Practice Questions
Tentative solutions
Qsn 1: From the following information, prepare a cost sheet for period ended on 31st March 2006.
Opening stock of raw material 12,500 Purchases of raw material 1, 36,000 Closing stock of raw
material 8,500 Direct wages 54,000 Direct expenses 12,000 Factory overheads 100% of direct wages
Office and administrative overheads 20% of works cost Selling and distribution overheads 26,000
Cost of opening stock of finished goods 12,000 Cost of Closing stock of finished goods 15,000 Profit
on cost 20%.
Ans:
Cost sheet for the period ending 31st March 2006
Opening stk of RM 12,500
Add: Purchases 1,36,000
Less: Closing stock 8,500
Direct wages 54,000
Direct expenses 12,000
Prime Cost 2,06,000
Factory O/H
(100% of direct wages) 54,000
Works Cost 2,60,000
Office and admn O/H 52,000
(20% *2,60,000)
TC of Production 3,12,000
Add: Opening stk of FG 12,000
Cost of goods 3,24,000
Available for sale
Less: Closing stock of FG 15,000
COGS 3,09,000
Selling and sitribution O/H 26,000
TC 3,35,000
Profit
(20%*3,35,000) 67,000
Sales 4,02,000
Qsn 2: The following information is given to you from which you are required to prepare Cost Sheet
for the period ended on 31st march 2006:
Consumable material: Opening stock 20,000 Purchases 1, 22,000 closing stock 10,000
Direct wages 36,000 Direct Expenses 24,000 Factory overheads 50 % of direct wages
Office and administration overheads 20% of works cost Selling and distribution expenses Rs.3 per
unit sold
Units of finished goods In hand at the beginning of the period (Value Rs. 12500) 500
Units produced during the period 12,000
In hand at the end of the period 1,500
Find out the selling price per unit if 20% profit on selling price. There is no work-in-progress either at
the beginning or at the end of the period.
Ans: Cost sheet for the period
Opening stock 20000
Add: Purchases 122000
Less: Closing stock 10000
Cost of raw material = 1,32,000
Consumed
Add:
Direct wages 36,000
Direct expenses 24,000
Prime Cost 1,92,000
Factory O/H
50% of direct wages 18,000
(12,000*1.50)
Factory O/H 2,10,000
Office O/H
20% of Work Cost 42,000
TC of Production 2,52,000
Add: Opening stk 12,500
Of FG
(500*25)
Cost of Goods available
For sale
(12000+500) 2, 64,500
Less: Closing stk of FG
@21 p.u (1500 units) 31,500
Cost of goods sold
(12,500-1500=11,000 units) 2,33,000
Add: Selling and Distbn exp 33000 (3*11,000 units)
Cost of sales 2,66,000
Add: Profit
(20% on SP) 66,500
Sales 3,32,500
Qsn 3: The Venketeshwara Hospital Trust operates two types of specialist X-ray scanning machines,
XR1 and XR50. Details for the next period are estimated as follows:
Machine XR1 XR50
Running hours 1100 2000
(£) (£)
Variable
running costs
(excluding plates) 27500 64000
Fixed costs 20000 97500
A brain scan is normally carried out on machine type XR1: this task uses special X-ray plates costing
£40 each and takes four hours of machine time. Because of the nature of the process, around 10 per
cent of the scans produce blurred and therefore useless results.
Required:
(a) Calculate the cost of a satisfactory brain scan on machine type XR1. (b) Brain scans can also be
done on machine type XR50 and would take only 1.8 hours per scan with a reduced reject rate of 6
per cent. However, the cost of the X-ray plates would be £55 per scan.
Required: Advice which type should be used, assuming sufficient capacity is available on both types
of machine.
Ans:
Particulars XR1 XR50
Variable running costs 27,500 64,000
Hours 1100 2000
Fixed Costs 20,000 97,500
Cost sheet
Plates Cost 40 55
Overhead =4*VC/Hours =1.8*VC/Hours
=4*27500/1100 =1.8*64,000/2000
=100 =57.6
Normal Loss =0.1*(100+40) =0.06*(55+57.6)
=14 =6.756
Total Cost 154 119.356
Qsn 4: Several costs incurred by Myrtle Beach Golf Equipment, Inc. are listed below. For each cost,
indicate which of the following classifications best describe the cost. More than one classification
may apply to the same cost item. For example, a cost may be both a variable cost and selling cost
Cost Classifications a. Variable b. Fixed c. Administrative d. Selling e. Manufacturing
f. Research and development g. Direct material h. Direct labour I. Manufacturing overhead
Cost Items
1. Metal used in golf clubs. – a, e, g
2. Salary of the plant manager- b, e, i
3. Cost of natural gas used to heat factory-a, e, i
4. Commissions paid to sales personnel-a, d
5. Wages paid to employees who assemble golf bags-e, h
6. Salary of an engineer who is working on a prototype of a new solar-powered golf cart-b, f
7. Depreciation on the word processing equipment used by the company president’s secretary-b,c
Qsn 5: The following expenditure was incurred on a contract of 12, 00,000 for the year ending 31-
12-2015.
`Materials 2,40,000 Wages 3,28,000 Plant 40,000 Overheads 17,200 Cash received on account of the
contract to 31st Dec., 2015 was ` 4,80,000, being 80% of the work certified. The value of materials in
hand was ` 20,000. The plant had undergone 20% depreciation. Prepare Contract Account
It is assumed that the when the work certified is 1/10 or more but less than 9/10 of the contract
price then the profit to the P and L account to be transferred is
Notional Profit * 2/3* Cash Ratio (Cash received / Work certified)
Ans: Contract account
Particulars Amt Particulars Amt
Materials 240000 Materials in hand 20,000
Wages 328000 Plant in hand (40,000 32,000
less 20%)
Plant 40,000 By WIP 6,00,000
Work certified
(480000*80%)
Overheads 17,200 Notional Profit 26,800
To P and L a/c 14,293
(2,68,00*2/3*80%)
Reserve 12,507
