problem 1: What do you mean by the term job costing? Illustrate the main features of this method? Give a Performa cost sheet under such a system.
problem 2: Describe the nature and use of batch costing. describe the concept of the economical batch with the help of appropriate ex.
problem 3: There are two techniques of charging the contract cost account for the use of pant. describe their two methods and state which method is preferable and describe why.
problem 4: What do you mean by cost plus contract? Describe this from the point of view of:
a) The manufacturer
b) The buyer
problem 5: Is it necessary to compute profit on incomplete contracts? If yes, under what circumstances would you propose calculation of profit on such contracts?
problem 6: Deluxe Ltd. undertake a contract for Rs. 5,00,000 on 1st July, 1996. On 30th June, 1997 when the accounts are closed, the given details about the contract were gathered:
Materials Purchased Rs. 1,00,000; Wages paid Rs. 45,000; General expenditures Rs. 10,000; Plant purchased Rs. 50,000; Materials on hand 30-6-1997 Rs. 25,000; Wages Accrued 30-6-1997 Rs. 5,000; Work certified Rs. 2,00,000; Cash received Rs. 1,50,000; Work uncertified Rs. 15,000; Depreciation of Plant Rs. 5,000.
The contract above an escalation clause which reads as shown below:
‘In the even of prices of materials and rates of wages rise by more than 5% the contract price would be raise accordingly By 25% of the rise in the cost of material and wages beyond 5% in each case’.
It was found that as the date of signing the agreement the prices of materials and wage rates raised by 25%. The value of the work certified does not take into account the effect of the above clause.
Make the contract amount.