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B.B.

M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)


CHAPTER 1-ELEMENTS OF COST
1. From the following information, prepare cost sheet off Megha Methods Ltd. fro the month of January 2015.
Rs. Rs.
Local raw materials 20,000 Depreciation of delivery van 450
Imported materials 1,600 Bank charges 150
Productive wages 16,000 Drawing office expenses 650
Non-productive wages 500 Convertible materials 3,000
Fuel 2,000 Repairs-building (factory) 720
Tools used 1,000 Work manager bonus 480
Salaries of work staff 500 Special dies 1,800
Office expenses 600 Legal charges 4,600
Managing director’s fees 1,200 Audit fees 900
Director’s fees 3,000 Bad debts 1,200
Advertising expenses 1,800 Samples and free gifts 550
Sales depots 2,100 Commission on sales 270
Packing expenses 700 Goodwill written off 500
Carriage outward 800 Income tax 1,650
Carriage inward 500 Debenture interest 600
Warehouse expenses 400 Canteen expenses
Storage of materials 300 (80% factory; 20% to office) 750
Depreciation of plant 900 Interest received on investment 640
Depreciation – office management 200 Sales of finished goods 80,000

2. From the following information prepare cost sheet for 30-12-2013


Rs. Rs.
Purchase of raw material 4,80,000 Carriage 5,760
Direct wages 4,00,000 Printing and stationery 8,000
Indirect material 24,000 Office salary 48,000
Work managers salary 30,000 Counting house salary 8,000
Work stationery 2,000 Samples and free gifts 5,000
Indirect wages 4,000 Upkeep of delivery van 5,000
Research and experiment 20,000 Debt collection charges 5,000
ESI 4,000 Donation 15,000
Other factory expenses 20,000 RBD 3,000
Consumable stores 2,000 Advance income tax 10,000
Haulage 5,000 sales 12,00,000
Drawing office expenses 2,000
Other selling expenses Rs.2.50 per unit; During the year 32,000 units were produced
Stock 01-01-2013(Rs.) 31-12-2013(Rs.)
Finished goods 2,000 4,000
WIP 19,200 64,000
Raw materials 80,000 88,960 (2014, 2012, 20 marks)

3. Prepare cost sheet


Rs. Rs.
Raw materials consumed 40,000 Depreciation: Office premises 500
Wages 10,000 Plant and machinery 200
Chargeable expenses 2,000 Consumable stores 1000
Oil waste and cotton 400 Factory manager’s salary 2000
Wages of foremen 1,000 Director’s fees 500
Store keepers wages 500 Office printing and stationery 200
Electric power 200 Telephone charges 50
Lighting: Factory 500 Postage and telegram 100
Office 200 Salesman commission 500
Rent: Factory 2000 Travelling expenses 200
Office 1000 Advertising 500
Repairs and renewals Warehouse expenses 200
Factory plant 500 Carriage outward 150
Machinery 1000 Sales( 10,000 units) 75,000
Office premises 200
(2011, 20 marks)

REF: Cost and Management Accounting-I by K.S. Adiga Page 1


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
4. The following information has been obtained from the records of Prajna Pvt Ld. For the year 31-12-2012
Rs. Rs.
Raw materials purchased 60,000 Stock:1-1-2012
Direct wages 50,000 Raw materials 10,000
Office rent rates and insurance 20,000 Finished goods (2000 units) -
Carriage inwards 1,000 WIP 2,400
Factory supervision 4,000 Stock:31-12-2012
Sales 2,50,000 Raw materials 11,000
Finished goods (4000 units) -
WIP 8,000
Advertisement, discount and selling expenses Re.1 per unit. During the year 32,000 units were produced.
Prepare cost sheet (2013, 20 marks)

5. Prepare cost sheet


Rs. Rs.
Opening stock of raw materials 70,000 Bad debt 1,000
Unproductive wages 10,000 Collection charges(selling) 200
Productive wages 80,000 Postage 2,000
Purchase of raw materials 1,00,000 Technical director’s fee 15,000
Carriage inwards 4,000 Manager’s salary 20,000
Depreciation on machinery 3,000 Supervision charges 1,000
Insurance 1,000 Research expenses 12,000
Bank interest 6,000 Cleaning charges 1,000
Dividend 10,000 Goodwill w/o 2,000
Inspection fees 1,000 Counting house expenses 3,000
Stores used 4,000 Closing stock of raw materials 30,000
Loose tools used 10,000 Sales (12000 units) 4,00,000
Advertisement 6,000
(2010, 20 marks)
6. Prepare cost sheet
Rs. Rs.
Raw materials 36,000 Stationery : Office 900
Direct expenses 3,000 Works 750
Productive wages 35,000 Depreciation : plant 2,000
Unproductive wages 10,500 Office building 1,000
Factory rent 7,500 Loose tools 600
Factory lighting 3,700 Warehouse rent 300
Power 4,900 Advertising 300
Office expenses 1,000 Commission on sales 1,500
Directors fee: Works 1,000 Bad debts 100
Office 2,000 Sales department salary 1,500
Insurance: Office 500 Reserve for bad debt 500
Factory 1,100 Total output for the period 18000 tons
(2009, 20 marks)
7. Prepare estimated cost sheet from the following data
Estimated material Rs.48,000; Estimated labour cost Rs.54,000
It is estimated that the factory overhead will be 100% of direct wage, administrative overhead will be 10%
on cost of production. The expected profit will be 33.33% on the sales (2014, 08 marks)
8. Following figures are taken from the books of a firm
Raw materials-opg stock Rs.40,000 Direct Wages Rs.1,20,000
- Closing stock Rs.30,000 Factory Expenses Rs. 1,20,000
Finished goods- opg stock Rs.10,000 Office overheads Rs.50,000
- Closing stock Rs.15,000 Sales Rs.4,89,500
Purchase of raw materials Rs.1,50,000
What should be the quotation of a job requiring Rs.2,000 in materials and Rs.3,000 in direct wages.

REF: Cost and Management Accounting-I by K.S. Adiga Page 2


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
CHAPTER 3-MATERIAL COSTING
Calculation of purchase price:-
1. Ramgopal Agarwal invited quotations for the supply of a chemical. The following quotation is submitted by a
supplier.
Lot price: 200 kg. Rs.50.00 per kg
400 kg. Rs.47.50 per kg
600 kg. Rs.40.00 per kg
Cash discount, if payment is made within 2 weeks, 6%. Trade discount is 25%. Freight and forwarding
charges Rs.200. one container is required for every 50kg and each container is charged at Rs.5, if the
container is returned within 2 months, credit will be allowed at Rs.3 per container. Calculate the purchase
price of 600kg of the chemical.

2. Geetanjali stores received a consignment of articles M and N. The invoice gave the following data.
M- 500kgs @ Rs.30 per kg- Rs.15,000; N-300kgs @ Rs.40 per kg- Rs.12,000;
Sales tax- Rs.640; Cost of container ( 8 containers)Rs.800. A 5% of cash discount for payment made within
one week. Return value of a container Rs.50 each. Calculate the cost per kg of M and N.

3. The following quotation is received for the supply of a chemical.


Lot price: 400kg Rs.80 per kg
600kg Rs.70 per kg
800kg Rs.60 per kg
Cash discount is allowed @5%. if payment is made within one month. Trade discount is allowed 25%. Freight
and forwarding charges are levied at Rs.1,800. One container is required for every 50kg. of chemicals. For
each container Rs.85 is charged. However credit will be allowed at Rs.40, if the containers are returned
within one month. Calculate the purchase price per kg. of chemical if 600kgs lot is selected, assuming that
the containers are returned within one month.

4. A supplier quotes for Material N as follows.


Lot price: 200kg Rs.2.50 per kg
500kg Rs.1.75 per kg
800kg Rs.1.25 per kg
He allows trade discount of 25% & Cash discount is allowed @3%. if payment is made within 15 days. One
container is required for every 100kg. of materials. For each container Rs.15 is charged. However credit will
be allowed at Rs.10. Calculate the purchase price per kg. of 800kgs, if transport charges amounting to
Rs.100charged by supplier

5. A firm purchased a raw material Z from Venus Ltd. Quantity purchased 4500kgs at Rs.20 per kg. company
allows a trade discount of 10%, Freight charges Rs.2 per kg, Inspection charges Re.0.10 per kg, unloading
charges 15 paise per kg. calculate purchase price of material Z (2011, 08 marks)

6. A lorry load of materials of mixed goods was purchased for Rs.100000 by mr. kishen. Later on these were
sorted out into following categories
Category A-1000 units, selling price Rs.20 per unit
Category B-2000 units, selling price Rs.22.5 per unit
Category C-2400 units, selling price Rs.25 per unit
Find the purchase price per unit of each category of material assuming that all grades yield same rate of
profit (2013, 08 marks)

7. For posting in the stores ledger, what values would you adopt in respect of the transactions in the following
purchase invoice?
1000 kgs of material A at Rs.25 per kg (one case) Rs.25000
500 kgs of material B at Rs.10 per kg (one case) Rs.5000
2000 kgs of material C at Rs.15 per kg (two case) Rs.30000
Rs.60000
Less: trade discount 10% Rs.6000
Rs.54000
Add: freight Rs.2000
Not returnable cases @ Rs.10 each Rs.40
Insurance Rs.1430
Sales tax @ 4.5% Rs. 2430 Rs.5900
TOTAL Rs.58550

EOQ:
8. Cost of placing an order Rs.100; Annual carrying cost per unit Rs.15;
Usage of material per week: Minimum -25 units; Maximum – 75 units;

REF: Cost and Management Accounting-I by K.S. Adiga Page 3


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
Re-order period- 4 to 6 weeks. Find the Economic Ordering Quantity.
9. The cost of ordering is Rs.240. the carrying cost of inventory is estimated to be Rs.0.05 per month per unit.
The demand for the material is 250 units per month. Calculate the Economic Ordering Quantity.

10. Yearly consumption 800 units, Cost per unit Re.0.30; Buying cost per order Rs.7.00; warehouse charges of
inventory 15%. Find out EOQ

Ordering Level
11. Calculate for each material minimum level, maximum level and reorder level.
Minimum usage- 50 units per week; Maximum usage 150 units per week; Normal usage – 100 units per week
Reordering quantities- 600 units-X Delivery periods: 4-6 weeks-X
1000 units-Y 2-4 weeks-Y

12. Calculate Maximum, Minimum and reorder levels.


Minimum usage- 25 units per week; Maximum usage- 75 units per week; Normal usage – 50 units per week
Reordering quantities- 300 units Delivery periods: 4-6 weeks

13. Ram enterprises manufactures a product M. the following particulars are available.
Cost of placing an order Rs.100, Annual carrying cost per unit Rs.3.25, Minimum usage 25 units per week,
maximum usage 75 units per week, re-order period 4-6 weeks.
Calculate: Re-order Quantity, Re-order level, Minimum level and Maximum level.

Bin Card:
14. The following information regarding coal is obtained from the stores record of Ganesh steels Ltd.
Dec 2010
01 opening balance 500 tons
04 issuing on MR No.85 160 tons
05 received from vendor vide GR no.7 240 tons
08 issued on MR no.86 180 tons
12 issued on MR no.87 60 tons
17 received from vendor vide GR no.8 200 tons
24 issued on MR no.88 150 tons
30 received from vendor vide GR no.9 250 tons
31 issued on MR no.89 170 tons
Stock verified on 5-12-2010 revealed that a shortage of 200 tons and 100 tons of surpluses on 26-12-2010.
The minimum stock level is 200 tons. The ordering level is 300 tons. Prepare a Bin Card No.20 for the above
transactions. (2012, 8 marks)

15. The following information regarding coal is obtained from the stores record of ABC Ltd.
Jul 2013
01 opening balance 7500 kgs
02 issuing on MR No.1 3900 kgs
02 issuing on MR No.2 600 kgs
03 received from vendor vide GR no.31 9000 kgs
03 issuing on MR No.3 3000 kgs
04 issuing on MR No.4 1500 kgs
06 received from vendor vide GR no.80 3000 kgs
07 issuing on MR No.5 1350 kgs
Stock verified on 6-7-2013 revealed that a shortage of 150 kgs and 10 kgs of surpluses on 02-07-2013.
Prepare a Bin Card No.63 for the above transactions. (2013, 08 marks)

16. The following information regarding coal is obtained from the stores record of canara steels Ltd.
Dec 2010
01 opening balance 200 tons
04 issuing on MR No.285 83tons
05 received from vendor vide GR no.77 120 tons
08 issued on MR no.286 92 tons
12 issued on MR no.287 30 tons
17 received from vendor vide GR no.88 100 tons
24 issued on MR no.288 69 tons
30 received from vendor vide GR no.99 125 tons
31 issued on MR no.289 85 tons
Stock verified on 26-12-2010 revealed that a shortage of 5 tons. The minimum stock level is 50 tons. The
ordering level is 100 tons. Maximum level is 200 tons. Prepare a Bin Card No.23 for the above transactions.
(2011, 08 marks)

REF: Cost and Management Accounting-I by K.S. Adiga Page 4


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)

FIFO:
17. From the following particulars, write up a stores ledger card in the prescribed form using FIFO method
AUGUST 2007
01 opening balances 250 units at a total value of Rs.275
03 received 100 units at Rs.1.20 per unit
04 issued 50 units
06 received 800 units at Rs.1.30 per unit
07 issued 300 units
08 returned to stores 20units, issued on 4th august
12 received 300 units at Rs.1.40 per unit issued 320 units
15 issued 320 units
18 received 100 units at Rs.1.40 per unit
20 stock verification revealed a loss of 20 units
21 issued 100 units
23 returned to vendors 30 units, received on 18th August
25 transferred from Job A to Job B, 50 units
26 received 200 units at Re.1 per unit
28 Freight paid on purchase made on 25th August, Rs.70
30 issued 150 units
31 excess of 5 units were found on stock verification

18. From the following particulars, write up a stores ledger card in the prescribed form using FIFO method
January 2012
01 Balance 500 kg @ Rs.2 per kg
02 Ordered 350kg, purchase order no. 20 to dept A
09 Issued 125 kg MR no.61 to dept A
12 Received 180 kg of purchase order no. 20 kg @ Rs.3 per kg
15 Ordered 350 kg P.O no. 25 expected on 20th January
16 Issued 175kg MR No.65 to dept B
20 Received 200kg, P.O no.25 Rs.4 per kg
21 It was discovered that 5kg, received on 12-1-2012 P.O. No. 20 were defective and so were returned to
vendor
24 Received 170 kg,(balance of PO no.20) at Rs.3 each
26 Issued 100 kg, MR No.70 to dept C
29 Dept. C returned to store room 25kg earlier issued on 26-1-2012
30 Issued 125kg MR No.75 to dept A

19. From the following particulars pertaining to the material “MIX” prepare a store ledger card using FIFO
method of pricing the material during 2010.
February 1,2010: Opening stock 600 units @40 per unit.
Purchases:
Date Quantity Rate GR No
10 400 38 446
20 480 44 447
25 200 48 449
27 225 51 451

Issues
Date Quantity MR.No Dept.
06 500 617 A
16 130 620 B
26 360 716 T
28 217 728 X

Additional Information
Feb 14 received back from Dept A 30 units
Feb 18 shortage of 20 units as per stock verification

REF: Cost and Management Accounting-I by K.S. Adiga Page 5


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
LIFO
20. Prepare stores ledger account under LIFO method
2010 December
01 opening balances 500 units @Re.1 per unit
03 issued 100 units MR no.61
06 received 1600 units @ Rs.1.10 per unit GR No.13
07 issued 600 units MR no.63
08 returned to stores 40 units issued out of MR no.61
12 received 600 units @ Rs.1.20 per unit GR No.15
15 issued 640 units MR no.83
18 received 200 units @ Rs.1.20 per unit GR No.77
20 issued 240 units MR no.102
23 returned to vendors 80 units received as per GR No.77
26 received 400 units @ Rs.1 per unit GR No.96
28 freight paid Rs.100 on purchase as per GR No.96
30 issued 500 units MR no.113

21. Prepare stores ledger account under LIFO method


01 opening balance 10850 kg @ Rs.130 per kg
05 purchased 20,000 kg @ Rs.134 per kg
07 issued 6750 kg
09 issued 8500 kg
10 received back 550 kg from production dept
15 purchased 17,550 kg @ Rs.128 per kg
18 issued 11250 kg
20 stock verification- shortage 250kg
22 issued 8950 kg
24 issued 6300 kg
26 purchased 10,000 kg @ Rs.132 per kg
30 issued 7750 kg

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CHAPTER 4-LABOUR COSTING
Calculation of WAGE
1. Calculate the wage per hour.
a) Basic pay Rs.200 per day
b) DA Rs.1000 per month,
c) Leave salary 10% of basic and DA,
d) Employer’s contribution to PF 8% of (a+b+c)
e) Employers’ contribution to ESI 2.5% of (a+b+c)
f) Expenditure amenities to labour Rs.200 per head per month. Number of working days in a month 25
days of 8 hours each.

2. Calculate labour cost per day of 8 hours


a) Monthly salary Rs.2250
b) Leave salary 5% of salary
c) Employers’ contribution to PF 8.33% (a+b)
d) Employers’ contribution to ESI 3%v(a+b)
e) Pro-rata expenditure on amenities Rs.2800 per head per month
f) Number of working hours in month 200 (2013, 8 makrs)

3. The following particulars are taken from the books of Prajna Ltd. for the month of july 204, relating to a dept
where 25 workers are employed
Basic wages Rs.20,000 Dearness Allowance Rs.10000
House rent recovered Rs.4000 Loan recovered Rs.6000
Night shift allowance Rs.3000 overtime allowance Rs.3000
PF Rs.5000 ESI contribution Rs.1000
Canteen expenses Rs.1500 bonus 20% on basic wage
The factory worked for 25 days of 8 hours each in July. The workers are entitled to 5% of the total working
days as leave on full pay. Normal idle time is 10%. The contribution of ESI and PF are in the proportion of 6:4
and 1:1 by the employer and employee respectively.
Ascertain :
a) Labour cost
b) Labour cost per hour
c) Cash required for payment of wage

REF: Cost and Management Accounting-I by K.S. Adiga Page 6


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
4. Calculate the total net earnings of workers Sunil and Raghavendra for the month from the following
particulars given and also calculate
a) Normal labour cost per hour
b) Normal time rate and overtime rate
Particulars worker Sunil Worker Raghavendra
Basic wage Rs.1000 Rs.1000
DA 50% 55%
PF on basic wage 8% 8%
ESI on basic wage 2% 2%
Overtime 10hrs -
Idle time and leave - 16 hours
The normal working hours for the month is 200 hours. Overtime is paid at double the normal wage plus DA.
Employer’s contribution to PF and ESI are equal rate with the employee’s contributions. The month contains
25 days and one paid holiday.

INCENTIVE PLANS
5. From the following information, calculate the earnings of A, B and C on Taylor’s differential piece rate
system, for a day of 8 hours.
Std production 10 units per hour Time rate Rs.40 per hour
Actual production A- 50 units, B- 79 units and C- 81 units

6. From the following information, calculate the earnings of A,B,C & D under Taylor’s differential piece rate
system.
The working hours in a week consisted of 48 hours
Std output: 2 units per hour. Time rate Rs.30 per hour
Actual output: A- 90 units B- 95 units C- 96 units D- 103 units

7. Calculate the earnings of X and Z under Taylor’s differential piece rate system
Normal rate per hour is Rs.24. Std time per unit is 30 seconds.
Differentials to be applied: 80% of piece rate below standard and 120% of piece rate at or above standard.
Worker A produces 800 units per day and worker B produces 1000 units.

8. From the following information, calculate the earnings of Arun and Bhavan under Taylor’s differential piece
rate system. The working hours in a week is 48 hours.
Std output: 2 units per hour. Time rate Rs.30 per hour
Actual output: Arun- 95 units and Bhavan- 103 units
Differential piece rates are
Low piece rate at 80% of normal production
High piece rate at 120% of normal production

9. Calculate the earnings under Taylor’s plan


Time rate Rs.3 per hour; Std output per hour 6 units
Differential piece rates are
Low piece rate at 80% of normal production
High piece rate at 120% of normal production
In a day of 8 hours, Bharath produced 39 units, Praveen 45 units, Govind 48 units and Kumar 50 units.

Premium bonus plan:


10. A worker takes 6 hours to complete a job under a scheme of payment by results. The standard time allowed
for the job is 9 hours. His wage rate is Rs.60 per hour. Material cost of the job is Rs.640 and overheads are
recovered at 200% of total direct wages. Calculate the cost of the job under Rowan and Halsey Premium
plan.

11. A worker takes 8 hours to complete a job under a scheme of payment by results. The standard time allowed
for the job is 10 hours. His wage rate is Rs.3.50 per hour. Material cost of the job is Rs.24 and overheads are
recovered at 150% of total direct wages. Calculate the cost of the job under Rowan and Halsey Premium
plan.

12. The following are the particulars given to you


Std time: 10 hours Time rate: Rs.3 per hour
Prepare a comparative table under Halsey plan and Rowan plan if the time taken is 9hrs,8 hrs, 6 hrs and 3
hrs.
The table should clearly show the amount of bonus payable , amount of the total wages and labour cost per
hour under 2 methods.

REF: Cost and Management Accounting-I by K.S. Adiga Page 7


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
13. Using the following data, calculate total remuneration payable to a worker under Halsey plan & Rowan’s
plan.
Std time:48 hours; time taken-42Hours; Time rate:Rs.60 per hour

14. Calculate the total earnings of 3 workers under


a) Time rate b) Piece rate c) Rowan’s plan d) Halsey premium plan
Particulars A B C
Time allowed 35 40 42
(Hours per 100units)
Wage rate per unit Rs.2 Rs.3 Rs.4
Hourly rate Rs.7 Rs.8 Rs.10
Actual time taken (hours) 50 48 46
Actual units produced 200 150 125

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CHAPTER 5-OVERHEADS AND ABSORPTION OF OVERHEADS


PRIMARY DISTRIBUTUION SUMMARY:
1. A company has 4 departments, A,B,C which are production departments and D which is a service
department. The actual expenses for the month of july 2012 are as follows.
Power Rs.5400 depreciation Rs.2700 rent and rates Rs.6000
Repairs Rs.6000 repairs Rs.3600 light Rs.600
Supervision Rs.9000 insurance Rs.3000 canteen exps Rs.900
The following are the additional information supplied to you
particulars Production dept Service dept
A B C D
Area (sq.mtrs) 600 440 360 200
No.of workers 48 32 24 16
Direct wages 40000 30000 20000 10000
Value of plant 48000 36000 24000 12000
Value of stock 25000 15000 10000 -
Indirect materials 2850 3600 600 4500
Indirect wages 2700 3300 900 3000
Direct material 100000 150000 50000 25000
Apportion overheads to the departments.

DIRECT DISTRIBUTION METHOD:


2. The following particulars have been collected for the period ending 31-3-2012. Compute the departmental
overhead of production departments
particulars Production dept Service dept
A B C D E
Direct wages (Rs.) 20,000 30,000 40,000 10,000 20,000
Direct materials(Rs.) 10,000 20,000 20,000 15,000 15,000
Staff (nos) 100 150 150 50 50
Electricity (KWH) 4,000 3,000 2,000 1,000 1,000
Light points (Nos) 10 16 4 6 4
Asset value (Rs.) 6,00,000 4,00,000 3,00,000 1,00,000 1,00,000
Area occupied (sq.ft) 1,500 2,500 500 500 500
The expenses for the period were
Motive power Rs.5,500 Lighting Rs.1,000 Stores Overhead Rs.4,000
Amenities to staff Rs.15,000 depreciation Rs.1,50,000 Repairs and Maintenance Rs.30,000
General overhead Rs.60,000 Rent and taxes Rs.2750
Apportion the expenses of service department E apportionate to direct wages and that of D in the ratio 5:3:2
to department A, B and C respectively.

REF: Cost and Management Accounting-I by K.S. Adiga Page 8


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
SIMULTANEOUS METHOD:
3. Vivek enterprises collects overhead expenses under 3 production departments A,B and C and service
department X and Y.
Rent and rate Rs.5,000 General Lighting Rs.900 Power Rs.1500
Indirect wages Rs.2,000 welfare expenses Rs.2200 Depreciation Rs.8000 Other exps Rs.4400
Overhead Production Department Service Department
A B C P Q
Floor space 200 300 250 200 50
Light points 20 30 20 20 10
Direct wages 60000 40000 60000 30000 10000
HP of machine 100 60 80 5 5
Cost of machine 24000 32000 40000 2000 2000
No.of employees 25 30 35 12 8
Labour hours 1800 2000 2600
Apportion the cost by the most equitable method. The expenses of service department are charged out on a
percentage basis as follows
Production department Service department
A B C X Y
P 20% 30% 40% - 10%
Q 40% 20% 20% 20% -
Using the above particulars apportion the service department expenses to various production departments
by adopting simultaneous equation method. Calculate the absorption rate per hour.

4. The following particulars relate to the manufacturing company which has 3 production department X Y and Z
an 2 service departments S1 and S2
X Y Z S1 S2
As per Primary distribution 6300 7400 2800 4500 2000
The company decides to charge service departments cost to the production departments and other service
department on the basis of following percentages.
Production department Service department
X Y Z S1 S2
S1 40% 30% 20% - 10%
S2 30% 30% 20% 20% -
Find out the total overhead of production department by using simultaneous equation method

REPEATED DISTRIBUTION METHOD:


5. You are supplied with the following information and required to work out production hour rate of overhead
recovery in departments A,B and C under Repeated distribution method
Overhead Total Production Department Service Department
A B C P Q
Rent 12000 2400 4800 2000 2000 800
Electricity 4000 800 2000 500 400 300
Indirect labour 6000 1200 2000 1000 800 1000
Depreciation 5000 2500 1600 200 500 200
Sundries 4500 910 2143 847 300 300
working Hours ---- 1000 2500 1400 --- ---

6. In a factory there are 3 production departments A,B & C and 2 service departments D and E. The following
figures are for January 2010. Prepare secondary distribution under repeated distribution method
Rent Rs.10,000 Depreciation of machinery Rs.8,000 Sundries Rs.10,000
Lighting Rs.6,000 indirect Wages Rs.1,500 Amenities to staff Rs.8,000
Power Rs.15,000 supervision charges Rs.6,000
particulars Production dept Service dept
A B C D E
Floor area 2000 1000 3000 2000 2000
Light points 20 30 10 30 30
Direct wages 30000 40000 10000 25000 25000
HP of machines 3 3 4 3 2
Value of machines 20000 30000 10000 10000 -
No.of workers 20 30 25 25 20
The expenses of D and E are to be allocated as follows.
Production department Service department
A B C D E
D 20% 30% 40% - 10%
E 40% 20% 20% 20% -

REF: Cost and Management Accounting-I by K.S. Adiga Page 9


B.B.M- V SEMESTER-COST AND MANAGEMENT ACCOUNTING-I (PRACTICAL)
8. A company has 3 production departments and 2 service dept. the following information are available from
the record of the factory
Particulars Rs. Particulars Rs. Particulars Rs.
Rent and rates 25,000 Lighting 3000 Indirect wages 7,500
Power 7500 Sundries 50,000 Depreciation on machine 50,000
Additional information:
Particulars production department service departments
A B C X Y
Direct wages 15,000 10,000 15000 7500 2500
HP of machine 60 30 50 10 -
Cost of machine 300000 400000 500000 25000 25000
Production hours 6226 4028 4066 - -
Floor area 2000 2500 3000 2000 500
Light points 10 15 20 10 5

Allocation of service dept expenses


A B C X Y
Service Dept X 20% 30% 40% - 10%
Service Dept Y 40% 20% 30% 10% -
Redistribute the service dept expenses using repeated distribution method and also calculate the overhead
absorption rate per hour of production departments.

MACHINE HOUR RATE:


9. Compute machine hour rate
a) Cost of the machine Rs.150,000; b) Life of the machine 10 years;
c) Scrap value of the machine Rs.5000; d) Rent and rates (for 3 months) Rs.30,000;
e) Supervision charges Rs.20,000pm; f) Insurance Rs.500 pm; lighting Rs.2000 pm;
g) Annual repair charges Rs.10,000; h) The machine occupies ¼ of the total area (factory)
i) Power consumption 2 units per hour; power charges Rs.10 per 100 units;
j) Supervisor spends 1/5 of his time for this machine.
k) Lighting charges must be apportioned on the basis of floor area occupied;
l) Machine works for 120000 hours p.a.

10. From the following particulars calculate the machine hour rate.
Cost of machine Rs.1,06,000; Estimated scrap value Rs.8000; Estimated working life 20,000 hours;
Estimated cost of repair during the working life of machine Rs.12000
Power used for machine 10 units at Rs.1.40 per hour
Rent and rate per month (10% to be charged to the machine) Rs.3,000
Overhead charges allotted to this machine per month Rs.800
Normal working hours 180 per month

11. Calculate the machine hour rate


a) Rent of the department Rs.1500p.a b) Lighting (out of 12 points 2 are for this machine)Rs.576 p.a.
c) Insurance Rs.72p.a. d) Cotton waste Rs.1200 p.a.
e) Cost of machine Rs.18,400 f) Foremen salary ( ¼ for this machine) Rs.12000 p.a.
g) Scrap Rs.400 h) the life of the machine is 10 yrs.
It is assumed that the machine will work for 1800 hours p.a. and that it will incur Rs.2250 for repairs and
maintenance for life. It is assumed that 5 units of power would be used per hour available at Rs.2 per unit

12. Compute the machine hour rate for machine purchased from Sunil Pvt Ltd. to cover the following expenses:
Rent of the department (space occupied by the machine is ¼ of the department) Rs. 6000 p.a.
Lighting (no. of men in the dept 15 and 3 men are employed in this machine)Rs.2500 p.a
Insurance Rs.600 p.a. & Cotton waste oil and sundries Rs.400 p.a. Other details:-
a) Machine will consume 5 units of power per hour at a cost of Rs.1 per unit
b) Machine will work for 2300 hours p.a. c) Base period 1 year

13. Compute the machine hour rate


Particulars Per hour Per year
Electric power 0.85
Steam 0.35
Water 0.15
Repairs 1,600
Rent 3200
Running hours 2000
Original cost price 40,000; replacement Value- Rs.32,000, depreciation at 7.5% p.a. original cost
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REF: Cost and Management Accounting-I by K.S. Adiga Page 10