1.basics Of Cost Accounting-problems.docx

Basics of Cost Accounting Q.1. Specify the method of determination of costs and the Cost Units for the following industries:-

Oil Chemicals Canteen Aerated water Printing Hospital Telephone service House-building Insurance Ready- made garments

Q.2. A company manufactures and retails clothing. Classify the following costs into :

Direct material Direct labour Direct expenses Indirect production expenses Research and development costs Administration costs Selling & distribution costs Finance costs Details of Costs:

1) Lubricant for sewing machines (2) CD for offi ce computer (3) Maintenance contract for offi ce photocopier (

(4) Telephone rental & metered calls (5) Interest on bank overdraft (6) Performing rights society’s charge for broadcasting in factory (7) Market research for product launch (8) Wages of security guards at factory (9) Carriage on basic raw material purchased (10) Royalty payable on number of products produced (11) Road license fees for delivery vans (12) Parcels sent to customers (13) Cost of advertising products on television (14) Audit fees (15) Chief Accountant’s salary (16) Wages of operators in cutting department (17) Cost of painting slogans on delivery vans (18) Wages of storekeeper in material stores (19) Wages of fork-lift truck driver (20) Developing a new product in laboratory

Answers:Q.1.Ans: Oil – Process Costing Method – a liter or a barrel Chemicals – Process Costing – kg for solids, liters for liquids or cu. ft for gases Canteen – Operating Costing – a meal Aerated water – Unit or Batch Costing – a bottle or a barrel Printing – Job Costing – a printing job Hospital – Operating Costing – a patient bed Telephone service – Multiple Costing – a call per unit of time House building – Contract Costing – a dwelling unit or a building Insurance – Operations Costing – a claim Ready-made garments – Batch Costing – a batch of shirts or clothing Q.2.Ans:

Direct Material – 9 Direct Labour – 16 Direct Expenses – 10 Indirect Production Costs – 1, 6, 8, 18, 19 Research & Development Costs – 20 Selling & Distribution Costs – 7, 11, 12, 13, 17 Administration Costs – 2, 3, 4, 14, 15 Finance Costs – 5