Unit 1

ELEMENTS OF COST ACCOUNTING

1) Ascertain the prime cost, cost of production, total cost and profit from the under mentioned
figures.
Direct material 5000
Direct labour 3500
Factory expenses 1500
Administration expenses 800
Selling expenses 700
Sales 15000

2) Prepare a cost sheet

Labour 1,50,000
Prime cost 3,50,000
Factory expenses 98000
Office expenses 85000
10% of the output is in stock and sales total up to Rs5,10,000

3) X company ltd is asked to send a quotation for a machine. The costing department estimates
the cost as under.
Direct material 60000
Direct labour 40000
It is also estimated that works overhead is at the rate of 60% of direct labour, office
overhead is 20% and selling and distribution overhead at the rate of 15% on work cost.
Prepare a job cost sheet.

4) Zindu company ltd is asked to send a quotation for a machine. The costing department
estimates as under.
Direct material 60000
Direct labour 40000
It is also estimated that works overhead is 60% of direct labour, office overhead is 30% of
labour cost and selling and distribution overhead at 20% on work cost. Prepare a job cost
sheet.

5) In a factory 2 types of articles were manufactured, they are A and B. From the following
particulars, prepare a statement of cost showing total cost of each. Verify and ascertain
total profit and there is no opening and closing stock.
Particulars A B
Materials 30000 50000
Labour 60000 30000
Work cost is charged at 40% of works cost and office cost is taken at 20% of total cost. A
article sold during the period are at 180 at Rs 1200 each and B articles are 200 at Rs1500
each.
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 6) A company manufactures a standard product. From the following data prepare a statement
of cost and profit.
Raw material consumed 45000 Selling cost 1.5 per unit
Direct labour 27000 Units produced 15000
Machine hours worked 900 Units sold14000 @ Rs12 per unit.
Machine hour rate 15
Administration overhead 20% on works cost

7) The following information has been obtained from the records of Hindhusthan corporation,
1st jan to 30th jan 2012.
1st jan 2012 30th jan 2012
Cost of raw material 30000 25000
Cost of work in progress 12000 15000
Cost of finished goods 60000 55000
Transactions during the month are
Purchase of raw material 4,50,000
Wages paid 2,30,000
Factory overhead 92000
Administrative overhead 30000
Selling & distribution overhead 20000
Sales 9,00,000
a) Prepare cost sheet showing, materials consumed, prime cost, factory cost
b) Income statement in traditional form showing gross profit and net profit.

8) The following is the extract of costing information related to commodity A for the year
ending 31/03/2002.
Purchase of raw material 120000 c/s stock of raw material 22240
Works overhead 48000 c/s stock of finished goods 32000
(2000tons)
Direct wages 100000 Opening work in progress 4800
Carriage on purchase 1440 Closing work in progress 16000
o/p stock of raw material 20000 Sale of finished goods 300000
o/p stock of finished goods 16000
(1000tons)
Selling and distribution overhead are Rs1 per ton sold and 16000 tons of commodities were
produced during the period.

9) Prepare a cost sheet from the information given below for the year ended 31/3/2008
Op. stock of: raw material 110000 Direct expenses 210000
Work in progress 55000 Raw material returned 4000
Finished goods 140000 Factory expenses 325000
cl. stock of: raw material 82000 Administration expenses 245000
Work in progress 60000 Income tax 22000
Finished goods 105000 Dividends 28000
Raw material purchased 600000 Selling expenses 88000
Carriage on purchases 4000 Sale of finished goods 2200000

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 Direct wages 450000
10) From the following figures prepare a cost sheet for 3 months ending on 31/12/2012 and
also tender for 3 months ending and also tender for supply of 750 fans to realize the same
percentage of profit as was in previous period.
Completed stock on 01/10/2012 ---
Completed stock on 31/12/2012 20250
Stock of raw materials on 01/10/2012 5000
Stock of raw materials on 31/12/2012 3500
Factory wages 75000
Indirect charges 12500
Materials purchased 32500
Sales 112500
Number of fans manufactured 3000

11) From the following particulars prepare a cost statement

Stock on 01/01/2002: raw material 30500 sales 95000
Finished goods 20400 direct wages 20400
Stock on 31/12/2002: raw material 48500 factory expenses 10500
Finished goods 10000 office expenses 5400
Purchase of raw material 25000 selling expenses 3800
W.I.P on 01/01/2002 8000 distribution expenses 2500
W.I.P on 31/12/2002 9000
Calculate the percentage of work expenses to direct wages and percentage of office
expenses to work cost.

12) Calculate the prime cost, factory costs, cost of production, cost of sales and profit from the
following particulars.

Direct materials 100000 Discount on shares 500

Direct wages 30000 Depreciation:
Wages of foremen 2500 Factory plant 500
Electric power 500 Office premises 1250
Lighting: Managers salary 5000
Factory 1500 Consumable stores 2500
Office 500 Director fees 1250
Store keeper wages 1000 Office stationary 500
Oil and water 500 Telephone charges 125
Rent: Postage & telegram 250
Factory 5000 Salesman salary 1250
Office 2500 Travelling expenses 500
Repairs and renewals: Advertising 1250
Factory plant 3500 Warehouse charges 500
Office plant/ premises 500 Carriage outwards 375
Transfer to reserves 1000 Sales 189500
Income tax 10000 Dividend 2000

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 13) From the following particulars prepare a cost sheet showing the total cost per ton for the
period ended 31/12/2011.
Raw materials 33000 Loose tools written off 600
Productive wages 35000 Rent and taxes ( office ) 500
Direct expenses 3000 Water supply ( works ) 1200
Unproductive wages 10500 Factory insurance 1100
Factory rent and taxes 7500 Office insurance 500
Factory lighting 2200 Legal expenses 400
Factory heating 1500 Rent of warehouse 300
Motive power ( works ) 4400 Depreciation on
Haulage ( works ) 3000 Plant and machinery 2000
Director fees ( works ) 1000 Office building 1000
Directors fees ( office ) 2000 Delivery van 200
Factory cleaning 500 Bad debts 100
Sundry office expenses 200 Advertising 300
Estimating expenses ( works ) 800 Sales dept. Salary 1500
Factory stationary 750 Upkeep of delivery van 700
Office stationary 900 Bank charges 50
Commission on sales 1500
The total output for the period has been 14775

14) The accounts of Happy company ltd shows the following for the year 2010.
Materials used in manufacturing 65,000
Materials used in primary packaging 20000
Materials used in selling the products 10000
Materials used in factory 500
Materials used in office 950
Labour required in producing the products 8000
Labour required for factory 3150
Direct expenses 49000
Indirect expenses 1000
Administration expenses 1400
Dep on office building & equipments 800
Depreciation on factory buildings 1280
Selling expenses 4220
Fright on materials purchases 6140
Advertisement 1460
Assuming that all the products manufactured are sold, what should be selling price to obtain
the profit of 20% on selling price

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 15) The following details are available from the books of shreya sea product ltd for the year
ending 31/12/2000
Direct wages 600000 Carriage inwards 8640
Purchase of material 720000 Sales 1800000
Wages of foreman & storekeeper 48000 Stock on 1/1/2000
Other indirect wages 6000 Raw material 120000
Cost of research & experiments 30000 Work in progress 28800
Office manager salary 72000 Finished products 6000(units)
Employees state insurance 6000 Stock on 31/12/2000
Power, fuel and haulage 54000 Raw material 133440
Drawing office expenses 36000 Work in progress 96000
Printing and stationary 12000 Finished products 12000(units)
Counting house salary 12000 Income tax 22000
Other materials 36000 Donations 5000
Selling and distribution expenses are to be charged at Rs 1 per unit. During the year 96000
units were produced. Prepare a cost sheet showing the different elements of cost and profit.

16) The following particulars have been extracted from the books of manufacturing company.
Op. Stock of R. material 65000 Cash discount allowed 2050
Purchase of raw material 261000 Repairs to plant & machinery 8500
Salary ( factory ) 18240 Carriage outwards 3260
Bad debts written off 3000 Gas and water 650
Dep on office furniture 430 Rent,rates & taxes ( office) 4200
Office salary 9300 Op.stock of finished goods 10200
Salesman salary & commission 11220 cl. stock of raw material 58290
Factory rent and rates 9100 cl. stock of finished goods 8300
Productive wages 178200 Good will 1000
Director fees 8400 Income tax 500
Gas and water ( factory ) 1820 Dividend 500
Travelling expenses 2820 Sales 625450
Dep on plant & machinery 8500
From the above information, prepare a statement showing prime cost, factory overhead and
its percentage on wages, administration overhead and its percentage on works cost of goods
sold and net profit.
17) The account of ABC company ltd showing the following
Materials 7,00,000
Direct wages 5,40,000
Works overhead expenses 1,62,000
Establishment and general expenses 1,12,160
Prepare a statement showing work cost, total cost, percentage that works overhead
bear to the direct wages and percentage that establishment and general expenses bear to the
work cost.

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 What price should the company quote to manufacture machine which will required
expenditure in 1000 for materials and 800 in wages, so that it will yield on profit of 20%
on sale price.
18) The account of pleasant company ltd show for 2010
Material 3,50,000
Labour 2,70,000
Factory overhead 81,000
Administration overhead 56080
What price the company could offer for refrigerator? It is estimated that 1000 in
materials and 700 i n labour will be required for the refrigerator. Absorb factory overhead
on the basis of labour and the administration overhead on the basis of works cost. Profit of
12.5% on selling price is required.

19) The following figures have been extracted from records of a company for the year 2007.
Direct materials 70000
Direct wages 60000
Factory overhead 30000
Administration overhead 48000
Selling overhead 32000
Distribution overhead 16000
Profit 6400
A work order has been received in 2008 and the following expenses have been incurred.
Materials Rs10000, wages Rs6000. Assume the rate of factory overhead has gone up by
20%, administration overhead has also gone up by 20%, selling overhead are Rs3000 and
distribution overhead are Rs130. Prepare cost sheet for the year 2007 and find out at what
price the product would be sold in 2008 so as to earn the same percentage of profit on
selling price.

20) From the following data prepare a cost and profit statement of popular stove manufacturing
company for the year 2002.
Stock of raw materials on 01/01/2002 35000
Stock of materials on 31/12/2002 4900
Purchase of raw material 52500
Direct wages 95000
Factory expenses 17500
Establishment expenses 10000
Completed stock in hand on 1/1/2002 nil
Completed stock in hand on 31/12/2002 35000
Sales 189000
The number of stoves manufactured during the year 2002 was 4000
The company wants to quote for a contract for the supply of 1000 electric stoves
during the year 2003. The stoves to be quoted are of uniform quality and make similar to
those manufactured in the previous year, but the cost of material has increased by 15% and
the cost of factory labour by 10%. Prepare a statement showing the price to be quoted to
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 give the same percentage of net profit on turnover was realized during the year 2002,
assuming that the cost per unit overheads will be the same as in the previous year.

21) A company manufactures a standard product of sewing machine. Following are the
particulars of 2000 sewing machines for the year 2002.
Cost of materials 160000 Rent, rates and insurance 20000
Wages 240000 Selling expenses 60000
Manufacturing expenses 100000 General expenses 40000
Salary 120000 Sales 800000
The company plans to manufacture 3000 sewing machines during 2003. You are required
to submit a statement showing the price at which machine would be sold as to show a profit
10% on selling price. The following additional information is supplied to you.
i. Price of materials is expected to raise by 20%
ii. Wages rates are expected to show an increase of 5%.
iii. Manufacturing expenses will raise in proportion to the combined cost of materials and wages.
iv. Selling expenses per unit will remain the same.
v. Other expenses will remain unaffected by the rise in output.

22) Super star sirsi supplies you following figures for the year 2007.
Production 1000 units
Cost of materials 20000
Labour cost 12000
Factory overhead 8000
Office overhead 4000
Selling expenses 1000
Rate of profit is 25% on selling price. The company decides to produce 1500 units in 2008.
It is assumed that,
i. the cost of materials increased by 20%.
ii. The labour cost increased by 10%.
iii. 50% of factory and office overheads are fixed and other 50% are variable.
iv. Selling expenses per unit will reduce by 20%.
v. The rate of profit remains as same.
Prepare a statement for 2008 showing total profit, selling price per unit.

23) The following are the cost records for the year 2000 of a manufacturer.
Production 4000 units
Materials purchased 86000
Op. stock of materials 4000
Cl. Stock of materials 10000
Wages 48000
Production overhead 32000
Administration overhead 16000
Selling & distribution overhead 4000

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 Rate of profit is 25% on selling price. It is estimated that production can be increased in
2000 by 50% due to spare capacity. Raw materials price will increase by 20% and wages
will have increased by 10%, the rate of profit will remain the same. 50% of all overheads
are fixed and other 50% are variable. Prepare a statement of cost for 2000 and an estimation
for 2000 showing cost, profit and sales.
24) From the following particulars, prepare cost sheet ascertaining the cost under the
follo0wing division of cost. a) prime cost b) works cost c) total cost d) selling price.
Paper pulps 500tons at Rs 50 per ton
Other materials- 100 tons at Rs30 per ton
Direct labour:
80 skilled men at Rs 3 per day for 25 days
40 unskilled men at Rs 2 per day for 25 days
Direct expenses;
Special equipment’s 3000
Special dyes 1000
Works overhead variable at 100% on direct wages and fixed at 50% on direct wages.
Administration overhead at 10% on works cost
Selling and distribution overhead at 15% on works cost
Profit at 10% on total cost
Finished paper manufactured 400tons
Credit on account of scrap sold Rs800

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