CMA SEPTEMBER-2022 EXAMINATION

INTERMEDIATE LEVEL I
COST ACCOUNTING

Course Code : CM121 Total Marks : 100

Reading Time : 15 minutes Writing Time : 180 minutes

Instructions to Candidates
 You MUST NOT write anything during the reading time.
 You should attempt ALL questions.
 Answers should be properly structured and relevant.
 Carefully read ALL the requirements and sub-questions before attempting a specific
question.
 ALL answers must be written in the answer book.
 AVOID WRITING/MARKING on the question paper at any time which may cause
disciplinary action.
 Start answering each question from a fresh sheet.
 Answers should be clearly numbered with the sub-question number.

Allowable Materials
 Writing Stationaries
 Non-programmable Calculator

Assessment Structure
Sub- Expected Time
Marks
question Required
Question 1 Multiple Choice Questions 10 10 20 minutes
Section
Question 2 Modified True/False 5 5 10 minutes
A
Question 3 Matching 5 5 10 minutes
Question 4 Essay/Computational/Case 3 20 32.50 minutes
Section Question 5 Essay/Computational/Case 3 20 32.50 minutes
B Question 6 Essay/Computational/Case 3 20 32.50 minutes
Question 7 Essay/Computational/Case 3 20 32.50 minutes
Revision 10 minutes
Total 100 180 minutes

RESTRICTED USE
This paper MUST NOT BE REMOVED from the examination venue

Do not turn the page until instructed

 SECTION A [20 MARKS]
THERE ARE 3 (THREE) QUESTIONS IN THIS SECTION. ANSWER ALL THE QUESTIONS IN
THE ANSWER SCRIPT FOLLOWING THE EXAMPLE PROVIDED FOR THE SPECIFIC
QUESTION.

QUESTION 1 [10 × 1 = 10 Marks]

There are ten (10) multiple-choice questions with five options. Pick the option that best explains
the given question. Write your answer on the answer script [DO NOT PUT ANY MARK ON THE
QUESTION PAPER]. Follow the example given below in providing your answer.

Example:
(i) ICMAB stands for the –
(a) Institute of Cost Management Accounting of Bangladesh
(b) Institute of Cost and Management Accountants of Bangladesh
(c) Institute for Cost Managers and Accounting of Bangladesh
(d) Institute of Cost Management Accountants of Bangladesh
(e) Industrial Cost Management Accountants of Bangladesh

Answer: (i) (b)

(i) All of the following are the characteristics of early centuries’ manufacturing environment
and information requirement EXCEPT:
(a) Mass production of few standardized products
(b) Widely accepted concept of ‘economies of scale’
(c) Activity-based management
(d) Narrow product focus
(e) Focused on directly measured cost
(ii) Cost and expense differ in that:
(a) Cost is a part of expense
(b) Expense is a part of cost
(c) Cost is short-term and expense is long-term
(d) Cost is small and expense is large
(e) There is no connection between them
(iii) Job-order costing deals with:
(a) Customized goods
(b) Non-customized goods
(c) Similar goods and mass production
(d) Dissimilar goods and mass production
(e) All goods that are available in the market
(iv) Which of following is not an example of process costing?
(a) Brick field
(b) Tailors shop
(c) Shoe company
(d) Electric organization
(e) Food company

CMA September 2022 Examination, CM121 [Page 2 of 8]

(v) Contract costing is a part of:
(a) Process costing
(b) Activity-based costing
(c) Marginal costing
(d) Job-order costing
(e) Target costing
(vi) Variance analysis is discussed in:
(a) Relevant costing
(b) Traditional costing
(c) Absorption costing
(d) Contract costing
(e) Standard costing
(vii) Which of the following is not a method of joint cost allocation?
(a) Physical measure
(b) Sales at split-off
(c) Equal distribution
(d) Net realizable value
(e) Constant gross margin NRV
(viii) Relevant costs usually refer to:
(a) Indirect costs
(b) Direct and indirect costs
(c) Fixed costs
(d) Variable costs
(e) Variable and fixed costs
(ix) Which of the following is prevention cost?
(a) Quality training
(b) Inspection of materials
(c) Field testing
(d) Scrap
(e) Lost sales
(x) Service costing is suitable for:
(a) Construction company
(b) Furniture company
(c) Food company
(d) Fabric company
(e) Transportation company

CMA September 2022 Examination, CM121 [Page 3 of 8]

QUESTION 2 [5 × 1 = 5 Marks]
There are five (5) statements given under the question. Identify the statements as True or
False. If the statement is false, rewrite the statement on the answer script to make it ‘True’.
Reasoning is NOT required. Follow the example given below in providing your answer.

Example:
(a) ICMAB stands for the Industrial Cost Management and Accounting of Bangladesh.
Answer:
(a) False. ICMAB stands for the Institute of Cost and Management Accountants of
Bangladesh.
Note:
 You will not get any mark if you simply rewrite as ICMAB does not stand for the
Industrial Cost Management Accountants of Bangladesh.
 If the statement is true, you need NOT to rewrite the statement rather only mention
that the statement is True.

(a) All overhead costs are indirect costs.

(b) Conversion cost is equal to prime cost plus manufacturing overhead.
(c) External failure cost occurs before the sales of products.
(d) Opportunity cost is the cost of next best alternative.
(e) Contribution margin is synonymous to gross margin.

QUESTION 3 [5 × 1 = 5 Marks]
Match the items of column A with the most suitable items of column B. Match only one item of
column A with one item of column B. Write your answer on the answer script. Follow the
example given below in providing your answer.

Example:
Column A Column B
(i) ICMAB (a) Professional accountancy body
(b) University
Answer: (i) (a)

Column A
(i) Inter process profit
(ii) Material usage sub variance
(iii) Work uncertified
(iv) Life cycle costing
(v) Job Ticket
Column B
(a) Material mix variance
(b) Valued at cost.
(c) Assessing the performance of the process
operations.
(d) Production of standardized goods.
(e) Not useful for controlling cost.
(f) No profit should be taken into account.
(g) A method of Time Booking
(h) A Technique of Inventory Control
(i) Design costs
(j) Cost driver

END OF SECTION A

CMA September 2022 Examination, CM121 [Page 4 of 8]

 SECTION B [80 MARKS]
THERE ARE 4 (FOUR) QUESTIONS IN THIS SECTION. ANSWER ALL THE QUESTIONS IN
THE ANSWER SCRIPT. SHOW ALL RELEVANT COMPUTATION.

QUESTION 4 [4+6+10 = 20 Marks]

(a) What do you mean by economic order quantity? How does it help an organization to
minimize the inventory cost?
(b) Calculate the total monthly remuneration of three workers: A, B, and C from the following
data:
(i) Standard production per month per worker 2,000 units. Actual production during the
month:
A: 1,800 units
B: 1,600 ”
C: 1,900 ”
(ii) Piece work rate is 40 paisa per unit of actual production.
(iii) Additional production bonus is Tk. 10 for each percentage of actual production
exceeding 80% of standard production.
(c) Barilgaon Company has three production departments and two service departments. For
the month of April 2021, the departmental expenses were as follows:
Production departments: Tk.
A 50,000
B 30,000
C 40,000
Service departments:
X 10,000
Y 8,000
Total 138,000
The overhead costs of service departments are apportioned on the following basis:
Department A B C X Y
X 20% 40% 30% - 10%
Y 40% 20% 20% 20% -
Required:
Show the distribution of service departments’ overhead costs to production departments
under the following methods:
(i) Repeated distribution method;
(ii) Simultaneous equation method.
QUESTION 5 [8+4+8 = 20 Marks]
(a) Seedy manufactures one product, and the entire product is sold as soon as it is produced.
There is no opening or closing inventories and work in progress is negligible. The
company operates a standard costing system and analysis of variances is made every
month. The standard cost card for the product, a boomerang, is as follows.

STANDARD COST CARD Tk.

Direct materials 0.5 kilos at Tk. 4 per kilo 2.00
Direct wages 2 hours at Tk. 2.00 per hour 4.00
Variable overheads 2 hours at Tk. 0.30 per hour 0.60
Fixed overhead 2 hours at Tk. 3.70 per hour 7.40
Standard cost 14.00
Standard profit 6.00
Standing selling price 20.00

CMA September 2022 Examination, CM121 [Page 5 of 8]

Selling and administration expenses are not included in the standard cost, and are deducted
from profit as a period charge. Budgeted (planned) output for the month of June 2022 was
5,100 units. Actual results for June 2022 were as follows:
Production of 4,850 units was sold for Tk. 95,600.
Materials consumed in production amounted to 2,300 kgs at a total cost of Tk. 9,800. Labor
hours paid for amounted to 8,500 hours at a cost of Tk.16,800.
Actual operating hours amounted to 8,000 hours. Variable overheads amounted to Tk. 2,600.
Fixed overheads amounted to Tk. 42,300.
Selling and administration expenses amounted to Tk.18,000.
Required:
Calculate all variances and prepare an operating statement for the month ended 30 June 2022.
(b) Alpha Inc. makes one main product, AZ-3, and a by-product, PA-5. The estimated sales
value of the units of PA-5 produced during the month is Tk. 5,000. Assuming that the
value of the by-product is treated as a reduction in cost of the main product, prepare the
journal entries to record the placing of PA-5 in stock and the subsequent sale of it for Tk.
4,000, on account.
(c) Kalatia Company manufactures only one product that is available in both a Deluxe model
and a Regular model. The company has manufactured the Regular model for years and
the Deluxe model was recently introduced. The company is concerned about the accuracy
of its costing system because profits are declining since the Deluxe model was
introduced.
Indirect production costs are assigned to the products using direct labor hours. For the
current year, the company estimates Tk. 2,000,000 of indirect production costs and
40,000 direct labor hours. They expect to produce 5,000 units of the Deluxe model and
40,000 units of the Regular model. The Deluxe model requires 1.6 hours of direct labor
time per unit and the Regular model requires 0.8 hours. Other costs are as follows:
Costs Deluxe Model Regular Model
Direct materials Tk. 150 Tk. 112
Direct labor Tk. 16 Tk. 8
Assume the company's indirect production costs can be traced to four activities with the
following cost drivers:
Activity (Cost Driver) Costs
Purchase orders (number of purchase orders) Tk. 84,000
Rework orders (number of rework orders) Tk. 216,000
Product testing (number of tests) Tk. 450,000
Machining (number of machine hours) Tk. 1,250,000

Cost Drivers Deluxe Model Regular Model

Number of purchase orders 400 600
Number of rework orders 200 600
Number of tests 4,000 6,000
Number of machine hours 20,000 30,000
Required:
(i) Assume direct labor hours are the only cost-allocation base. What is the cost to
manufacture one unit of each model?
(ii) Assume the activity-based costing method is used. What is the cost to manufacture
one unit of each model?

CMA September 2022 Examination, CM121 [Page 6 of 8]

QUESTION 6 [3+9+8 = 20 Marks]
(a) Discuss briefly the salient features of service costing.
(b) The following data relate to a process of a single product in a manufacturing
company for the month of April 2021:
% Units Tk.
(a) Opening work-in-process 10,000
Degree of completion:
Raw materials 100 60,000
Labour 60 36,000
Overheads 60 18,000
(b) Receipts from previous process 100,000 427,500
(c) Expenses incurred during the month:
Raw materials 197,500
Labour 345,575
Overheads 172,800
(d) Closing work-in-process 7,500
Degree of completion:
Raw materials 100
Labour & overheads 50
(e) Scrapped units 10,000
Degree of completion:
Raw materials 100
Labour & overheads 80
(f) Normal loss 5% of current input
(g) Spoiled units sold @ Tk. 1.50 each
Units completed are transferred to warehouse. The company uses the FIFO
method of valuation.
Required: Prepare:
(i) Statement of equivalent units.
(ii) Statement of cost per equivalent unit and total cost.
(iii) Process account.
(c) New Construction Ltd. is engaged in a contract during the year. Following information is
available at the year end.
Particulars Amount (Tk.)
Contract price 6,00,000
Material delivered direct to site 1,20,000
Materials issued from stores 40,000
Materials returned to stores 4,000
Materials at site at the end of year 22,000
Direct labor payments 1,40,000
Direct expenses 60,000
Architect's fees 2,500
Establishment charges 24,500
Plant installed at cost 80,000
Value of plant at the end of year 65,000
Accrued wages at the end of year 10,000
Accrued expenses at the end of year 6,000
Cost of contract not certified by architect 23,000
Value of contract certified by architect 4,20,000
Cash received from contractor 3,78,000
During the period, materials amounting to Tk. 9,000 have been transferred to another
contract to another place. You are required to show the Contract Account.

CMA September 2022 Examination, CM121 [Page 7 of 8]

QUESTION 7 [4+4+12 = 20 Marks]
(a) Cost associated with the quality of conformance can be broken down into four broad
groups. What are these four groups and how do they differ?
(b) Given the strong cost orientation in a target costing environment, there is obviously a
considerable role for the cost accountant on a design team. What are the specific
activities and required skills of this person?
(c) The marketing department at Taranagar Manufacturing has an idea for a new product that
is expected to have a life cycle of 5 years. After conducting market research, the company
has determined that the product could sell for Tk. 250 per unit in the first 3 years of life
and Tk. 175 per unit for the last 2 years. Units expected to sell are as follows:
Year 1 3,000 units
Year 2 4,500 units
Year 3 4,800 units
Year 4 5,000 units
Year 5 1,500 units
Per unit variable selling costs are estimated at Tk. 30 through the product’s life; annual
fixed selling and administrative costs are expected to be Tk. 350,000. Taranagar
Manufacturing desires a profit margin of 20% of selling price per unit.
Required:
(i) Compute the life cycle target cost to manufacture the product.
(ii) If the company expects the product to cost Tk. 65 to manufacture in the first year
what can the maximum manufacturing cost be in the following 4 years.
(iii) Assume Taranagar Manufacturing engineers conclude that the expected
manufacturing cost per unit is Tk. 70. What action might the company take to reduce
this cost?

END OF SECTION B

CMA September 2022 Examination, CM121 [Page 8 of 8]