COST ACCOUNTING MANAGEMENT Materials X and Y are used as follows : Minimum usage — 50 units each per week Minimum usage — 150 units each per week Normal usage — 100 units each per week Ordering quantities x = 600 units Y = 1000 units Delivery period x = 4 to 6 weeks Y = 2 to 4 weeks Calculate for each material a) Minimum level b) Maximum level c) Order level d) Explain importance of inventory controls? AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL CASE STUDY : 2 A company presently sells an equipment for Rs 35,000. Increase in prices of labour and material cost are anticipated to the extent of 15% and 10% respectively, in the coming year. Material cost represents 40% of cost of sales and labour cost 30% of cost sales. The remaining relate to overheads. If the existing selling price is retained despite the increase in labour and material prices. The company would face a 20% decrease in the existing amount of profit on the equipment. Question : 1) You are required to arrive at a selling price so as to give the same percentage of profit on increased cost of sales, as before. 2) Prepare a statement of profit / loss per unit, showing the new selling price and cost per unit in support of your answer. 3) What is the anticipated amount of increased material and labour cost. 4) What policy changes should the company make for maintaining the profits. CASE STUDY : 3 A product passes through two processes. The output of process, I becomes the input of process II and the output of process II is transferred to wearhouse. The quantity of raw materials introduced into process I is 20000 Kg at Rs 10 per kg. The cost and output data for the month under review are as under. Process I Process II Direct Materials (Rs) 60,000 40,000 Direct Labour (Rs) 40,000 30,000 Production overheads (Rs) 39,000 40,250 Normal loss 8 5 Output 18000 17400 Loss realization of Re/unit 2.00 3.00 The company’s policy is to fix the selling price of end product is such a way as to yield a profit of 20% on selling price. Required : 1) Prepare the process account 2) Determine the selling price per unit of the end product. 3) What are the advantages for preparation of an process account? 4) What is the output of Process I and Process II? CASE STUDY : 4 A factory manufactures a chemical product with three ingredient chemicals A, B and C as per standard data given below. Chemical Percentage of total input Standard Cost per Kg A 50% 40 B 30 60 C 20 95 There is a process loss of 5% during the course of manufacture. The management gives the following details for a certain week. Chemical consumed Quantity Purchased Actual Cost & issued (Rs) A 5200 Kg 2,34,000 B 3600 Kg 2,19,600 C 1700 Kg 1,58,100 Output of finished product : 10200 Kg Calculate all the relevant variances a) Total material cost variances b) Material price variance c) Material mix variance d) Yield variance e) Usage variance & give the chart Standard cost of a Chemical product

COST ACCOUNTING MANAGEMENT

Materials X and Y are used as follows :
Minimum usage — 50 units each per week
Minimum usage — 150 units each per week
Normal usage — 100 units each per week
Ordering quantities x = 600 units
Y = 1000 units
Delivery period x = 4 to 6 weeks
Y = 2 to 4 weeks
Calculate for each material
a) Minimum level
b) Maximum level
c) Order level
d) Explain importance of inventory controls?
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
CASE STUDY : 2
A company presently sells an equipment for Rs 35,000. Increase in prices of labour and
material cost are anticipated to the extent of 15% and 10% respectively, in the coming
year. Material cost represents 40% of cost of sales and labour cost 30% of cost sales.
The remaining relate to overheads. If the existing selling price is retained despite the
increase in labour and material prices. The company would face a 20% decrease in the
existing amount of profit on the equipment.
Question :
1) You are required to arrive at a selling price so as to give the same percentage of
profit on increased cost of sales, as before.
2) Prepare a statement of profit / loss per unit, showing the new selling price and cost
per unit in support of your answer.
3) What is the anticipated amount of increased material and labour cost.
4) What policy changes should the company make for maintaining the profits.
CASE STUDY : 3
A product passes through two processes. The output of process, I becomes the input of
process II and the output of process II is transferred to wearhouse. The quantity of raw
materials introduced into process I is 20000 Kg at Rs 10 per kg. The cost and output
data for the month under review are as under.
Process I Process II
Direct Materials (Rs) 60,000 40,000
Direct Labour (Rs) 40,000 30,000
Production overheads (Rs) 39,000 40,250
Normal loss 8 5
Output 18000 17400
Loss realization of Re/unit 2.00 3.00
The company’s policy is to fix the selling price of end product is such a way as to
yield a profit of 20% on selling price.
Required :
1) Prepare the process account
2) Determine the selling price per unit of the end product.
3) What are the advantages for preparation of an process account?
4) What is the output of Process I and Process II?
CASE STUDY : 4
A factory manufactures a chemical product with three ingredient chemicals A, B
and C as per standard data given below.
Chemical Percentage of total input Standard Cost per Kg
A 50% 40
B 30 60
C 20 95
There is a process loss of 5% during the course of manufacture.
The management gives the following details for a certain week.
Chemical consumed Quantity Purchased Actual Cost
& issued (Rs)
A 5200 Kg 2,34,000
B 3600 Kg 2,19,600
C 1700 Kg 1,58,100
Output of finished product : 10200 Kg
Calculate all the relevant variances
a) Total material cost variances
b) Material price variance
c) Material mix variance
d) Yield variance
e) Usage variance & give the chart Standard cost of a Chemical product

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