June 2016 Eco 10 Solved Question Paper | ECO 10 Solved Question Paper June 2016

ECO 10 Solved Question Paper June 2016




Term-End Examination: June 2016
Time: 2 hours; Maximum Marks: 50; (Weightage: 70%)

June 2016 Eco 10 Solved Question Paper

Note: Attempt any two questions from Section-A and any two questions from Section-B.


1. What are the objectives of cost accounting? State its major advantages to a manufacturing concern.                    4+6

Objectives/functions of Cost Accounting

According to Blocker and Weltemer, “Cost Accounting is to serve management in the execution of polices and in comparison of actual and estimated results in order that the value of each policy may be appraised and changed to meet the future conditions”. The main objectives/functions of cost accounting are:

1) Ascertain Cost: To ascertain the cost of product or a services reveled and enable measurement of profit by proper valuation of inventory.

2) Analyse Costs: To analysis costs or to classify the expenses under different heads of accounts viz. material, labour, expenses etc.

3) Allocate and Apportion the Costs: To allocate or charge the direct expenses or specific costs such as Raw Material, Labour to particular product, contract or process and to distribute common expenses to each product, contract or process on a suitable basis.

4) Cost Reporting: Cost Reporting or presentation includes:

a) What to report i.e. what is the nature of information to be presented?

b) Whom to Report i.e. to whom the report is to be addressed.

c) When to Report i.e. when the report is to be presented i.e. Daily weekly monthly yearly etc.

d) How to Report i.e. in what format the report is to be presented.

Advantages of Cost Accounting (Aid to Management)

a)      Helps in Decision Making: Cost accounting helps in decision making. It provides vital information necessary for decision making. For instance, cost accounting helps in deciding:

1.       Whether to make a product buy a product?

2.       Whether to accept or reject an export order?

3.       How to utilize the scarce materials profitably?

b)      Helps in fixing prices: Cost accounting helps in fixing prices. It provides detailed cost data of each product (both on the aggregate and unit basis) which enables fixation of selling price. Cost accounting provides basis information for the preparation of tenders, estimates and quotations.

c)       Formulation of future plans: Cost accounting is not a post-mortem examination. It is a system of foresight. On the basis of past experience, it helps in the formulation of definite future plans in quantitative terms. Budgets are prepared and they give direction to the enterprise.

d)      Avoidance of wastage: Cost accounting reveals the sources of losses or inefficiencies such as spoilage, leakage, pilferage, inadequate utilization of plant etc. By appropriate control measures, these wastages can be avoided or minimized.

e)      Highlights causes: The exact cause of an increase or decrease in profit or loss can be found with the aid of cost accounting. For instance, it is possible for the management to know whether the profits have decreased due to an increase in labour cost or material cost or both.

f)       Reward to efficiency: Cost accounting introduces bonus plans and incentive wage systems to suit the needs of the organization. These plans and systems reward efficient workers and improve productivity as well improve the morale of the work -force.

2. (a) What are the important requirements of an efficient system of materials control? 6+4

Essential of store control: The following at the essentials of good system of material control.

a)      There should be proper co-operation and co-ordination among the departments dealing with materials.

b)      All purchases must be centralized and must be made through an expert purchase manager.

c)       All items in the stores should be classified with codes.

d)      Receiving and inspection procedure should be chalked out.

e)      Ideal storage and preservation facilities will have to be provided.

f)       Stores control measures like ABC analysis, perpetual inventory system, stock verification should be introduced.

g)      There should be an efficient system of internal audit and internal check.

h)      Maximum level, minimum level and re-order level of stock should be fixed to avoid over-stocking or shortage of materials.

i)        Appropriate records should be maintained to control issues and utilization of stores in production.

j)        There should be a system of regular reporting to management regarding materials purchases, storage and utilization.

Significance/Advantages of Inventory control

1. Protects from fluctuations in demand: There are always chances of fluctuations in the demand of a material. These fluctuations can be adjusted if there are sufficient items in the stock of inventory. Therefore, proper inventory control protects the company from fluctuations in demand.

2. Better services to customers: If the company maintains a proper inventory of raw-materials, then it can complete its production in time. So, it can deliver the finished goods to the customers in time. Similarly, if the company has a proper inventory of finished goods, then it can satisfy the additional demand of the customers.

3. Continuity of production operations: Proper inventory control helps to maintain continuity of production operations. This is because it maintains a smooth flow of raw materials. So, there are no shortages of raw-materials required for production process.

4. Reduces the risk of loss: Proper inventory control helps to reduce the risk of loss due to obsolescence (outdated) or deterioration of items. This is because it checks all the items regularly.

5. Minimizes the administrative workload: Proper inventory control helps to minimize the administrative work load of purchasing, inspection, warehousing, etc. This will reduce the manpower requirement and will minimize the labour cost too.

6. Protects fluctuation in output: Inventory control tries to reduce the gap between planned production and actual production. There are cases where the production schedule cannot be followed because of Sudden breakdown of machines, Problems in supply of materials, Sudden labour strikes, Loss due to failure of power supply, etc.

In such cases, the difference between planned production and actual production can be bridged by inventories held in stock.

7. Effective use of working capital: Proper inventory control helps to make effective use of working capital. Inventory control helps in maintaining the right amount of stocks of materials, components, etc. Over stocking is avoided. Therefore, the working capital will not be blocked in excess inventory.

8. Check on loss of materials: Inventory control helps to maintain a check on the loss of materials due to carelessness or pilferage. If there is no proper inventory control, then there are more chances of carelessness and pilferage by the employees, especially in the store-keeping department.

9. Facilitates cost accounting activities: Inventory control facilitates cost accounting activities. This is because, inventory control provides a means of allocating materials cost of products, departments or other operating accounts.

10. Avoids duplication in ordering: Inventory control avoids duplication in ordering of stock. This is done by maintaining a separate purchase department.

 (b) What are the major advantages of piece wage system in a production department?            3. Write short notes on any two of the following:                            5+5

a)         Time booking

Time Booking: Time spent by the worker on different jobs and works is called time booking. This is the productive time of workers. The following are the objectives of time booking:

1. It ensures that the time paid for, as per time keeping is properly utilized on jobs and orders.

2. It enables the cost department to ascertain the labour cost of each job or work order.

3. It helps in allocation and apportionment of wages among different departments where labour hour rate method is used as basis.

4. It helps to calculate idle time.

5. It is helpful when incentive schemes are in operation in the factory by revealing the time spent by the workers on different jobs.

6. Time booking also helps in measuring the efficiency of workers by comparing standard time for the jobs with actual time.

Time Booking Methods: The following methods are used for time booking.

1) Daily Time Sheet: In this method, each worker records the time spent by him on the work during the day, for which a sheet is provided to each worker. The time is recorded daily and hence accuracy is maintained.

2) Weekly Time Sheets: The only difference between the daily time sheet and weekly time sheet is that these time sheets are maintained on weekly basis. This means that each worker prepares these sheets weekly rather than daily.

3) Job Ticket: Job tickets are given to all workers where time for commencing the job is recorded as well as the time when the job is completed. The job tickets are given for each job and the recording of the time as mentioned above helps to ascertain the time taken for each job.

4) Labor Cost Card: This card is meant for a job, which involves several operations or stages of completion. Instead of giving one card to each worker, only one card is passed on to all workers and time taken on the job is recorded by each one of them. This card shows the aggregate labor cost of the job or the product.

5) Time and Job Card: This card is a combined record, which shows both, the time taken for completion of the job as well as the attendance time. Therefore there is no need to keep separate record of both, time taken and attendance time.


b)         Centralised purchasing

c)          Cost centre

Cost Centre: A large business is divided into a number of functional departments (such as production, marketing and finance) for administrative convenience. These departments are further divided into smaller divisions for cost ascertainment and control. These smaller divisions are called cost centers. A cost centre is a location, person or item of equipment (or group of these) in relation to which cost can be ascertained and controlled. In simple words, it is a subdivision of the organization to which cost can be charged.

The determination of suitable cost centre is very important for the purpose of cost ascertainment and control. The manager of a cost centre is held responsible for control of cost of his cost centre. The number and size of cost centers vary from organization to organization. The selection of a suitable cost centre depends on the following factors:

a. Nature and size of the business.

b. Layout and organization of the factory.

c. Availability of various cost data and information.

d. Management policy regarding cost ascertainment and control.

d)         Payroll Accounting


4. In a manufacturing concern, there are three production departments A, B and C and two service departments D and E. The following cost figures are extracted from the records of the company:          15



Rent and Rates

Indirect wages

Depreciation of machinery

General lighting









The following further details are available:








Floor Space (sq. ft.)

Light points (No.)

Direct wages (Rs.)

H.P. of Machines

Value of Machinery (Rs.)































(a) Apportion the costs amongst all the Departments; and

(b) Apportion the costs of Department D on the basis of direct wages and that of department E in the ratio of 5 : 3 : 2 to the production departments, A, B and C respectively.

5. (a) Work out the Machine Hour Rate (MHR) from the following particulars :                                 10+5


Amounts (Rs.)

Cost of machine

Installation charges

Working life

Repairs and Maintenance

Annual power expenses @ 25 paise per unit



Five years

40% of depreciation



Eight hourly day charges:



Lubrication oil

Consumable stores


No. of Hours per annum 2,000






June 2016 Eco 10 Solved Question Paper

(b) What are the requisites of a good method of absorption of factory overheads?

6. Calculate the cost of each process by preparing the Process Accounts form the data given below; and prepare the Abnormal Loss A/c:                                         10+5


Process – A

Process – B

Material (Rs.)

Direct labour (Rs.)

Direct expenses (Rs.)

Normal wastage

Output (units)

Value of normal wastage

(per 100 units) (Rs.)
















10,000 units introduced in process - A @ 1 per unit.


June 2016 Eco 10 Solved Question Paper

June 2016 Eco 10 Solved Question Paper


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