BBS Cost and Management Accounting

State any two importance of cost accounting.

"Management accounting is the practice of identifying, measuring, analyzing, interpreting, and communicating financial information for achieving an organization's goals". Discuss.

Write any two objectives of cost accounting.

Define semi-variable cost with suitable examples.

A Company's cost structure of two different level of output is given below:

Total cost : (Rs) 40,000 60,000Output (units) 2,000 4,000

Required: Total cost for 3,000 units.

Define management accounting. Explain the reasons for gaining popularity by management accounting in modern business world.( H ) [10]

Write down any two limitations of financial accounting.

A manufacturing Company's cost structure at two different levels of outputs are:

Required: Total cost for 6,000 units using High Low Method

The following information regarding labour are:

Standard:

Standard hours needed to work and actual hours paid for a week is 40 hours. Actual output produced by the workers is 340 units and Standard output per gang hour is 8 units 

Required: Labour Variances

"Management accounting is the presentation of accounting information to formulate the policies to be adopted by the management & assists its day to day activities." Comment.

Write any two limitations of cost accounting.

Define the indirect cost with an example?

"Management accounting is effective tool for formulating plan & policies and taking right decisions." Explain this statement with the help of its significance.

State any two importance of cost accounting.

Difference in total cost is Rs. 100,000 between 40,000 units and 20,000 units. The total fixed cost is Rs. 200,000. Required : Total cost for 30,000 units.

Define management accounting. Explain the importance of management accounting in the modern business world.

Explain about "Just in Time" inventory policy.

The following information is available in respect of a material.•

 Maximum stock level = 12,000 units• Maximum consumption = 1,000 units• Average consumption = 800 units• Delivery period = 8 days - 10 days• Re-order level = 7,200Required: Reorder quantity

Write in brief about ABC analysis in stock control system.

Following information are given:

- Carrying cost per unit Rs. 0.5

- Ordering cost per order Rs. 40

- EOQ 1,000 units

Required: Annual requirement.

What is perpetual inventory system?

The following information is available:

 Annual requirement = 40,000 units
Ordering Cost per Order = Rs.400
Cost per unit = Rs.20
Carry cost per unit = 10% of inventory value
Required: Total cost at EOQ

Define "Just in Time" inventory policy.

A manufacturing company provides you the following information:

Total cost at economic order quantity: Rs. 3,000

Ordering cost per order: Rs. 60

Cost per unit of material: Rs. 20

Carrying cost is 10% of inventory value.

Required: Annual requirement.

The following information is available in respect of a material.

Maximum stock level = 20,000 units

Consumption per day = 2,000 - 3,000 units

Re-order period = 4 - 6 days

Required: Reorder quantity

"Optimum investment in inventory is the main essence of inventory management." Clarify this statement with the help of objectives of Inventory Management.

Write any two motives of holding inventory.

Following information is given :

Annual requirement: 3600 units @ Rs. 20 each
Carrying cost: 10 % of inventory value
Cost of placing an order: Rs. 400
Required: Number of order of EOQ.

Following information are supplied to you :

Consumption per day: 800 - 1200 units
Re-order period: 3 - 5 days
Maximum stock level: 6000 units
Required: Re-order quantity.

What is replacement cost?

The following data are given to you:Standard output = 1,000 unitsActual output = 1,200 unitsCost per unit = Rs.20Required: Total wages under Gant Task Bonus Scheme

The following particulars are extracted from the records of a company:•

Beginning and ending number of employees were 350 and 450 respectively.• Number of employees quit and discharged was 30 and 20 respectively.• Employees replaced during the period were 30.Required: Labour Turnover Rate under Separation Method

Point out the causes of labour turnover.

A manufacturing company provide you the following information :

Standard time allowed ………150 hours

Time Saved by a worker ………20 hours

Wage rate per hour ………Rs. 30

Required: Total earning of a worker under Rowan Premium Plan

Following information are supplied to you :

Consumption per day ......30,000 to 50,000 units

Re-order period ......3 to 5 days

Maximum stock level ......3,00,000 units

Required: Re-order quantity

Following particulars are provided :

Cost of selection ...... Rs.25,000

Training cost ......Rs.20,000

Cost of welfare services ......Rs.22,500

Loss due to inefficiency of new workers ...Rs. 20,000

Average no. of workers ......100

No. of workers replaced ......200

Required: Replacement cost per replacement

A worker gets a total wages of Rs.4,000 for a job after working 20 hours. The wage rate per hour is Rs.180.

Required: Amount of bonus under Rowan Plan

Write down the meaning of labour turnover.

The following data are given to you:

Standard time allowed: 160 hrs.

Actual time taken: 140 hrs.

Wage rate per hour: Rs. 20

Required: Bonus under Rowan premium plan.

Following particular are provided :

Cost of selection: Rs. 30,000

Training cost: Rs. 24,000

Cost of welfare services: Rs. 26,000

Loss due to inefficiency of new workers: Rs. 10,000

Average no. of workers: 50

No. of workers replaced: 100

 Required: Replacement cost per employee

Write any two causes of labour turnover.

The following data are given to you:

• Standard output = 1,000 units

• Actual output = 1,200 units

• Normal price rate = Rs. 20

Required: Total wages under Taylor's differential piece rate system.

Following particular are provided :

Cost of selection: Rs. 25,000

Training cost: Rs. 20,000

Cost of welfare services: Rs. 22,000

Pension scheme: Rs. 15,000

Loss due to inefficiency of new workers: Rs. 20,000

Average no. of workers: 1000

No. of workers replaced: 200

Required: Preventive cost per employee.

The following information are provided to you:

 Required: Machine hour rate of the production departments .

a. Write down the limitations of cost volume profit analysis.b. A company produces two products A and B. Both products are produced on the same equipment and use similar processes. The information for output and the cost of activities are given below:

The indirect cost of the different activities is Rs. 500,000 which is apportioned as follows:

• Volume Related 40%

• Purchase Related 40%

• Set-up Related 20%

      Required : Cost Per Unit under Activity Based Costing Method 

Write any two differences between allocation and apportionment of overhead.

Following are the particulars of an industry manufacturing two products A and B :

 The overhead cost and cost drivers are as follows:

       Required: Cost per unit under Conventional method using MH and Activity Based Costing  [10 ]

Explain the meaning of activity based costing.

The following details are given to you:

Required:

i) Process Accounts
ii) Normal Loss Account
iii) Abnormal Gain Account
iv) Abnormal Loss Account

(a) A company produces two products: A and B. Both products are produced on the same equipment and use similar processes. The information for output and the cost of activities are given below:

The indirect cost of the different activities are as follows:

 Volume related cost: 68,000

 Purchase related cost: 55,000

 Set up related cost: 30,000

 Required: Cost per unit under activity-based costing method. 

 b) What is job order costing? Why is it needed?

(a) What is job order costing? Explain the importance of job order costing. 

(b) Following are the particulars of an industry manufacturing two products X and Y . 

The overhead cost and cost drivers are as follows:

Required: Cost per unit under Activity Based Costing method.

Define the meaning of by-product.

The following information up to 9 months i.e. 30th Magh of a renowned company who undertook a contract for erecting a sewerage treatment plant for Lalitpur Metropolitan for a total value of Rs 2,000,000 are provided:• Material = Rs.300,000• Wages = Rs.400,000• Overhead = Rs.100,000• Plant = Rs.200,000• Work certified was for Rs.1,200,000 and 75% of the same was received in cash• Value of work uncertified was Rs.45,000• Material at site as on 30th Magh = Rs.30,000• Depreciation on plant is 15% per year• Ignore depreciation of plant for the use on uncertified portion of the work

Required:

a. Contract Account

b. Contractee's Account

c. Work in Progress Account

d. Balance Sheet .

Product AB passes through two processes A and B before it is transferred to finished stock. The following information is obtained for the month of January:

   The output of process A is transferred to process B at 25% profit on the cost price.

    The output of process B is transferred to finished stock at 25% profit on cost price.

    The stocks in process are valued at prime cost. The finished stock is valued at the price at which it is received from process B. Sales during the period are Rs. 300,000.

Required:

 a. Process Account

 b. Finished Stock Account

c. Actual realized profit

d. Stock valuation for Balance Sheet purpose .

(a) Harati Yatayat Sewa provides the following information to you:

Cost of bus ...... Rs. 660,000Scrap value after 10 years ...... Rs. 60,000Drivers Salary ...... Rs. 20,000 per monthHelper's Salary ...... Rs. 10,000 per monthInsurance and Taxes ...... Rs. 360,000 per annumOther administrative expenses ...... Rs. 240,000per annumDiesel and other lubricating oil ......Rs. 20 per kmThe bus will run 25 days in a month with 6 round trips of 15Km a day

.**Required**: Operating cost statement showing standing and running charges 

(b) Give the meaning of joint product, main product and by product with examples. 

The following details are taken from a factory

The output of process I is transferred to process II at a profit of 25% on cost price and that of process II to finished stock at a profit of 20% on transfer price. The factory sold 80% of the finished goods for Rs. 350,000.

**Required** :

   -**Process I and II account**

   - Finished stock account

  - Actual realized profit

What is batch costing?

 a) What is contract costing? Why is it needed?

b. The following information is provided:

Rent -------------------------------------- Rs. 6,000
Lighting --------------------------------- 5,000
Supervision ----------------------------- 3,000
Insurance ------------------------------- 2,000
Total ------------------------------------- 16,000

Estimated labour hours in the month are 8,000 hours and estimated machine hours are 4,000.

Required: Calculate overhead rate per labour hour and machine hour.

a. What is Job-order Costing? Also, explain the importance of Job-order Costing.


b. Following are the information of a renowned Hotel in Nepal

 Expenses (Rs.) summary:

 Total salaries = 50,000 per month

 Lighting and heating = 60,000 per annum

 Repair and maintenance = 40,000 per annum

 Depreciation on fixed assets = 15% of Rs.1,000,000

 Insurance = Rs.5,000 per month

 Miscellaneous = Rs.194,000 per annum

 Profit margin 25% on cost

 Total number of rooms = 20

 Occupancy ratio:

 For 150 days = 100%

 For 210 days = 60%

 Required:

 a. Operating cost statement

 b. Single room charge per day

What is normal loss?

The following is summary of the entries in a contract ledger as on 31ˢᵗ Chaitra 2080.

The additional information are as follows: i. The cost of work uncertified included material Rs. 5,000 and other expenses Rs. 3,000 ii. Material lost by theft Rs. 1,000 iii. Plant costing Rs. 8,000 sold for Rs. 7,000 iv. Depreciation on plant at @ 15% p.a. v. Material at site Rs. 2,000 vi. Cash received from contract Rs. 120,000 being 80% of work certified vii. Contract price Rs. 200,000.

 Required:
Contract Account

Contractee's Account

 Work in progress Account

Balance Sheet

The following details are taken from a factory:

The output of process I is transferred to process II at a profit of 20% on cost price and that of process II to finished stock at a profit of 25% on transfer price. The factory sold 80% of the finished goods for Rs. 420,000.

Define direct cost with suitable examples?

What do you mean by service costing?

The following is a summary of the entries in a contract ledger as on \( 31^{\text{st}} \) Chaitra 2081.

The additional information are as follows:
i. 5% of the value of work certified still remained to be certified.
ii. Material returned to store Rs. 8,000.

iii. Material costing Rs. 15,000 sold at a profit of Rs. 1,000. iv. Depreciation on plant @ 15 % p.a. v. Material at site Rs. 10,000 vi. Cash received from contractor Rs. 540,000 being 90% of work certified. vii. Contract price Rs. 900,000.

Required:

a. Contract account

b. Contractee's account

c. Work in progress account

d. Balance sheet

The following details are given to you:

Required: a. Process accounts b. Normal loss account c. Abnormal gain account d. Abnormal loss account

The sales revenue and profit of a manufacturing company for two years were as follows : 

Required:

 i) Profit volume ratio

ii) Fixed cost

 iii) Brake-even point in Rs.

iv) Break-even point in units if selling price per unit is Rs.10

iv) Sales to earn desired profit after tax of Rs.20,000 if tax rate is 25%

v) Profit when sales are Rs.500,000

vi) Margin of safety if profit is Rs.25,000

What is variable costing? Differentiate it from absorption costing with examples.

The profit and total cost of a company during two years were as follows:

A company had the following relevant information:

Direct material per unit Rs. 8

Direct labour per unit Rs. 4

Variable manufacturing cost per unit Rs. 5

Variable selling expenses : 5% of sales

Selling price per unit : Rs. 30

Fixed manufacturing OH per unit : Rs. 5

Fixed administrative and selling expenses Rs. 72,000

Normal capacity : 30,000 units

Required: 

a.-Income statement under absorption costing system for year 2077 

b.-Profit From variable costing system . 

Income Statement of a MM Company is as follows:

A Company Ltd. is working now at its annual normal capacity of 10,000 units. The total cost per unit is Rs. 50. The annual fixed costs are Rs. 160,000.

Required: Total cost at 80% of the normal capacity.

The total cost and profit of a manufacturing company for two years were as follows:

Required:

Break - even point in Rs.
Break - even point in units if selling price per unit is Rs. 100.
Sales to earn desired profit after tax of Rs. 30,000 if tax rate is 25%
Profit when sales are Rs. 800,000
Margin of safety if profit is Rs. 50,000 

A manufacturing company with normal capacity of 30,000 units provides the following particulars:

Productions units:           25,000

Sales units:                   26,000

Closing stock units:      4,000

Direct material per unit:     Rs. 6

Direct labour per unit:    Rs. 4

Variable manufacturing cost per unit:   Rs. 5

Variable selling expenses per unit:    Rs. 2

Selling price per unit: Rs. 30

Fixed manufacturing OH per unit: Rs. 5

Fixed administrative and selling expenses: Rs. 72,000

Required:

 a. Income statement under absorption costing system.

b. Reconciled profit under variable costing system.

The sales revenue and total cost of a manufacturing company for two years were as follows:

Required:

a. Profit volume ratio

b. Fixed cost

c. Break-even point in Rs.

d. Break-even point in units if selling price per unit is Rs. 10

e. Sales to earn desired profit after tax of Rs. 75,000 if tax rate is 25%

f. Profit when sales are Rs. 80,000

g. Margin of safety if profit is Rs. 125,000

What is budget?

a. Differentiate between flexible budget and static budget.

b. The sales forecasts for coming four months of a company are:

Each unit of finished product needs 3 kg of material @ Rs. 5 per kg. The company has a policy of keeping ending inventory of finished goods in each month that will be equal to half month's sales and raw material is 50 percent of raw material required to same month's production need.

Required: Production Budget and Material Purchase Budget for the three months from Baisakh to Ashad

The following information are given:

Standard:

Actual : 

Standard Loss in 10% and Actual output is 390 kg 

Required : Material Variances 

(a) A trading company has presented the following information:

The gross profit margin on sales will be 40%. The merchandize inventory will be equal to meet next months sales need. The operating expenses and selling expenses will be 10% and 20% of sales revenue respectively including depreciation 10,000 per month.

**Required**:

• Merchandize purchase budget for 1st three months ending March

• Operating and selling expenses budget for 1st three months ending March [3+2=5];

(b) What is standard costing? Explain any two difference between standard cost and estimated cost. [5]

A company adopts standard cost practices for it's direct labour cost and factory overhead cost. The activities level and cost per direct labour hour are summarized below:

Normal capacity: 35,000 DLH
Hours worked and paid: 32,000 DLH
Hours produced: 28,000 DLH
Actual overhead incurred: Rs. 300,000
Actual Wages paid :

2 Skilled labour @Rs. 2 per hour .................. Rs. 128,000
2 Semi-skilled labour @ Rs. 1.5 per hour ....... Rs. 96,000
5 Unskilled labour @ Rs. 0.90 per hour ......... Rs. 144,000

 Total: Rs. 368,000

 Required :
Direct labour cost and factory overhead budget for 30,000 DLH
Analysis of variance showing direct labour efficiency, mix, rate and cost
Three overhead variances

Define flexible budget.

The production plan of a company for three months is:

Labour hour per unit is 2 hours and rate per labour hour is Rs.10 

Required: Direct labour cost for three months ending March

“Budget is an estimation of revenue and expenses over a specified future period of time,” Discuss.

(a) The planned production units for coming four months of a company are:

Following standard and actual data are given to you:

Standard output per gang hours is 0.25 units. 8,000 hours needed to work and paid. Actual output produced 2,200 units in 8,000 hours. 

Required: Labour Variances. 

(a) Explain the characteristics of joint product and by-product. 

(b) The following information are given:

Standard loss is 10% and actual output is 280 kg.

Required: Material variances .

The following information are provided to you:

Expected price of product = Rs.1,000Expected discount = 10% on priceExpected production cost of product = Rs.400Expected designing cost of product = Rs.50Required: Value of product

What do you mean by cost reduction? Also explain the tools and techniques of cost reduction.

(a) What is job order costing? Mention its features.(b) Define Cost Reduction. How does it differ from cost control?

“Cost reduction will be helpful in meeting competition effectively,” comment.

(a) Explain in brief the meaning nature and scope of cost reduction. 

(b) What do you mean by batch costing? Also, explain its features. 

"Budget is an important tool for the development of organizations." Explain.

"Cost reduction is the accomplishment of a permanent and real reduction in per unit cost of goods without compromising the value it is intended to deliver." Comment. And also differentiate between cost reduction and cost control.