ECO 10 ELEMENTS OF COSTING | DEC 2017 | IGNOU SOLVED QUESTION PAPER | IGNOU B.COM SOLVED PAPERS

ECO - 10: ELEMENTS OF COSTING SOLVED QUESTION PAPERS
ELEMENTS OF COSTING
IGNOU SOLVED QUESTION PAPERS 
BACHELOR'S DEGREE PROGRAMME
Term-End Examination: Dec, 2017
ELECTIVE COURSE: COMMERCE
Time: 2 hours; Maximum Marks: 50; (Weightage: 70%)

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

Eco 10 Solved Question Papers Elements of Costing

JUNE 2014

JUNE 2015

JUNE 2016

JUNE 2017

JUNE 2018

JUNE 2019 COMING SOON

DEC 2014

DEC 2015

DEC 2016

DEC 2017 (CURRENT PAGE)

DEC 2018

DEC 2019 COMING SOON

SECTION - A

1. Distinguish between the Cost Accounting and Financial Accounting.                                 10

Ans: DISTINGUISH BETWEEN FINANCIAL AND COST ACCOUNTING

Basis

Financial Accounting

Cost Accounting

1.    Nature

Financial accounts are maintained on the basis of historical records.

Cost accounts lay emphasis on both historical and predetermined costs.

2.    Use

Financial Accounting is used even by outside entities.

Cost Accounting is used only the management of the concern.

3.    System

Financial Accounting uses the double-entry system for recording financial data.

Cost Accounting does not use the double-entry for collecting cost data.

4.    Scope

Financial Accounting covers all items of income and expenditure whether related to the cost centers or not,

Cost Accounting covers all items related to a cost centre.

5.    Reports

Financial Accounting results are shown P&L A/c and balance sheet.

Cost Accounting results are shown in Cost Sheet/ Coating Profit & Loss A/c/ Reports Contract A/c/ Process A/c.

6.    Period

Financial Accounting is for a specific period.

Cost Accounting concentrates on cost centers and not on period.

7.    Stock Valuation

In financial accounts, stocks are valued at cost or realisable value, whichever is lesser.

In cost accounts stocks are valued at cost.

8.    Analysis of Profit and Cost

In financial accounts, the Profit or Loss of the entire enterprise is disclosed into.

Cost accounts reveal Profit of Loss of different products, departments separately.

 2. (a) State the advantages of centralized purchasing.                    5,5

(b) What is ABC analysis? How is the control of store items effected through ABC analysis?

Ans: ABC Analysis: In this technique, the items of inventory are classified according to the value of usage. Materials are classified as A, B and C according to their value.

Items in class ‘A’ constitute the most important class of inventories so far as the proportion in the total value of inventory is concerned. The ‘A’ items constitute roughly about 5-10% of the total items while its value may be about 80% of the total value of the inventory.

Items in class ‘B’ constitute intermediate position. These items may be about 20-25% of the total items while the usage value may be about 15% of the total value.

Items in class ‘C’ are the most negligible in value, about 65-75% of the total quantity but the value may be about 5% of the total usage value of the inventory.

The numbers given above are just indicative, actual numbers may vary from situation to situation. The principle to be followed is that the high value items should be controlled more carefully while items having small value though large in numbers can be controlled periodically.

3. Write short notes on any two of the following:                                            5, 5

a) Idle time

Ans: Idle time refers to the labour time paid for but not utilized on production. It, in fact, represents the time for which wages are paid, but during which no output is given out by the workers. This is the period during which workers remain idle.

Types of Idle Time:

a. Normal idle time is inherent in any job situation and thus it cannot be eliminated or reduced. For example: time gap between the finishing of one job and the starting of another; time lost due to fatigue etc. The cost of normal idle time should be charged to the cost of production. This may be done by inflating the labour rate. It may be transferred to factory overheads for absorption, by adopting a factory overhead absorption rate.

b. Abnormal idle time is defined as the idle time which arises on account of abnormal causes; e.g. strikes; lockouts; floods; major breakdown of machinery; fire etc. Such an idle time is uncontrollable. The cost of abnormal idle time due to any reason should be charged to Costing Profit & Loss Account.

Reasons for idle time: According to reasons, idle time can be classified into normal idle time and abnormal idle time.  Normal idle time is the time which cannot be avoided or reduced in the normal course of business.

1.       The main reasons for the occurrence of normal idle time are as follows:

2.       Time taken by workers to travel the distance between the main gate of factory and the place of their work.

3.       Time lost between the finish of one job and starting of next job.

4.       Time spent to overcome fatigue.

5.       Time spent to meet their personal needs like taking lunch, tea etc.

b) Abnormal loss

Ans: Abnormal loss are those which are arises due to some accidental reason such as loss by theft, loss by accident, loss due shortage of material etc. These loss are avoidable in nature. Units of abnormal loss can be calculated by deducting normal loss from total loss. In other words, If the units lost in the production process are more than the normal loss, the difference between the two is the abnormal loss. It is excluded from total cost due to which it does not affect the cost per unit of the product. The relevant process of account is credited and abnormal loss account is debited with the abnormal loss valued at full cost of finished output. The amount realized from sale of scrap of abnormal loss units is credited to the abnormal

c) Piece wage system

Ans: Piece Rate System: The payment of wages under this system is based upon the out turn of the worker. The rate is fixed per piece of work and the worker is paid according to the pieces of work completed or the volume of work done by him, irrespective of the time taken by him in completing that work. A workman is free to earn as much as his ability, energy, or skill would allow to him to produce. The piece rate System can be classified into:

a.       Straight Piece Rate.

b.      Differential Piece Rate.

Straight Piece Rates: It is a simple method of making payment at a fixed rate per unit for the units manufactured. Earnings = Number of units X Rate per unit.

Differential Piece Rates: Under this system, efficient workers are paid wages at a lower rate. A definite standard of efficiency is set for each job and for efficiency below or above the standard different piece rates are paid according to different levels of efficiency.

b) Job costing

 Ans: Job costing is designed to accumulate cost data for a manufacturing firm which produces goods to specific order. It is also known as specific orders costing or production order costing. Under this method of costing, each job, batch or contract is treated as a cost unit and costs are collected and built up accordingly.

According to “ICMA”, London, it is that category of basic costing method which is applicable where the work consists of separate contract job or batches each of which is authorized by specific order or contract. It is followed by manufacturing and non-manufacturing concerns.

It is employed in industries in which:

a) A production is done on the basis of customer’s own specifications.

b) Products are manufactured in distinguishable lots.

c) Products are not uniform.

d) It is practical to maintain a separate record of each lot from the time production is begun until it is completed.

Following is the list of concerns which generally employ job costing method.

a) Printing Work. b) Design Engineering Concerns. c) Repair Works. d) Construction companies. e) Furniture makers. f) Hardware industry. g) Automobile garages. h) Interior decoration etc.

SECTION - B

4. Z Co.Ltd., commenced its business on 1-1-2015. The following data has been extracted from its books in relation to a contract.              15 (12+3)

Particulars

(Rs.)

Contract price

Materials

Direct Labour

Plant and Machinery (at cost)

Cash received from contractee

Expenses at site

Fuel and power

Work certified

Work un-certified

3,00,000

40,000

55,000

30,000

1,20,000

2,000

2,500

1,50,000

1,000

Used machinery costing 2,000 was returned to stores. Stock of materials at site on 31-12-2015 was worth i 5,000 and wages outstanding were 200. Depreciation on machinery to be charged at 10%. Prepare (a) contract account and (b) Show how the work-in-progress will appear in the Balance Sheet as on 31-12-2015.

5. The following is the record of receipts and issues of a certain material in the factory during the first week of Jan., 2015 :                                                 15

Jan. 1

Jan. 1

Jan. 2

Jan. 3

Jan. 3

Jan. 4

 

Jan. 5

Jan. 6

Jan. 7

Opening Balance

Issued

Received

Issued

(Stock verification revealed a loss of 1 Ton)

Received back

From production Dept.

Issued

Received

Issued

50 Tones @ Rs. 10 per ton

30 Tons

60 Tons @ Rs. 10.20 per ton

25 Tons

 

10 Tons (previously issued at Rs. 9.15 per ton)

 

40 Tons

22 Tons @ Rs. 10.30 per ton

36 Tons

Prepare a stores Ledger Account using LIFO (Last-in-First-out) method.

6. (a) Calculate the earnings of A, B and C workers under Marrick's Differential Piece Rate System. The particulars are given below:                                     10, 5

Standard output

Piece Rate

150 units per day of 8 hrs.

Rs. 20 per unit

output of A 100 units, B 135 units and C 180 units.

Solution:-


(b) From the following information, calculate Economic Order Quantity (EOQ)

a)         Consumption of material

b)         Cost of placing one order

c)          Cost of unit

d)         Storage and carrying

2,000 kgs in 3 months

Rs. 50

Rs. 40

8% of cost per unit

Solution:-


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