-determined rate calculated with reference to normal capacity
is __________

a) Multiple Overhead Rate b) Normal Overhead Rate

c) Pre-Determined Overhead Rate d) Blanket Overhead Rate

75. The cost of running a machine per hour is __________

a) Machine Hour Rate b) Piece Rate Hour c) Standard Hour Rate

d) Multiple Piece Rate Hour

76. Each stage of Production is __________________

a) Product b) Process c) Progress d) Promotion

77. The ascertainment of cost at each stage production is _______________

a) Production Costing b) Progress Costing c) Promotional Costing

d) Process Costing

78. The loss that occurs in the process of Production is ________ loss.

a) Process b) Production c) Product d) Promotion

79. The Loss of Units in Production process caused by nature or unavoidable causes is _____

a) Product Loss b) Normal Loss c) Abnormal Loss d) Price Loss

80. The cost of _______ loss is considered as a part of production

a) Normal b) Abnormal c) Product d) None

81. The loss that exceeds normal limits and which can be avoided is ___________ loss

a) Product b) Normal c) Abnormal d) Price

82. The difference between Pre-determined normal loss and actual loss is __________
 a) Normal Loss b) Normal Gain c) Abnormal Gain d) Abnormal Loss

83. The Profit earned from the transfer of output from one process to the next is ________

a) Normal Profit b) Inter Process Profit c) Abnormal Profit d) Intra Process Profit

84. Raw materials, Labour and Overheads costs incurred for products at various stages of
production is ___________

a) Finished Goods b) Production Process c) Work in Progress

d) Product Expenses

85. The expected output is equal to ___________

a) Input-Normal Gain b) Input-Abnormal Gain c) Input-Abnormal Loss

d) Input-Normal Loss

86. The cost of closing stock = _____________

a) Cost/Total*Value of Closing Stock b) Cost/Total + Value of Opening Stock

c) Cost/Total-Value of Closing Stock d) None of them

87. In process costing, cost follows through ____________

a) Finished Goods b) Product Flow c) Price Rise d) Normal Gain

88. Which of the following method is used in large oil refinery ____________

a) Job Costing b) Unit Costing c) Operation Costing d) Process Costing

89. Sometimes, materials may not be put into process ______________

a) Continuously b) At the beginning of the Operation c) In shipping department

d) At the end of the operation

90. The type of loss that should not affect the cost of inventories is _____________

a) Abnormal Loss b) Normal Loss c) Seasonal Loss d) None

91. In which method each job is treated as a cost unit ________________

a) Job Costing b) Contract Costing c) Process Costing d) Unit Costing

92. The first step in Job Order Cost system is __________________

 a) Receiving of Order b) Paying for Order c) Production Order

d) Receiving an Enquiry

93. The contract where both the parties agree to a fixed contract price is __________

a) Cost plus Contract b) Fixed Price Contract c) Future Price Contract

d) Both a and b

94. The contract where contractor fixes a fee towards profit is _____________

a) Cost plus Contract b) Fixed Price Contract c) Fluctuating Price Contract

d) None of them

95. The sub contract cost is shown on __________ side of the contract account

a) Debit b) Credit c) Contra entries on both sides d) No entry made

96. In contract costing, most of the items of cost are ____________ in nature

a) Direct b) Indirect c) Equal d) Unequal

97. The loss incurred on an incomplete contract is transferred to _______ account

a) Contractor b) Contract c) Profit and Loss d) Not Transferred

98. The term reconcile refers to __________

a) Reconsider b) Settle Differences c) Record d) Reject

99. The costing profit will be lower than financial profit in _______________

a) Over Absorption b) Under Absorption c) Equal Absorption

d) None of the cases

100. Financial Income includes _______________

a) Donation b) Goodwill c) Profit on sale of assets d) All of the above

K2 Level
1. Decode the meaning of Costing.
Costing is the classifying, recording and appropriate allocation of expenditure for the
determination of the costs of products or services.

2. Describe the term Cost Accounting.

Cost accounting is the process of recording, classifying, analyzing, summarizing, and
allocating costs associated with a process, and then developing various courses of action
to control the costs.

3. Review the concept of Cost.

Nominal cost and Real cost, Explicit and Implicit costs, Accounting costs and
Economic costs, Opportunity cost, Business cost and Full cost.

4. Discriminate between Direct and Indirect Expenses.

A cost that is easily attributable to a cost object is known as direct cost. Indirect cost
is defined as the cost that cannot be allocated to a particular cost object.

5. Infer the notion of Prime Cost.

A prime cost is the part of the cost of a commodity that changes according to the
amount of it that is produced, such as materials and labour.

6. Indicate about the concept of Factory Cost.

Factory cost refers to the total cost required to manufacturing goods. This is the cost
of those materials directly associated with the construction of goods.

7. Review on Cost of Production.

Cost of production is the total price paid for resources used to manufacture a product
or create a service to sell to consumers including raw materials, labour and overhead.

8. Generalise the term Work-in-Progress.

Work in progress refers to partially completed goods that are still in the production
process. These items do not include raw materials or finished goods.

9. Predict the Cost of Sales.

Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement
instead of cost goods sold. The cost of sales does not include selling, general and
administrative expenses or interest expenses.

10. Discuss on Materials Consumed.

Material consumed means the raw material used for production of any goods. The
goods produced have three elements of cost (Cost of raw material, cost of labour, factory
overheads).
11. Describe the term Material Control.
 The term material control means systematic control over purchasing, storing and
consumption of materials. Material control helps to reduce the losses and wastage of
materials by maintaining their efficient purchase, storage and use or consumption in the
factory.

12. Enumerate on Economic Order Quantity.

Economic ordering quantity is the ideal order quantity a company should purchase for
its inventory given a set cost of production, a certain demand rate and other variables.

13. Examine Re-Order Level.

The reorder level should result in replenishment inventory arriving just as the existing
inventory quantity has declined to zero. To calculate the reorder level, multiply the
average daily usage rate by the lead time in days for an inventory item.

14. Predict the Minimum Stock Level.

The minimum stock level is stock limits for the customer location product that the
customer agrees upon with the supplier. The projected stock must not fall below the
minimum stock level.

15. State the Maximum Stock Level.

The maximum stock level is a not-to-exceed amount used for inventory planning.
This stock level is based on a calculation of the cost of storage, standard order quantities
and the risk inventory becoming obsolete or spoiling with the passage of time.

16. Review on the Average Stock Level.

Average stock level is the average quantity of stock for a given time of period.
Average stock level = Minimum level + ½ (Re-order quantity).

17. Define Danger Level.

Danger level is a level of fixed usually below the minimum level. When the stock
reaches danger level, an urgent action for purchase is initiated.

18. Describe the Base Stock Method.

Base stock method is a valuation technique for the inventory asset, where the
minimum amount of inventory needed to maintain operations is recorded at its acquisition
cost.

19. Extend the term LIFO.

Last In First Out method of inventory accounting whereby the most recent purchases
are first charged to cost of goods sold.

20. Clarify about the Inflated Price Method.

 Inflated price method is a method of inventory valuation where in material loss due to
climatic or natural factors.

21. Reproduce the idea on Labour Turnover.

Labour turnover refers to the rate at which employees leave employment. Labour turn
over can be evaluated by relating the number of employees leaving their employment
during a period of time to the total or average numbers employed in that period.

22. Enumerate on the Piece Rate System.

Piece rate system is the method of remunerating the workers according to the number
of unit produced or job completed.

23. Defend on the Time Wage System.

Time is made a basis for determining wages of worker. Under this system, the wages
are paid according to the time spent by workers irrespective of his output of work done.
The wage rates are fixed for an hour, a day, a week, a month or even a year.

24. Express the Merrick’s Piece Rate System.

The Merrick differential piece rate system is a modification of Taylor’s differential
piece rate system in which three piece –rates are used to distinguish between the
beginners, the average workers.

25. Explain about Halsey Premium Plan.

Under Halsey plan the standard time for the completion of a job is fixed and the rate
per hour is then determined. If the time taken by a worker is more than the standard time,
then he shall be paid according to the time rate.

26. Quote on the term Indirect Cost.

Indirect costs are costs that are not directly accountable to a cost object. Indirect cost
may be either fixed or variable.

27. Examine on the perception about Machine Hour Rate.

Machine hour rate is the cost of running a machine per hour. It is one of the methods
of absorbing factory expenses to production.

28. State the term Apportionment.

Apportionment is one of the most important functions of the decennial census. It is
used to assign the business income among the states.

29. Infer about Allocation.

Cost allocation is the process of identifying, aggregating, and assigning costs to cost
objects. A cost object is any activity or item for which you want to separately measure
costs.
30. Define Labour Cost.
 Labour cost represents human contribution. Labour cost is sensitive in nature. The
reason is that the labour cost is fully based on the human behaviour.

31. Describe Process Costing.

Process costing is a term used in cost accounting to describe one method for
collecting and assigning manufacturing costs to the units produced.

32. Discuss on Normal Process Loss.

The loss expected or anticipated prior to production is a normal process loss. It is also
called as standard loss.

33. Clarify about the Abnormal Process Loss.

Abnormal loss means that loss which is caused by unexpected or abnormal conditions
such as accident, machine breakdown, etc.

34. Define Abnormal Gain.

The actual loss of a process is less than that of expected loss then the difference
between the two will be treated as abnormal gain.

35. Report on the Elements of Cost.

The elements that constitute the cost of manufacture are known as the elements of
cost. Such element of cost is divided into three categories. They are material, labour and
expenses.

36. Label the Inter Process Profit.

The profit associated with the transfer of goods from one process to another process is
called inter-process profit.

37. Decode the term Job Costing.

Job costing is accounting which tracks the costs and revenues by “Job” and enables
standardized reporting of profitability by job.

38. Discriminate Job Costing Vs Process Costing.

Job costing involves the detailed accumulation of productions costs attributes to
specific units or groups of units.
Process costing involves the accumulation of costs for lengthy production runs
involving products that are indistinguishable from each other.

39. Describe Equivalent Production.

An equivalent unit of production is an indication of the amount of work done by
manufacturers who have partially completed units on hand at the end of an accounting
period.

40. Indicate the term Work-in-Progress.

 Work in progress refers to materials that are turned into goods in a short time period.

41. Interpret the need for Reconciliation of Cost.

Management is enabling to know the reasons for the difference in results of both cost
and financial accounts. It ensures the reliability of cost data.

42. State the need for Reconciliation of Financial Accounts.

Financial accounts reveal the reasons for difference in profit and loss between cost
and financial accounts. To check the arithmetical accuracy of both sets of accounts as
well as to detect errors and omissions committed in the accounts.

43. Define Job Costing.

Job costing is a method of recording the costs of a manufacturing job, rather than
process.

44. Describe the term Contract Costing.

Contract costing is the tracking costs associated with a specific contract with a
customer.

45. Decode on Fixed Price Contracts.

A fixed price contract is a type of contract where the payment amount does not
depend on resources used or time expended.

46. Clarify about the Cost Plus Contracts.

A cost plus contract also termed as cost addition contract, is a contract where a
contractor is paid for all of its allowed expenses, plus additional payment to allow for a
profit.

47. Associate Job and Contract Costing.

Job costing is a system used for completion of specific customer orders where each
unit produced is considered a job where as contract costing is referred to as a costing
system applied work is undertaken according to special requirements of customers in a
location specified by the customer.

48. State the prerequisites of Job Order Costing.

The job order cost system must capture and track by job the costs of producing each
job, which includes materials, labour and overhead in a manufacturing environment.

49. Explain the concept behind Certificate of Work done.

Document certified by an architect or an engineer that a certain construction project
has been completed in accordance with the terms, conditions and specification contained
in a job contract.

50. Predict the Profit on Uncompleted Contract.

 The work of contract which is completed but not certified by the engineers is called
work uncertified. The uncertified contract never includes the portion of notional profit.

K3 Level
1.Analyze the scope of Cost Accounting.

2. State the meaning of cost accounting and examine its disadvantages.

3. List out the Advantages of cost accounting.

4. Discover the objectives of cost accounting.

5. Simplify the features of cost accounting.

6. Distinguish between cost and cost accounting.

7. Calculate Prime Cost.

Particulars Amount (Rs.) Particulars Amount (Rs.)

Factory Expenses 10,000 Office Overhead 7,000
Selling Expenses 5,000 Direct Labour 15,000
Direct Material 20,000 Direct Expenses 3,000

8. Find out the amount of production overheads.

Particulars Amount (Rs.) Particulars Amount

(Rs.)
Office stationery 5,000 Indirect Materials 9,000
Factory lighting 10,000 Audit fees 13,000
Works Manager’s Salary 22,000 Foreman’s Salary 13,000

9. Compute Prime cost, Factory cost, Cost of production, Cost of sales and profit from the
following details:

Particulars Amount Particulars Amount

(Rs.) (Rs.)
Direct Materials 10,000 Administrative Expenses 1,000
Direct Labour 4,000 Selling Expenses 300
Direct Expenses 500 Sales 20,000
Factory Expenses 1,500
10. Predict works cost from the following.
 Particulars Amount Particulars Amount
(Rs.) (Rs.)
Materials 60,000 Work-in progress:
Labour 40,000 Opening stock 10,000
Direct Expenses 10,000 Closing stock 8,000
Factory Overheads 50,000

11. Calculate the economic order quantity (EOQ) from the following particulars.

Annual usage 6,000 units

Cost of material per unit Rs. 20

Cost of placing and receiving one order Rs. 60

Annual carrying cost of one unit 10% of inventory value

12. Find out the economic order quantity and the number of orders per year from
the following information:

Monthly consumption 3,000 units

Cost per unit Rs. 54

Order carrying cost 20% of average inventory

13. You are required to compute the economic ordering quantity and the frequency of
orders in terms of days from the data given below.

Consumption of materials per annum Rs. 8,000

Ordering cost per annum Rs. 25

Storage and carrying cost per annum 10% of inventory value

14. In a company weekly minimum and maximum consumption of materials A are 25

and 75 units respectively. The reorders quantity as fixed by the company is 300 units.
the material received within 4 to 6 weeks from issue of supply order. Calculate
minimum level and maximum level of material A.

15. Material A is used as follows:

 Maximum usage in a month 600 units
Minimum usage in a month 400 units
Average usage in a month 450 units
Reorder quantity 1500 units
Maximum reorder period for emergency purchases One month
lead time - maximum 6 months minimum 2 months

Prepare the (a) Reorder level (b) Minimum level (c) Maximum level
(d) Average stock level and (e) Danger level.

16. X Ltd has purchased and issued the material in the following orders.

Jan 2015 1 Purchased 300 units at Rs.5 per units

4 Purchased 600 units at Rs.4 per units
6 Issued 500 units
10 Purchased 700 units at Rs.5 per units

Predict the closing stock as 31-1-2015 under LIFO method

17. From the following particulars prepare the stores ledger under FIFO method

Dec 1 stock in hand 500 units at Rs.20

2 Issued 200 units
3 Purchased 150 units at Rs.22
4 Issued 100 units
5 Purchased 200 units at Rs.25

18. From the following practice at stores ledger by adopting LIFO method

DATE RECEIPTS ISSUE

2010 Jan 1 300 units at Rs.10 per unit -
10 200 units at Rs.12 per unit -
15 - 250 units
18 200 units at Rs.14 per unit -
20 - 300 units
25 100 units at Rs.16 per unit -
31 - 100 units

19. From the following particulars produce the stores ledger by adopting first in first out
method.
 2013 March 1 Purchased 300 units at Rs. 2 per unit
2 Purchased 600 units at Rs. 3 per unit
5 issued 400 units
8 issued 200 units
10 purchase 600 units at Rs. 5 per unit
12 issued 400 units

20. The following information is exacted from the stores ledger.

Jan 1 opening balance 500 units at Rs 4

5 purchase 200 units at Rs 4.25
12 purchase 150 units at Rs 4.10
20 purchase 300 units at Rs 4.50
25 purchase 400 units at Rs 4

issue of material were as follows:

Jan 4 200 units

10 400 units
15 100 units
19 100 units
26 200 units
30 250 units

Issues are to priced on the principle of FIFO method. Develop the store ledger
accounts in respect of the materials for the month of January.

21. Calculate the earnings of workers A and B under Straight Piece-rate System and Taylor’s
Differential Piece-rate System from the following particulars:

Normal rate per hour = Rs. 1.80

Standard time per unit = 20 seconds
Differentials to be applied:
80% of piece rate below standard
120% of piece rate at or above standard

Worker A produces 1,300 units per day and worker B produces 1,500 units per day.

22. Compute the earnings of workers A, B and C under Straight piece rate system and
Merrick’s multiple piece rate system from the following particulars:
 Normal rate per hour Rs. 1.80
Standard time per unit 1 minute
Output per day is as follows:
Worker A 384 units
Worker B 450 units
Worker C 552 units
Working hours per day 8 hours

23. Find out the total earnings of the worker under the Halsey Plan. Also find out
effective rate of earning.

Rate per hour Rs. 1.50 per hour

Time allowed for job 20 hours
Time taken 15 hours

24. A worker completes a job in a certain number of hours. The standard time allowed for the
job is 10 hours, and the hourly rate of wages is Re.1. The worker earns at the 50% rate a
bonus of Rs. 2 under Halsey plan. Assess his total wages under the Rowan Premium Plan.

25. Find out the earnings of workers A and B under Straight Piece rate system and Taylor’s
Differential Piece rate system from the following particulars:

Normal Rate per hour = Rs. 2.40

Standard time per unit = 30 Seconds
Differentials to be applied:
80% of piece rate below standard
120% of piece rate at or above standard
Worker A produces 800 units per day
Worker B produces 1,000 units per day.

26. On the basis of the following information, compute the earnings of A and B under
Straight Piece rate system and Taylor’s Differential Piece rate system:

Standard production = 8 units per hour

Normal time
I rate = Re.0.40 per hour
Differentials to be applied:
80% of piece rate below standard
120% of piece rate at or above standard

In a nine-hour day A produces 54 units and B produces 75 units.

27. From the following data, calculate total monthly remuneration of two workers A and B
 under the Gant’s Task and Bonus Scheme.

i. Standard Production per month per worker is 1000 units.

ii. Actual Production during the month: A – 850 Units, B – 1000 Units.

iii. Piece Work Rate – 50 Paise per Unit.

28. Select what would be the basis to be followed to distribute the following overhead
expenses to departments?

Store Service Expenses Employees’ State Insurance

Factory Rent Municipal Rent, Rates & Taxes

Insurance on Building & Machinery Welfare Department Expenses

Creche Expenses Steam

Electric Light Floor Area

29. The Modern Company is divided into four departments: P1, P2, P3 are producing
departments and S1 is a service department. The actual costs for a period are as follows:

Rent Rs. 1,000 Supervision Rs. 1,500

Fire insurance in respect of
Repairs to plant Rs. 600
stock Rs. 500
Depreciation of plant Rs. 450 Power Rs. 900
Employer’s liability for
Rs. 150 Light Rs. 120
insurance

Following information is available in respect of the four departments:

Dept. P1 Dept. P2 Dept. P3 Dept. S1

Area (sq. metres) 1,500 1,100 900 500
Number of Employees 20 15 10 5
Total Wages (Rs.) 6,000 4,000 3,000 2,000
Value of Plant (Rs.) 24,000 18,000 12,000 6,000
Value of Stock (Rs.) 15,000 9,000 6,000 -
H.P. of Plant 24 18 12 6

Apportion the costs to the various departments on the most equitable basis.

30. Schedule the bases of the following service departments expenses:

 Maintenance Department Store-keeping Department

Overhead Crane Service Internal Transport Service

Canteen Department Personnel Department

Power House Hospital

31. A product passes through three distinct processes to completion. These processes are
numbered respectively I, II, and III. During the week ended 15th January 2001, 500units
are produced the following information is obtained:
Process I Process II Process III

RS. Rs. Rs.

Direct materials 3,500 1,600 1,500

Direct labours 2,500 2,000 2,500

The overhead expenses for the period were Rs.1,400 appointed to the processes on the
basics of wages. No work-in-progress or process stocks existed at the beginning or the end
of the week. Prepare Process Accounts.

32. Bengal Chemical Co. Ltd. produced three chemicals during the month of uly,1998 by
Three consecutive processes. In each process 2% of the total weight put in is lost and
 10% is scrap which from processes (1) and(2) realizes Rs.100 a ton and from process (3)
Rs. 20 a ton.
The products of three processes are dealt with as follows:

Process I Process II Process III

Passed on to the next process 75% 50% -

Sent to warehouse for sale 25% 50% 100%

Process I Process II Process III

RS. Tons Rs. Tons Rs. Tons

Raw materials 1,20,000 1,000 28,000 140 1,07,840 1,348

Manufacturing wages 20,500 - 18,520 - 15,000 -

General expenses 10,300 - 7,240 - 3,100 -

Prepare process cost accounts showing the cost per ton of each product.

33. In process A 100 units of raw materials were introduced at a cost of rs.1,000. The other
expenditure incurred by the process was Rs.602. of the units introduced 10% are normally
lost in the course of manufacture and they process a scrap value of Rs.3 each the output
of process A was only 75 units. Prepare process A account and abnormal loss account.

34. In process B, 75 units of a commodity were transferred from process A at a cost of

Rs.1,310.The additional expenses incurred by the process were Rs.190.20% of the units
entered are normally lost and sold @ Rs.4 per unit. The output of the process was 70
units. Prepare process account and abnormal gain account.

35. From the following details prepare statement of equivalent production, statement of cost
statement of evaluation and process accounts by following average cost method.
 Opening work –in- progress (2000 units)

Materials (100% complete) Rs.7,500

Labour (60% complete) Rs.3,000

Overhead (605 complete) Rs.1,500

Units introduced into the process 8,000

There are 2000 units in process , and the stage of completion is estimated to be:

Material 100%

Labour 50%

Overheads 50%

8,000 units are transferred to the next process. The process costs for the period are:
Material 1,00,000

Labour 78,000

Overheads 39,000

36. Neo pharma processes a product through three distinct stages the product of one process
being passed on to the next process and so on to the finished product intact .

Details of the cost incurred in each process are given below:

Process I Process II Process III

RS. Rs. Rs.

Raw materials 1,150 1,050 700

Direct wages 500 600 700

The overhead expenses for the period amounted to Rs.3600 and are to be distributed to
the processes on the basis of direct wages. There were no stocks in any of the processes
either at the beginning or at the close of the period .

Assuming the output was 1,000 kilos show thee processes cost of A,B and C indicating
 also the cost per kilo of each element of cost and the output in each processes .
(b)If 10 percent of the output is lost in storage and givimg samples, what should the
Selling price per unit be to make a gross profit 33 1/3 % on the selling price.

37. In the manufacturing unit, raw material passes through four processes I,III and IV and the
output of each processes is the input of the subsequent process. The loss in the four
processes I,II,III and IV are respectively 25%,20%,20%and 16 2/3% of the input . if the
end product at the end of process IV is 40,000 kgs. What is the quantity of raw material
required to be fed at the beginning of process I and the cost of the same at Rs 5per kg.
Find out also the effect of increase are decrease in the material cost of end product for
variation of every Rupee in the cost of the raw material.

38. Fifty units are introduced in a process at Rs.50. The total additional expenditure incurred
by the process is Rs.32. Of the units introduced 10 Per cent are normally spoil in the
course of manufacture ; these posses a scrap value of Re.0.20 each. Owing to an accident
only 40 units are produced. You are required to –(I) prepare a process account, and ( II)
give journal entries to show how the loss arising out of spoiled units should be treated.

39. A batch of 600 units was introduced in a process at Rs.20 per units .500 units were
completed and transferred to the finished goods stores. The normal process was 20% of
the input, and the scrap is normally sold to a contractor at Rs.3 each. The labour and
overhead expenditure, incurred in the process amounted to Rs.600. You are required to
show the process and abnormal gain accounts.

40. 10,000 units of raw materials into a process at a cost of ?Rs.20,000. Wages and overheads
for the process are Rs.5,100 and rs.3,400 respectively, 7,500 units were completed; of the
remaining 2,500 units on the average 40% work has been done in respect of labour and
overheads. Prepare (I) statement of equivalent production,(II) statement of cost,(III)
statement of evaluation, and (IV) process account.

41. You are required to assess, in each of the following cases, whether costing profit will be
more or less than Financial Accounts Profit.
 Particulars As per Cost As per Financial
Accounts (Rs.) Accounts (Rs.)
a) Opening Stock of Raw Materials 40000 42000
b) Closing Stock of Raw Materials 45000 49000
c) Opening Stock of W.I.P 30000 28000
d) Closing Stock of W.I.P 32000 36000
e) Opening Stock of Finished Goods 60000 68000
f) Closing Stock of Finished Goods 48000 44000

42. Prepare a Reconciliation Statement from the following details:

Particulars Amount (Rs.)

Net loss as per cost accounts 344800
Net loss as per financial accounts 432890
Works overhead under recovered in costing 6240
Depreciation overcharged in costing 2600
Interest on investments 17500
Administrative overhead over recovered in costing 2600
Good will written off 92000
Stores adjustment in financial books (cr) 950
Depreciation of stock charged in financial books 13500

43. Find the profit as per cost accounts from the details given below:

Particulars Amount (Rs.)

Profit as per Financial Accounts 35000
Dividends received on Investments 5200
Loss on sale of Buildings 4000

44. The following data is available in respect of Job No. 876:

Direct Materials : Rs. 17000, Wages : Rs. 160 hours at Rs. 50 per hour. Variable overheads
incurred for all jobs Rs. 80000 for 2000 labour hours. Fixed overheads are absorbed at Rs.
20 per hour. Interpret the profit or loss from the job is billed for Rs. 40000.

45. From the following information construct Job No. 236 account in the Job Cost Ledger:
 Particulars Amount (Rs.)
Direct Materials Purchased 3600
Direct Materials received from stores 25200
Direct Wages 14400
Other Expenses 1500

The works overheads are to be taken at 75% of wages and administrative overheads at
25% of works cost. The contract price of Job No. 236 which is completed is fixed as Rs.82500.

46. From the following details, compute the overhead rate to be charged on the basis of the
direct labour rate to Job No 707 and determine the total cost and selling price:

Particulars Value
Material Used Rs. 4000
Direct Wages Rs. 3000
Direct Labour Hours 700 hours
Estimated factory overheads for the year Rs. 105000
Estimated labour hours for the year 210000
Gross profit ratio on sales 25%

47. Mercy & Co., undertook a contract for construction of a private house. Contract price was
Rs.4000000. The following were the details:

Particulars Amount (Rs.) Amount (Rs.)

Materials sent to contract site 1600000
Labour: Skilled 600000
Unskilled 400000
___________ 1000000

Subcontracts for plumbing and Electricity 400000

Sundry Expenses 200000
Closing stock of materials at site 100000

Prepare contract account and determine the profit or loss.

48. Computer the profit that can be reasonably credited to P & L A/c from the following details:
 Particulars Amount (Rs.)
Notional Profit 79000
Cash Received 330000
Work Certified 400000
Contract Price 600000

49. Predict the amount of profit taken to P & L A/c:

Particulars Amount (Rs.)

Notional Profit 60000
Work Certified 800000
80 % of work certified is paid in cash
Contract Price 1000000

50. Prepare a Contract Account:

Particulars Amount (Rs.)

Material 336000
Wages 340000
Plant Purchased 60000
Work Certified 750000
Material at Site 40000

K4 & K5 Level

1. Distinguish between cost and management accounting.

2. Discriminate briefly Costing as an aid to management.

3. Following information has been obtained from the records of a manufacturing company:

1-1-2015 31-12-2015
Rs. Rs.
Stock of Raw materials 40,000 50,000
Stock of Finished goods 1,00,000 1,50,000
Stock of Work-in-Progress 10,000 14,000

Particulars Amount Particulars Amount

 (Rs.) (Rs.)
Indirect Labour 50,000 Administration Expenses 1,00,000
Lubricants 10,000 Power 30,000
Insurance on plant 3,000 Direct labour 3,00,000
Depreciation on
Purchase of raw materials 4,00,000 50,000
Machinery
Sale commission 60,000 Factory rent 60,000
1,00,000 Property tax on factory
Salaries of salesman 11,000
building
Carriage outward 20,000 Sales 12,00,000

Prepare a statement of cost and profit showing (a) Cost of Raw materials
Consumed (b) Prime cost (c) Total manufacturing cost (d) Factory manufacturing cost
(e) Cost of production (f) Cost of goods sold (g) Cost of sales (h) Profit.

4. Following information has been obtained from the record of left centre corporation for the
period from January 1 to June 30, 2010.

2010 2010
On January 1 on June 30
Rs. Rs.
Cost of raw material 30,000 25,000
Cost of work-in-progress 12,000 15,000
Cost of stock of finished goods 55,000 60,000

Transactions during 6 months are:

Purchase of raw materials 4,50,000 Administration overheads 30, 000

Selling and distribution

Wages paid 2,30,000 20, 000
overheads

Factory overheads 92,000 Sales 9, 00, 000

Prepare the Cost sheet showing (a) materials consumed (b) prime cost (c) factory cost
incurred and factory cost and Income statement in traditional from for the six months
showing gross profit and net profit.

5. From the following the particulars, prepare a cost statement showing the component of
 total cost and profit for the year ended 31-12-2009.
2009 2009
On January 1 on Dec 31
Rs. Rs.
Stock of raw materials 80,000 1,00,000
Work-in-progress 30,000 20,000
Stock of finished goods 12,000 30,000

Rs. Rs.
Purchase of raw materials 9,50,000 Generals expenses 65,000
Carriage inward 25,000 Sales for the year 17,20,000
Wages 3,50,000 Income-tax 5,500
Works manager’s salary 60,000 Dividend 1,000
Factory employees sales 1,20,000 Debentures interest 5,000
Factory rent, taxes and
14,000 Goodwill 10,000
insurances
Power expenses 19,000 Payment sales tax 10,000
Other production
85,000
expenses

6. Two company A and B are used as follows:

A 1200 units
Reordering quantity
B 1000 units
A 2 to 4 weeks
Reordering period
B 3 to 6 weeks
Normal usage 300 units per week each
Minimum usage 150 units per week each
Maximum usage 450 units per week each

You are required to calculate the following for each of the components
a) Reordering level b) Maximum level c) Average stock d) Minimum level

7. From the particulars given below prepare the stores ledger account.
 2007 Jan 1 Opening stock 1000 units at Rs 26 each
5 Purchase 500 units at Rs 24.50 each
7 Issued 750 units
10 Purchased 1500 units at Rs 24 each
12 Issued 1100 units
15 Purchased 1000 units at Rs 25 each
17 Issued 500 units
25 Purchased 300 units
29 Issued 1500 units

Adopt FIFO method of issue and determine the value of the closing stock.

8. A factory consumes 60 units of materials per day which is supplied by a vendor in lots of
240 units each at Rs 2400 per lot. The factory works for 300 days per annum. Each order
involves handling charges of Rs. 120 and freight charges of Rs.380 the storage cost is
Rs.0.50 per unit annum .The interest cost to carry inventory works out 1.25% per month.

You are required to identify a) No of units to be ordered each time to minimize the
overall inventory cost b) The frequency of placing orders.

9. Following transactions took place in respect of an item of material.

Receipts Rate Issue

Quantity Rs. Quantity
2-9-2015 200 2.00 -
10-9-2015 300 2.40 -
15-9-2015 - - 250
18-9-2015 250 2.60 -
20-9-2015 - - 200
Assemble the above transactions in the Stores Ledger, Pricing the issues at:
a. First In First Out and b. Last In First Out method.

10. Following transactions took place in respect of an item of material

 Receipts Rate Issue
Quantity Rs. Quantity
2-9-2015 200 2.00 -
10-9-2015 300 2.40 -
15-9-2015 - - 250
18-9-2015 250 2.60 -
20-9-2015 - - 200
Arrange the above transactions in the Stores Ledger, Pricing the issues at:
a. Simple average rate and b. Weighted average rate.

11. Calculate the earnings of the workers on the basis of Merrick’s differential piece rate
system from the following particulars:

Piece rate = 10 paise per unit

Standard production = 120 units
Production of workers:
X= 90 units Y= 100 units Z=130 units
Basic piece rate is guaranteed up to 83% of the standard production
Workers get premium above 83% as follows:
83% to 100% - 110% of ordinary piece rate
Over 100% - 120% of ordinary piece rate

12. From the following particulars determine the earnings for the week of a worker under:
a. Straight Piece Rate b. Differential Piece Rate c. Halsey Premium Plan
d. Rowan Plan

Number of working hours per week 48 hours

Wages per hour Rs. 3.75
Rate per piece Rs. 1.50
Normal time per piece 20 minutes
Normal output per week 120 pieces
Actual output for the week 150 pieces
Differential piece rate:
80% of piece rate when output is below standard
120% of piece rate when above standard

13. A company has three production departments and two service departments, and for a
 period the departmental distribution summary has the following totals:

Production Service
Departments Departments
P1 Rs. 800 -
P2 Rs. 700 -
P3 Rs. 500 -
S1 - Rs. 234
S2 - Rs. 300
Total Rs. 2000 Rs. 534
The expenses of the service departments are charged out on a percentage basis as
follows:
P1 P2 P3 S1 S2
Service Department S1 20% 40% 30% - 10%
Service Department S2 40% 20% 20% 20% -

Prepare a statement showing the apportionment of two service departments expenses

to production departments by Simultaneous Equation Method.

14. In a factory, there are three production departments P1, P2, P3 and one service department
S1. Following figures are available for one month of 25 working days of 8 hours each day.
All departments work all these days with full attendance:

Service Prod. Prod. Prod.

Total
Expenses Dept. S1 Dept. P1 Dept. P2 Dept. P3
Rs.
Rs. Rs. Rs. Rs.
Power and Lighting 1,100 240 200 300 360
Supervisor’s Salary 2,000 - - - -
Rent 500 - - - -
Welfare 600 - - - -
Others 1,200 200 200 400 400
Total 5,400
Supervisor’s Salary 20% 30% 30% 20%
Number of Workers 10 30 40 20
Floor Area in Sq. Metres 500 600 800 600
Service rendered by Service
- 50% 30% 20%
Dept. to Production Depts.

Calculate labour hour rate for each of the Depts. P1, P2 and P3.

. 15. A manufacturing company has four production departments and six service departments.
From the following information briefly appraise the service departments’ overheads to
production departments only.

Production Departments:

Departments Rs.

P1 30,000

P2 30,000

P3 24,000

P4 16,000

Service Departments:

Departments Rs

S1 (Power) 18,000

S2 (Purchasing Dept) 15,000

S3 (Stores Dept) 12,000

S4 (Canteen) 9,000

S5 (Labour Welfare) 6,000

S6 (Time Keeping) 4,500

Additional Information: P1 P2 P3 P4

Horse Power of Machine 600 600 300 300

Value of Materials Purchased (in Lakhs) 5 4 4 2

Number of Stores Requisitions 4 3 3 2

Number of Workers 18 16 14 12
16. A product passes through three distinct processes to completion. These processes are
numbered respectively I, II and III. During the week ended 15th January 2012, 500 units
are produced. The following information is obtained:

Process I Process II Process III

Particulars
(Rs.) (Rs.) (Rs.)

Direct Materials 3500 1600 1500

Direct Labour 2500 2000 2500

The overhead expenses for the period were Rs. 1400 apportioned to the processes on
the basis of wages. No work-in-progress or process stocks existed at the beginning or at
the end of the week. Prepare process accounts.

17.The following data are available pertaining to a product after passing through two
processes A and B:
Output transferred to process C from process B 9120 units for Rs. 49,263.
Expenses Incurred in Process C:

Sundry Materials: Rs.1480

Direct Labour: Rs.6500

Direct Expenses: Rs.1605

The wastage of process C is sold at Re.1.00 per unit. The overhead charges were
168% of direct labour. The final product was sold at Rs.10.00 per unit fetching a profit of
20% on sales. Validate the percentage of wastage in process C and prepare process C
Account.

18. A certain product passes through three processes before it is completed. The output of
each process is charged to the next process at a price calculated to give a profit of 20% on
transfer price (I.E.25% on cost price).the output of process III is charged to finish stock
account on a similar basis. There was no work-in-progress at the beginning of the year
and overheads have been ignored. Stock in each process has been valued at crime cost of
the process. The following data are obtained at the end of 31st march 2001.
 Process I Process II Process III Finished
Particulars
(Rs.) (Rs.) (Rs.) stock (Rs.)

Direct Materials 4000 6000 2000 -

Direct wages 6000 4000 8000 -

Stock on 31st
2000 4000 6000 3000
March

Sales during the

- - - 36000
year

From the above information prepare (a) process cost accounts showing the profit
elements at stage rate (b) Actual realized profits and (c) Stock valuation as would
appear in the balance sheet.

19. A product is completed in three consecutive processes. During a particular month the
input to process I of the basic raw material was 5,000 units at Rs.2 per unit other
information for the month was as follows:
Process I Process II Process III
Particulars
(Rs.) (Rs.) (Rs.)

Output (Units) 4700 4300 4050

Normal loss as % of input 5 10 5

Scrap value per unit (Rs.) 1 5 6

Direct wages (Rs.) 3,000 5,000 8,000

Direct expenses (Rs.) 9,750 9,910 15,560

Overhead Rs.32, 000 total chargeable as percentage of direct wages. There were no
opening or closing work-in-progress stocks. Compile three process accounts and finished
stock account with details of abnormal loss and gain, where applicable.
20. The information below is extracted from the cost accounts of a factory producing a
commodity in the manufacture of which three processes are involved. Prepare process
cost account showing the cost of the output and the cost per unit at each stage of
manufacture.
(a) The operation in each separate process are completed daily

(b) the value at each units are to be charged to process B and C is the cost per unit of
process A and A plus B respectively.

Particulars Process A Process B Process C

Production - gross (Units) 37000 - -

Wastage (Units) 1000 1500 500

Opening stock of raw materials

- 4000 16500
(Units)

Closing stock of raw materials

- 1000 5500
(Units)

Raw materials consumed (Rs.) 2400 - -

Factory overheads (Rs.) 200 225 240

Direct wages (Rs.) 640 1200 2925

Machine expenses (Rs.) 360 300 360

21. Modern Printers undertook two jobs during the 1st week of June 2017. The following are
the details that are available:

Particulars Job 110 (Rs.) Job 120 (Rs.)

Materials Supplied 4000 2000
Wages Paid 900 600
Direct Expenses 200 100
Material transfer from Job 120 to 110 200 200
Material returned to stores - 100
Analysis the cost of each job and profit or loss if any, assuming that job 120 is
completed and invoiced to the customer at Rs.3000.
22. The following data are from the costing records of Sai Industries Ltd., in respect of Job
No. 76:

Wages:
Cutting Department 20 hours at Rs.50 per hour
Shearing Department 10 hours at Rs.40 per hour
Boring Department 5 hours at Rs.60 per hour
Variable Overheads:
Cutting Department Rs. 40000 for 2000 Direct labour hours
Shearing Department Rs. 20000 for 2500 Direct labour hours
Boring Department Rs. 10000 for 400 Direct labour hours

Fixed overheads are estimated at Rs. 100000 for 20000 normal working hours. You
are required to establish the cost of job No. 76 and calculate the price to be charged so as
to give a profit of 20% on cost.

23. Categorize the Contract No.303 account in the contract ledger of Sree & Co., from the
following details:
Particulars Amount (Rs.)
Direct Materials 16200
Wages 10800
Special Plant 8000
Stores issued 2880
Loose tools 1500
Tractor expenses 3420
Contract price 40000

The contract was completed in 20 weeks. The special plant was returned subject to
depreciation at 20% on original cost. The value of loose tools and stores returned were
Rs.1000 and Rs.400 respectively. The book value of the tractor used for the contract was
Rs.19500 and depreciation to be charged to this contract is at 20% per annum on the book
value. Provide 7% for administrative expenses on works cost.
24. From the following figures prepare a reconciliation statement between cost and financial
records:
Particulars Amount (Rs.)
Net profit as per financial records 128755
Net profit as per costing records 172400
Works overhead under-recovered in costing 3120
Administrative overhead recovered in excess 1700
Depreciation charged in financial records 11200
Depreciation recovered in costing 12500
Interest received but not included in costing 8000
Obsolescence loss charged in financial records 5700
Income tax provided in financial books 40300
Bank interest credited in financial books 750
Stores adjustment ( Credit in financial books) 475
Depreciation of stock charged in financial books 6750

25. Prepare memorandum reconciliation account from the following data:

Particulars Amount (Rs.)

Net profit as per financial records 63780
Net profit as per costing records 66760
Factory overhead under-recovered in costing 5700
Administrative overhead recovered in excess 4250
Depreciation charged in financial records 3660
Depreciation recovered in costing 3950
Interest received but not included in costing 450
Income tax provided in financial books 600
Bank interest credited in financial books 230
Stores adjustment ( Credit in financial books) 420
Depreciation of stock charged in financial books 860
Dividend appropriated in financial accounts 1200
Loss due to pilferage provided only in financial books 260
 QUESTION BANK
PAPER: COST ACCOUNTING
COURSE: B.Com (Semester IV)
MCQs
1. The basic objective of cost accounting is
a) Recording of cost
b) Reporting of cost
c) Cost control
d) EarningProfit

2. Standard costs imply

a) Predetermined cost for a period
b) Incurred cost
c) Conversion cost
d) Incremental cost

3. Material Management is needed

a) To keep material cost under control
b) To ensure continuous supply of material
c) To avoid over & under stocking of material
d) All the above

4. Cost of abnormal time is treated as

a) Direct Wages
b) Overheads
c) Costing P&L item
d) None of the above

5. Overhead means
a) The aggregate of indirect materials, indirect labour and indirect expenses
b) All expenses with respect to materials
c) All expenses with respect to labour
d) Direct and indirect expenses

6. When the actual overhead is more than the absorbed overhead, then it is called
a) Capacity costs
b) Over absorption
c) Under absorption
d) None of the above
 7. Work in progress (WIP) in contract means
a) Work certified only
b) Work certified and work uncertified
c) Work uncertified only
d) None of these

8. Job costing is suitable for

a) Firms manufacturing goods on a continuous basis
b) Firms manufacturing goods to customer’s specific requirements
c) Departments/organisations rendering services
d) Continuous or mass production industries

9. Integrated accounting system is beneficial because

a) Perpetual inventory system can be dispensed with
b) No valuation of work in progress is necessary
c) Estimation of budgets easy
d) It eliminates problems of reconciliation

10. Composite unit is distinctive feature of

a) Job costing
b) Operating costing
c) Process costing
d) Contract costing

SHORT QUESTIONS
1. Differentiate between cost units and cost centre.
2. Differentiate between waste, scrap and defectives and explain their treatment in cost
accounts.
3. From the following data, given by the personnel department, calculate the labour turnover
rate by applying:
i) Separation method
ii) Replacement method
iii) Flux method

Number of workers on the payroll:

At the beginning of the month 900
At the end of the month 1100
During the month 10 workers left, 40 persons were discharged and 150 workers were
recruited. Of these, 25 workers are recruited in the vacancies of those leaving, while the rest
were engaged for an expansion scheme.
4. In a company weekly minimum and maximum consumption of material A are 25 and 75
units respectively. The reorder quantity as fixed by the company is 350 units. The material is
received within 8 to 10 weeks from issue of supply order. Calculate minimum level and
maximum level of material A.
5. How would you treat abnormal loss and abnormal gain in process costing?
6. The budgeted expenses of three departments of Raja engineering company for the year 2014-
15 are as follows:
A B C
Direct material (฀) 120000 95000 90000
Direct wages (฀) 115000 80000 80000
Factory overheads (฀) 95000 65000 63750
Administrative 20000 20000 12000
overheads (฀)
Direct labour hours 10000 13000 7500

The company recovers factory overheads at direct labour rates and administration overheads
as percentage of factory cost.
The direct costs and labour hours incurred on job number 26 completed during the year are
as follows:
Department A Department B Department C
Direct material (฀) 6000 5000 4000
Direct wages (฀) 4200 3300 2250
Direct labour hours 1000 1200 600

What price should be charged for job number 26 to include a profit of 10% on cost?
7. Define Activity Based Costing. What are its special features?
8. XYZ ltd. which absorbs overheads at predetermined rates provides you the following
information:

Overheads actually incurred ฀ 200000

Overheads absorbed ฀ 150000
Goods sold 13000 units
Stock of finished goods 10000 units
Stock of work in progress 10000 units (20% complete)
Unabsorbed overheads were due to rising price levels. How would under absorbed
overheads be treated in cost accounts?
9. What do you understand by “Integrated Accounts”? State the advantages of “Integrated
Accounts”.
10. Prepare a Reconciliation account from the following details:
Profit as per cost accounts was of ฀60,000, while the profit as per financial accounts was of
฀59,700. Values of opening & closing stock as shown in cost & financial accounts were as
under:
Financial Accounts Cost accounts
Raw Materials: ฀ ฀
Opening 25,300 25,000
Closing 30,000 29,600

Work-in-Progress:
Opening 16,000 15,500
Closing 20,000 19,900

LONG QUESTIONS
1. “Cost accounting is a tool of managerial planning and control”. Explain the statement.
2. What do you understand by time keeping? What are the various methods of time keeping?
How time keeping is different from time booking?
3. The following is the record of receipts and issues of a certain material in a factory during a
month.

March 2015
1 Opening stock 5000 units@ ฀10 per unit
5 Issued 3000 units
7 Received 6000 units@ ฀10.2 per unit
15 Issue 2500 units (stock verification reveals loss of
100units)
16 Received back from orders 1000 units (previously issued at฀9.15 per
unit)
17 Issued 4000 UNITS
25 Received 2200 units @ ฀10.30 per unit
27 Issued 3800 units
At what price will you issue the materials according to FIFO and LIFO methods using
perpetual inventory system?
4. A company manufactures a product with semi- annual demand of 16,000 units. One unit of
the product needs 3 litres of a chemical “R”. Cost per litre of R is ฀20. Cost of placing an
order is ฀1000 and carrying cost is 15% per annuam of average inventory.
 Determine the Economic Order Quantity for R.Should the company accept an offer of 2%
discount by the supplier, if he wants to supply the annual requirement of R in 4 equal
installments?

5. The following particulars relate to processing machine treating a typical material

Cost of machine ฀10000
Estimated life 10 yrs
Scrap value ฀1000
Yearly working time (50 weeks of 44 hours each) 2200 hrs
Machine maintenance 200 hrs p.a.
Setting up time estimated at 5% of total productive time and is regarded as productive time
Electricity is 16 units per hr at 10 paise per unit.
Chemical required weekly ฀20
Maintenance cost per year ฀1200
Two attendants control the operations of machine together with six other machines. Their
combined weekly wages are ฀140
Departmental overhead allocated to this machine per annum ฀2000.
Calculate Machine Hour Rate.

6. Following figures have been extracted from the accounts of a manufacturing concern for the
month of January 2016:
i)Indirect materials:
Production department X ฀2400
Production department Y ฀1800
Production department Z ฀500
Maintenance department M ฀3000
Stores department S ฀800
฀8500
ii) Indirect labour
Production department X ฀2500
Production department Y ฀3000
 Production department Z ฀700
Maintenance department M ฀3000
Stores department S ฀1950
฀11150
iii) Power and light ฀36000
iv) Rent and rates ฀16800
v) Insurance on assets ฀6000
vi) Meal charges ฀18000
Depreciation 6% per annum on capital value of assets
From the following additional information, calculate the share of overheads of each
production department.
Item Production departments Service departments
X Y Z M S
Area (Sq. feet) 8000 8000 6000 4000 2000
Capital value of assets (฀) 100000 120000 80000 60000 40000
Kilowatt hours 4000 4400 1600 1500 500
Number of employees 45 60 15 20 10
Direct labour hours 3600 3200 2200
Number of material 900 600 500
requisitions

7. During the month 8000 units were introduced in process X, the cost per unit being
฀25.Labour and production overheads are ฀39000 and ฀78000, respectively. Opening stock
of work in progress in the process was 2000 units. The costs were:
Materials ฀15000 (100% complete)
Labour ฀1500 (60% complete)
Overheads ฀3000(60% complete)
At the end of the period there were 2000 units in process. Stage of completion was estimated
as 100% for material and 50% for both labour and overhead costs. Assuming FIFO method,
you are required to prepare:
i) Statement of equivalent production
ii) Statement of cost per unit
iii) Statement of evaluation, andProcess X account
8. The following information relates to a building contract for ฀10,00,000 for two years i.e.,
2014 and 2015.
2014 (฀) 2015 (฀)
Material issued 400000 89000
Direct wages 130000 100000
Direct expenses 22000 10000
Indirect expenses 6000 1400
Work certified 750000 1000000
Work uncertified 8000 -
Closing material at site 5000 7000
Plant issued 15000 3000
Cash received from contractee 600000 1000000

The value of plant at the end of 2014 and 2015 was ฀8000 and ฀7000 respectively. Prepare
Contract A/C and Contractees A/C for two years 2014 and 2015 taking into consideration
such profit for transfer to profit and loss A/C. Also show how work in progress will appear
in the balance sheet of the year 2014.

9. The following profit and loss A/C for the year ending 31 st march 2015 has been extracted
from the books of ABC Ltd.
Profit and loss a/c
(for the year ending 31.3.15)
Particulars ฀ Particulars ฀
To direct material 20000 By sales 45000
To direct labour 10000 By work in progress 1300
To factory expenses 9500 By finished stock in hand 2700
To administration expenses 5200 By net loss 2000
To selling and distribution expenses 3800
To interest on capital 1000
To goodwill written off 1500
51000 51000
Cost A/C manual states that the factory overheads are to be recovered at 100% of direct wages.
Administration overheads at 10% of works cost and selling and distribution overheads @ ฀1 per
unit sold. The units of product sold and in hand were 4000 and 257 respectively.
Prepare
1) Statement of cost and profit as per cost A/C

2) Reconciliation statement
10. ABC Transport Company supplies the following details with respect of a truck of 5 tonne
capacity:

Cost of truck ฀900000

Estimated life 10 years
Diesel, oil, grease etc. ฀150 per trip each way
Repairs and maintenance ฀5000 per month
Cleaner’s wages ฀2500 per month
Driver’s wages ฀5000 per month
Insurance ฀4800 per year
Tax ฀2400 per year
General supervision charges ฀4800 per year
The truck carries goods to and from city covering a distance of 50 miles each way. While
going to the city freight is available to the extent of full capacity and on return 20% of
capacity. Assuming that truck run on an average 25 days a month, work out
i) Operating cost per tonne mile, and

ii) Rate per trip that the company should charge if profit of 50% on freightage is to be
earned.