June 2017 Eco 10 Solved Question Paper | ECO 10 Solved Question Paper June 2017

ECO 10 Solved Question Paper June 2017




Term-End Examination: June 2017
Time: 2 hours; Maximum Marks: 50; (Weightage: 70%)

June 2017 Eco 10 Solved Question Paper

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

1. Discuss the possible difficulties and the factors to be considered before installation of a system of costing in a manufacturing concern.                                               4, 6

Ans: Steps in Installation of a Costing System

The costing system of an organization should be carefully planned in order to achieve its objectives. The important steps for the installation of a costing system are discussed below:

1)      Determination of objectives: The first step is to clearly lay down the objectives of the costing system. If the objective is only to ascertain the cost, a simple system will be sufficient. However, if the objective is to get information for decision making, planning and control, a more elaborate system of costing is necessary.

2)      Study of the nature of business: The nature of the business and other technical aspects like nature of the products, methods and stages of production cycle should be carefully analyzed. Such an analysis is necessary to decide the method of costing to be adopted. For example, contract costing is suitable for large construction projects. Operating costing is adopted by service industries like transport.

3)      Study of the nature of the organization: The costing system should be designed to meet the requirements of the organization. Hence, it is necessary to study the nature, size and layout of the organization. The factors to be considered are:

a.       Size of the organization and the size of the departments.

b.      The physical layout of the organization.

c.       The different levels of management.

d.      The extent of decentralization of authority.

e.      The nature of authority relationships.

4)      Deciding the structure of cost accounts: A suitable costing system can be developed on the basis of the study of the nature of business and organization. The structure of cost accounts should be simple and in accordance with the natural production process.

5)      Determination of cost rates: This step involves a thorough study of the following points for developing an integrated costing system.

a.       Classification of costs into direct and indirect costs.

b.      Grouping of indirect costs (overheads) into production, administration, selling and distribution etc.

c.       Methods of pricing issues.

d.      Treatment of wastes of all types.

e.      Absorption of overheads.

f.        Calculation of overhead rates.

6)      Organization of the cost office: The cost office is responsible for the efficient operation of the costing system. The cost office, with adequate staff must be located a close as possible to the factory. The following are the major functions of the cots office.

a.       Stores accounts.

b.      Labour accounting

c.       Recording of cost data and

d.      Cost control.

7)      Further, the role and duties and responsibilities of the cost accountant must be clearly defined. He must have the necessary authority to discharge his duties effectively.

8)      Introducing the system: After completion of the above steps, the costing system may be formally introduced. Introduction of the system in an existing organization should be done gradually. Before introduction, the feature of the systems, its working and advantages must be explained to the concerned employees to secure their co-operation.


2. (a) Explain meaning of fixed, variable and semi-variable costs with examples.  5, 5

(b) State the main advantages of the perpetual inventory system.

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

a)         Process costing

Process Costing

Process costing is a method of operation costing which is used to ascertain the cost of production at each process, operation or stage of manufacture, where processes are carried in having one or more of the following features:

a)      Where the product of one process becomes the material of another process or operation

b)      Where there is simultaneous production at one or more process of different products, with or without by product,

c)       Where, during one or more processes or operations of a series, the products or materials are not distinguishable from one another, as for instance when finished products differ finally only in shape or form’.

Process costing is defined by Kohler as: “A method of accounting whereby costs are charged to processes or operations and averaged over units produced; it is employed principally where a finished product is the result of a more or less continuous operation, as in paper mills, refineries, canneries and chemical plants; distinguished from job costing, where costs are assigned to specific orders, lots or units.

Features/Characteristics of Process Costing:

a)      Process Costing Method is applicable where the output results from a continuous or repetitive operations or processes.

b)      Products are identical and cannot be segregated.

c)       It enables the ascertainment of cost of the product at each process or stage of manufacture.


b)         Labour turn over

Labour Turnover – Meaning, Methods causes and cost

Meaning: Labour turnover may be defined as change in labour force i.e., percentage change in the labour force during a specific period. High labour turnover indicates that labour is not stabilised and there are frequent changes by way of workers leaving the organization. High labour turnover is to be avoided. At the same time very low labour turnover indicates inefficient workers are being retained in the organization.

Measurement of Labor Turnover: It is essential for any organisation to measure the labor turnover. This is necessary for having an idea about the turnover in the organisation and also to compare the labor turnover of the previous period with the current one. The following methods are available for measurement of the labor turnover.

Additions Method: Under this method, number of employees added during a particular period is taken into consideration for computing the labor turnover. The method of computing is as follows:

Labour Turnover = Number of additions/Average number of workers during the period X 100

Separations Method: In this method, instead of taking the number of employees added, number of employees left during the period is taken into consideration. The method of computation is as follows:

Labour Turnover = Number of separations/Average number of workers during the period X 100

Replacement Method: In this method neither the additions nor the separations are taken into consideration. The number of employees replaced is taken into consideration for computing the labour turnover.

Labour Turnover = Number of replacements/Average number of workers during the period X 100

Flux Method: Under this method labor turnover is computed by taking into consideration the additions as well as separations. The turnover can also be computed by taking replacements and separations also. Computation is done as per the following methods:

Labor Turnover = ½ [Number of additions + Number of separations] /Average number of workers during the period X 100


c)          Decentralised purchasing of materials

d)         Time wage system

Time Rate System: In this system, a worker is paid on the basis of attendance for the day or according to the hours of the day, regardless of the output. This system is also known as time work, day work, day age rate or day rate. The wage rate of the day worker may be fixed on hourly, daily, weekly, fortnightly, or monthly basis depending on the practice followed in the concern. There are two variants of this system, each differing only in so far as the fixation of the time rate is concerned. They are:

1.       Measured Day work or Graduated Time Rate

2.       Differential Time Rate

Graduated Time Rate:   Under this method wages are paid at time rates which vary according to

a.       Merit-rating of the workers, or

b.      Changes in the cost of living index.

It the cost of living goes up, the wages also go up proportionately, and vice versa. Thus the works get the real wages. Similarly, the workers having higher merit rating get higher wages, and the workers with lower rating get lower wages.

Differential Time Rate: Workers are paid rate accounting to their individual efficiency. They are paid normal rate upto a certain percentage of efficiency and the rate increases in steps for efficiency slabs beyond the standard. As the efficiency is measured in terms of output, this method does not fall strictly under the area of time rate system.



4. From the following information, prepare a cost sheet showing:      15

a)         Prime cost

b)         Cost of production

c)          Cost of sales and

d)         Profit



Z Purchase of raw material

Direct wages

Carriage inwards

Works on cost

Stock on 1-1-2015 :

Raw materials

Finished Products (1, 600 tons)

Selling and distribution expenses

Stock on 30-06-2015 :

Raw materials

Finished products (3, 200 tons)

Sale of finished products













25,600 Tons were produced during the period from 1-1-2015 to 30-6-2015.


June 2017 Eco 10 Solved Question Paper

5. From the following figures, prepare a Reconciliation statement and find out the profit as per financial accounts.                                       15



Net profit as per the cost accounts

Works overheads under recovered in costing books

Administrative overheads over- recovered in cost accounts

Depreciation charged in financial a/c

Depreciation charged in cost accounts

Interest received but not included in cost accounts

Income tax recorded in financial accounts only

Bank interest credited in financial accounts only

Depreciation of stock charge in financial accounts only











June 2017 Eco 10 Solved Question Paper

6. (a) From the following information, calculate :                                             10, 5

1)         Reordering level

2)         Minimum stock level and

3)         Maximum stock level

Re-order quantity

Time required for delivery

Maximum consumption

Minimum consumption

Normal consumption

30,000 units

2 – 4 weeks

8,000 units per month

3,000 units per month

5,000 units per month


June 2017 Eco 10 Solved Question Paper

 (b) How would you ascertain the profit of an incomplete contract? Explain with an example.


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