Cost and Management Accounting Solution IIMT



(i) The cost of drawings, design and layout is an example of production cost.

(ii) Cost accounting is a government reporting system for an organistaion.

(iii) Internal instruction to buy the specified quantity and description is called stores requisition note.

(iv) The stock turnover ratio indicates the slow moving stocks.

(v) The flux rate method of labour turnover considers employees replaced.

(vi)  An automobile service unit uses batch costing.

(vii) Ash produced in thermal power plant is an example of co-product.

(viii) The marginal costing method conforms with the accounting standards.

(ix) An increase in variable cost reduces contribution.

(x) The use of actual overhead absorption may be suitably applied in small firms which are manufacturing a single product.

Part B: Attempt five of the following:                                               10*5=50 Marks

  1. Explain the advantages of standard costing.
  2. State the circumstances in which time rate system of wage payment can be preferred in a factory. What are the advantages of this system?
  3. How do you deal with the following in Cost Accounts?
  4. i. Fringe benefits
  5. ii. Data processing cost

Part C:                                                                                                                         30 marks

  1.  A company manufactures a product from a raw material, which is purchased at ` 54 per kg. The company incurs a handling cost of ` 350 plus freight of ` 400 per order. The incremental carrying cost of inventory of raw material is Re. 0.50 per kg per month. In addition, the cost of working capital finance on the investment in inventory of raw material is `8 per kg per annum. The annual production of the product is 94,500 units and 2 units are obtained from one kg of raw material. Required :

(i) Calculate the economic order quantity of raw materials.

(ii) Advise, how frequently should orders for procurement be placed.

(iii) If the company proposes to rationalize placement of orders on quarterly basis, what percentage of discount in the price of raw materials should be negotiated

2. A large consignment of materials of various types of makes was purchased for ` 40,000. Later on these were sorted into the following categories :

materials of various types

You are required to calculate the purchase price for each of the materials presuming that percentage of profit in each case is the same.

PlaceholderCost and Management Accounting Solution IIMT