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ADVANCE COST ACCOUTING

To Input

XXX

XXX

XXX

To Materials

XXX

To Labour

XXX

To Overheads

XXX

By Normal
loss

By
Abnormal

XX
X

XXX XXX
*
[scra
p
rate]

XX
X

XXX

Loss**
By Process
II (output)
(transferred)

By Abnormal
Gain **

XX
X

XXX

XXX

XX
X

XXX

XXX

xxx

XXX

XXX

XXX

UNIT 1 PROCESS COSTING


Normal Loss Can Be Calculated On Input Of Respective Process
A/C
PROCESS I A/C
NOTES:

Q = Quality ; R = Rate ; V = Value

1.Calculation of Abnormal Loss:


Normal cost of normal output
x Abnormal Loss Units

Normal output

2.Calculation of Abnormal Gain:


Normal cost of Normal output
x Abnormal Gain Units

To Process I

Normal output

XXX

XXX

XXX

To Materials

XXX

To Labour

XXX

To Overheads

XXX

By Normal
loss

By
Abnormal

XXX
*
[scra
p
rate]

XXX

XX
X

XXX

Loss**
By Process
III (output)
(transferred)

By Abnormal
Gain **

XX
X

XX
X

XXX

XXX

XX
X

XXX

XXX

xxx

XXX

XXX

XXX

PROCESS II A/C

PROCESS III A/C

To Process - II

XXX

XXX

To Materials

V
XXX

XXX

To Labour

XXX

To Overheads

XXX

By Normal
loss

By
Abnormal

XXX
*
[scra
p
rate]

XXX

XXX

xx
x

XX
X

XXX

XXX

XX
X

XXX

XXX

xxx

XXX

XXX

XXX

THEORY QUESTION AND ANSWERS


QUESTION - 1
What is process costing ?
ANSWERS :

Loss**
By Finished
Goods

By Abnormal
Gain **

XX
X

PROCESS COSTING :
Process costing is that method of operation
costing which is used to ascertain the cost of output at each
stage of production.
QUESTION 2
What is meant by normal loss and abnormal loss in process
costing ?
ANSWERS :
NORMAL LOSS : Normal Loss is unavoidable during the course
of production process. It is mainly due to evaporation ,
shirkage etc. The cost of Normal Loss should be absorbed by
other units produced. The process a\c is credited with the
realisable value of normal loss, if any.
ABNORMAL LOSS : Abnormal Loss is avoidable loss during the
course of production process. It may arise due to negligence of
worker, fire etc. The cost of abnormal loss is not absorbed by
other units produced. Therefore the process a\c is credited and
abnormal loss is debited with full amount of loss. After
considering realisable value of Abnormal Loss , the balance
transferred to costing P & L a\c.
QUESTION - 3
What are the main features of process costing ?
ANSWERS :
FEATURES OF PROCESS COSTING

1. There is continuous series of production.


2. The finished product of one processes becomes the raw
material input to the subsequent processes, till the final
product is completed.
3. The cost of one processes inclusive of raw material and
expenses are transferred to the next processes along with
the output.

4. Transfer of cost from one processes to subsequent


processes sometimes with inclusive of profits.
5. The loss in processes may be normal (or) abnormal or
both.
6. Work in progress in processes are expressed in terms of
completed output.
7. Average cost per unit is arrived by dividing total costs by
units output of each processes.

UNIT 2 - OPERATING COST


Calculation of K.m. (Without Passengers)
No. of Trips x Distance x No. of buses x No. of days x
Running
capacity of bus.
Calculation of Passenger K.m.
No. of Trips x Distance x No. of buses x No. of days x
Running Capacity of bus x No. of Passengers x Effective
Loaded Capacity of Passengers.
NOTE : If Lorry transport, instead of Passengers tone capacity
is to be used.

OPERATING COST STATEMENT

Standing charges [fixed]


Salaries to driver, conductor, cleaner

xxx

Garage rent

xxx

Insurance

xxx

Vehicle Taxes

xxx

Interest on Capital [Interest rate on


vehicle value]

Supervision

xxx

xxx

Road License

xxx
xxx

Maintenance charges [variables]


Repairs & Maintenance

xxx

Tyre & Tube Allocation

xxx

Depreciation

xxx

Cost of Fuel, Diesel

xxx
xxx
xxx

Total Expenses

Calculation of Cost per Km. :

Total Expense

Total Kms.

Calculation of Cost per Passengers Km. :

Total Expenses

Total Passengers Km.

THEORY QUESTION AND ANSWERS


QUESTION - 1
Write a note on Operating Costing
ANSWERS :
Operating Cost : Operating Cost is defined as the cost of
providing a service. It is applicable to service organisation. The
service organizations are :(i)

Transport Service : Bus Transport, Lorry Transport,


Railways etc., [to find passengers km (or) Tonne - km for
goods]
(ii) Supply Service : Gas supply, Electriciy, Water supply
[cubic metre of gas, khw of power etc.,]
(iii) Welfare Suppliers : Hospital, Canteen, Hotel etc.

QUESTION - 2
What is Transport Costing ?
ANSWERS :
TRANSPORT COSTING : Transport Cost is the cost providing a
service to passengers. It is applicable Transport organization to
measure passengers kilometer , etc.

1.
2.
3.

4.

Contract Price
Contract Period
Work in Progress
(a)
Work Certified
(b) Work Uncertified
Cash received

UNIT 3 CONTRACT COSTING

5. Calculation of Work Certified :(a) % on contract price


(b) If work certified is not given [based on cash received] :Work Certified =
x 100
CONTRACT ACCOUNT

Cash Received
Percentage on Work
Dr.
Cr.

To Materials

xxx

To Labour
(+) O/s. Labour
To Expenses

xxx
xxx

xxx

To General Overhead

xxx

(ii)Work uncertified

xxx

By Material Return
By Profit & Loss a/c

xxx

To plant hire charges


(or) up keep

xxx

(i)Work certified

(+) O/s. Expenses

To plant issued

By Work in
progress:

xxx
xxx
xxx
xxx
xxx

xxx

Material Lost
Plant Lost
By Plant Return
Less: Depreciation

xxx
xxx

xxx

By Closing Plant :
Plant issued

xxx

(-) Plant Lost

xxx
xxx

(-) Return on plant

(-) Depreciation

xxx
xxx
xxx

xxx

By Closing Material

xxx

xxx

To Notional Profit
[B/F]

xxx

xxx By Notional Profit


xxx

To Profit & Loss A/c


[see : Note 11]
To General Reserve

xxx

Dr.
To Balance c/d

xxx

CONTRACT
xxx

xxx

ACCOUNT

By Bank [cash received]

xxx
By Balance b/d

Cr.
xxx
xxx
xxx

ABSTRACT OF BALANCE SHEET


Liabilities
Profit & Loss A/c
(-) Material Lost

Assets
xxx

Work in Progress :

xxx
xxx

(-)Plant Lost

Work certified

xxx

Work Uncertified

xxx

xxx

xxx
xxx

Outstanding
Expenses

(-) Cash Received

xxx

xxx
(-) General Reserve

xxx

xxx

xxx

Closing Material
[including Return]

xxx

Closing Plant
[including Return]

xxx
xxx

xxx

Note No. 1 Calculation of Amount Transferred to


Profit & Loss A/c
Profit on Incomplete Contract
Particulars

Amount to Profit & Loss A/c

(1)
If work certified is Less than th of
contract price (or) equal to th of
NIL
contract price.
(2)
If work certified is more than th but
1/3 of notional Profit
Less than of contract price.

=>

=>

Particulars

Amount of Profit & Loss A/c

(3)
If work certified is equal to (or)
More than of contract price.
=> 2/3 x Notional profit x
Cash
Received
Work Received
(4)
If contract is completed.
=> Entire amount transferred to P&L a/c

THEORY QUESTION AND ANSWER


QUESTION 1
Write short notes on Cost Plus contract.
ANSWER :
COST PLUS CONTRACT :
Under Cost plus contract, the value of contract
price is arrived by adding a certain percentage of profit over
the actual cost of contract work. This kind of Cost Plus
contract is applied for production of special item.
QUESTION - 2
Write short notes on Cost Control.
ANSWER :
COST CONTROL : Cost Control defines as, The regulation by
executive action of the cost of operating an undertaking
particularly where such action is guided by cost accounting .

UNIT 4 - UNIT COSTING TENDER / QUOTATION


FORMAT :
Method 1 : Tender / Quotation / Estimate Cost Sheet
Material [Quotation Units x Per Unit Rate ]

xxx

Add / Less : Increase or Decrease of Material

xxx
xxx

Direct Wages or Labour


[Quotation Units x Per Units Rate]
Add / Less : Increase or Decrease of Material

xxx

xxx

xxx

PRIME COST
Factory Overhead [Quotation Units x Per Unit
Rate ]

xxx
xxx

Add / Less : Increase or Decrease

xxx

FACTORY COST
Administration Overhead
[Quotation Units x Per Units Rate]

xxx

xxx

COST OF PRODUCTION

Add / Less : Increase or Decrease

COST OF SALES

xxx

xxx

Add / Less : Increase or Decrease

Selling & Distribution Overhead


[Quotation Units x Per Units Rate]

xxx

xxx

xxx

xxx
xxx

xxx

Add : Profit % on Cost

xxx

[Example : If 20% on cost = cost of sales x


20/100
If 20% on sales = cost of sales x

xxx

20/100 ]
Quotation Price / Tender Price

Method II : Quotation / Tender / Estimated Cost


[ Overheads are based on th percentages ]
Materials of Quotation is given
Direct wages of Quotation is given

xxx
xxx

Prime cost

xxx

Factory overhead is % on Direct wages of Quotation


[ Percentage is calculated :-

sheet

xxx

Factory overhead in previous cost sheet


Direct wages in previous cost
x 100 ]
Factory cost

xxx

Administrative overheads is % on factory cost of


Quotation
xxx

[ Percentage is calculated :Administrative overhead in previous cost


sheet

Xxx
Factory cost in previous cost sheet

]
Cost of Production

x 100

Selling & Distributiion overhead is . % of factory cost of


Quotation
[ percentage is calculated :-

xxx

xxx

Selling & Distribution overhead in previous cost sheet


Factory cost in previous cost sheet
x 100 ]
Cost of sales

xxx
xxx

Profit

Quotation Price

Method III : Both I and II may be combined. That is Material and


Labour are based on per unit and other overheads are on
percentage basis.

Method IV : According to given information.

UNIT 5 JOB COSTING


Material

xxx

Labour

xxx
Prime cost

xxx

Factory Overheads [ Refer : Note ]

xxx

Factory cost
Administrative Overhead [ Refer : Note ]

xxx

Cost of production
Less : Sale of scrap ( if any )

Selling overhead [ Refer : Note ]

xxx
xxx

xxx
xxx
xxx

xx
x

Add : Profit
Job Cost

xxx
xxx

THEORY QUESTION AND ANSWERS


QUESTION 1
Write a note on job costing and the industries which adopt job
costing ?
ANSWERS :
NOTE ON JOB COSTING :
Job Costing is a method of costing, costs are
allocated and accumulated according to job (or) work orders.
Job costing is suitable for industries which manufacture
products render service against specific orders. Each job is
considered as accost unit over which costs are accumulated.
Job costing is applicable to printing press, repair job, etc .
QUESTION 2
Define Job Costing.
ANSWERS :
JOB COSTING : Under this method, costs are collected and
accumulated for each and every job separately. Each job has a
separate identity , therefore cost of each job should be arrived

separately. Based on the principle of job costing, there are


some other methods. They are :
(i)

(ii)

CONTRACT COSTING : This methods is used to ascertain


the cost of each contract separately. This is used in
building construction work. Hence each contract cost is
applied.
BATCH COSTING: Under this method, products are
arranged in a convenient batch and each batch is termed
as one job and cost is arrived accordingly. This method is
applied in biscuit industry, garment etc.

UNIT 5 BATCH COSTING


Calculation of Economic Lot Size (or) Economic Batch Quantity
[E.B.O.]
(i)

E.B.O. =

2 US
C

U = Annual Production Units.


S = Setup Cost Per batch
C = Annual Carrying Cost per unit of production.
(ii)

Batch interval (or) Frequently of production run size (or)


Production intervel

E.B.Q.

Monthly Demand
x 30 days = xxx days

(iii) Number of batches


Total Production Requirement
E.B.Q.
(OR)

Number of days in a year


Batch interval in a day

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