Top 14 Cost Accounting Problems With Solutions

8/3/2017 Top 14 Cost Accounting Problems With Solutions
Top 14 Cost
Accounting
Problems With
Solutions
Article shared by
In this article we have compiled various cost

accounting problems along with its relevant
Solutions. After reading this article you will
learn about cost accounting problems on: 1.
Cost Sheet 2. Economic Ordering Quantity 3.
Store Ledger 4. Wage Payment 5. Labour Hour
Rate 6. Secondary Distribution 7. Incentive
Schemes 8. Idle Capacity Cost 9. Batch Costing
10. Contract Costing 11. Process Costing 12.
Normal Loss, Abnormal Loss and Abnormal
Gain 13. Equivalent Production 14.
Apportioning Total Process Costs.
Contents:
1. Cost Accounting Problems on Cost Sheet

2. Cost Accounting Problems on Economic
Ordering Quantity
3. Cost Accounting Problems on Store Ledger
4. Cost Accounting Problems on Wage Payment
5. Cost Accounting Problems on Labour Hour
Rate
http://www.yourarticlelibrary.com/cost-accounting/problems-cost-accounting/top-14-cost-accounting-problems-with-solutions/75727/ 1/47
6. Cost Accounting Problems on Secondary

Distribution
7. Cost Accounting Problems on Incentive
Schemes
8. Cost Accounting Problems on Idle Capacity
Cost
9. Cost Accounting Problems on Batch Costing
10. Cost Accounting Problems on Contract
Costing
11. Cost Accounting Problems on Process Costing
12. Cost Accounting Problems on Normal Loss,
Abnormal Loss and Abnormal Gain
13. Cost Accounting Problems on Equivalent
Production
14. Cost Accounting Problems on Apportioning
Total Process Costs
Cost Accounting Problems
1. Cost Accounting Problem on Cost

Sheet (4 Problems):
Problem 1:
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Rs. 27,290.00
Rs. 8,500.00 (details + delivery)
(details + delivery)
The accounts of Basudev Manufactures Ltd.

for the year ended 31st December 1988 show
the following:
Find out:
(a) Material Consumed
ADVERTISEMENTS:
(b) Prime Cost
(c) Works Cost
(d) Cost of Production
(e) Total Cost and
ADVERTISEMENTS:
(f) Sales.
Solution:
Problem 2:
ADVERTISEMENTS:
Prepare a Cost Sheet for the year ended 31.3.86

from the following figures extracted from the
books of Best Engineering Co.
Opening Stock:
(i) Raw Material 40,350,
(ii) Work-in-Progress 15,000 and
(iii) Finished Stock 35,590.
Cost incurred during the period:
Materials purchased 2,50,000, Wages paid

2,00,000, Carriage inward 2,000, Consumable
Stores 10,000, Wages of Storekeeper 7,000,
Depreciation of Plant & Machinery 10,000,
Materials destroyed by Fire 5,000, Repairs &
Renewals 5,010, Office Managers Salary 10,000,
Salary to Office Staff 20,500, Printing &
Stationary 10,000, Power 10,500, Lighting for
Office Building 2,000, Carriage outward 3,000,
Freight 5,000, Entertainment 2,500, Warehousing
charges 1,500, Legal charges 2,000, Expenses for
participating in Industrial exhibition-6,000.
Closing Stock:
(i) Raw material 35,000,
(ii) Work-in-Progress 14,500, and
(iii) Finished Stock 40,030. Profit 25% on cost.
Solution:
Best Engineering Co.
Cost Sheet:
for the year ended 31.3.86

Problem 3:
From the following figures relating to the

manufacture of a Electronic Product during the
month of July 1990, prepare a statement showing
Cost and Profit per unit:
Solution:
Working Notes:
Calculation of Closing Finished Stock:
Closing Finished Stock= Opening Finished Stock +

Production Sales
= Nil + 20,000 18,000 = 2,000.
Problem 4:
The following data are available for 2006:
It is expected that in 2007:
(a) Production will be 1,00,000 units.
(b) Prices of materials will go up by 33%.
(c) Variable selling overhead and fixed expenses

will rise by 25% and Rs. 25,000, respectively.
What would be the cost per unit and selling price
in 2007, if it is desired to maintain the same rate
of profit on sales as in 2006?
Solution:
Working:
(i) Calculation for Material Cost per unit in 2007
(ii) Calculation for cost per variable selling

overhead in 2007
Selling overhead increased by 25% i.e. selling

overhead per unit in 2007
= Rs. 4.00 + 25% of Rs. 4 = 4.00 + 1.00 = Rs. 5.00
(iii) Fixed expenses in 2007 = 75,000 + 25,000 =

1,00,000
(iv) Rate of profit on sales = 2/12 100 = 16%
Working Notes:
(i) Variable overhead changed with production

unit.
(ii) Fixed expenses assumed related with office

and administration.
2. Cost Accounting Problem on

Economic Ordering Quantity (2
Problems):
Problem 1:
From the following information calculate the

Economic Order Quantity:
Annual usage 20,000 units
Cost of Materials (per unit) Rs. 250
Cost of placing and receiving order Rs. 2,000
Annual cost of carrying inventory (including

interest) 10% of cost
Solution:
Problem 1(a):
A manufacturer uses 75,000 units of a particualr

material per year. The material cost is Rs. 1-50
per unit and the carrying cost is estimated to be
25% p.a. of average inventory cost. The cost of
placing an order is Rs. 18.
You are required to determine the Economic

Order Quantity and frequency of orders p.a.
Solution:
We know EOQ = 2AO/C
A = Annual consumption = 75,000 units
O = Ordering cost per unit = Rs. 18.
C = Carrying cost per unit = 25% of Rs. 1.5 = 0.375
... EOC = 2 75,000 18/0.375 = 2,691 units

(approx).
Frequency of order p.a. = 28 (approx.)
Problem 2:
From the following particulars determine the

Economic Order Quantity:
Additional information:
(i) Annual consumption of materials = 2,000

tonnes;
(ii) Carrying cost 10%,
(iii) Ordering cost Rs. 5 per order.
Solution:
The total cost of the inventory is minimum, when

the ordering quantity is 500 units, i.e. Rs. 19,662-
50.
Therefore Economic Order Quantity = 500 units.
3. Cost Accounting Problems on

Store Ledger (4 Problems):
Problem 1:
From the following particulars find out the

value of closing stock when materials are
issued under Simple Average Method:
Solution:
Problem 2:
From the following details write Store Ledger

under simple average method:
The stock verifier found a shortage of 10 kg. on

16.12.06 and another shortage of 10 kg on
26.12.06.
Solution:
Problem 3:
The particulars of receipts and issues of

materials in a factory in January 2007 are:
Pricing of issues is to be done on FIFO basis. A

shortage of 10 kg was noticed on 16th January.
Prepare the Store Ledger for the month of
January 2007.
Solution:
Problem 4:
The following are the details supplied by J.K.

Corporation in respect of its raw materials for
the month of December 1988:
On 31.12.88 a shortage of 100 units was found.

Find the values of issues and resulting stocks on
different dates using (i) LIFO. (ii) FIFO; and (iii)
Simple Average methods.
Solution:
Working Notes:
1. Rate of stock issued on 10.12.88 = Rs. 5.00 + Rs.

6.00/2 = Rs. 5.50
2. Value of stock issued on 31.12.88 = Rs. 6.00 +

Rs. (Here opening Stock rate i.e. Rs. 5 will not be
considered as it has already been exhausted).
4. Cost Accounting Problem on Wage

Payment (2 Problems):
Problem 1:
Calculate total monthly remuneration of

workers A, B, C and D on the basis of the
following information for the month of
January 2007:
(i) Standard Production for each worker = 1,000

units
(ii) Rate of wages = 10 paise per unit
(iii) Bonus = Rs. 5 for each 1% increase over 90%

of the standard.
(iv) Dearness Allowance per month = 100% of

piece wage.
The units completed by the four workers were

as under:
A = 950 units, B = 900 units, C = 960 units, D = 850

units.
Solution:
% of work done by the workers:
A = 950/1,000 100 = 95%
B = 900/1,000 100 = 90%
C = 960/1,000 100 = 96%
D = 850/1,000 100 = 85%
Problem 2:
In a factory bonus system, bonus hours are

credited to the employee in the production of
time taken which time saved bears to time
allowed. Jobs carried forward from one week to
another. No overtime is worked and payment is
made in full for all units worked on, including
those subsequently rejected.
From the following, you are required to

calculate for each employee:
(a) The bonus hours and amount of bonus

earned;
(b) Total wage cost;
(c) The wage cost of each good unit produced.
Solution:

Labour Hour Rate (3 Problems):
Problem 1:
Calcutta Engineering Co. has three production

departments X, Y and Z and one service
department S.
From the following particulars calculate

Labour Hour Rate of each of the departments
X, Y and Z:
There were 125 working days of 8 hours each.

Services rendered by the Service Department are
to be apportioned to the production departments
X 50%, Y 25%, and Z 25%.
Solution:
Working Notes:
1. Labour hours worked = No. of working days

hours of daily work No. of workers
X: 125 8 7 = 7,000
Y: 125 8 5 = 5,000
Z: 125 8 5 = 5,000
2. Labour hour rates = Expenses/Labour hours

worked
Problem 2:
Moonlight Engineering Company has three

production departments, A, B and C and one
service department S. Following are the
particulars of a month of 25 working days of 8
hours each.
Calculate the labour hour rate for each of the

production departments:
Service rendered by the service department to

production departments A, B and C is in the ratio
of 2: 2: 1, respectively.
Solution:
Working Notes:
1. Total Assets value = Rs. 5,000 + Rs. 6,000 + Rs.

6,000 + Rs. 3,000
= Rs. 20,000
... Depreciation = 12% of Rs. 20,000 = Rs. 2,400
2. Labour hours worked = No. of working days

Hours of daily work No. of workers:
X: 25 8 20 = 4,000
Y: 25 8 25 = 5,000
Z: 25 8 30 = 6,000
Problem 3:
A machine was purchased for Rs. 55,000. It was

installed in a shop over th of its floor area at an
additional cost of Rs. 5,000. The working life of
the machine as also the scrap value was
estimated at 10 yrs and Rs. 5,000, respectively.
From the following details compute the

Machine Hour Rate:
It is estimated that the supervisor devotes one-

fourth of his time for the machine, the cost of
power is Rs. 20 per 100 units and the machine
consumed 10 units per hour.
Normal working hours of the machine is

estimated at 1,200 but during the year it actually
worked for 1,000 hrs.
Solution:

Secondary Distribution (1 Problem):
Problem 1:
XYZ Ltd. has two production and two Service

departments namely P1 and P2, and S1 and S2,
respectively.
From the following information prepare a

statement showing primary distribution of
overhead:
Solution:

Incentive Schemes (2 Problems):
Problem 1:
A worker takes 12 hours to complete a work on

daily wages and 8 hours on a scheme of payment
by results. The workers day rate is Rs. 6.00 per
hour. The cost of material of the product is Rs. 20
and the overheads are recovered at 200% of the
total wages.
Calculate the factory works cost of the

product under:
(i) Rowan Plan and
(ii) Halsey Scheme.
Solution:
Problem 2:
Production department of a company pays its

workers standard wages @ Rs. 2.00 per hour plus
a bonus under the Rowan Premium Bonus
Scheme and Dearness Allowance of Rs. 50 per
week of 55 hours.
At the end of a particular week the time sheet

of a worker is summarised below:
Calculate the gross wages (including bonus and

D.A.) of the worker of the week.
Solution:
Working Notes:
(i) Time Saved
Job No. 205 = (30 25) hours = 5 hours
8. Cost Accounting Problems on Idle

Capacity Cost (1 Problem):
Illustration 4:
A manufacturing company has two production

departments X and Y and three service
departments: Store, Maintenance and Time
Keeping.
The departmental distribution summary

showed the following expenses for June 2007:
Production Departments:
Solution:

Batch Costing (2 Problems):
Problem 1:
Rina, a contractor got a contract to supply 100

wooden dolls per day to M/s R. K. Mitra & Co. The
cost of holding a doll is Rs. 2 p.a. and the set-up
cost of production is Rs. 3. Assume there are 300
working days in a year.
What would be the optimum run size for unit

manufacture?
Solution:
We know optimum run size
or EBQ = 2AS/C
where A = Annual production units
= 100 300 = 30,000
S = Setting cost per unit = Rs. 3
C = Carrying cost per unit = Rs. 2
... EBQ = 2 30,000 3/2 = 300 units
Problem 2:
Saha & Bose Ltd. has made a contract with Mitra

& Das Ltd. to supply 4,800 T.V. sets per annum.
It is estimated that the carrying cost per T.V. per

annum will be Rs. 10 and that the set-up cost per
batch is Rs. 648. Find out:
(a) Economic Batch Quantity.
(b) The time interval between two consecutive

optimum runs,
(c) The minimum inventory holding cost.
Solution:
(a) EBQ = 2AS/C = 2 4,800 648/12
= 2 4,800 54 = 720
(b) Time interval between two consecutive

optimum runs
= 365/No. of set-up per annum
Again, No. of set-up per annum = Annual

Production/EBQ
= 4,800/720 = 20/3
... Time interval between two consecutive

optimum runs
= 365/20/3 = 365 3/20
= 1,095/20 = 54.75 days = 55 days
(c) Minimum inventory holding cost per annum

720/2 12 = Rs. 4,320

Contract Costing (3 Problems):
Problem 1:
A construction company undertook two

contracts namely Contract No. 005 and
Contract No. 052, on 1.1.06 and 1.7.06,
respectively. On 31st December 2006, when the
accounts were closed, the portion of the
contracts was as follows:
The total establishment expenses incurred

during the year amounted to Rs. 25,000. These
are to be charged to the two contracts in
proportion to wages.
Prepare the Contract A/cs.
Solution:
Workings:
Calculation for Profit to be charged to P/L A/c.
(a) Contract No. 005 = 2/3 2,25,000/2,50,000

62,000 = 37,200
(b) Contract No. 052 = 2/3 72,000

1,60,000/20,000 = 38,400
Problem 2:
M/s Pine Corporation undertook a contract for

Rs. 2,40,000. You are requested to prepare the
Contract A/c and Contractees and Work-in-
Progress A/c for the year ended 31st December
2006 from the following information:
10% of value of material and 15% of wages may

be considered as being incurred for the
proportion of works completed but not certified.
Other charges are charged as a proportion of
direct wages.
Solution:
Workings:
Problem 3:
XYZ Ltd. obtained a contract for Rs. 7,50,000

on 1.1.06. At the end of the year the following
information were collected:
The above contract contained an escalator

clause:
In the event of price of raw material and rates

of wages increased more than 10%, the contract
price would be increased accordingly by 25% of
the rise in the cost of materials and wages
beyond 10% in each case.
It was found that since the date of signing of the

contract the price of material and rate of wages
increased by 25%. The value of the work certified
should not be considered in the effect of

escalator clause.
Solution:
Workings:
(i) Calculation for the amount of Contract Price

increased due to Escalation Clause.
As the wages and material cost increased by Rs.

34,800 beyond escalation clause the contract
price will be increased by 25% of Rs. 34,800 =
8,700.
(ii) Calculation for Profit to be charged to Profit &

Loss A/c
= 2/3 1,24,200 2,25,000/3,00,000 = 2/3

1,24,200 3/4 = 62,100.
11. Cost Accounting Problem on

Process Costing (3 Problems):
Problem 1:
Product A passes through two processes I and

II and then to Finished Stock. From the
following data prepare the Process A/cs:
Solution:
Problem 2:
Mukherjee & Co. produces an article through two

processes X and Y which is then sent to the
finished stock.
The details of the processes are:
Solution:
Problem 3:
Solution:

Normal Loss, Abnormal Loss and
Abnormal Gain (1 Problem):
Illustration 1:
The following are the details of Process X,

Process Y and Process Z:
Stock in process is valued at Prime Cost and

Finished stock at the price at which it is received
from process III.
Find out the amount of provision to be made to

offset the inter-process profits added.
Solution:

Inter-Process Profit (1 Problem):
Problem 1:
The following illustration will be helpful to

understand how to calculate the inter-process
profit. A product passes through three processes
before it is transferred to Finished Stock.
The following details for January 1992 are

available:
Stock in processes is valued at Prime Cost and

Finished Stock at the price at which it is received
from process III.
Find out the amount of provision to be made to

offset the inter-process profits added.
Solution:
Note:
Profit on Closing Stock: 40,000/2,40,000 12,000 =

2,000
Profit on Closing Stock = 2,42,000/6,60,000

30,000 = Rs. 11,000
Statement showing the amount of provision to

be made to offset the inter-process profits
added:

Equivalent Production (1 Problem):
Illustration 1:
The following information is available regarding

process X during the year ended 31.3.95.
Production Records:
Cost Record:
Work-in-process as on 1.4.94:
Material Rs. 25,500 Labour Rs. 15,000
Overhead Rs. 12,000
Cost for the year 94-95
Material Rs. 60,000, Labour Rs. 35,000, Overhead

Rs. 17,500 Prepare the
(a) Statement of Equivalent Production
(b) Statement of Cost for each element
(c) Statement of Evaluation.
Solution:

Apportioning Total Process Costs (2
Problems):
Problem 1:
In the process line of XY Company three joint

products are produced for the month of May
1990.
The following data were available:
Pre-separation point costs amounted to Rs.

20,000. The joint products are manufactured in
one common process; after which they are
separated and may undergo further individual
processing. The pre-separation point costs are
apportioned to joint products according to
weight.
You are required to prepare a statement showing

the estimated profit or loss for each product and
in total.
Solution:
Problem 2:
From the following information, find the

profit made by each product apportioning
joint cost on sales value basis:
Solution:
... Joint Cost should be borned by:
Product A = 1,32,000/2,20,000 1,67,600 =

1,00,560
Product B = 88,000/2,20,000 1,67,600 = 67,040
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Top 14 Cost Accounting Problems With Solutions

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8/3/2017 Top 14 Cost Accounting Problems With Solutions

In this article we have compiled various cost

1. Cost Accounting Problems on Cost Sheet

6. Cost Accounting Problems on Secondary

Cost Accounting Problems

1. Cost Accounting Problem on Cost

Sony ICD-UX533 4 GB Zoom H6 6 Track Portable

The accounts of Basudev Manufactures Ltd.

(a) Material Consumed

(b) Prime Cost

(c) Works Cost

(d) Cost of Production

(e) Total Cost and

Prepare a Cost Sheet for the year ended 31.3.86

(i) Raw Material 40,350,

(ii) Work-in-Progress 15,000 and

(iii) Finished Stock 35,590.

Cost incurred during the period:

Materials purchased 2,50,000, Wages paid

(i) Raw material 35,000,

(ii) Work-in-Progress 14,500, and

(iii) Finished Stock 40,030. Profit 25% on cost.

Best Engineering Co.

for the year ended 31.3.86

From the following figures relating to the

Calculation of Closing Finished Stock:

Closing Finished Stock= Opening Finished Stock +

= Nil + 20,000 18,000 = 2,000.

The following data are available for 2006:

It is expected that in 2007:

(a) Production will be 1,00,000 units.

(b) Prices of materials will go up by 33%.

(c) Variable selling overhead and fixed expenses

(i) Calculation for Material Cost per unit in 2007

(ii) Calculation for cost per variable selling

Selling overhead increased by 25% i.e. selling

= Rs. 4.00 + 25% of Rs. 4 = 4.00 + 1.00 = Rs. 5.00

(iii) Fixed expenses in 2007 = 75,000 + 25,000 =

(iv) Rate of profit on sales = 2/12 100 = 16%

(i) Variable overhead changed with production

(ii) Fixed expenses assumed related with office

2. Cost Accounting Problem on

From the following information calculate the

Annual usage 20,000 units

Cost of Materials (per unit) Rs. 250

Cost of placing and receiving order Rs. 2,000

Annual cost of carrying inventory (including

A manufacturer uses 75,000 units of a particualr

You are required to determine the Economic

We know EOQ = 2AO/C

A = Annual consumption = 75,000 units

O = Ordering cost per unit = Rs. 18.

C = Carrying cost per unit = 25% of Rs. 1.5 = 0.375

... EOC = 2 75,000 18/0.375 = 2,691 units

Frequency of order p.a. = 28 (approx.)

From the following particulars determine the

(i) Annual consumption of materials = 2,000

(ii) Carrying cost 10%,

(iii) Ordering cost Rs. 5 per order.

The total cost of the inventory is minimum, when

Therefore Economic Order Quantity = 500 units.

3. Cost Accounting Problems on

From the following particulars find out the

From the following details write Store Ledger