Problems of MACS

June 9, 2019 | Author: Preetham Gowda | Category: Inventory, Cost Of Goods Sold, Cost, Output (Economics), Oil Refinery
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(1) (1) A manu manufa fact ctur urer er has show shown n as amoun amountt of Rs. 19.31 19.310 0 in his book bookss as “Establishment “which really includes the following expenses: Rs Interest on debentures 1200 Agents’ commission 6750 Warehouse wages 1800 Warehouse repairs 1500 Lighting of office 70 Office salaries 1130 Director’s remuneration 1400 Travelling expenses of salesman 1760 Rent, rates and insurance of warehouse 310 Rent, rates and insurance of office 230 Lighting of warehouse 270 Printing and stationery 1500 Trade magazine 70 Donations 150 Bank charges 100 Cash discount allowed 770 Bad debts 300 From the information prepare a statement showing total: (a) Selling expenses. expenses. (c) Administrat Administration ion expenses expenses : (b) Distribution expenses. (d) Expenses which you would exclude from costs. (2) From the following information for the month of January, prepare a cost sheet to show the following components: (a) prime cost, (b) factory cost, (c) cost of   production,  production, (d) total total cost. cost. Direct material Direct wages Factory rent and rates Office rent and rates Plant repairs and maintenance Plant depreciation Factory heating and lighting Factory manager’s salary Office salaries Director’s remuneration Telephone and postage Printing and stationery Legal charges Advertisement Salesmen’s salaries Showroom rent Sales

57000 28500 2500 500 1000 1250 400 2000 1600 1500 200 100 150 1500 2500 500 116000

(3) The following particular have been extracted from the book of J.K production Co. Ltd., for he year ended 31st march 2005. Stock of materials as on 1st April, 2004 47,000 st Stock of materials as on 31 March, 2005 45,000 Materials purchased 2,08,000 Drawing office salaries 9,600 Counting house salaries 14,000 Carriage inwards 8,200 Carriage outwards 5,100 Donations to relief fund 4,300 Sales 4,87,000 Bad debts written off 4,700 Repairs of plant, machinery an tools 8,600 Rent, rates, taxes and insurance (factory) 3,000 Rent, rates, taxes and insurance (office) 1,000 Travelling expenses 3,700 Travelling salaries and commission 7,800 Production wages 1,45,000 Depreciation written off on machinery,  plant and tools 9,100 Depreciation written off on office furniture 600 Director’s fees 6,000 Gas and water charges (factory) 1,000 Gas and water charges (office) 300 General charges 5,000 Manager’s salary 18,000 Out of 48 working hours in a week, the time devoted by the manger to the factory and office was on an average 30 hours and 18 hours respectively throughout the accounting year. Prepare a cost sheet showing different element of cost. (4) Mr. Gopal furnishes the following data relating to the manufacture of a standard  product during during the the month of April April 2005; Raw materials consumed Rs. 15,000 Direct labour charges Rs. 9,000 Machine hours worked 900 Machine hour rate Rs. 5 Administration overheads 20% on works cost Selling overhead Re. 0.50 per unit Unit produced 17,100 Unit sold 16,000 at RS. 4 per unit You are required to prepare a cost sheet from the above, showing: a) The The cos costt per per unit unit,,  b) Cost per unit and profit for the period.

(5) The following extract of costing information relates to Commodity a for the year ending 31 December, 2004 Purchases of raw materials 60,000 Direct wages 50,000 Rent, rates, insurance and works on cost 20,000 Carriage inward 1,000 Stock-1 January, 2004: Raw materials 10,000 Finished product – 2,000 tons 8,000 Stock _ 31 December, 2004: Raw materials 11,000 Finished products __ 4,000 tons _  Work- in progress—1 January, 2004 2,400 Work--in progress __31 December, 2004 8,000 Cost of factory supervision 4,000 Sales of finished supervision 1,50,000 Advertising, discount allowed and selling costs Re. 0.40 per ton sold. 32,000 tons of the commodities were produced during the period. Prepare a production statement to ascertain: a) the cost of the output of the period and the cost per ton of production;  b) The net profit. (6) From the books of account of M/s ZYX Enterprises, he following details has  been extracted for the year ending March 31, 2005: Stock of materials --- opening Closing Materials purchased during the year Direct wages paid Indirect wages Salaries to administrative staff Freight: __ Inward Outward Sales Cash discount allowed Bad debts written off Repairs of plant and machinery Rent, Rates and taxes --Factory Office Travelling expenses Salesmen’s salaries and commissions Depreciation written on plant & machinery On Furniture Director’s fees Electricity charges (Factory) Fuel (for boiler)

1,88,000 2,00,000 8,32,000 2,38,400 16,000 40,000 32,000 20,000 15,79,800 14,000 18,800 42,400 12,000 6,400 12,400 33,600 28,900 2,400 24,000 48,000 64,000

Sale of scrap 500 General charges 24,800 Manager’s salary 48,000 The manager’s time is shared between the factory and the office in the ratio of  20:80. From the above details you are required to prepare a cost sheet to show: (a) Prime cost; (b) factory cost; (c) cost of production; (d) total cost; (e) profit. (7) The PET chemicals Co. supplies you the following details from its cost records; Stock of raw materials on 1 September, 2005 75,000 Stock of raw materials on 30 September, 2005 91,500 Direct wages 52,500 Indirect wages 2,750 Sales 2,00,000 Work-in progress on 1 September, 2005 28,000 Work –in – progress on 30 September, 2005 35,000 Purchase of raw materials 66,000 Factory rent, rates and power 15,000 Depreciation of plant and machinery 3,500 Expenses on purchases 1,500 Carriage outward 1,000 Advertising 5,000 Office rent and taxes 2,500 Travelers wages and commission 6,500 Stock of finished goods on 1 September, 2005 54,000 Stock of finished goods on 30 September, 2005 31,000 Prepare a cost sheet giving the maximum possible break-up of cost and profit. (8) Usha engineering work Ltd. Manufactured and sold 1,000 sewing machines in 2004. Following are the particulars obtained from the records of the company. Cost of materials 80,000 Wages paid 1,20,000 Manufacturing expenses 50,000 Salaries of managerial staff 60,000 Rent, rates and insurance 10,000 Selling expenses 30,000 General expenses 20,000 Sales 4,00,000 The company plans to manufacture 1,200 sewing machines in 2005. You are required to submit a statement showing the price at which machines would be sold so as to show a profit of 10% on the selling price. The following additional information is supplied to you. (a) The price of materials will rise by 20 per cent over the previous year’s level. (b) Wages rates will rise by 5 per cent.

(c) Manufacturing expenses per unit will rise in proportion to the combined cost of materials and wages. (d) Selling expenses per unit will remain unchanged. (e) Other expenses will remain unaffected by the rise in output. (9) A company makes two distinct types of vehicles. A and B. The total expenses during a period as shown by the books for the assembly of 600 of the type A and 800 of the type B vehicles are as under: Materials Direct wages Stores overheads Running expenses of machines Depreciation Labour amenities Works general overhead Administration and selling overhead The other data available to you is:

1, 98,000 12,000 19,800 4,400 2,200 1,500 30,000 26,800

A: B Material cost ratio per unit 1: 2 Direct labour ratio per unit 2: 3 Machine utilization ratio per unit 1: 2 Calculate the cost of each vehicle per unit giving reasons for the bases of  apportionment adopted by you. (10) Jolly shoes Co. manufactures two types of shoes A and B. production costs for  the year ended 31st March, 2005 were: Direct materials Direct wages Production overhead

15,00,000 8,40,000 3,60,000  __________  27,00,00 There was no work-in-progress at the beginning or at the end of the year. It is ascertained that (a) direct material in type A shoes consists twice as much as that in type B shoes. (b) The direct wages for type B shoes were 60% of those of type A shoes. (c) Production overhead was the same per pair of A and B type, (d) administrative overhead for each type was 150% of direct wages. (e) Selling cost was RS. 1.50 Per pair. (f) production during the year were : type A 40,000 pairs of  which 36,000 were sold; type B 1,20,000 pairs of which 1,00,000 were sold. (g) Selling price was RS. 44 for type A and RS. 28 for type B per pair. Prepare a statement showing cost and profit.

(11) Pee co. manufacturing two types of pens P and Q. the cost date for the year  ended 30th September, 2005 is as follows: Direct materials Direct wages Production overhead

4,00,000 2,24,000 96,000 7,20,000

It is further ascertained that: (a) Direct materials in type P cost twice as much direct material in type Q. (b) Direct wages for type Q were 60% of those for type P. (c) Production overhead was same for both types. (d) Administration overhead for each was 200% of direct labour. (e) Selling costs were 50 paisa per pen sold for both types. (f) Production during the year: Type P -----40,000 Type Q -----1,20,000 (g) sale during the year: Type P -----36,000 Type Q -----1,00,000 Selling prices were RS. 14 per pen for the type P and RS. 10 per for the type Q.  prepare a statement showing per unit cost of production, total cost, profit and also total sales value separately for two types of pens P and Q. (12) On June 30, 2004, a flash flood damaged the warehouse and factory of ABC Corporation completely destroying the work-in-progress in inventory there was no damage to either the raw materials or finished goods in inventories. A physical verification taken after the flood revealed the following valuations. Raw materials Work-in-progress Finished goods The inventory on Jan. 1, 2004, consisted of the following: Raw materials Work-in-progress Finished goods

62,000 0 1,19,000

30,000 1,00,000 1,40,000 Rs.2,70,000 A review of the books and records disclosed that the gross profit margin historically approximated 25% of sales. The sales for the first six months of 2004 were RS. 3,40,000. Raw material purchases were RS. 1,15,000. Direct labour costs for his  period were RS. 80,000 and manufacturing overhead has historically been 50% of  direct labour. Compute the cost of work-in-progress inventory lost at June 30, 2004 by preparing a statement of cost and profit.

(13) In respect of a factory, the following particulars have been extracted for the year 2004. Cost of materials 6,00,000 Wages 5,00,000 Factory overheads 3,00,000 Administration charges 3,36,000 Selling charges 2,24,000 Distribution charges 1,40,000 Profit 4,20,000 A work order has to be executed in 2005 and the estimated expenses are: Materials RS. 8,000 wages RS. 5,000 Assuming that in 2005 the rate of factory overheads has gone up by 20%, distribution charges have gone down by 10% and selling and administration charges have each gone up by 15% at what price should the product  be sold so as to earn the same rate of profit as in 2004 ? Factory overheads are based of wages and administration, selling and distribution overheads on factory cost. (14) The following data relate to the manufacturing of a standard product during the four weeks ending on 31st March, 2005: Raw materials consumed 20,000 Direct wages 12,000 Machine-hours worked 1,000 hours. Machine-hour rate Rs. 2 per hour  Office overhead 20% on works cost Selling overheads Re. 0.40 Per unit Units produced 20,000 units Units sold at RS. 3 each 18,000 units Prepare a cost sheet and show the profit (15) A factory produces a standard product. The following information is given to you, from which you are required to prepare a “cost sheet” for the period ended 31 July, 2005: Opening stock 10,000 Purchases 85,000 Closing stock 4,000 Direct wages 20,000 Other direct expenses 10000 Factory overheads 100% of direct labour  Office overheads 10% of works cost Selling and distribution expenses Rs. 2 per unit sold Units of finished product: In hand at the beginning of the period units 1,000 (value Rs. 16,000) Produced during the period 10,000 units In hand at the end of the period 2,000 units

Also, find out the selling price per unit on the basis that profit mark-up is uniformly made to yield a profit of 20% of the selling price. There was no work-in-progress either at the beginning or at the end of the period. (16) Z company is manufacturing transistor sets and the following details are furnished in respect of its factory operations for the year ended 31 st December, 2004. Raw materials: Purchases 40,000 Opening stock 8,000 Closing stock 6,000 Direct labour 28,000 Manufacturing expenses 8,500 Office and administration expenses 5,300 Work-in-progress: opening closing Materials RS. 1,000 RS. 1,500 Labour RS. 1,200 RS. 1,400 Manufacturing expenses RS. 600 RS. 700  __________ _________  Total RS. 2,800 RS. 3,600  __________ _________  During the year, 600 sets are produced. Prepare a statement of cost of production. (17) The following information relates to a commodity for the half year ended 30th June, 2005: Purchase of raw materials Direct wages Rent, rates, insurance and work on cost Carriage inward Stock on 1 January, 2005 Raw materials Finished products (1,600 tons) Stock on 30 June, 2005 Raw materials Finished products (3,200 tons) Work-in-progress 1 Jan., 2005 Work-in-progress 30 June. 2005 Cost of factory supervision Sales of finished products

1,32,000 1,10,000 44,000 1,584 22,000 17,600

24,464 -------5,280 17,600 8,800 3,30,000

Advertising, discounts allowed and selling cost 75 paisa per ton sold. 25,600 tons of  commodities were produced during the period: You are required to prepare a cost statement showing the cost and profit.

(18) Modern manufacturing company submits the following information on 31 March, 2005. Sales for the year 2,75,000 Inventories at the beginning of the year were: Finished goods 7,000 Work-in-progress 4,000 Purchases of materials: 1,10,000 Materials inventory at the Beginning of the year 3,000 End of the year 4,000 Direct labour 65,000 Factory overhead was 60% of the direct labour cost: Inventory at the end of the year were: Work-in-progress 6,000 Finished goods 8,000 Other expenses for the year were: Selling expenses 10% of sales Administrative expenses 5% of sales. Prepare statement of cost Television Enterprises supply you the following information for 10,000 TV values manufactured during the year ending 31.12.2004: Direct materials 90,000 Direct wages 60,000 Power and consumable stores 12,000 Factory indirect wages 15,000 Lighting of factory 5,500 Defective work (cost of rectification) 3,000 Clerical salaries and management expenses 33,500 Selling expenses 5,500 Sale proceeds of scrap 2,000 Plant repairs and maintenance and depreciation 11,500 The net selling price RS. 31.60 per unit sold and all units were sold. As from 1 January, 2005, the selling price was reduced to RS. 31 per unit. It was estimated that production could be increased in 2005 by 50% due to spare capacity. Rates of materials and direct wages will increase by 10%. You are required to prepare: (a) cost sheet for the year 2004 showing various elements of cost per unit; and (b) Estimated cost and profit statement for 2005 assuming that 15,000 units will be produced and sold during the year and factory overheads will be Recovered as a percentage of direct wages and office and selling expenses as a percentage of works cost.

PROBLEMS ON JOB COSTING

(1) The following direct costs were incurred on job No. 415 of standard radio company. Materials RS. 6010 Wages: Dept. A--- 60 hours @ RS. 30 per hr. B --- 40 hours @ RS. 20 per hr  C --- 20 hours @ RS. 50 per hr. Overhead for these three departments were estimated as follows: Variable overheads: Dept A Rs. 15,000 for 1,500 labour hours B Rs. 4,000 for 200 labour hours C Rs. 12,000 for 300 labour hours Fixed overheads: Estimated at Rs. 40,000 for 2,000 normal working hours. You are required to calculate the cost of job 415 and calculate the price to give  profit of 25% on selling price. (2) Mayur Engineering engaged in job work, has completed all jobs in hand on 30t Dec., 2004, except job no. 447. The cost sheet on 30th Dec., showed direct materials and direct labour costs of RS. 40,000 and RS. 30,000 respectively as having been incurred on job no. 447. The costs incurred by the business on 31st Dec., 2004 the last day of the accounting year, were as follows: Direct materials (job 447) Rs. 2,000 Direct labour (job 447) Rs. 8,000 Indirect labour Rs. 2,000 Miscellaneous factory overhead Rs. 3,000 It is the practice of the business to make the jobs factory overheads on the basis of  120% of direct labour cost. Calculate the cost of work-in-progress of job no. 447 on 31st Dec., 2004. (3) A shop floor supervisor of a small factory presented the following cost for job no. 303 to determine the selling price. Per unit RS. Materials 70 Direct wages 18 hrs. @ RS. 2.50 45 (Dept. X 8 hrs. dept., Y 6 hrs, dept. Z 4 hrs.) Chargeable expenses (special stores items) 5 _______  Add: 33 1/3% for expenses 120 40 ________  Total cost 160 __________ 

Analysis of the profit/loss account for 2004 shows the following:

Material used Direct wages : Dept. X 10,000 Dept. Y 12,000 Dept. Z 8,000 special stores items works overheads: Dept. X 5,000 Dept Y 9,000 Dept Z 2,000 Work cost Gross profit c/d

selling expenses  Net profit

RS. 1,50,000

Sales less returns

2,50,000

30,000 4,000

16,000 2,00,000 50,000  ________  2,50,000  _______  20,000 Gross profit b/d 30,000  _____   __  50,000  ___________ 

2,50,000 50,000  _______  50,000

It is also noted that average hourly rates for the 3 departments, X,Y,Z are similar. You are required to: (1) Draw up a job cost sheet. (2) Calculate the entire revised cost using 2004 actual figures as basis. (3) Add 20% to total cost to determine the selling price. (4) From the records of a manufacturing company, the following budgeted details are available: Rs. RS. Direct materials 1,99,000 Direct wages: Machine shop ( 12,000 hours ) 63,000 Assembly shop ( 10,000 hours) 48,000 1,11,000 Works overheads Machine shop 88,200 Assembly shop 51,800 1,40,000 Administrative overhead Selling overhead Distribution overhead

90,000 81,000 62,100

Assuming that the company follows absorption method of costing, you are required to: (a) Prepare a schedule of overhead Rates from the figures available stating the  basis of overhead recovery rates used under the given circumstances. (b) Work out a cost Estimate for the following job based on overhead so computed. Direct material = 25 kg @ Rs. 16.80/kg, 15kg @ Rs. 20.00/kg Direct labour (on the basis of hourly rate for machine shop and Assembly shop): Machine shop 30 hours and assembly shop 42 hours (5) Job no. 2198 was commenced on 10 October 2005 and completed on 1  November 2005. Materials used were Rs. 600 and labour charge directly to the  jobs was Rs. 400. Other information was as follows; Machine No. 215 used for 40 hours; the machine hour rate is Rs. 3.50 Machine No. 160 used for 30 hours; the machine hour rate is Rs.4.00. 6 welders worked on the job for 5 days of 8 hours each; the direct labour  hour rate for welders is 20 paise. Other expenditure of the concern not apportioned for calculating the machine hour  or the direct labour rates amounted to Rs. 20,000, total direct wages for the period  being Rs. 20,000 Ascertain the works cost of job No. 2198. (6) The estimated material cost of a job is Rs. 5,000 and direct labour cost is likely to be Rs. 1,000. In a machine shop it will require machining by machine No. 8 for  20 hrs and by machine No. 11 for 6 hours. Machine hour rates for machine No.8 and machine No. 11 are respectively RS. 10 and 15. Considering only machine shop cost, the direct wages in all other shops last year amounted to Rs. 80,000 as against Rs. 48,000 factory overhead. Last year factory cost of all jobs amounted to RS. 2,50,000 as against RS. 37,500 office expenses. Prepare a quotation which guarantees 20% profit on selling price. (7) The following expenses were incurred for a job during the year ended 31st December, 2004; Direct materials 3,000 Direct wages 4,000 Chargeable expenses 1,000 Factory overheads 2,000 Selling and distribution overheads 2,000 Administration overheads 3,000 Selling price for the above job Rs. 18,000. You are required to prepare a statement showing the profit earned for the year 2004 from the job and an estimated price of a  job which is to be executed in the year 2005. Materials, wages and chargeable expenses required will be of Rs. 5,000, Rs. 7,000 and Rs. 2,000 respectively for the

 job. The various overhead should be recovered on the following basis while calculating the estimated price: (a) Factory overheads as a percentage of direct wages. (b) Administration and selling and distribution overhead as a percentage of factories cost. (8) In respect of a factory, the following particulars have been extracted for the year  2004. Cost of materials 6,00,000 Wages 5,00,000 Factory overheads 3,00,000 Administration charges 3,36,000 Selling charges 2,24,000 Distribution charges 1,40,000 Profit 4,20,000 A work order has to be executed in 2005 and the estimated costs are; Material Rs. 8,000, wages Rs. 5,000. Assuming that in 2005 the rate of factory overheads has gone up by 20% distribution charges have gone down by 10% and selling administration charges have each gone up by 15% at what price should the product be sold so as to earn the same rate of profit on the selling price as in 2004? Factory overheads are based on wages and administration selling and distribution overhead on factory cost. (9) R.K Ltd has to quote a price for job No. 450. The cost estimator has produced the following data; Direct materials = 34 units @ RS. 2 per hour. Direct labour = dept. A—12 hours @ RS. 1.80 Per hour  dept. A—12 hours @ RS. 1.80 Per hour  The following additional information is extracted from the company’s budgets; Dept. A variable overhead Rs. 18,000 Hours to be worked 18,000 Dept. B variable overheads Rs. 18,000 Hours to be worked. 10,000 Fixed overhead for the company Rs. 1,00,000 Total hours to be worked 50,000 Profit is taken at 20% of the selling price. You are required to prepare a job cost sheet. (10) The following expenses were incurred on job No. 664. (1) Materials; RS. 9,720 (2) Wages paid: Dept. A 40 hours at Rs. 8 per hour  Dept. B 50 hours at Rs. 9 per hour  Dept. C 60 hours at Rs. 5 per hour  (3) works overhead expenses of these departments were estimated as under:

Dept. A Rs. 9,000 for 6,000 working hours. Dept B Rs.10,000 for 5,000 working hours Dept C Rs. 12,000 for 3,000 working hours. Office expenses were RS. 75,000 when total direct wages paid in all three departments came to RS. 2,50,000. It is the practice to recover office overhead as  percentage of direct wages. You are required to calculate the cost of job No. 664 and its price to be quote which would include 20% profit on selling price. PROBLEMS ON PROCESS COSTING

(1) A product passes through three distinct processes to completion. These  processes are numbered respectively 1, 2 and 3. During the week ended 31st January. 1,000 units are produced. The following information is obtained. Process 1 Process 2 Process 3 Material 6000 3000 2000 Labour  5000 4000 5000 Direct expenses 1000 200 1000 The indirect expenses for the period were Rs. 2800 apportioned to the processes on the basis of labour costs. (2) The following information is given in respect of process A. Material 1,000 kg. @ RS. 6 per kg. Labour Rs. 5,000 Direct expenses Rs. 1,000 Indirect expenses allocated to process A Rs. 1,000  Normal wastage 10% input Prepare process A account when: Scrap value of normal loss in nil. • Scrap arising out of normal has a sale value of Re. 1 per unit. • (3) 600kg of a material was charged to process A at the rate of Rs. 4 per kg. The direct labour accounted for RS. 200 and the other departmental expenses amounted to RS. 760. The normal loss is 10% of input and the net production was 500kg. Assuming that process scrap is saleable at RS. 2 per kg. Prepare a ledger  account of process A clearly showing the values of normal and abnormal loss. (4) Fifty units are introduced into a process at a cost of rupee one each. The total additional expenditure incurred by the process is Rs. 30. Of the units introduced, 10% are normally spoiled in the course of manufacture; these possess a scrap value of Re. 0.25 each. Owing to an accident, only 47 units are produced, you are required to prepare (i) process account, and (ii) Abnormal loss Account.

(5) Fifty units are introduced into a process at a cost of rupee one each. The total additional expenditure incurred by the process is Rs. 30. Of the units introduced, 10% are normally spoiled in the course of manufacture; these possess a scrap value of Re. 0.25 each. Owing to an accident, only 40 units are produced, you are required to prepare (i) process account, and (ii) Abnormal gain Account. (6) From the following information prepare a process account. 1,000 units at Rs. 40 per unit were introduced in process I: Labour cost RS. 5,000 Material 20,000 Production overhead 3,500 The normal process loss has been estimated at 10% of the input which can be sold at Rs. 10 per unit. Actual production was 920 units. (7) A product passes through three processes A, B and C. The normal wastage of  each process is as follows: process A-3 per cent, Process B-5 per cent, and process C-8 per cent. Wastage of process A was sold at 25 paise per unit, that of process B at 50 Paise per unit and that of process C at Re. 1 per unit. 10,000 units were issued to process A in the beginning of October 2005 at a cost of Re. 1 per unit. The other expenses were as follows: Process A Process B Process C Sundry materials 1000 1500 500 Labour  5000 8000 6500 Direct expenses 1050 1188 2009 Actual output 9500 units 9100 units 8100 units Prepare the process Accounts, assuming that there were no opening or closing stocks. Also give the abnormal wastage and Abnormal gain Accounts. (8) A product passes through two processes. The output of process I becomes the input of process II and the output of process II is transferred to warehouse. The quantity of raw materials introduced into process I is 20,000 kg at RS. 10 per kg. The cost and output data for the month under review are as under: Process I Process II Direct materials RS. 60,000 RS. 40,000 Direct labour RS. 40,000 RS. 30,000 Production overhead RS. 39,000 RS. 40,000  Normal loss 8% 5% Output RS. 18,000 RS. 17,400 Loss realization of Rs. /unit 2.00 3.00 The company’s policy is to fix the selling price of the end product in such a way as to yield a profit of 20% on selling price. Required: (h) prepare the process Accounts (ii) Determine the selling price per unit of the end product.

(9) Product B is obtained after it passes through three distinct process. The following information is obtained from the accounts for the week ending 31st October, 2005: Items Total Process I II III Rs. Rs. Rs. Rs. Direct materials 7,542 2,600 1,980 2,962 Direct wages 9,000 2,000 3,000 4,000 Production overhead 9,000 1,000 units at Rs. 3 each were introduced to process I. There was no stock of  material of work-in-progress at the beginning or at the period. The output of each  process passes direct to the next process and finally to finished stock. Production overhead is recovered on 100% of direct wages. The following additional data are obtained: Process output during percentage of normal value of scrap the week loss to input per unit Process I 950 units 5% RS. 2 Process II 840 10% 4 Process III 750 15% 5 Prepare process cost accounts and abnormal gain or loss accounts. (10) Prepare process Accounts from the following data: X article passes through two processes. The costs of the processes are: Process A Process B Labour 45,100 27,360 Mfg. Expenses 21,000 14,400 2,000 units are introduced to process A at a cost of Rs. 5 per unit. The output of  each process is: Process A = 1,800 units B = 1,640 units  Normal wastage of each process is 5% and 10% of units introduced respectively. The scrap is saleable at Re. 1 and RS. 2 per unit of each process respectively (11) A product passes through two processes A and B and thereafter it is transferred to finished stock. The output of A passes to B and of B to finished stock. From the following information you are required to prepare accounts. A B Materials consumed RS. 24,000 14,000 Direct labour RS. 28,000 18,000 Manufacturing Expense RS. 23,100 26,468 Input in process A Units 20,000 ___  Input in process A Rs. 20,000 ____  Output Units 18,800 16,000  Normal wastage % of input 5% 10% Value of normal wastage Rs.10 per100 units Rs. 10 per100 units.

(12) The product of a company passes through three distinct processes to completion. From the past experience it is ascertained that wastage is incurred in each process as under: process A 2% process B 5% and process C 10%. The wastage of processes A and B is sold at Rs. 10 per 100 units and that of process C at Rs. 80 per 100 units. Following is the information regarding the production of March 2005 Process A Process B Process C materials 12000 8000 4000 direct Labour  16000 12000 6000 machine expenses 2000 2000 3000 other factory expenses 3500 3800 4200 20000 units have been issued to process A at a cost of Rs. 20000. the output of  each process has been as under  Process A 19500 units Process B 18800 units Process C 16000 units There was no stock work in progress in any process in the beginning and in the end of March. Prepare process accounts. (13) The product of a manufacturing concern passes through two processes A and B and then to finished stock. It is ascertained that in each process normally 5% of  the total weight is lost and 10% is scrap which from processes A and B realizes Rs. 8 per ton and Rs. 200 per ton respectively. The following are the figures relating to both the processes: Processes A processes B Materials in tones 1,000 70 Cost of materials in rupees per tones 125 200 Wages in rupees 28,000 10,000 Manufacturing expenses in rupees 8,000 5,250 Output in tones 830 780 Prepare process Accounts showing cost per ton of each process. There was no stock of work-in-progress in any process. (14) A product is completed in three consecutive processes. During a particular  month, the input to process I of the basic raw material was 5,000 units at Rs. 2 per  unit. Other information for the month was as follows: Processes I II III Output (units) 4,700 4,300 4,050  Normal loss as % of input 5 10 5 Scrap value per unit (RS.) 1 5 6 Direct wages (RS.) 3,000 5,000 8,000 Direct expenses (RS.) 9,750 9,910 15,500 Overhead total RS. 32,000 chargeable as percentage of direct wages.

There was no opening or closing work-in-progress stock. Compile three process accounts and finished stock account with details of abnormal loss and gain, where applicable. (15) A product is obtained after passing it through three processes. The following information is collected for January 2005. Processes I II III Direct material (RS.) 5,200 3,960 5,924 Direct wages (RS.) 4,000 6,000 8,000 Output in the month (units) 950 840 750  Normal loss 5% 10% 15% Value of scrap per unit (RS) 4 8 10 Additional data: 1,000 units at Rs. 6 each were introduced in process I. There was no stock of  materials of work-in-progress at the beginning or at the end of the month. Production overhead was RS. 18,000 for the month. Prepare account indicating normal loss, abnormal loss and abnormal gain. (16) The finished product of a manufacturing company passes through three  processes, viz., I, II and III. The normal wastage in each process is 5%, 7% and 10% for the processes I, II and III respectively (calculated with reference to the number of units fed into each process). The scrap generated out of wastage has a sale value of 70 paisa per unit, 80 paisa per unit and Rupee per unit in the process I, II and III respectively. The output of each process is transferred to the next process and the finished output emerges from the process III and transferred to stock. There was no stock of work.-in-progress in any process in a particular month. The details of cost data for the month are given below. Processes I II III Material used (RS.) 1,20,000 40,000 40,000 Direct labour cost (RS.) 80,000 60,000 60,000 Production expenses (RS.) 40,000 40,000 28,000 Output in units (actual) 38,000 34,600 32,000 Process I was fed with 40,000 units of raw input at cost of RS. 3,20,000. Prepare the process accounts.

(17) A product passes through three processes to completion. In January 2005 the cost of production was given below: I II III Material Rs. Rs. Rs. Wages 2,000 3,020 3,462  production overheads 3,500 4,226 5,000 1,000 units were issued to process I @ Rs. 5 each.  Normal loss in process I is 10%, in processes II 5% and in process III, it is 10%. Wastage realizes Rs. 3 per unit, Rs. 5 per unit and Rs. 6 per unit in processes I, II and III respectively. Actual production: process I-920 units, process II-870 units and process III-800 units. Prepare the necessary accounts. (18) A product passes through three processes namely 1, 2 and 3. From the following information. Prepare the process accounts: Process I process II process III Raw material used (tones) 1,000 ___ _____  Cost per tonne (RS.) 200 ____ _____  Manufacturing wages and Expenses (RS.) 72,500 40,800 10,710 Weight loss 5% 10% 20% Scrap (sold at Rs. 50 per tonne) 50 30 51 Two-thirds of output of process I and one-half of process 2 output passes to the next process and the balance is sent to warehouse for sale. (19) XYZ Ltd. Manufactures and sells three chemicals produced by consecutive  processes known as X, Y and Z. In each process 2% of the total weight put in is lost and 10% is scrap, which from processes X and Y realized Rs. 100 a tonne and from Z. Rs. 200 a tonne. The products of the three processes are dealt with as follows; X Y Z Sent to warehouse for sale 25% 50% 100% Passed on the next process 75% 50% __  The following particulars relate to the Month of May: Materials used (tones) 1,000 140 1,348 Cost per tonne materials (RS.) 120 200 80 Mfg. Expenses (RS.) 30,800 25,760 18,100 Prepare an account for each process, showing the cost per tonne of each product

(20) Bangalore products Ltd. manufacture a chemical in three processes. details of these three processes are as follow:

The

Process I Process II Process III Transfer to next process 662/3% 60% ____  Transfer to warehouse for sales 331/3% 40% 100% In each process out of the total weight put in, 4% is wasted and 6% is scrap. The scrap is sold at Rs.6, Rs.10 and Rs. 12 per tonne in I, II, and III processes respectively. For the month of October, the details of expenditure are: Process I 2,800 tonnes of materials at RS. 40 per tonne. Process II 320 tonnes of materials at RS. 64 per tonne. Process III 2,520 tonnes of materials at RS. 28 per tonne. Production labour cost is: process I RS. 20,608; process II 12,560; process III 11,580. For the month of October, the office and administration expenses worked out at RS. 15,567 which is to be charged equally for all the process. Prepare process Accounts. Calculate the cost per tonne in cash process. (21) Chemicals Ltd. Processes a patent material used in buildings .the Material is  produced in three consecutive grades - soft, medium and hard.

Raw materials used Cost per tonne Manufacturing wages and expense Weight lost ( % of input of the process ) Scrap ( sale price Rs. 50 per tonne) Sale price per tonne

Process I

Process II

1,00 tones Rs. 200 RS. 87,500 5% 50 tones Rs. 350

____  _____  RS.39,500 10% 30 tones Rs. 500

Process III

______  ______  RS.10,710 20% 51 tones Rs. 800 Mana gement expenses were Rs.17,500 and selling expenses Rs. 10,000. Two third of the output of process I and one-half of the output of process II are passed on to the next  process and the balances are sold. The entire output of process III is sold. Prepare the three process accounts and a statement of profit. Make approximations, where necessary. (22) A product through three processes A, B and C. The details of expenses incurred on the three processes during the year were as under: Processes A B C Units introduced 10,000 Cost per unit Rs. 100 Rs. Rs. Rs. Sundry materials 10,000 15,000 5,000 Labour 30,000 80,000 65,000 Direct expenses 6,000 18,150 27,200 Selling price per unit of  Output 120 165 250 Management expenses during the year were RS. 80,000 and selling expenses were RS. 50,000 these are not allocable to the processes.

Actual output of the three processes was: A - 9,300 units, B - 5,400 units and C - 2,100 units. Two-thirds of the output of process A and one-half of the output of   process B was passed on to the next process and the balance was sold. The entire output of process C was sold. The normal loss of the three processes, calculated on the input of every process was: process A - 5%, B - 15% and C - 20%. The loss of process A was sold at Rs. 2 per unit that of B at Rs. 5 per unit and of process C at Rs. 10 per unit. Prepare the three process accounts and the profit and loss account. (23) A manufacturer produced three products in consecutive processes A, B and C. It is known from the past experience that wastage occurs in the process as under: The scrap value of wastage in process A is Rs. 10 per kg., in process B is Rs. 15 per  kg and in process C Rs. 20 per kg. The product of three processes is dealt with as follows; A B Output passed to the next process 60% 80% Output sent to warehouse for sale 40% 20% The figures relating to the processes are: Raw materials consumed 2,000 kg. 1,000 kg. Rate of raw materials (per kg.) Rs. 20 50 Sundry materials and direct wages Rs. 3 2,000 35,000 Manufacturing expenses Rs. 24,000 20,640 Output 1,800kg. 2,000kg. Prepare the process accounts, showing cost per kg of each product.

C ___  100% 500 kg. 100 48,000 23,900 1,800 kg.

(24) A product passes through three processes A, B and C. the details of expenses incurred on the three processes during the year 2004 were as under: Processes A B C Units issued 1,000 Rs. RS. RS. Cost per unit 50 ___ ___  Sundry materials 1,000 1,500 500 Labour 2,600 8,000 6,392 Direct expenses 600 8,815 2,720 Sale price of output (per unit) 70 100 200 Actual output of the three processes was __  Process A: 930 units; process B: 540 units; process C: 210 units. Two-thirds of  output of process A and one half of the output of process B were passed on to the next process and the balance was sold. The entire output of process C was sold. The normal loss of the three processes, calculated on the input of every process was: Process A : 5% ; process B : 15% and process C: 20%. The loss of process A was sold at Re. 1 per unit that of process B at Rs. 3 per unit, and that of process C at Rs. 6 per unit. Selling and distribution expenses during the year were RS. 10,000 these are allocable to the processes but to be considered while drawing the income statement.

Prepare the three process accounts and a statement of income. (25) Product X in a manufacturing unit passes through three processes—A, B and C. the expenses incurred in the three processes during the year 2001 were as under; A B C Units of input issued 9,000 RS. RS. RS. Cost per unit 150 ___ ___  Sundry materials 23,500 25,000 15,000 Direct labour 80,000 2,07,200 26,110 Direct expenses 2,250 7,200 8,100 Selling price per unit of output 200 280 600 The actual outputs obtained vis-à-vis normal process losses from the three  processes were: Output (units) process loss (%) Process A 8,400 5 Process B 5,700 10 Process C 3,660 3 During the year, three-fourth of the output of process A and two-third of the output of process B were transferred to the next process and the balances were sold outside. The entire output of process C was however, sold outside. The losses of the three processes were sold at RS. 5 per unit for process A, RS. 10 per unit for   process B and RS. 15 per unit for process C. Prepare the three process accounts and a statement of income considering a total selling and distribution expenses of RS. 45,000 which is not allocated to processes. (26) The following details are extracted from the costing records of an oil refinery for the week ended 30 September 2005. Purchase of 500 tonnes of copra RS. 2,00,000 Crushing plant Refinery Finishing Cost of labour 2,500 1,000 1,500 Electric power 600 360 240 Sundry material 100 2,000 ___  Repairs to machinery and plant 280 330 140 Steam 600 450 450 Factory expenses 1,320 660 220 Cost of casks ___ ___ 7,500 300 tonnes of crude oil was produced. 250 tonnes of oil was produced by refining process. 248 tonnes of refined oil was finished for delivery. Copra sack sold RS. 400 175 tonnes of copra residue sold RS. 11,000 Loss in weight in crushing 25 tonnes. 45 tonnes by-product was obtain from refining valued at RS. 6,750. You are required to show the accounts in respect of each of the following stages of 

manufacture for the purpose of arriving at the cost per tonne of each process and also the total cost per tonne of finished oil. (a) Copra crushing process, (b) Refining process, (c) Finishing process (27) The following details are taken from the books of an oil mill for the month of  March. Purchase of 100 tons of oil seeds at RS. 1,000 per tonne. Crushing Refining Finishing Wages RS. 1,000 RS. 700 RS. 900 Sundry stores 200 600 100 Electricity 400 350 200 Steam 300 250 200 Factory expenses 500 400 300 Container __ ____ 2,350 60 tonnes of crude oil produced. 51 tons of oil was produced in the refining  process. 50 tonnes of refining oil were furnished for delivery. Empty bags of  oilseeds were sold for RS. 100 and 35 tonnes of oil cake were sold at RS. 60 per  ton. Loss in weight in crushing was 5 tonnes. 8.5 tonnes of by-product from refining process were valued at RS. 2,250 Make out accounts in respect of each process and calculate the cot of the product  per tonne at the end of each process.

PROBLEMS ON ABSORPTION COSTING

(1) Zen Ltd. Supplies you the following data: Direct material cost Direct wages Variable overhead - Factory Admn, and selling Fixed overhead - Factory Admn and selling Sales

RS. 48,000 RS. 22,000 RS. 13,000 RS. 2,000 RS. 20,000 RS. 8,000 RS.1,25,000

Prepare an income statement under absorption costing. (2) From the following information prepare an income statement under: (a) Marginal costing (b) Absorption costing Products  _________________________________   _____  X Y .RS. RS. Direct materials Direct wages Factory overhead__fixed variable 3,900 selling overhead --- fixed variable 2,100 sales

Z RS 7,500 9,000 3,000 9,000 1,500 6,000 32,000

30,000 9,000 1,500 4,500---900 3,000--61,000

3,000 1,500 1,500 600 16,000

Fixed factory overhead and fixed selling overhead were apportioned to products X, Y and Z one equitable bases. (3) XYZ ltd. Supplies you the following data for the year ending 31st Dec, 2005. Production –1100 units, sales 1,000 units There was no opening stock. Variable manufacturing cost per unit RS. 7 Fixed manufacturing overhead (total) RS. 2,200 Variable selling and administration overhead per unit Re. 0.50 Fixed selling and administration overhead RS. 400 Selling price per unit RS. 15 Prepare (a) Income statement under marginal costing. (b) Income statement under absorption costing. (c) Explain the difference in profit under marginal and absorption costing, if  any. (4) XYZD limited sells its products at RS. 3 per unit. The company uses a first-in first-out actual costing system. A new fixed manufacturing overhead allocation rate is computed each year by dividing the actual fixed manufacturing overhead cost by the actual production costs. The following simplified data are related to its first two years of operation:

Sales (units) Production (units) Costs Variable manufacturing

Year I 1,000 1,400 RS. 700

year II 1,200 1,000 RS. 500

Fixed manufacturing Variable marketing and administration Fixed marketing and administration

700 1,000 400

700 1,200 400

Required : (i) prepare income statements based on : a. absorption costing and  b. variable costing for each year. (ii)Give reasons for the difference in the answer. 21. ABC Motors assembles and sells motor vehicles. It uses an actual costing system, in which unit costs are calculated on a monthly basis. Data relating to march and April, are: March Unit data: Beginning inventory 0 Production 500 Sales 350 Variable-cost data: RS. Manufacturing costs per unit produced 10,000 Distribution costs per unit sold 3,000 Fixed cost data : Manufacturing costs 20,00,000 Marketing costs 6,00,000 The selling price per motor vehicle is RS. 24,000.

April 150 400 520 RS. 10,000 3,000 20,00,000 6,00,000

Required: (i) present income statement for ABC Motors in March and April under (a) variable costing and (b) absorption costing. (ii) Explain the differences between (a) and (b) for March and April.ss

22. XYZ Ltd. Has a production capacity of 2,00,000 units per year. Normal capacity utilization is reckoned as 90%. Standard variable production costs are RS. 11 per unit. The fixed costs are RS. 3, 60,000 per year. Variable selling costs are RS. 3 per unit and fixed selling costs are RS. 2,70,000 per year. The unit selling price is RS.20. in the year just ended on 30th June, 2006, the production was 1,60,000 units and sales were 1,50,000 units. The closing inventory on 30th June was 20,000 units. The actual variable production costs for the year were RS.35,000 higher than the standard. (i) calculate the profit for the year  (a) by absorption costing method and (b) by normal costing method. (ii) Explain the difference in the profits. 23. Top class company supplies you the following standard cost per unit for  one of its products. Direct material RS. 1.60 Direct labour RS. 1.50 Variable factory overhead RS. 1.20 Fixed factory overhead RS. 3.00 Production at normal capacity is 2,00,000 units. Variable selling and administrative overhead per unit is Re.0.50 and fixed selling administrative overhead are RS. 75,000 per year. Production and sales data for the year 2005 and year 2006 are as follows: Units produced in year 2005 2,00,000 Units sold in the year 2005 1,60,000 st Inventory—31 Dec. 2005 68,000 Units produced in year 2006 1,50,000 Units sold in year 2006 1,80,000 Selling price in each year was RS. 10.50. prepare income statement for the two years under (i) Absorption costing, and (ii) Marginal costing.

24. the following is the standard cost data per unit of product ‘X’ RS. Selling price 40 Direct material 8 Direct labour 5 Variable factory overhead 2 Fixed factory overhead RS. 5 (based on a budgeted normal output of 36,000 units per year) variable selling overhead RS.6 Fixed selling overhead per year were RS. 1,20,000 During a month the company produced 2,000 units of the product and sold 1,500 units there was no opening stock.

You are required to prepare an income statement under (i) absorption costing, and (ii) marginal costing. Explain the difference in profit if any. 25. From the following information prepare an income statement under (a) Absorption costing, and (b) Marginal costing. RS. RS. Sales 1,50,000 Adm.overhead—fixed 5,000 Direct materials 50,000 --- variable 12,000 Direct labour 20,000 Selling overhead --- fixed 20,000 Fixed factory overhead 10,000 --- variable 15,000 26. the following information is given for the year ending 31st Dec. 2005 opening stock ---- 1000 units valued at RS. 70,000 (including variable cost of RS. 50 per unit). Variable cost RS. 60 per unit Fixed cost (Total) ---RS. 1,20,000 Production ----- 10,000 units Sales --- 8,000 units at RS. 90 per unit. Prepare income statement under (a) absorption costing, and (b) marginal costing. 27. your company has a production capacity of 12,500 units and normal capacity utilization is 80% opening inventory of finished goods on 1-12005 was 1,000 units. During the standard variable cost per unit is RS. 6,50 and standard fixed factory cost per unit is RS. 1.50. Total fixed selling and administration overheads amounted to RS. 10,000. the company sells its product at RS. 10 per unit. Prepare income statements under absorption costing and marginal costing. Explain the reasons for difference in profit, if any 28. the following information is given for the year ending 31st Dec, 2005: RS. Sales (@ RS. 50 per unit) 10,00,000 Direct material 2,90,000 Direct labour 3,10,000 Variable factory overhead 1,20,000 Fixed factory overhead 2,40,000 Selling and administration overhead (fixed) 60,000 Selling and administration overhead (variable) 20,000 During the year 24,000 units were produced but only 20,000 units were sold. There was no opening stock. Prepare an income statement under—  (a) Absorption costing, and

(b) Marginal costing Explain the difference in profit, if any. 29. X Ltd. Produces a product which has the following costs: Variable manufacturing cost --- RS. 4 per unit. Fixed manufacturing cost ---RS. 2,00,000 per year   Normal capacity ---2,00,000 units There are no work in progress inventories. In year I, the company produced 2,00,000 units and sold 90% at a price of RS. 7 per  unit. In the II the company produced 2,10,000 units and had sold 2,15,000 units at the same price. Prepare income statement for two years based on (a) Absorption costing. (b) Marginal costing.

30. The data given below relates to a company which makes and sells calculators. Jan. Feb. Sales in units 5,000 10,000 Production in units 10,000 5,000 Selling price per unit RS. 100 100 Variable production cost per unit RS. 50 50 Fixed production overhead RS. 1,00,000 1,00,000 Fixed production overhead per unit 10 10 ( pre-determined absorption rate ) selling and distribution costs (fixed)RS. 50,000 50,000  prepare income statement under (a) absorption costing, and (b) marginal costing. Comment on the results 31. using the information given below, prepare operating statements for the months of June and July using: (i) marginal costing and (ii) Absorption costing. Suggest reasons why the two techniques disclose different amounts of profit. Selling price RS. Per unit 50 monthly costs: Direct material cost 18 fixed production overhead RS. 99,000 Direct labour cost 4 fixed selling expenses RS. 15,000 Variable production overhead 3 fixed administration expenses RS. 25,000 Variable selling costs are 10% of sales revenue and normal production capacity is 11,000 units per month.

June July

Sales (units) 10,000 12,000

production (units) 12,000 10,000

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