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cost accounting
Questions and Answers of
Cost Accounting
Compute the economic batch quantity for a company using batch costing with the following information:Annual demand for the component 400 unitsSetting up and order processing cost Rs. 50Cost of
Given the following information, identify the correct calculation for the economic order quantity (EOQ) Cost per purchase order Annual cost of carrying one unit in stock for one Year Annual
Describe the meaning objectives, and basic principles of materials control system.
In a factory component A is used as follows:Calculate the following for component A:(a) Re-order level(b) Maximum level(c) Minimum level(d) Average stock level Normal usage 50 kg per week Maximum
Economic order quantity (EOQ) model is used by a business to(a) Minimise the cost of placing orders(b) Minimise the unit purchase price of inventory(c) Minimise the number of orders placed during a
P. Ltd., is engaged in the manufacture of industrial pumps of a standard description. The company uses about 75,000 valves per year for its production and the usage is fairly constant at 6,250 valves
What are the important requirements of a materials control system.
The calculation of inventory re-order point in units requires the(a) Purchase price per month(b) Annual demand for units(c) Daily demand for units(d) Storage cost per unit(e) Warehouse capacity
A company manufactures a product having a monthly demand of 2000 units. For one unit of finished product 2 kg of a particular raw material item is needed. The purchase price of the materials is Rs.
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
Materials control system would be most useful to a(a) Manufacturer(b) Wholesaler(c) Hospital(d) Retailer
A producer has estimated annual purchase requirement of 30,000 units of a material. Unit price of material is Rs. 50. Annual cost of carrying inventory is 20%. Ordering cost for an order is Rs. 60.
Which of the following items would most likely be included in the calculation of economic order quality?(a) Price(b) Cost(c) Demand(d) Supply
Annual requirement of a particular item of inventory is 10,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is Rs. 40 per order. The price quoted by the supplier is Rs.
About 50 items are required every day for a machine. A fixed cost of Rs. 50 per order is incurred for placing an order. The inventory carrying cost per item amount to Re. 0.02 per day. The lead
Explain Just-In-Time purchases.
From the following information calculate Economic Order Quantity, and the number of orders to be placed in one quarter of the year: (i) Quarterly consumption of materials (ii) Cost of placing one
Vijay Industries manufactures a product X. On 1st January 2007, there were 5000 units of finished product in stock. Other stocks on 1st January 2007 were as follows:The information available from
The following particulars relating to the year 2007 have been taken from the books of a chemical works manufacturing and selling a chemical mixture:The stock of finished mixture at the end of 2007 is
Calculate the maximum stock level from the following:EOQ-300 unitsUsage rate-25 to 75 units per weekReorder period-4 to 6 weeks.
Define the term 'cost'. How is it different from expense?
A factory produces a standard product. The following information is given to you from which you are required to prepare a cost sheet for January 2000.Factory overheads 80% of direct wagesOffice
The following figures are extracted from the trial balance of Gogetter Co. on 30th September, 2007: Inventories: Finished Stock Raw Materials Work-in-Process Office appliances Plant and
What is meant by 'differential cost'?
From the following particulars of a manufacturing firm, prepare a statement showing:(a) Cost of materials consumed(b) Works cost(c) Cost of production(d) Percentage of works overhead to productive
The following data have been extracted from the books of M/s Moonshine Industries for the calendar year 2002.The Managing Directors remuneration is to be allocated as Rs. 40,00,000 to the factory,
What is the meaning of the term incremental cost? Does incremental cost mean the same thing as variable cost?
From the following particulars, prepare a cost sheet for the year ended 31.12.2002 Stock of finished goods (1.1.2002) Stock of raw materials (1.1.2002) Work-in-progress (1.1.2002) Purchase of raw
The following inventory data relates to XYZ Ltd:Requirements:(i) Determine raw materials purchases.(ii) Determine the direct labour cost incurred.(iii) Determine the cost of goods sold Finished
Explain the nature of product and period cost. How do they affect net income of a business enterprise?
X Ltd. manufactures four brands of toys-A, B, C and D. If the company limits the manufacture to just one brand, the monthly production will be:A - 50000 unitsB - 100000 unitsC - 150000 unitsD -
A manufacturing company has shown Rs. 32,380 as ''Establishment Expenses'' which include the following expenses:From the above information, find out the total of(i) Selling expenses (ii)
''Product cost is a general term that denotes different costs allocated to products for different purposes.'' Describe three purposes. Explain the composition of 'product cost' for the purpose of
On June 30, 2008, a flash flood damaged the warehouse and factory of ABC Corporation completely destroying the work-in-progress inventory. There was no damage to either the raw materials or finished
The books of Adarsh Manufacturing Company present the following data for the month of April 2007:Direct labour cost Rs. 17,500 being 175% of works overheadsCost of goods sold excluding administrative
The Vardhman Ltd. manufactures one product. A summary of its activities for the year 2008 is given below:Prepare a cost sheet Sales Material inventory 1-1-08 Material inventory 31-12-08 W.I.P.
The following particulars relate to a company for a period of three months:Prepare a statement of cost for the period and compute the price to be quoted for 500 units in order to realise the same %
The particulars obtained from the records of M/s Jain Industries for the year 2007 are given below, from which you are required to prepare a cost sheet and a statement showing estimated cost of 1000
From the understated particulars, you are required to prepare a monthly cost sheet of Soap Manufacturers Ltd. showing therein:(i) Prime cost;(ii) Works cost;(iii) Cost of production;(iv) Cost of
Bring out clearly the significance of the following costs for management:(a) Opportunity cost(b) Sunk cost(c) Imputed costs(d) Out-of-pocket costs
Discuss the various costs used in decision-making and explain their characteristics.
A company is considering a contract which requires among other things, 50 kg of material M. 80 kg of material M are in stock which were purchased for Rs. 2 per kg. The replacement price is Rs. 2.15
Popeye Company is a metal and wood cutting manufacture, selling products to the home construction market. Consider the following data for the month of October, 2004.Required(i) Prepare an income
(a) Distinguish between out-of-pocket cost and opportunity cost.(b) Explain and illustrate the distinction between 'direct cost' and 'indirect cost' specially from the point of view of decision
A fire occurred in the factory premises on October 31, 2003. The accounting records have been destroyed. Certain accounting records were kept in another building. They reveal the following for the
A manufacturer buys certain equipment from an outside supplier at Rs. 30 per unit. Total annual needs are 800 units. Further the following data are available. Annual return on investment Rent, taxes,
Which one of the following items is not included in the annual carrying costs of inventory?(a) Cost of capital(b) Insurance on inventory(c) Annual warehouse depreciation(d) Taxes on inventory(d)
Explain 'cost management'.
Explain the nature and scope of cost control and 'cost reduction'. Which of the two is superior?
Distinguish between cost reduction and cost control.
Discuss cost classifications based on variability and controllability.
Explain the significance of cost reduction in the present global economy. Mention some important techniques used for cost reduction. Also, mention the important areas in a manufacturing company to be
''The term cost must be qualified according to its context''. Comment.
What do you mean by cost reduction? How is it different from cost control?
Explain the meaning of relevant costs in managerial decisions. Give examples.
Enumerate the basic principles of cost control.
Explain briefly the following concepts:(a) Sunk cost(b) Differential cost(c) Variance analysis(d) Key factor(e) Cost reduction
A company manufactures radios, which are sold at Rs. 1,600 per unit. The total cost is composed of 30% for direct materials, 40% for direct wages and 30% for overheads. An increase in material price
Name a cost which is reflected in the accounting system but not used in decision making?
Enumerate the various factors to be considered in fixing the reorder level of raw material item.
After inviting tenders, two quotations are received as follows:(a) Rs. 1.20 per unit.(b) Rs. 1.10 per unit plus Rs. 3,000 fixed charges to be added irrespective of units ordered.Advise with your
Shriram Enterprises manufactures a special product ZED. The following particulars were collected for the year 2002:(a) Monthly demand of ZED 1,000 units.(b) Cost of placing an order Rs. 100.(c)
Describe the procedure for the efficient system of physical control of materials till it reaches the stores.
A company uses three raw materials A, B and C for a particular product for which the following data apply:Weekly production varies from 175 to 225 units, averaging 200 units of the said product. What
A Ltd. is committed to supply 24,000 bearings per annum to B Ltd. on a steady basis. It is estimated that it costs 10 paise as inventory holding cost per bearing per month and that the set-up cost
What are the causes of discrepancies in stock records? How would you treat these discrepancies?
Shagoon India Ltd. provides the following information in respect of material XOrdering costs are Rs. 20 per order.Purchase price per unit is Rs. 50.Storage costs are 10% of unit value.Compute:(i)
The following information is available about a company for the year 2008.The inventory is value @ Rs. 1 per kg or litre.Calculate the material turnover ratio for each of the above materials and
From the following data, calculate the economic order quantity and the re-order point for Part Z: Working days in a year Safety stock Lead time Order costs Holding cost Annual consumption Cost per
Eats Ltd. supplies a number of products to bakers and confectioners. One of their products consists of packets of cake decorations. The cake decorations are sold in packets of twelve decorations for
A company's monthly requirement of an inventory item is 1,800 units. The cost of processing an order is Rs. 5 and the carrying cost per unit is 20 paise. The company supplier agrees to offer the
A manufacturer requires 9,600 units of a certain component annually. This is currently purchased from a regular supplier at Rs. 50 per unit. The cost of placing an order is Rs. 60 per order and the
Under what circumstances is it essential to use continuous stock taking for control over materials? State its advantages.
RST Limited has received an offer of quantity discount on its order of materials as under:The annual requirement for the material is 500 tonnes. The ordering cost per order is Rs. 12,500 and the
Write short notes on the following:(i) Re-order quantity(ii) Re-order level(iii) Maximum stock level(iv) Minimum stock level
The Complete Gardener is deciding on the economic order quantity for two brands of lawn fertilizer: Super Grow and Nature's Own. The following information is collected.Required:(i) Computer EOQ for
For the manufacture of a certain product two components A and B are used. The following particulars about these components are available:You are required to calculate for each component:(i)
Write detailed explanatory notes on the following:(i) JIT manufacturing(ii) Kanban
A company manufactures 5,000 units of a product per month. The cost of placing an order is Rs. 100. The purchase price of the raw material is Rs. 10 per kg. The reorder period is 4 to 8 weeks. The
JP Limited, manufacturers of a special product, follows the policy of EOQ (Economic Order Quantity) for one of its components. The component's details are as follows:Annual cost of carrying one unit
What do you mean by inventory control? What are its techniques? Discuss briefly ABC system of inventory control.
The Purchase Department of your organisation has received an offer of quantity discounts on its orders of materials as under:The annual requirement for the material is 5,000 tonnes. The ordering cost
A large local government authority places orders for various stationery items at quarterly intervals. In respect of an item of stock, data are as follows:Annual usage 5000 boxesMinimum order quantity
In a meeting of the department heads of a company, the purchase procedure and materials accounting were strongly criticised and blamed for high cost of materials. The Managing Director of the company
M/s Tubes Ltd. are the manufacturers of picture tubes for T.V. The following are the details of their operation during 2007:Compute from the above:1. Economic Order Quantity. If the supplier is
Calculate the material turnover ratio for the year 2008 from the following information: Opening Stock Closing Stock Purchases Determine the fast moving material Material
Distinguish between spoilage and defectives in a manufacturing company. Discuss their treatment in cost accounts and suggest a procedure for their control.
G. Ltd. produces a product which has a monthly demand of 4,000 units. The product requires a component X which is purchased at Rs. 20. For every finished product, one unit of component is required.
XYZ Company buys in lots of 500 boxes which is a 3 months supply. The cost per box is Rs 125 and the ordering cost is Rs 150. The inventory carrying cost is estimated at 20% of unit value. What is
What do you understand by 'inventory control'. State its objects.
ZEE is product manufactured out of three raw materials M, N and Q. Each unit of ZEE requires 10 kg, 8 kg, and 6 kg. of M, N and Q respectively. The re-order levels of M and N are 15,000 kgs and
From the following information relation to a type of raw material, calculate EOQ: Monthly demand Unit price Order cost per order Storage cost Interest rate 200 units Rs. 5 Rs. 12 2% p.a. 10% p.a.
What are the objectives of inventory control? How is inventory control effected through ABC analysis of stores?
Materials X and Y are used as follows:Calculate for each material :(a) Minimum level;(b) Maximum level; and(c) Order level. Minimum usage - 50 units each per week Maximum usage - 150 units each per
Define waste, scrap, defectives and spoilage with examples. Discuss the respective treatment in cost accounts and set out a procedure for their control.
If the minimum stock level and average stock level of raw-material A are 4,000 and 9,000 units respectively, find out its ''Re-order quantity''.
From the details given below, calculate:(i) Re-ordering Level(ii) Maximum Level(iii) Minimum Level(iv) Danger LevelCost of placing a purchase order is Rs. 20Number of units to be purchased during the
The following information in an inventory problem is available:Calculate EOQ, Re-order level and total annual inventory cost. How much does the total inventory cost vary if the unit price is changed
In ABC Company Ltd. waste, scrap, spoilage and defectives are very high. Suggest and explain various methods for accounting of wastage and scrap and also treatment of costs incurred on spoilage and
The quartely production of a company's product which has a steady market is 20,000 units. Each unit of a product requires 0.5 kg of raw material. The cost of placing one order for raw material is Rs.
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