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