FinancialandManagementAccounting

Unit12

Unit12

UnderstandingCost

Structure:
12.1

Introduction
Objectives

12.2

Meaning
SelfAssessmentQuestions1

12.3

Concepts
SelfAssessmentQuestion2

12.4

Components
SelfAssessmentQuestions3

12.5

Totalcost
SelfAssessmentQuestions4

12.6

Costsheet
SelfAssessmentQuestions5

12.7

Format
SelfAssessmentQuestions6

12.8

ValuationofWIP
SelfAssessmentQuestions7
TerminalQuestions
AnswertoSAQsandTQs

12.1Introduction
The need for accounting arose because of limitations of human memory. To preserve the
knowledge,variousstepsaretakenbothinthepastandinfuture.Itisnecessarytorecordallthe
business purposes. Accounting is a science as well ass an art of recording the business
transactionsinthebooksofaccountssystematicallyandscientifically.
Until the1980s, the Cost Accounting was in the domain of the Engineer. Its integration with
financial accounting started when Accountants started to audit the cost records. The costing
technique play a vital role in gathering and analyzing revenue and cost data to assist
management in decision making. The point of emphasis has logically shifted from cost
accumulation to cost analysis, a change from a limited cost finding function on to a broader

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managerial function. All managerial policies and decisions permeate all phases of cost
accountingandcostinformationhelpsin:
Acquiringplantandmachinery
Addingorreducingaproduct
Buyingormakingparts
Specialpricingofproducts
Replacementofequipments.

LearningObjectives:
Afterstudyingthisunit,youshouldbeabletounderstandthefollowing
1. Explainthemeaningofcost.
2. Analysethecostconcepts.
3. Understandtheelementofcost.
4. Familiarizewithcomponentsoftotalcost.
5. Preparethestatementofcost.
6. Understandthevaluationprocedureofworkinprogress.

12.2MeaningOfCost
Cost is the amount of resources given up in exchange of some goods and services. The
resourcesareexpressedinmoneyormoneysequivalent.CIMAdefinesthetermCostasthe
amountofexpenditure(actualornotional)incurredonorattributabletoagiventhing..Thegiven
thingmaybetakenasaproduct,serviceoranyotheractivity.Whiletheactualexpenditurerefers
totheamountspent,thenotionalexpendituredoesnotinvolveinanycashoutlay.Itdoesnot
reflectitselfintheaccountingrecords.But,itisimportantforthepurposeofcomparisonofcost
andindecisionmaking.
SelfAssessmentQuestions1
1. CA___________resourcesscarified.
2. Resourcearein_________________.

12.3CostConcepts
Costrepresentsexpenses.Itisasacrificeinadvance.Itconcernswithareleaseofsomethingof
value.Thecostisused:
The expected cost of a particular action. It is what the cost is expected to be in
choosingacourseofaction.
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Thecostofsomethingpurchasei.e.thepriceactuallypaidforit.Itisthepricepaidorpayable,
timeof purchase ofgoods or services. The pricepaid is theamount ofmoney,theholding of
whichisforegone.
Thecostofattainingsomeendthesacrificesactuallymadetoattainit experiencedcosts.
SelfAssessmentQuestions2
1. Costis________________.
2. cost__________advance.

12.4ComponentOrElementOfCost
Any product that is manufactured, whether a pin or a computer callsfor consumption of some
resources. The management,for its planningand control function must knowthe cost ofusing
their resources. Therefore, the elements of costs are classified as materials, labor and
expenses.Thesethreeelementsofcostwouldbegroupedintodirectandindirectcategories
Cost

Direct

Raw
Material

Labor

Indirect

Chargeable
Expenses

Material

Labor

Overheads

Followingarethethreebroadelementsofcost
Materials
Labor
Expenses
Materials: The term materials may be defined as the substances from which products are
manufactured. These materials may be in a raw or a manufactured state. Materials may be
directorindirect.
Itisanacceptedfact,basedonstatistics,that75%ofthetotalcostisintheformofrawmaterials.
These are the physical items used in manufacturing. These are the physical items used in
manufacturing.Thesecanbetracedpreciselyandconvincinglytotheunitofproduct.Itrefersto
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allmaterialsbroughtforbeingconvertedintofinishedproductexamplelogofwoodawaitingtobe
converted into doors and windows. Therefore, the term raw indicates that thefirm using the
materialshasnotyetprocessedthem.Butwhatisrawmaterialforonemanufacturermightbea
finished product for another : for example bricks, cement, steel is a raw material for a
constructioncompanywhereforasteelproducingfirmitisthefinalproduct.ForadmissiontoI
MBA,therawmaterialsarethegraduates.
Indirect materials: These are materials which do ot become part of the product. These
materials are consumed in the course ofproduction. These materials cannot be conveniently
assigned to specific physicalunits. Someof theindirect materials are consumable stores,oil,
lubricants,cottonwastes,printingandstationers.Indirectmaterialsmayrelatetothefactory,the
officeandadministrationandthesellinganddistributiondivisions.
DirectLabor:Itrepresentswagespayable/paidtothoseemployeeswhodirectlyengagedinthe
conversionofrawmaterialsintofinalproduct.Theyoperateinthemanufacturingmachineryand
equipment. They directly handlethe raw materials, work inprocessand thefinishedgoods on
theproductionline.Theyaccountistoseewhethertheworkdoneonaparticularproductora
specificgroupofproducts.
Examples:Inafurnituremart,thecarpentersengagedinconversionofrawwoodwithsofaset,
computertables,windows,doors,benchesaresaidtobethedirectworkers.Inanengineering
workshop,thewagespaidtotheoperatorsworkingwithlaths,drilling,cutting,shapingmachines
canbespecificallyassignedtotheproductsconcerned.Therefore,thedirectlaborcostscanbe
traceabletoindividualproducts.
Indirect Labor: Indirect labor is the labor which is not directly engaged in the production
operations.Theyare,however,engagethemselvestohelpintheproductionoperations.Such
labor does not alter the construction, composition or conditions of the product. Example
foremans salary, storekeepers salary, Factory managers salary etc. The indirect labor may
relatetothefactory,officeandadministrationandsellinganddistributiondivisions.
Chargeable Expenses : Theitems are of expenses which may be allocated toa specificjob,
process oroperation.The utility ofexpensesisexhausted on completionofthejob concerned.
Therefore,logically,theyaretreatedasdirectexpenses.Thechargeableexpensesareusually
incurredwhenthebusinessconcernundertakessomeoutsideconstructionalworkfarawayfrom
the principal premises, example widening of road by L & T construction company for the new
InternationalAirport.Thepopularitemsfallunderthiscategoryare:

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a) costofpattern,designs,drawingsspecificallypreparedforaparticularjob
b) hirechargesofspecialmachinery,plantorequipment
c) architectsandsurveyorsfeesinconnectionwithparticularjoborcontracts.
d) Costofanyexperimentalworkcarriedoutforaparticularjob
Indirect expenses: These are those expenses which cannot be directly and conveniently
allocated to specific costunits /cost centers.. They areapportioned. Examples are rent, rates
and insurance. They may relate to the factory, the office and administration and selling and
distributiondivisions.Thesearenowpopularlyknownasoverheads.Thesecostsariseasa
resultofoveralloperationsofabusiness.Thesecostsaresharedbyalltheproducts.Itincludes
all manufacturing and nonmanufacturing suppliers and services. These costs cannot be
associatedwithyaparticularproductorunit.Overheadsremainrelativelyconstantfromperiodto
period. At least they do not fluctuate in amount in relations to changing levels of factor
production.Overheadcostsareclassifiedbyfunctionsofanorganizationinto:
Factory,worksormanufacturingoverheads
Administration,office,establishmentorgeneraloverheads
Sellinganddistributionoverheads.
SelfAssessmentQuestions3
1. Costcompose________________
2. Directcostinclude__________.
3. Indirectcostareknowas___________.
4. Rawrefersto______________.
5. Indirectmaterialscannotbe_____________.
6. Directlaboris____for__________.
7. Indirectlaborisengagedfor________.
8. Chargeableexpensesare____________
9. Chargeableexpensesare______________________expand.
10. Indirectexpensesare________________.
11. IDEareknownas_________________.

12.5ComponentsOfTotalCost
Thecomponentsoftotalcostsarebasedonfunctionalclassification.Thevariousstagesthrough
whichthecostsfloware:

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Primecost: Itisthetotalofdirectmaterialscost,directlaborcostandchargeableexpenses/
FactoryCost: Itconsistsofprimecostandfactoryoverheads/
Office cost or Cost of Production: It comprises of factory cost and office and administration
overheads.
Total Cost : By adding sellingand distribution expenses to cost ofproduction,one can get the
totalcostorcostofsales.
SelfAssessmentQuestions4
1. Primecostis_______________.
2. Factorycostis_____________.
3. Costofproductionis_____________.
4. Totalcostis___________________.
5. Salesis_________________.
6. Profitis__________________.

12.5StatementOfCostSheet
Cost sheet is a statement prepared to show the different components of the total cost. It
generallyshowsthetotalcostandsalesaswellascostandsellingpriceperunit.Itisgenerally
presentedinatabularform.
SelfAssessmentQuestions5
1. Costsheetshows___________cost.
2. Itisprepared_________form.

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12.5FormatSpecimenOfCostSheet
NameofCompany_______________________________
Costsheetfortheproduct__________________________
Fortheyearending_______________________________
Outputinunits
Particulars

TotalPerunit
Rs.Rs.

RawMaterialsconsumed:
OpeningStockofRawMaterial
ADD:PurchasesofRawmaterials
Add:Carriageonpurchases
LESS:ClosingstockofRawmaterial
RawMaterialConsumed(RMC)

xxx

DirectorLaborxxx
ChargeableExpenses

xxx
PrimeCost

XXX

Factoryoverheads

xxx

FactoryCost
OfficeandAdministrationOverheads

XXX
xxx

CostofProduction

XXX

Inventoryvaluation
Openingstockoffinishedgoodsxxx
Less:closingstockoffinishedgoods:always
Tobevaluedatcostofproduction(xxx)
CostofGoodsSold(COGS)

XXX

SellingandDistributionOverheadsxxx
TotalCostofCostofSalesXXX
Profit(balancingfigure)xxx
SalesRevenueorSales

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XXX

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Example:
Prepare a cost sheet Raw materials consumed Rs.1,60,000. Direct wages Rs.80,000. Factory
overheadsRs.16,000.Officeoverheads10%offactorycost.SellingoverheadsRs.12,000.Units
produced4,000.SellingpriceperunitRs.100.
Solution:

CostSheet

Rawmaterials

1,60,000

Directwages80,000
Primecost
2,40,000
Factoryoverheads16,000
FactoryCost
Officeoverheads(10%offactorycost)
CostofProduction

2,56,000
25,600
2,81,600

Less:Closingstockoffinishedgoodstobevaluedat
Costofproduction:2,81,600x400*/4000**(28,160)
CostofGoodsSold
2,53,440
Sellingoverheads12,000
CostofSales/TotalCost

2,65,440

PROFIT(balancingfigure)94,560
Sales(3600xRs.100)3,60,000
*Closingstockinunits:Unitsproducedminusunitssold
**Denominatorshouldbethecurrentyearproductioninunits.
ItemsnotincludedinCostSheet:
a) Incometax
b) Dividendstoshareholders
c) Commissiontomanagingdirectors
d) Capitallossesi.e.lossoutofsales
e) Interestonloanordebenturesorbankinterest
f) Donations
g) Capitalexpenditure
h) Discountsonsharesanddebentures
i) Premiumonredemptionofsharesanddebentures
j) Underwritingcommission
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k) Writingofgoodwill,preliminaryexpenses
l) Reserveforbaddebts
m) Transfertoallreservesorappropriationofprofits
n) Sharepremium
o) Interestoncapital
p) Drawingofproprietors
q) Allpersonalexpensesofowner
SelfAssessmentQuestions6
1. RMCis___________.
2. COGSis_____________.
3. Closinginventoryisvalued_____________________.
4. Profit______________figure.

12.6ValuationOfWorkinProgress
In a manufacturingenterprise, there may be certain amount of goods in a partly manufactured
stateattheendofaparticularperiod.Thesearecalledassemimanufacturedgoodsorwork
in progress. The WIP is valued according to the value of raw material, labor and expenses
which has so far incurred tothe date of closing offinancial period. The work inprogress has
usuallythreecomponents:
Materialworkinprogresscosttodate
Labortodate
Manufacturingexpensesincurredtodate
Thetreatmentofworkinprogressistoaddtheopeningworkinprogresstotheconcernedcost
anddeducttheclosingworkinprogressagainstit.
SelfAssessmentQuestions7
1. WIPisnether____________nor__________.
2. WIPistreatedas________________.
3. Profitmarginastotalcostis_____________.
4. Profitmarginassellingpriceis___________.
5. 25%profitonSPis______________.
6. 25%onTCis___________.
Example:
DRLtdmanufacturesElectroniccomponents.ThefollowingfiguresaresuppliedRs.
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Purchase of Raw Material 2,00,000. Direct labor 1,20,000. Carriage inwards 20,000
Manufacturingexpenses10,000.Stockofrawmaterials:opening25,000,closing75,000.Work
inprogress on 1:4:2006 : Materials 2,000Labor5,000Expenses 1,000. Calculate the Factory
cost..

Solution:
COSTOFPRODUCTIONFORTHEYEARENDED31st March2008
DirectRawmaterialsconsumed:
Openingstockofrawmaterial25,000
Add:Purchaseofrawmaterials2,00,000
Add:carriageinwards20,000
Less:Closingstockofrawmaterials(75,000)
Add:OpeningWorkinprogressofmaterials5,000
Less:Closingworkinprogressofmaterials(2,000)
Rawmaterialsconsumed

1,73,000

DirectorLabor1,20,000
Add:OpeningWIPoflabor8,000
Less:ClosingWIPoflabor

(5,000)
_________1,.23,000
___________

PRIMECOST

2,96,000

FACTORYOVERHEADS
Manufacturingexpenses10,000
Add::openingWIPofexpenses

2,000

Less:ClosingWIPofexpenses(1,000)
___________11,000
____________
FactoryCost

3,07,000

Problem1:
Calculate the cost of raw materials purchased: Opening stock of raw materials Rs.10,000.
Closing stock of raw materials Rs.15,000. Expenses on purchases Rs.5,000. Direct wages
Rs.50,000PrimecostsRs.1,00,000.

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Solution:
Computationofcostofrawmaterialspurchased
OpeningStockofrawmaterials10,000
AddPurchases

Expensesonpurchases5,000
___________
15,000+X
Lessclosingstockofrawmaterials(15,000)
____________
Rawmaterialsconsumed
Directwages

X
50,000
_____________

PrimeCost

50,000+X

PrimecostgivenintheproblemisRs.1,00,000
Hencesubstituting,1,00,000=50,000+XThereforeX=Rs.50,000
CostofRawMaterialsisRs.50,000

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Problem2:
Prepareacostsheet:
DirectmaterialsRs.2,00,000.FactoryexpensesRs.1,20,000.OfficeexpensesRs.90,000
TotalsalesRs.6,50,000.PrimecostRs.4,10,000.10%oftheoutputisinstock.

Solution:

CostSheet

Directmaterials2,00,000
Directwages(PrimecostminusDirectmaterials2,10,000
_____________
PrimeCost
Factoryexpenses

4,10,000
1,20,000
_____________

FactoryCost

5,30,000

Officeexpenses90,000
_____________
CostofProduction

6,20,000

Less:closingstockoffinishedgoods10%of6.20,000(62,000.)
_____________
CostofSales5,58,000
Profit(balancingfigure)92,000
_____________
SALES

6,50,000

Problem3:
Thefollowinginformationisobtained:
Stock on Jan 1, 2007 : Raw materials 40,000 Finished goods 30, 000. Purchases of Raw
materials 2,40,000. Direct wages 1,36,000. Works expenses 70,400. Dividends paid 40,000.
Officeexpenses24,000.Depreciation10,000.SellingandDistributionexpenses32,000.Workin
progress : 1.1.2007 64,000. 31:.12.:2007 72,000. Goodwill written off 40,000. Stock on
31.12.2007 Raw materials 42,000 Finished goods 32,000. Sale of finished goods 5,50,000.
Paymentofsalestax16,000.Prepareacostsheet.

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Solution

Unit12

CostSheet

OpeningstockofRawmaterials40,000
Add:Purchasesofrawmaterials2,40,000
Less:Closingstockofrawmaterials(42,000)
___________
Rawmaterialsconsumed
Directwages

2,38,000
1,36,000
____________

PrimeCost

3,74,000

WorksOverheads
Worksexpenses70,400
Depreciation

10,000
____________
4,54,400

Add:openingstockofWIP64,000
Less:ClosingstockofWIP

(72,000)
____________

WorksCost

4,46,400

OfficeandAdministrationoverheads
Officeexpenses24,000
____________
CostofProduction

4,70,400

Add:openingstockoffinishedgoods30,000
Less:Closingstockoffinishedgoods(32,000)
____________
CostofGoodssold

4,68,400

SellingandDistributionexpenses32,000
_____________
CostofSales5,00,400
SalesTax
16,000
_____________
TotalCost
5,16,400
Profit

33,600
_____________

Sales

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5,50,000

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Problem4:
Prepareacostsheet
Raw materials Rs.33,000. Unproductive wages Rs.10,500. Factory lighting Rs.2,200. Motive
power Rs.4,400. Directors fees (Works) Rs.1,000. Factory cleaning Rs.500. Factory stationery
Rs.750. Loose tools written off Rs.600. Water supply Rs.1,200. Office insurance Rs.500.
Chargeable expenses Rs.3,000. Depreciation: Plant and machinery Rs.2,000. Office Building
Rs.1,000.DeliveryvansRs.200.UpkeepofDeliveryvanRs.700.CommissiononsalesRs.1,500.
Productive wages Rs.35,000. Factory rent and taxes Rs.7,500. Factory heating Rs.1,500.
Haulage Rs.3,000. Directors fees (office) Rs.2,000. Sundry office expenses Rs.200. Office
stationeryRs.900.Rentandtaxes(office)Rs.500.FactoryinsuranceRs.1,100.Legalexpenses
Rs.400. rent of warehouse Rs.300. Bad debts Rs.100. Advertising Rs.300. Sales Department
salaries Rs.1,500. Bank charges Rs.50, Reserve for Doubtful debtsRs.100..Debenture interest
Rs.20,000.IncometaxRs.22,500.Totaloutput20,000tons.
Solution

StatementofCost(Production20,000tons)
Directmaterialsconsumed33,000
Productivewages35,000
Chargeableexpenses3,000
____________
PrimeCost

71,000

WorksExpenses
Unproductivewages10,500
Factoryrentandtaxes

7,500

Factorylighting2,200
Factoryheating1,500
Motivepower

4,400

Haulage3,000
Directorsfees1,000
Factorycleaning500
Factorystationery750
Loosetoolswrittenoff

600

Watersupply1,200
Factoryinsurance1,100
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DepreciationofPlantandmachinery2,000
__________36,250
____________
Factory/Workscost

1,07,250

OfficeandAdministrationexpenses
Directorsfees

2,000

Sundryexpenses200
Officestationery900
Rentandtaxes

500

Officeinsurance500
Legalexpenses400
Bankcharges

50

Depreciationofofficebuilding1,000
_____________5,550
__________
CostofProduction

1,12,800

SellingandDistributionExpenses
Rentofwarehouse300
DepreciationofDeliveryvans200
Baddebts

100

Advertising300
SalesDepartmentsalaries1,500
UpkeepofDeliveryvan

700

Commissiononsales1,500
4,600
TotalCost/CostofSales

1,17,400

CostPerunit:TotalCost/NoofUnitsproduced:117400/20,000Rs.5.87
Note: Ignorereservefordoubtfuldebts.
IgnoreIncometax
IgnoreDebentureinterest

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Problem5:
Thefollowingextractreferstoacommodityforthehalfyearending31st March2008.Preparea
coststatement.
Purchase of raw materials Rs.1,20,000. Rent, rate, insurance and worksexpenses Rs.40,000.
DirectwagesRs.1,00,000.CarriageinwardsRs.1,440.OpeningstockRawmaterialsRs.20,000,
Finishedgoods(1000units)Rs.16,000.Closi9ngstock:rawmaterialRs.22,240FinishedGoods
(2,000tons).Workinprogress:openingRs.4,800andclosingRs.16,000.Saleoffinishedgoods
Rs.3,00,000.CostoffactoryRs.8,000.
Advertising,discountsallowedandsellingcostsRe.1pertonsold.Productionduringtheyearis
16,000tons.Prepareacostsheet.

Solution
StatementofCost
Directmaterials
Openingstockorrawmaterials20,000
Add:Purchasesofrawmaterials

1,20,000

Add:carriageinwards1,440
Less:Closingstockofrawmaterials(22,240)
____________
Rawmaterialsconsumed
DirectWages

1,19,200
1,00,000
__________

PrimeCost

2,19,200

WorksExpenses
Costoffactory8,000
Rent,rateandinsurance

40,000

Add:openingWIP4,800
Less:ClosingWIP

(16,000)
__________
Factory/Workscost

Officeandadministrationexpenses

2,56,000
Nil
__________

Costofproduction

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2,56,000

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Inventoryvaluation
Openingstockoffinishedgoods

16,000

Less:Closingstockoffinishedgoodstobevaluedatcostof
Production(32,000)
__________
CostofGoodSold

2,40,000

SellingandDistributionExpenses*
Advertisementanddiscountallowed15,000
__________
TotalCostorcostofsales2,55,000
Profit45,000
__________
Sales**3,00,000

*Tobevaluedonlyatnumberofunitssold.Openingstockoffinishedgoods+productionminus
closingstock=Numberofunitssold.
**Alwaystobevaluedatnumberofunitssold.NumberofunitssoldxSellingpriceperunit.
TenderCostSheetorQuotations
Frequently,amanufacturerofcapitalgoodsandconsumerdurablegoodsisrequiredtoquotethe
priceatwhichhecansupplyaparticulararticle.Moreover,demandforcertainseasonalarticles
needtobetakenintoaccount.Themanufacturerhastofixacompetitivepricetotakecareof
inflationarytrendsontheinput.Theseaspectsneedanestimationattheproductionlevelitself.
Forthispurpose,considerthefollowingprinciple:
Worksexpensesarebasedondirectwages
Officeexpensesarebasedonworks/factorycost.
Finally, since the costs are estimated, the profits can be related either to cost or to the selling
price.Theformulais:
Ifprofitpercentageisgivenon

Profit=TotalCostxgivenpercentageex.

Costpriceie.OnTotalcost

for20%,TCx20/100or25%,itisTCx25/

Ifprofitpercentageisgivenon

Profit=Totalcostxgivenpercentage/100

Sellingprice,bringthepercentage

minussamegivenpercentageeg.For20%

to costprice

TCx20/100minus20for25%,itis
TCx25/100minus25%

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Problem6:
Thecostdataisasfollows:
Raw materials consumed Rs.1,82,000. Direct wages Rs.40,000. Chargeable expenses
Rs.20,000.Openingstockoffinishedgoods(1,000units)Rs.32,000.Closingstock2,000units.
Factory overheads 100 % of direct labor. Office overheads 10% of works cost. Selling of
DistributionexpensesRs.4perunitsold.Unitsproduced10,000.Profitmarkup20%onselling
price.Prepareacostsheet.
Solution
STATEMENTOFCOST
Rawmaterialsconsumed1,82,000
Directwages40,000
Chargeableexpenses

20,000
_____________
PrimeCost

2,42,000

Factoryexpensesat100%ondirectwages40,000
_____________
Workscost

2,82,000

Officeandadministrativeexpenses10%ofworkscost28,200
_____________
CostofProduction

3,10,200

Inventoryvaluation

Openingstockoffinishedgoods32,000
Less:ClosingstockoffinishedgoodsatCOP

(62,040)
_____________

CostofGoodssold

2,80,160

SellingandDistributionoverheadsatRs.4perunitsold36,000
_____________
CostofSalesorTotalsales

3,16,160

Profit20%onSellingPrice:TCx20/10020or.
3,16,160x20/1008079,040

TenderPricebeingsales

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3,95,200

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TerminalQuestions:
1. Thecostingrecordsshowthefollowing
RawmaterialsconsumedRs.3,30,400.DirectwagesRs.3,80,000.Closingstockoffinished
goods Rs.1`,60,000. Administrative expenses Rs.40,000. Factory expenses Rs.70,000.
SalesRs.7,56,000Unitsproducedandsold4,000.Thefirmreceivedaquotationforsupply
of1,000units.Prepareaquotationbasedontheabovedata.
2. CostingDepartmentprovidesthefollowinginformation:
Total production 5,000 tons. Cost of raw materials consumed Rs.22,00,000. Direct wages
Rs.20,00,000. In direct factory wages Rs.1,00,000. Office expenses Rs.10,00,000. Public
RelationsexpensesRs,.50,000.ExpensesontestinglaboratoryRs.60,000.Sellingoverheads
Rs.10,00,000. Salaryof Managing Director Rs.50,000. Payment of income tax Rs.3,00,000.
Dividendspaid Rs.5,00,000. A profit marginof50 % on costis provided. The Government
grantsaspecialexportsubsidyofRs.1,000perton.Prepareacostsheet.
3. TheTrading,profitandlossaccountofDRisgivenbelow
ToCostofmaterials
Consumed2,00,000BySales8,00,000
ToDirectwages2,00,000
ToWorksexpenses1,00,000
ToGrossProfit3,00,000

8,00,000

8,00,000

ToSellingexpenses1,00,000ByGrossProfit3,00,000
ToNetProfit2,00,000

3,00,0003,00,000
Themanagementestimatesthefollowingfortheyearending31st March:
a) outputandsaleswillbe2000units.
b) Pricesofmaterialsandwageswillgoupby25%ofpreviousyear.
c) Worksexpenseswillriseinproportiontothecombinedcostofmaterialsandwages
d) SellingexpensesperunitareestimatedatRs.50
Prepareacoststatementforquotationpurposessoastooyieldaprofitof10%onsellingprice.

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AnswerSelfAssessmentQuestions
SelfAssessmentQuestions1
1. Amountof
2. Monetaryterm
SelfAssessmentQuestions2
1. Expense
2. Sacrificein
SelfAssessmentQuestions3
1. DirectandIndirect
2. Rawmaterial,labor,directexpenses
3. Overheads
4. Crudeformofasubstance.
5. Chargedtoproduct
6. Conversionofmaterialstofinishedproducts
7. Productionoperations
8. Allocated
9. Direct
10. Apportioned
11. Overheads
SelfAssessmentQuestions4
1. AggregationofDM,DLandDE.
2. PC+FOHS
3. FC+AOSH
4. COP+DOSH
5. TC+profit
6. Salestotalcost.
SelfAssessmentQuestions5
1. Components
2. Tabular
SelfAssessmentQuestions6
1. Openingstock+purchaseclosingstock.
2. COP+Inventoryvaluation.

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FinancialandManagementAccounting

Unit12

3. AtcurrentyearCOP
4. BalancingfigurebetweenSPandTC.
SelfAssessmentQuestions7
1. Rawmaterial,finishedproduct.
2. AddopeningWIPanddeductclosingWIP
3. TCxgivenpercentage.
4. (TCxgivenpercentage)100givenPercentage.
5. TCx25/10025.
6. TCx25/100.
AnswerforTerminalQuestions
1. Costofproductionfor4000unitsRs8,20,400costofproductionfor1000unitsRs2,26,990.
Total cost (4000units ) Rs6,80,400 (1000units)Rs 2,26,990profitforquotationof1000
unitsRs25,221.
2. Cost of production Rs 54, 60,000 per ton Rs 1092 Total cost Rs 64,60,000 per unit Rs
1,292.
3. TotalcostofthetenderRs13,50,000SalesRs15,00,000

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