Downloaded from castudyweb.

com

Test Series: September, 2023

MOCK TEST PAPER – 1
INTERMEDIATE (IPC): GROUP – I
PAPER – 3: COST MANAGEMENT ACCOUNTING
Suggested Answers/ Hints

FixedCost
1. (a) (i) Break-even sales =
P / VRatio
ChangeinPr ofit ` 37,50,000
P/V Ratio = 100 or, 100
ChangeinSales ` 7,80,60,000 − ` 5,93,10,000
` 37,50,000
Or,  100 or, 20%
` 1,87,50,000
` 98,50,000
Break-even sales = = `4,92,50,000
20%
(ii) Profit/ loss = Contribution – Fixed Cost
= `8,20,00,000 × 20% - `98,50,000
= `1,64,00,000 – `98,50,000 = `65,50,000
(iii) To earn same amount of profit in 2022-23 as was in 2021-22, it has to earn the same amount
of contribution as in 2021-22.
Sales – Variable cost = Contribution equal to 2021-22 contribution
Contribution in 2021-22 = Sales in 2021-22 × P/V Ratio in 2021-22
= `5,93,10,000 × 20% = `1,18,62,000
Let the number of units to be sold in 2022-23 = X
Sales in 2022-23 – Variable cost in 2022-23 = Desired Contribution
90 X – 80 X = `1,18,62,000
Or, 10 X = 1,18,62,000
Or, X = 11,86,200 units
Therefore, Sales amount required to earn a profit equal to 2021-22 profit
= ` 90 × 11,86,200 units = ` 10,67,58,000
2D S
(b) (i) Optimum run size or Economic Batch Quantity (EBQ) =
C
Where, D = Annual demand = 9,20,000 units
S = Set-up cost per run = ` 3,500
C = Inventory holding cost per unit per annum
= ` 1.5 × 12 months = ` 18
2  9,20,000units Rs.3,500
EBQ = = 18,915 units
Rs.18

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

(ii) Calculation of Total Cost of set-up and inventory holding

Batch size No. of set- Set-up Cost Inventory holding Total Cost
ups (`) cost (`) (`)
23 3,60,000
80,500
A 40,000 units  9,20,000   40,000  ` 18  4,40,500
 40,000  (23 × ` 3,500)  
   2 
B 18,915 units 49 1,71,500 1,70,235 3,41,735
 9,20,000  (49 × ` 3,500)  18,915  ` 18 
 18,915   
   2 
Extra Cost (A – B) 98,765
(c) Calculation of cost per unit:
Particulars Units (`)
Listed Price of Materials 5,000 2,50,000
Less: Trade discount @ 10% on invoice price (25,000)
2,25,000
Add: CGST @ 6% of ` 2,25,000 13,500
Add: SGST @ 6% of ` 2,25,000 13,500
2,52,000
Add: Toll Tax 5,000
Freight and Insurance 17,000
Commission and Brokerage Paid 10,000
Add: Cost of returnable containers:
Amount deposited ` 30,000
Less: Amount refunded ` 20,000 10,000
2,94,000
` 2,94,000 6,000
Add: Other Expenses @ 2% of Total Cost ( ×2)
98
Total cost of material 3,00,000
Less: Shortage material due to normal reasons @ 20% 1,000 -
Total cost of material of good units 4,000 3,00,000
Cost per unit (` 3,00,000/4,000 units) 75
Note:
1. GST is payable on net price i.e., listed price less discount.
2. Cash discount is treated as interest and finance charges; hence it is ignored.
3. Demurrage is penalty imposed by the transporter for delay in uploading or off -loading of
materials. It is an abnormal cost and not included.
4. Shortage due to normal reasons should not be deducted from cost to ascertain total cost of
good units

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

50,000
(d) Output by experienced workers in 50,000 hours = = 5,000 units
10
Output by new recruits = 60% of 5,000 = 3,000 units
Loss of output = 5,000 – 3,000 = 2,000 units
Total loss of output = Due to delay recruitment + Due to inexperience
= 10,000 + 2,000 = 12,000 units
Contribution per unit = 20% of `180 = ` 36
Total contribution lost = `36 × 12,000 units = ` 4,32,000
Cost of repairing defective units = 3,000 units × 0.2 × ` 25 = ` 15,000
Profit forgone due to labour turnover
(`)
Loss of Contribution 4,32,000
Cost of repairing defective units 15,000
Recruitment cost 1,56,340
Training cost 1,13,180
Settlement cost of workers leaving 1,83,480
Profit forgone in 2022-23 9,00,000
2. (a) Process-I A/c
Particulars Qty. Amount ) Particulars Qty. Amount
(kgs) (kgs) (`)

To Material A 6,000 3,00,000 By Normal loss 500 8,000

To Material B 4,000 4,00,000 By Process-II A/c 9,200 7,38,857
To Labour -- 21,500 By Abnormal loss A/c 300 24,093

To Overhead -- 49,450
 ` 92,000  430hrs 
 
 800hrs 
10,000 7,70,950 10,000 7,70,950

{(`3,00,000 + `4,00,000 + `21,500 + `49,450) − `8,000} `7,70,950 − `8,000

* = = `80.3105
(10,000 − 500)units 9,500units

Process-II A/c
Particulars Qty. Amount Particulars Qty. Amount
(kgs) (`) (kgs) (`)
To Process-I A/c 9,200 7,38,857 By Normal loss 1,000 --
To Material C 6,600 8,25,000 By Packing Dept. A/c 18,000 18,42,496
(See the working notes)
To Material D 4,200 3,15,000 By WIP A/c 1,000 1,00,711
(See the working notes)

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

To Flavouring essence -- 3,300

To Labour -- 18,500
To Overheads -- 42,550
 ` 92,000  370hrs 
 
 800hrs 
20,000 19,43,207 20,000 19,43,207
Abnormal loss A/c
Particulars Qty. Amount Particulars Qty. Amount
(kgs) (`) (kgs) (`)
To Process-I A/c 300 24,093 By Bank 300 4,800
By Costing Profit & Loss A/c -- 19,293
300 24,093 300 24,093
Working Notes:
Calculation of Equivalent Production units
Input Units Output Units Process-I Mat-C & D Labour & OH

(%) Units (%) Units (%) Units

9,200 Transferred to 18,000 100 18,000 100 18,000 100 18,000
Packing.

Mat-C 6,600 Closing WIP 1,000 100 1,000 100 1,000 50 500

Mat-D 4,200 Normal loss 1,000 -- -- -- -- -- --

20,000 20,000 19,000 19,000 18,500

Calculation of Unit cost

Cost component Amount (`) Equivalent units Cost per unit (`)
Transferred-in 7,38,857 19,000 38.8872
Material-C 8,25,000 19,000 43.4211
Material-D 3,15,000 19,000 16.5789
Flavouring essence 3,300 19,000 0.1737
Total Material Cost 18,82,157 19,000 99.0609
Labour 18,500 18,500 1.0000
Overheads 42,550 18,500 2.3000
Total Cost 19,43,207 102.3609
Value of Materials transferred to Packing Department
= 18,000 unit × `102.3609 = 18,42,496
Value of WIP: For Materials- 1,000 units × `99.0609 = `99,061
For Labour & Overheads 500 units × `3.30 = `1,650
`1,00,711

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

(b) (i) PCP Limited’s

Statement of operating income and gross margin percentage
for each of its supermarket segments
Particulars Supermarket A Supermarket B Total
Revenues: (`) 11,21,67,000 9,52,87,500 20,74,54,500
(660 × ` 1,69,950) (1,650 × ` 57,750)
Less: Cost of goods sold: (`) 10,89,00,000 9,07,50,000 19,96,50,000
(660 × ` 1,65,000) (1650 × ` 55,000)
Gross Margin: (`) 32,67,000 45,37,500 78,04,500
Less: Other operating costs: (`) 16,55,995
Operating income: (`) 61,48,505
Gross Margin 2.91% 4.76 % 3.76%
Operating income % 2.96%
(ii) Operating Income Statement of each distribution channel
in April (Using the Activity based Costing information)

Supermarket A Supermarket B
Gross margin (`) : (A) 32,67,000 45,37,500
(Refer to (i) part of the answer)
Operating cost (`): (B) 6,55,600 10,00,395
(Refer to working note)
Operating income (`): (A–B) 26,11,400 35,37,105
Operating income (in %) 2.33 3.71
(Operating income/Revenue) ×100
Working note:
Computation of rate per unit of the cost allocation base for each of the five activity
areas for the month of April

(`)
Store delivery 100 per delivery
[` 3,90,500/ (1,100 + 2,805 store deliveries)]
Cartons dispatched 1 per carton dispatch
[` 4,15,250/ {(250×1,100) +( 50×2,805)} carton dispatches]
Shelf-stocking at customer store (`) 6 per hour
[` 64,845/ {(6×1,100) + (1.5×2,805)} hours]
Line item ordering 10 per line item order
[` 3,45,400/ {(14×770) + (12×1,980)} line items]
Customer purchase order processing 160 per order
[` 4,40,000/ (770 + 1,980 orders)]

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

Computation of operating cost of each distribution channel:

Supermarket A (`) Supermarket B (`)

Store delivery 1,10,000 2,80,500
(` 100 × 1,100 deliveries) (` 100 × 2,805 deliveries)
Cartons dispatched 2,75,000 1,40,250
(` 1× 250 cartons × 1,100 (` 1 × 50 cartons × 2,805
deliveries) deliveries)
Shelf stocking 39,600 25,245
(` 6 × 1,100 deliveries × 6 Av. (` 6 × 2,805 deliveries × 1.5 Av.
hrs.) hrs)
Line item ordering 1,07,800 2,37,600
(` 10 × 14 line item x 770 (` 10 × 12 line item x 1,980
orders) orders)
Customer purchase 1,23,200 3,16,800
order processing (` 160 × 770 orders) (` 160 × 1,980 orders)
Operating cost 6,55,600 10,00,395
3. (a) (i) Statement showing the apportionment of joint costs to A, B and X
Products A B X Total
Output (kg) 18,000 10,000 54,000
Sales value at the 9,00,000 4,00,000 5,40,000 18,40,000
point of split off (`) (` 50 x 18,000) (` 40 x 10,000) (` 10 x 54,000)
Joint cost 6,30,000 2,80,000 3,78,000 12,88,000
apportionment on the  ` 12,88,000   ` 12,88,000   ` 12,88,000 
basis of sales value at  x ` 9,00,000   x ` 4,00,000   x ` 5,40,000 
 ` 18,40,000   ` 18,40,000   ` 18,40,000 
the point of split off (`)

(ii) Statement showing the cost per kg. of each product

(indicating joint cost; further processing cost and total cost separately)
Products A B X
Joint costs apportioned (`) : (I) 6,30,000 2,80,000 3,78,000

Production (kg) : (II) 18,000 10,000 54,000

Joint cost per kg (`): (I ÷ II) 35 28 7
Further processing Cost per kg. (`) 10 15 2
 ` 1,80,000   ` 1,50,000   ` 1,08,000 
     
 18,000kg   10,000kg   54,000kg 
Total cost per kg (`) 45 43 9

(iii) Statement showing the product wise and total profit for the period
Products A B X Total
Sales value (`) 12,24,000 2,50,000 7,92,000

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

Add: Closing stock value (`)

(Refer to Working note 2) 45,000 2,15,000 90,000
Value of production (`) 12,69,000 4,65,000 8,82,000 26,16,000
Apportionment of joint cost (`) 6,30,000 2,80,000 3,78,000
Add: Further processing cost (`) 1,80,000 1,50,000 1,08,000
Total cost (`) 8,10,000 4,30,000 4,86,000 17,26,000
Profit (`) 4,59,000 35,000 3,96,000 8,90,000
Working Notes
1.
Products A B X
Sales value (`) 12,24,000 2,50,000 7,92,000
Quantity sold (Kgs.) 17,000 5,000 44,000
Selling price `/kg 72 50 18
 ` 12,24,000   ` 2,50,000   ` 7,92,000 
     
 17,000kg   5,000kg   44,000kg 

2. Valuation of closing stock:

Since the selling price per kg of products A, B and X is more than their total costs, therefore
closing stock will be valued at cost.
Products A B X Total
Closing stock (kgs.) 1,000 5,000 10,000
Cost per kg (`) 45 43 9
Closing stock value (`) 45,000 2,15,000 90,000 3,50,000
(` 45 x 1,000 kg) (` 43 x 5,000 kg) (`9x10,000 kg)

(iv) Calculations for processing decision

Products A B X
Selling price per kg at the point of split off (`) 50 40 10
Selling price per kg after further processing (`) 72 50 18
(Refer to working Note 1)
Incremental selling price per kg (`) 22 10 8
Less: Further processing cost per kg (`) (10) (15) (2)
Incremental profit (loss) per kg (`) 12 (5) 6
Product A and X has an incremental profit per unit after further processing, hence, these two
products may be further processed. However, further processing of product B is not profitable
hence, product B shall be sold at split off point.
(b) (a) (i) Production Budget (in units) for the year ended 31 st March 2023
Product M Product N
Budgeted sales (units) 28,000 13,000
Add: Increase in closing stock 320 160

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

No. good units to be produced 28,320 13,160

Post production rejection rate 4% 6%
No. of units to be produced 29,500 14,000
 28,320   13,160 
   
 0.96   0.94 
(ii) Purchase budget (in kgs and value) for Material Z
Product M Product N
No. of units to be produced 29,500 14,000
Usage of Material Z per unit of production 5 kg. 6 kg.
Material needed for production 1,47,500 kg. 84,000 kg.
Materials to be purchased 1,63,889 kg. 88,421 kg.
 1,47,500   84,000 
   
 0.90   0.95 
Total quantity to be purchased 2,52,310 kg.
Rate per kg. of Material Z `36
Total purchase price `90,83,160

(b) Calculation of Economic Order Quantity for Material Z

2  2,52,310kg. `320 16,14,78,400
EOQ = = = 6,385.72 kg.
`36 11% `3.96
4. (a) Effective machine hours = 200 hours × 75% = 150 hours
Computation of Comprehensive Machine Hour Rate
Per month (`) Per hour (`)
Fixed cost
Supervision charges 18,000.00
Electricity and lighting 9,500.00
Insurance of Plant and building (`18,250 ÷12) 1,520.83
Other General Expenses (`17,500÷12) 1,458.33
Depreciation (`64,800÷12) 5,400.00
35,879.16 239.19
Direct Cost
Repairs and maintenance 17,500.00 116.67
Power 65,000.00 433.33
Wages of machine man 139.27
Wages of Helper 109.41
Machine Hour rate (Comprehensive) 1,037.87

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

Wages per machine hour

Machine man Helper
Wages for 200 hours
Machine-man (`400 × 25) `10,000.00 ---
Helper (`275 × 25) --- `6,875.00
Dearness Allowance (DA) `4,575.00 `4,575.00
`14,575.00 `11,450.00
Production bonus (1/3 of Basic and DA) 4,858.33 3,816.67
Leave wages (10% of Basic and DA) 1,457.50 1,145.00
20,890.83 16,411.67
Effective wage rate per machine hour `139.27 `109.41
(b) Statement of Cost of G Ltd. for the year ended 31 st March, 2023:
Sl. Particulars Amount (`) Amount (`)
No.
(i) Material Consumed:
- Raw materials purchased 20,00,00,000
- Freight inward 22,41,200
Add: Opening stock of raw materials 36,00,000
Less: Closing stock of raw materials (19,20,000) 20,39,21,200
(ii) Direct employee (labour) cost:
- Wages paid to factory workers 58,40,000
(iii) Direct expenses:
- Royalty paid for production 3,45,200
- Amount paid for power & fuel 9,24,000
- Job charges paid to job workers 16,24,000 28,93,200
Prime Cost 21,26,54,400
(iv) Works/ Factory overheads:
- Stores and spares consumed 2,24,000
- Repairs & Maintenance paid for plant & 96,000
machinery
- Insurance premium paid for plant & 62,400
machinery
- Insurance premium paid for factory 36,200
building
- Expenses paid for pollution control and
engineering & maintenance 53,200 4,71,800
Gross factory cost 21,31,26,200
Add: Opening value of W-I-P 18,40,000
Less: Closing value of W-I-P (17,40,000)
Factory Cost 21,32,26,200

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

(v) Quality control cost:

- Expenses paid for quality control check 39,200
activities
(vi) Research & development cost paid 36,400
improvement in production process
(vii) Less: Realisable value on sale of scrap and (1,72,000)
waste
(viii) Add: Primary packing cost 1,92,000
Cost of Production 21,33,21,800
Add: Opening stock of finished goods 22,00,000
Less: Closing stock of finished goods (36,40,000)
Cost of Goods Sold 21,18,81,800
(ix) Administrative overheads:
- Depreciation on office building 1,12,000
- Salary paid to General Manager 25,12,000 26,24,000
(x) Selling overheads:
- Repairs & Maintenance paid for sales 36,000
office building
- Salary paid to Manager- Sales & Marketing 20,24,000
- Performance bonus paid to sales staffs 3,60,000 24,20,000
(xi) Distribution overheads:
- Packing cost paid for re-distribution of
finished goods 2,24,000
Cost of Sales 21,71,49,800
5. (a) (i) Annual Cost Statement of three vehicles
(`)
Diesel {( 1,34,784 km. ÷ 4 km) × ` 65) (Refer to Working Note 1) 21,90,240
Oil & sundries {(1,34,784 km. ÷ 100 km.) × ` 250} 3,36,960
Maintenance {(1,34,784 km. × ` 0.25) + ` 6,000} 39,696
(Refer to Working Note 2)
Drivers' salary { (`24,000 × 12 months) × 3 trucks} 8,64,000
Licence and taxes (` 25,000 × 3 trucks) 75,000
Insurance 45,000
Depreciation { (` 29,00,000 ÷ 10 years) × 3 trucks} 8,70,000
General overhead 1,15,600
Total annual cost 45,36,496
(ii) Cost per km. run
Totalannual cos t of vehicles
Cost per kilometer run = (Refer to Working Note 1)
Totalkilometre travelled annually

10

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

` 45,36,496
= = ` 33.66
1,34,784 Kms

(iii) Freight rate per tonne km (to yield a profit of 10% on freight)
Total annual cos t of three vehicles
Cost per tonne km.= (Refer to Working Note 1)
Total effective tonnes kms. per annum

Rs` 45,36,496
= = ` 7.48
6,06,528 kms

 ` 7.48 
Freight rate per tonne km.    1 = ` 8.31
 0.9 
Working Notes:
1. Total kilometer travelled and Commercial tonnes kilometer (load carried) by three
trucks in one year
Truck One way No. of Total distance Total distance Load Total
distance trips covered in km covered in km carried per effective
in kms per day (with per day (up & trip / day in tonnes km
load) down) tonnes
a b c=a×b d=c×2 e f = 27/3 × c
1 16 4 64 128 6 576
2 40 2 80 160 9 720
3 30 3 90 180 12 810
Total 234 468 27 2,106
Total kilometre travelled by three trucks in one year
(468 km. × 24 days × 12 months) = 1,34,784
Total effective tonnes kilometre of load carried by three trucks during one year
(2,106 tonnes km. × 24 days × 12 months) = 6,06,528 tonne-km
2. Fixed and variable component of maintenance cost:
Difference in maintenanc e cost
Variable maintenance cost per km. =
Difference in distance travelled
` 46,050 – ` 45,175
= = ` 0.25
1,60,200 kms – 1,56,700 kms
Fixed maintenance cost = Total maintenance cost–Variable maintenance cost
= ` 46,050 – 1,60,200 kms × ` 0.25= ` 6,000
(b) Workings:
1. Calculation of Standard Qty. of Explosives and Detonators for actual output:
Particulars Iron ore Overburden (OB) Total
SME:
A Actual Output 20,000 tonne 58,000 M 3
B Standard Qty per unit 2.4 kg./tonne 1.9 kg./M 3
C Standard Qty. for actual 48,000 kg. 1,10,200 kg. 1,58,200 kg.
production [A×B]
11

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

Detonators:
D Standard Qty per unit 2 pcs/ tonne 2 pcs/ M 3
E Standard Qty. for actual 40,000 pcs. 1,16,000 pcs 1,56,000 pcs
production [A×D]
2. Calculation of Actual Price per unit of materials:
Material Quantity [A] Amount (`) [B] Rate (`) [C = B÷A]
SME 1,67,200 kg. 63,53,600 38.00
Detonators 1,18,400 pcs 24,27,200 20.50

(i) Computation of material price variance:

Material Price Variance = Actual Qty. × (Std. Price - Actual Price)
SME = 1,67,200 kg. × (` 40 – ` 38) = ` 3,34,400 (F)
Detonators = 1,18,400 pcs × (` 20 – ` 20.5) = ` 59,200 (A)
Total = ` 2,75,200 (F)
(ii) Computation of material quantity variance:
Material Qty. Variance = Std. Price × (Std. Qty for actual output - Actual Qty.)
SME = ` 40 × (1,58,200 kg. - 1,67,200 kg.) = ` 3,60,000 (A)
Detonators = ` 20 × (1,56,000 pcs -1,18,400 pcs) = ` 7,52,000 (F)
Total = `3,92,000 (F)
(iii) Computation of material cost variance:
Material cost variance = Std. cost – Actual Cost
Or, (Std. Price × Std. Qty) – (Actual Price × Actual Qty.)
SME = (` 40 × 1,58,200 kg) – (` 38 × 1,67,200 kg.)
= ` 63,28,000 – ` 63,53,600 = ` 25,600 (A)
Detonators = (` 20 × 1,56,000 pcs) – (` 20.50 × 1,18,400 pcs)
= ` 31,20,000 – ` 24,27,200 = 6,92,800 (F)
Total = ` 6,67,200 (F)
6. (a) Controllable costs and Uncontrollable costs: Cost that can be controlled, typically by a cost,
profit or investment centre manager is called controllable cost. Controllable costs incurred in a
particular responsibility centre can be influenced by the action of the executive heading that
responsibility centre.
Costs which cannot be influenced by the action of a specified member of an undertaking are known
as uncontrollable costs.
(b) Cost plus contract: Under cost plus contract, the contract price is ascertained by adding a
percentage of profit to the total cost of the work. Such types of contracts are entered into when it
is not possible to estimate the contract cost with reasonable accuracy due to unstable condition of
material, labour services etc.
Following are the advantages of cost plus contract:
(i) The contractor is assured of a fixed percentage of profit. There is no risk of incurring any loss
on the contract.
12

Downloaded from castudyweb.com

 Downloaded from castudyweb.com

(ii) It is useful specially when the work to be done is not definitely fixed at the time of making the
estimate.
(iii) Contractee can ensure himself about the ‘cost of contract’ as he is empowered to examine
the books and documents of the contractor to ascertain the veracity of the cost of contract.
(c) In integrated accounting system cost and financial accounts are kept in the same set of books.
Such a system will have to afford full information required for Costing as well as for Financial
Accounts. In other words, information and data should be recorded in such a way so as to enable
the firm to ascertain the cost (together with the necessary analysis) of each product, job, process,
operation or any other identifiable activity. It also ensures the ascertainment of marginal cost,
variances, abnormal losses and gains. In fact all information that management requires from a
system of Costing for doing its work properly is made available. The integrated accounts give full
information in such a manner so that the profit and loss account and the balance sheet can be
prepared according to the requirements of law and the management maintains full control over the
liabilities and assets of its business.
Since, only one set of books are kept for both cost accounting and financial accounting purpose so
there is no necessity of reconciliation of cost and financial accounts .
(d) The impact of IT in cost accounting may include the followings:
(i) After the introduction of ERPs, different functional activities get integrated and as a
consequence a single entry into the accounting system provides custom made reports for
every purpose and saves an organisation from preparing different sets of document s.
Reconciliation process of results of both cost and financial accounting systems become
simpler and less sophisticated.
(ii) A move towards paperless environment can be seen where documents like Bill of Material,
Material Requisition Note, Goods Received Note, labour utilisation report etc. are no longer
required to be prepared in multiple copies, the related department can get e -copy from the
system.
(iii) Information Technology with the help of internet (including intranet and extranet) helps in
resource procurement and mobilisation. For example, production department can get
materials from the stores without issuing material requisition note physically. Similarly,
purchase orders can be initiated to the suppliers with the help of extranet. This enabl es an
entity to shift towards Just-in-Time (JIT) approach of inventory management and production.
(iv) Cost information for a cost centre or cost object is ascertained with accuracy in timely manner.
Each cost centre and cost object is codified and all related costs are assigned to the cost
object or cost centre. This process automates the cost accumulation and ascertainment
process. The cost information can be customised as per the requirement. For example, when
an entity manufacture or provide services, it can know information job-wise, batch-wise,
process-wise, cost centre wise etc.
(v) Uniformity in preparation of report, budgets and standards can be achieved with the help of
IT. ERP software plays an important role in bringing uniformity irrespective of location,
currency, language and regulations.
(vi) Cost and revenue variance reports are generated in real time basis which enables the
management to take control measures immediately.
(vii) IT enables an entity to monitor and analyse each process of manufacturing or service activity
closely to eliminate non value added activities.
The above are examples of few areas where Cost Accounting is done with the help of IT .

13

Downloaded from castudyweb.com