A firm has purchased a plant to manufacture a new

Info icon This preview shows pages 299–301. Sign up to view the full content.

View Full Document Right Arrow Icon
10. A firm has purchased a plant to manufacture a new product, the cost data for which is given below: Estimated annual sales 24,000 units Estimated costs: Material Rs 4.00 per unit Direct labour Rs 0.60 per unit Overheads Rs 24,000 per year Administrative expenses Rs 28,800 per year Selling expenses 15% of sales Calculate the selling price if profit per unit is Rs 1.02 [Ans. Rs 9.20] 11. Prepare a cost sheet from the following data to find out profit and cost per unit: Raw materials consumed Rs 1,60,000 Direct wages Rs 80,000 Factory overheads 20% of direct wages Office overheads 10% of factory cost Selling overheads 12,000 Unit produced 4,000 Units sold 3,600 Selling price Rs 100 per unit [Ans. Prime cost Rs 2,40,000, factory cost Rs 2,56,000, cost of production Rs 2,81,600, cost of sales Rs 2,65,440, profit Rs 94,560]
Image of page 299

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
293 21.4 REVISION POINTS 1. IMPORTANCE OF COST ACCOUNTING includes Costing helps in periods of trade depression and trade competition, aids in price fixation, helps in estimation, helps in channeling production on right lines, wastages are eliminated 2. Installation of Cost Accounting System It is essential to undertake a preliminary investigation installing a suitable system of cost accounting to know the feasibility of installing cost accounting system to such business. 3. ELEMENTS OF COST There are three broad elements of cost namely Material, Labour and Expenses 4. OVERHEADS It is to be noted that the term overheads has a wider meaning than the term indirect expenses overheads include the cost of indirect material, indirect labour besides indirect expenses. 5. Components of total cost It includes prime cost , factory cost, office cost and total cost. 21.5 IN TEXT QUESTIONS 1. Define Material. 2. Define labour. 3. Define Expenses. 4. Define overheads. 5. What are the elements of cost. 21.6 SUMMARY IMPORTANCE OF COST ACCOUNTING includes Costing helps in periods of trade depression and trade competition, aids in price fixation, helps in estimation, helps in channeling production on right lines, wastages are eliminated, costing makes comparison possible, provides data for periodical profit and loss accounts, aids in determining and enhancing efficiency, helps in inventory control, helps in cost reduction, assists in increasing productivity. Installation of Cost Accounting System It is essential to undertake a preliminary investigation installing a suitable system of cost accounting to know the feasibility of installing cost accounting system to such business. Essential Conditions: The following conditions are essential for successful functioning of the costing system:- Material control system should be very efficient., The role of cost accounting must be clear. ,The methods of wage payment must be sound and well designed. The cost report should be printed forms to facilitate quick compilation. The cost and financial accounts must be integrated so as to facilitate reconciliation of profit.
Image of page 300
Image of page 301
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern