Dibrugarh University - Cost Accounting 2010


Cost accounting is better understood as a cost control and cost reduction exercise and not mere a cost ascertainment process. Discuss.

2.                   What do you understand by economic order quantity? How are they calculated?


From the following figures, prepare a store ledger account of ABC Ltd. Assuming that materials are issued on LIFO basis :
April 1, 1999 : Opening stock of ball bearing
100 nos. valued at Rs 5 each
Purchases during the month :
April 5 : 200 ball bearings @ Rs 11 each
April 10 : 100 ball bearings @ RS 12 each

Issues to production during the month :
April 18—100 ball bearings
April 25—50 ball bearings
Solution available here

3.                   Explain the different systems of wage payment.
Discuss the prerequisites of a sound incentive scheme.

4.                   What are the general considerations that would decide bases for distribution of overhead cost to departments?


A machine has been purchased for cash at Rs 9,200. Its working life is estimated to be 18000 hours after which its scrap value is estimated at Rs 200. It is assumed from past experience that-
i)        The machine will work for 1800 hours annually,
ii)       The repair charges will be Rs 1080 during the whole period of life of the machine;
iii)     The power consumption will be 5 units per hour at 6 paise per unit;
iv)     Other annual standing charges are estimated to be :
1)      Rent of department (machine 1/5th )—Rs 780
2)      Light (12 points in the department, 2 points engaged in the machine)—Rs 288
3)      Foreman’s salary (1/4th of his time is occupied in the machine)—Rs 6,000
4)      Insurance premium (fire) for machinery—Rs 36
5)      Cotton waste—Rs 60
Find out the machine hour rate on the basis of above data for allocation of work expenses to all jobs for which the machine is used. Solution available here

5.                   Write notes on :
i)                    Fixed price contract with escalation clause
ii)                   Cost plus contract
A & Co’s profit as per costing system was Rs 46,126 whereas the audited final accounts showed a profit of Rs 33,248. From the following additional information, you are required to prepare a reconciliation statement showing clearly the reason for discrepancy between the two figures :
Trading and profit and loss account for the year ended on 31-03-03
To Opening stock    4,94,358
Add : Purchases     1 ,64,308
Less : Closing stock 1,50,242  
Materials consumed
“  Direct wages                                 
 “  Factory overhead
 “  Gross Profit                                                  

To administrative overhead       
“   Selling overhead
“   Net profit                                                      



By Sales

By gross profit
By sundry income



The costing records show the following :
i)                    Closing stock—Rs 1,56,394
ii)                   Direct wages absorbed during the year—Rs 49,734
iii)                 Factory overhead absorbed—Rs 39,428
iv)                 Administrative overhead charged at 3% of selling price
v)                  Selling overhead charged @ 5% on value of sales
solution available here