MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

(GI-8, GI-9)
DATE: 23.02.2022 MAXIMUM MARKS: 100 TIMING: 3¼ Hours
PAPER : COSTING
Answer to questions are to be given only in English except in the case of candidates who
have opted for Hindi Medium. If a candidate who has not opted for Hindi Medium.
His/her answer in Hindi will not be valued.
Question No. 1 is compulsory.
Candidates are also required to answer any Four questions from the remaining Five
Questions.
In case, any candidate answers extra question(s)/sub-question(s) over and above the
required number, then only the requisite number of questions first answered in the
answer book shall be valued and subsequent extra question(s) answered shall be
ignored.
Wherever necessary, suitable assumptions may be made and disclosed by way of note.

Answer 1:
(a) Total Joint Cost
Particulars Amount (Rs.)
Direct Material 60,000
Direct Labour 19,200
Variable Overheads 24,000
Total Variable Cost 1,03,200
Fixed Overheads 64,000
Total joint cost 1,67,200
(Each Bold 1/5 M)
Apportionment of Joint Costs:
Product-Ghee Product-Cream
I. (i) Apportionment of Joint Cost Rs. 76,000 Rs. 91,200
on the basis of ‘Physical  Rs. 1,67,200   Rs. 1,67,200 
Quantity’   200    240 
 200  240 litre   200  240 litre 
(ii) Apportionment of Joint Cost
on the basis of ‘Contribution
Margin Method’:
- Variable Costs (on basis of Rs. 46,909 Rs. 56,291
physical units)  Rs. 1,03,200   Rs. 1,03,200 
  200    240 
 200  240 litre   200  240 litre 
Contribution Margin Rs. 73,091 Rs. - 8,291
(Rs. 600 x 200 – 46,909) (Rs. 200 x 240 – 56,291)
Fixed Costs* Rs. 64,000
Total apportioned cost Rs. 1,10,909 Rs. 56,291
II. (iii) Profit or Loss:
When Joint cost apportioned on basis of physical units
A. Sales Value Rs. 1,20,000 Rs. 48,000
B. Apportioned joint cost on Rs. 76,000 Rs. 91,200
basis of ‘Physical Quantity’:
A-B Profit or (Loss) 44,000 (43,200)
When Joint cost apportioned on basis of ‘Contribution Margin Method’
C Apportioned joint cost on Rs. 1,10,909 Rs. 56,291
basis of ‘Contribution
Margin Method’
A-C Profit or (Loss) Rs. 9,091 Rs. (8,291)
(Each Bold 1/5 M)

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

* The fixed cost of Rs. 64,000 is to be apportioned over the joint products- Ghee and
Cream in the ratio of their contribution margin but contribution margin of Product-
Cream is Negative so fixed cost will be charged to Product- Ghee only.

Answer:
(b) Process- I Account
Particulars Units (Rs.) Particulars Units (Rs.)
To Material 5,000 40,000 By Normal loss* 150 -
To Labour 30,000 By Abnormal loss** 500 10,000
(500 units × Rs. 20)
To Overhead 27,000 By Process II 4,350 87,000
(4,350 units × Rs. 20)
5,000 97,000 5,000 97,000
(Each Bold 1/4 M)
* 3% of input = 3% x 5,000 = 150 units }(1/4 M)
97 ,000 97 ,000
**   Rs. 20 per unit. }(1.5 M)
(5,000  150 ) 4,850

Answer:
Actual output in terms of s tan dard hours
(c) Efficiency Ratio =  100
Actual hour worked

60 units  8 hours 480 hours

Or,  100 Or,  100  96 % }(2.5 M)
500 hours 500 hours
Actual hours worked
Capacity Ratio =  100
Budgeted hours
500 hours 500 hours
Or,  100 Or,  100  78 .12 % }(2.5 M)
80 units  8 hours 640 hours

Answer:
(d) (i) Statement of Equivalent Production (Using FIFO method)
Particulars Input Particulars Output Equivalent Production
Units Units Material Labour &
O.H.
% Units % Units
Opening WIP 10,000 Completed and
transferred to
Process-II
Units introduced 55,000 - From opening WIP 10,000 - 30 3,000
- From fresh inputs 33,500 100 33,500 100 33,500
43,500 33,500 36,500
Normal Loss 3,250 - -
{5% (10,000 + 55,000
units)}
Abnormal loss
(9,500 – 3,250) 6,250 100 6,250 60 3,750
Closing WIP 12,000 100 12,000 90 10,800
65,000 65,000 51,750 51,050
(Each Bold 1/10 M)

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

(ii) Abnormal Loss A/c

Particulars Units (Rs.) Particulars Units (Rs.)
To Process-I A/c 6,250 29,698 By Cost Ledger Control 6,250 53,125
(Refer Working Note-2) A/c (6,250 units × Rs. 8.5)
To Costing Profit & - 23,427
Loss A/c
6,250 53,125 6,250 53,125
(Each Bold 1/10 M)
Working Notes:
1. Computation of Cost per unit
Particulars Materials Labour Overhead
(Rs.) (Rs.) (Rs.)
Input costs 2,20,000 26,500 61,500
Less: Realisable value of normal scrap (27,625) -- --
(3,250 units x Rs. 8.5)
Net cost 1,92,375 26,500 61,500
Equivalent Units 51,750 51,050 51,050
Cost Per Unit 3.7174 0.5191 1.2047
Total cost per unit = Rs. (3.7174 + 0.5191 + 1.2047) = Rs. 5.4412
(Each Bold 1/10 M)
2. Valuation of Abnormal Loss
(Rs.)
Materials (6,250 units × Rs. 3.7174) 23,233.75
Labour (3,750 units × Rs. 0.5191) 1,946.63
Overheads (3,750 units × Rs. 1.2047) 4,517.62
29,698

Answer 2:
(a) Cost Sheet of ‘Super’
Particulars Per unit (Rs.) Total (Rs.)
Direct materials (Working note- (i)) 8.00 4,80,000
Direct wages (Working note- (ii)) 4.00 2,40,000
Prime cost 12.00 7,20,000
Production overhead (Working note- (iii)) 1.20 72,000
Factory Cost 13.20 7,92,000
Administration Overhead (200% of direct wages) 8.00 4,80,000
Cost of production 21.20 12,72,000
Less: Closing stock (60,000 units – 54,000 units) - 1,27,200
Cost of goods sold i.e. 54,000 units 21.20 11,44,800
Selling cost 1.00 54,000
Cost of sales/ Total cost 22.20 11,98,800
Profit 7.80 4,21,200
Sales value (Rs. 30 × 54,000 units) 30.00 16,20,000
(Each Bold 1/5 M)
Working Notes:
(i) Direct material cost per unit of ‘Normal’ = M
Direct material cost per unit of ‘Super’ = 2M
Total Direct Material cost = 2M × 60,000 units + M × 1,80,000 units
Or, Rs. 12,00,000 = 1,20,000 M + 1,80,000 M
Rs. 12,00,000
Or, M =  Rs. 4
3,00,000
Therefore, Direct material Cost per unit of ‘Super’ = 2 × Rs. 4 = Rs. 8 }(2 M)

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

(ii) Direct wages per unit for ‘Super’ =W

Direct wages per unit for ‘Normal’ = 0.6W
So, (W x 60,000) + (0.6W x 1,80,000) = Rs. 6,72,000
W = Rs. 4 per unit }(1 M)
Rs. 2,88,000
(iii) Production overhead per unit =  Rs. 1.20
(60,000  1,80,000 )
Production overhead for ‘Super’ = Rs. 1.20 × 60,000 units = Rs. 72,000 }(1/2 M)

Notes:
1. Administration overhead is specific to the product as it is directly related to
direct labour as mentioned in the question and hence to be considered in cost
of production only.
2. Cash discount is treated as interest and finance charges; hence, it is
ignored.
3. Penalty paid against the copyright infringement case is an abnormal cost;
hence, not included.
(Each Point 1/2 M)
Answer:
(b) Journal Entries in Cost Books
Maintained on non-integrated system
(Rs.) (Rs.)
(i) Work-in-Progress Ledger Control A/c Dr. 5,50,000
Factory Overhead Control A/c Dr. 1,50,000
To Stores Ledger Control A/c 7,00,000
(Being issue of materials)
(ii) Work-in Progress Ledger Control A/c Dr. 2,00,000
Factory Overhead control A/c Dr. 40,000
To Wages Control A/c 2,40,000
(Being allocation of wages and salaries)
(iii) Factory Overhead Control A/c Dr. 20,000
To Costing Profit & Loss A/c 20,000
(Being transfer of over absorption of overhead)
Costing Profit & Loss A/c Dr. 10,000
To Administration Overhead Control A/c 10,000
(Being transfer of under absorption of overhead)
(Each Entry 2.5 M)
Answer 3:
(a) Statement of Reconciliation
Sl. No. Particulars Amount (Rs.) Amount (Rs.)
Net loss as per Cost Accounts (35,400)
Additions
1. Factory O/H over recovered 1,35,000
2. Dividend Received 20,000
3. Bank Interest received 13,600
4. Difference in Value of Opening Stock 20,000
(1,65,000 – 1,45,000)
5. Difference in Value of Closing Stock 6,500
(1,32,000 – 1,25,500)
6. Notional Rent of own Premises 60,000 2,55,100
Deductions
1. Administration O/H under recovered 25,500
2. Depreciation under charged 26,000
3. Loss due to obsolescence 16,800

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

4. Income tax Provided 43,600

5. Goodwill written-off 25,000
6. Provision for doubtful debts 15,000 (1,51,900)
Net Profit as per Financial A/c. 67,800
(Each Bold 1/1.6 M)
Answer:
(b) (i) Calculation of total project cost per day of concession period:
Activities Amount
(Rs. in lakh)
Site clearance 341.00
Land development and filling work 9,160.00
Sub base and base courses 10,520.00
Bituminous work 32,140.00
Bridge, flyovers, underpasses, Pedestrian subway, footbridge, etc. 28,110.00
Drainage and protection work 9,080.00
Traffic sign, marking and road appurtenance 8,810.00
Maintenance, repairing and rehabilitation 12,850.00
Environmental management 1,964.00
Total Project cost 1,12,975.00
Administration and toll plaza operation cost 1,200.00
Total Cost 1,14,175.00
Concession period in days (21 years × 365 days) 7,665
Cost per day of concession period (Rs. in lakh) 14.90
(Each Bold 1/2 M)
(ii) Computation of toll fee:
Cost to be recovered per day = Cost per day of concession period + 15% profit
on cost
= Rs. 14,90,000 + Rs. 2,23,500 = Rs. 17,13,500
Rs. 17 ,13,500
Cost per equivalent vehicle =
76,444 units (Re fer working note)
= Rs. 22.42 per equivalent vehicle }(1 M)

Vehicle type-wise toll fee:

Sl. Type of vehicle Equivalent cost Weight [B] Toll fee per
No. [A] vehicle [A×B]
1. Two wheelers Rs.22.42 1 22.42
2. Car and SUVs Rs.22.42 4 89.68
3. Bus and LCV Rs.22.42 6 134.52
4. Heavy commercial vehicles Rs.22.42 9 201.78
(Each Bold 1/4 M)
Working Note:
The cost per day has to be recovered from the daily traffic. The each type of
vehicle is to be converted into equivalent unit. Let’s convert all vehicle types
equivalent to Two-wheelers..
Sl. Type of vehicle Daily traffic Weight Ratio Equivalent Two-
No. volume [A] [B] wheeler [A×B]
1. Two wheelers 44,500 0.05 1 44,500
2. Car and SUVs 3,450 0.20 4 13,800
3. Bus and LCV 1,800 0.30 6 10,800
4. Heavy commercial 816 0.45 9 7,344
vehicles
Total 76,444 }(1 M)

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

Answer 4:
(a)
(i) Material Usage Variance = Std. Price (Std. Quantity – Actual Quantity)
= Rs. 45 (9,000 kg. – 8,900 kg.)
= Rs. 4,500 (Favourable)
(ii) Material Price Variance = Actual Quantity (Std. Price – Actual Price)
= 8,900 kg. (Rs. 45 – Rs. 46) = Rs. 8,900 (Adverse)
(iii) Material Cost Variance = Std. Material Cost – Actual Material Cost
= (SQ × SP) – (AQ × AP)
= (9,000 kg. × Rs. 45) – (8,900 kg. × Rs. 46)
= Rs. 4,05,000 – Rs. 4,09,400
= Rs.4,400 (Adverse)
(iv) Labour Efficiency Variance = Std. Rate (Std. Hours – Actual Hours)
 9,000 
= Rs. 50   8 hours  7,000 hrs.
 10 
= Rs. 50 (7,200 hrs. – 7,000 hrs.)
= Rs. 10,000 (Favourable)
(v) Labour Rate Variance = Actual Hours (Std. Rate – Actual Rate)
= 7,000 hrs. (Rs. 50 – Rs.52)
= Rs. 14,000 (Adverse)
(vi) Labour Cost Variance = Std. Labour Cost – Actual Labour Cost
= (SH × SR) – (AH × AR)
= (7,200 hrs. × Rs. 50) – (7,000 hrs. × Rs. 52)
= Rs. 3,60,000 – Rs. 3,64,000
= Rs.4,000 (Adverse)
(vii) Variable Cost Variance = Std. Variable Cost – Actual Variable Cost
= (7,200 hrs. × Rs. 10) – Rs. 72,500
= Rs. 500 (Adverse)
(viii) Fixed Overhead Cost = Absorbed Fixed Overhead – Actual Fixed Overhead
Variance
Rs. 200
  9,000 kgs.  Rs. 1,92,000
10 kgs.
(ix) = Rs. 1,80,000 – Rs. 1,92,000 = Rs. 12,000 (Adverse)
(Each Point 1.25 M)

Answer:
(b) (i) Production Budget for the year 2013 by Quarters
I II III IV Total
Sales Demand (Unit) 18,000 22,000 25,000 27,000 92,000
I Opening Stock 6,000 7,200 8,100 8,700 30,000
II 70% of Current Quarter‘s 12,600 15,400 17,500 18,900 64,400
Demand
III 30% of Following Quarter’s 6,600 7,500 8,100 7,400* 29,600
Demand
IV Total Production(II &III) 19,200 22,900 25,600 26,300 94,000

V Closing Stock (I+IV-Sales) 7,200 8,100 8,700 8,000 32,000

*Balancing Figure (Each Bold 1/5 M)

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

(ii) Break Even Point = Fixed Cost ÷ PV Ratio

= Rs. 2,20,000 ÷ 13.75% = Rs.16,00,000 or 40,000 units. }(4 M)
P/V Ratio = (Rs.40 - Rs.34.50 = Rs. 5.50) ÷ 40 × 100 =13.75%
(Or, Break Even Point = Fixed Cost ÷ Contribution = Rs. 2,20,000 ÷ Rs. 5.50 =
40,000 Units)
Total sales in the quarter II is 40,000 equal to BEP means BEP achieved in II quarter.
Answer 5:
(a) Working Notes:
(i) Total Room days in a year
Season Occupancy (Room-days) Equivalent Full Room
charge days
Season – 80% 200 Rooms × 80% × 6 28,800 Room Days × 100%
Occupancy months × 30 days in a month = = 28,800
28,800 Room Days
Off-season – 40% 200 Rooms × 40% × 6 14,400 Room Days × 50%
Occupancy months × 30 days in a month = = 7,200
14,400 Room Days
Total Room Days 28,800 + 14,400 = 43,200 36,000 Full Room days }(2 M)
Room Days

(ii) Lighting Charges:

It is given in the question that lighting charges for 8 months is Rs.110 per
month and during winter season of 4 months it is Rs.30 per month. Further it is
also given that peak season is 6 months and off season is 6 months.
It should be noted that – being Hill station, winter season is to be considered as
part of Off season. Hence, the non-winter season of 8 months include – Peak
season of 6 months and Off season of 2 months.
Accordingly, the lighting charges are calculated as follows:
Season Occupancy (Room-days)
Season & Non-winter – 200 Rooms × 80% × 6 months × Rs. 110 per
80% Occupancy month = Rs. 1,05,600
Off- season & Non-winter – 200 Rooms × 40% × 2 months × Rs.110 per
40% Occupancy (8 – 6 month = Rs. 17,600
months)
Off- season & -winter – 200 Rooms × 40% × 4 months × Rs. 30 per
40% Occupancy months) month = Rs. 9,600
Total Lighting charges Rs. 1,05,600+ Rs. 17,600 + Rs. 9,600 = Rs. 132,800 }(2 M)

Statement of total cost:

(Rs.)
Staff salary 8,00,000
Repairs to building 3,00,000
Laundry 1,40,000
Interior 2,50,000
Miscellaneous Expenses 2,00,200
Depreciation on Building (Rs. 300 Lakhs × 80% × 5%) 12,00,000
Depreciation on Furniture & Equipment (Rs. 300 Lakhs × 20% × 9,00,000
15%)
Room attendant’s wages (Rs. 15 per Room Day for 43,200 Room 6,48,000
Days)
Lighting charges 1,32,800
Total cost 45,71,000
Add: Profit Margin (20% on Room rent or 25% on Cost) 11,42,750
Total Rent to be charged 57,13,750
(Each Bold 1/3 M)

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

Calculation of Room Rent per day:

Total Rent / Equivalent Full Room days = Rs. 57,13,750/ 36,000 = Rs. 158.72
Room Rent during Season – Rs. 158.72 }(1 M)
Room Rent during Off season = Rs. 158.72 × 50% = Rs. 79.36 }(1 M)

Answer:
(b) (i) Calculation of Contribution to sales ratio at existing sales mix:
Products Total
A B C
Selling Price (Rs.) 300 400 200
Less: Variable Cost (Rs.) 150 200 120
Contribution per unit (Rs.) 150 200 80
P/V Ratio 50% 50% 40%
Sales Mix 40% 35% 25%
Contribution per rupee of sales 20% 17.5% 10% 47.5%
(P/V Ratio × Sales Mix)
Present Total Contribution Rs. 28,50,000
(Rs. 60,00,000 × 47.5%)
Less: Fixed Costs Rs. 18,00,000
Present Profit Rs. 10,50,000
Present Break-Even Sales Rs. 37,89,473.68
(Rs. 18,00,000/0.475)
(Each Bold 3/4 M)
(ii) Calculation of Contribution to sales ratio at proposed sales mix:
Products
A B E Total
Selling Price (Rs.) 300 400 300
Less: Variable Cost (Rs.) 150 200 150
Contribution per unit (Rs.) 150 200 150
P/V Ratio 50% 50% 50%
Sales Mix 45% 30% 25%
Contribution per rupee of sales 22.5% 15% 12.5% 50%
(P/V Ratio x Sales Mix)
Proposed Total Contribution Rs. 32,00,000
(Rs. 64,00,000 × 50%)
Less: Fixed Costs Rs. 18,00,000
Proposed Profit Rs. 14,00,000
Proposed Break-Even Sales Rs. 36,00,000
(Rs. 18,00,000/0.50)
(Each Bold 3/4 M)
(iii) The proposed sales mix increases the total contribution to sales ratio from
47.5% to 50% and the total profit from Rs. 10,50,000 to Rs. 14,00,000. Thus, (2.5 M)
the proposed sales mix should be accepted.

Answer 6:
(a) ESSENTIALS OF A GOOD COST ACCOUNTING SYSTEM
The essential features, which a good cost accounting system should possess, are as
follows:
(a) Informative and simple: Cost accounting system should be tailor-made,
practical, simple and capable of meeting the requirements of a business
concern. The system of costing should not sacrifice the utility by introducing
inaccurate and unnecessary details.
(b) Accurate and authentic: The data to be used by the cost accounting system
should be accurate and authenticated; otherwise it may distort the output of the

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MITTAL COMMERCE CLASSES INTERMEDIATE – MOCK TEST

system and a wrong decision may be taken.

(c) Uniformity and consistency: There should be uniformity and consistency in
classification, treatment and reporting of cost data and related information. This
is required for benchmarking and comparability of the results of the system for
both horizontal and vertical analysis.
(d) Integrated and inclusive: The cost accounting system should be integrated with
other systems like financial accounting, taxation, statistics and operational
research etc. to have a complete overview and clarity in results.
(e) Flexible and adaptive: The cost accounting system should be flexible enough to
make necessary amendment and modifications in the system to incorporate
changes in technological, reporting, regulatory and other requirements.
(f) Trust on the system: Management should have trust on the system and its
output. For this, an active role of management is required for the development of
such a system that reflect a strong conviction in using information for decision
making.
(Each Point 1 M Any Five)
Answer:
(b)
Industry Cost Unit
(i) Steel Tonne
(ii) Automobile Numbers
(iii) Transport Passenger Kilo-meter/ Tonne Kilo-meter
(iv) Power Kilo-watt hour (Kwh)
(Each Point 1.25 M)
Answer:
(c) Fast Moving, Slow Moving and Non Moving (FSN) Inventory: It is also known as
FNS (Fast, Normal and Slow moving) classification of inventory Analysis. Under this
system, inventories are controlled by classifying them on the basis of frequency of (2 M)
usage. The classification of items into these three categories depends on the nature
and managerial discretion. A threshold range on the basis of inventory turnover is
decided and classified accordingly.
(i) Fast Moving- This category of items are placed nearer to store issue point and (1 M)
the stock is reviewed frequently for making of fresh order.
(ii) Slow Moving- This category of items are given stored little far and stock is
reviewed periodically for any obsolescence and may be shifted to Non-moving (1 M)
category.
(iii) Non Moving- This category of items are kept for disposal. This category of items
is reported to the management and an appropriate provision for loss may be (1 M)
created.

Answer:
(d) LIMITATIONS OF ACTIVITY BASED COSTING
The main limitations using Activity Based Costing are:
(i) It is more expensive particularly in comparison with Traditional costing system.
(ii) It is not helpful to small Organization.
(iii) It may not be applied to organization with very limited products.
(iv) Selection of most suitable cost driver may not be useful.
(1.25 M Each Point)

__**__

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