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Ipcc test – material, oh, inti, non-inti, contract & process costing
Q.1. Accounting relating to Non integrated system: Aman Co. operates separate cost accounting and financial
accounting systems. The following is the list of Opening balances as on 1st April in the Cost Ledger :
Debit (Rs.)
Credit (Rs.)
Stores Ledger Control Account
53,375
WIP Control Account
1,04,595
Finished Goods Control Account
30,780
General Ledger Adjustment Account
1,88,750
Transactions for the quarter-ended 30th June are as under :
Rs.
Materials purchased
26,700
Materials issued to production
40,000
Materials issued for factory repairs
900
Factory wages paid (including indirect wages Rs. 23,000)
77,500
Production overheads incurred
95,200
Production overheads under-absorbed and written-off
3,200
Sales
2,56,000
The Company’s gross profit is 25% on Factory Cost. WIP stocks increased by Rs. 7,500 at the end of the
quarter. Prepare the relevant Control Accounts, Costing Profit and Loss Account and General Ledger
Adjustment Account to record the above transactions for the quarter ended 30th June.
Q.2. Naman Limited keeps books on integrated accounting system. The following balances appear in the books
as on April 1, 2002 :
Debit (Rs.)
Credit (Rs.)
Stores Control A/c
40,950
Work-in-progress A/c
38,675
Finished Goods A/c
52,325
-Bank A/c
22,750
Creditors A/c
18,200
Fixed Assets A/c
1,47,875
Debtors A/c
27,300
Share Capital A/c
1,82,000
Provision for Depreciation A/c
11,375
Provision for Doubtful Debts A/c
3,725
Factory Overheads Outstanding A/c
6,250
Pre-paid Administration Overheads A/c
9,975
Profit & Loss A/c
72,800
3,17,100
3,17,100
The transactions for the year ended March 31, 2003 were as given below :
(Rs.)
(Rs.)
Direct Wages
1,97,925
Indirect Wages
11,375
2,09,300
Purchase of material (on credit)
2,27,500
Materials issued to production
2,50,250
1
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Materials issued for repairs
4,550
Goods finished during the year (at cost)
4,89,125
Credit Sales
6,82,500
Cost of Goods sold
5,00,500
Production overhead absorbed
1,09,200
Production overheads paid during the year
91,000
Production overheads outstanding at the end of year
7,775
Administration overheads paid during the year
27,300
Selling overheads incurred
31,850
Payment to Creditors
2,29,775
Payment received from Debtors
6,59,750
Depreciation of Machinery
14,789
Administration overheads outstanding at the end of year
2,225
Provision for doubtful debts at the end of the year
4,590
Required : Write up account in the integrated ledger of Naman Limited and prepare a Trial balance.
Q.3. An expenditure of Rs. 1,94,000 has been incurred on a contract to the end of 31 st March, 2000. The value
of work certified is Rs. 2,20,000. The cost of work done but not yet certified is Rs. 6,000. It is estimated that the
contract will be completed by 30th June, 2000 and an additional expenditure of Rs. 40,000 will have to be
incurred to complete the contract. The total estimated expenditure on the contract is to include a provisions of
2 ½ percent for contingencies. The contract price is Rs. 2,80,000 and Rs. 2,00,000 has been realised in cash
upto 31st March,2000. Calculate the proportion to be taken to Profit and Loss Account as on 31st March, 2000
under different methods.
Q.4. From the following information for January 2002, prepare accounts for Process-Y (Apply FIFO Method)
Opening stock 600 units Rs. 1,050
Degree of completion : Materials -80%; Labour-60%; Overheads -60%
Units
Rs.
Transfer from Process-A
11,000
5,500
Transfer to Process-Z
8,800
Direct materials added in Process-Y
2,410
Direct labour amounted to
7,155
Production overhead incurred
9,540
Units scrapped
1,200
Degree of completion : Materials-100%; Labour-70%; Overheads-70%
Units
Closing stock
1,600
Degree of completion : Materials-70%; Labour-60%; Overheads-60%
There was a normal loss in process-Y of 10% of production Units scrapped realised at 50 paise per unit.
Q.5. A supplier quotes for Material A as follows :
Rs.
100 units or more but less than 500 units
25 each
500 units or more but less than 1,000 units
24 each
1,000 units or more
22.5 each
Trade discount
20%
Cash discount
5% in 7 days
Contains are charged at Rs. 50 each and credited at Rs. 375 each on return.
One container is required for every 100 units.
The purchaser decides to buy 600 units. The supplier charged transport charges amounting to Rs. 337.50 and
storage charges amounting to Rs. 62.50.
2
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(a)
(b)
(c)
You are required to calculate :
total cost of the lot,
per unit cost of the lot, and
amount of cash discount, if the payment is made on time.
Q.6. A company has three production department A, B and C and two service departments X and Y. The
expenses incurred by them during the month are:
A.
Rs. 80,000
X
Rs. 23,400
B.
Rs. 70,000
Y
Rs. 30,000
C.
Rs. 50,000
The expenses of service departments are apportionment to the production departments on the following basis :
A
B
C
X
Y
Expenses of X
20%
40%
30%
10%
Expenses of Y
40%
20%
20%
20%
Show how the expenses of X and Y departments would be apportionment to the A, B and C departments,
according to :
(i) Repeated Distribution Method (ii) Simultaneous Equation Method, (iii) Trial and Error Method.
Q.7. A machine shop has 8 identical drilling machines manned by 6 operators. The machine cannot be worked
without an operator wholly engaged on it. The original cost of all these machines works out to Rs. 8 lakhs.
These particulars are furnished for a 6 month period :
Normal available hours per month per worker
208
Absenteeism (without pay) hours P.M per worker
18
Leave (with pay) hours per worker P.M.
20
Normal idle time Unavoidable hours per worker P.M.
10
Average rate of wages per worker for 8 hours a day
Rs. 20
Average rate of production bonus estimated
15% on wages
Value of power consumed
Rs. 8,050
Supervision and Indirect Labour
Rs. 3,300
Lighting and electricity
Rs. 1,200
Following particulars are for a year :
Repairs and maintenance including consumables
3% of value of machine
Insurance
Rs. 40,000
Depreciation
10% of original cost
Other sundry works expenses
Rs. 12,000
General management expenses allocated
Rs. 54,530
You are required to work out a comprehensive machine hour rate for the machine shop.
3
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Ans .1
Particulars
To Balance b/d
To General Ledger control-Purchases
Aman COMPANY
a. stores Ledger control account
Amount
Particulars
53375 By Work in progress control –issues
26700 By Factory Overhead control-repairs
By balance c/d (bal. fig. )
Total
80075 Total
b. Wages control account
Particulars
Amount
Particulars
To General Ledger control-wages paid
77500 By Work in progress Direct [bal. fig.]
By Factory Overhead control-Indirect
Total
77500 Total
c. Factory Overhead control account
Particulars
Amount
Particulars
To Materials/ stores Repairs
900 By Profit and Loss –written/off
To Wages control
23000 By Work in progress control absorption
To General Ledger control FOH incurred
95200 (bal. fig. )
Total
119100 Total
d. Work in progress control account
Particulars
Amount
Particulars
To Balance b/d
104595 By Finished Goods Control Production
To Stores control
40,000 (bal. fig.)
To Wages control
54,500 By Balace c/d (old balance + 7500 )
To factory overheads control
115900
Total
314995 Total
e. Finished goods control account
Particulars
Amount
Particulars
To Balance b/d
30780 By Profit and Loss cost of sale transferred
To Work in progress control (production)
202900 By balance c/d (bal. fig. )
233680 Total
f. General Ledger control account
Particulars
Amount
Particulars
To Balance b/d
256000 By Balance b/d
To General Ledger control-Purchases
By stores control raw material
By wages control
By factory overheads control
To balance c/d (bal.fig.)
180150 By profit and Loss –profit transferred
Total
436150 Total
g. costing profit and Loss account
Particulars
Amount
Particulars
To Finished goods–transferred(bal.fig)
204800 By Sales
To Gross Profit @ ¼ on cost =1/5 on sales
51200
Total
256000 Total
To factory Overhead control–written off
3200 By Gross Profit b/d
To General Ledger Control –profit
transferred [bal. fig.]
48000
Amount
40,000
900
39175
80075
Amount
54500
23000
77500
Amount
3200
115900
1,19,100
Amount
202900
112095
3,14,995
Amount
204800
28880
Total
Total
51200 Total
4
233680
Amount
188750
26700
77500
95200
48000
436150
Amount
256000
256000
51200
51200
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Particulars
To Profit and Loss –transferred
Total
h. Sales account
Amount
Particulars
256000 By General Ledger control
256000 Total
i. Trial Balance on 30th June
Particulars
Stores Ledger control
Work in progress control
Finished goods control
General Ledger control
Total
Amount
256000
256000
Dr
Stores control A/c
Rs
To Balance b/d
40950 By WIP
To Creditors A/c
227500 By Production overheads A/c
By Balance c/d
268450 Total
Dr
WIP Control A/c
Rs
Particulars
To Balance b/d
38675 By Finished Goods A/c
To Wages control A/c
197925 By balance c/d
To stores control a/c
950250
To Production overheads A/c
109200
596050 Total
Dr
Production Overheads A/c
Rs
To Wages control a/c
11375 By WIP A/c
To Stores control A/c
4550 By Profit & Loss A/c
To bank (91000 – 6.250)
84750 (Under absorbed overheads written off)
To Production overheads outstanding
7775
To Provision for depreciation
14789
123239
Dr
Finished Goods A/c
Rs
To Balance b/d
52325 By Cost of sales A/c
To Work in progress a/c
489125 By balance c/d
To Administration
39500
Total
Dr
To Pre-paid Admn. Overheads A/c
To Bank
To Admn. Overheads outstanding
Dr
5
180150
80075
180150
Solution : 2
Dr
Total
Cr
39175
112095
28880
580950 Total
Administration Overheads A/c
Rs
9975 By Finished Good A/c
27300
2225
39500 Total
Cost of sales A/c
Rs
Cr.
Rs
250250
4550
13650
268450
Cr
Rs
489125
106925
596050
Cr
Rs
109200
14039
123239
Cr
Rs
500500
80450
580950
Cr
Rs
39500
39500
Cr
Rs
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To Finished Goods A/c
To Selling overheads
5005000 By Sales A/c
31850
532350
Dr
Sales a/c
Particulars
To Cost of sales A/c
To Profit & Loss A/c
Amount
Particulars
532350 By Debtors A/c
150150
Total
Dr
682500 Total
Factory Overheads/Production Overheads outstanding A/c
Rs
6250 By Balance b/d
7775 By Production overheads
To Bank
To Balance c/d
Total
Dr
14025 Total
Prepaid Administration Overheads A/c
Rs
9975 By Admn. Overheads A/c
To Balance b/d
9975
Provision for Depreciation A/c
Particulars
Amount
Particulars
To Balance b/d
26164
By Balance b/d
To General Ledger control-Purchases
By production overheads A/c
532350
532350
Cr
Amount
682500
682500
Cr
Rs
6250
7775
14025
Cr
Rs
9975
9975
Dr
Total
Dr
26164
Total
Provision for Doubtful Debts A/c
Rs
4590 By Work in progress control –issues
By Factory Overhead control-repairs
By balance c/d (bal. fig. )
To Balance b/d
Cr
Amount
11375
14789
26164
Cr
Rs
3725
865
To Provision for doubtful debts
To Production overheads
To Balance c/d
4590
Profit & Loss A/c
Rs
865 By Balance b/d
14039 By sales A/c
208046
4590
Cr
Rs
72800
150150
Total
222950 Total
Rs
27300 By Bank A/c
682500 By Balance c/d
2,22950
Cr
Rs
659750
50050
709800 Total
Creditors A/c
Rs
709800
Cr
Rs
Dr
Dr
Debtors A/c
To Balance b/d
To General Ledger control-Purchases
Total
Dr
6
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To Bank
To Balance c/d
229775
By balance b/d
15925
By stores control A/c
245700
Fixed Assets A/c
Rs
147875 By Balance c/d
Dr
To Balance b/d
Dr
To Debtors
18,200
2,27,500
245700
Cr
Rs
147875
Bank A/c
Rs
Particulars
659750 By Balance b/d
By Direct wages
By Indirect wages
By Production overheads
(Rs 84750 + Dr. 6250)
By Admn. Overheads A/c
By selling overheads A/d
By Creditors A/c
By Balance c/d
659750 Total
Trial Balance As on March 31, 2003
Dr (Rs.)
Stores control A/c
Work in progress A/c
Finished Goods A/c
Bank A/c
Creditors A/c
Fixed Assets A/c
Debtors A/c
Shares Capital A/c
Provision for Depreciation A/c
Profit & Loss A/c
Production overheads outstanding A/c
Outstanding administrative Overheads A/c
Provision for doubtful debts A/c
Cr
Rs
22750
197925
11375
91000
27300
31850
229775
47775
659750
Cr. (Rs.)
13650
106925
80450
47775
15925
147875
50050
446725
Solution : 3
Expenditure incurred up to the end of 31st March
Add: Estimated costs to completion
Computation of Profit
Rs 194000
40,000
234000
6000
240000
40,000
Rs 280000
Add : Provision for contingencies 234000 x 2.5/97.5
Total estimated expenditure on the contract
Estimated profit (Balancing figure, i.e. 280000 – 240000)
Contract price
Profit to be credited to profit and Loss Account under different method:
(a) Estimated profit x work certified = 40000 x 220000
Contract price
240000
(b) Estimated profit x cost of work to date = 40000 x 194000
Estimated total cost
240000
7
182000
26164
208046
7775
2225
4590
446725
= Rs 31428
= Rs 32333
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(c) Estimated profit x Cash received = 40000 x 200,000
Work certified
220000
(d) Estimated profit x Cost of work to date x Cash received = 40000 x 194000 x 200000
Estimated total cost
Work certified
240000 2,20,000
(e) Estimated profit x work certified = x Cash received = 40000 x 220000 x 200000
Contract price
Work certified
280000 220000
Option (e) is more conservative and is generally considered better.
= Rs 36364
= Rs 29394
= Rs 28571
Solution:4
Statement of Equivalent Production
Equivalent Production Units
Input
Output
Materials –I
Material-II
Labour
Overhead
Items
Units
Items
units % com- units
% com- Units % com- units % comUnits
pletion
pletion
pletion
pletion
Opening stock 600 (a) Opening stock 600 20%
120
40%
240
40%
240
From Process-X 11000(b) Normal loss 1000 [10% of (600+
11000-1600)]
(c) Finished
8200 100% 8200
100% 8200
100% 8200
100%
8200
product
(d) Closing stock 1600 100% 1600
70%
1120
60%
960
60%
960
(e) Abnormal loss 200 100% 200
100% 200
70%
140
70%
140
Total
11600
11600
10,000
9640
9540
9540
Note : (1) Materials – I refers to materials of Process –I. It will be always 100% complete as it is finished product of the
previous process. (2) Material – II refers to materials added in Process – II.
Statement of cost
Element of cost
Cost Rs
Equivalent Production
Cost per unit Rs
(units)
Materials cost :
Materials cost(transferred from previous process)
5500
Less: Scrap value [1000 units @ 50 paise]
500
5000
10,000
0.50
Materials added in Process –y
2410
9640
0.25
Direct labour cost
7155
9540
0.75
Overheads
9540
9540
1.00
Total
24105
2.50
Statement of Evaluation
Particulars
Element of
Equivalent
Cost per unit
Cost
Total cost
cost
production (Rs) (Rs)
(Rs)
Units
Opening stock Materials-I
Materials –II 120
0.25
30
Labour
240
0.75
180
Overheads
240
1.00
240
450
Finished
8200
2.50
20500
production
Closing stock
Materials –I
1600
0.50
800
Materials-II
1120
0.25
280
Labour
960
0.75
720
Overheads
960
1.00
960
2760
Abnormal loss Materials –I
200
0.50
100
8
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Materials –II
Labour
Overheads
200
140
140
0.25
0.75
1.00
50
105
140
395
24105
Total
Output Transferred to Process – Z
Particular
Units
Opening WIP (completed)
600
Completed processed during the period
8200
Total
8800
Dr
Process –Y Account
Particulars
Units
Amount
Particulars
To opening stock
600
1050
By normal Loss
To Process-X A/c
11000
5500
By Abnormal Loss
To Materials cost
2410
By Process –Z A/c
To direct labour cost
7155
(output transferred)
To overheads
9540
By Closing stock
11600
25655
Value(Rs.)
1500 (1050 + 450)
20500
22000
Cr
Units
Amount
1000
500
200
395
8800
22000
1600
11600
2760
25655
Solution 5:
(a & b) Statement of Computation of Purchase Price of Material A
Particulars
Total cost for the
Lot of 600 units
Rs.
600 units @ Rs. 24. Each
14,400
Less: Trade discount @ 20%
2,880
11,520
Add: Cost of returnable container :
6 containers @ Rs. 50 each
Rs. 300
Less: Credited on return @ Rs. 37.5 each
225
75
11595
Add : Transport charges
337.50
Storage charges
62.50
400
Total Cost
11,995
Cost
Unit
Rs.
2400
480
19.20
.12
19.32
.67
19.99
©
Computation of amount of cash discount :
5% of Rs. 11,520
= Rs. 576
[Cash discount of Rs. 576 would be received, if payment is made within 7 days. It, however, will not affect cost accounts; it
is as item of financial nature. ]
Solution – 6
9
Secondary Distribution Summary (Repeated Distribution Method)
Production Departments
Service Departments
A
B
C
X
Y
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Primary overheads (Given)
Distribution of OHs of Deptt.X
2:4:1–
Distribution of OHs of Deptt. Y
4 : 2 : 2 : 2Distribution of OHs of Deptt. X
2 : 4 : 3: 1 –
Distribution of OHs of Deptt. Y
4 : 2: 2:2 –
Distribution of OHs of Deptt. X
Distribution of OHs of Deptt. Y
Distribution of OHs of Deptt. X
Rs 80,000
4680
Rs 70,000
9360
Rs 50000
7020
Rs 23400
- 23400
Rs 30000
2340
12936
6468
6468
6468
- 32340
1294
2587
1940
- 6.468
647
259
129
129
130
-647
26
5
1
52
3
1
39
2
1
-130
3
-3
13
-13
-
Total
99201
88600
65599
-
-
Alternatively (Simultaneous Equation Method) :
Let x = Total overheads of department X
:
and y = Toal overheads of departments Y
x= 23400 + . 2Y ….. (1)
:
and y = 30,000 + . 1x :
or y - .x = 30,000…. (2)
Multiplying equation 1 by 5 we get :
5 x = 117000 + y
:
or – y + 5x = 117000.. (3)
Addign (3) and (2) we get 5x -.x = 30000 + 11700
4.9x = 147000
:
or x = 147000» 4.9 = 30000
By substituting value of x in equation (1) we get
30,000 = 23400 + .2y
or .2y = 30,000 – 23400 = 6600
Y = 6600 » .2 :
or y = 6600 x 5 = 33000
Secondary Distribution
Production departments
service Departments
A
B
C
X
Y
Total Expenses(Given summary)
Rs 80000
Rs 70,000
Rs 50,000
Rs 23400
Rs 30,000
Expenses of service department X
Rs 30,000 in 2:4:3: - : 1
6000
12000
9000
- 30,000
3000
Expenses of service department Y
Rs 33000 in 4: 2:2: 2: 13200
6600
6600
6600
-33000
Total
99200
88600
65600
Verification :
x = 23400+ .2y
y = 30000+ .1y
30000= 23400+ .2(33000)
33000 = 30,000 + .1 (30000)
= 23400 + 6600
= 30,000 + 3000
Alternatively (Trial and Error method) : Service Departments
X
Y
As per summary
23400
30,000
Distribution to Y (10% of 23400 of X)
2340
Distribution to X (20% of 3234 of Y) 6468
Distribution to Y (20% of 6468 of X) 647
Distribution to X (20% of 647 of Y)
129
Distribution to Y (10% of 129 of X)
13
Distribution to X (20% of 13 of Y )
3
Distribution to Y (10% of 3 of X)
Total
30000
33,000
Solution: 7 . Before computing the comprehensive machine hour rate, it is necessary to find out the total machine hours
utilized and total wages paid to the operators.
Computation of total machine hours utilized :
10
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Normal available hours p.m. per operator
208 hours
Less : Unutilised hours due to :
Absenteeism 18 hours
Leave
20
Idle time
10
48
Total hours utilized p.m. per operator
160
Total hours utilized for 6 months for 6 operators = 160 x 6 x 6 or
5760 hrs.
It is give in the question that the machines cannot work without an operator wholly engaged on it. Therefore, hours utilized
for 6 operators i.e. 5760 hrs. represents the total machine hours.
Total wages to 6 operators for 6 months :
Average rate of wages per hour =Rs 20 » 8 hrs = Rs 2.50
Normal hours for which wages are to be paid = 208 – 18 or 190 hrs.
Wages for 6 months for 6 operators @ Rs 2.50/hr = 190 x 6 x 6 x 2.50 or Rs 17100.
Computation of Comprehensive Machine hour rate for the Machine shop
Operators’ wages (as above)
Rs 17100
Production Bonus
2565
Power consumed
8050
Supervision and indirect labour
3300
Lighting and electricity
1200
Repairs and maintenance (3% of Rs 8 lakhs ) » 2
12000
Insurace (given for 12 months : reduced to 50% for 6 months)
20,000
40,000
Depreciation for 6 months
Other sundry work expenses for 6 months
6000
General management expenses for 6 months
27265
Total overheads for 6 months
137480
Comprehensive Machine hour rate = 137480 »5760 hrs = Rs 23.87 per hr.
11
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