COST ACCOUNTING

ASSIGNMENT-1

UNIT-1: INTRODUCTION TO COST ACCOUNTING

Full marks: 80
1. Choose the appropriate answer from the given options: (1x15)
I. Cost accounting emerged mainly due to:
a. Statutory requirements
b. Market competition
c. Labour unrest
d. Limitations of financial accounting
II. Which of these is not an objective of cost accounting?
a. Ascertainment of cost
b. Determination of selling price
c. Cost control and cost reduction
d. Assisting shareholders in decision making
III. A profit centre is a:
a. Where the manager has the responsibility of generating and maximizing profits.
b. Which is concern with earning an adequate return on investment
c. Both of the above
d. Which manages cost
IV. Fixed cost is a cost:
a. Which changes in total proportion to changes in output
b. Which is partly fixed and partly variable in relation to output
c. Which do not change in total during a given period despite changes in output
d. Which remains same for each of the unit
V. Abnormal cost is the cost:
a. Cost normally incurred at a given level of output
b. Cost not normally incurred at a given level of output
c. Cost which is charged to customer
d. Cost which is included in the cost of the product
VI. Conversion cost includes cost of converting __________ into _________ .
a. Raw material , work-in-progress
b. Raw material , finished goods
c. Finished goods , saleable goods
d. None of the above
VII. Describe the method of costing to be applied in case of nursing home.
a. Operating costing
b. Process costing
c. Contract costing
d. Job costing
VIII. Calculate the prime cost from the following information:
Direct material purchased: Rs.1,00,000
Direct material consumed: Rs.90,000
Direct labour: Rs. 60,000
Direct expenses: Rs. 20,000
Manufacturing overheads: Rs. 30,000
a. Rs. 1,80,000
b. Rs. 2,00,000
c. Rs. 1,70,000
d. Rs. 2,10,000
IX. Describe the cost unit applicable to bicycle industries:
a. Per part of the bicycle
b. Per bicycle
c. Per tone
d. Per day
X. Overhead refers to:
a. Direct or prime cost
b. All indirect cost
c. Only factory indirect cost
d. Only indirect expenses
XI. The institute of Cost and Works Accountants set up in 1959 has changed its name as:
a. Institute of Cost and Management Accountants of India
b. Chartered Institute of Management Accountants of India
c. Institute of Corporate Accountants of India
d. Institute of Cost Accountants of India
XII. Rents and rates come under:
a. Fixed overhead
b. Variable overhead
c. Semi variable overhead
d. Semi fixed overhead
XIII. The variable cost per unit remains:
a. Fixed
b. Variable
 c. Semi variable
d. Semi fixed
XIV. Which one is not an example of direct material?
a. Stone used in maintaining machine
b. Timber in furniture
c. Milk and cream in ice cream
d. Paper in books
XV. Labour engaged in cost accounting department is an example of:
a. Indirect labour
b. Direct labour
c. Accounts clerk
d. Administrative clerk
2. Fill in the blanks with appropriate answers: (1x7)
I. The segment of activity of a business which is responsible for both revenue and
expenses and disclose profit is called _______ .

II. __________ is the method of costing in case the job is spread over long period of
time.
III. ___________ is the smallest segment of activity or are or responsibility for which
costs are accumulated.
IV. __________ is the statement designed to show the output of a particular accounting
period along with break- up of costs.
V. Contract costing is also known as__________.
VI. The real and permanent reduction in the unit cost of goods manufactured or service
rendered without sacrificing quality is known as __________.
VII. The verification of the correctness of cost account and check on the adherence to
the cost accounting plan is known as __________.
3. Answer the following in one word: (1x8)
I. Identify the cost which is normally incurred at a given level of output in the
conditions in which that level of output is normally attained.
II. Identify the cost that is incurred in purchasing assets either to earn income
or increasing the earning capacity of the business.
III. Identify the cist that fluctuate in total amount but tend to remain constant
per unit as production activity changes.
IV. This is suitable for industries where production continuous, manufacturing is
carried on by distinct and well defined process and the finished product of
one process becomes the raw material of the subsequent process. Identify
the method of costing.
 V. It is the practice of charging all costs, both variable and fixed to operations,
processes or products. Identify the technique of costing.
VI. The cost for searching for new and improved products, new applications of
materials or products, and new applications of improved methods. Identify
the type of cost.
VII. The process involves the classifying, recording, and appropriate allocation of
expenditure for the determination of cost of products and services. What is
the process called?
VIII. Cost of production + selling and distribution head =
4. Answer the following questions within 50 words: (10x3)
I. What do you mean by costing? Discuss any three features of cost accounting.
II. Why cost accounting is called an art?
III. Mention any three importance of cost accounting.
IV. State ay three features of operating costing.
V. State any three difference between job costing and process costing.
VI. What is production cost centre? Give examples.
VII. Classify overheads on the basis of functions.
VIII. Compute manufacturing expenses from the data given below:
Opening stock of raw materials: Rs. 5, 000
Expenses on purchases: Rs. 1, 000
Direct wages: Rs. 21,000
Closing stock of raw materials: Rs. 7, 000
Manufacturing cost: 80, 000
Purchases: Rs.25, 000
IX. Prepare statement of cost and profit from the following:
Works overheads: Rs. 100% of the labour cost
Labour cost: Rs. 22, 800
Office overheads: Rs. 25% of works cost
No. of cabinets manufactured: 400
Materials consumed: Rs. 12, 000
X. Classify overheads on the basis of functions. Compute the value of raw materials
consumed from the following figures extracted from the books of National
Electronics for the month of 2020:
Opening stock of raw materials: Rs.50, 000
Closing stock of raw materials: Rs.10, 000
Carriage inwards: Rs.20, 000
Purchases: Rs. 1, 00, 000
5. Answer the following questions within 80-90 words: (4x5)
I. Define cost accounting and discuss the limitations of cost accounting to the
management.
II. Explain the requisites of good costing system.
III. Following extract of costing information relates to commodity X for the half year
ending 31st December, 2020 (profit% on cost).
Purchases of raw materials: Rs. 1, 20, 000
Administrative overhead: Rs. 8, 000
Works overhead: Rs. 40, 000
Carriage on purchases: Rs. 1, 440
Stock (1st July 2020):
Raw materials: Rs. 20, 000
Finished products (1000 units): Rs. 16, 000
Stock (31st December 2020)
Raw materials: Rs. 22, 240
Finished products (2000 units): Rs. 32, 000
Work-in-progress (1st July 2020): Rs, 4, 800
Work-in-progress (31st December2020): Rs. 16, 000
Selling and distribution overheads are 1 rupee per tonne sold. 16, 000 units of
commodity were produced during the period.
You are to ascertain (i) prime cost(ii) cost of raw materials used (iii) cost of
production (iv) cost of sales (v) calculate sales when 20% profit on total cost is
desired.
IV. The accounts of Dyson manufacturing company for the year ended December
2020 show the following:
Stock of materials-
31st December 2019: Rs. 62, 800
31st December 2020; Rs. 48, 000
General expenses: Rs. 3, 400
Manager’s salary (3/4 factory and ¼ office): Rs. 10, 000
Gas and water- factory: Rs. 1, 200
-office: Rs. 400
Director’s fees: Rs. 6, 000
Depreciation-plant and machinery: Rs. 6, 500
- Furniture: Rs. 300

Productive wages: Rs. 1, 26, 000

Traveller’s salary and Commission: Rs. 7, 700

 Travelling expenses: Rs. 2, 100

Materials purchased: Rs. 1, 85, 000

Drawing office salaries: Rs. 6, 500

Counting house salaries: Rs. 12, 600

Carriage outward: Rs. 4, 300

Carriage on purchase: Rs. 7, 150

Bad debts written off: Rs. 6, 500

Repairs of plant and machinery: Rs. 4, 450

Rent, rates, taxes and insurance: factory: Rs. 8, 500

Office: Rs. 2, 000

Sales: Rs. 4, 61, 100

Prepare a statement giving the following information:

Materials consumed, prime cost, factory cost, cost of production, total cost, net profit.

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