Prof.
HIRAL PARIKH
Kssbm
Guj University
Example 1
“I” CO. LTD., manufactures specific types of Refrigerators. It’s trading
and P&L account for the year ending on 31/12/2011 is as follows:
Trading and P&L A/C
Particulars Amt Particulars Amt
To opening stock of By Sales
raw materials 20000 Cash 200000
To purchases Credit 100000 300000
Cash 80000 By closing stock of
Credit 20000 Raw Material 20000
100000
-returns 10000 90000
To Carriage inward 10000
To salary of skilled
workers 50000
To salary of
unskilled workers 10000
To factory overheads
[20% fixed] 30000
To G.P. 110000
320000 320000
To administrative By G.P. 110000
overheads [60% 100000 By Income of repairs 10000
fixed dept. 20000
To selling overheads 50000 By income from lottery 30000
[40% fixed] 20000 By net Loss
To Deb. Interest
170000 170000
During 2012
1. Order for 200 refrigerators will be received and accepted
2. Material prices will increase by 30% and wage rates will increase
by 20%
3. Total fixed expenses will remain the same
4. Variable overheads will rise in proportion to the additional units
5. The number of temporary workers will increase by 40%
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6. During 2011, 100 refrigerators were manufactured and sold. The
company wants to earn 20% profit on selling price.
Prepare estimated cost sheet and determine the price to be quoted to the
person giving order.
Example 2
The trading and profit and loss account of Tirupati manufacturing Co. for
the year ending 31/12/2011 are as follows:
Raw Materials 68000 Sales 250000
Carriage Inward 3000 Closing stock 4000
Productive Wages 36000
Railway freight 3000
Production Expenses 14000
G.P. c/d 130000
Total 254000 254000
Office Salary 16000 G.P. b/d 130000
Office rent 15000 Interest 10000
Administratioin 9000 Discount received 1000
expenses
Advertising 3000 Sundry Receipts 2500
Distribution cost 6000
Selling cost 5470
Commission on sales 15000
[rs.6p.u.]
N.P. 74030
Total 143500 143500
The estimates for 2011 are as under:
1. Output and Sales will rise by 40%
2. Price of material will rise by 12.5% carriage Inward and Railway
freight will rise in proportion to output.
3. Because of increase in output, five new workers will be recruited
and each will be paid a salary of Rs.150 p.m.
4. Half the production expenses are variable. Fixed cost will rise by
25%.
5. The co. will purchase the rented house from 1/1/2012 in respect of
which municipality has assessed rates and taxes of Rs. 6000.
6. Office salary will rise by 8%
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7. Distribution cost includes packing charges at the rate of Re.1 per
unit.
Prepare a statement showing selling price per unit for 2012 if sales are
to be made so as to make a profit of 25% on selling price.
Example 3
The P&L a/c of ABC ltd. for Dec. 2011 is as follows:
Opening Stock 720000 Sales 13200000
[3000 units] [37500units]
Direct Material 4800000 Closing Stock 1320000
[5500 units]
Direct labour 2400000
Factory 1600000
expenses
G.P. c/d 5000000
Total 14520000 14520000
Office expenses 800000 G.P. b/d 5000000
Selling expenses 900000
N.P. 3300000
Total 5000000 5000000
The co. will produce 60000 units and 50000 units will be sold during the
year
1. The price of materials will go up by 20%
2. In addition to the proportionate increase in number of workers
another additional wages of Rs. 360000 are to be paid.
3. Factory expenses will rise in proportion to the combine cost of
material and wages
4. Administrative expenses per uint will be reduced by 20%
5. Selling expenses per unit will go up by Rs. 7.5
6. The percentage of profit on selling price is to be maintained.
Prepare a Cost sheet for the year 2011.
Example 4
A firm manufactures a standard article in the qualities, of which they
produced during 2010: 500 Articles of Quality X
1000 Articles of Quality Y
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1200 Articles of Quality Z
The stock of finished goods at 1st January , 2010 were:
Quality X – 60 articles, Quality Y- 40 articles and Quality Z- 76 articles.
Sales during the year were:
Quality X 510 articles at Rs. 60 each
Quality Y 960 articles at Rs. 67.50 each
Quality Z 1248 articles at Rs. 75 each
The following figures, in respect of the year, were extracted from the
books of accounts:
Work –in –progress on 1st Jan. 15000
Work –in –progress on 31 Dec.
st
18000
Cost of raw Material used in manufacture 43500
Stores 6000
Manufacturing wages 78000
Depreciation [works] 9000
Works on cost 16500
From the above prepare Cost Sheet [Manufacturing and trading account]
for the year ending on 31st Dec. 2010. Assume that the rate of profit is the
same for all three kinds of articles.
Example 5
Smart Shoe-Polish Company manufactures black and brown polish in one
standard size of tin retailing at Rs. 1.08 and 1.2 respectively. Following is
supplied to you.
Direct Materials
-polish 738000
-tins 288000
Direct Wages 244800
Production overheads 367200
Admin, Selling Overheads 122400
Sales
-Black Polish 1440000
-brown Polish 600000
Opening stock
-Black Polish 48000
-Brown Polish 160000
Closing stock
-Black Polish 108000
-Brown Polish 60,000
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The opening stock of black and brown polish was valued at its production
cost of 80.4 paise per tin and 86.4 paise per tin respectively. The cost of
raw material for brown is 10% higher than that for Black but there is no
difference in the cost of tins. Direct wages for brown are 8% higher than
those for black polish and production overheads are considered to vary
with direct wages. Administrative and selling overheads are absorbed at a
uniform rate per tin of Polish sold.
Prepare a statement of cost and profit per tin of polish.
Example 6
Component A is made entirely in Cost Centre 100. Material cost is 6
paise per component and each component takes 10 minutes to produce.
The machine operator is paid 72 paise per hour, and the machine hour
rate is Rs. 1.50. The setting up of the machine to produce the component
A takes 2 hours and 20 minutes.
On the basis of this information prepare cost sheet showing the
production and setting up cost, both in total and per component, assuming
that a batch of :
1. 10 components
2. 100 components
3. 1000 components
Example 7
A shop floor supervisor of a factory presented the following cost for job
No. 420 to determine selling price
Material 5600
Direct Labour [180 hrs @ Rs. 20 per hr]
[dept. X 80 hrs , dept. Y 60 hrs, dept Z 40 hr] 3600
Chargeable Expenses [Special Stores items] 400
-------
9600
Add: 33-1/3% for expense 3200
-------
Total Cost 12800
--------
Profit and loss account for previous year shows the follows:
Amt Amt
Material used 1200000 Sales less 2000000
returns
Direct wages
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Dept X 80000
Y 96000
Z 64000
--------- 240000
Special Stores 32000
items
Overheads
Dept X 40000
Y 72000
Z 16000
-------- 128000
Gross Profit c/d 400000
2000000 2000000
Selling Expenses 160000 Gross Profit 400000
Net Profit 240000
400000 400000
It is also noted that average hourly rates for the 3 departments X, Y and Z
are similar.
You are required to calculate and enter revised cost of job no. 420 using
the actual figures for the previous year as the basis. Add 20% to the total
cost to determine the selling price.
Example 8
The following information pertains to factory
Direct material 15% of s.p.
Direct labour 25% of s.p.
Factory overheads 25% of P.C.
Office overheads 40% of factory cost
Profit [Rs. 1500 p.u.] 20% of s.p.
Calculate selling overheads.
Example 9
The information given below has been taken from the cost records of a
factory in respect of job no.007
Direct Material Rs. 4010
Direct Wages
Dept. A 60 hrs @ Rs. 3 per hr
Dept. B 40 hrs @ Rs. 2 per hr
Dept. C 20 hrs @ Rs. 5 per hr
The Variable overheads are as follows:
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Dept. A Rs. 5000 for 5000 hrs
Dept. B Rs. 3000 for 1500 hrs
Dept. C Rs. 2000 for 500 hrs
Fixed Expenses Rs. 20000 for 10000 working hrs.
Calculate the cost of job no. 007 and the price for the job to give a profit
of 25% on selling price.
Example 10
From the records of Rajiv & Co. the following budgeted data are
available
Direct Material 225000
Direct Wages
Machine shop [12000 hrs] 75000
Assembly shop [10000 hrs] 60000
Works o/hs
Machine shop 95500
Assembly shop 44500
Admin o/hs 100000
S&D o/hs 150000
The company is following absorption method of costing
You are required to prepare :
1. Schedule of overhead recovery rates
2. Cost estimates of a job on basis of following information
Material
A 50 kg @ Rs. 20 per kg.
B 30 kg @ Rs. 30 per kg.
Labour
Machine shop 32 hrs
Assembly shop 48 hrs
Example 11
Aarav ltd. undertakes to supply 5000 units of a component per month for
the month of October, November, and December. Every month a batch
order is opened against which materials and labour cost are booked at
actuals. Overheads are levied at the rate per labour hr. The selling price is
contracted at Rs. 15 per unit.
From the following data, present cost and profit per unit of each batch
order and overall position of the order for 15000 units
Month Batch Material Labour Overheads Total
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[output] [Rs] [Rs.] [Rs] hours
Oct. 2300 12500 7500 6000 3000
Nov. 3420 18000 9000 7000 1750
Dec. 1900 10000 6000 9000 3600
Example 12
Suppose Annual Consumption is Rs. 20000 unit’s setup cost Rs. 200,
carrying cost Rs 0.50 find out Economic Batch size.
Example 13
A contract was signed by AB for Rs. 3900000. at the rate of 80% of
certified work Rs. 720000 and Rs. 1200000 were received during first
and second year respectively.
At the end of the first year, the books showed the following bal.
Rs.
Uncertified work 120000
Stock of material 30000
Plant [less dep] 90000
Work –in –progress [res.] 60000
Outstanding wages 24000
The following information is relating to second year
Material Issued 420000
Wages paid 252000
Special Plant [after 6 mths] 60000
Indirect expenses 60000
Other expenses [including
Rs. 12000 of other contracts] 48000
Material Returned to Stores 6000
Theft of special Plant from the site
Of contract 12000
Theft of material from site 5400
At the end of the second year
Uncertified work 150000
Stock of material 18000
Outstanding wages 12000
Write off 10% depreciation on Plant on RBM
Prepare Contract A/C and transfer Reasonable profit to P&L A/C
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Example 14
M/S M & N contractors obtained a contract to build a college building the
contract price being Rs. 400000. Work commenced on 1/1/2011 and upon
it the following expenditure was incurred during the year.
Rs.
Plant & tools 20000
Stores & material 72000
Wages 65000
Sundry expenses 5300
Establishment charges 11700
Certain of the materials costing Rs. 12000 were unsuited to the contract
and were sold for Rs. 2300
The value of Plant & tools on site on 31/12/2011 was Rs. 6200 and the
value of material on hand Rs. 3400. Cash received on account was Rs.
140000 representing 80% of the work certified. The cost of work done
but not certified Rs. 21900. M/s M & N decided to estimate future
expenditure would be incurred in completing the contract and to compute
the profit.
The estimates are as follows:
1. The contract would be completed by 30/09/2012
2. Wages Rs. 71500, material Rs. 68600 sundry expenses Rs. 6000
would be incurred in addition
3. Plant worth Rs. 25000 and tools worth Rs. 3000 would be
purchased
4. Establishment charges would cost the same per month as in 2011.
5. 2.5% of total cost of the contract would be on account of
contingencies
Prepare Contract A/C and show calculation of amount credited to P&L
A/C.
Example 15
D Ltd. undertook a contract to construct a building at a contract price of
Rs. 800000. The contract was commenced on 1/1/2010.
The following trail bal. was extracted on 31/3/2011
Particulars Debit Credit
Share Capital 900000
Land and Bldg. 400000
Investments 300000
Cash / Bank 55000
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Debtors and Creditors 90000 85500
B.R. and B.P. 30200 34500
Contract A/C:
Material 335000
Wages 179800
Plant 80000
Expenses 30000
Cash received [75% on Work Certified] 480000
1500000 1500000
Of the plant and material charged to the contract, plant costing Rs. 6000
and material costing Rs. 7000 were destroyed by an accident. A plant
costing Rs. 14000 was returned to stores. The value of materials on site
was Rs. 8100 and cost of work done but not certified was Rs. 27500.
Wages due but not paid on 31/3/2011 Rs. 8200. Charge 10% depreciation
on Plant and 7.5% on Land and Building.
D Co. estimates that the contract would be completed within next 4
months and the additional expenditure would be as under:
Rs.
Material 65300
Wages 55000
Other expenses 26300
Profit to be calculated on the basis of estimated profit and work certified.
Prepare Contract A/C for the year ended on 31/3/2011. And Balance
sheet as on that date.
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