Learning Simplified

Mumbai University
TYBCOM - Sem 5
Cost Accounting
Notes

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 INDEX
Sr. Name of the Chapter Page
No. No.
1 Cost Sheet 03 – 10
1 Reconciliation of Cost and Financial Accounts 11 – 12
2 Material Cost 13 – 15
3 Labour Cost 16 – 17
4 Overheads 18 – 19

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 COST SHEET
Q.1. From the books of accounts of M/s. Avinash Enterprises, the following details have been
extracted for the Quarter ending 31-03-2014.
Particulars Rs.

Stock of Materials - Opening 270000

Stock of materials - Closing 300000
Purchases of materials 1248000
Direct wages 357600
Direct expenses 120000
Indirect wages 24000
Salaries and administrative staff 60000
Carriage inwards 48000
Carriage outwards 37500
Manager‟s salaries 72000
General charges 37200
Legal charges for criminal suits 20000
Commission on sales 28000
Fuel 96000
Electricity charges (Factory) 72000
Director‟s fees 36000
Repairs to plant and machinery 63000
Rent, Rates and taxes – factory 18000
Rent, Rates and taxes – Office 9600
Depreciation on plant & machinery 45000
Depreciation on furniture 3600
Salesmen‟s salaries 50000
Audit Fees 18000

1. The manager‟s time is shared between the factory and the office in the ratio of
20:80.
2. Carriage outwards include Rs.7500 being carriage inwards on plant &
machinery.
3. Selling price is 120% of the cost price
From the above details prepare detailed cost sheet for the quarter ending 31-03-
2014 and ascertained the sales.

Q.2. The following particulars have been extracted from the books of Shri Gautam
Industries Ltd. for the year 2017.
Particulars Rs.

Opening stock of raw materials 25000

Purchases of raw materials 85000
Closing stock of materials 40000
Carriage inwards 5000
Wages (direct) 75000
Wages (Indirect) 10000

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 Other direct charges 15000
Rent & Rates:
- Factory 5000
- Office 500
Indirect consumption of material 500
Depreciation on plant 1500
Depreciation on office furniture 100
Salary:
- Office 2500
- Salesman 2000
Other factory expenses 5700
Other office expenses 900
Managing director‟s remuneration 12000
Other selling expenses 1000
Travelling expenses of salesman 1100
Carriage outwards 1000
Sales 250000
Advance Income tax paid 15000
Advertisement 2000

The Managing director‟s remuneration is to be allocated Rs.4000 to factory. Rs.2000

to office and Rs.6000 to Selling departments. From the above information prepare a
statement of cost showing (a) Prime cost (b) Works cost (c) Cost of production (d)
Cost of sales (e) Net profit.
Q.3. From the books of accounts of Vibhav Enterprises the following details have been
extracted for the year ended 31-03-2014.
Particulars Rs.

Corporate manager‟s salary 1110000

Rent of plant 127500
Sales of defective raw materials 8500
Hire charges for special equipment 57000
Office rent 84700
Purchase of raw material 485230
Carriage inward 24325
Indirect materials 235600
Office expenses 41000
Insurance premium for stock of raw materials 22600
Insurance premium for computer 12700
Insurance premium for Delivery van 11500
Opening stock of raw materials 78175
Closing stock of raw materials 76230
Sale of factory scrap 16800
Carriage outward 110000
Depreciation on delivery van 28000
Depreciation on Computer 87300
Salaries to office staff 115300
Salaries to drawings and designing department 185700
Opening work in progress 94300

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 Closing work in progress 96500
Brand ambassador remuneration 480000
Direct wages - skilled labour 315500
- Unskilled labour 124500
Cost of catalogue printing 57500
Opening stock of finished goods 640000
Closing stock of finished goods 750000
Repairs to delivery van 35500
Other Information :
1. The corporate manager‟s salaries to be apportioned between the factory and
the office in the ratio of 1:9.
2. Selling price is 120% of cost price
From the above details prepare cost sheet showing various elements of cost.

Q.4. From the following information, prepared detailed cost statement for the year
ended 31-3-2014.
Particulars Rs.

Opening Stock – Raw materials 20000

- Finished Goods 30000
Purchases of raw materials 1500000
Direct wages 1200000
Power 99500
Carriage on purchase of raw materials 20000
Cost of a special design 50000
Custom duty and octroi on raw materials 60000
Rent and rates – office 50000
- Factory 70000
Telephone expenses 30000
Advertisement 75000
Electricity – office 15000
- Factory 30000
Machinery lost in fire 100000
Depreciation – Plant & machinery 80000
- Delivery van 20000
Income tax 120000
Salaries 250000
Donations 70000
Establishment expenses 100000
Rent of showroom 65000
Interest on loan 45000
Sale of factory scrap 7500
Dividend received 17500
Directors fees 60000
Mailing charges of sale literature 10000
Closing stock – raw materials 185000
- Finished goods 30000
Other Information :
1. 60% of telephone expenses relate to office and 40% to sales department.

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 2. Salaries to be allocated to the Factory, Office and Sales Department in the ratio
1:2:1.
3. Establishment Expenses are to be apportioned equally between office and sales
department.
4. Sales are made to earn profits @ 20% on selling price.
Q.5. Following details are furnished by NY Ltd. of expenses incurred during the year
ended 31st March, 2014.
Particulars Rs.

Salesman Salary 6,47,500

Opening Stock of Finished Goods (2000 units) 7,60,000
Director‟s Fees 9,73,700
Indirect Wages 9,76,300
Repairs to Office Furniture 4,01,700
Works Managers Salary 11,94,700
Showroom Expenses 10,68,750
Depreciation on Computer 12,12,900
Indirect Materials 7,31,900
Depreciation on Plant and Machinery 4,77,100
Advertisement 15,33,750
Office Salary 7,91,700
Direct Wages 10,01,000
Direct Materials 18,82,400
Direct Expenses 4,96,600
Closing Stock of Finished Goods (3000 units) ?

Other Information:
1. Closing stock of finished goods to be valued at cost of production.
2. Profit desired on sales is 20%.
3. Number of units sold during the year was 25000.
Prepare Cost Sheet showing the various elements of cost both in total and per unit
and also find out the total profit and per unit profit for the year ended 31st March,
2014.

Q.6. The State Government grained licence to Sweet Sugar Ltd. To manufacture and sell
sugar with a stipulation that 40% of the output should be sold to the State
Government at a controlled price of Rs.3,000 per ton and the balance Output can be
sold in the open market at any price. Following are the details of Sweet Sugar Ltd.
for the year ended 31st March, 2014. During the year 3,600 tons Sugarcane was
consumed @ Rs.1,000 per ton. Direct labour amounted to Rs.825 per ton of sugar
produced. The details of other expenditure are as follows:-
Particulars Rs.

Direct Expenses 4,20,000

Telephone Charges 3,52,695
Office Computer Purchased 2,75,350

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 Factory Rent and Insurance 3,54,760
Machinery purchased 4,25,560 98,847
Machinery repairs 3,37,650
Commission on Sales 2,19,588
Factory Salaries 1,54,090
Carriage Outward 1,94,450
Packing Expenses 1,65,895
Bank Interest 2,61,880
Factory Electricity 1,06,850
Delivery Van Expenses 3,80,125
Coal Consumed 2,49,600
Depreciation on Machinery 2,04,180
Depreciation on Computer 1,57,360
Depreciation on Delivery Van 1,89,325
Office Salaries 1,13,000
Printing and Stationery
During the year 2,400 tons of sugar was produced. The Company‟s Profit target for
the year, for fixing the open market selling price on the basis of cost sheet, is 10%
of its average paid-up Capital of Rs.1, 42, 56,000. Prepare cost sheet and find
various components of total cost and per unit cost and suggest the Selling Price for
Open-Market.

Q.7. Prepare a cost sheet showing the total and per tonne cost of paper manufactured by
Times Paper Mills Ltd. for the month of March, 2014. There were 26 working days in
the month. Also find the profit earned by the company. The details are as under:-
Direct Raw Materials: Paper pulp : 6,000 tons @ Rs.900 tonne.
Direct Labour:-
280 Skilled workmen : Rs.250 per day
300 Semiskilled workmen : Rs.150 per day
470 Unskilled workmen : Rs.100 per day
Direct Expenses:-
Special equipments hire charges : Rs.12, 000 per day
Special dyes : Rs.250 per tonne of total raw material input
Work overheads : Variable : @ 50% of direct wages
: Fixed : Rs.2, 70,000 p.m.
Administration overheads : @ 12% of works cost
Selling and distribution overheads : Rs.80 per tonne sold.
Opening stock of paper : 500 tonnes valued @ Rs.2,501.60 per ton
Closing stock of paper : 300 tonnes valued at cost of production.
The paper is sold @ Rs.3, 000 per tonne.
Q.8. Sagar manufacturing company gives you the following particulars for the year 2012.
Production and sales during the year was 20,000 units.
Particulars Rs. Particulars Rs.

Material 5,00,000 Factory Overheads

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 Direct Wages 3,00,000 -Fixed 2,00,000
Administrative 2,00,000 -Variable 4,00,000
Overheads (Fixed) 24,00,000 Selling and Distribution
Sales 5,00,000 Overheads
Profit -Fixed 1,20,000
-Variable 1,80,000

The company has worked to its maximum capacity of 20,000 units during the year
2012. The management has decided to increase production capacity to 30,000 units
for the year 2013 and it is estimated that:
1. There will be all round rise in all variable expenditure by 10%.
2. There will be increase of 20% in all fixed overheads.
3. There will be no need to change the selling price for the year 2013. Prepare
Cost Sheet for the year 2012 with cost per unit column and also prepare
estimated Cost Sheet for the year 2013 with cost per unit column.
Q.9. Super Vision Company furnishes you with the following information about its 1000
TV sets manufactured and sold during the year:
Particulars Rs. Particulars Rs.

Materials 18,00,000 Office and 6,80,000

Direct Wages 10,00,000 Administration
Power and Stores 2,40,000 Expenses 1,20,000
Indirect Wages 3,00,000 Selling & Distribution
Factory Lighting 1,20,000 Expenses 40,000
Cost of rectifying 60,000 Sale of Scrap
defective work Sale of 1000 TV sets 62,00,000
Repairs and 2,00,000
depreciation of
Machinery
Prepare the cost sheet for the above year, showing the elements of cost per unit,.
Prepare also the estimated cost sheet for the next year assuming that:
1. Materials cost and direct wages cost will increase by 10% and 15%
respectively.
2. Factory overheads will be recovered as a percentage of direct wages, as last
year.
3. Office overheads and selling overheads will be recovered as percentage of
works cost, as last year, and
4. 1500 TV sets will be produced and sold at Rs.6,600 each in the next year.
Q.10. –
Q.11. –
Q.12. Following information is available from cost records for the year ended 31st March,
2014:
Direct Material Rs.36 Per Unit
Direct Labour Rs.28 Per Unit
Chargeable Expenses Rs.11 Per Unit
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 Factory Overheads Fixed Rs.15,00,000,
Variable Rs.10 Per Unit
Office Overheads Fixed Rs.12,50,000
Selling Overheads Fixed Rs.5,00,000, Variable Rs.25Per Unit
Units Produced and Sold 50,000
Selling Price Per Unit Rs.210.
Following changes are anticipated during the year ended 31st March, 2015.
1. Production and Sales will increase by 60%.
2. Direct Material cost per unit will increase by 12.5%.
3. Direct Labour per unit will decrease by 5%.
4. Chargeable expenses per unit will decrease by 10%.
5. Variable factory overheads per unit will increase by 25%.
6. Variable selling overheads will decrease by 25%.
7. All fixed overheads will increase by 20%.
8. 75% of the output will be sold in Domestic Market at a profit of 20% on sales.
9. Balance 25% output will be sold in Export Market at a profit of 50% on sales.
You are required to:
(i) Prepare a Cost Sheet for the year ended 31st March,2014 and estimated
cost sheet for the year ended 31st March, 2015, showing total and per unit
cost.
(ii) Calculate total and per unit profit for the year ended 31st March, 2014.
(iii) Calculate total sales and profit for Domestic Market and Export Market.
Q.13. M/s. Vidya Pen Company manufactures two types of pens “Sharada” and “Viveka”.
The particulars for the year ended 31st March, 2014 were as follows:
Particulars Rs.

Direct Material 5,00,000

Direct Wages 2,25,000 75,000
Direct Expenses 10,00,000
Total Sales
There was no work-in-progress at the beginning or at the end of the year. On the
study it is ascertained that-
1. Direct Material per unit in “Sharada Pen” consists twice as much as that in
type “Viveka Pen”.
2. The Direct Wages per unit for “Viveka Pen” were 40% of those for “Sharada
Pen”.
3. Direct Expenses were same per unit for Viveka as well as Sharade Pen.
4. Factory Overheads were 20% of the prime cost.
5. Administrative Overheads were 50% of Direct Wages.
6. 2,500 units of Sharada Pen were produced of which 2,000 were sold and 5,000
units of Viveka Pen were produced of which 4,000 were sold, during the
year.
7. Selling Overheads were Rs.8 per unit for Sharada Pen and Rs.9 per unit for
Viveka Pen.

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 8. Selling price per unit for sharada Pen was Rs.250 and Viveka Pen was Rs.125
respectively.
You are required to prepare a statement showing cost and profit in total as well
as per unit for Sharada Pen and Viveka Pen.

Q.14. From the following information, prepare a cost sheet for the month of December,
2014.
Particulars Rs.

Stock on Hand – 1stDec. 2014:

Raw Materials 25,000
Work-in-Progress 8,200
Finished Goods 17,300
Raw Materials consumed during Dec. 2014 21,800
Works Cost for the month (after adjusting work-in-progress) 48,400
Cost of Production of Goods sold 53,200
Purchase of Raw Materials 21,900
Carriage on Purchases 1,100
Sale of Finished Goods 72,300
Direct Wages 17,200
Direct Expenses 1,200
Factory Overheads 9,100
Administration Overheads 3,200
Selling and Distribution Overheads 4,200

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 RECONCILIATION OF COST AND FINANCIAL
ACCOUNTS
Q.1. From the following particulars, prepare Reconciliation Statement and Ascertain Costing
Profit/Loss. Net Profit as per financial P & L A/c. Rs.50,000, Opening Stock was overvalued
by Rs.2,000 in Cost Accounts as compared to financial accounts. Administrative overheads
charged in Financial Books Rs.20,000 but recovered in Cost Rs.40,000.
Income Tax Provision Rs.1,200.
Notional Salary of Proprietor in Cost Rs.20,000.
Interest Received Rs.12,000.
Closing Stock as per financial books Rs.16,200.
Whereas in Cost books it was Rs.19,000.

Q.2. From the following, prepare Reconciliation Statement of M/s. XYZ and Company as on 30-6-
2014:
(1) Net Profit as per Financial Accounts Rs.40,340.
(2) Income Tax Provision made Rs.30,000.
(3) Materials Purchased of 5,000 units were recorded in cost at standard cost Rs.24 per unit
whereas in Financial it was recorded at actual cost Rs.22 per unit.
(4) Old debts recorded Rs.20,500.
(5) Loss on sale of furniture was Rs.4,120.

Q.3. From the following information you are required to prepare a statement reconciling the
results of Cost Books:
Particulars Rs.
Net Profit as per Financial Books 51,052
Works overheads under recovery in cost book 1,001
Depreciation charged in Financial Books 13,000
Depreciation charged in Cost Book 14,326
Obsolescence loss charged in Financial Books Only 2,021
Income-tax provided in Financial Books only 2,626
Interest received but not recorded in Cost Book 3,031
Bank interest debited in Financial Books only 292

Q.4. Following is the summarized Profit and Loss Account of XYZ Industries for the year ended
31-03-2014.
Profit and Loss Account for the year ended 31st March 2014
Particulars Rs. Particulars Rs.
To Materials consumed 2,00,000 By Sales (12,000 units) 4,80,000
To Wages 75,400 By Closing Stock (Finished
To Factory Expenses 52,400 54,600 Goods 3000 units) 66,000
Add: Outstanding 2,200 52,500 By Interest on Securities 17,000
To Administrative Overheads By Profit on Sale of Assets 1,20,000
To Selling and Distribution
Overheads 96,000
To Interest on Loans 14,000
To Income Tax 7,500
To Net Profit 1,83,000
6,83,000 6,83,000
The cost accounting record for the above period showed the following:
(a) Material consumed @ Rs.10 per unit produced.
(b) Direct Wages @ Rs.6 per unit produced.
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 (c) Factory overheads were absorbed @ 25% of Prime Cost.
(d) Administrative overheads were absorbed @ Rs.5 per unit produced.
(e) Selling and Distribution overheads were absorbed @ Rs.7 per unit sold.
You are required to prepare the detailed Cost Sheet for the year ended 31-03-2014 and a
Statement of Reconciliation.

Q.5. RST Ltd. has furnished the following information from the financial books for the ended 31st
March, 2012.
Dr. Trading and Profit and Loss A/c Cr.
Particulars Rs. Particulars Rs.
To Opening Stock 2,50,000 By Sales (47,500 units) 59,85,000
(Finished goods 2500 units) By Closing Stock 5,00,000
To Raw Materials 20,80,000 (Finished Goods 5000 units)
To Direct Wages 15,15,000 By Commission Received 35,000
To Factory Expenses 10,18,000 By Bad Debts Recovered 12,000
To Office and Administrative By Net Loss 36,000
Expenses 8,45,000
To Selling and Distribution
Expenses 7,00,000
To Goodwill w/off 60,000
To Loss on Sale of Investments 1,00,000
65,68,000 65,68,000
The following information is revealed form the cost records for year ended 31st March, 2012:
(a) Raw material consumption is Rs.40 per unit of Production.
(b) Direct wages are 70% of Direct Materials.
(c) Factory overheads are recovered @ 50% of Direct Materials.
(d) Administrative overheads are taken @ 20% of Works cost.
(e) Selling and Distribution overheads are recovered Rs.15 per unit.
(f) Opening stock of Finished goods is valued at Rs.101.80 per unit.
(g) Closing stock of Finished goods is to be valued at cost of Production.
(h) Selling price is recorded at Rs.125 per unit.
Prepare:
(i) Detailed Cost Statement showing total cost, per unit cost and profit.
(ii) Statement of Reconciliation.

Q.6. From the following figures prepare a reconciliation statement:

Particulars Rs.
Net loss as per Financial records 2,08,045
Depreciation charged in Financial records 11,200
Depreciation recovered in Costing 12,500
Value of Opening Stock : Cost Accounts 52,600
Financial Accounts 54,000
Interest charged in cost accounts but not in Financial Accounts 6,000
Preliminary expenses written off in Financial Accounts 800
Calculate the figure of profit or loss as per cost records.

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 MATERIAL COST
Q.1. Keep stock record on FIFO, and Weighted Average basis from the following transactions:
Date Units Rate Per Date Units Rate Per
Unit (Rs.) Unit (Rs.)
Purchases: March 2014 Sales: March 2014
01 500 18 02 200 22
04 700 20 07 500 25
09 900 18 11 400 21
15 300 25 18 800 28
25 200 20 27 500 25
31 500 25
Find out cost of goods sold and the profit.

Q.2. M/s Desai & Co. a trade of Plastic Toys had 12,000 toys valued at Rs.3 per toy. His purchases
and sales during first six months ending 31st December, 2013 were as under:
On 22nd July, 2013 Sales 5,000 Toys @ Rs.20 each
rd
On 23 July, 2013 Purchased (Carriage Inward Rs.1,000) 10,000 Toys @ Rs.15 each
On 25th October 2013 Sales 8,000 Toys @ Rs.24 each
On 26th October 2013 Purchased (Carriage Inward Rs.1,200) 12,000 Toys @ Rs.18 each
On 31st December 2013 Sales 13,000 Toys @ Rs.29 each
You are required to ascertain:
Cost of stock on hand as on 31st Dec.2013 under each of the following methods:
(1) FIFO, (2) Weighted Average

Q.3. The following is a summary of the receipts and issue of materials in a factory during January.
January
1 Opening balances 500 units @ Rs.25 per unit
3 Issue 70 units
4 Issue 100 units
8 Issue 80 units
13 Received from supplier 200 units @ Rs.24.50 per unit
14 Returned to store 15 units @ 24 per unit
16 Issue 180 units
Work out on the basis of First-in-First-out. On the 15th there was a shortage of five units.

Q.4. Prepare a Stores Ledger Account from the following information adopting FIFO method of
pricing of issues of materials.
March 2012 1 Opening Balance 500 tonnes @ Rs.200
3 Issue 70 tonnes
4 Issue 100 tonnes
5 Issue 80 tonnes
13 Received from suppliers 200 tonnes @ Rs.190
14 Returned from Department A 15 tonnes
16 Issued 180 tonnes
20 Received from suppliers 240 tonnes @ Rs.195
24 Issue 300 tonnes
25 Received from suppliers 320 tonnes @ Rs.200
26 Issue 115 tonnes
27 Returned from Department B 35 tonnes
28 Received from suppliers 100 tonnes @ Rs.200

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Q.5. From the following particulars find out the Economic Order Quantity:
(i) Annual Demand 12,000 units
(ii) Ordering cost Rs.90 per order
(iii) Inventory carrying cost per annum Rs.15

Q.6. From the following information, calculate Economic Order Quantity.

Semi-Annual Consumption 6,000 units
Purchase price of input unit Rs.25
Ordering cost per order Rs.45
Quarterly carrying cost 3%

Q.7. The Purchase Manager of an organization has collected the following data for one of the A
class items.
Interest of the locked up capital 20%
Order processing cost (Rs.) for each order Rs.100
Inspection cost per lot Rs.50
Follow up cost for each order Rs.80
Pilferage while holding inventory 5%
Other holding cost 15%
Other procurement cost for each order Rs.170
Annual Demand 1,000 units
Cost per item Rs.10
What should be the EOQ?

Q.8. A company manufactures a product from a raw material, which is purchased at Rs.60 per kg.
The company incurs a handling cost of Rs.360 plus freight of Rs.390 per order. The
incremental carrying cost of inventory of raw material is Rs.0.50 per kg per month. In
additional, the cost of working capital finance on the investment in inventory of raw material
is Rs.9 per kg per annum. The annual production of the product is 1,00,000 units and 2.5
units are obtained from one kg of raw material.
Calculate the economic order quantity of raw materials.

Q.9. The following information relating to a type of raw material is available:

Annual demand 2,000 units
Unit price Rs.20.00
Ordering cost per order Rs.20.00
Storage cost 2% p.a.
Interest rate 8% p.a.
Calculate economic order quantity and total annual inventory cost of the raw material.

Q.10. X Ltd. manufactures a special product „ZED‟ and provides the following information:
Demand of ZED is 1,000 units per month.
Semi-annual carrying cost – 6%
Raw material required per unit to finished product – 2 kg
Ordering cost per order – Rs.90
Purchase price of input unit – Rs.25 per kg
Required: Calculate (a) Economic order quantity and (b) Total Annual Carrying and
Ordering Cost at that quantity.

Q.11. ABC Co. buys a lot of 125 boxes which is a three month supply. The cost per box Rs.125 and
ordering cost is Rs.250 per order. The inventory carrying cost is estimated at 20% of unit
value per annum.

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 You are required to ascertain:
(i) The total annual cost of existing inventory policy.
(ii) How much money would be saved by employing economic order quantity?

Q.12. KL Limited produces product „M‟ which has a quarterly demand of 8,000 units. The product
requires 3 kgs quantity of material „X‟ for every finished unit of product. The other
information are follows:
Cost of material „X‟: Rs.20 per kg
Cost of placing an order: Rs.1,000 per order
Carrying cost: 15% per annum of average inventory
Required:
(i) Calculate the Economic Order Quantity for material „X‟.
(ii) Should the company accept an offer of 2 percent discount by the supplier, if he wants to
supply the annual requirement of material „X‟ in 4 equal quarterly installments?

Q.13. The purchase Department of your organization has received an offer of quantity discounts on
its order of materials as under:
Price per tonne (Rs.) Tonnes
1,400 less than 500
1,380 500 and less than 1,000
1,360 1,000 and less than 2,000
1,340 2,000 and less than 3,000
1,320 3.000 and above
The annual requirement of the material is 5,000 tonnes. The delivery cost per order is
Rs.1,200 and the annual stock holding cost is estimated at 20 percent of the average
inventory.
The purchase Department wants you to consider the following purchase options and advise
which among them will be the most economical ordering quantity, presenting the relevant
information in a tabular form.
The purchase quantity options to be considered are 400 tonnes, 500 tonnes, 1000 tonnes,
2000 tonnes and 3,000 tonnes.

Q.14. The following data are available in respect of material X for the year ended 31st March, 2015:
Opening Stock Rs. 90,000
Purchases during the year Rs.2,70,000
Closing Stock Rs.1,10,000
Calculate:
(1) The Inventory Ratio
(2) The number of days for which the average inventory is held.

Q.15. From the following information calculate stock turnover ratio:

Gross Sales Rs.5,00,000
Sales Returns Rs.25,000
Opening Stock Rs.70,000
Closing Stock at Cost Rs.85,000
Purchase Rs.3,00,000
Direct Expenses Rs.1,00,000

Q.16. From the following data for the year ended 31st December, 2014, calculate the inventory
turnover ratio of two items and put forward your comments on them:
Particulars Material X (Rs.) Material Y (Rs.)
Opening Stock (1st January, 2014) 20,000 18,000
Purchases during the year 1,04,000 54,000
Closing Stock (31st December, 2014) 12,000 22,000

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 LABOUR COST
Q.1. Standard production @ 20 units per hour, general wage rate Rs.2.00 per hour, wages rate if
work executed below standard: 80% of general rate on execution of work equal to standard
120% of, general rate; production in 8 hrs of one day by Mr. A:150 units and by Mr. B:200
units. Compute total remuneration payable to Mr. A and Mr. B under the Taylor plan.

Q.2. 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
Differential to be applied are:
80% of the piece rate below the standard;
120% of the piece rate above standard.
A produced 1,300 units per day of 8 hours; and B 1,500 units per day of 8 hours.

Q.3. The following particulars apply to a particular job:

Standard production per hour – 6 units
Standard working hours – 8
Normal rate per hour – Rs.1.20.
Mohandas produced 32 units
Ram produces 42 units
Peas ad produces 50 units
Calculate the wages of these workers under Merrick Differential Piece Rate System.

Q.4. The following are the particulars applicable to a process:

Time Rate – Rs.8 per hour
High Task – 200 units per week.
In a 40 hour week, the production of the workers was:
A – 180 units; B – 200 units; C – 205 units
Production above standard-high piece rate of Rs.2.00 per unit.
Calculate the total earnings of the workers under Gantt‟s Task Bonus system.

Q.5. Rate per hour = Rs.1.50

Time allowed for the job = 16 hrs.
Time taken = 12 hrs.
Calculate the total earnings of the workers under Halsey Permit Plan. Find out effective rate
of earnings also.

Q.6. Calculate bonus payable under Rowan plan where time allowed is 24 hours, time taken is 18
hours and time rate is Rs.20 per hr.

Q.7. A worker produced 200 units in a week‟s time. The guaranteed weekly wage payment for 45
hours is Rs.81. The expected time to produce one unit is 15 minutes which is raised further
by 20% under the incentive scheme. What will be the earnings per hour of that worker
under Halsey (50% sharing) and Rowan bonus schemes?

Q.8. Calculate the earnings of a worker under (i) Rowan Plan (ii) Halsey Plan from the following
particulars:
(1) Hourly rate of wages guaranteed 0.50 pause per hour.
(2) Standard time for producing dozen articles – 3 hours.
(3) Actual time taken by the worker to produce 20 dozen articles – 48 hours.

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Q.9. A worker takes 6 hours to complete a job under a scheme of payment by results. The
standard time allowed for the job is 9 hours. His wage rate is Rs.1.50 per hours. Material cost
of the job is Rs.16 and the overheads are recovered at 150% of the total direct wages.
Calculate the factory cost of job under (a) Rowan and (b) Halsey systems of Incentive.

Q.10. Calculate normal overtime and total wages payable to a worker from the particulars given
below:
Days Hours Worked
Monday 10
Tuesday 9
Wednesday 8
Thursday 12
Friday 9
Saturday 4
Normal working hours = 8 per day
Normal rate = Rs.50 per day
Overtime rate = up to 9 hours per day-single rate; beyond 9 hours a day-double rate.

Q.11. From the following data prepare a statement showing the cost per day of 8 hours of
engaging a particular type of labour:
(a) Monthly salary (basic + dearness allowance) – Rs.200
(b) Leave salary payable to the workman – 5% of salary
(c) Employer‟s contribution to P.F. – 8% of salary [item (a) and (b)]
(d) Employer‟s contribution to State Insurance – 2½% of salary (item a + b)
(e) Expenditure on amenities – Rs.17.95 per head per month
(f) No. of working hours in a month – 200

Q.12. „A‟, an employee of XYZ Co. gets the following emoluments and benefits:
(a) Salary Rs.2,500 per month
(b) Dearness Allowance Rs.5,250 per month
(c) Employers‟ contribution to Provident Fund 8% of Salary and D.A.
E.S.I. 4% of Salary and D.A.
(d) Bonus 20% of Salary and D.A.
(e) Other allowances Rs.27,250 per annum
A works for 2,400 hours per annum, out of which 400 hours are non-productive but treated as
normal idle time. You are requested to find out the Effective hourly cost of „A‟.

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 OVERHEADS
Q.1. A factory has 3 production departments (P1, P2, P3) and 2 service departments (S1 & S2).
The following overheads and other information are extracted from the books for the month
of January 2014.
Expense Amount (Rs.) Expense Amount (Rs.)
Rent 6,000 Supervision 9,000
Repair 3,600 Fire Insurance for Stock 3,000
Depreciation 2,700 ESI contribution 900
Lighting 600 Power 5,400

Particulars P1 P2 P3 S1 S2
Area sq. ft. 400 300 270 150 80
No. of workers 54 48 36 24 18
Wages 18,000 15,000 12,000 9,000 -
Value of plant 72,000 54,000 48,000 6,000 6,000
Stock Value 45,000 27,000 18,000 - -
Horse power of plant 600 400 300 150 50
Allocate or apportion the overheads among the various departments on suitable basis.

Q.2. The Modern Company is divided into departments: A, B, and C are production departments
and D is service department. The actual costs for a period are as follows:
Particulars Rs. Particulars Rs.
Rent 10,000 Fire insurance (Stock) 5,000
Repairs to plant 6,000 Power 9,000
Depreciation of plant 4,500 Light 1,000
Supervision 15,000 Employer‟s Insurance Liability 1,500
The following information are available in respect of the four departments:
Particulars Departments
A B C D
Area (sq. mtr.) 1,500 1,100 900 500
Number of employees 20 15 10 15
Horsepower of machines 800 500 200 -
Total wages (Rs.) 60,000 40,000 30,000 20,000
Value of plant (Rs.) 2,40,000 1,80,000 1,20,000 60,000
Value of Stock (Rs.) 1,50,000 90,000 60,000 -
Light points (Nos.) 40 30 20 10
Apportion the costs of the various departments by the most equitable method.

Q.3. The following cost information for a period is available for a small engineering unit:
(a) Allocated expenditure
Total Allocated
(Rs.) Production Departments Service Departments
Machine Assembly General Stores
Shop Service
Indirect Wages 29,300 8,000 6,000 4,000 11,300
Stores consumed 6,700 2,200 1,700 1,100 1,700
Supervisory Salaries 14,000 - - 14,000 -
Other Salaries 10,000 - - 10,000 -
(b) Expenditure to be apportioned
Power and Fuel 15,000
Rent 15,000

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 Insurance 3,000
Depreciation 1,00,000
(c) Additional Information available
Floor Area H.P. No. of Investment
(Sq. ft.) Hrs. Employees (Rs.)
Machine Shop 2,000 3,500 30 6,40,000
Assembly 1,000 500 15 2,00,000
General Plant 500 - 5 10,000
Stores 1,500 1,000 10 1,50,000
You are required to prepare an overhead primary distribution statement in detail.

Q.4. In an engineering factory particulars have been extracted for the year ended 31-12-2013:
Particulars Production Dept. Service Dept.
A B C X Y
Direct Wages (Rs.) 30,000 45,000 60,000 15,000 30,000
Direct Material (Rs.) 15,000 30,000 30,000 22,500 22,500
Staff number 1,500 2,250 2,250 750 750
Electricity 6,000 4,500 3,000 1,500 1,500
Asset Value (Rs.) 60,000 40,000 30,000 10,000 10,000
Light Points 10 16 4 6 4
Area (Square meters) 150 250 50 50 50
The expenses for the period were as follows:
Particulars Rs. Particulars Rs.
Power 1,100 Depreciation 30,000
Lighting 200 Repairs 6,000
Stores Overheads 800 General overheads 12,000
Welfare to Staff 3,000 Rent and Taxes 550
Apportion the expenses of service department Y according to direct wages and those of
service department X in the ratio 5 : 3 : 2 to the production departments.
You are required to prepare an Overheads Distribution Summary.

Q.5. Radha Enterprises has three production departments A, B and C and one service
department S.
The following figures are available for one month of 25 working days of 8 hours each day.
All departments worked all these days with full attendance.
Expenses Total Service Production Department
(Rs.) Dept. (Rs.) A (Rs.) B (Rs.) C (Rs.)
Power and Lighting 1,100 300 200 250 350
Supervisor‟s Salary 1,500 - - - -
Rent 600 - - - -
Canteen Expenses 500 - - - -
Others 1,100 140 210 470 280
4,800
The following additional information is available:
Particulars Service Production Department
Dept. A B C
Supervisor‟s Salary 20% 20% 30% 30%
Floor Area in sq. feet 800 700 900 600
Number of workers 20 30 30 20
Service rendered by service department to
production department 20% 30% 50%
You are required to calculate the labour hour rate of each of the department A, B and C.

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