Q.1. A manufacturer has planned his level of operation at 50 % of his total plant capacity of 30,000 units. His expenses are estimated as follows, if 50 % of the plant capacity is utilized. Rs. Direct Materials 8,280 Direct Wages 11,160 Variable and other manufacturing expenses 3,960 Total fixed expenses irrespective of capacity utilisation 6,000 The expected selling price in the domestic market is Rs. 2 per unit. Recently the manufacturer has received a trade enquiry from an overseas organization interested in purchasing 6000 units at a price of Rs.1.45 per unit. As a professional Management Accountant, what would be your suggestion regarding acceptance or rejection of the order? Would the situation be any different if we are able to convince them to increase their offer price by 20 %. Why? What would be the total profit or loss in both the cases? Support your suggestion with suitable quantitative information. Q.2 Explain in detail Classification of Costs. Give examples.

Q.3. Product Rimjhim is obtained after it passes through three distinct processes. The following information is obtained from the accounts for the week ended 31st October 2010. Items Total Rs. Direct Materials Direct wages Production Overhead 7,542 9,000 9,000 I Rs. 2,600 2,000 Process II Rs. 1,980 3,000 III Rs. 2,962 4,000

1,000 units at Rs. 3 each were introduced in Process I. There was no stock of material or work-inprogress at the beginning or at the end of the period. The output of each process passes direct to the next process and finally to finished stock. Production overhead is recovered on 100 % of direct wages. The following additional data are obtained: Process I II III Output during the week 950 840 750 % of Normal Loss to input 5% 10 % 15 % Value of scrap per unit 2 4 5

Prepare Process Cost Accounts. All calculations should form part of your answer. Q.4. Prepare and present a flexible budget on the basis of the following information for the year 2012-2013 in the format of a Cost Sheet:

person or item of equipment for which costs may be ascertained and used for the purpose of cost control".00. all the units produced were sold and the factory was working at the capacity of 60 %.00. cost sheet: Paperwork that details all fabric.5. trim.00. 2000 per unit ) Rs.000 1.000 4.00. Explain.000 20.000 80.Direct Materials Direct Labour Direct Expenses Machine Expenses Motive Power Other Factory Overheads ( 80 % Fixed ) Office Overheads ( 60 % Fixed ) Selling Overheads ( 50 % Fixed ) Sales ( Selling Price Rs. The flexible budget is to be prepared with the following assumptions: (a) That the capacity will be 75 % (b) That the price of Direct Materials will increase by 25 % and the wages will increase by 20 % Q.00.000 2. It may be defined as "a location. short-term cash flow.000 During the year. opportunity cost The loss of potential gain from other alternatives when one alternative is chosen Cash budget: : A budget used to quantify an immediate. 6.20.000 40.00. labor and packaging costs Classification of costs .000 1. (a) Cost Centre (b) Opportunity Cost (c) Cash Budget (d) Special Plant and Common Plant (e) Variable Costs (f) Cost Sheet Variable costs are expenses that change in proportion to the activity of a business Cost centres are the smallest segments of activity or area of responsibility for which costs are accumulated or ascertained.000 1. Cash Budget : An estimation of the cash inputs and outputs of a person or a business over a specific period of time.

material labor and expenses. On the basis of controllability there are controllable and uncontrollable costs. lighting. variable and semi-fixed variable. rent. It includes salary of office staff. consumable stores. Indirect costs are those which are not easily traced to a unit of a product or a cost object. and spare parts. depreciation etc. This helps in finding total cost. office and administration cost is incurred in the general administration of the enterprise. It is important as it identifies the cost with cost centers or cost units. how such total cost is constituted and valuation of work-in-progress. For example materials are divided into raw material components. On the basis of functions it is classified as Production. Classification of costs is done on the basis of a number of ways. The cost classification is a process of grouping costs according to their common characteristics. audit fee. Administration. It includes power. rent of office building. According to the behavior it is fixed.Classification of costs is done for the development of the cost data that are useful to management. Selling and distribution Cost includes both selling cost as well as distribution cost. On the basis normality there are normal costs and abnormal costs. The classification of the costs of the basis of elements includes material cost. According to variability there are direct and indirect costs. Selling costs are those costs which are incurred in connection with the selling of goods and services. and Selling & Distribution. packing material etc. heating. The classification is also based on relevance which includes sunk and opportunity costs . Direct costs are easily traced to a unit of product or other cost objective. These are further sub divided for each element. On the basis of association with products it is product costs and period costs. printing and stationeries etc. Production and manufacturing cost are incurred in the course of manufacture. electricity charges.

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