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cost accounting
Questions and Answers of
Cost Accounting
A factory uses 4,000 varieties of inventory. In terms of inventory holding and inventory usage, the following information is compiled:Classify the items of inventory as per ABC analysis with reasons.
Compute the materials turnover ratio for materials A and B and comment upon the results. Opening stock Purchase during the year Closing stock Materials A (Rs.) 10,000 76,000 6,000 Materials B
A company's basic wage rate is Rs. 3.00 per hour and its overtime rates are:During the previous year the following hours were worked:The following times have been worked on these jobs:You are
In a factory Ram and Sham produce the same product using the same input of same material and at the same normal wage rate.Bonus is paid to both of them in the form of normal time wage rate adjusted
A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of Rs. 30 per hour. The standard time per unit for a particular product is 4 hours. P, a machineman, has been paid wages under the Rowan
The Directors of Quality Machineries Ltd. requests you to ascertain the amount at which the inventory should be included in the financial statement for the year 2006-07. The value of inventory as
The management of Sunshine Ltd. wants to have an idea of the profit lost/foregone as a result of labour turnover last year.Last year sales amounted to Rs. 66,00,000 and the P/V Ratio was 20%. The
From the following information calculate Labour turnover rate:No. of workers as on 01.01.2000 = 7,600No. of workers as on 31.12.2000 = 8,400During the year, 80 workers left while 320 workers were
The profitabililty position of TARGET LTD. for the year ending 31.03.2006 is as under.The profit for the year did not mach with company's expectation and works management attributed it to labour
The capacity usage ratio and the capacity utilisation ratio in respect of a machine for a particular month is 80% and 90% respectively. The available working hours in a month is 200 hours.The
How is payroll accounting function organised in a manufacturing establishment?
Sona Corporation has filed the following income statement for the year ending 31st March, 2003.The actual number of hours direct labour worked, in the year under review is 2,06,000. As a consequence
Explain what is meant by group bonus and state the objectives of introducing a group bonus schemes.
What do you understand by overtime premium? What is the effect of overtime payment on productivity and cost? Discuss the treatment of overtime premium in cost accounts and suggest a procedure for
What do you understand by time and motion study? Explain how standard time is set under time study. State how time and motion study is useful to management.
Define job evaluation and distinguish it from merit rating. Explain the method and objectives of job evaluation.
What do you understand by 'idle time'? Distinguish between 'Normal' and 'Abnormal idle time'. How would you deal with each one of them in cost accounts? Give a suitable example to clarify your answer.
How will you treat the following in cost accounts:(i) Interest on capital(ii) Leave wages(iii) Research and development cost(iv) Audit fees
Discuss briefly how will you deal with casual workers and workers employed on outdoor work in cost accounts.
The following quotation is received from a supplier in respect of a material:One container is required for every 100 units and if containers are returned within two months, credit would be received
What are the methods of pricing materials issues? When do you advocate pricing the issues at cost price based on last-in, first-out?
At what price per unit would Part No. A 32 be entered in the store's ledger, if the following invoice was received from a supplier?Notes:(i) A 2% discount will be given for payment within 30
Which method of materials pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations?(a) Average cost(b) FIFO(c) LIFO(d) Base stock
A manufacturer in Surat purchased three chemicals A, B and C from Mumbai. The invoice gave the following information:A shortage of 200 kg in Chemical A, of 280 kg in Chemical B and of 100 kg in
State the various methods of pricing the issue of materials or stores. State the method to be adopted for the issue of materials for an industry where their cost is fluctuating constantly.
Alpha company was using FIFO (and not LIFO) for materials pricing and its value of inventory was found lower.Assuming no opening inventory, what direction did the purchase prices move during the
The particulars relating to the import of sealing ring invoiced by AB and Co., during December 2002 are given below:(a) Sealing ring 1,000 pieces @ $2.00 CIF Bombay Port.(b) Customs duty was paid @
Explain the following two methods of pricing issue of materials and also the circumstance under which these methods are used.(i) FIFO(ii) LIFO
A materials pricing method in which the oldest cost incurred rarely have an effect on the closing inventory valuation is(a) FIFO(b) LIFO(c) Simple average (d) Weighted average
Calculate the raw material cost of 100 yards of hessian cloth made in a jute mill. The cloth contains 45% warp yarn and weighs 10 oz per yard. Wastage of yarn is 2% warp and 5% weft. Both the yarns
From the following details of stores receipts and issues of material ''EXA'' in a manufacturing unit, prepare the Stock Ledger using ''Weighted Average'' method of valuing the issues: Nov. 1 Opening
Describe the following methods of valuing materials issued to production and discuss the advantage and disadvantage of each?(i) First-in, First-out;(ii) Weighted Average;(iii) Replacement Price.
Alpha company has been using LIFO method of materials pricing for 15 years. Its 2008 closing inventory was Rs. 15,000 but it would have been Rs. 26,000 if FIFO had been used. Thus, if FIFO had been
You are presented with the following information by Sphix Engineering Co. relating to the first week of September, 2008.Materials - The transactions in connection with the materials are as
From the following particulars workout the issue rate per 1000 each of first class and second class bricks.(a) Paid for supply at the kiln site for 30 lakh first class bricks @ Rs. 30 per 1,000.(b)
Explain the FIFO methods of valuation of materials issues. Discuss the effects of rising prices and falling prices on these two methods of pricing of materials issues.
The stores ledger of a manufacturing Company reveals the following entries of a particular material.Opening stock as on 1.1.2002 was 20,000 units valued at Rs. 40,000, Closing stock as per physical
What factors have to be considered for adopting a method for the pricing of materials? In the light of these and relevant factors, give a comparative description of LIFO and FIFO.
Modern Manufacturing Company purchased a material of 20 tonnes from a mining company. The following data is available for the lot of material purchased:(a) Invoice price of material @ Rs. 2,000 per
Show the stores ledger entries as they would appear when using(a) The weighted average method(b) The LIFO method of pricing issues, in connection with the following transactions:In a period of rising
What are the conditions that favour the adoption of the Last-in, First-out system of materials pricing ? Explain its working and indicate its advantages and limitations.
Prepare a stores ledger account from the following transactions under the LIFO method. 1 10 20 4 21 March 16 April 12 May 10 25 Jan. Feb. Received 1,000 units @ Received 260 units @ Issued 700
The following is a summary of the receipts and issue of materials in a factory during January. January1 Opening balance 500 units @ Rs. 25 per unit3 Issue 70 units4 Issue 100 units8 Issue 80 units13
From the following information prepare a stores ledger account assuming 100 units as base stock following the FIFO method: Rate January 1, 2007 January 10 January 15 January 20 January 25 January
Give the advantages and disadvantages of the actual cost basis of pricing of material issues.
A consignment consisted of two chemicals A and B. The invoices gave the following data:A shortage of 200 lb in A and 128 lb in B was noticed due to breakage. What stock rate would you adopt for
Explain FIFO and LIFO methods of pricing of material issues. Which of these should be preferred in rising and falling prices and why?
You are the Chief Accountant of a sugar factory, whose cost of production per tonne of sugar is given below:Salaries, wage and bonus include administration salaries Rs. 20.You have been valuing the
Under conditions of rising prices, which of the following two methods of pricing material issues would you recommend and why?(i) FIFO(ii) LIFO
The following are the transactions in respect of purchase and issue of components forming part of an assembly of a product manufactured by a firm which requires to update its cost of production, very
From the records of an oil distributing company, the following summarised information is available for the month of March 2005.Sales of the month: Rs. 19,25,000Opening Stock as on 1.3.2005: 1.25,000
Briefly contrast the effects of using first-in, first-out with the last-in, first-out methods of pricing material issues from stores.
Show how the items given ahead relating to purchases and issue of raw material item will appear in the stores ledger card, using weighted average method for issue pricing: Jan. 1 Opening balance Jan.
The Stock Ledger Account for Material X in a manufacturing concern reveals the following data for the quarter ended Sept. 30, 2002.Physical verification on Sept. 30, 2002 revealed an actual stock of
Write short notes on:(i) LIFO vs FIFO(ii) Bill of Materials(iii) Prepetual Inventory System.
The following transactions in respect of material Y occurred during the six months ended 30th June, 2005.Required:The chief accountant argues that the value of closing stock remains the same, no
ABC Limited provides you the following information. Calculate the cost of goods sold and ending inventory, applying the LIFO method of pricing raw materials under the Perpetual and Periodical
Oil India is a bulk distributor of oil. A periodic inventory of oil on hand is taken when the books are closed at the end of each month. The following summary of information is available for the
The following are the particulars regarding receipts and issues of certain material:The credit balance of price variance account, before transfer to costing profit and loss account, was Rs.
The annual accounts of a trading company are to be made up to December 31 but it was not possible to carry out a stock-taking until January 5 at which date the stock was valued at cost at Rs.
Describe the various methods of recording time.
The standard hours of job X is 100 hours. The job has been completed by Amar in 60 hours, Akbar in 70 hours and Anthony in 95 hours. The bonus system applicable to the job is as follows:The rate of
From the following particulars, find the amount of cash required for payment of wages in a factory for a particular month: 1. Wages for normal hours worked 2. Overtime wages 3. Leave wages 4.
There are two piece-workers, Rakhal and Upendra, who are paid Rs. 5 for each piece work executed, which costs Rs. 15 per piece in materials.In a working day of 8 hours, Rakhal can complete 4 pieces
What are the merits and demerits of time rate and piece-rate systems of wage payment? State the situations in which each system is effective and useful.
A worker is paid Rs. 50 per hour and the 5 days working week contains 42 hours. The daily allowance for approved absence from his place of work, maintenance of machine etc. is 12 minutes and his job
What are the reasons for booking workers on idle time in a factory? How is idle time controlled and treated in cost accounts?
A factory has a piece-work scheme for mass production of a certain component for a T.V. manufacturer. The standard production fixed for a day of 8 hours is 40 units. The piece work rate is Rs. 4 per
Calculate total monthly remuneration of three workers A, B and C from the following data:(a) Standard production per month per worker - 1,000 units. Actual production during month A - 850 units, B -
The standard labour time requierd for the production of a certain component has been fixed as 4 hours. An incentive scheme was introduced recently to raise labour productivity. The relevant details
Discuss individual bonus systems, group bonus systems and bonus systems for indirect workers.
List the characteristics desirable in any Incentive Wages Plan.
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
From the following particulars, you are required to work out the earnings of a worker for a week under (i) Straight Piece Rate; (ii) Differential Piece Rate; (iii) Halsey Premium Scheme (50% sharing)
Calculate the earnings of workers A, B and C under Straight Piece Rate System and Merrick's Multiple Piece Rate System from the following particulars: Normal Rate per Hour Standard Time per
Distinguish between systems of wage payments known as Taylor's Differential Piece-Rate and Emerson's Efficiency system.
A worker, whose day-work wages are Rs. 25 per hour, received production bonus under the Rowan Scheme. He carried out the following work in a 48-hour week:Job No. 2 was carried out on a machine
What is labour turnover? How will you measure it? What are its causes and effects on labour costs?
Following particulars have been extracted from the books of Supreme Engineers Limited:(a) You are required to compute the quantum of wages under Halsey Scheme and Rowan Schemes. Which of these
In a manufacturing unit, a multiple piece rate plan is operated as under:(i) Basic piece rate up to 85% efficiency;(ii) 115% basic piece rate between 90% and 100% efficiency;(iii) 125% basic piece
What is idle time? Indicate the different categories into which idle time can be classified and state which of them can be effectively controlled and how?
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 produced one unit is 15 minutes which is raised further by 20% under the
The management of Bina and Rina Ltd. is worried about its increasing labour turnover in the factory and before analysing the causes and taking remedial steps it wants to have an idea of the profit
A company is considering installing a workers' profit sharing scheme in lieu of an individual bonus scheme. You are required to specify the disadvantages of the former.
Three workers Govind, Ram and Shyam respectively produced 80, 100 and 120 pieces of product X on a particular day in May 2007 in a factory. The time allowed for 10 units of product X is 1 hour and
The following particulars for the first week of September 2003 relate to X and Y, two workers employed in a factory.The normal working hours per week are fixed at 42 hours. Bonus is paid @ 2/3 of
(a) Describe the treatment of payments to labour for overtime work and in respect of holiday with pay in cost accounts.(b) Distinguish between Taylor's differential piece-rate and the Emerson
A company is undecided as to what kind of wage scheme should be introduced. The following particulars have been compiled in respect of three systems, which are under consideration of the
For each of the pay roll costs given below, state the accounting treatment that you would recommend, giving your reason:(a) Idle time in the finishing department because the assembly department
Discuss labour turnover and different methods of measuring it.
The finishing shop of a company employs 60 direct workers. Each worker is paid Rs. 400 as wages per weak of 40 hours. When necessary, overtime is worked upto a maximum of 15 hours per weak per worker
Both direct and indirect labour of a department in a factory are entitled to production bonus in accordance with a group incentive scheme, the outline of which is as follows:(a) For any production in
ZED Limited employing 50 skilled workers is considering the introduction of incentive scheme-either Halsey scheme (with 50% bonus) or Rowan scheme of wage payment for increasing the labour
What do you mean by labour turnover? What are the costs associated with it? How would you treat these costs in cost accounting?
An article passes through five hand operations as follows:The factory works 40 hours a week and the production target is 600 dozens per week. Prepare a statement showing for each operation and in
Discuss the effect of overtime payment on productivity.
The time taken for a particular operation for Operator X in the process division of a manufacturing concern on three different counts was 24,22 and 27 minutes while that of Operator Y was 20, 23 and
Explain the purpose of time keeping and time booking and state what detailed records are normally maintained under each. Do you feel any need for reconciliation of these two? What is the benefit you
Following are the particulars for April, 2002 relating to four employees working in Department M of a factory, exclusively for Job. No. 120.The normal working hours per week of six days are 48,
Write a short essay on ''Time and Motion Study'', stating the benefits to be derived by management from such study.
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