Thursday, 10 March 2016

A company manufactures a product which involves two processes, namely pressing and polishing For the months of January the following information is available

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Cost and  Management Accounting






  1. X is the manufacture of Mumbai purchased three chemicals A, B and C from U.P.The bill gave the following information:

Chemical A:                          6000 kgs @ Rs. 4.20 per kg                                   Rs        25,200
Chemical B:                          10000 kgs @ Rs. 3.80 per kg                                             38,000          
Chemical C:                          4000 kgs @ Rs. 4.75 per kg                                                19,000
VAT                                                                                                                              2,055
Railway Freight                                                                                                         1,000
Total Cost                                                                                                                  85,255

A shortage of 100 kgs in chemical A, of 140 Kgs in chemical B and Of 50 kgs in chemical C was noticed due to breakages. At Mumbai, the manufacture paid octroi duty @ 0.20 kg. He also paid hamali, Rs 20 for the chemical a, Rs 58.12 for chemical B and Rs 35.75 for chemical C. Calculate the stock rate that you would suggest for pricing issue of chemicals assuming a provision of 4 % towards further deterioration and also show the quantity (kgs) of chemicals available for issue.

  1. ABC Ltd has collected the following data for its two activities. It calculates activity cost rates based on cost driver capacity.                                                                                    

Activity                      Cost driver                            Capacity                     Cost
Power                         Kilowatt hours                                 50000 hrs                 Kilowatt Rs 200000

Quality Inspection   Numbers of inspection       10000 inspection                    Rs 300000

The Company makes three products, A, B and C.For the year ended March 31, 2004, the following consumption of cost drivers was reported:

Product                                              Kilowatt-hours                    Quality Inspection
A                                                         20000                                                7000              
B                                                         40000                                                5000
C                                                          30000                                                6000

Compute the costs allocated to each product from each activity
Calculate the cost of unused capacity for each activity.

  1. Reliable company wishes to discontinue the sale of one of the products in vew of unprofitable operations. Following details are available with regard to turnover, cost and activity for the current year ending 31st March.                                                       

Products
                                                P                                  Q                     R                     S
Sales Turnover                     Rs.600000                Rs.1000000  Rs.500000    Rs.900000
Cost of sales                               350000                        800000       370000          480000
Storage area (square meters)               40000                          60000         70000              30000  
Number of cartons sold          200000                      300000        150000          350000    
Number of bills raised                         100000                       120000           80000          100000

Overhead costs and basis of apportionatement are:

Fixed Expenses
                                                                                                            Basis of Apportionatement
Administration wages & salaries                          Rs.100000    Number of bill raised
Salesmen salaries a & expenses                                 120000     Sales turnover
Rent and insurance                                                        60000     Storage area
Depreciation                                                                    20000     Number of cartons

Unfixed Expenses

Commission                                                                                     3 % of sales
Packing material & wages                                                              Re 1 per carton
Stationery                                                                                         Re 0.50 per bill

You have to prepare
1. Staement showing summary of Selling & Distribution Costs to the products
2. Profit & Loss Statement showing contribution and profit or loss of each of the products to enable the Company take an appropriate decision on discontinuance of the sale of a product.

  1. The Tata Infrastructure Co. is involved in two contracts Contract 69 & Contract 96 during the current year. The following information relates to these contracts, which were started on January 1 and July 1, respectively.                                                                          

Contracts
                                                                                                A                                 B
Contract Price                                                                      Rs.300000                Rs.400000
Direct material issued                                                              55000                          40000
Material returned to store                                                        1500                            2500
Direct Labour                                                                             36000                         22000
Wages accrued on Dec 31                                               2000                           2500
Plant installed          (at cost)                                                   30000                         40000
Establishment Charges                                                20000                         15000
Direct Expenses                                                             20000                         30000
Direct expenses accrued, December 31                      2000                           3000
Work certified by architect                                                   320000                       120000
Cost not work not yet certified                                  10000                         30000
Material on site, 31 December                                   11000                            5500
Cash received from contractees                                 60000                       150000
Depreciation of plant p.a                                               12 %                              34%

Prepare Contract & Contractees Account for Contract 69 & Contract 96.

  1. A company manufactures a product which involves two processes, namely, pressing and polishing. For the months of January, the following information is available:            

Pressing                                 Polishing
Opening Stock                                                                     
Inputs of unit in process                                        1200                                       1000  
Units completed                                                      1000                                         750
Unit under process                                                    200                                         250
Material Cost                                                                        Rs.69000                               Rs.17500
Conversion Cost                                                      328500                                  82500

For incomplete unit in process, charge material costs at 100% and conversion costs at 60% in the pressing process and 50 % in the polishing process. Prepare a statement of cost and calculate the selling price per unit which will result in 25 % on the sale price.

  1. M/s Modern Company Ltd furnishes the following summary of Trading & Profit and Loss account for the current year ending March 31.

To Raw Material                                          140000          By sales (12000 units)                    510000
To direct wages                                              72000          By finished stock (200 units)           6000
To production overheads                             45000          By work in Process 
To selling & distribution overheads          43500                       Material         26800
To administration overheads                     41010                       Wages                        11786
To Preliminary Expenses w/off                    3250           Production overheads          8000              46586
To Goodwill w/off                               2541            By interest on securities (gross) 5000     
To dividend (net)                                 4000
To income-tax                                                  5870
To net profit                                                 210415
                                                                       
567586                                                         567586

The Company manufactures a standard unit. The scrutiny of cost records for the same period shows that-
  1. factory overheads have been allocated to production at 20 percent on prime cost
  2. Administration overheads have been charged at Rs.3 per cent on units produced
  3. Selling & distribution expenses have been charged at Rs.4 per unit on unit sold.

You are required to prepare a statement of cost, to work out profit as per cost accounts, and to reconcile the same with that shown in the financial accounts.


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