PARUL UNIVBRSITY

FACULTY OF MANAGEMENT STUDIES

MID. TERM EXAMINATION 2017
MBA _SEM II
Subject: Cost & Management Accounting Total Marks: 50
Date:314/2417 Time: 10.30am to 12.30 pm

1-. Cost of Production equals to

a) Work Cost Plus Administrative Overhead
b) Prime Cost Plus Work Cost
c) Prime Cost Plus Work Overhead
d) Work overhead plus Administrative Overhead
2. Period cost means
a) Variable Cost
b) Fixed Cost
c) lndirect cost
d) None ofthe above
3. Cost of Drawings, Design and layout is an example of
a) Production cost
b) Direct expense
c) lndirect material
d) lndirect cost

a.1 (B) Explain the Following Terms with an example:

1. Out -of- Pocket Cost
2. Discretionary Cost
3. lmputed Cost

Q.2 A Manufacturing unit supply you the following information for 10000 units manufactured forthe month ending on
3Lst December 201"6.

Direct Material 90000 (Rs)

Direct Wages 60000
Power and Consumable stores 12000
Factory Indirect Wages 15000
Lightening of Factory 5500
Factory White Wash Expenses 3000
Management Expenses 33500
Selling & Distribution Expenses 6500
Sale proceed of scrap 2000
Plant Repairs & Maintenance 11s00
Units Sold (Selling Price @ Rs. 35 p.u) 9000

From 1'tJanuary 2O1l it is estimated that the production will increase by 50% in the current month to meet the
increased demand. The new selling price will be 33.5 Rs. Per unit. Rates of material and Wages each willgo up by 10%
each.
 You are required to prepare:
1.
Cost Sheet for the month of December 2016.
2'
Estimated Cost sheet for the month January 2017, where all the units produced
were sold. Factory overhead are
recovered as a percentage of direct wages and office and selling overheads:are
recovered as a percentage of
Factory Cost. (8)

Q.3 Bin Card and store Ledger are two methods of store records. Each of them has its own
unique features. Explain both
the methods in detail. 1

(6)
OR

Q'3 A Factory manufactures only one product in one quality and size. The owner of the
factory states that he has a
sound system of finance which can provide him with the necessary data for
decision making and does not require a Cost
Accounting and a Management Accounting system. State your arguments
to convince him the need to introduce both
the Accounting systems.
(6)

Q'4 From ordering the material to issue it to different departments enumerate and explain the important
forms and
documents you would like to introduce as to ensure effective control
over materialcost. (s)

SECTION -B
a.1 (A) Answer the following:
1. Allotment of whole item of cost to a cost centre or cost unit is known as;
A. Cost Apportionment
B. Cost Allocation
C. Cost Absorption
D. Machine hour rate
2. Which of the following is not a method of cost absorption?
A. Percentage of direct material cost
B. Machine hour rate
C. Labour hour rate
D. Repeated distribution method
3' Most suitable basis for apportioning insurance of machine would
be:
A. Floor Area
B. Value of Machines
C. No. of Workers
D. No. of Machines
a.1 (B) Explain the following terms:
1. Cost Drivers
2. Apportionment
3. Allocation

Q'2 Kundra Limited is a readymade garment manufacturer. lt has

four customers: two *not"r.lu channel customers
and two retail channel customers:
r Vimal wholesalers
r Chopra brothers
. Classic men's store
r Design clothing store
Kundra's owner and CEo, Raj Kundra, has deveroped the foilowing
ABC system :
Activity Cost driver Cost Driver rate in 2017
Order processing Number of purchase orders Rs 490 per order
Sales visits Number of customer visits Rs 2860 per customer visit
 Delivery - regular Nurnber of regular deliveries Rs 600 per delivery
Delivery - rushed Number of rushed deliveries Rs 1700 per delivery
List selling price per suit is Rs.400 and average cost per unit is Rs220.
she *ants to eval*te the profitability of each of
the four customers in 2016 to explore opportunities for increasing the profitability
of his company in 2017. The following
data are available for 2016:

Item Vimal Chopra Classic Design

Total number of orders 88 124 424 s00
Total number of sales visits 46 24 AA
4A
Regular deliveries 82 96 332 380
Rush deliveries 6 92 1.20
Average number of suits per order 800 400 60 50
Average selling price per suit Rs 280 Rs 320 Rs 340 Rs 360
Allocate the costs and calculate operating income for each of tf,e fouilustonrers
(8)

Q'3 A company has three production department and two service departments. Distribution summary
of overheads is
as follows:
Production Department Service Department
A B c D E
3000 2000 1000 234 300
The expenses of service departments are chirged on percenlage
oasts w hich is as fol lows;
ba
Service
A B C D E
Departments
D 20% 40% 30% 10%
E 40% 70% 20% 20%

Find out the total overheads of production departments

using:
a) simultaneo,us Equation Method and b) Repeated Distribution
Method. (6)
OR
Q 3 The two conventional methods of Labour remuneration i.e. Time
Rate system and piece Rate system have its own
unique features, benefits and limitations. show one of the
methods as from the view point of the workers and union
and other from the view point of Employer- Explain.
(6)

Q'4 A company has five departments P, N, R & s are production departments and T is a service department.
The actual costs for a period are as follows:
Repairs Rs.2,000 lnsurance Rs. 1,500
Rent Rs. 2,500 t-ighting Rs. 1,800
Depreciation Rs. 1,200 Supervision Rs. 4.000
Employer's Liability lnsurance Rs. 600

The following data are avairabre in respect of the five

departments
Details Dept P Dept N Dept R Dept S Dept T
Area Sq ft 140 120 110 90 40
No. of Workers 7q 20 10 10 5
Total Wages Rs. 10,000 Rs. 8,000 Rs. 5,000 Rs. 5,000 Rs. 2,000
Value of Plant Rs. 20,000 Rs. 18,000 Rs. 16,000 Rs. 10,000 Rs.6,000
Value of Stock Rs. 15,000 Rs. 10,000 Rs. 5,000 Rs.2,000

Apportion the cost to various departments on equitabre

basis. (s)