Maharaja Agrasen Institute of Management Studies

Affiliated to GGS IP University, Recognized u/s 2(f) of UGC

Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,

Department of Business
Administration Academic Year: 2022-
23
Semester: 2nd
Assignment No.-
1 (Unit No. -1 &2)

Course/ Subject Code: BBA 102 Course/ Subject Title: Cost Accounting
Issue Date: 25 April 2023 Last Date of Submission: 04 May 2023

Note:
1. The student should attach proper cover page for each assignment clearly mentioning Student’s
complete Name, University Enrolment No., Program, Semester, Class, Section, Assignment
Number, and Subject Title. Format of Cover page is attached herewith.
2. Each assignment should be prepared by the student individually in his/her own handwriting.
3. A4 size ruled sheets should be used for writing the assignment.
4. Black or Blue pens should be used for writing the assignment.
5. Assignment pages should be serially numbered at the bottom of page.
6. The student should use examples and illustrations in support of the answers.
7. Do not use plastic folder for submission of assignment. Just staple properly all pages of an
assignment. During online education mode, upload scanned copy of the complete assignment
including cover page latest by due date at the link/ mode specified by the Subject-Teacher.

CO
Questions
No.
Q1 Attempt any five:
(a) Nature of Cost Accounting
(b) Cost Accounting and Financial Accounting.
(c) Objectives of Cost Accounting
(d) Cost centres vs cost units CO1
(e) Expired vs Unexpired costs
(f) Product vs Period Cost

Ans: (a) Nature of Cost Accounting:

 It is a branch of accounting involving the cost of goods and services.
 Management is able to analyze the data which helps in decision-making and
budgeting for the future. The data achieved is used in financial accounting.
 It is the sub-field for accounting where the process for accounting of costs is
studied. The costing data that are recorded in this helps the management in
developing the budget. It is also used in future planning and decision making
processes by the organisation.
 Certain standard costs and budgets can be established with the help of cost
accounting.
 Whether a particular process adapted by the company is efficient or not can be
determined from this data.
 Costing data is provided that further helps in fixing the prices of products.
 It helps to predict the amount of wastage of time and resources.
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,
(b) Cost Accounting and Financial Accounting
Cost accounting is referred to as a form of Financial accounting is a branch of
managerial accounting that is used by accounting that is concerned with the
businesses to classify, summarize and summarizing, recording and reporting of
analyse the different costs with the purpose financial transactions that take place in a
of cost control and cost reduction and thereby business concern over a time period.
helping management in making better
decisions.
Documents the data associated with the Documents the data that are in monetary
labour and material which are utilised in the terms.
manufacturing procedure.
Normally, the gains are investigated for a Profits, Income and expenditure are
specified job, batch, product and procedure investigated together for a specific period of
the entire trading concern

(c). Objectives of Cost Accounting

Cost accounting is a tool that can determine the accounting and costing methods and
procedures to the ascertain the cost. Few objectives are mentioned below:
1. To determine per unit cost of various goods produced by a business
2. To present an accurate report of both operation and process cost
3. To indicate and prepares a report for the wastage costs in terms of raw material, time or
money used in machinery
4. To provide important data and guidelines for determining the cost of manufactured
goods or services rendered
5. To understand the profitability of every commodity produced and inform management
about how profits can be maximised

(d) Cost centres vs cost units

the cost centre as the one or more units of the firm that don’t contribute directly to the process
of revenue generation in an organisation but incur expenses. This is a type of responsibility
centre that is accountable for incurring expenses that are under their control. It indicates any
section of the organisation’s product or service for which specific cost collection is looked for.
A cost centre, according to the Institute of Cost and Management Accountants (ICMA), is a
location, person, or item of equipment (or a combination of these) for which costs can be
determined and utilised for cost control.

The cost unit is defined as the unit of product, service, time, activity, or combination in relation
to which cost is estimated. At the time of preparing the cost statements and accounts, a
particular unit is required to be selected. It helps to identify the cost accurately and allocate the
various expenses. It assists the cost measurement process of the company and promotes
comparison.

( e) Expired vs Unexpired costs

Expired costs are those that occurred in a given accounting period, like a month or a year, but
were used up entirely or were consumed.

An unexpired cost is any cost that has not yet been charged to expense because it still
represents some residual value.
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,
(f) Product vs Period Cost
Product costs are the direct costs involved in producing a product. A manufacturer, for example,
would have product costs that include: Direct labor , Raw materials , Manufacturing supplies

Period costs are all costs not included in product costs. Period costs are not directly tied to the
production process. Overhead or sales, general, and administrative (SG&A) costs are
considered period costs. SG&A includes costs of the corporate office, selling, marketing, and
the overall administration of company business.

Q2: a) Write short notes on any two of the following:

(i) Weighted Average Method
(ii) Perpetual vs Periodic Inventory System

Answer: (A) (i) In the weighted average cost method, the cost of goods available for sale is divided
by the number of units available for sale and is commonly used when inventory items are so melded
or identical to each other that it is impossible to assign specific costs to single units. CO2
(ii)
PERPETUAL INVENTORY PERIODIC INVENTORY
SYSTEM SYSTEM
Meaning The inventory system which The Periodic Inventory System
traces every single movement is an inventory record method
of inventory, as and when they whereby, the inventory records
arise is known as Perpetual are updated at periodic
Inventory System. intervals.
Basis Book Records Physical Verification
Updations Continuously At the end of the accounting
period.

b) A firm maintains its stores ledger on the FIFO method. During the month of Jan, 2017, the
following receipts and issues of materials were made. Record these transactions in the stores
ledger.
Receipts
Jan 1 Balance 50 units @ Rs. 4 per unit
Jan 5 Purchase Order No. 10, 40 units @Rs. 3 per unit.
Jan 8 Purchase Order No. 12, 30 units @ Rs. 4 per unit.
Jan 15 Purchase Order No. 11, 20 units @ Rs. 5 per unit
Jan 25 Purchase Order No. 13, 40 units @ Rs. 3 per unit
Issues
Jan 10 Material Requisition No. 4, 70 units
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,

Jan 12 Material Requisition No. 5, 10 units

Jan 20 Material Requisition No. 6, 20 units
Jan 24 Material Requisition No. 7, 10 units
Jan 27 Shortage 5 units

OR
a) Write short notes on:
(i) EOQ model
(ii) ABC Analysis

b) Medical Aids Co. manufactures a special product A. The following particular were
collected for the year 2016:
Monthly demand of product A 1000 Units
Cost of placing an order Rs 100
Annual carrying cost per unit Rs 15
Normal usage 50 units per week
Minimum usage 25 units per week
Maximum usage 75 units per week
Re-order period 4 to 6 weeks
Compute from the above:
(i) Re-order quantity
(ii) Re-order level
(iii) Minimum level
(iv) Maximum level
(v) Average Stock level (Weeks in a year 52).

Answer
2. (a) (i) EOQ model - The economic order quantity (EOQ) is a company's optimal order
quantity that meets demand while minimizing its total costs related to ordering, receiving,
and holding inventory.
The EOQ formula is best applied in situations where demand, ordering, and holding costs
remain constant over time. One of the important limitations of the economic order quantity
is that it assumes the demand for the company’s products is constant over time.
(a) (ii) ABC Analysis- In materials management, ABC analysis is an inventory categorisation
technique. ABC analysis divides an inventory into three categories—"A items" with very
tight control and accurate records, "B items" with less tightly controlled and good records,
and "C items" with the simplest controls possible and minimal records.
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,

2 (b) Solution: CO3

 Reorder quantity/EOQ== 187 units
*Annual demand for input unit of (1,000 × 12) 12,000 product A = 52 weeks ×
Normal usage of inputs per week (52 × 50 units) = 2,600 units
 Reorder level= (Maximum usage × Maximum delivery time) = (75 units × 6 weeks) =
450 units
 Minimum level= Reorder level – (Normal usage × Average delivery time in weeks) =
450 units – (50 units × 5 weeks) = 200 units
 Maximum level= Reorder level – (Minimum usage × Minimum delivery time) + Reorder
quantity = 450 units – (25 units × 4 weeks) + 187 units = 537 units.
 Average stock level= (Minimum level + Maximum level)/2 = (200 units + 537 units)/2 =
369 units

Q3) a) Write short notes on:

(i) Idle time
(ii) Casual workers vs out workers
(iii) Treatment of overtime
b) A worker under the Halsey method of remuneration has a day rate of `12 per week of 48
hours, plus a cost of living bonus of 10 p. per hour worked. He is given 8 hours task to
perform, which he performs in 6 hours, he is allowed 30% of the time saved as premium
bonus. What would be his earnings under Halsey Plan and Rowan Plan.

Answer

(i) Idle time - Idle time is a period of time during which an employee is not engaged in
productive activities. It is usually caused by a work stoppage, or simply because an
organization is so overstaffed that there is no need for certain employees.
(ii) Casual workers vs out workers- A casual employment contract in India is a
temporary employment agreement that does not have a fixed duration or a set
number of working hours. The employee is hired casually, typically for a specific
task or project.
(iii) Treatment of overtime-
 When overtime is taken as a recourse to a customer’s request
The company will charge the whole amount of overtime to the job order
straightly.
 When overtime results from abnormal conditions like a natural disaster,
machinery breakdown, ineffective planning, management fault like strike,
etc.
In such cases, the company will charge the amount of overtime to Costing
Profit and Loss Account.
 When overtime is a result of any capital order
The company charges the amount to the capital work order account.
 When overtime takes place in a department resulting from negligence or
delay of workers of another department
In this case, the overtime premium is charged to the department causing the
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,
delay.
 When overtime takes place because of general work pressure or the
seasonal nature of production
The company will charge an overtime premium to general or factory
overheads.

3 (b) Computation of earnings of worker under Halsey Plan:

Earnings under Halsey Plan = Hours worked × Rate per hour + (30% × Time
Saved × Rate per hour)
= (6 x 0.25) + 30/100 (8-6) x 0.25 = 1.65
(+) Cost of Living Bonus (6 x 0.1) = 0.60
Earnings under Halsey Plan = `2.25

Computation of earnings of worker under Rowan Plan:

Earnings under Rowan Plan = Hours worked × Rate per hour +[ (Time
saved /Time allowed) × Hours worked × Rate per hour)]
= (6 × 0.25) + (8-6 / 8) × 6 × 0.25 = 1.88
(+) Cost of Living Bonus (6 × 0.1) = 0.60
= `2.48
Earnings under Halsey Plan = ` 2.25
Earnings under Rowan Plan = ` 2.48

OR

a) What are the causes of Labour Turnover? Suggest remedial measures to reduce
the Labour Turnover.
b) From the following data, find out the Labour Turnover Rate by applying:
(i) Flux method
(ii) Replacement method
(iii) Separation method
No. of the workers on the payroll:
At the beginning of the month 500
At the end of the month 600
During the month, 5 workers left, 20 persons were discharged and 75 workers were
recruited. Of these, 10 workers were recruited in the vacancies of, while the rest were
engaged for and expansion scheme.

Ans: (a) Unavoidable causes of labour turnover

 Change of Locality.
 Death, retirement etc., of workers.
 Transport or housing problem in the firm's locality.
 Unfit for the work.
 Misconduct of workers.
 Sickness, accident, etc., of workers.
 On account of personal betterment.
 Domestic matter like marriage, etc.
Avoidable causes of Labour Turnover
Low wage rates and other allowances when compared to other concerns.
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,
Unhealthy and bad working conditions.
Lack of job satisfaction due to faulty placement of workers.
Heavy work load and long working hours.
Lack of proper promotion methods.

Measurement to control it:

 Fair wages and equal treatment
 Provision for welfare activities
 Improve working conditions
 Allowing workers to participate in management.
(b) No. of workers separated during the period = 25
Average no. of workers= 550
Labour turnover from separation method = 25/550 X 100 =4.55 %
Labour turnover from replacement method= 10 /550 X 100= 1.81 %
Labour turnover from flux method= (25+10 / 550 ) X 100 = 6.36%
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015
CertifiedInstitution Sector 22, Rohini, Delhi -110086,

CO4

Q4) A machine costs Rs. 90,000 and is deemed to have a scrap value of 5% at the end of its
effective life (19 years.) Ordinarily the machine is expected to run for 2,400 hours per annum
but it is estimated that 150 hours will be lost for normal repairs and maintenance and further
750 hours will be lost due to staggering. The other details in respect of machine shop are:
a) Wages, bonus & provident fund contribution of each of two operators. Rs.6,000
per year (Each operator is incharge of two machines)
b) Rent and Rates for the shop Rs. 3,000 per year
c) General lighting of the shop Rs. 250 per month
d) Insurance premium for the machine Rs. 200 per annum
e) Cost of repairs and maintenance per machine Rs. 250 per month
f) Shop supervisor’s salary Rs. 500 per month
g) Power consumption of the machine per hour 20 units, rate of power per 100 units, Rs. 10.
h) Other factory overheads attributable to the shop Rs. 4000 per
annum There are four identical machines in the shop. The supervisor is expected to devote
one-fifth of his time for supervising the machine. Compute a comprehensive machine hour
rate from the above details.

Ans:

Computation of machine hour rate Rs. Per hour

Standing charges per annum
Rent and rates 750

General lighting 750

Insurance 800
Supervisor salary 1200
Allocated overhead 1000
Total 4500
Standing charges per hour ( 4500/1500) 3
Running exps
Machine expenses per hour wages, etc 2
Power 2
Repairs and maintenance Depreciation 2
Machine hour rate 12