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Quiz

Management Accounting I
1. Which of the following is the primary objective of costing? (a) Ascertainment of cost (c) Cost reduction (e) Preparation of financial statements. (b) Control of cost (d) Estimation of sales price (1 mark) 2. Simon Ltd. manufactures a single product with a capacity of 1,50,000 units per annum. The summarised income statement for the year is as under: Particulars Sales (1,00,000 units @ Rs.15 per unit) Cost of sales: Direct materials Direct labor Variable production overhead Fixed production overhead Fixed administrative overhead Variable selling & distribution overhead Fixed selling & distribution overhead Total costs Profit Rs. Rs. 15,00,000

3,00,000 2,00,000 60,000 3,00,000 1,50,000 90,000 1,50,000 12,50,000 2,50,000

If the packing of marketable goods is improved at a cost of Re.1 per unit, the amount of sales required to earn a target profit of 25% on sales is (a) Rs.18,00,000 (b) Rs.24,00,000 (c) Rs.20,00,000 (d) Rs.17,50,000 (e) Rs.18,50,000. (1 mark) 3. Which of the following can improve break-even point? (a) Increase in variable cost (c) Increase in sale price (e) Increase in production volume. (b) Increase in fixed cost (d) Increase in sales volume (1 mark) 4. Due to changes that are occurring in the basic operations of many firms, all of the following represent, trends of allocation of indirect cost, except (a) Treating direct labor as an indirect manufacturing cost in an automated factory (b) Using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time (c) Preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations (d) Using several machine cost pools to measure product costs on the basis of time in a machine center (e) Using cost drivers as application to increase the accuracy of reported product costs. (1 mark) 5. The total of costs incurred in the operation of a business undertaking other than the cost of manufacturing and production is (a) Out-of-pocket cost (c) Conversion cost The term ‘cost’ refers to (a) (b) (c) (d) (e) The present value of future benefits An asset that has given benefit and is now expired An asset that has not given benefit and is now expired The price of products sold or services rendered The value of the sacrifice made to acquire goods or services. (1 mark) (b) Programmed cost (d) Commercial cost (e) Imputed cost. (1 mark) 6.

7.

Which of the following costs is not an example of a committed fixed cost? (a) (b) (c) (d) (e) Interest payments on a long-term loan Property taxes on land and related buildings Employees training Lease payments on production equipment Depreciation on plant & machinery. (1 mark)

8.

Non-production overhead costs are not considered in stock valuation, because (a) (b) (c) (d) (e) They are outside the control of production manager They are fixed period costs They cannot be identified with individual product They are incurred after stock has been brought to its present location and condition They are indirect costs. (1 mark)

9.

The cost of goods sold under a periodic cost accumulation system is equal to the (a) (b) (c) (d) (e) Cost of goods available for sale less ending finished goods inventory Cost of goods available for sale plus beginning finished goods inventory Cost of goods manufactured plus beginning finished goods inventory Cost of goods manufactured less beginning finished goods inventory Cost of goods available for sale less beginning finished goods inventory. (1 mark)

10.

Which of the following is a cost-behavior oriented approach to product costing? (a) Absorption costing (c) Process costing (e) Job order costing. (b) Marginal costing (d) Uniform costing (1 mark)

11.

An accounting system that collects financial and operating data on the basis of underlying nature and extent to the cost drivers is (a) Direct costing (c) Activity based costing Which of the following statements is false? (a) (b) (c) (d) (e) Notional costs are not included while ascertaining costs Administrative expenses are mostly fixed Historical costs are useful solely for estimating costs that lie ahead Abnormal cost is controllable Direct cost is one that can be conveniently identified with and charged to a particular unit of cost. (1 mark) (b) Target costing (d) Variable costing (e) Cycle-time costing. (1 mark)

12.

13.

Ponchu Das Pvt.Ltd. of Kolkata is currently operating at 80% capacity. The following is the income statement furnished by the company: Particulars Sales Cost of sales: Direct materials Direct expenses Variable overheads Fixed overheads Total cost Net income Rs. in lakh Rs. in lakh 640 200 80 40 260 580 60

The Managing Director has been discussing an offer from Middle East for the supply of a quantity which will require 50% capacity of the factory. The price is 10% less than the current price in the local market. Order cannot be split. The capacity of the factory can be augmented by 10% by adding facilities at an increase of Rs.40 lakh in fixed cost. If the proposal is accepted with the increased facilities, the profit will be increased by (a) Rs.50 lakh (b) Rs.40 lakh (c) Rs.60 lakh (d) Rs.25 lakh (e) Rs.35 lakh. (2 marks)

14.

Which of the following assumptions is true in cases where practical capacity is treated as plant capacity? (a) It assumes all personnel and equipment will operate at the maximum efficiency and the total plant capacity will be used (b) It does not consider idle time caused by inadequate sales demand (c) It includes consideration of idle time caused by both limited sales orders and human & equipment inefficiencies (d) It is the production volume that is always less than the actual use of capacity (e) It is the production volume that is necessary to meet sales demand for the next year. (1 mark) Cost of idle time arising due to non-availability of raw-materials should be (a) Charged to costing profit & loss account (b) Charged to factory overheads (c) Recovered by inflating the wage rates (d) Charged to indirect labor cost (e) Charged to direct labor cost. (1 mark) Which of the following statements is/are false? I. II. III. IV. Depreciation is an out-of-pocket cost. Conversion cost is equal to direct wages plus factory overhead. An item of cost that is direct for one business may be indirect for another. All costs are controllable. (b) Only (IV) above (d) Both (II) and (III) above (1 mark)

15.

16.

(a) Only (I) above (c) Only (III) above (e) Both (I) and (IV) above.

17.

AB Ltd. has furnished the following data pertaining to its product at 40% capacity level, which is its break-even level: Particulars Selling price per ton Variable cost per ton Fixed expenses Rs. 69.50 35.50 18,02,000

The company wants to increase the production by 40%. The selling price will be reduced by 10% for first 20% additional production and 15% of original selling price for next 20% additional capacity. The profit for additional 40% capacity level is (a) Rs.16,55,250 (d) Rs.11,68,456 (b) Rs.13,41,563 (e) Rs.7,89,734. (c) Rs.6,24,738 (2 marks) 18. Jem Ltd. has the following data pertaining to the year ending March 31, 2005: Particulars Purchases Opening stock Closing stock Freight-in Freight-out Cost of goods sold during the year 2004-05 is (a) Rs.13,40,000 (b) Rs.9,70,000 (c) Rs.9,50,000 (d) Rs.9,20,000 (e) Rs.7,70,000. (1 mark) Rs. 9,00,000 3,40,000 4,20,000 1,00,000 1,50,000

Sai Plastics Ltd. (2 marks) 20. (2 marks) 22.62 Rs.000 The normal capacity level.000 1.01. is (a) 4.000 hours (b) 5.000 hours (d) 8. Which of the following is false with regard to the supplementary rate method for accounting of under or over absorption of overheads? (a) (b) (c) (d) (e) It facilitates the absorption of actual overhead for production The value of stock is distorted under this method The supplementary rate can be determined only after the end of the accounting period It requires a lot of clerical work Correction of costs through supplementary rates is necessary for maintaining data for comparison.51.2.000 2. The cost break-up per chair is as under: Materials Labor Overheads – – – Rs.4.640 respectively 1.000 The following additional manufacturing data were available for the month of March 2005: Particulars Direct materials purchased Purchase returns Transportation Direct labor Actual factory overhead (Rs. on the basis of which the standard overhead rate has been worked out.) 1.800 chairs per month.000 The company applies factory overhead at a rate of 60% of direct labor cost and any overapplied or underapplied factory overhead is deferred until the end of the year 2004-05.798 units and Rs.180 per chair.000 (b) Rs.000 1.89.89. 2005 (Rs.50 per hour and overhead allowances are as follows: Activity level (hours) 3.000 26.6.000 (e) Rs.00.2.646 units and Rs.000 1.75.000 hours (2 marks) 21.2.) 1. The company is working at 60% capacity level. The manufacturing cost of the company for the month of March 2005 was (a) Rs.2.19.6.34.000 March 31. Ajex Ltd. manufactures plastic chairs.95.40 (60% fixed) The selling price is Rs.20.2.000 (c) Rs. For a department.798 units and Rs.800 respectively.000 hours (e) 6.65.56.) 1.000.640 respectively 1.2. 2005 (Rs.000 Budgeted overhead allowance (Rs.000 18. (1 mark) .000 2.6.000 (d) Rs.35. (c) 11.500 hours.25.56.17.95.000 7. The break-even point in units and profit at 80% level of capacity of the company are (a) (b) (c) (d) (e) 1.000 1.040 respectively 1. the standard overhead rate is Rs.000 3.646 units and Rs.32 Rs. At 80% capacity level the selling price falls by 5% accompanied by a similar fall in the price of materials.73.040 respectively 1.000 11. had the following inventories at the beginning and end of the month of March 2005: Particulars Finished goods Work-in-process Direct materials March 1.24.000 3.798 units and Rs.) 10.81. The company is planning to produce at 80% capacity level. which represents 4.2.

The company has furnished the following information pertaining to operations for the last quarter ending March 31.000 24.30.39.000 4.) 24.3.15 per unit.000 2.45.900 (over) (b) Rs.) 12. (1 mark) A machine shop has 5 identical machines manned by 3 operators. The overall profit of the order of 4.300 (over) (d) Rs. has undertaken to supply 2. (1 mark) 27.48.000 (2 marks) Labor cost (Rs.000 10.32.52 (c) Rs.000 Total labor hours 8.09. If predetermined overhead rate is not employed and the volume of production is increased over the level planned.100 Electricity and lighting Rs.30 per machine hour.000 (d) Rs. The company has furnished the following data pertaining to the costs for 3 months: Month April 2005 May 2005 June 2005 (a) Rs.23. (2 marks) Monark Ltd.12 (e) Rs. The rate per labor hour is Rs. The company utilized 500 machine hours.300 (under) (e) Rs.800 Repairs and maintenance per quarter 1% on value of machines Depreciation per annum 10% on original cost Miscellaneous expenses per annum Rs. 26.20 (under). Idle capacity of a plant refers to the difference between (a) (b) (c) (d) (e) Maximum capacity and practical capacity Maximum capacity and actual capacity Practical capacity and normal capacity Practical capacity and capacity based on sales expectancy Maximum capacity and normal capacity.000 Overhead cost (Rs. the cost per unit would be expected to (a) (b) (c) (d) (e) Decrease for fixed costs and remain unchanged for variable costs Remain unchanged for fixed costs and increase for variable costs Decrease for fixed costs and increase for variable costs Increase for fixed costs and increase for variable costs Increase for fixed costs and remain unchanged for variable costs.200 General management expenses per annum Rs.000 10.) 5.000 9.000 Material cost (Rs.265 Supervision and indirect labor Rs.15.000 18.49.7. The standard hours were 520 machine hours. 2005 is (a) Rs. A company uses a predetermined overhead rate of Rs. If the actual overhead costs of the company are Rs.4. the under or over absorption of overhead is (a) Rs.8 Estimated production bonus 10% on wages Value of power consumed Rs.24.20.2.900 (under) (c) Rs. 25. May and June 2005. The total original cost of these 5 machines is Rs.7. (1 mark) .000 (e) Rs. Every month a batch order is opened against which materials and labor cost are booked at actual.00.500 18.000.900.400 units is (b) Rs.000 Batch Production (Units) 2.000 units of product – ‘MONO’ per month for the months of April. The operators are fully engaged on machines.000 (c) Rs.61 (d) Rs. 2005: Normal available hours per month per operator 200 hours Absenteeism (without pay) 12 hours Leave (with pay) 20 hours Normal idle time (unavoidable) 8 hours Average rate of wages per hour Rs.58 (b) Rs. The selling price is contracted at Rs.000.22.40.000 30.000 6.800 The comprehensive machine hour rate for the machine shop for the quarter ending March 31.8. Overheads are absorbed at a rate per labor hour.500 3.25.

1.28. 4 per unit Budgeted production .440 (d) Rs.000 Rs. Each unit also requires 8.000 based on an output of 400 units of A.80.000 units There is no overhead spending variance Sales .48.357.30 respectively.20. .000.714 (b) Rs.23.73.64. 3 per unit Fixed overhead . (c) Rs.Rs.28 per unit Using Absorption costing. 96. Rs.10 per unit Direct labor .500 Rs. 12.72.000 100 200 Product B 2.25.1. and 22 machine hours per unit of production respectively. 3.000 (1 mark) 29.56.40.80 (d) Rs. AB Ltd.000 300 200 Product C 500 150 200 Overhead costs Rs.Rs.10.57.000 (d) Rs.23.000 Assuming overhead is allocated based on activities.12. The overhead cost per period of DM Ltd.1. how much would be allocated to Product B? (a) Rs. Direct labor costs of A.14.40 (c) Rs.27.00. the total overhead cost chargeable to B amounts to (a) Rs.2. using ABC basis. and Rs. has furnished the following information for its product: Direct material .Rs.000 units Selling price . has furnished the following information pertaining to its 3 products: Department Production Purchasing Inspection Allocation Base Machine Hours Purchase Orders Labor Hours Product A 1.33. 6 per unit Variable overhead .00.000 (e) Rs.000 (e) Rs. HP Ltd.00. (2 marks) 31. Using machine hours as cost driver. (1 mark) (e) Rs.11. B and C per unit amount to Rs.000 (b) Rs. amounts to Rs.Rs. what is the cost per unit based upon actual costs? (a) Rs.Rs.7.9.14.6. 400 units of B and 200 units of C.28. 5.12.00 Which of the following is not considered to be a classification of product costs? (a) (b) (c) (d) (e) Cost of wood used in making a table Cost of labor to assemble a table Cost of Company President's salary Cost of electricity to operate machine used to sand wood Cost of decolum to be used on the table .500 (1 mark) 30. (c) Rs.24.60.3.60 (b) Rs.000 units Actual production .

721 and Rs.555 respectively Rs. A home decorating company has certain amount of fixed cost that cannot be recovered due to decrease in the demand for home furnishings and floor coverings.400 (e) (1 mark) 34.7.700 12.2.712 and Rs.16.833 and Rs.000 (c) Rs.18.32.000 The company has provided the expenses of service departments which are charged to production as well as service departments on the following percentage basis: Department S1 S2 P1 40% 30% P2 30% 30% P3 20% 20% S1 20% S2 10% - The total overhead expenses of P1 and P3 are (a) (b) (c) (d) (e) Rs.000 8. These costs include the cost of Vinyl flooring manufacturing equipment and the cost of warehouses built to store materials and finished goods.2.00. uses a historical cost system and applies overheads on the basis of predetermined rates. P2 and P3 and 2 service departments – S1 and S2.3. (1 mark) 35.000 14. Which of the following is not an advantage of departmentalization of Overheads? (a) It facilitates control of overhead expenses by means of forecasted budgets (b) Departmentalization of overheads helps in controlling the uses made of the services rendered to the respective departments (c) The reasons for variance can be known by the analysis of under or over-absorption of overhead which in turn helps in taking remedial measures (d) Departmentalization of overheads helps in arriving at the cost of work-in-progress correctly (e) The correct costs can be determined as the actual overhead costs of the respective departments are taken into consideration in determining the overhead rates.200 Rs. The following data are furnished by the company for the year ended March 31. The company has furnished the following overhead costs of production as well as service departments: Department P1 P2 P3 S1 S2 Overhead costs (Rs.000 3.18.712 respectively Rs.555 respectively. is (a) Rs.15.200 (d) Rs.00.15.) 13. 13.18.00.712 and Rs.000 9. Baisakhi Ltd. Mahan Ltd.84.16. (2 marks) 33.800 9.600 14. (b) Rs.555 and Rs.000 3. has 3 production departments – P1.18. (1 mark) .2005: Particulars Manufacturing overheads Manufactured overheads applied Work-in-progress Finished goods Cost of goods sold Rs.721 respectively Rs 18. using supplementary rate.00. These costs are examples of (a) Incremental costs (c) Contribution margin costs (b) Hidden costs (d) Period costs (e) Capacity costs.15.16.100.833 respectively Rs.000 The amount of under absorbed overheads to be adjusted to work-in-progress.

40. 39. More accurate cost allocation can be accomplished when (a) (b) (c) (d) (e) There are less direct costs to allocate Costs are more homogeneous Costs are more indirect Different costs vary depending upon different causes and effects Labor costs are more than material costs. Which of the following statements is false? (a) Canteen expenses are apportioned to cost centers on the basis of number of employees (b) Insurance costs of buildings are apportioned to cost centers on the basis of floor area (c) Supervision expenses are apportioned to cost centers on the basis of estimated time devoted to each machine (d) Depreciation expenses are apportioned to cost centers on the basis of floor area occupied by each machine (e) Power expenses are apportioned to cost centers on the basis of machine hours. (b) Understate the profit (d) Overstate the gross profit (1 mark) (b) Indirect labor (d) Administrative overhead cost (1 mark) 38. (1 mark) 37. provident fund paid by the employer for factory employee is preferably accounted for as (a) Direct labor (c) Factory overhead cost (e) Distribution overhead cost. (1 mark) . Which of the following would be considered as an indirect cost in the case of manufacturing of air conditioners? (a) (b) (c) (d) (e) Cost of the condenser put in an air conditioner unit Cost of inspecting air conditioners Cost of assembling an air conditioner Cost of the box and packaging for an air conditioner Cost of exhaust fan put in an air conditioner. 41. Which of the following statements is false? (a) Management Accounting provides data for internal uses whereas Financial Accounting provides data for external users (b) Management Accounting is concerned with a strong orientation towards future while Financial Accounting is concerned with a record of financial data of the past (c) Management Accounting relies on the concept of responsibility whereas Financial Accounting does not rely on the concept of responsibility (d) Financial Accounting is mandatory for business organizations whereas Management Accounting is not mandatory (e) Financial Accounting statements have to be prepared in accordance with the GAAP whereas managers set their own rules in the form and content of Management Accounting statements. (1 mark) An over-statement of beginning work-in-progress inventory will (a) Understate cost of goods sold (c) Overstate the net profit (e) Understate the cost of production.36. (1 mark) In job order costing.

III.000 30. IV.6.116. (1 mark) (a) Only (I) above (c) Both (I) and (II) above .00 (d) Rs.000 Direct Hours – – 45.000 27.9.00.00.119.18 (e) Rs. (2 marks) 43. opening stock was 18. 1. The profit based on marginal costing was Rs. individual departmental rates rather than a plant wide rate for applying overhead would be used if (a) A company wants to adopt a standard cost system (b) A company wants to adopt a direct costing system (c) The manufactured products differ in the resources consumed from the individual departments in the plant (d) The manufacturing overhead is the largest cost component of its product cost (e) The manufacturing operations of a company are highly automated. what is the appropriate overhead allocation rate to Department B? (a) Rs.000 Allocation Base Employees Square feet Hours Hours Using the Step Method to allocate Personnel Department and Cleaning Department costs.8. Which of the following average costs per unit may be expected to decrease by the greatest percentage with an increase in the volume of units produced? I.34 (d) Rs.000 – 3.750 25. if actual profits on a contract are 20% higher than negotiated amount (b) Cash returned to contractee. Average fixed cost per unit Average semivariable cost per unit Average variable cost per unit Average total cost per unit (b) Both (I) and (IV) above (d) Only (IV) above (e) (I).000 2.50 (c) Rs.59 (b) Rs.900 units and closing stock was 21.50.50 (e) Rs.7.ft 1. For a period.00 (b) Rs.80.75. (II) and (III) above. A Operating Dept. ADC Ltd. (1 mark) 44.90. The fixed overheads absorption rate per unit is (a) Rs. Retention monies are best defined as (a) Cash returned to contractee.000 Costs Rs. if actual profits on a contract are 25% higher than negotiated amount (c) Cash withheld by the contractee. Generally. II. B Employees 3 5 30 10 Sq.216.6.42.22.116. (1 mark) 45.209. where it is desired to secure his service for a future contract.150 units.44 (c) Rs.750 3.600 and profit under absorption costing was Rs. in order to improve the cash flow of the contractor (e) Payments to the contractor. (1 mark) 46. under the terms of contract when payments of the value certified are being made (d) Cash withheld by the contractee.44.225. has furnished the following data pertaining to its business: Department Personnel Cleaning Operating Dept.

0.3. using FIFO method. runs its boiler on furnace oil obtained from Indian Oil and Bharat Petroleum. From the records available. Opening work in process: Materials 20.2. The emptying time in the factory is only 45 minutes for both. and by a common process (c) The main difference between joint products and by-products is its commercial value (d) Where the by-products are utilized in the same undertaking.390.240 (b) Rs. which incidentally results from the manufacture of main product (b) Joint products are produced from the same basic raw material.13. (b) Rs.000 (d) Rs. exclusive of spoilage allocation.200 Closing work-in-process (March 31.75.36 (b) Rs. it is seen that the average speed of the company’s lorries works out to 40 km per hour.15.12.3. (2 marks) Which of the following statements is false? (a) By-product is a secondary product.1.5. Costs pertaining to the month of March 2005 are as follows: Particulars Rs. the by-product is valued at standard cost (e) The relationship between main product and by-product changes with changes in economic conditions.000 units. All units were inspected between the completion of manufacturing and transfer to finished goods inventory.520 (d) Rs. 2005. 2005) 1.500 Conversion 16.60. (2 marks) 48. is (a) Rs.000 and abnormal spoilage of Rs.14.000.350 During the month: Materials 1. The portion of total spoilage that should be charged against revenue in the month of March 2005 is (a) Rs.18.20. During the month of March 2005. Normal spoilage for the month was Rs.43 (c) Rs.0.000.000 units of product ‘P’ at a cost of Rs.250 (e) Rs. manufactured 5.000 Rs.1.25. (1 mark) Shivam Chemicals Ltd. 2005. costing Rs. 50. APW Ltd.6. An additional 1. The cost per ton-mile from Indian Oil is (a) Rs.280 Introduced in production during March 2005 7.500 (e) (2 marks) .5.2. The company sold 2. 2005) 950 There is no loss in the manufacturing process. Onward trips are made only on full load and the lorries return empty.500 units of product ‘P’ during the month.72 (e) Re.20 and fixed charges per hour of operation is Rs.7.520 The total cost of closing work-in-process on March 31. The opening inventory was 60% complete for materials and 50% complete for conversion costs. whose depots are situated at a distance of 10 km and 8 km from the factory site of the company. The variable operating charges per km is Rs.20.000. The following pertains to operations for the month of March 2005: Particulars Units Opening work-in-process (March 01.830 Conversion 89. uses process cost system to manufacture Dust Density Sensors for the mining industry.000 was also incurred during the month. Transportation of furnace oil is made by the company’s own tank lorries of 5 tons capacity each. were completed to the extent of 50% by March 31.1. 49.8.000 (c) Rs.650 (c) Rs.47. Murphi Ltd.51 (d) Re. The filling-in time takes an average of 50 minutes for Indian Oil and 45 minutes for Bharat Petroleum. The closing inventory was 80% complete for material and 60% complete for conversion costs.

Anjani Ltd.20.400 hours at the rate of Rs.7. (2 marks) 53.10 per hour.60% complete.000 units Actual overheads .15.19.43.2. Conversion costs are incurred evenly throughout the process. There was no beginning inventory.6.240 Raw material – Rs.000 (e) Rs.1.000.610 (c) Rs.230 (b) Rs.82.70.98.450 Raw materials – Rs.500 There were 1. Sigma Chemicals Ltd.000 (d) Rs.200 Ending Inventory .3.31.500 Direct labor – Rs. 2005.25.6.750 (b) Rs.6. (1 mark) .3. Direct labor incurred .250 (c) Rs. Budgeted overheads .340.30.000.6.15.88.36.1.2.300 Work-in-process – Rs.970 (e) Rs.600 (d) Rs.490 Factory overhead expenses – Rs. The following data are available for the month of March 2005: Material costs Conversion costs Units introduced Units completed Rs. 2005 Indirect labor – Rs. Past experience indicates that approximately 8% of the units introduced are found to be defective on inspection by quality control.350. when some units are separated out as inferior quality.430 hours Budgeted overhead cost .3. All materials are introduced at the beginning of the process.Rs.000 Rs.Rs.1. (2 marks) 52. A quality control inspection occurs when units are 80% through with the manufacturing process.2.500 Total manufacturing costs incurred – Rs.800 Sales (15.000 units Units completed .000 7.60. 2005 was (a) Rs.51.500 units of finished goods of ‘Brand D’ as on March 31. The value of ending inventory is (a) Rs.87.500 8.000 units) – Rs.490 (d) Rs.120 The following data are available as on March 31.50. The amount of raw materials purchased during the half-year ended March 31.000 (c) Rs.7. The company has provided the following balances as on October 01. makes one model of a product known as ‘Brand D’. produces high-quality plastic sheets in a continuous manufacturing operation. 2004: Finished goods – 500 units Work-in-process – Rs.16.000 There is no opening or closing work-in-progress. 5.520 (e) Rs.450 Units started .100 Freight in – Rs.20.3.000 Indirect material – Rs.16.01.000 (b) Rs.25. The cost of abnormal loss for the month of March 2005 is (a) Rs. Consider the following data of Hifi Ltd: Material Purchased .Rs.

P (pieces) 18.1.000 pieces? (a) 1. B and C. These units were 60% complete as to conversion costs. (1 mark) .8.790 (e) (1 mark) 56.9.464.000 units (d) 4.000 units. 2005.800 3. The following information furnished by the company relating to inputs. (c) 3.000 1. The company had 6.400 Output (Pieces) 12.800 units (b) 6. outputs and rejections during the month of March 2005: Process A B C Input including opening W.I. Shiva Ltd.800 20.000 What should be the inputs in Process A.000 units were started and 36. Semi-variable costs are incurred in the form of tyre maintenance. 34. II.9.000 units of work-in-procress inventory in department A on March 1.832 (d) Rs. The company uses weighted average flow of costs. Which of the following is/are true regarding transport costing? I.200 units (2 marks) 57.000 17.54. (2 marks) 55.800 pieces (d) 1.980 pieces.400 Rejections (pieces) 6.000 19.900 pieces (e) 1. The costs of a transport company includes publicity costs.700 pieces (c) 1.10. These units were 80% complete as to conversion costs. (b) Rs.000 units completed. painting etc. The equivalent production unit of conversion (under the average method) exceeds the equivalent production of conversion (under FIFO method) by (a) 8.282 Costs incurred evenly throughout the month. Direct materials are added at the beginning of the process.9.000 18. Ganpati Ltd.736 Rs. III. Insurance of the vehicle can be considered as running cost. 2005. IV. Operating costs and running costs are the costs which vary more or less in direct proportion to the distance traveled. (a) Only (I) above (c) Only (III) above (b) Only (II) above (d) Both (II) and (IV) above (e) Both (II) and (III) above. uses a particular raw material in its 3 process accounts – A.042 Rs. has furnished the following information pertaining to its process account for the last month: Opening work-in-process Closing work-in-process Units started Value of opening work-in-process Cost incurred during the month 100 units (70% complete) 50 units (60% complete) 500 units Rs. had 8. KBKM Ltd.778 (c) Rs.9.000 units of work-in-process inventory on March 31.The value of finished goods was (a) Rs. During the month of March 2005.250 pieces (b) 1.000 units (e) 5. if the final product transferred from Process C is 1.

000.500 30.) Direct wages Selling price (Rs. (a) Only (I) above (c) Only (III) above (e) Both (I) and (II) above.000 Rs.70.93.78. items of prime cost cannot be traced with a particular order due to continuous production.The company has furnished the following data relating to 2 jobs undertaken by it in a period: Particulars Direct materials (Rs.250 20% Profit % on total cost The company has received an order of Job no A3.) (Rs. cost is accumulated according to processes or departments In job costing.24. the basis of cost accumulation is job order or batch size In process costing.650 10% Job B2 37.000 1. using the above recovery rates.80. II.20.750 (2 marks) 59.000 42.) Job A1 54.) Rs. is (a) Rs. The company has furnished the following information pertaining to Job A3: Direct materials Direct wages (Rs. cost is accumulated on time basis In job costing. Which of the following is/are the best explanation of the relevance of equivalent production units in process costing? I.900 (e) Rs.000 12. (c) Rs. In an engineering company. A means of equalizing production charged into stock of each period. cost is computed at the end of the cost period In process costing. Which of the following statements is false? (a) (b) (c) (d) (e) In process costing. A means by which the output achieved may be compared with the equivalent quantity budgeted for the period under review.5% Profit % on selling price The selling price of Job A3.58.000 (b) Rs.) (Rs. III.66. the factory overheads are recovered on a fixed percentage basis on direct wages and administrative overheads are absorbed on a fixed percentage basis on factory cost.000 1.28.91.100 (d) Rs. . The conversion of partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis. (1 mark) (b) Only (II) above (d) Both (II) and (III) above (1 mark) 60.

The club has furnished the following cost structure: Service Single Room Double Room Gym facility The fixed cost per day is: For single room For double room For Gym – – – Rs. the cost of closing inventory of product B is (a) Rs.) 300 80 3.00.9.25 Rs.50.3.1.000 2.000 If joint costs are apportioned on the basis of relative sales value of output. No opening inventory of finished goods and work-inprocess existed on March 01. (2 marks) 62.000 (e) (2 marks) Rs.75.19.50 The average occupancy rate in the club is 80% for 365 days of the year.00.1.000 20% of sales value – – – 25 – – 60% (d) Rs.1.000 (b) Rs. Selling price per motor Selling and distribution expenses Cost incurred as per job card: Direct material Direct labor Overheads iv. 97 (e) Rs.610 (b) Rs.220 (e) Rs.000 Rs. iii. Number of motors completed and transferred v.150 (c) Rs.1.20.40. Small Pumps Ltd. The club deserves a margin of 25% on hire of room and the rent of double room should be fixed at 150% of a single room. Presidency Club is involved in providing staying facilities and Gym facilities to its members. – – Rs.000 – 100% (c) Rs.707.000 Rs.35. 2005.000 C 120 120 5. The production costs for March 2005 were as follows (assume separable costs were negligible): Particulars Crude oil acquired and used in production Direct labor and related costs Factory overhead The output and sales for the month of March 2005 were as follows: A Particulars Number of Barrels produced Number of Barrels sold Prices per Barrel sold (Rs.35 Rs. (2 marks) 63.1. The rent of a double room per day is (a) Rs.000 3.20. 4.000 Rs.1. differing only in grade.00.50.1.145 (d) Rs.512 (d) Rs.61.45 Rs.1.10 Variable cost per day Rs.000 Rs.65 Rs.000.1.A. manufactures standardized electric motors.80. B & C.23.2.75.51.000 .31.000 B 240 150 4. The company has furnished the following information pertaining to a job of 50 motors: i. ii. Simul Petroleum is a small company that acquires crude oil and manufactures three intermediate products.476 (c) Rs. It has a capacity of 25 single rooms and 15 double rooms and the gym facility is provided for residents in the club and also outsiders.100 (b) Rs. Completion stage of work-in-progress: Direct material Direct labor and overheads The value of work-in-process is (a)Rs.109.1.

23.000 Selling price per unit Rs.500 Rs.250 respectively (d) Rs.0.000 1.365 (b) Rs.28.500 18.510 (d) Rs.25.00 Rs.6. A by-product ‘B’ is also produced.14. 2. 2005) Contract price Cash received from the contractee Direct expenses The profit to be transferred to reserve account is (a) Rs. Output and Sales for the month are as follows: Particulars Product J Product K By-product ‘B’ Production units 8.000 Nil Production overheads are absorbed at the rate of 300% of direct labor costs.02.20. Information related to products for the month of March 2005 is as follows: Opening stock Cost of processing: Direct material Direct labor Rs.5. has furnished the following information pertaining to a contract for the year ended March 31. 2005: Particulars Material sent to site Materials on hand (March 31.00.4.000 1. Costs of the common processing are apportioned between products J and K on the basis of sales value of production.5.100.000 and Rs. The profit of products J and K is (a) Rs.000 respectively (e) Rs.000 8.34.250 and Rs.000 3.3.750 respectively.000 and Rs. credit is taken for the full amount of profit on complete portions of the incomplete contract (c) Work-in-progress certified and uncertified in a contract is valued at cost (d) Salary of supervisor employed on a contract is an indirect cost (e) Cost plus contract protects the contractor from the risk of market fluctuations in the prices of material. Which of the following statements is true? (a) Escalation clause in a contract provides that contract price is fixed (b) In contract costing.50.50 It is the practice of the company to credit the realizable value of by-product in the process costs before apportioning costs to each joint product.750 respectively (2 marks) 66.500 7.000 respectively (c) Rs.000 1.750 and Rs.000 72. labor and other elements.000 1.71.000 6.64. (1 mark) (b) Rs.20. .000 1.250 and Rs.32.000 65.00 Re.6.500 4.255 (2 marks) Rs.620 (e) Rs.375 1.3.6.5.25. Modern Construction Ltd. 2005) Cost of plant installed at site Labor costs Work certified Cost of work not certified Value of plant (March 31.2.6.000 Sales units 7. (c) Rs. manufactures two joint products – J and K in a common process.3.10.50. JK Ltd.

7.6. There is no other variance.000 1.000 and Rs.00 Rs.20.6. If the company desires to earn a profit of Rs. ABC Ltd.000 and Rs.000 4.5.50.7.18.000 (c) 82.000 and Rs.9.40 per unit – 1.97.) 30.70.000 (e) 75. The variable manufacturing cost is Rs. (1 mark) 69.70.000.6.67. A corporate fixed cost of Rs.25% (b) 52.0. SMK Ltd.00 Re.6.000 units of Product ‘K’ per quarter.800 respectively Rs.78% (e) 55.20.30.70.75% (c) 54.000 Separate costs(Rs.5.000 respectively.6 per unit and the fixed selling expenses were budgeted at Rs.800 and Rs.30.50 The company will incur Rs.20.500 (b) 90.000.20. (2 marks) .4.000.000 10.6.500 units Production – 2.000 per quarter.000 30.000 respectively (b) Rs.000 5.1.6.000 and Rs. (2 marks) 68.82.00.000 and Rs.P and Q.6. The output and sales in the year 2004-05 were as follows: Product M N P Q Output(gallons) 5.7. in lakh) Turnover 240 280 180 Variable cost 160 210 90 Fixed cost 60 70 60 The Break-even percentage of the merged plant is (a) 50.) 1. The information pertaining to the costs per unit of the new product is as follows: Direct materials Direct labor Distribution expenses Rs.000 and Rs.70.000 Sales(Rs. 5.50. 17. The total cost till the split off point was Rs. in the course of refining crude oil obtains 4 joint products – M.48%.800 respectively Rs.000. The company estimated its normal capacity utilization at 90% for the quarter ending March 31.500 presently absorbed by other products will be allocated to this new product.000 6.000 respectively (c) Rs. The variable selling overheads amounted to Rs.000 respectively (d) Rs.00.00.800 respectively.000 and Rs. is planning to launch a new product ‘K’. The profits under absorption costing method and marginal costing method are (a) Rs. The operating data for the quarter ending March 31.29% (d) 58.000 9.000 respectively (e) Rs.600 respectively Rs.15. 2005 are as under: Opening stock of finished goods – 12. The details are as follows: Plant A B C Capacity operated 80% 70% 60% Particulars (Rs. The selling price per unit of the new product is estimated as Rs. A.000 If the joint costs are apportioned on the basis of relative sales value of the different products at the split off point.22 per unit and the fixed factory overheads were budgeted at Rs. B and C are three similar plants under the same management of Apicon Ltd.70.17. in lakh) (Rs.6.000 10.500 (d) 80. in lakh) (Rs. 17.800 and Rs.N. (2 marks) 70.625 of additional fixed costs associated with this new product. has a productive capacity of 2.1. Varun Electronics Ltd.500 units The cost analysis revealed an excess spending of variable factory overheads to the extent of Rs.1.87.6.5. the number of units to be sold by the company is (a) 92. 2005.000 units Sales at the rate of Rs.00. the net incomes of products M and P are (a) (b) (c) (d) (e) Rs.600 respectively Rs.75.000 and Rs.70.600.

2.000 units 20. is (a) Rs.2.000 higher than the standard. (2 marks) 72.60. (2 marks) . The management has received the following summary report on the operations of each factory for a period: Region North East South Actual sales (Rs.1.600.118 (d) Rs.000 units per year.500 (c) Rs. by using FIFO method.375 (e) Rs.000 Rs. The net profit under absorption costing.64.) 1. CVP Ltd.00.) (180) 90 (110) If the variable cost ratio.3 per unit Rs.200 (d) Rs.19. fixed costs and sales mixes are as per budget.375 (b) Rs.100 1.35.50.1.24.60. has a production capacity of 2. the break-even sales in rupees of the company as a whole is (a) Rs.750 (e) Rs.Normal capacity utilisation is reckoned as 90%.3.1.91.450 1. East and South with its head office in Hyderabad.11 per unit Rs.200 Over/(under) budgeted sales (Rs.20 per unit 1.500 (b) Rs.1.000 Rs.000 units 1.46.2.000 units The actual variable production costs for the year were Rs.2.118 (c) Rs.70.2. The following details are provided by the company: Standard variable production costs Fixed production cost per year Variable selling cost Fixed selling cost per year Selling price Production during the year Sales during the year Closing inventory Rs.) (400) 150 (200) Actual profit (Rs.71.) 135 210 330 Over/(under) budgeted profit (Rs.118.2.2. A company has three factories situated in North.

50% = (Rs. Therefore. or even an entire plant. Other statements mentioned in (a). Option (b) is incorrect because through put time is one of the cost drivers that is beginning to be used more often as an overhead application base.24. desired profit = 25% on sales. increase in sale price can improve break-even point.000 : (c) Fixed cost Sale price per unit − Variable cost per unit 2.000 + 0. : (c) Reason : Employee training cost is usually a discretionary fixed cost. : (b) Reason : Total fixed cost = Rs.7.00 + Re. the factor that changes the cost of the activity.000 + Rs. Therefore. some companies are treating direct labor as an indirect factory overhead cost.3. One change is that plant-wide application rates are being used less often because a closer matching of costs with cost drivers provides better information to management.00 + Rs. For this reason some companies have found that it is no longer expedient to track direct costs as closely as was once done.90 = Rs. Contribution to sales ratio = Contribution / Sales = (Fixed cost + profit) / sales.25x) / x 0. Cost reduction is not the primary object of costing.00.6.1. They permit a better matching of indirect costs with cost drivers. ABC results in a more accurate application of indirect costs because it provides more refined data. (e) is correct.00.50. Instead of a single cost goal for a process.000 = Rs. Option (a) is incorrect because one effect of computerization is that the amount of direct labor relative to other costs has been decreasing. The related cost driver. Variable cost after improving packing cost = Rs. 4. sales volume and production volume. 3. a department. x = desired sales.1.1. Option (e) is incorrect because ABC uses cost drivers (causes) as application bases to provide more refined data.000. (d) and (e) are not correct. .50.50.15 = 50%.(b) is correct. Variable cost per unit = Rs. an indirect cost pool is established for each identified activity. It is typically fixed since 5.6.2. (b). Contribution to sales ratio = Rs. fixed cost. Reason : Break even point = From the above relation.50 / Rs.6.6. Thus. 6.Suggested solution Management Accounting I 1. Option (d) is incorrect because multiple cost pools are preferable. This rate clearly drives (influences) costs.60 + Re.7.0. : (c) Reason : With the recent automation of factories and the corresponding emphasis on activitybased costing(ABC). : (d) Reason : The total of costs incurred in the operation of a business undertaking other than the cost of manufacturing and production is commercial cost : (e) Reason : The cost means the value of the sacrifice made to acquire goods or services. estimation of sales price and preparation of financial statements are not the primary object of costing.50. is also identified.00.5x = Rs. 7.000 + Rs.00 = Rs. Let. : (b) Reason : The primary object of costing is to control cost. Similarly.50 + Re.6.000 + 0.00.0.3.00.25x x = Rs. Throughput is the rate of production over a stated time.companies are finding new ways of allocating indirect factory overhead. Breakeven point will not improve with the increase in variable cost.

alternatives (II) and (III) are true. : (b) Reason : Contribution = Rs.10% of (Rs. Therefore. : (a) Reason : Cost of idle time arriving due to non-availability of raw-materials must be charged to costing profit & loss account.640 / 80%) x 50% . If volume of production increases. : (b) Reason: Proposed sales = Local sales + Middle East sales = Local sales of 60% + Export sales of 50% = (Rs. (a) is correct. 8. Fixed cost = Rs.640 / 80%) x 60% + [(Rs.200 – Rs.740 – Rs. job order costing and uniform costing. It is not necessary to meet sales demand for the next year.000 / Rs. 13 .69. : (a) Reason : Notional costs should be included while ascertaining costs. : (c) Reason : An activity based costing system identifies the casual relationship between the incurrence of cost and underlying activities that cause those costs.02.000.160 lakh. : (b) Reason : Marginal costing or direct costing is a cost behavior oriented approach to product costing. Other options given (b). Selling price for next 20% = Rs. This statement (a) is false. the correct is (e).840 – Rs.640 = Rs.300 = Rs.69. Other options are not correct. (a) is correct. Incremental revenue = Rs. So. 15 . the total contribution increases and profit is also increased after covering fixed costs.480 + Rs. Therefore. (d) is correct : (a) Reason : The cost of goods sold under a periodic cost accumulation system is equal to the cost of goods available for sale less ending finished goods inventories. it is not a part of production cost. : (b) Reason : Practical capacity is the maximum level at which output is produced efficiently.its amount is not based on volume. : (e) Reason : Depreciation is not an out-of-pocket costs as there is no real outflow of cash. : (d) Reason : Non-production costs are incurred in the place other than production function.50 – Rs. It is discretionary because it is set each year during the planning process. All costs are not controllable. Training costs are optional.110 + Rs. But alternatives (I) and (IV) are not true.50 = Rs.075 9. It includes consideration of idle time caused by human and equipment inefficiencies. Under this system.40 lakh. So these costs are either administrative or selling and distribution cost.34. (d) and (e) are all correct. In this method costs are separated into fixed and variable cost.275 + Rs. 14 . Practical capacity always exceeds the actual use of capacity. (c) is correct.740 Differential cost = Rs. 10 . Therefore. Break-even units = Rs.260 + Rs. process costing.000 ton. costs are applied to products on the basis of resources consumed (drivers). This approach is not available in other types of costing like absorption costing.200/80) x 110 + (Rs.55. So. 16 .640. Incremental profit = Rs. Therefore.18. option (b) is correct.80/80) x 110 + (40/80) x 110 + (Rs. So.35.160 = Rs. and they can be altered or perhaps deleted entirely during the year in response to business environment changes. . 11 . Selling price for 1st 20% = Rs.40) = Rs.18. It does not consider idle time caused by inadequate sales demand. Proposed cost = 60% local + 50% Middle East = Direct material at 110% + Direct expenses at 110% + variable expenses at 110% + fixed expenses = (Rs. 12 . Therefore (b) is correct.62.200lakh.640 / 80%) x 50%] = Rs.580 = Rs. Therefore. 17 .360 = Rs.34 = 53.50 x 90% = Rs.840.50 x 85% = Rs. Other options are not correct.69. Other options are related to committed cost.59.55 + Rs.02. Present sales = Rs. (c).

Contribution for next 20% capacity = Rs. 20 .2. (c) and (e) are not correct.575 × 26.5. 4.50.64.563.34. Cost of goods sold = Rs.000 3.35.02.240 1.) 60% 4. Fixed cost = Rs.000. 9.50 = Rs.000 Less: Purchase returns (1.84.7.040 1.55 – Rs. 6.50.00 = Re. : (d) Reason : Particulars Sales unit Sale value Materials Labor Overheads (variable) Total variable cost Contribution Fixed cost (40 × 60% × 4.20.62.24.00.) 171. : (d) Reason : The correct is (d).15.000 (Direct labor) = Rs.16.600 76. Hence the is (b). Profit from 1st 20% capacity = Rs.575 per unit.7.000 Total prime costs 5. : (b) Reason: The value of stock is not distorted under this method.00 106.738 Profit from added production of 40% capacity over break-even volume = Rs.000. The supplementary rate method facilitates the absorption of actual overhead incurred for production.000 2.27.825 + Rs. Job cost sheet is designed to record cost of materials.10 80% 6.20. 180 62 32 16 110 70 Per unit (Rs. .89.075 – Rs.95.59. : (a) Beginning direct materials inventory 1.600 1.500 = Rs. Correction of costs through supplementary rates is necessary for maintaining data for comparison.4. 10.000 Manufacturing cost = Rs.000.36.00.50 = 8.000 hours.94.0.00 16.000 1.01.000) = Rs.000 + Rs.10.27.200 2.798 units 19 .6. labor and factory overhead applicable to a particular job and it does not include selling and distribution cost.000) Add: Transportation 3.90 32.18.000 – 7. : (d) Reason : Variable cost = Change of cost / change of activity = (Rs.000 = Rs. 18 .2.000 Less: Ending direct materials inventory (1.16. 21 .28. 9.800 Rs.30 per machine hour Actual machine hours = 500 hours 23 .97.15.01.23. Hence.960 2.40.00.18.Contribution for 1st 20% capacity = Rs.13.0. (b).800 1646 units Per unit (Rs. 6.05 per unit.000) Direct material used 2.400 Rs.50 = Rs.00. 3.81.738 = Rs. : (b) Reason : Prodetermined overhead rate = Rs.000 – Rs.000 – 3.90 64. The supplementary rate can be determined only after the end of the accounting period.53. 8.000 – Rs. It requires a lot of clerical work.04.800 5.76.10.3. (a).2.41.000 ) / (7.500 = Rs.23. Normal capacity level = Rs.000 Add: Purchases 1.00 58.05 x 26. 1.000 x Rs.000 + 60% of Rs.400 3.825 Profit from next 20% capacity = Rs. Standard fixed cost = Rs.000 Total direct materials available 3.50 – Rs.24.2 = Rs.2.000 + Rs.20. Standard overhead = Rs.800) Profit Break even point 22 .01.400 6.24.800 1.4.000 Direct labor 3.25.000 / Re.200 2.160 4.35.

Therefore.000 ÷ Rs.000 Rs.00.2 = 2.500 40.000 4.15 4400 × Rs. Normal hours for which wages are to be paid = 200 – 12 = 188 hours Wages for 3 months = 188 hours × 3 × 3 × Rs.500 (Rs.000 = Rs.100 3.000 6.000 20.45.000 30.13.000 15.000 5 10 Total 7.8.) 1.8 = Rs.5.000 Rs.000 (Rs.) 30.000 = Rs.30 (Standard rate for actual hours) = Actual overhead Under absorption 24 .10 Rs.000 6.305 Comprehensive machine hour rate = Rs.000 ÷ 4) Miscellaneous expenses (Rs.15) Less: Costs: Materials Labor Overheads (Workings) Profit Profit per unit Cost per unit April 2.000 Rs.000 20. : (a) Reason : If predetermined overhead rate is not employed and the volume of production is increased over the level planned. 25 .440 hours Therefore.000 6.2 = 2.500 12. : (a) Reason : Particulars Batch Production (units) Total sales value (@ Rs.536) Power consumed (last quarter) Supervisor & indirect labor Electricity & Lighting Repairs & Maintenance (1% on Rs.000 = Rs.66.500 5 10 May 3.000 7.000 37.000) Depreciation (10% of Rs.000 10. : (b) Reason : Computation of total utilized machine hours: Normal available hours per month per operator Less: Unutilized hours due to Absenteeism Leave Idle time Total utilized hours per operator per month = Rs.000 hours – – 4400 × Rs.7.49.800 8.500 (Rs.4.536 Comprehensive Machine hour rate Operators wages Production Bonus (10% on Rs.000 18.500 25.500 Rs.000 ÷ 8.000 hours Rs.450 71.354 7.6.15.2 Rs.3 Rs.265 4.000 10. (a) is correct.000 26 .440 hours = Rs.500 Profit for 4400 units Sales Cost Profit Workings: Batch labor hours Overhead per hour (Total Overheads ÷ Total labor hours) Overhead for the batch Rs.536 1.500 75.000 1.7.12.000 (Rs. the cost per unit will be reduced because fixed cost per unit will be reduced and variable cost per unit will remain same.800 ÷ 4) Rs.22.24.000 5 10 June 2.71.2 = 3.6.Applied overhead = 500 hours × Rs.800 11.8.00.52.500 5.13.500 hours Rs.000 ÷ 9.900 Rs.000 12.200 ÷ 4) General management expenses (Rs.000 Rs.44.440 hours (Machine cannot work without operator).3 Rs.15.000 ÷ Rs.) 37. 13.000 19.000 Rs.000 ÷ 10.000 ÷ Rs.6.30.) 45. machine utilized is 1.900 200 hours 12 20 8 40 160 Total hours for 3 operators × 3 months = 160 × 3 × 3 = 1.305 ÷ 1.500 15.18. : (d) 27 .

8. But. direct labor. Therefore.000 x ( Rs. . : (c) Reason : Particulars Primary Distribution S1 (4:3:2:1) S2 (3:3:2:2) S1 (4:3:2:1) S2 (3:3:2:2) S1 (4:3:2:1) S2 (3:3:2:2) Total P1 (Rs.00.000.16. 32 .80 Total cost per unit = Material Rs.170 312 23 6 1 18.3.000 Total overheads 30 .00 = Rs.712 P2 (Rs.3.833 P3 (Rs.96. (d) is correct.4.400 = Rs. The amount of over absorbed = Rs. It is not the difference between the maximum capacity and practical capacity or maximum capacity and actual capacity or practical capacity and actual capacity.4.00.500 × Rs.00.6 + Variable overhead Rs.4.600 1.00. : (c) Reason : President's salary is a period cost and not a product cost.1. (d) and (e) are true of the advantages of departmentalization of overhead. finished goods and cost of goods sold in proportion to their values Rs.900 78 (-) 78 2 (-) 2 31 .000 900 (-) 3.9.20. Therefore.500 200/600 × Rs.400.) 14.2.14. (c) is correct.000 ) = Rs.000 + Rs.000 Rs.800 780 156 16 3 15.000 (-) 9.600 3.5. 2. 29 .000 / Rs.8.00.20.73.000 Rs.00.80 = Rs.48.000 Rs.700 2. option (a) is not an advantage as departmentalization of overhead facilitates control of overhead exp.000 – Rs.) 9.00. Total overhead costs for B = 400 x 12 x 20 = Rs.16. and overhead.2.170 234 23 5 1 18.00.10 + Labor Rs.73.80.48. : (a) Reason : Options (b).00.8. The amount of over absorbed overhead is adjusted to work-in-progress = Rs.000.) 12.2.20.000 units actual production = Rs.00.000/3.000..) 13.13.14. (c). 34 .) 3.555 S1 (Rs.3.000 / [(400 x 8) + (400 x 12) + (200 x 22)] = Rs.000 + Rs.000 Rs. Fixed overhead per unit based on actual production = Rs. 33 .00. Rs.000 = Rs. The other costs represent the product cost classifications of direct material.000 Purchasing Inspection 300/550 × Rs. : (d) Reason : Under this method the amount of under absorbed overheads is adjusted to work-inprogress.84.000 780 (-) 780 16 (-) 16 S2 (Rs.00.3 + Fixed overhead Rs. The total amount = Rs.000 ÷ 12. : (b) Reason: Production 2.000 actual overhead / 10.000 units x Rs.00.800 1.00.000 and Rs.48. : (b) Reason: Overhead absorption rate = Rs.11.48.000 respectively by use of supplementary rate.000. 28 .000 = Rs.3. by means of pre-determined budgets and not forecasted budgets.000.00.23. Reason : Idle capacity of a plant is the difference between practical capacity and capacity based on sales expectancy.700 1. : (c) Reason : Total fixed overhead = 12.9.

889 + Rs. Direct costs are costs traceable to the goods or services and do not have to be allocated. 41 .000/6. 42 . Management Accounting is not mandatory. : (b) Reason : Over-statement of work-in-progress represents the understatement of profits. (b). Other options are not correct.000 + Rs. 38 . 36 . one overhead application rate is sufficient. A Dept. Income Tax Act. Other options are all direct cost to manufacture air conditioner.00. : (c) Reason : Factory overhead is usually assigned to products based on a predetermined rate or rates.000 = Rs.47. : (d) Reason : Depreciation expenses are apportioned to cost centers on the basis of machine hours. B Total 3. 37 .42.000 40.80.59 43 . Since a large part of the overall responsibilities of a manager have to do with planning. Therefore. ( c) and (e) are correct. Hence options (a) and (e) are incorrect. Other options in (a).889 Rate = Rs. : (b) Reason : More accurate cost allocation can be accomplished when costs are more homogeneous. Financial Accounting is concerned with a record of financial data of the past. (e) is correct.31.47. B Total Cleaning Department Dept. not on the basis of floor area occupied by each machine. If this cost is not recovered due to low demand. Hence (c) is false. creditors. (d) and (e) are not correct.750 3. etc. 39 .07.861 1.35 . : (c) Reason : Provident fund paid by the employer for factory employee must be charged as factory overhead costs. it is known as capacity cost.30.31.889 / 27. Personal Department Cleaning Dept.1.34. They should compulsorily maintain financial records as per various legal statutes like Companies Act. Therefore.07. Financial Accounting is concerned with the concept of responsibility or stewardship over the company as a whole. By contrast. : (c) Reason : Both Financial and Management Accounting rely heavily on the concept of responsibility. Financial Accounting statements have to be prepared in accordance with the GAAP whereas managers set their own rules in the form and content of Management Accounting statements. while Management Accounting is concerned with stewardship over its parts. a manager’s information need has a strong orientation towards future. 40 .000 = Rs.40. (c).000 1. Management Accounting provides data for internal uses by managers whereas Financial Accounting provides data for external users like shareholders.750/6. (b) is correct. Financial Accounting is mandatory for business organizations.000 1.889 2. Other options given in (a). : (b) Reason: The inspection cost relates to all air conditioners produced and is not easily traced to a specific air conditioner.20. A Dept. : (a) Reason: Rs. The activity base for overhead allocation should have a high correlation with the incurrence of overhead. : (e) Reason : These costs are the fixed costs necessary to achieve a desired level of production or to provide a desired level of service without decreasing product quality or service attributes. If products differ in the resources consumed in individual departments. It is an indirect cost to the air conditioner industry. . When the costs are more indirect in nature or when the different costs vary depending upon different causes and effects then the cost allocation becomes more difficult task and hence the accuracy is affected.750 5/45 30/45 10/45 20. On the other hand.116.750 Department B = Rs. etc.000 1. Given only one cost driver.

(iii) and (iv) has some variable part in them which increases with an increase in the volume of units produced.00 = = Rs.48 0 40% 100 % 80% Material 512 6. 625 2. 12. : (c) Reason : Under the terms of the contract. which incidentally results from the manufacture of main product. So none of them are inversely proportional to the number of units produced (although inversely related).1.20 0 8.830 Rs.28 0 6. 15 Conversion 50% 100 % 60% 640 6.840 Rs. Other options are not correct. it is called Retention money. Rs.e.00 45 . Profit difference = Rs.150units – 18.48 0 Costs during the month Cost per unit Output Completed Opening Introduced Closing 1.14.522 Rs.12. : (b) Reason : Particulars Distance (Depots to factory – full load) Distance covered per trip Indian Oil 10 km 20 km Bharat Petroleum 8 km 16 km 49 . The total cost of closing work-in-process Material Conversion – – 760 × Rs. and by a common process.89.250 760 7.25 0 950 8. : (d) Reason : Where the by-products are utilized in the same undertaking.460 Rs.15 570× Rs.250 570 7.75.900units) Rs. Joint products are produced from the same basic raw material. The main difference between joint products and by-products is its commercial value.e.6.11.multiple rates are preferable 44 .520 Rs.90. : (a) Reason : Statement of equivalent Production Unit (FIFO) Input Opening Introduced 1.18. 21. Fixed overhead rate per unit = 250units = Rs. 46 . the by-product is valued at opportunity cost or replacement cost. The relationship between main product and by-product changes with changes in economic conditions.14. 6.625 (i. : (a) Reason : (i) average fixed cost per unit = total fixed cost / number of units produced (ii) Average semivariable cost per unit = total semivariable cost/ number of units produced (iii) Average variable cost per unit = total variable cost / number of units produced (iii) Average total cost per unit = total cost / number of units produced As the numerator is constant.250 units (i.225 – Rs.400 Rs.600) Physical stock movements = 2. By-product is a secondary product.12. if contractee retains cash at the time of payments of the value certified of work-in-progress.28 0 7. All of (ii).240 48 . average fixed cost per unit is inversely proportional to the number of units produced. . : (b) Reason : The profit difference is due to the fixed overheads being incorporated in the stock movements under the absorption costing system.50. So Average fixed cost per unit may be expected to decrease by the greatest percentage with an increase in the volume of units produced. 47 .

100 43.25. Therefore. Rs.50 50 ton-km Rs.230 . 52 .35.000 Output Completed 7.000 Rs.500 Rs.400 1.000 : (e) Reason : Material Input Units started – 8.19.1.20) Bharat Petr.120 82.20 / 60 mint.860 6.000 % 100% units Conversion % units 7.240 91.20) Fixed charges @ Rs.000 of abnormal spoilage is therefore expensed during the month of March.800 Rs.Running time @ 40 km p.20 / 60mint) Bharat Petroleum (114 mint.08 Rs.490 98.15.500 ÷ 5.500 16.51 50 . (16 km x Rs.60.000 = Rs. In addition 50% of the normal spoilage is debited to cost of goods sold because 50% (2.) Total cost per trip Ton-km (full load) Indian Oil (5 tons x 10 km) Bharat Petroleum (5 tons x 8 km) Cost per ton-km (Total cost per trip / Ton-km) 30 minutes 50 minutes 45 minutes 125 minutes Rs. 2.13.000) of the units completed were sold during the month.13.71.4.50 Abnormal loss 360 Cost Cost per unit Rs. : (a) Reason : Total manufacturing Costs Less: Overhead costs: Indirect labor Factory overhead Indirect material Freight in Less: Add: Less: Direct labor Material consumed Closing material Opening material Material purchased Rs.1.5.50 = Rs. No spoilage is allocated to work-in-process because inspection occurs after completion.43 Rs.20 Indian Oil(20 km x Rs. normal spoilage = 50% of Rs.1.50 Rs.620 + Rs.x Rs. Abnormal spoilage is a period cost recognized when incurred.4.6.340.000 51 . 2005. 7.000 512 288 7.000 Total spoilage charged against revenue = Rs. Filling-in time Emptying time Total time per trip Details of costs: Variable operating charges @ Rs.20 per hour Indian Oil (125mint.5.2.28 40 ton-km Rs. : (b) Reason : Normal spoilage is an inventoriable cost of production that is charged to cost of goods sold when the units are sold.h.20 Rs.720 = Rs.2.50 Cost of abnormal loss = 360 × Rs.500 Rs.27.000 + Rs.2.10 0 31. 80.1.50 0 7.2.44.000 100% Normal loss 8% 640 100% 100% 640 80% 360 80% 8.36.2.1.30 0 25.000 = Rs.35.13.50 + 288 × Rs.00 24 minutes 45 minutes 45 minutes 114 minutes Rs. x Rs.2.2.350 16.

000 units + 6.15/hour). 15) Cost per unit = Rs.000 = = 3.00 per equivalent unit.324 / Rs.000 units.180.000 1.1.10.000 = 36. Out put = 36. Total cost = Material Rs.000 equivalent units in ending inventory = Rs.000 units = 42.000/18. Process C B A Output (pieces) 1.000) = 18.000 units = 42.30.80 = Rs.000 units.282 = Rs.200 1. Workings: Equivalent units 15.000 (Overhead rate = Rs. of Rejections (pieces) 200 120 660 Input (pieces) 1.10.980 The input of process A will be 1. 10.000 units. painting etc.000 in ending inventory (60% x 5. Cost per unit = Rs.17.000 + 4.000 units + 100% of 28.80.800 = 40.000 units + 34. : (d) Reason : Equivalent units of production for the material (weighted average) = 100% of 550 units + 60% of 50 = 580 units.800 units. inputs have to be calculated in the reverse order based on percentage of output. Out put = 8. : (d) Reason : Weighted Average Method: Input = 8.000 units + 28.000 units + 34.000) x 100 = 50% Process B .320 1. 55 . 6. 6.320 % of rejection on output 20% 10% 50% No.800 units – 36.000 + 80% of 6.(1.200 1. Equivalent production units of conversion = 40% of 8.790.000 units.9.10. Excess equivalent units of production of conversion = 40. : (b) Reason: Cost per equivalent unit of ending inventory = Rs. Total cost of finished goods = 550 units x Rs. = Rs.80.000) x100 = 20% Now.800 units.000 equivalent units.(3.1.53 .042 + Rs.000 units.580 = Rs.980 pieces for an output of 1. : (e) Reason : The costs involved in transporting costing are operating costs and running costs. Insurance of the vehicle cannot be considered as running cost.000) x 100 = 10% Process C.450 ÷ 430 = Rs.170.000 units + 6.000 / 12.000 units = 42.000 + applied overhead Rs. Running costs are the costs which vary more or less in direct proportion to the distance traveled like petrol and Semi-variable costs are incurred in the form of tyre maintenance.000 units = 42. 56 .000 = Rs.000 + labor 4. .000 + 4.000 pieces in process C.800 = 36.200 + 28. : (e) Reason : Percentage of rejection on output : Process A – (6.324.00 x 3. FIFO Method: Input = 8.000 (400 hours x Rs.9.000 units +80% of 6.000 units = 4.000 completed + 3.400 / 17.000. Total costs = Rs. 54 . 57 .800 / 18.17. Equivalent production units of conversion = 100% of 36.

00. factory overhead percentage on direct wages = f.000 + Rs.58 .51 / 240) x 90 = Rs.3.000 + Rs.96.500 + Rs.250 / 6) 1.42. 3.500 Job B2 = (Rs.000f) + (Rs.37.84 (1.30.51 The cost of closing inventory of Product B = (Rs.) 1.07 400 Margin (25% hire charge) = Rs. : (d) Reason : Particulars Selling price Less Profit Total cost JobA1 (Rs.30.219. It does not consider the period of cost.000 + Rs. 3. prime cost cannot be traced with a particular order due to continuous production.70.000 Double room = 4380 (Rs.000 = Rs.145.45 + Rs.51.60.000 Total sales value of units produced = 300 x Rs. Selling price = Rs.000.000 / Rs24.000 + Rs.) 1.50.9.000 (Since.9.000 + 240 x 4.60.30.9.42.35)= Rs.000 + Rs.28.000 ÷ 0. In job costing. Factory cost of Job A1 = Rs. Therefore (d) is false.375 (1. : (d) Reason : In process costing.000 = Rs.56.000 = Rs.96.9.000f) a = Rs. Profit = 12.145.000 + 25% of Rs. 80.3.30. : (c) Reason : Equivalent production unit means the conversion of partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.400 Total cost = Rs.26 or Rs.00.67.000f) + (Rs.4.5% on sale price) 59 .150 (1.000f) a = Rs.000 + 60% on Rs.000) x Rs.06.1. 6. 70. 13.500 + Rs. cost is accumulated on time basis and according to process or departments.20.3.5) = Rs.000f Total cost of production Job A1 = (Rs.20.66. : (c) Reason : Occupancy days in a year For single room For double room = = 25 × 365 × 80% = 15 × 365 × 80% = 7300 4380 60 .13.56. Total room occupancy = 7300 + 1.650 / 11) 1. and Administrative overhead percentage on factory cost = a. .000 + Rs.200 / 13.000 = Rs.31. cost is accumulated according to job order or batch size.00.707 : (b) Reason : 63 .54.3.96.000 + Rs.51. In this method.6.500 + Rs.06. Share of joint costs of Product B = (Rs.43.000f Job B2 = Rs.84 Rent of a double room per day = Rs.65 + Rs.00.1.51.57.875 Let.51.2.96. : (e) Reason : Joint cost = Rs.870 = Rs. 62 .500 Job B2 (Rs.25)= Rs.5 (4380) = 7300 + 6570 = 13.650 15.24.1. 10.24.60. 61 . Factory cost of Job A3 = Rs.219.000 Total cost of Job A3 = Rs.000 + Rs.60.000 = Rs.35.000 = Rs.800 Total = Rs. Other options are not correct.00.200 Rent per day of single room = Rs.56.42.250 21.875 = Rs.000 + Rs.00.42. Job cost is computed when the job is completed.875 Solving the 2 equations: f = 60% = percentage of factory overhead on wages A = 25% = percentage of administrative overhead on factory cost.000 + Rs.66.000 + 120 x 5.9.870 Total cost: Single room = 7300 (Rs.28.000.00.67.43.

50.375 18. 000 2 = 3 × Rs. 3.4 K – 8.48.1.375 5.10.4.60.35.000 9.) 39.000 1.000 = Rs.20.000 x Rs. Value of Work-in-progress: Material = Rs.000 J (Rs.000 (40%) Rs.510 Profit transferred to Reserve a/c = Rs.000 (100%) Rs.1.02. : (d) Reason : Sales value of production J – 8.000 =Rs. 000 = Rs.25.20.4.500 Rs.50) Rs.38.28.32.500 72.38. 4.000 .28.000 Rs.71000–Rs.000 Cr 15 × Rs.750 Total (Rs.000 – 25 × Rs.000 Particulars Work certified Work certified not Rs 4.875 – Rs.000 K (Rs.1.Output Completed and transferred Work-in-progress Total Cost Rs.000 3.65.000 Cost per unit Rs.000 64 . 500 Rs. K=2.48.500 48.000 Rs.80.1.510 = Rs. : (d) Reason : Contract A/C Particulars Materials Labor costs Direct expenses Depreciation on plant (Rs. 75.48.375 Profit transferred to P/L a/c Rs.000.000 x Re.500 1.1.0.875 × Rs.000 Work-in-progress – Labour & Overheads – 60.3.30.6 Common cost: Direct materials Direct labor Overheads Less: Sales value of by-product (1.25.) Production cost Less: Closing stock J = 1.23.3.000 25 25 50 100% 100% – – Material 25 25 50 100% 60% Labor and overheads 25 15 40 Rs.00.500 Rs.) 65.65.500) Notional profit Rs 2.000 13.000 Rs.875 5. 00.000 Material in hand 68.000 x Rs.365 65 .000 (60%) Rs.250 26.50.

25 Required sales = (Rs.000 Profit under Marginal Costing: Rs.Cost of sales Sales Profit 66 . 17.000 ÷ Rs. Therefore.500 Production Rs.000 5.400 67 .000 × Rs.000 6.00.000 Separate costs (Rs.75. 97.000 44.000) ÷ Rs.59.25.000 1.6.000 6.75.22 75.800 24.50.00.000 37.22.000 1.00.000 6.000 6.22 + Rs.000 30.) 30.25.25 = 82.750 28.70.50.250 36.) 85.40 Cost of goods sold: Opening Stock (Rs. 68.00 0 46.00.25.250 29.) 17. (e) is correct.6 Fixed Less: Under absorption: Profit Rs.000 1.000 4.87.00.000 : (e) Reason : Cost plus contract protects the contractor from the risk of market fluctuations.22. 22.000 : (c) Reason : Contribution per unit = Rs.000 64. full profit is not credited to profit and loss account. 85.18.) 1.500 × Rs.22 . : (c) Reason : Profit under absorption costing: Sales – 1.00 0 5.000 25.30.600 = Rs.000 Gross Profit (sales – cost) Less: Selling expenses: Variable 1. Rs.26 × 2.000 6.4) × 12.22 Production – 2. escalation clause will protect the contractor.000 Rs.40 Cost of goods sold: Opening St – 12.00. * Rs. 1. If there are any cost fluctuations. Salary of supervisor is the direct cost of the contract account.50 = Rs.000 10.000 Add: Adverse variable cost variance Less: Closing stock Rs.000 29. 69 .25.625 + Rs.000 3.200 23.500 × Rs.000 1.000 7.8.000 12.000 4. Sales – 1. In contract account.000 41.000 49. In contract account.000 800 800 5.50.000 55.000 56. : (c) Reason : Joint costs are apportioned on the basis of relative sales value of the products: Sales value (Rs.000 3.8.00 0 Less: Closing Stock – 25.25.200 97.70.750 52.500 units.500 × Rs.500 × Rs.87.000 4. Product M N P Q Total 68 .000 1.75 – Rs.00.75.000 52.) *68.000 x Rs.87.200 3.000 Share of joint cost (Rs.25.26 × 25. certified work-in-progress is valued at contract value and uncertified work-in-progress is valued at cost.00.15.10.600 Net income (Rs.000 2.55.000 Relative Sales value at split off point (Rs.000 × Rs. 75.30.000 11.

Fixed cost: North = Rs.542.90 / Rs.675 Therefore.150 = 60%.00 0 11.000 70 . in lakh) 300 150 150 60 Merged 100% (Rs.1.1. Total profit of 3 region = Rs.400 = 45%.025 / Rs.29%.100 x 45% –Rs. South = Rs.3.750 = 54% Break-even sales = Rs.200 = 55%. in lakh) 300 200 100 60 B 100% (Rs. South = Rs.350.350 + Rs.210 = Rs.675 Contribution to sales ratio = Rs.00 53. Sales x contribution to sales ratio = fixed cost + profit Rs.135 = Rs.750.000) × 100 = 54.00.000 0 21.86 lakh P / V ratio 35% Break even capacity = (542.1.450 x 60% –Rs.330.30.3.Less: Adverse variance Less: Variable selling expenses Contribution Less: Fixed cost: – Manufacturing Rs.330 = Rs.360. East = Rs.000 650 350 190 350 × 100 = 35% P/V ratio of merged plant = 1000 Break even point of merged plant = 71 .750 x contribution to sales ratio = Rs.200 x 55% .30.000 15. : (c) Reason : Plant Capacity operated Turnover Variable cost Contribution Fixed cost A 100% (Rs.000 6.2.660 + Rs.330 = Rs. Total sales of 3 region = Rs.110 / Rs.360 + Rs.000 42.25. .25.00.000 6.350 / 54% = Rs.50. East = Rs.50.500.3. Fixed Cost 190 = = Rs.1.1.000 9.180 / Rs.20. : (a) Reason : Contribution to sales ratio = Change in profit / Change in sales North = Rs.1.86/1. in lakh) 1.660. Total fixed cost = Rs.Rs. in lakh) 400 300 100 70 C 100% (Rs.2. Selling Profit 1.

etc can be solved.000/1.000 3.30.000 7.375 9.50. D. Cost of production of 1.00.20 Cost of production Variable production cost 1.e.50.000 2.375.60.000 = Rs. Using the FIFO approach has solved the above question.000 units = Rs.000 × Rs.55.000 /1.72 .55.) Total amount (Rs.375 Amount (Rs.000 Less: Closing stock 20.11 Increase in variable cost Fixed cost 17.00 per unit plus an apportionment of fixed cost at normal capacity.70. it is valued at variable cost Rs.85.000 units (W N) 2.000 units = Rs.21.84. i.000 Opening stock 10.69.000 × Rs.375 20.000 21.50.000 2.000 = Rs.2.000 × Rs.60.60.2.2 Profit Statement for the Year (Under Absorption Costing Method) Particulars A B Sales revenue 1.11.64.60.000 35.3.60. Rs.625 C. OF THE DOCUMENT .15.21. but using other approaches like average costing.60. Gross profit (A-B) Selling expenses Variable (1.000 22. Net profit (C– D) 4.) 30.20.000 × 20.3) Fixed E. : (d) Reason : Fixed production cost per unit = Rs.13 (Working Note) 1.69.000 Cost of 20.000 x Rs.000 Working Notes: In the absence of information concerning stock.55.80.