Q1. The Bangalore Ltd. supplies you the following information and requires you to prepare a cost sheet.

1.Opening Stock of raw materials on – Rs.75,000

2. Closing Stock of raw materials on- Rs.91,500 10 MARKS

3. Direct wages- Rs. 52,500

4.Indirect wages- Rs. 2,750

5. Sales- Rs. 2,00,000

6. Opening Work-in-progress on – Rs.28,000

7. Work-in-progress on- Rs.35,000

8. Purchases of raw materials- Rs. 66,000

9. Factory rent, rates and power- Rs. 15,000

10. Depreciation of plant and machinery used in office- Rs. 3,500

11. Expenses on purchases- Rs. 1,500

12. Carriage outward- Rs. 2,500

13. Advertising – Rs.3,500

14. Office rent and taxes – Rs.2,500

15. Travellers’ wages and commission- Rs. 6,500.

16. Stock of finished goods on – Rs. 54,000

17. Stock of finished goods on- Rs.31,000

Q2. The following expenses were incurred for a job during the year ended on 31st March
2020: 10 marks

Amount ( Rs.)
Direct Materials 30,000
Direct Wages 40,000
Chargeble Expenses 10,000
Factory Overheads 20,000
Selling and Distribution 20,000
overheads
Administrative 30,000
overheads
Single price for the above job was Rs.1,80,000. You are required to prepare a statement
showing the profit earned during the year ended 31.3.2019 from the job and an estimated
price of a job which is to be executed in the year 2019-20, charging the same percentage of
profit on sales as it was during the year 2019-20. Materials, wages and chargeable
expenses will be required of Rs.50,000, Rs.70,000 and Rs.20,000 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). Administrative and selling and distribution overheads as a percentage of factory cost.

Q3. The gadget company produces three products A, B and C all made from the same
material . Until now it has been using traditional costing system . The company is now
considering to switch over to Activity Based Costing system in the hope that it will improve
Information

QUESTION 3

The Gadget Co produces three products. A, B and C, all made from the same material. Until now, it has
used traditional absorption costing to allocate overheads to its products. The company is now
considering an activity based costing system in the hope that it will improve profitability. Information for
the three products for the last year is as follows:

A B C
Production and sales volumes units 15000 12000 18000
 Selling Price Per Unit $7.50 $12 $13
 Raw material usage (kg) per unit 2 3 4
 Direct labour hours per unit 0.1 0.15 0.2
 Machine hours per unit 0.5 0.7 0.9
 Number of purchase runs per annum 16 12 8
 Number of purchase orders per annum 24 28 42
 Number of deliveries to retailers per annum 48 30 62

The price for raw materials remained constant throughout the year at $1.20 per kg. Similarly, the direct
labour cost for the whole workforce was $14.80 per hour. The annual overhead costs were as follows:

$
Machine set up costs 26,550
Machine running costs 66,400
Procurement costs 48,000
Delivery costs 54,320
Required:

(a) Calculate the full cost per unit for products A, B and C under traditional absorption costing, using
direct labour hours as the basis for apportionment. (5 marks)

(b) Calculate the full cost per unit of each product using activity based costing. (9 marks)