Description

Cost & Management Accounting

September 2024

 

 

Q1. The following is the summary of the receipts and issues of material in a factory during December 2007. Prepare Store Ledger according to First In First Out Method.

December 2007

• 1.Opening balance 500 units @ Rs.25 per unit
• Issue 70 units
• Issue 100 units
• 8. Issue 80 units
• 13. Received from supplier 200 units @ Rs.24.50 per unit
• 14. Returned to store 15 units @ Rs.24 per unit
• 16. Issue 180 units.
• 20. Received from supplier 240 units @ Rs.24.75 per unit
• 24. Issue 304 units.
• 25. Received from supplier 320 units @ Rs.24.50 per unit
• 26. Issue 112 units
• 27. Returned to store 12 units @ Rs.24.50 per unit
• 28. Received from supplier 100 units @ Rs.25 per unit

It was revealed that on 15th there was a shortage of five units and another on 27th of 8 units.  (10 Marks)

Ans 1.

Introduction

In cost and management accounting, the effective management of inventory is crucial for ensuring that production processes run smoothly and efficiently. One common method used to manage inventory is the First In, First Out (FIFO) method. FIFO operates on the principle that the oldest inventory items are used or sold first, thereby maintaining the flow of goods and minimizing the risk of obsolescence. This method is particularly useful in industries where inventory items are perishable or subject to price fluctuations. The FIFO approach provides a systematic way to track the costs associated with inventory, which in turn helps in accurate financial reporting and cost control. In this context, the FIFO method will be applied to a summary of material receipts and issues in a factory for the month of December 2007. By preparing a store ledger using FIFO, we

 

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Q2. The anticipated material expense for project D-2 totals Rs. 5,000, with an expected direct labor cost of Rs. 1,000. In the machine shop, it necessitates 20 hours of machining by Machine No. 8 and 6 hours by Machine No. 11. The machine hour rates for Machine No. 8 and Machine No. 11 stand at Rs. 10 and Rs. 15 respectively. Last fiscal year, direct wages summed up to Rs. 80,000, while factory overheads (excluding those associated with Machine No. 8 and 11) amounted to Rs. 48,000. Similarly, the collective factory cost of all projects last year equaled Rs. 2,50,000, with office expenses reaching Rs. 37,500. To incorporate a 20% profit margin on the selling price, a quotation statement needs to be prepared.  (10 Marks)

Ans 2.

Introduction

In cost and management accounting, accurate cost estimation is vital for project planning and pricing strategies. Understanding the breakdown of costs, including material expenses, direct labor, machine usage, and overheads, enables businesses to determine the total project cost and set appropriate selling prices. This process involves detailed calculations to ensure all cost components are considered and a suitable profit margin is added. In this case, we are tasked with preparing a quotation statement for project D-2, considering various cost elements and incorporating a 20% profit margin on the selling price. This exercise will demonstrate the practical application of cost accounting principles in real-world scenarios, highlighting the

 

Q3a. How can you install a system of costing in a biscuit producing factory? What are the possible difficulties in installing such system?  (5 Marks)

Ans 3a.

Introduction

Installing a costing system in a biscuit producing factory is crucial for effective financial management and operational efficiency. This system enables the factory to track and control costs, optimize production processes, and enhance profitability. However, the installation process can encounter several challenges, including technical, operational, and organizational hurdles.

Concept and Application

System Installation

The first step in installing a costing system in a biscuit producing factory involves determining the type of costing method best suited for the operations. For a biscuit factory, a standard costing

 

1. Financial Accounting procedures are generally designed to ascertain the periodic profit or loss, but there are important limitations and deficiencies in the system.” Discuss. (5 Marks)

Ans 3b.

Introduction

Financial accounting is a critical component of business management, providing stakeholders with essential information about a company’s financial performance. Primarily focused on ascertaining periodic profits or losses, financial accounting follows established standards and practices. However, despite its structured approach and broad applicability, the system harbors inherent limitations and deficiencies that may affect the depth and utility of the financial