Cost accounting

1. SRM INSTITUTE OF
SCIENCE AND TECHNOLOGY
UAF20501J
Dr.G.SOWMIYA
ASSISTANT PROFESSOR
DEPARTMENT OF
COMMERCE
(BCOM A & F)
2023-24
PRACTICAL COST
ACCOUNTING

2. The regulation of the functions of an organisation relating to the
procurement, storage and usage of materials in such a way as to
maintain an even flow of production without excessive
investment in material stock

3.  Ensuring supply of adequate quantity of materials
 Optimum investment in materials
 Favourable terms of purchase
 Control of Wastage
 Control of obsolescence and spoilage
 Proper reporting to management
 Prevention of misappropriation of materials
 Proper control system for settlement of invoices

4. Purchase control is an important part of
business operations and is defined as
the process of monitoring and
managing the acquisition of
goods and services.

6. Receiving authorised purchase requisition
Studying the market and selecting a supplier
Issuing purchase order and following up
delivery
Arranging for receiving and inspection of
materials
Verifying and passing supplies'
invoice for payment

7.  Level of stock and EOQ.
 ABC Analysis
 Perpetual Inventory System
 Just -in -time Inventory (JIT)
 VED Analysis
 FNSD Analysis
 Automatic Order System
 Ordering Cycle Method
 Min- Max Method
 Inventory Turnover Ratio
 Input- output Ration Analysis
 Material Cost Reports

9. There are various methods in use. They are broadly classified under the
following categories:
 Cost Price Methods
 First in First out (FIFO)
 Last in First out (LIFO)
 Specific price
 Base stock
 Highest in first out (HIFO)

10.  Derived from Cost Prices or Average Price methods
 Simple Average
 Weighted Average
 Periodic Simple Average
 Periodic Weighted Average
 Moving Simple Average
 Moving Weighted Average
 Notional Price Methods
 Standard Price
 Inflated Price
 Re-use Price
 Replacement Price

11. Date Particulars Units ` P.U. Date Particulars Units
Sep. 6
Sep. 20
Sep. 27
Oct. 13
Oct. 20
Nov. 17
Purchases
Purchases
Purchases
Purchases
Purchases
Purchases
100
700
400
1,000
500
400
11
12
13
14
15
16
Sep. 9
Sep. 22
Sep. 30
Oct. 15
Oct. 22
Nov. 11
Issues
Issues
Issues
Issues
Issues
Issues
500
500
500
500
500
500
PROBLEM: 1
The stock in hand of a material as on 1st September was 500 units at `10 per unit.
The following purchases and issues were subsequently made.
Prepare the store ledger account showing how the value of the issue would be
recorded under FIFO method.

12. Date Particulars Units ` P.U. Date Particulars Units
April 5
April 10
April 20
April 2
Purchases
Purchases
Purchases
Issues
100
150
180
150
2.20
2.40
2.50
--
April 7
April 12
April 28
Issues
Issues
Issues
100
100
200
PROBLEM: 2
The stock of a material as on 1st April 2009 was 200 units at `2 each.
The following purchases and issues were made subsequently.
Prepare store ledger account showing how the value of the issues
would be recorded under LIFO method.

13. Date Particulars Units ` P.U. Date Particulars Units
Oct. 3
Oct. 13
Oct. 23
Purchases
Purchases
Purchases
500
900
600
4
4.3
3.8
Oct. 5
Oct. 15
Oct. 25
Issues
Issues
Issues
400
600
600
PROBLEM:3 (Simple Average method)
The following particular have been extracted in respect of material X.
Prepare ledger account showing receipts and issue pricing material issued on
the basis of simple average method.

14. Date Particulars Units ` P.U. Date Particulars Units
Oct. 3
Oct. 13
Oct. 23
Purchases
Purchases
Purchases
500
900
600
4
4.3
3.8
Oct. 5
Oct. 15
Oct. 25
Issues
Issues
Issues
400
600
600
PROBLEM: 4 (Weighted average method)
The following particular have been extracted in respect of material X.
Prepare ledger account showing receipts and issue pricing material issued
on the basis of weighted average method.

15. Minimum
consumptions
Normal consumption
Maximum
consumption
240 units per day
300 units per day
420 units per day
Re-order quantity
Re-order period
Normal order period
3,600 units
10 to 15 days
12 days
PROBLEM: 5 (Various stock levels)
From the following information, calculate:
o Maximum stock level;
o Minimum stock level;
o Re-order level.