Roll No…………………

Total No. of questions :6 Total No. of printed pages-5

Time Allowed: 3 hours Maximum Marks: 100

Cost and Management Accounting

Question No.1 is compulsory

Answer any four questions out of the remaining 5 questions.

Working notes form part of your answer

Marks

1. Answer the following. 4x5=20

a. A company produces single product which sells for Rs.20 per unit. Variable cost is Rs. 15 per unit
and Fixed overhead for the year is Rs.6,30,000/-.
Required:
(i) Calculate sales value needed to earn a profit of 10% on sales.
(ii) Calculate sales price per unit to bring BEP down to 1,20,000 units.
(iii) Calculate Margin of Safety if profit is Rs.60,000/-
b. Following details relating to product X during the month of April, 2019 are available:
Standard cost per unit of “X” :
Materials : 50 kg @ Rs. 40/ kg.
Actual production : 100 units
Actual material cost : Rs.42/kg.
Material Price Variance : Rs. 9,800 ( Adverse)
Material Usage Variance : Rs.4,000/- ( favourable)
Calculate the actual quantity of material used during the month of April 2019.
c. The following information relating to a type of Raw-material is available:
Annual demand : 2000Units
Unit Price : Rs. 20/-
Ordering cost per order : Rs. 20/-
Storage cost : 2% p.a.
Interest rate : 8%
Lead time : half month.
Calculate EOQ and total annual inventory cost of raw-material.
d. Compute the conservative estimate of profit on a contract ( which has been 80% complete) from
the following particulars. Illustrate four methods of computing the profit.
Total expenditure to date – Rs. 1,70,000/-
Estimated further expenditure to complete the contract( including contingencies) – Rs.34,000/-
Contract price – Rs. 3,06,000/-
Work Certified – Rs.2,00,000/-
Work Uncertified – Rs.17,000/-
Cash received – Rs. 1,63,200/-
2. (a). X Ltd furnishes to you the following information relating to process B for the month of October
2020.
(i) Opening WIP – Nil
(ii) Units introduced – 10,000 units @ Rs 3/- per unit.
(iii) Expenses debited to process : Direct Materials Rs. 14,650/- , Labour Rs. 21,148/-, Overhear
Rs. 42,000/-
(iv) Finished product – 9,500 units
(v) Clossing WIP – 350 Units. Degree of completion: Materials -100% and Labour and Overhead-
50%.
 (vi) Normal loss in process – 1 % of input.
(vii) Degree of completion of Abnormal loss: Materials -100% and Labour and Overhead-80%.
(viii) Units scrapped as normal loss were sold at Rs. 1 per unit.
(ix) All the units of abnormal units were sold at Rs. 2.50 per unit.
(x) Prepare:
a. Units of Equivalent production
b. Statement of Cost.
c. Process “ B “ Account.
(b). A machine costing Rs.1,00,00,000 is expected to run for 10years. At the end of this period its scrap
value is likely to be Rs.9,00,000. Repairs during the whole life of the machine are expected to be
Rs.18,00,000 and the machine is expected to run 4,380 hours per year on the average. Its electricity
consumption is 15 units per hour, the rate per unit being Rs.5. The machine occupies one-fourth of the
area of the department and has two points out of a total of ten for lighting. The foreman has to devote
about one sixth of his time to the machine. The monthly rent of the department is `30,000 and the
lighting charges amount to Rs.8,000 per month. The foreman is paid a monthly salary of Rs.19,200. Find
out the machine hour rate, assuming insurance is @1% p.a. and the expenses on oil, etc., are Rs.900 per
month.
Marks: 10 x 2 = 20
3. (a) Two workmen, ‘A’ and ‘B’, produce the same product using the same material. Their normal wage
rate is also the same. ‘A’ is paid bonus according to the Rowan system, while ‘B’ is paid bonus
according to the Halsey system. The time allowed to make the product is 50 hours. ‘A’ takes 30hours
while ‘B’ takes 40hours to complete the product. The factory overhead rate is Rs.5/- per man-hour
actually worked. The factory cost for the product for ‘A’ is Rs.3,490 and for ‘B’ it isRs.3,600.

Required:

a. Compute the normal rate of wages;

b. Compute the cost of materials cost;
c. Prepare a statement comparing the factory cost of the products as made by the two
workmen.
(b). MST Limited has collected the following data for its two activities. It calculates activity

cost rates based on cost driver capacity.

Activity Cost Driver Capacity Cost

Power Kilowatt hours 50,000 kilowatt hours Rs.2,00,000

Quality Inspections Number of Inspections 10,000 Inspections Rs.3,00,000

The company makes three products M, S and T. For the year ended
March31,20X4, the following consumption of cost drivers was reported:

Product Kilowatt hours Quality Inspections

M 10,000 3,500
ST 20,000 2,500
15,000 3,000
Required:

(i) Compute the costs allocated to each product from each activity.
(ii) Calculate the cost of unused capacity for each activity.
(iii) Discuss the factors the management considers in choosing a capacity level to compute
the budgeted fixed overhead cost rate.
 Marks : 10 x 2 = 20

4 (a). Action Plan Manufacturers normally produce 8,000 units of their product in a month, in
their Machine Shop. For the month of January, they had planned for a production of 10,000
units. Owing to a sudden cancellation of a contract in the middle of January, they could only
produce 6,000 units in January.

Indirect manufacturing costs are carefully planned and monitored in the Machine Shop and the
Foreman of the shop is paid a 10% of the savings as bonus when in any month the indirect
manufacturing cost incurred is less than the budgeted provision.

The Foreman has put in a claim that he should be paid a bonus of ` 88.50 for the month of January.
The Works Manager wonders how anyone can claim a bonus when the Company has lost a
sizeable contract. The relevant figures are as under:

Indirect manufacturing Expenses for a Planned for Actual in costs

January January
(`) (`) (`)
Salary of foreman 1,000 1,000 1,000
Indirect labour 720 900 600
Indirect material 800 1,000 700
Repairs and maintenance 600 650 600
Power 800 875 740
Tools consumed 320 400 300
Rates and taxes 150 150 150
Depreciation 800 800 800
Insurance 100 100 100
5,290 5,875 4,990
Do you agree with the Works Manager? Is the Foreman entitled to any bonus for the performance in January?
Substantiate your answer with facts and figures.

(b).

Sales Rs. 8,00,000 ?

Profit/Volume Ratio (P/V ratio) 50% 37.5%
Margin of Safety sales as a % of total sales 40% 21.875%

There has been substantial savings in the fixed cost in the year 2019 due to the restructuring
process. The company could maintain its sales quantity level of 2018 in 2019 by reducing selling
price.

You are required to calculate the following:

(i) Sales for 2019 in Value,

(ii) Fixed cost for 2019,
(iii) Break-even sales for 2019 in Value.
Marks : 10 x 2 = 20

5.(a) The standard cost of a chemical mixture is as follows:

 40% material A at Rs. 20 per kg.
60% material B at Rs. 30 per kg.
A standard loss of 10% of input is expected in production. The cost records for a period showed the
following usage:
90 kg material A at a cost of Rs. 18 per kg.

110 kg material B at a cost of Rs. 34 per kg. The quantity produced was 182 Kg of good product.

Calculate all material variances.

(b) PR Ltd. manufactures and sells a typical brand of Tiffin Boxes under its on-brand name. The installed
capacity of the plant is 1,20,000 units per year distributable evenly over each month of calendar year. The Cost
Accountant of the company has informed the following cost structure of the product, which is as follows:
Raw Material Rs.20 per unit.
Direct Labour Rs. 12 per unit
Direct Expenses Rs. 2 per unit
Variable Overheads Rs. 16 per unit.
Fixed Overhead Rs. 3,00,000.
Semi-variable Overheads are as follows:
Rs. 7,500 per month upto 50% capacity & Additional Rs. 2,500 per month for every additional 25% capacity
utilization or part thereof.
The plant was operating at 50% capacity during the first seven months of the calendar year 2016, at 100%
capacity in the remaining months of the year.
The selling price for the period from 1st Jan, 2016 to 31st July, 2016 was fixed at Rs. 69 per unit. The firm has
been monitoring the profitability and revising the selling price to meet its annual profit target of Rs. 8,00,000.
You are required to suggest the selling price per unit for the period from 1st August 2016 to 31st December
2016.
Prepare Cost Sheet clearly showing the total and per unit cost and also profit for the period.
1. from 1st Jan. to 31st July, 2016
2. from 1st Aug. to 31st Dec, 2016.
Marks : 10 x 2 = 20

6. Answer any four of the following.

a. What are the important difference between Cost Control and Cost Reduction?
b. What are the important difference between Marginal costing and Absorption Costing?
c. Point out the important causes or reasons for difference of profit /loss arises in Costing and Financial P/L
account?
d. What is the difference between explicit and implicit cost?
e. What is Profit Volume Ration and what are the factors affecting P/V Ratio?
Marks : 5 x 4= 20

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