COST ACCOUTING

PROBLEMS
UNIT I COST SHEET
1. You are required to compile a statement showing cost and profit from the information given, showing
clearly: a) Material consumed b) Prime cost c) Works cost d) Cost of production e) Cost of sales f) Profit
and g) Sales
Materials purchased Rs 2,00,000 Opening stock of materials Rs 40,000
Wages Rs 1,00,000 Closing stock of materials Rs 60,000
Direct expenses Rs 20,000
Factory overhead is absorbed at 20% on wages. Administration overhead is 255 on the works cost. Selling
and distribution overheads are 20% on the cost of production. Profit is 20% on sales.
2. Calculate prime cost, factory cost, cost of production, cost of sales and profit from the following
particulars:
Rs Rs
Direct materials 1,00,000 Depreciation:
Direct wages 30,000 Factory plant 500
Wages of foreman 2,500 Office premises 1,250
Electric power 500 Consumable stores 2,500
Lighting : Managers salary 5,000
Factory 1,500 Directors fees 1,250
Office 500 Office stationery 500
Storekeepers wages 1,000 Telephone charges 125
Oil and water 500 Postage and telegrams 250
Rent: Salesmen’s salaries 1,250
Factory 5,000 Travelling expenses 500
Office 2,500 Advertising 1,250
Repairs and renewals: Warehouse charges 500
Factory plant 3,500 Sales 1,89,500
Office premises 500 Carriage outward 375
Transfer to reserve 1,000 Income tax 10,000
Discount on shares written off 500
Dividend 2,000
3. During the year 2008, X ltd, produced 50,000 units of a product. The following were the expenses:
Stock of raw materials on 1.1.2008 Rs 10,000 Direct expenses Rs 25,000
Stock of raw materials on 31.12.2008 Rs 20,000 Factory expenses Rs 37,500
Purchases Rs 1,60,000 Office expenses Rs 62,500
Direct Wages Rs 75,000 Selling expenses Rs 25,000
You are required to prepare a cost sheet showing cost per unit and total cost at each stage.
4. A factory produces 100 units of a commodity. The cost of production is:
Materials – Rs.10,000; Wages – Rs. 5,000; Direct expenses – Rs,1,000;
Factory overheads are 125% on wages; office overheads are 20% on works cost. Expected profit is 25%
on sales.
Calculate the price to be fixed per unit.
5. The following details have been obtained from the cost records of Raja Sekar Ltd.
Stock of raw materials on 1.12.2010 Rs 75,000 Depreciation of plant and machinery Rs 3,500
Stock of raw materials on 31.12.2010 Rs 91,500 Expenses on purchases Rs 1,500
Direct Wages Rs 52,500 Carriage outwards Rs 2,500
Indirect wages Rs 2,750 Advertising Rs 3,500
Sales Rs 2,11,000 Office rent and taxes Rs 2,500
Work-in-progress 1.12.2010 Rs 28,000 Travellers wages and commission Rs 6,500
Work-in-progress 31.12.2010 Rs 35,000 Stock of finished goods (1.12.2010) Rs 54,000
Purchases of raw materials Rs 66,000 Stock of finished goods (31.12.2010) Rs 31,000
Factory rent, rates and power Rs 15,000
Prepare a cost sheet giving the maximum possible break up of costs and profit.
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6. M/s Indus Industries Ltd. Are the manufacturers of moonlight torches. The following data relate to
manufacture of torches during the month of March 2009.
Raw materials consumed Rs 20,000 Office overheads 20% of works cost
Direct Wages Rs 12,000 Selling overheads 50 paise per unit
Machine hours worked 9500 hours Units produced 20,000 units
Machine hour rate Rs 2 Units sold 18,000 @Rs. 5 per unit
Prepare cost sheet showing the cost and the profit per unit and the total profit earned.
7. Following extract of costing information relates to a commodity for the year ended 31-12-2010.
Stock on 1.4.2009: Rent, rates and taxes of works Rs 10,000
Raw materials Rs 5,000 Carriage inwards Rs 360
Finished goods(1,000 tons) Rs 4,000 Work-in-progress on 1.4.2009 Rs 1,200
Stock on 1.3.2010: Work-in-progress on 31.3.2010 Rs 4,000
Raw materials Rs 5,560 Sales of finished goods Rs 75,000
Finished goods(2,000 tons) Rs 8,000 Cost of factory supervision Rs 2,000
Raw materials purchased Rs 30,000
Direct wages Rs 25,000
Advertisement and selling expenses amount to Re. 0.25 per ton sold. 16,000 tonnes were produced during
the year.
Prepare statement showing a) the value of raw materials used; b) the cost of the output for the year; c) the
cost of the turnover for the year; d) the net profit for the year and e) the net profit per ton of the
commodity.
8. Prepare a cost sheet showing cost of production and profit from the following data.
Opening Closing
Stock of raw materials 75,000 78,750
Work-in-progress 24,600 27,300
Stock of finished goods 52,080 47,250

Purchases for the year Rs 65,700 Selling & distribution expenses Rs 12,630
Sales Rs 2,16,930 Scrap sold Rs 990
Direct wages Rs 51,450 Office expenses Rs 20,610
Works expenses Rs 25,020
9. The following data are available from the books of a factory:
Opening Stock: Purchases of raw materials 40,000
Raw materials 16,000 Direct wages 32,000
Work-in-progress 6,000 Factory overheads 10,000
Closing stock:
Raw materials 8,000
Work-in-progress 10,000
The following additional information is given to you:
Composition of opening work-in-progress: Composition of closing work-in-progress:
Raw materials – 3,200 Raw materials – 4,000
Direct wages – 2,000 Direct wages – 5,400
Factory overheads – 800 Factory overheads – 600
Total – 6,000 Total – 10,000
You are required to ascertain factory cost.
10. In a factory two types of ceiling fans viz., Usha and Crompton are produced. Ascertain the cost and
profit per unit sold from the particulars given below.
Usha Crompton
Materials 16,400 18,900
Wages 8,900 9,800
Works overhead are 60% of wages and office overheads are 20% on works cost. The selling expenses per
fan sold is Rs. 2. The selling expenses of Usha and Crompton are Rs. 550 and Rs. 800 respectively. 80 fans
of Usha and 100 fans of Crompton are sold. There is no opening or closing stock.

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11. From the following details extracted from the trial balance of new era ltd. For the financial year
ending 31.3.2010, you are require to prepare:
a) A statement of cost showing various elements of cost in detail
b) A separate statement of profit
Credit Balances Rs Debit Balances Rs
Sales 8,00,000 Opening stock:
Returns of materials 10,000 Raw material 30,000
Sale of scrap of raw 8,000 WIP 40,000
material Finished goods 60,000
Plant & Machinery 1,00,000
Buildings 8,00,000
Returns inwards 20,000
Raw material purchased 2,00,000
Carriage on material 10,000
Direct Wages 1,20,000
Indirect wages 40,000
Factory expenses 30,000
Sundry office expenses 83,000
Power 50,000
Indirect materials infactory 10,000
Sundry factory expenses 20,000
Selling expenses 60,000
Distribution expenses 20,000
Interest on bank loan 10,000
Additional Information
a) Closing stock
Raw material 40,000
WIP 25,000
Finished goods 50,000
b) Depreciation on plant &
Machinery at 10% P.A
Depreciation on buildings (50%
factory and 50% office) at 5% P.A
12. The following information has been obtained from the records of Left Center Corporation for the
period from January 1 to June 30, 2010.
On January 1, 2010 On June 30, 2010
Cost of raw materials 30,000 25,000
Cost of work-in-progress 12,000 15,000
Cost of stock of finished goods 60,000 55,000
Transactions during six months are:
Purchases of raw materials 4,50,000
Wages paid 2,30,000
Factory overheads 92,000
Administration overheads 30,000
Selling and distribution overheads 20,000
Sales 9,00,000
Prepare i) Cost sheet showing a) Materials consumed b) Prime cost c) Factory cost incurred and factory
cost; and
ii) Income statement in Tradional form for the six months showing gross profit and net profit.

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TENDER AND QUOTATIONS
13. The following figures relate to the costing of a Tarpaulin manufactured in respect of a certain type of
a sheet for a period of three months:
Stock of materials (1-1-2001) 11,000 Sales 2,87,100
Stock of materials (31-3-2001) 7,000 Indirect expenses 26,000
Productive wages 1,66,000 Completed stock (1-1-2001) NIL
Materials purchased 1,23,000 Completed stock (31-3-2001) 58,000

The number of sheets manufactured during three months was 4,400 and the price is to be quoted for 1,296
sheets in order to realise the same percentage of profits as for the period under review, assuming no
alteration in rates of wages and cost of materials.
Prepare a statement of cost for the manufacture of 4,400 sheets and quotation for 1,296 sheets.
14. The particulars of a factory for the year 2006 are given below:
Raw materials 3,00,000 Selling overhead 1,12,000
Direct wages 1,68,000 Distribution overhead 70,000
Works overhead 1,50,000 Net profit 1,10,000
Office overhead 1,68,000
In 2007, the expenses incurred on the execution of a work order:
Raw materials - 12,000; wages – 7,000; Assuming that in 2007 works overhead went up 20% distribution
overhead went down by 10% and selling and office overheads went up by 12 1/2 %, at what rate of price
should the product be quoted so as to earn the rate of profit on the selling price same as in 2006?
15. On August 15, 1991 a manufacture Soman desired to quote for a contract for the supply of 500 radio
sets. From the following details prepare a statement showing the price to be quoted to give the same
percentage of net profit on turnover as was realised during 6 months ending on 30th June 1991:
Stock of materials as on 1st Jan 1991 20,000 Indirect charges during 6 months 25,000
Stock of materials as on 30th June 1991 25,000 Opening stock of completed sets NIL
Purchase of materials during 6 months 1,50,000 Closing stock of completed sets 100
Factory wages during 6 months 1,20,000 Sales during 6 months 3,24,000

The number of radio sets manufactured during these six months was 1,450 sets including those sold and
those stocked at the end of the period. The radios to be quoted are of uniform quality and size as were
manufactured during the six months to 30th June, 1991. As from August 1, the cost of factory labour has
gone up by 10%.
16. Cooling Ltd. Manufactured and sold 1,000 refrigerators in the year ending 31-12-1997. The
summarised trading and profit & loss account is as follows:
Rs Rs
To cost of materials 80,000 By sales 4,00,000
To direct wages 1,20,000
To other manufacturing costs 50,000
To gross profit c/d 1,50,000
4,00,000 4,00,000
To management salaries 60,000 By gross profit B/d
To rent, rates 10,000
To selling expenses 30,000
To general expenses 20,000
To net profit 30,000
1,50,000 1,50,000
For the year ending 31-12-98, it is estimated that:
a) Output and sales will be 1,200 refrigerators.
b) Price of materials will go up by 20% on the level of the previous year.
c) Wages will increase by 5%.
d) Manufacturing cost will rise in proportion to the combined cost of materials and wages.
e) Selling costs per unit remain unchanged.
f) Other expenses will also remain constant.
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You are required to submit a statement to the board of directors showing the price at which the
refrigerators should be sold so as to show a profit of 10% on selling price.
17. The accounts of Pleasant company Ltd., shows the following details for the year 1990:
Materials – 3,50,000; Labour – 2,70,000; Factory Overhead – 81,000; Administration overheads –
56,080;
It is estimated that Rs. 1,000 for materials and Rs. 700 for labour will be required for one unit of the
finished product for quotation purpose.
Absorb factory overheads on the basis of labour and administration overheads on the basis of works cost.
A profit of 12.5% on selling price is required on quotation.
a) Prepare a cost sheet and
b) Prepare a statement of the selling price per unit of the finished product.
18. The cost of manufacturing 2,500 units of a commodity is as follows:
Materials – 40,000; wages – 50,000; direct expenses – 800; variable overheads – 8,000; fixed overheads –
32,000;
For manufacturing every 500 extra units of the commodity, the cost of production increases as follows:
Materials – Proportionately
Wages – 10% less than proportionately
Direct expenses – No extra cost
Fixed overheads – 400 extra
Variable overheads – 25% less than proportionately
Calculate the estimated cost of production of 4,000 units of the commodity.
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Specimen of cost sheet
Cost sheet of ---- for the month of January 2011
Particulars Total Cost Cost per unit
Rs. Rs. Rs.
Opening stock of raw materials xxx Xxx
Add: Purchase of raw materials xxx Xxx
Add: Carriage inwards xxx Xxx
Add: Other direct materials used xxx Xxx
Add: Taxes and duties on the material purchased xxx Xxx
xxx Xxx
Less: Closing stock of raw materials xxx
Less: Saale of unsuitable raw materials xxx
Less: Sale of scrap of raw materials xxx xxx Xxx
Cost of raw materials consumed xxx Xxx
Direct labour xxx
Direct expenses or chargeable expenses xxx xxx Xxx
Prime cost xxx Xxx
Add: Works Overhead
Indirect materials xxx
Indirect wages xxx
Factory rent and rates xxx
Factory lighting and heating xxx
Power and fuel xxx
Repairs and maintenance xxx
Drawing office expenses xxx
Depreciation of plant and machinery xxx
Factory stationery xxx
Insurance of factory xxx
Factory/works managers salary xxx
Water consumption in factory xxx
Total works overhead Xxx Xxx
xxx Xxx
Add: opening work-in-progress Xxx Xxx
Xxx Xxx
Less: Closing work-in-progress Xxx Xxx
Works cost/Factory cost/Manufacturing cost Xxx Xxx
Add: Office or Administration overheads
Office rent and taxes Xxx
Office lighting Xxx
Office stationery Xxx
Office furniture depreciation and repairs Xxx
Office salaries Xxx
Legal expenses Xxx
Bank commission Xxx
Telephone and postages Xxx
Office cleaning Xxx
Total administration overhead Xxx Xxx
Cost of Production Xxx Xxx
Add: Opening stock of finished goods Xxx Xxx
Xxx Xxx
Less: Closing stock of finished goods Xxx Xxx
Cost of production of goods sold Xxx Xxx
Add: Selling and Distribution overheads
Salesmen’s salaries Xxx
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Salesmen’s commission Xxx
Showroom rent Xxx
Showroom expenses Xxx
Advertisement Xxx
Sales office rent Xxx
Travelling expenses Xxx
Warehouse rent and rates Xxx
Warehouse staff salaries Xxx
Repairs and depreciation of delivery vans Xxx
Carriage outward xxx
Total selling & distribution overhead Xxx Xxx
Cost of sales Xxx
Profit/Loss Xxx
Sales xxx

Tender and Quotations

A) Direct material and direct labour cost are generally estimated on the basis of cost per unit of preceding
period, subject to fluctuations in the market price of materials and labour rates.
B) Overhead is estimated on the basis of past experience as a percentage as given below:
1. Percentage of factory overheads to direct wages
= (Factory overheads / Direct wages) * 100
2. Percentage of office overheads to works cost
= (Office overheads / Works cost) * 100
3. Percentage of selling and distribution overheads to works cost
= (Selling and distribution overheads / Works cost) * 100
Or
The percentage may be calculated on cost of production
= (Selling and distribution overheads / Cost of production) * 100

C) Estimation of profit for a tender or quotation

Profit = Cost of sales X (Percentage of profit / 100)
If profit is to be ascertained as a percentage of selling price of the tender, the profit is to be calculated
as given below:
Profit = (Cost of sales x Rate of profit on sales) / (100 – Rate percentage on sales)
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