V Semester B.Com.

Examination, December - 2019

(CBCS) (F+R) (2016-17 and Onwards)
COMMERCE
Paper 5.4 : Costing Methods
Time : 3 Hours Max. Marks : 70
ANSWER SCHEME
SECTION A
Answer any 5 sub questions; each question carries 2 marks (5 x 2 = 10)
1. Two marks answers
a) Job costing is carried out for the purpose of ascertaining cost of each job and takes into account the
cost of materials, labour and overheads etc.,
Costs are ascertained for each work order separately as each job has its own specification and scope.
b) Printing, Foundries, Repairs and Service centres, Furniture, Catering, Jewellery, Advertising agency
etc.
c) It is also called as Economic Batch Size. The object of this quantity is to see the cost of setting up
and carrying cost should be minimum during the course of production, in such a way the selection of
optimum size of quantity for production is called EBQ.
d) Features of Process Costing are:
 The production is continuous and the final product is the result of last process.
 Cost are accumulated from one process to another
 The products are standardised and homogeneous.
 The output of one process will be the input of next process.
e) A work is completed by the contractor but which remains to be certified by the architect on the date
of accounting.
f) All organisational units must provide medical services to the existing employees of an organisation.
The medical services are provided on the basis of functions performed, although the main function of
a hospital is to provide medical service. Each department has a separate cost unit and cost of service
of each department is ascertained independently of the other. Cost of medical services is apportioned
to administration, dispensary, transport etc., on most equitable basis.
g) When cost per unit is ascertained by considering which passenger kilometres or passenger miles, ton
kilometre or ton miles etc.

SECTION B
Answer any 3 questions, each questions carries 6 marks. (3 x 6 = 18)
2. Difference between Job costing and Batch costing.
Job Costing Batch Costing
1. Costs are accumulated according to jobs, 1. Lot of similar units which comprise the batch
contracts. may be used as a cost unit for ascertaining of
2. Each job is treated as separate entity. cost.
3. Materials and labours cost is taken with the 2. Cost sheet is prepared for each batch.
abstracts and overheads are charged on the 3. Costs are ascertained on the basis of number
basis of past experience. of articles for each batch separately.
4. Costs are ascertained after completion of a job 4. Cost per unit of the product is determined by
or work order. dividing the total cost of a batch by the
5. This is followed in printing, furniture, ship number of units of that batch.
building etc., 5. Drug industries, readymade garments, TV
sets, Radio etc.,
3. Job Cost Sheet
Particulars Rs. Rs.
Materials 24000
Wages:
A – 120 x 100 12000
B – 80 x 60 4800
C – 40 x 50 2000 18800
Prime Cost 42800
Add: Variable Overhead ( 240 Hrs. x 40) 9600
52400
Add: Fixed Overhead (50000 / 2000 Hrs. = Rs. 25, 240 Hrs. x 25) 6000
Cost of Sales 58400
Add: 25% of Profit (58400 x 25/100) 14600
Selling Price 73000

4. Preparation of Process Account

Process I Account
Units Rs. Units Rs.
To Materials a/c 2000 16000 By Normal Loss a/c 200 400
To Labour a/c 4000 By Abnormal Loss a/c 40 480
To Production overhead 2000
By Output 1760 21120
(Transferred to other
process)

2000 22000 2000 22000

Calculation of Abnormal Loss:
22000−400
Abnormal Loss = 𝑥40
2000−200
21600
= 𝑥40 = 480
1800
5. Preparation of Contract Account
Contract Account
Particulars Amount Particulars Amount
To Materials purchased 3000 By Materials Returned 480
To materials issued 1000 By Contractee a/c 12000
To Wages 4880
To Direct Expenses 588
To works cost (4880 x 25/100) 1220
To Office Cost (8988 x 10/100) 899

To P/L a/c 893

12480 12480
Prime Cost = 3000 + 1000 + 4880 + 588 – 480 = 8988

6. Calculation of Total Passenger kms

a. Total Kms Run = Distance x No. of buses x No. of days
= 400 x 4 x 30
= 4800 kms
b. Total Passenger per km = No. of buses x distance per trip x capacity x No. of days
= 4 x 400 x 50x75% x 30
= 4 x 400 x 37.5 x 30
= 18,00,000
 SECTION C

Answer any 3 questions, each questions carries 14 marks. (3 x 14 = 42)

7. A. Preparation of Job Cost Sheet

Particulars Rs. Rs.
Direct Materials 17600
Direct Labour 8000
Prime Cost 25600
Works overhead (50% of Prime cost) 12800
Works Cost 38400
Administration overhead ( 10% of Works cost) 3840
Cost of Production 42240
Profit (10% of Cost of Production) 4224
Sales 46464

B. Preparation of Process Account

Process x Account
Units Rs. Units Rs.
To Raw materials 4000 400000 By Weight lost 200 Nil
To Expenditure 240000 By scrap sold @ 16 per unit 200 3200

To Abnormal Gain 50 8400

By Next process a/c 3650 645200

4050 648400 4050 645200

640000−3200
Abnormal Gain = 𝑥 50 𝑢𝑛𝑖𝑡𝑠
4000−200
636800
= 𝑥 50 𝑢𝑛𝑖𝑡𝑠 = 8400
3800

8. Preparation of Process Account

Process I Account
Units Rs. Units Rs.
To Raw Materials 1000 3000 By Normal Loss @ 5% 50 100
To Direct Material 2600
To Direct Wages 2000 By Process II a/c 950 9500
To Production overhead 2000

1000 9600 1000 9600

Cost per unit = 9500/950 = Rs. 10 per unit.

Process II Account
Units Rs. Units Rs.
To Raw Materials 950 9500 By Normal Loss @ 10% 95 980
To Direct Material 1980 By Abnormal Loss 15 300
To Direct Wages 3000
To Production overhead 3000 By Process III a/c 840 16800

950 17400 950 17480

17480−380
Value of Abnormal loss = 𝑥 15 𝑢𝑛𝑖𝑡𝑠 = Rs. 300
950−95
 Process III Account
Units Rs. Units Rs.
To Raw Materials 840 16800 By Normal Loss @ 15% 126 630
To Direct Material 2962
To Direct Wages 4000 By Finished Goods a/c 750 28500
To Production overhead 4000

To Abnormal gain a/c 36 1368

876 29130 876 29130
27762−630
Cost per unit = = Rs. 38 per unit
840−126

27762−630
Value of Abnormal gain = 𝑥 36 𝑢𝑛𝑖𝑡𝑠 = Rs. 1368
840−126

9. Preparation of Contract a/c

Contract a/c
A B A B
To Materials 170698 146534 By Material to stores 1098 1264
To Labour 148750 137046 By WIP a/c
To Plant 30000 25000  Work certified 390000 290000
To Direct expenses 6334 5718  Work uncertified 9000 6000
To Est. charges 8252 7740 By materials at site 3766 3472
To o/s wages 4800 4200 By plant 22000 19000
To o/s expenses 480 360
By P/L a/c - 6826
To Notional profit 56550 -
4,25,864 3,26,562 4,25,864 3,26,562
To P/L a/c 30160 By Notional profit 56550
To WIP a/c 26390
56550 56550
Calculation of profit transferred to p/l a/c

𝑐𝑎𝑠ℎ 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 2
=Notional profit x x
𝑤𝑜𝑟𝑘 𝑐𝑒𝑟𝑡𝑖𝑓𝑖𝑒𝑑 3

312000 2
= 56550 x x 3 = 30160
390000

Cash received = 390000 x 80/100 = 312000

Contractee Account
A B A B
To Balance c/d 312000 232000 By cash a/c 312000 232000

312000 232000 312000 232000

10. Preparation of Operating Cost Sheet in the books of Transport Company
Operating Cost Sheet
Particulars Rs. Rs.
I. Fixed Charges
 Depreciation (700000 x 20/100) 140000
 Wages (200 x 12 x 10) 24000
 Cleaners wages (100 x 12 x 20) 24000
 Directors fees (800 x 12) 9600
 Office establishment (2000 x 12) 24000
 Licence and tax 4000
 Interest (700000 x 4/100) 28000
 Garage rent (100 x 12 x 6) 7200 260800

II. Variable Charges

 Annual Repairs (140000 x 80/100) 112000
 Diesel Expenses 40000 152000
Operating Cost 412800
Less : Income from sale of old tyres & tubes (6400 x 2) 12800
Net Operating Cost 400000
𝑁𝑒𝑡 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡
Cost Per Km = 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒 𝑥 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦
400000
= 1600 𝑥 900 = 0.2778 per km

11. Preparation of Job Cost Sheet

Calculation of overhead ratio of different rates
a) Hourly rate of direct wages
20000
X= = 8000 Hrs.
2.50
24000
Y= = 9600 Hrs.
2.50
b) Overhead rates per Hr.
10000
X = 8000 𝐻𝑟𝑠 = Rs. 1.25 per hr.
18000
Y = 9600 ℎ𝑟𝑠 = Rs. 1.875 per hr.
c) Percentage of overhead on direct wages
10000
X = 20000 x 100 = 50%
18000
Y = 24000 x 100 = 75%
Job Cost Sheet
Rate (Rs.) Quantity (Hrs.) Amount
Materials 140.00
Direct Wages
X 2.50 16hrs 40.00
Y 2.50 12hrs 30.00
Chargeable Expenses 10.00
Prime Cost 220.00
Overheads:
X (50% of Direct Wages) 1.25 16hrs 20.00
Y (75% of Direct Wages) 1.875 12hrs 22.50
Total Cost 262.50
Profit(20% on total cost) 52.50
Sales 315.00