2020

(Held in 2021)

BUSINESS ADMINISTRATION

Paper : MBA – 1063

(Cost and Management Accounting)

Full marks : 49

Time : Two and half hours (2 and ½ hours)

GROUP A

Answer any three questions from “GROUP A”

Q.No.1 a) Why is cost accounting an important aspect of an organization, inspite

of the fact that every company has to prepare their financial accounts statements
regularly? What role does Cost Accounting play in price determination? (7 marks)

Q.No.1b) From the following information provided prepare a statement such that
you consider most suitable and appropriate for highlighting all the elements of
cost:

Heads Rupees Heads Rupees

Opening stock of raw materials 22,000/- Freight outwards 1,800/-
Purchase of raw materials 62,000/- Rent of workshop 3,100/-
Raw materials returned 2,300/- Cost on utilities 2,600/-
Closing stock of raw material 21,500/- Plant repairs and 1,700/-
maintenance
Wages paid: Depreciation on machinery 2,900/-
Productive workers 15,500/-
Non-productive workers 2,700/-
Salary of office staff 5,600/- Office expenses 9,000/-
Freights inward 2,200/- Direct expenses chargeable 4,500/-
Advertising costs 3,600/-
Abnormal loss of raw 2,700/-
materials
(7 marks)
Q.No.2a) A manufacturing enterprise has three product lines A, B and C. The
income statement of the firm is as follows:

Heads Rupees Rupees

Sales 4,25,000/-
COGS 2,12,000/-
Selling and distribution costs
Salesmen salaries 18,500/-
Salesmen commission 19,200/
Advertising 38,000/
Transportation 9,600/-
Credit and collection 5,800/-
Packing and shipping 4,600/-
Warehousing 4,200/-
Sales office expenses 12,200/-
Bad debt 8,600/-
General administrative expenses 52,000/-

Additional information regarding the three products

Heads Product A Product B Product C

Sales 1,95,000/- 1,62,000/- 68,000/-
COGS 68,000/- 47,000/- 97,000/-
Salesmen salaries 5,800/- 3,200/ 9,500/
Salesmen 6,300/- 5,600/- 7,300/-
commission
Advertising (%) 35 28 37
Transportation and 8,200 6,200 7,300
delivery (kgs)
Accounts 33,000/- 28,000/- 42,000/-
outstanding
Invoice (Packaging 1,500/- 1,250/- 1,850/-
and shipping)
Accounts 33 43 24
receivable
uncollected (%)
Warehouse space 22 43 35
(%)
Sales office 4,200/- 3,300/- 4,700/-
expense

General administrative expenses are in the ratio of advertisement costs

Calculate

1) Overall gross profit and net profit of all three products.

2) The contribution of each product viz. A, B and C on the overall profit of the
manufacturing unit. (10 marks)

Q.No.2b) Describe and justify your choice of the best method of cost allocation in
cost accounting. (4 marks)

Q.No.3a) The following details are available of a firm for a calendar year:

Current production and sales : 17500 units

Selling price per unit : Rs.35/-

Variable cost per unit

Direct materials : Rs.8/-

Direct labour : Rs.9/-

Variable overheads : Rs.11/-

Total fixed costs : Rs.33,000/-

From the above data calculate :

i) C/S ratio
ii) Break even point
iii) Margin of safety

Also find the effects on

i) C/S ratio
ii) Break even point
iii) Margin of safety
In case of each of the following:

a) 11% increase in selling price

b) 9% decrease in variable cost
c) 10% increase in fixed cost
d) 15% decrease in sales volume (10 marks)

Q.No.3b) Do you think Halsey and Rowan incentive plans can be applied in case
of service sectors? What difference do you see in the application of these plans in
case of service sector and manufacturing units? (4 marks)

Q.No.4a) The following are the particulars of receipt and issue of aluminum as raw
materials in a factory dealing in production of alloy wheels for the month of April,
2021.

Date Status of inventory Amount

April 2 Opening Balance 390 kgs at Rs.22/-
April 4 Issued 133 kgs
April 6 Issued 149 kgs
April 8 Receipt 320 kgs at Rs.29/-
April 9 Return from a batch processing 86 kgs at Rs.31/-
April 11 Issued 260 kgs
April 12 Receipt 317 kgs at Rs.18/-
April 13 Issued 211 kgs
April 15 Issued 155 kgs
April 17 Receipt 89 kgs at Rs.44/-
April 18 Issued 215 kgs

If you were in charge of stores, illustrate the best two methods you would use for
issue of materials and justify why these methods are better over any other method
for issue of materials. (10 marks)

Q. No. 4b) “If planned properly sunk costs can be converted to opportunity costs”.
Do you agree with this statement or not? Justify. (4 marks)
 GROUP B

Answer any one question from “GROUP B”

Q.No.5) Given the following details:

Item Process A Process B

Materials (Rs.) 31,000/- 17,000/-
Labour (Rs.) 33,000/- 87,000/-
Overheads (Rs.) 9,400/- 6,700/-
Inputs (units) 22000 18000
Normal loss 9% 6%
Sales value of scrapped 2.4 1.8
items (Rs.)

The final output from process Y was 14500 units. There was no opening or closing
stock.

The output of Process X is transferred to Process Y at a price calculated to give a

profit of 22% on the transfer price and output of process Y is transferred to finish
stock at a profit of 27% on the transfer price. Based on the given information
construct the following accounts:

i) Process X account
ii) Process Y account
iii) Finished stock account
iv) Normal loss account
v) Abnormal loss account
vi) Abnormal gain account. (7 marks)

OR

Q.No.6) Answer the questions briefly (any two): (3.5 + 3.5 = 7 marks)

i) Why is there no mention of any normal gain account in cost accounting?

Which out of normal loss and abnormal loss is more harmful for an
organization and why?
ii) What implications can an organization face due to under-absorption or over-
absorption of overheads?

iii) If you were a cost manager at a plant floating a tender for manufacturing
Covid-19 vaccines, would you prefer cost plus contracts or fixed price
contracts? Justify your answer citing valid reasons.

iv) If overheads are not apportioned to respective cost centers, will it affect the
profitability of firms?

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