Material cost

1. Two components A,and B are used as

follows:Normal uage 50 units per week
each Minimum usage 25 units per week
each Maximum usage 75 units per week
each
Re-order quantity A: 300 units
B:500 units
Re-order period
A: 4 to 6 weeks
B: 2 to 4 weeks
Calculate :
a.Re-order level b. Minimum level c. Maximum level d. Average stock
level
2. For the manufacture of a certain product two components A and B are used .
Thefollowing particulars about these components are available :
Particulars A B
Normal Usage (per week) 60 nos 60 nos
Maximum usage (per week) 80 nos 80 nos
Minimum usage (per week) 30 nos 30 nos
Reorder Quantity 400 nos 600 nos
Reorder period 4 to 6 weeks 2 to 4 weeks
You are required to calculate for each component :
a. Reorder level
b. Maximum level
c. Minimum level
d. Average level

3. The following data are available in respect of Material x for the year ended 31sr March , 2015:
Particulars RS
Opening stock 90,000
Purchase during the year 2,70,000
Closing stock 1,10,000

Calculate :
1. Inventory turnover ratio
2. The number of days for which the average inventory is held
4. The following information relates to year 2013-14
Details Material -1 Material -II
Opening stock 5,00,000 20,00,000
Closing stock 3,00,000 16,00,000
Net purchases 42,00,000 50,00,000
Calculate the material turnover ratios regarding each of these materials and express in
number of days theaverage inventory held.
 Labour costing
1. A worker produced 200 units in a week’s time. The guaranteed weekly wage payment
for 45 hoursis Rs81. The expected time to produce one unit is 15 minutes which is raised
further by 20% underthe incentive scheme. What will be the earning per hour of that
worker under Halsey (50% sharing) and Rowan bonus schemes?

2. Calculate the earnings of a worker under (i) Halsey plan and (ii) Rowan Plan from
the followingparticulars:
1) Hourly rate of wages guaranteed 0.50 paise per hour.
2) Standard time for producing one dozen articles- 3 hours.
3) Actual time taken by the worker to produce 20 dozen articles- 48 hours.

3. A worker takes 6 hours to complete a job under a scheme of payment by result. The
standard timeallowed for the job is 9 hours. His wage rate is Rs.1.50 per hours.
Material cost of the job is Rs.16and the overheads are recovered at 150% of total direct
wages. Calculate the Factory cost of job under (a) Rowan and (b) Halsey systems of
incentive.

4.A worker is paid Rs.100 per month and a dearness allowance of Rs.200 p.m. There
is a providentfund @8 1/3 % and the employer also contribute the same amount as the
employees. The Employees State Insurance Corporation premium is 1 ½ % of wages
of which ½ % is paid by theemployees. The number of working days in a year are 300
of 8 hours each. Out of these the worker is entitled to 15 days leave on full pay. It is
the Firms Practice to pay 2 months wages as bonus each year.
Calculate the wage rate per hour for costing purpose.
 Overheads
1. M & Co. has 3 production department and service departments. The expenses are as given
below:
Expenses Total
Consumable stores 15,400
Supervision 22,800
Rent and taxes 10,000
Insurance 2,000
Depreciation 30,000
Power 9,000
Light and heat 4,000
Total 93,200

The following information is Available:

Production departments Service departments
PARTICULARS Finishing Repairs &
Machine shop Assembly shop assembly Stores maint
Direct materials 34% 39% 13% 4% 10%
Direct wages 35% 22% 27% 10% 7%
Area (sq. ft) 5250 3500 4375 1750 2625
Asset value 200000 225000 50000 12500 12500
H.P. x Hours x
LF 10800 7200
(A) Prepare the primary distribution statement using the most appropriate basis for
appointment
(B) The machine shop, assembly shop and finishing departments have issued stores
requisition in the ratio of 9:6:5 and repairs requests in the ratio of 2:3:1. Prepare
the secondary distribution statement on non-reciprocal (direct distribution) basis.
2. Superclass and co ltd has three production departments: X, Y and Z and two service
departments A and B the following estimated figures for a certain period have been made
available :
Particulars RS
Rent and Rates 10,000
Lighting and electricity 1,200
Indirect wages 3,000
Power 3,000
Depreciation of machinery 20,000
Other expenses and sundries 20,000
The following details are provided by the firm :
Particulars Total Departments
X Y Z A B
Floor space 10,000 2,000 2,500 3,000 2,000 500
Lighting points 120 20 30 40 20 10
Direct wages(RS) 20,000 6,000 4,000 6,000 3,000 1,000
Horse power of machines 300 120 60 100 20 -
Cost of machinery 1,00,000 24,000 32,000 40,000 2,000 2,000
Working hours - 4,670 3,020 3,050 - -
The expenses of the service departments A and B are to be allocated as follows:
X Y Z A B
A 20% 30% 40% - 10%
B 40% 20% 30% 10% -

You are required to calculate the overheads absorption rate per hour in respect of the three
production departments: What will be the total cost of an article with material cost of RS 80 and
direct labour cost of RS 40 which passes through X , Y and Z for 2,3, and 4 hours respectively.

3.M & Co. has 3 production department and service departments. The expenses are as given
below:
Expenses Total
Consumable stores 15,400
Supervision 22,800
Rent and taxes 10,000
Insurance 2,000
Depreciation 30,000
Power 9,000
Light and heat 4,000
Total 93,200

The following information is Available:

Production departments Service departments
PARTICULARS Finishing Repairs &
Machine shop Assembly shop assembly Stores maint
Direct materials 34% 39% 13% 4% 10%
Direct wages 35% 22% 27% 10% 7%
Area (sq. ft) 5250 3500 4375 1750 2625
Asset value 200000 225000 50000 12500 12500
H.P. x Hours x
LF 10800 7200
(A) Prepare the primary distribution statement using the most appropriate basis for
appointment
(B) The machine shop, assembly shop and finishing departments have issued
stores requisition in the ratio of 9:6:5 and repairs requests in the ratio of
2:3:1. Prepare the secondary distribution statement on non-reciprocal (direct
 distribution) basis.
4. Superclass and co ltd has three production departments: X, Y and Z and two service
departments A and B the following estimated figures for a certain period have been made
available :
Particulars RS
Rent and Rates 10,000
Lighting and electricity 1,200
Indirect wages 3,000
Power 3,000
Depreciation of machinery 20,000
Other expenses and sundries 20,000

5.The following details are provided by the firm :

Particulars Total Departments
X Y Z A B
Floor space 10,000 2,000 2,500 3,000 2,000 500
Lighting points 120 20 30 40 20 10
Direct wages(RS) 20,000 6,000 4,000 6,000 3,000 1,000
Horse power of machines 300 120 60 100 20 -
Cost of machinery 1,00,000 24,000 32,000 40,000 2,000 2,000
Working hours - 4,670 3,020 3,050 - -
The expenses of the service departments A and B are to be allocated as follows:
X Y Z A B
A 20% 30% 40% - 10%
B 40% 20% 30% 10% -

You are required to calculate the overheads absorption rate per hour in respect of the three
production departments: What will be the total cost of an article with material cost of RS 80 and
direct labour cost of RS 40 which passes through X , Y and Z for 2,3, and 4 hours respectively.

6. The following particular relate to a new machine : Rs

Purchase Price 4,00,000
Installation Expenses 1,00,000
Rent per quarter 3,750
General Lighting for the total area 1,000 per month
Foreman ‘s Salary 30,000 per annum
Insurance Premium for the machine 3,000 per annum
Departmental Overheads for the machine 5,000 per annum
Consumable Stores 4,000 per annum
Power – 2 units per hour at 50 paise per unit
The estimated life of the machine is 10 years and scrap value at the end of 10th year is Rs
1,00,000.
The machine is expected to run 20,000 hours in its life time. The machine occupies 25% of total
area. The foreman devotes 1/6th of his time for the machine.
7. From the following information compute machine hour rate :
Cost of machine Rs 44,000
Scrap value Rs 4,000
Rent for the workshop Rs 25,000 per annum
General lighting for the workshop Rs 160 per month
Power consumption 20 units per hour @ Rs 20 per every 100 units
Administrative expenses allocated to the machine Rs 4000 per annum
Repairs and maintenance 75% of depreciation
Workshop supervisor’s salary Rs 3000 per month
Estimated working time per year 50 week of 40 hours each
Setting up time which is regarded as productive time 200 hours per year
Effective life of the machine 10 Years
The machine occupied 1/4 area of the workshop. The supervisor is expected to devote 1/3rd of
th

his time in supervising the machine.

8. A machine costs Rs 12,00,000 and is deemed to have a scrap value of 10% at the end of its
effective life (12 years). Ordinarily the machine is expected to run for 1800 hours per year but it
is estimated that 200 hours of the time will be lost for normal repairs and maintenance. Other
details in respect of machine shop are as under:
Details Rs
Annual wages bonus and provident fund contribution of each of two operators
(each operator is in charge of three machine ) 1,50,000
Rent of shop per year 1,20,000
General lighting of the shop per month 6,000
Insurance premium for one machine per annum 28,000
Shop Supervisor’s monthly remuneration 15,000
Cost of repairs and maintenance per machine per quarter 6000
Other factory overheads attributable to the shop per annum 96,000
Power consumption of machine per hour 15 units @ 6 per unit ----
There are six identical machine in the shop. The supervisor is expected to devote one – fifth of
time for supervising the machine.
Compute the machine hour rate from the above details.
 Classification of cost sheet
1. Following details are furnished by K.K. Ltd of expenses incurred during the year
ended 31stMarch 2014
Particulars Rs
Direct Wages 1,10,000
Purchased of Raw Material 2,40,000
Factory Rent 35,000
Cost of Catalogues 17,100
Sundry Expenses 18,500
Depreciation on Plant and Machinery 19,000
Opening stock of Raw Material 25,000
Repairs to office furniture 12,500
Carriage outward 25,650
Interest on Loan 12,700
Closing stock of Raw Material 15,000
Distribution of Free samples 13,775
Audit Fees 11,500
Demonstration Expenses 13,300
Furniture Loss by Fire 8,000
Indirect Material 26,000
Office Salaries 27,500
Store Keepers Salary 9,000
Depreciation on Office Equipment 10,000
Commission of Sales 15,675
Direct Expenses 90,000
Material Handling Charges 11,000
Machinery Purchased 1,40,000
Other Information:
a. Stock of finished goods at the end 500 units to be valued at cost of production
b. Number of Units sold during the year was 9500
c. Profit desired on sales is 20%
Prepare Cost sheet showing the various elements of cost both in total and per
unit and also find outthe total profit and per unit profit.

2. Following details are furnished by NY Ltd. Of Expenses incurred during the

year ended31st march, 2014
Salesmen salary 6,47500
Opening stock of finished goods (2000 units) 7,60,000
Directors fees 973700
Indirect wages 9,76,300
Repairs to office furniture 4,01,700
Works manager salary 11,94,700
Showroom expenses 10,68,700
Depreciation on computer 12,12,900
Indirect materials 7,31,900
Depreciation on plant and machinery 4,77,100
Advertisement 15,33,750
 Office salary 7,91,700
Direct wages 10,01,000
Direct materials 18,82,400
Direct expenses 496,600
Closing stock of finished goods (3000 units) ?
Other information:
1. Closing stock of finished goods to be valued at cost of production.
2. Profit desired on sales is 20%
3. Number of units sold during the year was 25,000
Prepare cost sheet showing the various elements of cost both in total and per
unit and also find outthe total profit and per unit profit for the year ended 31st
march, 2014.

3. Super Vision company furnishes you with the following information about its
1000 TV setsmanufactured and sold during the year:
Particulars Rs Particulars Rs
Materials 18,00,000 Office and Administration Expense 6,80,000
Direct Wages 10,00,000 Selling & Distribution Expenses 1,20,000
Power and Stores 2,40,000 Sale of Scrap 40,000
Indirect Wages 3,00,000 Sale of 1000 TV sets 62,00,000
Factory lighting 1,20,000 Repairs & dep. Of Machinery 2,00,000
Cost of rectifying defective work 60,000
Prepare the cost sheet for the above year, showing the elements of cost per
unit. Prepare also theestimated cost sheet for the next year assuming that:
(i) Materials cost and direct wages cost will increase by 10% and 15% respectively.
(ii) Factory-overheads will be recovered as a percentage of direct wages, as last year.
(iii)Office-overheads and selling overheads will be recovered as percentage
of works cost, aslast year, and
(iv) 1500 TV sets will be produced and sold at Rs. 6,600 each in the next year.

4.
Dr. Trading and profit and Loss Accounts of MK & Co.
Cr.
For the year ended 31st march 2013
Particulars Rs Particulars Rs
To materials
consumed 3,75,000 By sales (15000 units) 15,00,000
To direct wages 2,25,000
To factory overheads 3,00,000
To gross profit c/d 6,00,000
15,00,000 15,00,000
To office rent 90000 By gross profit b/d 6,00,000
To general expenses 75000 By dividend received 13500
To management expenses 60000 By interest on investment 6500
To goodwill w/off 22500
To advertisement 1,31,250
To salesmen commission 1,50,000
To interest on loan 14500
 To net profit c/d 76,750
6,20,000 6,20,000
For the year ending 31st march, 2014 following estimates have been made:
a. Production and sales units will be doubled.
b. Direct materials cost per units will rise by 20%.
c. Direct wages per units will increase by 40%.
d. Of the factory overheads, Rs150000 are Fixed and would remain at
the same level butvariable thereof would be in same proportion to
direct wages as on 2012-13
e. Total office and administration overheads would increase by 40%
f. Selling and distribution overheads per units will increase by 20%
g. Selling price per units would rise by 10%
You are require to prepare:
A. Cost Sheet for the year ended 31st March,2013 showing cost per unit and total cost and
B. Projected cost sheet for the year ending 31st March, 2014 showing cost per unit and
total cost.