Description
| SESSION | JULY-AUG 2024 |
| PROGRAM | BACHELOR OF COMMERCE (B.COM) |
| SEMESTER | III |
| COURSE CODE & NAME | DCM2103 COST ACCOUNTING |
Set – 1
- a. Explain the nature and scope of cost accounting.
- Elaborate any five methods of costing.
Ans 1.
- Nature and Scope of Cost Accounting
Cost accounting is a branch of accounting that focuses on capturing, recording, and analyzing costs associated with the production of goods or services. It serves as a tool to ascertain the total cost incurred in business operations and assists in effective cost management. Cost accounting plays a crucial role in decision-making, pricing strategies, and performance evaluation.
Nature of Cost Accounting
- Classification of Costs: Cost accounting involves classifying costs into direct and indirect, fixed and variable, and controllable and uncontrollable categories. This classification aids in better understanding and management of expenses.
- Focus on Cost Control: It emphasizes controlling costs by identifying inefficiencies
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- Information regarding two types of materials A and B is as follows:
| Normal usage 50 units per week each |
| Minimum usage 25 units per week each |
| Maximum usage 75 units per week each |
| Reorder Quantity A: 300 units B: 500 units |
| Reorder Period A: 4 to 6 weeks B: 2 to 4 weeks |
Calculate the following levels for each type of material:
- a) Reorder level
- b) Minimum stock level
- c) Maximum Stock Level
- d) Average stock level
- e) Danger stock level
Ans 2.
Stock Level Calculations for Materials A and B
1. Formulas for Calculation
- Reorder Level = Maximum Usage × Maximum Reorder Period
- Minimum Stock Level = Reorder Level − (Normal Usage × Maximum Reorder Period)
- Maximum Stock Level = Reorder Level + Reorder Quantity − (Minimum Usage × Minimum Reorder Period)
- Average Stock Level =
- Danger Stock Level = Minimum Usage × Minimum Reorder Period
- On the basis of the following information, Calculate the earnings of a worker under: A) Halsey Plan B) Rowan Plan
Guaranteed hourly rate of wages Rs. 5 per hour
Standard time for production one dozen articles 3 Hours
Actual time is taken by the worker to produce 20 dozen 48 Hours
Articles
Ans 3.
Worker Earnings Under Halsey and Rowan Plans
Given Data
- Guaranteed Hourly Rate = Rs. 5/hour
- Standard Time for One Dozen Articles = 3 hours
- Actual Time Taken = 48 hours
- Number of Dozens Produced = 20 dozens
Step 1: Calculate Total Standard Time for Production
Step 2: Halsey Plan Calculation
Formula for Earnings under Halsey Plan:
- Bonus Percentage under Halsey Plan = 50%
Substitute values:
Set – 2
- Explain the Absorption of overhead. Explain various methods of Absorption of overhead.
Ans 4.
Absorption of Overhead
Absorption of overhead refers to the process of allocating or assigning overhead costs to specific products, jobs, or services. Overheads are indirect costs that cannot be directly traced to a single product or service, such as factory rent, depreciation, administrative expenses, and utilities. Absorbing these costs ensures that the total cost of production is accurately calculated and helps in determining the pricing of products or services.
Overhead absorption is essential for ensuring that all costs incurred during production are
- The product of a manufacturing concern passes through two processes A and B and then to finished stock. It is ascertained that for each process normally 5% of total weight is lost and 10% is scrap which from processes A and B realizes Rs. 80 per ton and Rs. 200 per ton, respectively. The following are the figures relating to both processes:
Process A Process B
Materials in tons 1000 70
Cost of material in rupees per 125 200
Ton
Wages in rupees 28,000 10,000
Manufacturing expenses 8,000 5,250
Output in tons 830 780
Prepare processes show the cost per ton of each process. There was no stock or work-in-progress in any process.
Ans 5.
Process Costing Calculation
The product passes through two processes, A and B. We will calculate the cost per ton for each process step by step.
Given Data
| Details | Process A | Process B |
| Materials Input (tons) | 1,000 | 70 |
| Cost of Material (Rs./ton) | 125 | 200 |
| Wages (Rs.) | 28,000 | 10,000 |
| Manufacturing Expenses (Rs.) | 8,000 | 5,250 |
| Output (tons) | 830 | 780 |
| Scrap Value (Rs./ton) | 80 | 200 |
| Normal Weight Loss (%) | 5% | 5% |
| Scrap (%) | 10% | 10% |
Step 1: Calculate Total Input Cost for Each Process
Process A
- Material Cost =
- XYZ Travels Ltd. Provides the following details related to a month:
Driver, Conductor and Cleaner’s wages Rs.5,00,000
Office staff’s salary Rs.2,00,000
Diesel and Other oils Rs.7,00,000
Insurance, Taxes, etc. Rs.4,00,000
Interest and other expenses Rs.4,50,000
Repairs & Maintenance Rs.2,00,000
Depreciation Rs.5,20,000
Five buses with a seating capacity of 50 passengers shuttled between two cities at a distance of 50 kms. Each bus has made one round trip (to and from) per day with a normal occupancy of 60%. The number of days worked in a month was 25 days. Calculate the cost per passenger kilometer.
Ans 6.
Calculation of Cost Per Passenger Kilometer
Step 1: Given Data
- Fixed Costs:
- Driver, Conductor, and Cleaner Wages = Rs. 5,00,000
- Office Staff Salary = Rs. 2,00,000
- Insurance, Taxes, etc. = Rs. 4,00,000
- Interest and Other Expenses = Rs. 4,50,000
- Depreciation = Rs. 5,20,000
- Repairs & Maintenance = Rs. 2,00,000
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