Professional Documents
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Q1 (A)
Q1 (B)
a) Factory Labourers wages -----------------Production
b) Carriage outwards _____________ Distribution
c) Cost of Idle time in factory -------------- Production
d) Cash Discount ------------- Selling
e) Income Tax -------------- Omitted from cost records
Q2
Q3 A
Q3 B
a) FIFO This is the price paid for the material first taken into stock from
which the material to be priced could have been drawn. Items longest in
stock are used up first. This method is most suitable for use where the
material is slow moving and has comparatively high unit cost.
b) Base stock price This is the adoption of any pricing method keeping a
fixed minimum volume of material at all times at a fixed price regardless of
the price fluctuations. Base stock is always in store and is not used unless an
emergency arises.
C) Weighted Average Price This is the price which is calculated by
dividing the total cost of material in the stock from which the material to be
priced have been drawn, by the total quantity of material in the stock
Q5
.
1. Fixed Overheads It is that portion of the total overhead which
tends to be unaffected by variations in volumes of output.
Expenses like Rent, insurance of factory buildings, salaray of
administrative staff are fixed in nature. It may be noted that an
expense is fixed only witin defined activity limits and in the long
run in an expanding or contracting business, no expense
remains unchanged.
2 Machine Hour Rate This is an actual or predetermined rate of
overhead absorption which is calculated by dividing the
overhead to be absorbed by the number of hours for which a
machine/machines are operated or expected to be operated.
Overhead to be absorbed Rs 6,000 Machine hrs 2,000 The
machine hr rate will be 6,000/2,000=Rs 3/hr
3 Standing order Numbers Indirect items such as Rent
electricity charges telephone charges etc incurred for the entire
works requires apportionment to different cost centres on some
suitable basis after they are collected under separate
STANDING ORDER NUMBERS .These are also called primary
standing numbers and distribution of such expenses to different
cost centres on some suitable basis is called primary
apportionment.
4 Sinking Fund method of Depreciation. This is the method
of providing for depreciation by means of fixed periodic
changes accompanied by investment which aggregated with
compound interest over the life of the asset would equal the
cost of that asset. Under this method a sum of money together
with interest received on investment is invested periodically in
gilt edged securities and at the same time a charge for
depreciation is made to costs equal to the amount invested
periodically. This method provides cash for the replacement of
the asset at the end of the useful life.This method is also used
for amortising i.e recovering the capital value paid for
leasehold in the accounts over a fixed period.
Q6
__________________________________________________________________________
____
Fixed Expenses
B. Overhead Exps
19,375/4000
4.84
Power While in operation
0.50
Operators wages 24/8= Rs 3/hr /2mcs
1.50
----
----
Comprehensive MHR while in operation 6.84
Fixed expenses
4.84
Power Nil
____
Comprehensive MHR under set up
7.84
Q7
6,22,500
Less Clg stk of finished goods
250 units @Rs 60.00 15,000
_______________________________
Cost of goods sold 10250 units 6,07,500
Profit 48,500
_________________
Reconciliation
Add Overvaluation of
Opg stock of finished goods in costing 5,000
Overabsorption of selling expenses 6,500
Income in financial accounts but not
In costing
Interest 250
Rent recd 10,000 10,250
----------- 21,750
________
70,250
Less Underabsorption of
1)
Statement of equivalent production
Abnormal loss
Balancing Figure 50 50 100% 40 80% 40 80%
2. Statement of cost
Finished goods = 9500x11.00 1,04,500
Abnormal Loss
Material 5x4.50 225
Labour 40x 2.17685 87
Overheads 40x4,3232 173
_______ 485
Closing wip
Material 350x4.50 1575
Labour 175x2.17685 381
Overheads 175x 4.3232 757
______ 2,713
---------------
Total 1,07,698
3. Process B account
4. Abonormal loss
To process B 50 485 By sales 50 125
By cost
P&L 360
________________________________________
50 485 50 485
Q9
Q 10 a)
The net profit arrived at under marginal costing
will not be the same as under absorption costing because :
• Over and under absorbed overheads In absorption
costing fixed overheads can never be absorbed exactly
because of the difficulty in forecasting costs and volume of
output. In marginal costing the atual fixed overheads
incurred is wholly charged to P&L account unlike in
absorption costing. Hence there will be differences in net
profits.
• Differences in stock valuation In marginal costing wip
and finished stocks are valued at marginal cost but in
absorption costing they are valued at total production cost
including fixed costs and hence profit will differ as fixed
overheads are different in the two methods.
b)
Pay off = Sales –variable cost-fixed cost
Fountain pens
Q11 a)
Variances
b)
Actual cost
A = 4.00(808-830) = 88(A)
B 3.00(1200x2020/2000-1190
= 3.00(1212-1190) = 66(F)
__________
22.00(A)
Material cost variance SC-AC
6800.6513.75 = 286.25(F)
Reconciliation
MCV = MPV+MYV+MMV
286.25(F) = 376.25(F)+68(A) + 22(A)
Q 12
_________________________________________________________________
___
MATERIAL BUDGET
A LTD YEAR 2XXX
Rate/Kgs Rs 60 Rs 60 Rs 10 Rs 50 Rs 25
B.
Material A Material B
Lab&Ohds
Items Units Items Units Units % Units % Units
%
Material A
Trnsfer from prev process 165400
Less Scap Normal 3000 162400 20300 8.00
Material B
Added this process 80360 20090 4.00
Direct wages 39620 19810 2.00
Overhead 19810 19810 1.00
----------------------------------------------------------
---
3,02,190
Introduced
And completed Mat A 18400 8 147200
Mat B 18400 4 73600
Wages 18400 2 36800
Ovheads 18400 1 18400
276000
Abnormal Loss
Mat A 100 8 800
Mat B 100 4 400
Wages 80 2 160
Ovheads 80 1 80
1440