COST ACCOUNTING

FORMAT OF COST SHEET

PARTICULARS TOTAL COST (Rs.) COST PER UNIT (Rs.)

DIRECT MATERIALS XXX XXX
(+) DIRECT LABOUR XXX XXX
(+) DIRECT EXPENSES XXX XXX
PRIME COST XXX XXX
(+)FACTORY OVERHEADS XXX XXX
FACTORY COST/WORK COST XXX XXX
(+) ADMINISTRATIVE
OVERHEADS XXX XXX
COST OF PRODUCTION XXX XXX
(+) SELLING & DISTRIBUTIVE
OVERHEADS. XXX XXX
TOTAL COST/COST OF SALES XXX XXX
(+) PROFIT XXX XXX
TOTAL SALES XXX XXX

ECONOMIC ORDER QUANTITY

EOQ =√2AB÷CS

A = ANNUAL CONSUMPTION OF UNITS.

B = BUYING COST PER ORDER /COST OF PLACING AN ORDER.

C = COST PER UNIT OF MTERIAL.

S = STORAGE & CARRYING COST.

NUMBER OF ORDER PLACE IN A YEAR

TOTAL QUANTITY REQUIRED PER YEAR

¿
EOQ ¿
¿
TIME BETWEEN TWO CONSECUTIVE YEAR

NUMBER OF MONTH ∈A YEAR

¿
NUMBER OF ORDER PER ANNUM ¿
¿
NUMBER OF ORDER PLACE IN A YEAR

TOTAL QUANTITY REQUIRED PER YEAR / ANNUAL CONSUMPTION

¿
EOQ
FREQUENCY OF ORDERS
 WEEK /MONTH ∈ A YEAR
¿
NUMBER OF ORDERS PER ANNUM

STOCK LEVELS
REORDER LEVEL

= MAXIMUM USAGE × MAXIMUM REORDER PERIOD

MAXIMUM LEVEL

= REORDER LEVEL + REORDER QUANTITY – MINIMUM CONSUMPTION × MINIMUM

REORDER LEVEL.

MINIMUM LEVEL

= REORDER LEVEL – (NORMAL CONSUMPTION ×NORMAL REORDER)

AVERAGE STOCK LEVEL

MINIMUM LEVEL+ MAXIMUM LEVEL

¿
2
(OR)

= MINIMUM LEVEL + ½ OF REORDER QUANTITY.

DANGER LEVEL

= AVERAGE CONSUMPTION × MAIMUM REORDER PERIOD FOR EMERGENCY PURPOSE

INVENTORY TURNOVER RATIO

COST OF MATERIALCONSUME
INVENTORY TURNOVER RATIO=
COSTB OF AVERAGE COST
PROBLEM 1: ( FIFO METHOD )

OCT.1 OPENING BALANCE =100UNITS@Rs.5.00each

2 RECEIVED 500UNITS@Rs.6.00each

20 ISSUED 300 UNITS

NOV.5 ISSUED 200 UNITS

6 RECEIVED 500 UNITS

DEC.10 ISSUED 300 UNITS & DEC.12 ISSUED 250 UNITS

 STORE LEDGER ACCOUNT (FIFO)

DATE RECIPT ISSUESS BALANCE

QUANTITY RATE AMT QUANTITY RATE AMT QUANTITY RATE AMT
OCT.1 - - - - - - 100 5.00 500
2 500 6.00 300 - - - 100 5.00 500
500 6.00 3000
20 - - - 100 5.00 500
200 6.00 1200 300 6.00 1800
NOV.5 - - - 200 6.00 1200 100 6.00 600
6 500 5.00 2500 - - - 100 6.00 600
500 5.00 2500
DEC.10 - - - 100 6.00 600
200 5.00 1000 300 5.00 1500
12 - - - 250 5.00 1250 50 5.00 250

CLOSING STOCK = 50UNITS@Rs,5.00 = Rs.250.00

PROBLEM 2 ( LIFO METHOD )

DEC 1. STOCK IN HAND 500UNITS@Rs.20

3. ISSUED 200 UNITS

3. PURCHASED 150UNITS@Rs.22

4. ISSUED 100 UNITS

5. PURCHASED 200UNITS@Rs.25

6. ISSUED 300 UNITS

6. RETURN TO STORE 10 UNITS (ISSUED ON 4 TH DEC)

7. ISSUED 100 UNITS

8. ISSUED 50 UNITS

ON 10TH WAS NOTICE THAT THERE IS A SORTAGE OF 10 UNITS.

STORE LEDGER ACCOUNT (LIFO)

DATE RECIPTS ISSUES BALANCE

QUANTITY RATE AMT QUANTITY RATE AMT QUANTIT RATE AMT
Y
DEC.1 500 20 10000
3 200 20 4000 300 20 6000
3 300 20 6000
150 22 3300 150 22 3300
4 300 20 6000
100 22 2200 50 22 1100
5 200 25 5000 300 20 6000
 50 22 1100
200 25 5000
6 200 25 5000 250 20 5000
50 22 1100
50 20 1000
6 10 22 220 250 20 5000
10 22 220
7 10 22 220 160 20 3200
90 20 1800
8 50 20 1000 110 20 2200
10 10 20 200 100 20 2000
(SHORTAGE)

CLOSING STOCK 100UNITS@Rs.2O=Rs.2000.

BASE STOCK METHOD

PREPARE STORE LEDGER ACCOUNT FROM THE FOLLOWING INFORMATION.

JAN 1. PURCHASE 500KG@Rs.20 per KG

10.PURCHASE 300KG@Rs.21 PER KG

15.ISSUED 600KG

20.PURCHASE 400KG@Rs.22 PER KG

25.ISSUED 300KG

27.PURCHASE 500KG@Rs.21 PER KG

31.ISSUED 200KG

ADOPT THE BASE STOCK METHOD OF ISSUE AND ASCERTAIN THE VALUE OF CLOSING STOCK UNDER
FIFO & LIFO METHOD. BASE STOCK 200KG.

STORE LEDGER ACCOUNT (FIFO)

DATE RECIPTS ISSUES BALANCE

JAN.1 500 20 10,000 - - - 500 20 10,000
10 300 21 6,300 - - - 500 20 10,000
300 21 6,300
15 - - - 300 21 6,300 200 20 4,000
300 20 6,000
20 400 22 8,800 - - - 200 20 4,000
400 22 8,800
25 - - - 300 22 6,600 200 20 4,000
100 22 2,200
27 500 21 10,500 - - - 200 20 4,000
100 22 2,200
 500 21 10,500
31 - - - 100 22 2,200 200 20 4,000
100 21 2,100 400 21 8,400

CLOSING STOCK OF 200KG@20 = 4,000

400KG@21 = 8,400

STORE LEDGER ACCOUNT (LIFO)

DATE RECIPTS ISSUES BALANCE

QUANTITY RATE AMT QUANTITY RATE AMT QUANTIT RATE AMT
Y
JAN 1. 500 20 10,000 - - - 500 20 10,000
10 300 21 6,300 - - - 500 20 10,000
300 21 6,300
15 - - - 300 21 6,300
300 20 6,000 200 20 4,000
20 400 22 8,800 200 20 4,000
400 22 8,800
25 - - - 300 22 6,600 200 20 4,000
100 22 2,200
27 500 21 10,500 200 20 4,000
100 22 2,200
500 21 10,500
31 - - - 200 21 4,200 200 20 4,000
100 22 2,200
300 21 6,300

CLOSING STOCK 200UNIT@Rs.20 = 4,000

100UNIT@Rs.22 = 2,200

300UNIT@Rs.21 = 6,300

SIMPLE AVERAGE PRICE METHOD

A FIRM MAINTAINS ITS STORE LEDGER ON THE SIMPLE AVERAGE PRICE METHOD.DURING THE
MONTH OF JANUARY 2004.THE FOLLOWING RECIPTS AND ISSUES OF MATERIALS WERE
MADE.RECORD THIS TRANSACTION IN THE STORE LEDGER.

RECIPTS

JAN 1. BALANCE 50UNITS@Rs.4 per unit

5. PURCHASED 40UNITS@Rs.3 per unit

8. PURCHASED 30UNITS@Rs.4 per unit

 15. PURCHASED 20UNITS@Rs.5 per unit

26. PURCHASED 40UNITS@Rs.3 per unit.

ISSUES :

JAN 10. MATEEIALS ISSUED 70 UNITS

12. MATERIALS ISSUED 10 UNITS

20. MATERIALS ISSUED 20 UNITS

24. MATERIALS ISSUED 10 UNITS

27. SHORTAGE 5 UNITS

STORE LEDGER ACCOUNT (SAPM)

DATE RECIPTS ISSUES BALANCE

QUANTITY RATE AMT QUANTITY RATE AMT QUANTITY AMT

JAN 1. - - - - - - 50 200

5 40 3 120 - - - 90 320

8 30 4 120 - - - 120 440

10 70 =4+3+4/3
- - - =11/3 257 50 183
=3.67
12 10 =3+4/2
- - - =7/2 35 40 148
=3.50
15 20 5 100 - - - 60 248

20 20 =3+4+5/3
- - - =12/3 80 40 168
=4
24 10 =4+5/2
- - - =9/2 45 30 123
=4.50
26 40 3 120 - - - 70 243

27 5 =4+5+3/3
- - - (SHORTAGE) =12/3 20 65 223
=4

CLOSING STOCK 65 UNITS VALUED @ Rs.223

 WEIGHTED AVERAGE PRICE METHOD (WAPM,)

WITH THE HELP OF THE FOLLOWING INFORMATION.PREPARE STOCK LEDGER BASED ON WAPM.

SEPT.1 OPENING BALANCE 24000KG@Rs7.50 PER KG

1 PURCHASE 44000KG@Rs.7.60 PER KG

1 ISSUE 10,000 KG

5 ISSUE 16,000 KG

12 ISSUE 24,000 KG

13 PURCHASE 10000KG@Rs.7.80 PER KG

18 ISSUE 24000KG

22 PURCHASE 50000KG@Rs.8 PER KG

28 ISSUE 30000KG

30 ISSUE 22000KG

STORE LEDGER ACCOUNT (WAPM)

DATE RECIPT ISSUES BALANCE

QUANTITY RATE AMT QUANTITY RATE AMT QUANTITY AMT
SEPT.1 - - - - - - 24,000 1,80,000
1 44,000 7.40 3,34,400 - - - 68,000 5,14,400
1 - - - 10,000 7.565 75,650 58,000 4,38,750

5 - - - 16,000 7.565 1,21,040 42,000 3,17,710

12 - - - 24,000 7.565 1,81,560 18,000 1,36,150
13 10,000 7.80 78,000 - - - 28,000 2,14,150
18 - - - 24,000 7.648 1,83,552 4,000 30,598
22 50,000 8.00 4,00,000 - - - 54,000 4,30,598
28 - - - 30,000 7.974 2,39,220 24,000 1,91,378
30 - - - 22,000 7.974 1,75,428 2,000 15,950

VALUE OF MATERIAL∈STOCK
ISSUE PRICE =
QUANTITY ∈STOCK

SEPTEMBER 1 = 5,14,400/68,000 = 7.565

5 = 4,38,750/58,000 = 7.565

12 = 3,17,710/42,000 = 7.565

18 = 2,14,150/28,000 = 7.648

28 = 4,30,598/54,000 = 7.974
 30 = 1,91,378/24,000 = 7.974

CLOSING STOCK OF 2000KG@Rs.15,950.

LABOUR COST
LABOUR TURNOVER RATE
1. SEPERATION RATE METHOD

¿ NUMBER OF WORKER ¿ ×100 ¿

AVERAGE NUMBER OF WORKER

2. REPLACEMENT METHOD

NUMBER OF WORKER REPLACE

¿ × 100
AVERAGE NUMBER OF WORKER

3. FLUX RATE METHOD

NUMBER OF WORKER ¿ NUMBER OF WORKER REPLACE

¿ ×100
AVERAGE NUMBER OF WORKERS
4.AVERAGE NUMBER OF WORKERS

NO .OF WORKER AT BEGINNING+ NO . OF WORKER AT END

¿
2

STATEMENT SHOWING CASH REQUIRE FOR PAYMENT OF WAGES

PARTICULARS Rs.
NORMAL WAGES XXX
OVERTIME WAGES XXX
LEAVE WAGES XXX
TOTAL AMOUNT OF WAGES XXX
LESS: EMPLOYEE’S SHARE TO STATE INSURANCE CORPORATION XXX
XXX
LESS: EMPLOYEE’S CONTRIBUTION TO PROVIDEND FUND XXX
XXX
LESS: HOUSE RENT TO BE RECOVER XXX
CASH REQUIRE PAYMENT OF WAGES XXX
TIME WAGE SYSTEM

= TIME TAKEN × TIME RATE

PIECE WAGE SYSTEM

= UNIT PRODUCED × RATE PER UNIT

STANDARD OUTPUT FOR 8 HOURS

= TIME TAKEN × STANDARD OUTPUT PER HOUR

TAYLOR’S DIFFERENTIAL PIECE RATE

80% OF PIECE RATE BELOW STANDARD.

120% OF PIECE RATE ABOVE STANDARD.

MERRICK’S DIFFERENTIAL PIECE RATE

UPTO 83% OF OUTPUT = ORDINARY PIECE RATE

84% TO 99% OF OUTPUT= 110% OF ORDINERY PIECE RATE

100% & ABOVE = 120% OF ORDINARY PIECE RATE.

EMERSON’S EFFICIENCY SYSTEM

I. BELOW 2/3 OR 83% STANDARD = TIME WAGE

II.2/3 OR 84% TO 100% STANDARD = TIME WAGE + 20% BONUS

III, ABOVE 100% STANDARD = TIME WAGE + 20% BONUS +1% INCREASE FOR EACH 1%
INCREASE IN PRODUCTION.

AVERAGE OUTPUT
% OF EFFICIENCY ¿ ×100
STANDARD OUTPUT
GANTT’S BONUS PLAN

BELOW STANDARD: GUARANTEED TIME WAGE

AT STANDARD 100%: TIME WAGE + 20% BONUS.

ABOVE STANDARD : HIGH PIECE RATE (OR) PIECE RATE + 20% WAGES EARNED.

INCENTIVE, PREMIUM & BONUS PLAN

1. HALSEY’S PREMIUM PLAN
EARNINGS = TIME WAGE + BONUS
= (TIME TAKEN × TIME RATE) + 50/100 + (TIME SAVED × TIME RATE)
2. HALSEY’S WEIR PREMIUM PLAN
 EARNINGS = TIME WAGE + BONUS
= (TIME TAKEN × TIME RATE) + 30/100 + (TIME SAVED × TIME RATE)
3. ROWAN PREMIUM PLAN
EARNINGS = TIME WAGE + BONUS
TIME SAVE
= (TIME TAKEN × TIME RATE) + ×(TIME TAKEN × TIME
STANDARD TIME
RATE)