Cost and Management Accounting 1- You are required to prepare a statement of cost, to work out profit as per cost accounts, and to reconcile the same with that shown in the financial

You are required to prepare a statement of cost

 Cost and  Management Accounting 1



Q1. X is the manufacture of Mumbai purchased three chemicals A, B and C from U.P.The bill gave the following information:

Chemical A:                          6000 kgs @ Rs. 4.20 per kg                                      Rs     25,200

Chemical B:                          10000 kgs @ Rs. 3.80 per kg                                             38,000

Chemical C:                          4000 kgs @ Rs. 4.75 per kg                                                19,000

VAT                                                                                                                              2,055

Railway Freight                                                                                                         1,000

Total Cost                                                                                                                  85,255

Q2.  A shortage of 100 kgs in chemical A, of 140 Kgs in chemical B and Of 50 kgs in chemical C was noticed due to breakages. At Mumbai, the manufacture paid octroi duty @ 0.20 kg. He also paid hamali, Rs 20 for the chemical a, Rs 58.12 for chemical B and Rs 35.75 for chemical C. Calculate the stock rate that you would suggest for pricing issue of chemicals assuming a provision of 4 % towards further deterioration and also show the quantity (kgs) of chemicals available for issue.

Q3.  ABC Ltd has collected the following data for its two activities. It calculates activity cost rates based on cost driver capacity.

Activity                         Cost driver                            Capacity                           Cost

Power                         Kilowatt hours                        50000 hrs                 Kilowatt Rs 200000

Quality Inspection   Numbers of inspection       10000 inspection                    Rs 300000

Q4. The Company makes three products, A, B and C.For the year ended March 31, 2004, the following consumption of cost drivers was reported:

Product                                              Kilowatt-hours                    Quality Inspection

A                                                         20000                                                7000

B                                                         40000                                                5000

C                                                          30000                                                6000

Q5. Compute the costs allocated to each product from each activity

Q6. Calculate the cost of unused capacity for each activity.

Q7. Reliable company wishes to discontinue the sale of one of the products in vew of unprofitable operations. Following details are available with regard to turnover, cost and activity for the current year ending 31st March.


P                               Q                     R                          S

Sales Turnover                     Rs.600000                Rs.1000000          Rs.500000        Rs.900000

Cost of sales                              350000                       800000                370000              480000

Storage area (square meters       40000                        60000                    70000             30000

Number of cartons sold              200000                       300000                   150000          350000

Number of bills raised                100000                       120000                     80000          100000

Overhead costs and basis of apportionatement are:

Fixed Expenses

Basis of Apportionatement

Administration wages & salaries                              Rs.100000    Number of bill raised

Salesmen salaries a & expenses                                 120000     Sales turnover

Rent and insurance                                                        60000     Storage area

Depreciation                                                                    20000     Number of cartons

Unfixed Expenses

Commission                                                                                     3 % of sales

Packing material & wages                                                              Re 1 per carton

Stationery                                                                                         Re 0.50 per bill

You have to prepare

  1. Staement showing summary of Selling & Distribution Costs to the products

  2. Profit & Loss Statement showing contribution and profit or loss of each of the products to enable the Company take an appropriate decision on discontinuance of the sale of a product.

Q8. The Tata Infrastructure Co. is involved in two contracts Contract 69 & Contract 96 during the current year. The following information relates to these contracts, which were started on January 1 and July 1, respectively.


A                                    B

Contract Price                                                                      Rs.300000                Rs.400000

Direct material issued                                                                 55000                       40000

Material returned to store                                                            1500                          2500

Direct Labour                                                                               36000                        22000

Wages accrued on Dec 31                                                           2000                          2500

Plant installed          (at cost)                                                       30000                        40000

Establishment Charges                                                               20000                        15000

Direct Expenses                                                                           20000                        30000

Direct expenses accrued, December 31                                       2000                           3000

Work certified by architect                                                           320000                       120000

Cost not work not yet certified                                                     10000                         30000

Material on site, 31 December                                                   11000                            5500

Cash received from contractees                                                   60000                       150000

Depreciation of plant p.a                                                            12 %                              34%

Prepare Contract & Contractees Account for Contract 69 & Contract 96.

Q9. A company manufactures a product which involves two processes, namely, pressing and polishing. For the months of January, the following information is available:

Pressing                                           Polishing

Opening Stock

Inputs of unit in process                                        1200                                                     1000

Units completed                                                      1000                                                      750

Unit under process                                                    200                                                      250

Material Cost                                                      Rs.69000                                                Rs.17500

Conversion Cost                                                      328500                                               82500

Q10. For incomplete unit in process, charge material costs at 100% and conversion costs at 60% in the pressing process and 50 % in the polishing process. Prepare a statement of cost and calculate the selling price per unit which will result in 25 % on the sale price.

Q11. M/s Modern Company Ltd furnishes the following summary of Trading & Profit and Loss account for the current year ending March 31.

To Raw Material                                          140000          By sales (12000 units)                        510000

To direct wages                                              72000          By finished stock (200 units                  6000

To production overheads                                45000          By work in Process

To selling & distribution overheads                 43500                       Material                                  26800

To administration overheads                          41010                       Wages                                      11786

To Preliminary Expenses w/off                       3250                Production overheads   8000              46586

To Goodwill w/off                                            2541                 By interest on securities (gross)         5000

To dividend (net)                                            4000

To income-tax                                                 5870

To net profit                                                 210415

567586                                                                     567586

Q12. The Company manufactures a standard unit. The scrutiny of cost records for the same period shows that-

a) Factory overheads have been allocated to production at 20 percent on prime cost

b) Administration overheads have been charged at Rs.3 per cent on units produced

c) Selling & distribution expenses have been charged at Rs.4 per unit on unit sold.

You are required to prepare a statement of cost, to work out profit as per cost accounts, and to reconcile the same with that shown in the financial accounts.



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