Cost Accounting Test

A stores ledger is a formal accounting record that tracks both the quantity and the monetary value of materials held in stock. A bin card only records the quantity.

Indirect materials are those required for the manufacturing process that cannot be easily or economically traced to a specific unit of product, such as nails, glue, or lubricants.

The formula for minimum stock level is: Reorder level - (Normal consumption x Normal delivery time). This accounts for the buffer needed during the lead time.

Normal loss is an inherent, unavoidable loss that occurs during the handling or processing of goods, such as evaporation or minor breakage.

A bin card is a document placed on the storage bin that records the quantity of items received, issued, and the current balance, but it does not typically record monetary values.

An element of cost refers to the classification of costs into material, labor, and expenses. Component cost is a subset of material cost.

When a container is returned to a supplier, the deposit or value previously charged for that container is refunded or credited, meaning it is deducted from the purchase price.

EOQ stands for Economic Order Quantity, which is the ideal quantity of inventory to order to minimize total inventory costs.

Total cost = (1000 * 8) + 500 + 200 = 8700. Cost per kg = 8700 / 1000 = 8.70.

Reorder level = Maximum consumption * Maximum reorder period. 75 units/week * 6 weeks = 450 units.

Wages are the remuneration paid to laborers for their time or work, usually calculated on an hourly, daily, or piece-rate basis.

Reorder level = Maximum consumption * Maximum reorder period. 450 units/day * 8 days = 3600 units.

Direct labor cost is the cost of wages paid to workers who are directly involved in the production of a specific product, allowing it to be easily identified.

Time keeping is the process of recording the arrival and departure times of workers to ensure accurate attendance and payroll calculation.

Idle time is the period during which a worker is paid but is not performing productive work, often due to machine breakdown or lack of materials.

Under the time wage system, employees are paid based on the amount of time they spend at work, regardless of the quantity of output produced.

Components that are bought and directly incorporated into the final product, like an engine for a car, are classified as direct materials.

A purchase requisition is an internal document prepared by the stores department to notify the purchase department that specific materials need to be ordered.

The purchase department is responsible for sourcing, negotiating, and issuing the official purchase order to the supplier.

The piece rate system is a method of wage payment where workers are paid based on the quantity of output they produce. It directly links remuneration to the volume of work completed rather than the time spent.

The monthly wage is 2400 for 24 days, meaning the daily wage is 100. The worker worked 20 days and is entitled to 2 days of paid leave, totaling 22 paid days. 22 days multiplied by 100 equals 2200.

Time booking refers to the process of recording the time spent by a worker on specific jobs or tasks to allocate labor costs accurately. Time keeping is the broader process of recording arrival and departure times.

Direct materials are those that can be easily and economically traced to a specific product or cost unit. Indirect materials are those that cannot be conveniently identified with a specific job.

Total labor hours are calculated by multiplying the number of workers by the hours worked per day and the number of working days in the month. 20 workers * 8 hours/day * 25 days = 4000 hours.

The formula for material consumed is Opening Stock + Purchases - Closing Stock. This represents the raw material used during the period.