UNIT -IV

UNIT & JOB COSTING

PRACTICE PROBLEMS
COST SHEET – FORMAT

Particulars Amount Amount Cost

per unit

Opening Stock of Raw Material ***

Add: Purchase of Raw materials ***
Add: Purchase Expenses ***
Less: Closing stock of Raw Materials ***
Raw Materials Consumed ***
Direct Wages (Labour) ***
Direct Charges (Expenses) ***
Prime cost ****
Add :- Factory Over Heads:
Factory Rent ***
Factory Power ***
Indirect Material ***
Indirect Wages ***
Supervisor Salary
***
Drawing Office Salary
***
Factory Insurance
***
Factory Asset Depreciation
*** ***
Gross factory Cost/ Gross Works cost ***
Add: Opening Stock of WIP ***
Less: Closing Stock of WIP ***
Net factory Cost/ Net Works cost ***
 Add:-Office and Administration Over Heads:-
Office Rent ***
Asset Depreciation ***
General Charges ***
Audit Fees ***
Bank Charges ***
Counting house Salary ***
Other Office Expenses *** ***
Cost of Production ***
Add: Opening stock of Finished Goods ***
Less: Closing stock of Finished Goods ***
Cost of Goods Sold ***
Add:- Selling and Distribution OH:-
Sales man Commission ***
Sales man salary ***
Traveling Expenses ***
Advertisement ***
Delivery man expenses ***
Sales Tax ***
Bad Debts *** ***
Cost of Sales OR Total Cost ***
Profit (balancing figure) ***
Sales ***

Notes: -
1) Factory Over Heads are recovered as a percentage of direct wages
2) Administration Over Heads, Selling and Distribution Overheads are recovered as a
percentage of works cost.
Items excluded from Cost Sheet
All capital expenditure will not include in cost accounting when we calculate total cost of
product. Following are the main examples of expenses which will be excluded from cost.

1. Income tax and advance tax

2. Dividend paid
3. Discount on issue of shares and debentures
4. Underwriting commission payment
5. Capital losses
6. Expenses for purchasing of fixed assets
7. Loss on the sale of fixed asset
8. Interest on capital
9. Abnormal loss of material
10. Over depreciation
11. Investment of profit

Practice Questions
1. Determine the Prime cost from the following:
Direct wages 50000
Chargeable expenses 5000
Opening stock of materials 1000
Materials bought 60000
Closing stock of materials 20000
Carriage inwards 1500
Carriage outwards 2000
Materials returned to supplier 1500

2. A factory produces 100 units of a commodity. The cost of production is:

Direct material – 10000, Direct wages – 5000, Direct expenses – 1000, Factory
overheads – 6500, Administrative overheads – 3480. If profit of 25 % on sales is to be
realized, what would be the selling price of each unit of the commodity?

3. In a factory two types of radio sets are manufactured namely, “Popular” and “Deluxe”
models. From the following particulars prepare a statement showing cost per radio set
and profit per radio set sold. There is no opening or closing stock.

Popular: Labour - 46800, Materials – 81900

Deluxe: Labour – 62920, Materials – 108680

Works on cost is charged at 80% on labour and office on cost is taken at 15% on
Works cost.
Popular radio sets sold during the period are 234 at 1000 each and Deluxe radio sets
are 286 at 1100 each. Ascertain the total profits as per cost books from the above
particulars.
4. Prepare a statement of cost using the following information:

Particulars Amount (Rs.)

Cost of raw materials on June 1 60,000
Purchase of raw materials during the month 9,00,000
Wages paid 4,60,000
Factory overheads 1,84,000
Cost of work in progress on June 1 24,000
Cost of raw materials on June 30 30,000
Cost of stock of finished goods on June 1 1,20,000
Cost of stock of finished goods on June 30 1,10,000
Selling and distribution overheads 40,000
Sales 18,00,000
Administration overheads 60,000

5. From the following particulars of manufacturing of a company, prepare a

statement showing a) Cost of materials consumed b) Prime cost c) works
cost d) cost of production e) percentages of works expenses to wages,
percentages of general expenses to works cost
Stock of material 1.1.1999
Stock of finished goods 1.1.1999
Purchase of materials
Production wages Rs.3,90,000
Works overhead charges Rs.86,000
Office and General charges
Stock of materials 31.12.1999
Stock of finished goods 31.12.1999
Sale of finished goods

6. Calculate (a) Value of raw-materials consumed (b) Total cost of production,

(c) Cost of sales and (d) The amount of profit from the following particulars

Particulars Amount Particulars Amount

(Rs.) (Rs.)
Opening Stock Power 2,000
- Raw-Materials 5,000 Factory Heating and Lighting 2,000
- Finished Goods 4,000 Factory Insurance 1,000
 Closing Stock Experimental Expenses 500
- Raw-Materials 4,000 Sale of Wastage of Materials 200
- Finished Goods 5,000 Office Management Salaries 4,000
Raw-Materials Purchased 50,000 Office Printing & Stationery 200
Wages paid to Labour 20,000 Salaries of Salesmen 2,000
Chargeable Expenses 2,000 Commission of Travelling 1,000
Agents
Factory Rent, Rates and Taxes 5,000 Sales 1,00,000

7. ABC Ltd. has given the following Trading and P/L account for the year ending
March 31, 2016. Prepare a statement of cost using relevant information from the
statements.

Amount
Particulars Particulars Amount (Rs)
(Rs)
To Opening Stock– Material 60,000 By Sales 10,00,000
- Finished Goods 2,00,000 By Closing Stock - Material 1,00,000
To Purchases Of Material 6,00,000 - Finished Goods 2,50,000
To Direct Labour 1,50,000
To Cost Of Moulds 15,000
To Salary Of Factory Manger 5,000
To Depreciation Of Machine 4,000
To Gross Profit 3,16,000
13,50,000 13,50,000

To Office Salary 45,000 By Gross Profit 3,16,000

To Salesman Salary 30,000 By Interest From Bank 4,000

To Insurance Of Office
5,000 By Dividend Received 1,000
Building
To Insurance Of Godown 4,000 By Rent Received 4,500

To Directors‘ Fees 10,000

To Telephone Charges 3,500

To Showroom Expenses 6,000

To Delivery Van Expenses 7,500

To Preliminary Expenses 10,000

To Interest On Debentures 3,500
 To Market Research Expenses 3,000

To Underwriting Commission 3,000

To Net Profit 1,95,000
3,25,500 3,25,500

8. In a factory 20000 units of product A were manufactured in the month of July 2017.
From the following figures obtained from the costing records, prepare a cost sheet
showing cost per unit.
Opening stock of raw materials 5000
Purchases 55000
Closing stock of raw materials 10000
Direct wages 25000
Factory overheads 40000
Office & admin overheads 20000

9. Prepare a cost sheet of the following data relating to the manufacture of Jeans:

Number of Jeans manufactured during the month 1,000

`
Direct materials consumed 20,000
Direct labour 8,000
Indirect labour (in factory) 2,500
Supervision costs (in factory) 1,000
Factory premises rent 1,600
Factory lighting 600
Oil for machines 100
Depreciation of machines 500
Office overheads 8,000
Office salaries 2,000
Misc. office expenses 1,000
Selling and distribution overheads 6,000
Note: A profit margin of 20% on the total cost of goods is expected on the sale of Jeans.

10. Mr. Gopal furnishes the following data relating to the manufacture of a standard
product during the month of April 2013
Raw materials consumed 15,000
Direct labour charges 9,000
Machine hours worked 900
Machine hour rate 5
Administration overheads 20% on works cost
Selling overhead 0.50 per unit
Units produced 17,100
 Units sold 16,000 at 4 per unit
You are required to prepare a cost sheet from the above, showing:
(a) the cost per unit,
(b) cost per unit sold and profit for the period.

11. From the following data, prepare a statement showing cost and profit per unit:
Raw materials used 3000
Direct wages 1800
Machine hours worked 7125 hours
Machine hour rate 0.40
Office overheads 20% on works cost
Selling overheads 0.10 per unit
Output 15000 units ---
Sales 13500 units 13500

12. The accounts of pleasant company Ltd. show for 2017:

Materials ₹3,50,000; Labour ₹ 2,70,000; Factory Overheads ₹ 81,000 and Administration
Overheads ₹ 56,080. What price should the company quote for a refrigerator? It is estimated
that ₹ 1,000 in material and ₹ 700 in Labor will be required for one refrigerator. Absorb
factory overheads on the basis of labor and administration overheads on the basis of works
cost. A profit of 12 1/2% on selling price is required.

13. From the following data prepare a cost and profit statement of Popular Stoves
Manufacturing Co. for the year 2016:
Stock of materials on 1– 1 –2016 = 35,000
Stock of materials on 31–12 –2016 = 4,900
Purchase of materials 52,500
Direct wages 95,000
Factory expenses 17,500
Establishment expenses 10,000
Completed stock in hand on 1– 1 –2016 - Nil
Completed stock in hand on 31– 12 –2016 = 35,000
Sales 1,89,000
The number of stores manufactured during year 2016 was 4000.
The company wants to quote for a contract for the supply of 1,000 Electric Stoves during the
year 2017. The Stoves to be quoted are of uniform quality and make and similar to those
manufactured in the previous year; but cost of materials has increased by 15% and cost of
factory labour by 10%.
Prepare a statement showing the price to be quoted to give the same percentage of net profit
on turnover as was released during the year 2016, assuming that the cost per unit of
overheads will be the same as in the previous year.

14. The following information is extracted from the manufacturing account of a factory
for the year ending 31st Dec 1980.
Materials consumed – 600000, Direct wages – 400000, Factory expenses – 240000,
Office and administrative expenses – 155000. During the year 1981, the factory
received a request from a customer for quotation for the manufacture and supply of a
machine for which the estimated cost of materials was 40000 and 30000 in wages.
What should be the quotation if the factory desires to make a profit of 25 % on the
selling price.

15. The accounts of Modern Engineering Ltd for 1985 showed:

Materials used 1750000,
Manual and machine labour wages directly chargeable – 1350000
Works overhead expenditure – 371250
Establishment and general expenses – 232500
Show the works cost and total cost, the percentage that the works overhead cost bear
to the manual and machine labour wages and the percentage that the establishment
and general expenses bear to the works cost.
What price should the company quote to manufacture a machine which it is estimated
will require an expenditure of 7500 in material and 6000 in wages so that it will yield
a profit of 25 % on the total cost.

16. Following are the particulars for the product production of 2000 sewing machines of
Nath Engineering Co. Ltd., for the year 2016:
Cost of materials ₹ 1,60,000; Wages ₹ 2,40,000; Manufacturing Expenses ₹ 100,000,
Salaries 120000; Rent, rates and Insurance 20000; Selling expenses 60000; General
Expenses ₹ 40,000 and Sales ₹ 800,000.
The company plans to manufacture 3000 sewing machines during 2017. You are required
to submit a statement showing the price at which machines would be sold so as to show a
profit of 10% on selling price. Following additional information is supplied to you:
(a) Price of material is expected to rise by 20% (b) Wages rates are expected to show an
increase of 5%.(c) Manufacturing expenses will rise in proportion to the combined
state of materials and wages (d) Selling expenses per unit will remain the same. (e)
Other expenses will remain unaffected by the rise in output.

17. In respect of a factory the following figures have been obtained for the year 2016:
Cost of material ₹ 6,00,000; Direct wages ₹ 5,00,000; Factory overheads ₹ 3,00,000;
Administrative overheads ₹ 3,36,000; Selling overheads Rs, 2,24,000; distribution
overheads ₹ 1,40,000 and Profit ₹ 4,20,000.
A work order has been executed in 2017 and the following expenses have been incurred:
Materials ₹ 8,000 and wages ₹ 5,000.
Assuming that in 2017 the rate of factory overheads has increased by 20%, distribution
overheads have gone down by 10% and selling and administration overheads have each
each gone up by 12 1/2%, at what price should the product be sold so as to earn the same
rate of profit on the cost as in 2016? Factory overheads is based on direct wages while all
other overheads are based on factory cost.

18. From the following particulars prepare the cost sheet of Job No 75 and find out the
value of the job.
Materials issued for job 6000
Productive wages 4600
Direct expenses 500
Provide 60% on productive wages for Works on Cost and 12 ½ % on Works Cost for
Office on Cost. Profit to be realized on the Selling price 15 %.

19. Printwell Ltd took up two jobs during the first week of April 92. The following details
are available.
Particulars Job 101 Job 102
Materials Supplied 2000 1400
Wages paid 900 600
Direct expenses 100 -
Materials transferred from 101 to 102 100 -
Materials returned to stores - 50

Find the cost of each job.

20. Prepare Job cost sheet no 243. Materials – 3000, wages – 2000, Factory overheads are
50 % of wages paid, Admin overheads – 80 % of factory on cost, Selling &
distribution overheads – 20 % of factory cost.

21. The following expenses were incurred for a Job during the year ended 31st Dec 2017.

Direct materials 3000

Direct wages 4000
Chargeable expenses 1000
Factory overheads 2000
Selling & distribution overheads 2000
Administrative overheads 3000
Selling price for the above Job was 18000.
 You are required to prepare a statement showing the profit earned for the year 2017
from the job and an estimated price of a job which is to be executed in the year 2018.
Materials, Wages and Chargeable expenses will be required of 5000, 7000 and 2000
respectively for the job. The various overheads should be recovered on the following
basis while calculating the estimated price.
a) Factory overheads as a percentage of direct wages
b) Administration and selling & distribution overheads as a percentage of factory
cost.

22. Following particulars relate to job No. 323

Materials used Rs 500

Direct wages Variable overheads

X-10 hours @Rs 2.50 per hour X-7000 labour hours =Rs7000
Y-8 hours @Rs 3.00 per hour Y-3000 labour hours =Rs6000
Z-5 hours @Rs 4.00 per hour Z-1000 labour hours =Rs4000

Fixed overheads estimated at Rs 30000 for 7500 normal working hours.

You are required to calculate the cost of Job No. 323 and calculate the price to give the profit
of 33 1/3 % on selling price.