Dec 2018 Eco 10 Solved Question Paper | ECO 10 Solved Question Paper Dec 2018

ECO 10 Solved Question Paper Dec 2018

ECO - 10: ELEMENTS OF COSTING SOLVED QUESTION PAPERS

ELEMENTS OF COSTING

IGNOU BCOM SOLVED QUESTION PAPERS 

BACHELOR'S DEGREE PROGRAMME
Term-End Examination: Dec 2018
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.

SECTION - A

1. Describe the advantages of cost accounting to a manufacturing concern.    10

Ans: 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.

g)    Prevention of frauds: Cost accounting envisages sound systems of inventory control, budgetary control and standard costing. Scope for manipulation and fraud is minimized.

h)   Improvement in profitability: Cost accounting reveals unprofitable products and activities. Management can drop those products and eliminate unprofitable activities. The resources released from unprofitable products can be used to improve the profitability of the business.

i)      Preparation of final accounts: Cost accounting provides for perpetual inventory system. It helps in the preparation of interim profit and loss account and balance sheet without physical stock verification.

j)     Facilitates control: Cost accounting includes effective tools such as inventory control, budgetary control and variance analysis. By adopting them, the management can notice the deviation from the plans. Remedial action can be taken quickly. 

2. How would you classify selling and distribution overheads? How are the selling overheads absorbed by cost units?  6+4

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

a) Incentive Plans.

Ans: Remuneration is a payment or compensation received by an employee against the services provided by him. This includes the basic salary, any bonus, allowances or other economic benefits that an employee or executives received during his employment. Remuneration paid on the basis of time rate or piece rate basis. It is fixed in nature and is constant for every employee even if they doesn't work as per standards. Remuneration is traditionally seen as the total income of an individual and may comprises a range of separate payments determined according to different rules.

Incentive is a monetary or non-monetary reward which is given to a worker for his efficiency and hard work. It is given to the workers when their actual production is more than the standard production. It is considered as a performance appraisal to the employee if he/she performs better than standard work in a way that benefits to the organization. It is variable in natures and change according to the efficiency of the workers. An incentive motivates and encourages a worker to produce more and better and help in increasing the interest of the worker in the production.

b) Inventory Turnover Ratio.

Ans: Inventory Turnover: Inventory Turnover is a ratio of the value of the materials consumed during a period to the average value of inventory held during that period. If the inventory turnover rate in terms of value of materials is high, or if the length of the inventory turnover period is short, the material is said to be fast moving. So if the rate of consumption is fast or if the inventory turnover rate is good, it is a healthy measure of efficiency of materials control, as the capital employed is properly utilized.

Inventory turnover ratio is calculated as = Raw material consumer / Average Stock

c) 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.

d) Centralised Purchasing.

Ans:

SECTION - B

4. From the following particulars of a manufacturing company, prepare cost sheet for September with the break-up of Prime cost, works cost, cost of production, cost of Goods sold, cost of Sales and Profit.

Rs.

Stock of Raw-material (on 1st September, 2017) Stock of Raw-material (on 30 September, 2017) Direct wages Indirect wages Work in progress (1st Sept. 2017) Work in progress (30th Sept. 2017) Purchase of raw materials Factory rent and power Expenses on purchase of Material Selling and Distribution overheads Office rent Sales Stock of finished goods (1st Sept. 2017) Stock of finished goods (30th Sept. 2017)

75,000   91,500 52,500 2,750 28,000 35,000 66,000 18,500 1,500 12,500 2,500 2,00,000 54,000 31,000

Solution:-

5. (a) In a manufacturing company, a material is used as follows :            10+5

Time required for delivery:

1.    Minimum - 4 weeks

2.    Maximum - 6 weeks

Calculate: (a) Re-order level; (b) Minimum stock level; (c) Maximum stock level, and (d) Average stock level

Solution:

 (b) Calculate Economic Order Quantity (EOQ) from the particulars given below:

Annual consumption Cost per unit 20 Ordering cost (per order) Z 12 Carrying cost (% of average inventory) 20%

600 units Rs. 20 Rs. 12 20%

Solution:-

6. A product passes through three processes A, B and C. 10,000 units were issued to process A in the beginning of November 2017 at the cost of 1 per unit. The other particulars are given below:

Particulars	Process
	A	B	C
Sundry Materials Labour Direct Expenses Actual output   Normal Wastage Wastage Sold (per unit)	1,000 5,000 1,050 9,500 Units 3% Rs. 0.25	1,500 8,000 1,188 9,100 Units 5% Rs. 0.50	500 6,500 2,009 8,100 Units 8% Rs. 1

 

Prepare the Process Accounts (A, B and C), assuming that there were no opening or closing stocks.

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