UNIT V

Classification of Costs and Cost Sheet

Q1)  Give a brief concept of Cost. (5 marks)

A1) According to the Association of Certified Management Accountants, costs are "expenditures (actual or hypothetical) incurred or resulting from a particular thing or activity." Similarly, according to Anthony and Wilsch, "cost is a monetary measure of the amount of resources used for several purposes."

Costs have been or may be incurred by the Cost Terminology Committee of the American Accounting Association, "in the realization of the management objectives mentioned above, which may be the manufacture of products or the provision of services.

From the above, it can be said that the cost is the sum of all the costs of a product or service. Therefore, the cost of a product means the actual shipment or confirmed change that occurred in its manufacturing and sales activities. In short, it is the amount of resources that have been exhausted in exchange for some goods and services.

So-called resources are expressed in money or currency units. What is said above does not make sense until it is used only as an adjective, that is, when it conveys its intended meaning.

Therefore, when we talk about prime cost, works cost, fixed cost, etc., we want to explain the specific implications that are essential when calculating, measuring, or analysing different aspects of cost.

Costing collects and analyses expenses, measures the production of products at various stages of manufacturing, and measures the link between production and expenses. Therefore, calculate or check past or actual costs, estimated costs, standard costs, and so on.

It also associates production with costs using a variety of costing methods, such as marginal costing methods, total costing methods, and direct costing methods.

The cost concept of accounting states that all acquisitions of items (e.g., assets or items needed for expending) should be recorded and retained in books at cost.

Therefore, if a balance sheet shows an asset at a certain value, it should be assumed that this is its cost unless it is categorically stated otherwise.

Explanation

Under the cost concept of accounting, an asset should be recorded at the cost at which it was purchased, regardless of its market value.

For example, if a building is purchased for $500,000, it will continue to appear in the books at that figure, irrespective of its market value.

Under this concept, stability in asset prices while recording is achieved. However, there are also some limitations to the cost concept of accounting.

For example, in the context of inflation, the cost concept of accounting would lead to an overstatement of net profit.

Despite its limitations, the cost concept of accounting is regarded as the best option when compared to the available alternatives.

The cost of an item may be different compared to its true value, but since figuring out the true value would be subjective, stating the assets at historical cost is generally accepted as a fair way to maintain records.

Following the cost concept of accounting means that unless there are special reasons for doing otherwise, the assumption should be made that the cost of an item is its true value, and all accounting entries should be made at cost.

Q2) What are the types of Costing? (5 marks)

A2) Costing is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products or services, and for presentation of suitably arranged data for the purposes of control, and guidance of management.”

Aims of Costing:

Main aims of costing are:

1. To determine the exact cost of each article.

2. To determine the cost incurred during each operation to keep control over workers’ wages.

3. To provide information to ascertain the selling price of the product.

4. To supply information for detection of wastage.

5. It helps in reducing the total cost of manufacture.

6.To help in formulating the policies for charging the prices of the product.

7.  To facilitate preparation of estimate for submitting the rates in tenders or quotations.

8.  To compare the actual cost with the estimated cost of the component.

The following types of costing are typically used to determine costs:

1. Uniform costing

If many companies in the industry agree to follow the same costing system in detail and adopt common terms for different items and processes, they are said to follow a uniform costing system. In such cases, you can compare the performance of each company to the performance of other companies, or to the average performance of the industry. Under such a system, it is also possible to determine the production cost of goods that apply to the entire industry. This is useful if your government requires tax cuts or protection.

2. Marginal cost:

This is defined as a confirmation of marginal costs by distinguishing between fixed and variable costs. It is used to see the impact of changes in production volume or type of production volume on profits.

3. Standard costing and variance analysis

This is the name given to the method in which the standard cost is pre-determined and then compared to the recorded actual cost. Therefore, this is a cost verification and cost management technique. This technique can be used in combination with any costing method. However, it is especially suitable when the manufacturing method involves the production of repetitive standardized products.

4. Historical cost principle

Confirmation of costs after incurred. The usefulness of this type of costing is limited.

5. Direct costing

This is the practice of charging all overhead costs to operations, processes, or products and amortizing all overhead costs to the profits they generate.

6. Absorption costing

This is the practice of charging all operational, process, or product costs, both variable and fixed. This is different from the marginal cost excluding fixed costs.

Advantages of Efficient Costing:

(i) It helps in tracing wastage, leakage and spoiled material.

(ii) It gives information regarding profitable and unprofitable activities.

(iii) It provides an effective check on wage systems.

(iv) Actual causes of reduction in profits can be easily found.

(v) It gives information, regarding component parts, whether it is profitable to manufac­ture them in the factory or to purchase from outside market.

(vi) It also helps in the settlement of wage rates with trade unions at the time of dispute.

(vii) It provides data for comparison between actual cost and estimated cost of an article.

(viii) It provides data for overhead charges etc. to assist in the preparation of estimates for future work.

(ix) It helps the management in forming the policies of price determination.

(x) It provides information of detailed expenditure, so that it can be checked when it is tending to exceed.

(xi) It keeps control over selling price.

(xii) The main advantages of costing is to compare the output of the persons of same trade and working on same type of machines.

Q3) Classify Cost in different ways. (8 marks)

A3) To refer to costs in a cost center, proper classification of costs is absolutely necessary. Costs are usually categorized according to their nature: materials, workforce, overhead, and so on. The same cost figures can be categorized in different ways depending on the needs of the company.

(A) According to the Function:

The general price is split into diverse segments in step with the cause of the enterprise. Therefore, fees are grouped in step with enterprise necessities with a purpose to nicely examine the functioning of the enterprise. In different words, the overall price consists of all fees, from cloth fees to product packaging fees.

Direct cloth fees, direct hard work fees, paid fees, and all overhead fees are born with the aid of using the top of production / production fees.

At the equal time, administrative fees (associated with clerical and administrative) and income and distribution fees (i.e. associated with income) are categorised one after the other and introduced to discover the overall price of the product. If those useful classifications aren't completed nicely, the real price of the product cannot be as it should be decided.

(B) According to volatility:

These fees consistent with quantity may be subdivided as follows:

1. Fixed fees;

2. Variable fees;

3.  Semi-variable price.

In different words, we keep constant fees (earnings, rent, etc.) as much as a sure restriction no matter manufacturing quantity. It is thrilling to word that if greater gadgets are products, the constant price consistent with unit might be reduced, and if fewer gadgets are produced, the constant price consistent with unit will manifestly boom.

On the alternative hand, variable fees vary in share to manufacturing quantity. s of manufacturing quantity. In different words, modifications in manufacturing (uncooked cloth prices, hard work, etc.) do now no longer have a right away effect on price consistent with unit. On the contrary, semi-variable fees are in part constant and in part variable (e.g. Constructing repairs).

(C) According to controllability:

Costs may be extensively divided into categories, relying at the overall performance of the participants of the enterprise.

They are:

(I) Manageable fees. And

(II) Uncontrollable fees.

Manageable fees are fees that can be suffering from choices made with the aid of using sure participants of the control of the enterprise, or fees which are as a minimum in part control-structured and practicable with the aid of using control. All direct fees, direct cloth fees, direct hard work fees, and billable fees (a thing of top fees) are practicable at a decrease stage of manipulate and are accomplished accordingly.

Uncontrollable fees are fees which are unaffected with the aid of using the movements taken with the aid of using a selected member of control. For example, constant fees, this is, constructing rent, earnings payments, and so on.

(D) According to normality:

Under this condition, fees are categorized in step with the everyday desires of a selected stage of output for the everyday stage of interest generated for such output.

They are divided as follows.

(I) Normal price; and

(II) Unusual price.

Normal price is the price this is usually required for everyday manufacturing at a selected output stage and is a part of manufacturing.

Anomalous fees, on the alternative hand, are fees that aren't usually required to efficaciously produce a selected stage of output, or aren't a part of the manufacturing price.

(E) According to time:

Costs also can be categorized in step with the time aspect inside them. Therefore, fees are categorized as follows:

(I) Acquisition price; and

(II) Prescribed fees.

Acquisition fees are fees which are taken into consideration when they occur. This is possible, specifically if manufacturing for a selected unit of output has already taken place. They have handiest ancient fee and cannot assist control fees.

On the alternative hand, the given price is the predicted price. Such fees are pre-calculated primarily based totally on beyond revel in and records. Needless to say, if it's miles scientifically decided, it will likely be the usual price. Comparing those general fees to real fees well-known shows the motives for the variations and facilitates control take suitable steps to make adjustments.

(F) According to traceability:

Costs may be recognized with the aid of using a selected product, process, department, and so on. Costs are categorized as follows:

(I) Direct (traceable) fees; and

(II) Indirect (untraceable) fees.

Direct / traceable fees are the fees that may be without delay tracked or assigned to a product. That is, it consists of all traceable fees, this is, all fees related to without problems traceable fees of uncooked materials, hard work, and different offerings used.

Indirect / non-traceable fees are fees that cannot be without delay tracked or assigned to a product. That is, it consists of all untraceable fees. Shopkeeper earnings, well-known and administrative expenses, this is, matters that cannot be nicely allotted without delay to the product.

(G) According to making plans and control:

Costs also can be categorized as follows:

(I) Budget fees; and

(II) Standard price.

Budget price refers back to the predicted production price calculated primarily based totally at the facts to be had previous to the real manufacturing or purchase. In reality, finances fees consist of general fees. Both are pre-decided fees and the quantities might also additionally match, however for one-of-a-kind purposes. It offers a medium which can degree the validity of present-day consequences and preserve derivation responsibilities.

Standard fees are pre-decided for every detail: materials, hard work, and overhead fees. The general fees are:

(I) the price consistent with unit is decided to supply the predicted general output for the subsequent period.

(A) Material;

(B) Labor; and

(C) Overhead.

(II) Costs need to rely upon beyond revel in and experimentation, and technical personnel specifications.

(III) Expenses have to be expressed in rupees.

(H) According to control's selection: Under this, fees can be categorized as follows:

(A) Marginal price:

Marginal price is the price of manufacturing extra gadgets with the aid of using isolating constant fees (this is, capability fees) from variable fees (this is, manufacturing fees) that assist us recognize profitability. In addition, we recognize that sure fees (constant) might not boom in any respect to boom manufacturing, and just a few fees associated with cloth fees, hard work fees, and variable fees will boom. Therefore, the overall price so elevated with the aid of using the manufacturing of 1 or greater gadgets is the price of the marginal unit, which price is referred to as the marginal price or the incremental price.

(B) Difference price:

The differential price is because of the extra functions and is a part of the price of the functions that may be recognized with the aid of using the extra functions. That is, a price extrudes because of a extrude in interest stage or manufacturing method.

(C) Opportunity price:

This is the anticipated price extrude related to the adoption of opportunity machines, processes, uncooked materials, specifications, or operations. In different words, it's miles the biggest opportunity sales you can have earned in case your present capability changed into modified to every other opportunity.

(D) Replacement price:

This is the price of replacing an object or institution of property on the present-day rate in a selected place or marketplace place.

(E) Implicit price:

This is the price used to suggest the presence of an arbitrary or subjective detail of product price this is greater critical than usual. This is likewise referred to as notional price. For example, hobby on capital, however no hobby is paid. This is specifically beneficial whilst making choices approximately opportunity capital funding projects.

(F) Sunk price:

This is a beyond price because of a selection that cannot be changed at gift and is related to specialized gadget or different centers that cannot be without problems tailored to present day or destiny objectives. Such fees are regularly visible as forming a small aspect in destiny-impacting choices.

Q4) What is Cost of Sales and how do we record cost of sales? ( 5 marks)

A4) Cost of products sold is that the cumulative sum of all costs won’t to create a product or service sold. Cost of products sold is a crucial a part of a corporation 's performance indicators because it measures the power of a company to style, procure, and manufacture goods at an inexpensive cost. This term is most ordinarily employed by retailers. Manufacturers are more likely to use the term cost of products sold. The value of products sold item appears near the highest of the earnings report as a deduction from income. The results of this calculation are that the gross profit margin earned by the reporting company.

The various costs of sales fall under the overall subcategories of direct labor, direct materials, and overhead costs, and may even be thought of as including the value of commissions related to the sale. Cost of products sold is calculated as first stock + purchase-end stock.

Cost of sales doesn't include general administration costs. It also doesn't include sales and marketing department costs.

Example of cost of sales

Suppose a corporation has $ 10,000 available at the start of the month, he spends $ 25,000 on various inventory items that month, and he has $ 8,000 available at the top of the month. What was the value of products sold for the month? the solution is:

Beginning inventory                                                       $10,000

+ Purchases                                                                      25,000

- Ending inventory                                                             8,000

= Cost of sales                                                                      $27,000

Record Cost of Sales

If your company uses a periodic inventory system, this is often expressed within the cost of products sold formula, where the value of products sold is first stored within the purchasing account. This is often usually a debit to the acquisition account and a credit to the accounts payable account. At the top of the reporting period, the balance of the purchasing account is shifted to the inventory account, the inventory account is debited, and therefore the purchasing account is credited. Finally, the book balance of the inventory account is compared to the particular end-of-term inventory. The difference is amortized to cost of products sold and debited to the value of products sold account and credited to the inventory account. This is often an easy cost of sales accounting that works well for little organizations.

Q5) What is the Unit Price? (5 marks)

A5) Unit costing is understood as "output" or "single output" costing. Following unit costing, there are concerns about the continual production of one product on an outsized scale. The value unit is that the same cost. Additionally, the merchandise has uniform and homogeneous properties. This product isn't manufactured during a continuous process. This is often the most difference between unit costing and process costing.

In some cases, concerns generate quite one grade of a product. Therein case, single costing or output costing is performed. Once a product is produced, cost collection and price verification are very easy.

In this method, the entire cost incurred is split by the entire production to work out the value per unit. Additionally, costs are collected for every element, and therefore the cost for every element is split by the entire output to work out the value per unit for every element.

A cost statement is made containing the figures for the previous period to supply comparison and control. We’ve successfully calculated unit costs within the manufacture of homogeneous products like bricks, pencils, pens, books, computers and laptops.

A unit cost is a total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service. Unit costs are synonymous with cost of goods sold (COGS).

This accounting measure includes all of the fixed and variable costs associated with the production of a good or service. Unit cost is a crucial cost measure in the operational analysis of a company. Identifying and analyzing a company's unit costs is a quick way to check if a company is producing a product efficiently.

Cost Accumulation Procedure In Unit Costing

Cost details for the varied elements of cost are collected from financial records. Thereto end; you'll properly design your financial records. Therefore, you are doing not got to maintain a separate set of books to gather costing information. The subsequent costing information is required for unit costing:

1. Value of raw materials consumed

Material request documents are the idea for collecting the worth of staple consumption. Materials are only issued supported approved material request documents.

Approval documents provide details on the quantity of fabric with different grade and sort values. If the fabric is broken during storage and handling, we'll increase and adjust the difficulty price of the fabric to point normal loss. Unusual losses should be charged to the costing of the earnings report.

2. Labor costs

Labor is often divided into two categories: direct labor and indirect labor. If workers are engaged in direct manufacturing activities, they're treated as direct labor and may identify and calculate direct labor with the assistance of production details. Several workers engaged generally factory activities. They will be placed in several categories of wage tables.

3. Overhead

Overhead is assessed on a functional basis for unit costing purposes. Factory overhead or production overhead, office and management overhead, and sales and distribution overhead are categories of overhead. These overhead costs are collected at a given rate for costing purposes.

The actual overhead incurred is collected from the financial records. Cost statements are made at short intervals with the assistance of certain overhead costs.

Q6) What Unit of measure are used in unit costing? (5 marks)

A6) Units of measure are a crucial factor for cost confirmation on the cost method. There are many units of measure. They’re units, liters, dozens, yards or meters, square feet, gloss, tones, veils, milliliters, kilograms, bags and more.

The company may choose or adopt one among the above units of measurement, counting on the character of the industry

Q7) What are the different Costing methods? (8 marks)

A7) Costing methods can be studied under the head below. –

1. Method based on the principle of job costing

2. Method based on the principle of process costing.

Some of the methods based on the principles of process costing are:

In addition, some other costing methods are: -

Different types of costing methods: job costing, contract costing, batch costing, process costing, and operating costing

Different methods of costing – individual costing, contract costing, batch costing, process costing, unit costing, operating costing, operating costing, and multiple costing

The costing method refers to the cost confirmation and costing system. Industries differ in their nature, the products they produce, and the services they provide. Therefore, different costing methods are used in different industries. For example, the costing method used by building contractors is different from that of shipping companies.

Job costing and process costing are two basic methods of costing. Job costing is suitable for industries that manufacture or perform work according to customer specifications. Process costing is suitable for industries where production is continuous and the units of production are the same. All other methods are a combination, extension, or improvement of these basic methods.

Let's take a closer look at how to calculate costs.

Method # 1 Job costing:

This is also known as specific order costing. There is no standard product and each job or work order is adopted in a different industry. The work is done strictly according to the customer's specifications, and the work is usually completed in a short time. The purpose of job costing is to see the cost of each job individually. Job costing is used in printing presses, motor repair shops, car garages, movie studios, the engineering industry, and more.

Method # 2 Contract Costing:

This is also known as terminal costing. Basically, this method is similar to job costing. However, it is used when the work is large and it takes a long time. The work will be done according to the customer's specifications.

The purpose of contract costing is to see the costs incurred in each contract individually. Therefore, a separate account is provided for each contract. This method is used by companies engaged in the construction of ships, buildings, bridges, dams and roads.

Method # 3 Batch Costing:

This is an extension of job costing. A batch is a group of identical products. All units in a particular batch are uniform in nature and size. Therefore, each batch is treated as a cost unit and is costed separately. The total cost of the batch is checked and divided by the number of units in the batch to determine the cost per unit. Batch costing is adopted by manufacturers of biscuits, ready-made garments, spare parts medicines and more.

Method # 4 Process Costing:

This is called continuous costing. In certain industries, raw materials go through various processes before they take the form of final products. In other words, the finished product of one process becomes the raw material for the next process. Process costing is used in these industries.

A separate account is opened for each process to see the total cost and cost per unit at the end of each process. Process costing applies to continuous process industries such as chemicals, textiles, paper, soaps and foam.

Method # 5-unit costing:

This method is also known as single costing or output costing. It is suitable for industries with continuous production and the same unit. The purpose of this method is to see the total cost and the cost per unit. Create a cost sheet considering material costs, labor costs, and overhead costs. Unit costing applies to mines, oil rig units, cement factories, brick factories and unit manufacturing cycles, radios, washing machines, etc.

Method # 6 Operating cost:

This method is followed by the industry that provides the service. To determine the cost of such services, use composite units such as passenger kilometres and tone kilometres to determine the cost. For example, for a bus company, operating costs represent the cost of carrying passengers per kilometre. Operating costs are used in air railways, road transport companies (commodities and passengers) hotels, movie theatres, power plants, etc.

Method # 7 Operating cost:

This is a more detailed application of process costing. It includes costing by all operations. This method is used when there is a repetitive mass production with many operations. The main purpose of this method is to see the cost of each operation.

For example, manufacturing a bicycle handlebar involves many operations such as cutting a steel plate into appropriate strips, forming, machining, and finally polishing. The cost of these operations can be viewed individually. Operating costs provide a detailed analysis of costs to achieve accuracy and apply to industries such as spare parts, toy manufacturing, and engineering.

Method # 8 Multiple Costing:

Also known as compound costing. This refers to a combination of two or more of the above costing methods. It is used in the industry where multiple parts are manufactured separately and assembled into a single product.

Different methods of costing – single costing, job costing, contract costing, batch costing, process costing, operating costing, operating costing, and a few others

The term "costing method" can be used to refer to the various processes or procedures used to determine and display costs. There are different costing methods in different industries, depending on the nature of the job. For example, the chemical industry follows a continuous production process in which raw materials are processed at various stages. There are other industries that undertake different types of work. For example, motor workshops accept a variety of jobs.

In industries such as transportation, banking and insurance, the entire activity is centred on a particular service operation. Similarly, many other industries may produce only one product. The nature of the manufacturing process and the way it works varies from industry to industry, making it essential to use different costing methods.

Q8) What is Cost Center? ( 5 marks)

A9) The London Association of Cost Management Accountants has described the Cost Center as "a business-related or business-related place, person, or equipment item (or of these) whose costs have been identified and may be used for a purpose. Group) ”is defined. Cost management "

Or

A cost center can be defined as a place, person, or device (or group of these) that can review costs and use them for cost control purposes. A cost center is any place, person, machine, section, part, activity or function within an organization or business that collects or accumulates costs and assigns costs.

Therefore, a cost center is a natural division of business to measure the cost of a particular operation and apply this cost to a product. Cost centers within an organization are formed with cost accumulation, comparability, and cost control convenience in mind. If costs are accumulated for each person, department, or machine, such person, department, or machine is treated as a cost center.

In the business, the cost center he may be divided into two parts.

A manufacturing cost center is a cost center engaged in normal production, that is, converting raw materials into final products. Service cost centers are centers that are not engaged in normal production but help carry out the activities of the production cost center, such as the store department, human resources department, and maintenance department.

Cost centers can also be divided into operational cost centers and process cost centers. Personal cost center and non-personal cost center. An operational cost center is a cost center that consists of machines and / or people who perform similar operations, and a process cost center is a process or sequence of operations.

A personal cost center is a cost center consisting of individuals or groups such as department managers, salesmen, supervisors, and factory managers. These groups, such as machines, departments, vehicles, etc.

Q9) Write note on Cost Unit. (8 marks)

A10) After costs are identified, accumulated, classified, and recorded, they need to be associated with a convenient measure of the quantity of products or services. This measure of the quantity of a product or service is known as a "cost unit".

A cost unit is defined as "a unit of quantity of goods, services, or time (or a combination of these) that can see or represent costs." That is, a cost unit is a standard or unit of measure for the services that are manufactured or provided. Cost units are expressed in terms of number, length, area, weight, volume, time, and value.

Cost Unit Characteristics

The unit of cost must have the following characteristics:

Cost Unit Type

The cost unit can be divided into two parts.

The measurement terms used in cost units are:

The cost unit is always carefully selected according to the nature of the business operation. The cost unit of steel is naturally confirmed in terms of per ton. The cost of transporting passengers by the carrier shall, of course, be confirmed in units of kilometers.

Differences between Cost Centers and Cost Units:

The main differences between cost centers and cost units are:

(i) Costs are accumulated by the cost center, which are measured and expressed in terms of cost units.

(ii) The cost center can be used as a criterion for classifying costs. However, cost units are not the basis for cost classification.

(iii) Different cost centers may be involved in the production of a product, but the product has only one cost unit in which that cost is represented.

(iv) The formation of cost centers depends on the nature and technology of the production process, the size of the organization, and the nature of the organizational structure. The determination of cost units depends on the nature of the final product or product and general trade practices.

(v) A cost center is created to assist in budgeting and managing management functions. But that's not the case with cost units.

Q10) Difference between Cost Centre and Cost Unit . (5 marks)

A11)

Q11) What is Profit Center? (5 marks)

A12) A profit center is a department or branch of a company that is considered an independent entity. Profit centers are responsible for producing their own results, and managers typically have decision-making authority related to products, pricing, and operating costs.

Profit Center managers are involved in all profit and cost related decisions except investment. Investment decisions such as the acquisition and sale of capital assets are made by the top management of the head office. Profit centers make it easier for top management to compare results and identify how much each profit center contributes to corporate profits.

For example. JKT Company is a multinational company that manufactures high-end cosmetics. JKT operates in 20 countries around the world. Cosmetics are produced in manufacturing plants in all 20 countries. Each business in each country operates as a profit center, with department managers responsible for all revenue and expense related decisions.

The concept of a profit center allows company management to determine the best way to allocate resources to maximize profitability.

Part B

Q12)  Calculate prime cost from the following information: -

Opening stock of raw material = Rs. 2,50,000 Purchased raw material = Rs. 15,00,000 Expenses incurred on raw material = Rs. 1,00,000 Closing stock of raw material = Rs. 4,50,000 Wages Rs. 9,52,000

Direct expenses Rs. 4,68,000    (5 marks)

A1)

Q13) Compute factory cost from the following details:-

Raw material consumed = Rs 50,00,000

Direct wages = Rs20,00,000

Direct expenses                      = Rs10,00,000 Factory expenses 80% of direct wages

Opening stock of work in progress Rs15,00,000

Closing stock of work in progress                         =Rs21,00,000               (5 marks)

A2)

Particulars	Amount (Rs)	Amount (Rs)
Direct material consumed	50,00,000
Add:- Direct wages	20,00,000
Add:- Direct Expenses	10,00,000
Prime cost		80,00,000
Add:- Factory expenses		16,00,000
Gross Factory Cost		96,00,000
Add:- Opening stock of work in progress		15,00,000
		--------------
Total goods processed during the period		1,11,00,000
Less:- Closing sock of work in progress		21,00,000
Factory cost or work cost		90,00,000

Q14) Prepare cost sheet from the following particulars:                  

Raw material purchased = Rs. 2,40,000

Paid freight charges = Rs 20,000

Wages paid to laborers = Rs 70,000

Directly chargeable expenses = Rs 50,000

Factory on cost = 20% of prime cost

General and administrative expenses = 4% of factory cost

Selling and distribution expenses = 5% of production cost (8 marks)

A3)

Q15) Calculate (a) Cost of raw-materials consumed; (b) Total cost of production; (c) Cost ofgoods sold and (d) The amount of profit from the following particulars : (8 marks)

A4)

Q16) Bombay Manufacturing Company submits the following information on 31-3-2010.

A5)

Bombay Manufacturing Company

Statement of cost for the year ended 31-3-2010.

Q17)  From the following information prepare a statement showing (i) Prime cost (ii) Works cost (iii) Cost of Production (iv) Cost  of  Sales (v) Net profit of X Ltd. Which produced and sold 1000 units in June 2009. (8 marks)

A6)

Cost Statement for June 2009

Q18) NRC Ltd. Manufactured and sold 1000 Radio sets during the year 2009. The summarized accounts are given below:

Mfg. / Trading & Profit & Loss A/c

It is estimated that output and sales will be 1200 Radio Sets in the year 2010. Prices of Materials will rise by 20% on the previous year’s level. Wages per unit will rise by 5% Manufacturing expenses will rise in proportion to the combined cost of materials and wages. Selling and distribution expenses per unit will remain unchanged. Other expenses will remain unaffected by the rise in output. Prepare cost sheet showing the price at which the Radio Sets should be sold so as to earn a profit of 20% on the selling price.(8 marks)

A7)

Cost Sheet

Q19) A factory can produce 60,000 units per year at its 100% capacity. The estimated cost of production are as under:-

Direct Material- Rs. 3 per unit

Direct Labour- Rs. 2 per unit

Indirect Expenses:

Fixed- Rs. 1,50,000 per year

Variable- Rs. 5 per unit

Semi-variable- Rs.50,000 per year up to 50% capacity and an extra  expenses of Rs.10,000 for every 25% Increase in capacity or part thereof.

The factory produces only against order and not for stock. If the Production programme of the factory is as indicated below and the management desires to ensure a Profit of Rs. 1,00,000 for the year, work out the average selling price at which per unit should be quoted:

First 3 months of the year 50% of capacity remaining 9 months 80% of the capacity. Ignore selling, distribution and administration overheads. (8 marks)

A8)

Q20) In a factory two types of T.V sets are manufactured i.e. black & white + color. From the following particulars prepare a statement showing cost and profit per T.V Set sold. There is no opening or closing stock.

Works overhead is charged at 60% of Prime cost and Office overhead is taken at 20% at Works cost. The selling price of B & W is Rs.60,00 and that of color is 10000. During the period 200 B & W and 400 color T.V. Sets were sold.  The selling expenses are Rs. 50 per T.V.Set.(8 marks)

A9)

Statement of Cost and Profit