COST AND MANAGEMENT ACCOUNTING

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

Chemical A:                            6000 kgs @ Rs. 4.20 per kg                            Rs        25,200

Chemical B:                            10000 kgs @ Rs. 3.80 per kg                                      38,000

Chemical C:                            4000 kgs @ Rs. 4.75 per kg                                        19,000

VAT                                                                                                                              2,055

Railway Freight                                                                                                            1,000

Total Cost                                                                                                                   85,255

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

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

Activity                       Cost driver                              Capacity                      Cost

Power                          Kilowatt hours                                    50000 hrs                    Kilowatt Rs 200000

Quality Inspection      Numbers of inspection            10000 inspection                        Rs 300000

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

Product                                               Kilowatt-hours                        Quality Inspection

A                                                         20000                                      7000               

B                                                         40000                                      5000

C                                                         30000                                      6000

Compute the costs allocated to each product from each activity

Calculate the cost of unused capacity for each activity.

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

Products

                                                P                                  Q                     R                     S

Sales Turnover                        Rs.600000                   Rs.1000000     Rs.500000       Rs.900000

Cost of sales                                 350000                          800000          370000            480000

Storage area (square meters)          40000                            60000            70000              30000      

Number of cartons sold               200000                         300000           150000            350000      

Number of bills raised                  100000                         120000             80000            100000

Overhead costs and basis of apportionatement are:

Fixed Expenses

                                                                                                            Basis of Apportionatement

Administration wages & salaries                                Rs.100000       Number of bill raised

Salesmen salaries a & expenses                                        120000       Sales turnover

Rent and insurance                                                            60000       Storage area

Depreciation                                                                       20000       Number of cartons

Unfixed Expenses

Commission                                                                                        3 % of sales

Packing material & wages                                                                   Re 1 per carton

Stationery                                                                                            Re 0.50 per bill

You have to prepare

1. Staement showing summary of Selling & Distribution Costs to the products

2. Profit & Loss Statement showing contribution and profit or loss of each of the products to enable the Company take an appropriate decision on discontinuance of the sale of a product.

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

Contracts

                                                                                                A                                 B

Contract Price                                                             Rs.300000                   Rs.400000

Direct material issued                                                       55000                           40000

Material returned to store                                                   1500                             2500

Direct Labour                                                                    36000                           22000

Wages accrued on Dec 31                                                  2000                             2500

Plant installed (at cost)                                                     30000                           40000

Establishment Charges                                                      20000                           15000

Direct Expenses                                                                20000                           30000

Direct expenses accrued, December 31                             2000                             3000

Work certified by architect                                            320000                         120000

Cost not work not yet certified                                       10000                           30000

Material on site, 31 December                                         11000                             5500

Cash received from contractees                                       60000                         150000

Depreciation of plant p.a                                                   12 %                              34%

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

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

Pressing                                   Polishing

Opening Stock                                                                       

Inputs of unit in process                                             1200                                        1000   

Units completed                                                          1000                                          750

Unit under process                                                        200                                          250

Material Cost                                                              Rs.69000                                 Rs.17500

Conversion Cost                                                         328500                                    82500

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

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

To Raw Material                                       140000            By sales (12000 units)             510000

To direct wages                                           72000            By finished stock (200 units)      6000

To production overheads                            45000            By work in Process    

To selling & distribution overheads            43500                        Material           26800

To administration overheads                       41010                        Wages             11786

To Preliminary Expenses w/off                     3250            Production overheads   8000    46586

To Goodwill w/off                                        2541            By interest on securities (gross) 5000  

To dividend (net)                                          4000

To income-tax                                               5870

To net profit                                              210415

                                                                 

567586                                                            567586

The Company manufactures a standard unit. The scrutiny of cost records for the same period shows that-

1. factory overheads have been allocated to production at 20 percent on prime cost
2. Administration overheads have been charged at Rs.3 per cent on units produced
3. Selling & distribution expenses have been charged at Rs.4 per unit on unit sold.

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