Cost Accounts

The labour can work even if there is shortage of employees. This excuse cannot be made by labour to sit idle,.  They cannot make the excuse that production is not possible with shortage of employees. The labour has all the required things to work, even if there is shortage of employees.

 Right answer because sales department is concerned with sale of finished products. It is not concerned with materials or raw materials, so bills of material are not required to be circulated to this department.

Right answer because  stores ledger records not only the details of quantity of physical movement of goods, but  also the rates of stock movements. The maximum ,minimum and re-order levels of stock are also mentioned for taking action to replenish the stock position.

 Re-order level is 630 units.
Re-order Level -
<o:p> 
Maximum Re-order period X Maximum Usage
=    6 weeks  X 105 units = 630 units 

 F stands for fast moving items and stocks of such items which are consumed in a short span of time. N means normal moving items and such items which are exhausted over a period of year or so. S indicates slow moving items, existing stock of which would last for two years or more. D stands for dead stock and for other existing stock which is no longer in demand.

 Book costs are those which do not require any cash payments. For instance, depreciation is the cost for which no cash transaction is involved.

It is 330 units.Minimum Level  
                  = Re-order level  - ( Normal Usage X Average Re-order period )                         =   630  -  (  50 X 6 )                        =   630  - 300                        =  330 units   

 VED stands for Vital Items, Essential Items, Desirable Items -Vital Items must be stored adequately for smooth operation of plant, as their non-availability leads to stoppage of prodcution. Essential items are considered essential for efficient running, but without which the system would not fail. D stands for desirable items which do not affect the production, but availability of such items leads to more efficiency and less fatigue. VED analysis divides items into three categories in the descending order of their criticality.

 It is 150%.
Input-output ratio =    Input Units    X  100
                                     Output Units
<o:p> 
                              =    600 Units   X  100    
                                    400 Units 
 
                               =   150 %

Right answer because  goods sold are not included in inventory of a manufacturing concern, as the goods sold are supplied to the buyers and do not remain with the manufacturing concern. 

 Minimum Stock level is also known as safety or buffer stock. It is the lower limit below which the stock of any item should not be allowed to fall. The main object is to protect against stock-out position of a particular stock.

 In this system, continuous  record of receipt and issue of materials is maintained by the stores department and the information about the stock material is always available. 

 In inventory, goods are included. So when goods are sold, the cost of goods sold is calculated and matched against sales revenue. Since cost of goods is typically assigned to inventories, it is also known as inventoriable cost.

 Imputed cost is the cost which are considered only for the purpose of decision making and performance evaluation. In interest on capital no actual cash payment is made, but the concept is that had the funds been invested elsewhere they would have earned interest.

 Telephone charges is an example of semi-fixed or semi-variable cost, as it is partially fixed and partially variable. The rent paid of phone s a fixed cost, but the charges for calls made is a variable cost. Variable cost increases with increase in number of calls.

Right answer because defectives represent the part of production that does not meet dimensional or quality specifications of a product but which can be reworked by additional applications of material, labour etc. and made into saleable condition. 

Joint Products are the products when two or more products arise simultaneously in the course of processing, each of which has equal significant sales value and so neither/none of the product can be treated as a major product. For example in the process of meat processing meat,hides, bones etc. arise simultaneously each of which has equal significant sales value or economic importance.

 It is an example of differential costing. It is the difference in total cost that will arise from selection of one alternative to another, when the old machine is replaced by a new one.

 It is 8,625 units. 
Maximum Level  = Re-order level + EOQ - ( Minimum usage X Minimum lead time )
                            =  4,500  + 6,000 - ( 75 X 25 )
                            =   10,500 - ( 1,875 )
                           =   10,500 - 1,875 = 8,625 units 

Direct cost is the cost which can be identified easily with a unit of operation. Cost of direct material, direct labour can be directly allocated with particular cost units.

Right answer because It is 12 times
Stock Turnover Ratio -      Cost of materials used during the year<o:p>
                                        Average Stock of materials used during the year
<o:p> 
Cost of Materials used during the year = Rs 6,00,000
<o:p> 
Average Stock  =    Opening Stock  +  Closing Stock <o:p>
                                                  2
<o:p> 
                         =    60,000  +  40,000   =  Rs 50,000
                                            2
<o:p> 
Stock Turnover Ratio =   6,00,000        = 12 times <o:p>
                                             50,000 <o:p>

 It is Rs 2,15,000 - 
Mixed Cost  =  Fixed Cost + ( Number of Units to be produced X Variable Cost per unit )
                     =  Rs 2,00,000   + (  500 X  Rs 30 )      
                     =  Rs 2,00,000    +   Rs15,000
                     =  Rs 2,00,000   +  15,000
                     =  Rs  2,15,000

 It is Rs 31,500 -
Mar 4 - Purchase 600 units @ Rs 40 per unit - 600 units X  Rs 40 =  Rs 24,000
<o:p> 
Mar 20 - Purchase 900 units @ Rs 45 per unit - 900 units X Rs 45 = Rs 40,500
<o:p> 
Mar 25 - Issue 800 units
<o:p> 
As First In, First Out method is used , 600 units will be valued at Rs 40 per unit.
                                                              200 units will be valued at Rs 45 per unit
                                                               600 units X Rs 40 = Rs 24,000
                                                               200 units X Rs 45 = Rs  9,000
       
     Closing Stock  = Total Purchase Price - Total Issue Price
                               = ( 24,000 + 40,500 ) - ( 24,000 + 9,000 )
                               =  64,500 - 33,000 = Rs 31,500

 It is 37,500 units.
Danger level - Average daily requirement X Time required to get emergency
                                                                                 Supply
                                                  7,500 X 5  = 37,500 units
Danger level of stock is that if the stock reaches below this level, urgent action for replenishment of stock must be taken to prevent stock-out-position.                              
<o:p> 
                                               

 It is Rs 8,100/-
Allocation is -
Direct Labour - Rs 45 X 160 hours                                   -  Rs 7,200
<o:p> 
Manufacturing Overhead ( idle time ) - Rs 45 X 20 hours - Rs 900
<o:p> 
Total Cost - Rs 7,200 + Rs 900 = Rs 8,100