Nov 2022 Costing Solutions AJ Education NeXt

Nov 2022 Suggested Solutions AJ Education NeXt
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COSTING - NOVEMBER 2022 - SUGGESTED SOLUTIONS

Question Number Page Number
Q1 (a) 2
Q1 (b) 3
Q1 (c) 4
Q1 (d) 5
Q2 (a) 6
Q2 (b) 7
Q2 (c) 8
Q3 (a) 9
Q3 (b) 10
Q4 (a) 11
Q4 (b) 12
Q5 (a) 13
Q5 (b) 14
Q5 (c) 15
Q6 16, 17
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Q1.
(a) Reference in AJ TextBook - Q20 of Chapter 2. This is a far easier question as
compared to it.
Number of Batches = 1600 / 80 = 20 batches
Cost Sheet for 1 batch of 80 units
Total Per unit
Direct Material 4,250 53.125
Direct Wages 500 6.25
Labour Set Up Cost 1400 17.5
Production Overheads (20% of Direct Wages) 100 1.25
Production Cost 6,250 78.125
(+) S & D overheads (20% of Production Cost) 1,250 15.625
Total Cost 7,500 93.75
(+) Profit (¼ of Sales or ⅓ of Cost) 2,500 31.25
Sales 10,000 125
Total Sales value for 20 Batches = 10,000 x 20 = Rs. 200,000
Selling as Above = Rs. 125
A student can alternately make a cost sheet for 20 Batches also.

(b) Reference in AJ TextBook - Q31 of Chapter 4 and Q27 of Chapter 12.

(i) Calculation of Cost of processing per vehicle loan
Total Vehicle Loan
Salary (50,000 x 4) 200,000
Overheads
Branch Manager 90,000
Legal Charges 30,000
Printing and Stationary 12,000
Advertising 18,000
Other 10,000
Total 1,60,000
Share of each Department i.e. 30% 48,000
Total Cost 248,000
÷ Number of Application 496
Cost per loan 500
(ii) Calculation of Number of Education Loans to get same cost as Vehicle Loan i.e. Rs.
500
Rs.
Salary (70000 x 2) 1,40,000
Overheads (30% of 160,000) 48,000
Total Cost 1,88,000
÷ Cost per loan 500
Number of Applications 376

(c) Reference in AJ TextBook - Q31 and Q32 of Chapter 2.

A = Number of Valves to be purchased for entire year = 7500 x 12 = 90,000 valves
CPU = Rs. 1.5 per valve
Ci = CPU x I = 1.5 x 20% = Rs. 0.3
Ca = Ordering Cost per order = Rs. 15
Lead time = 1.5 months
Safety Stock = 3200 Valves
Average Consumption per month = 90000 / 12 = 7500
(i) EOQ = Square Root of 2ACa / Ci = Square Root of 2 x 90000 x 15 / 0.3 = 3000 Valves
No of orders = 90,000 / 3000 = 30 Orders
Frequency of Orders i.e. Inventory Cycle = 360 / 30 = 12 Days
(ii) Re - Order Point

= Maximum Consumption x Maximum LEad Time + Buffer Stock
= 7500 x 1.5 + 3200 = 14,450 Valves
(iii) CPU = Rs. 4.5 per valve

Ci = CPU x I = 4.5 x 20% = Rs. 0.9
EOQ = Square Root of 2ACa / Ci = Square Root of 2 x 90000 x 15 / 0.9

= 1732 Valves (approximately)

(d) Reference in AJ TextBook - Q8 of Chapter 14.

SP = Rs. 300
VC per unit = Rs. 180 per unit
Fixed Cost = Rs. 1680,000
Profit = Rs. 720,000
(i) BEP in unit = FC / Contribution per unit = 1680,000 / 120 = 14,000 units
BES = 14,000 x 300 = Rs. 42,00,000
(ii) Margin of Safety = Profit / Contribution per unit = 720,000 / 120 = 6000 units
(iii) Profit at 24,000 units = Contribution - Fixed Cost

= 24000 x 120 - 1680,000 = Rs. 12,00,000
(iv) Sales to get Profit of Rs. 10,00,000
Profit 1,000,000
(+) Fixed Cost 1,680,000
Contribution 2,680,000
÷ Contribution per unit 120
Number of Units 22,333.33
x SP 300
Sales 67,00,000

Q2
(a) Reference in AJ TextBook - Q37 of Chapter 4.
Cost per hour of ROBOT = (270,000 / 6) / (400 + 400 + 1200) = Rs. 22.5 per hour
Cost per hour of Machine

Rent 18000/3 6000
Depreciation 192000 / 12 16000
Indirect expenses 1200000 x 20% / 12 20000
Total Cost 42000
÷ hours of the machine 500 + 1000 + 400 + 400 + 1200 3500
Cost per machine hour 12
(i) Machine hour Rate when

Robot was used with the machine = Rs. 22.5 + 12 = Rs. 34.5
When Robot was not used = Rs. 12
(ii) Individual Rate of Each Process

Vulcanizing = { (500 x 12) + (400 x 34.5) } / 900 = Rs. 22
Brushing = { (1000 x 12) + (400 x 34.5) } / 1400 = Rs. 18.43
Striping = (1200 x 34.5) / 1200 = Rs. 34.5

b) Reference in AJ TextBook - Q7 of Chapter 3.

(i)
A Wages under time system = Number of hours worked x Rate per hour
= 48 hours x Rs. 15 per hour = Rs. 720
B Rate per unit = Rate per hour / Units her hour

= 15 / (60/18) = 15 / 3.333 = Rs. 4.5 per unit
Wages as per piece Rate = 200 units x 4.5 per unit = Rs. 900
Guaranteed wages = 48 hours x Rs. 15 per hour = Rs. 720
Worker will get whatever is higher = Rs. 900
C Time Allowed for actual output = 200 units x 18 / 60 = 60 hours

(-) Time taken for actual output = 48 hours
Time Saved 12 hours
Basic Wages = 48 hours x Rs. 15 per hour = Rs. 720
Bonus as per Halsey = 50% of Time Saved x Rate per hour
= 50% of 12 x Rs. 15 = Rs. 90
Total Wages = 720 + 90 = Rs. 810
D Basic Wages = 48 hours x Rs. 15 per hour = Rs. 720

Bonus as per Rowan = TS / TA x Basic Wages = 12 / 60 x 720 = Rs. 144
Total Wages = 720 + 144 = Rs. 864
(ii) As the company is planning cost reduction, Halsey Scheme should be selected as cost is
lower.

(c) Reference in AJ TextBook - Q2 of Chapter 5.

Calculation of Cost as per Activity Based Costing
Expenses Total Cost Driver Cost Express Instant

Driver Coffee Coffee
Rate
Machine 700000 Total Machine hours Rs. 5 per 100000 600000

processing (20000:120000) machine
Cost hour
Set Up related 768000 Number of Set Ups Rs. 12000 240000 528000
Cost (20:44) per set up
Purchase 680000 Number of Purchase Rs. 1250 200000 480000

related Cost Order (160:384) per order
Total 540000 1608000
÷ Number of units 5000 60000
Overhead Cost per unit 108 26.8

Q3.
a. Reference in AJ TextBook - Q17 of Chapter 9.
(i) Contract Account for the year 2021 - 2022
To material Issued 400,000 BY WIP
To wages Work Certified 1,500,000
paid 250,000 Work Uncertified 300,000 1,800,000
(-) Prepaid (15,000) 235,000
To sundry exp By plant scrapped 12,000
(Costing P & L)
Paid 50,000 By plant at site 18,000
(+) outstanding 7,500 57,500 By material at Site 17,000
To office expenses By material Sold
Paid 65,000 Cash / Bank 20,000
(+) outstanding 12,500 77,500 (+) Loss on sale 10,000 30,000
To plant 200,000 (Costing P & L)
To Profit 907,000
1,877,000 1,877,000
(ii) Calculation of Estimated Profit
Contract Price 25,00,000
(-) Expenses over the 2 years
Material Consumed
2021 - 2022 400000 -17000 - 30000 353,000
2022 - 2023 17000+350000 367,000 7,20,000
Wages
2021 - 2022 235,000
2022 - 2023 15000 + 140000 155,000 3,90,000
Sundry Expenses
2021 - 2022 57,500
2022 - 2023 35000-7500+5000 32,500 90,000
Office Expenses
2021 - 2022 77,500
2022 - 2023 55000-12500+15000 57,500 1,35,000
To contingencies 1,25,000
Plant Depreciation
2021 - 2022 200000-12000-18000 170,000
2022 - 2023 18000 + 80000-10000 88,000 2,58,000 (17,18,000)
Estimated Profit 7,82,000

(b) Reference in AJ TextBook - Q2 of Chapter 10

Process I
Units Rs. Units Rs.
To Materials 6500 422500 By Normal Loss 250 1000
To Direct Wages 140000 By Process II @ Rs. 100 6000 600000
To Direct Expenses 42000 By Abnormal loss @ Rs. 100 250 25000
To Mfg Overheads 21500
6500 626000 6500 626000
Normal Cost per unit of output
= (DM + DL + DE + Factory Overheads - Scrap Value of NL) / Expected output
= (422500 + 140000 + 42000 + 21500 - 1000) / (6500 - 250) = Rs. 100
Process II
Units Rupees Units Rupees
To P1 Materials 6000 600000 By Normal Loss 500 8000
To direct Wages 130000 By Finished Good @ Rs. 144 5500 792000
To direct Expenses 45500
To Mfg Overheads 24500
6000 800000 6000 800000

Normal Cost per unit of output
= (DM + DL + DE + Factory Overheads - Scrap Value of NL) / Expected output
= (600000 + 130000 + 45500 + 24500 - 8000) / (6000 - 500) = Rs. 144
Finished Goods A/c
Units Rupees Units Rupees
To Process II 5500 792000 BY COGS @ Rs. 144 5000 720000
By Closing Stock @ Rs. 144 500 72000
5500 792000 5500 792000
Q4.

(a) Reference in AJ TextBook - Q33 of Chapter 14

(i) Calculation of Contribution per hectare
Wheat Rice Maize
Sales per kg 20 40 250
(-) VC per kg
Labour 8 10 120
Packing 2 2 10
Other VC 4 1 20
Contribution per kg 6 27 100
x kgs per hectare 2000 500 100
Contribution per hectare 12000 13500 10000
Ranks II I III
(ii) Allocation of Land and best production mix
Minimum Rank Balance Total Area Contribution per Total
Area Area hectare
Wheat 100 II 50 150 12000 18.00,000
Rice 40 I 10 50 13500 675,000
Maize 10 III 10 10000 100,000
150 60 210 Highest Contribution 25,75,000
(-) Fixed Cost 21,45,000
Profit 4,30,000
(iii) Calculation of Profit
Highest Contribution 25,75,000
(-) Fixed Cost (21,45,000)
Profit 4.30,000
(b) Reference in AJ TextBook - Q19 of Chapter 6A

Cost Sheet for Cloth Mask

Quantity Produced 50000
Quantity Sold 45000
Total per unit
Direct Materials 500,000 10
Direct wages 250,000 5
Production overheads 100,000 2
Administration overheads 50,000 1
COP 900,000 18
(-) Closing Stock of FG (90,000) 18
COGS 810,000 18
(+) Selling Cost 90,000 2
Cost of Sales 900,000 20
(+) Profit 675,000 15
Sales 1,575,000 35
WN1 DIRECT MATERIAL Cloth Mask Disposable Mask Total

DM per unit 2 1
x Number of units produced 1 3
Total Material Cost Ratio 2 3
Break up in above ratio 500000 750000 1250000
WN2 DIRECT LABOUR Cloth Mask Disposable Mask Total

DL per unit 100 60
Total Labour Cost Ratio 100 180
WN3 PRODUCTION OVERHEADS Cloth Mask Disposable Mask Total

Production overheads per unit 1 1
Total Production Overheads 1 3
Q5

a. Reference in AJ TextBook - Q1 of Chapter 13

Given Standard Revised Standard Actual
Output 1000 kgs 20000 kgs 20000 kgs
Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount
A 500 25 12,500 10,000 25 250,000 11,000 23 253,000
B 350 45 15,750 7,000 45 315,000 7,500 48 360,000
C 250 55 13,750 5,000 55 275,000 4,500 60 270,000
1,100 42,000 22,000 840,000 23,000 883,000
1. Material Cost variance = Standard Cost - Actual Cost 840000 - 883000 = 43,000 A
2. Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity

A (25 - 23) x 11000 = 22000 F
B (45 - 48) x 7500 = 22500 A
C (55 - 60) x 4500 = 22500 A 23000 A
3. Material Usage Variance = (standard quantity - Actual Quantity) x Actual Rate

A (10000 - 11000) x 25 = 25000 A
B (7000 - 7500) x 45 = 22500 A
C (5000 - 4500) x 55 = 27500 F 20000 A
4. Material Yield Variance

= (Std Total Quantity - Actual Total Quantity) x Standard Weighted average purchase price
= (22000 -23000) x 840000/22000 = 38182 Adverse

(b) Reference in AJ TextBook - Q15 of Chapter 7

Memorandum Reconciliation Account
Financial Profit 5,50,000 Costing Profit (Balancing Figure) 1,14,420
Expense only in financial Income only in Financial
Legal Charges 15,250 Interim Dividend 4,50,000
Preliminary Expenses 25,750 Profit on Sale of Capital Asset 30,000
Interest Paid on debentures 50,000 Over-absorption of S & D in costing 11,380
Over-absorption of Production 10,200
overheads in costing
Under - Valuation of closing stock in 25,000
Costing
6,41,000 6,41,000
OR
Financial Profit 5,50,000
Add:
Expense only in financial
Legal Charges 15,250
Preliminary Expenses 25,750
Interest Paid on debentures 50,000
Less:
Income only in Financial
Interim Dividend 4,50,000
Profit on Sale of Capital Asset 30,000
Over-absorption of S & D in costing 11,380
Over-absorption of Production overheads in costing 10,200
Under - Valuation of closing stock in Costing 25,000
Costing Profit 1,14,420

(c) Reference in AJ TextBook - Q21 of Chapter 11

(i) Cost Sheet for Main Product
Quantity Produced and Sold 10000 units
Total
Joint Production Cost 400,000
(-) Net Realizable Value of By Product (200 x 5) (1000) 3,99,000
(+) Further Processing Cost 1,01,000
COP / COGS / COS 5,00,000
(+) Profit / (loss) (50,000)
Sales 4,50,000
(ii) SP to get profit of Rs. 100,000
Cost as above 5,00,000
(+) Profit 1,00,000
Sales 6,00,000
÷ Number of units 10,000
SP 60

Q6
(a) JIT system is a system, which responds to the demand. There is no production done till
the time demand comes and material is purchased till the time production has to be carried out.
Just-in-time production: Production system which is driven by demand for finished products,
whereby each component on a production line is produced only when needed for the next
stage”.
Just-in-time purchasing: Purchasing system in which material purchases are contracted so that
the receipt and usage of material, to the maximum extent possible, coincide”.
The basic JIT principles are to make only what is needed, when needed, and in the amount
needed.
(b)
(i) Financial
(ii) Financial
(iii) Financial
(iv) Costing
(v) Costing
(vi) Financial
(vii) Financial
(viii) Costing
(ix) Financial
(x) Costing
(c)
(i) R & D: Cost Drivers: R & D hours, New Products launched
(ii) Design of Products: Cost Drivers: Engineering hours, Number of employees employed
(iii) Customer Service: Cost Drivers: No of customers, minutes spent
(iv) Marketing: Cost Drivers: Advertising minutes, no. of salesman employed
(v) Distribution: Cost Drivers: Number of truck drivers, No of units distributed

(d) Budget Manual: A document which sets out the responsibilities of the persons engaged
in, the routine, and the forms and records required for budgetary control. A typical budget
manual may include the following:
(i) A statement regarding the objectives of the organisation and how they can be achieved
through budgetary control;
(ii) A statement about the functions and responsibilities of each executive, both regarding
preparation and execution of budgets;
(iii) Procedures to be followed for obtaining the necessary approval of budgets. The authority
of granting approval should be stated in explicit terms. Whether one two or more
signatures are required on each document should be clearly stated;
(iv) A form of organisation chart to show who is responsible for the preparation of each
functional budget and the way in which the budgets are interrelated.
(v) A timetable for the preparation of each budget.
(vi) The manner of scrutiny and the personnel to carry it out;
(vii) Reports, statements, forms and other records to be maintained;
(viii) The accounts classification to be employed. It is necessary that the framework within which
the costs, revenue and other financial accounts are classified must be identical both in the
accounts and budget department;
(ix) The reporting of the remedial action;
(x) The manner in which budgets, after acceptance and issuance, are to be revised or the
matter amended these are included in budgets and on which action can be taken only with
the approval of top management
(xi) This will prevent the formation of a ‘bottleneck’ with the late preparation of one budget
holding up the preparation of all others.
(e)
Industry or Product Cost Unit Basis
Automobile Number
Gas Cubic feet
Brick-work Number of bricks
Power Kilo-watt hour (kWh)
Steel Ton
Transport Passenger- kilometer
Chemicals Litre, gallon, kilogram, ton etc.
Oil Barrel, tonne, litre
Brewing Barrel
Cement Ton/ per bag etc.


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COSTING - NOVEMBER 2022 - SUGGESTED SOLUTIONS

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CA ANUJ JALOTA 8080324444 Page 1

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Total Per unit

Direct Material 4,250 53.125

Direct Wages 500 6.25

Labour Set Up Cost 1400 17.5

Production Overheads (20% of Direct Wages) 100 1.25

Production Cost 6,250 78.125

(+) S & D overheads (20% of Production Cost) 1,250 15.625

Total Cost 7,500 93.75

(+) Profit (¼ of Sales or ⅓ of Cost) 2,500 31.25

Sales 10,000 125

Total Sales value for 20 Batches = 10,000 x 20 = Rs. 200,000

Selling as Above = Rs. 125

A student can alternately make a cost sheet for 20 Batches also.

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(b) Reference in AJ TextBook - Q31 of Chapter 4 and Q27 of Chapter 12.

Total Vehicle Loan

Salary (50,000 x 4) 200,000

Branch Manager 90,000

Legal Charges 30,000

Printing and Stationary 12,000

Share of each Department i.e. 30% 48,000

Total Cost 248,000

÷ Number of Application 496

Cost per loan 500

Salary (70000 x 2) 1,40,000

Overheads (30% of 160,000) 48,000

Total Cost 1,88,000

÷ Cost per loan 500

Number of Applications 376

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(c) Reference in AJ TextBook - Q31 and Q32 of Chapter 2.

(ii) Re - Order Point

(iii) CPU = Rs. 4.5 per valve

EOQ = Square Root of 2ACa / Ci = Square Root of 2 x 90000 x 15 / 0.9

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(d) Reference in AJ TextBook - Q8 of Chapter 14.

(iii) Profit at 24,000 units = Contribution - Fixed Cost

(iv) Sales to get Profit of Rs. 10,00,000

(+) Fixed Cost 1,680,000

÷ Contribution per unit 120

Number of Units 22,333.33

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Cost per hour of Machine

Depreciation 192000 / 12 16000

Indirect expenses 1200000 x 20% / 12 20000

Total Cost 42000

÷ hours of the machine 500 + 1000 + 400 + 400 + 1200 3500

Cost per machine hour 12

(i) Machine hour Rate when

(ii) Individual Rate of Each Process

Brushing = { (1000 x 12) + (400 x 34.5) } / 1400 = Rs. 18.43

Striping = (1200 x 34.5) / 1200 = Rs. 34.5

CA ANUJ JALOTA 8080324444 Page 6