CA - INTERMEDIATE

GROUP I – PAPER 3
COST & MANAGEMENT ACCOUTING
Series – 1 (May 2022)
Batch :B-R-B Date : 24.01.2022
Maximum Marks: 100 Time - 3 Hours
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Part “A” is compulsory
Attempt any four questions from the rest.
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1(a) Prepare a Store Ledger Account from the following transactions of XY Company Ltd. 5
April, 2011
1 Opening balance 200 units @ ` 10 per unit.
5 Receipt 250 units costing ` 2,000
8 Receipt 150 units costing ` 1,275
10 Issue 100 units
15 Receipt 50 units costing ` 500
20 Shortage 10 units
21 Receipt 60 units costing ` 540
22 Issue 400 units
The issues upto 10-4-11 will be priced at LIFO and from 11-4-11 issues will be
priced at FIFO.
Shortage will be charged as overhead.

(b) Following data is available for ABC Ltd.: 5

Standard working hours 8 hours per day of 5 days
per week
Maximum Capacity 60 employees
Actual working 50 employees
Actual hours expected to be worked per four 8,000 hours
week
Standard hours expected to be earned per four 9,600·hours
week
Actual hours worked in the four week period 7,500 hours
Standard hours earned in the four week period 8,800 hours
The related period is of four weeks. Calculate the following Ratios :
(i) Efficiency Ratio
(ii) Activity Ratio
(iii) Standard Capacity Usage Ratio
(iv) Actual Capacity Usage Ratio
(v) Actual Usage of Budgeted Capacity Ratio

(c) Following data have been extracted from the books of M/s. ABC Private Limited: 5
(i) Salary (each employee, per month) ` 30,000
(ii) Bonus 25% of salary
(iii) Employer's contribution to PF, ESI etc. 15% of salary
(iv) Total cost at employees' welfare activities ` 6,61,500 per annum
(v) Total leave permitted during the year 30 days
(v) No. of employees 175
(vii) Normal idle time 70 hours per annum
(viii) Abnormal idle time 50 hours
(due to failure of powersupply)
(ix) Working days per annum 310 days of 8 hours

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 You are required to calculate:
1. Annual cost of each employee
2. Employee cost per hour
3. Cost of abnormal idle time, per employee

(d) Following details have been provided by M/s AR Enterprises: 5

1. Opening works-in-progress - 3000 units (70% complete)
2. Units introduced during the year - 17000 units
3. Cost of the process (for the period) - ` 33,12,720
4. Transferred to next process - 15000 units
5. Closing works-in-progress - 2200 units (80% complete)
6. Normal loss is estimated at 12% of total input (including units in process in the
beginning). Scraps realise ` 50 per unit. Scraps are 100% complete.
Using FIFO method, compute:
i. Equivalent production
ii. Cost per equivalent unit

2(a) Arnav Inspat Udyog Ltd. has the following expenditures for the year ended 31st 10
March, 2021:
Sl. Amount Amount (`)
No. (`)
(i) Raw materials purchased 10,00,00,000
(ii) GST paid on the above purchases @18% 1,80,00,000
(eligible for input tax credit)
(iii) Freight inwards 11,20,600
(iv) Wages paid to factory workers 29,20,000
(v) Contribution made towards employees’
PF& ESIS 3,60,000
(vi) Production bonus paid to factory workers 2,90,000
(vii) Royalty paid for production 1,72,600
(viii) Amount paid for power & fuel 4,62,000
(ix) Amount paid for purchase of moulds and
patterns (life is equivalent to two years
production) 8,96,000
(x) Job charges paid to job workers 8,12,000
(xi) Stores and spares consumed 1,12,000
(xii) Depreciation on:
Factory building 84,000
Office building 56,000
Plant & Machinery 1,26,000
Delivery vehicles 86,000 3,52,000
(xiii) Salary paid to supervisors 1,26,000
(xiv) Repairs & Maintenance paid for:
Plant & Machinery 48,000
Sales office building 18,000
Vehicles used by directors 19,600 85,600
(xv) Insurance premium paid for:
Plant & Machinery 31,200
Factory building 18,100
Stock of raw materials & WIP 36,000 85,300
(xvi) Expenses paid for quality control check
activities 19,600
(xvii) Salary paid to quality control staffs 96,200

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 (xviii) Research & development cost paid for
improvement in production process 18,200
(xix) Expenses paid for pollution control and
engineering & maintenance 26,600
(xx) Expenses paid for administration of factory
work 1,18,600
(xxi) Salary paid to functional mangers:
Production control 9,60,000
Finance & Accounts 9,18,000
Sales & Marketing 10,12,000 28,90,000
(xxii) Salary paid to General Manager 12,56,000
(xxiii) Packing cost paid for:
Primary packing necessary to maintain
quality 96,000
For re-distribution of finished goods 1,12,000 2,08,000
(xxiv) Wages of employees engaged in
distribution of goods 7,20,000
(xxv) Fee paid to auditors 1,80,000
(xxvi) Fee paid to legal advisors 1,20,000
(xxvii) Fee paid to independent directors 2,20,000
(xxviii) Performance bonus paid to sales staffs 1,80,000
(xxix) Value of stock as on 1st April, 2020:
Raw materials 18,00,000
Work-in-process 9,20,000
Finished goods 11,00,000 38,20,000
(xxx) Value of stock as on 31st March, 2021:
Raw materials 9,60,000
Work-in-process 8,70,000
Finished goods 18,00,000 36,30,000
Amount realized by selling of scrap and waste generated during manufacturing
process – ` 86,000/-
From the above data you are required to PREPARE Statement of cost for Arnav Ispat
Udyog Ltd. for the year ended 31st March, 2021, showing (i) Prime cost, (ii) Factory
cost, (iii) Cost of Production, (iv) Cost of goods sold and (v) Cost of sales.

(b) K Lit. is engaged in the manufacture of tyres. Analysis of income statement indicated a 10
profit of `150 lakhs on a sales volume of 50,000 units. The fixed costs are ` 850 lakhs
which appears to be high. Existing selling price is `3,400 per unit. The company is
considering to revise the profit target to ` 350 lakhs. You are required to compute—
(i) Break- even point at existing levels in units and in rupees.
(ii) The number of units required to be sold to earn the target profit.
(iii) Profit with 15% increase in selling price and drop in sales volume by 10%.
(iv) Volume to be achieved to earn target profit at the revised selling price as calculated
in (ii) above, if a reduction of 8% in the variable costs and ` 85 lakhs in the fixed
cost is envisaged.

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3(a) A company runs a holiday home. For this purpose, it has hired a building at a rent of 10
`10,00,000 per month alongwith 5% of total taking. It has three types of suites for its
customers, viz., single room, double rooms and triple rooms.
Following information is given:

Type of suite Number Occupancy percentage

Single room 100 100%
Double rooms 50 80%
Triple rooms 30 60%
The rent of double rooms suite is to be fixed at 2.5 times of the single room suite and
that of triple rooms suite as twice of the double rooms suite.
The other expenses for the year 20X9 are as follows:

(`)
Staff salaries 14,25,00,000
Room attendants’ wages 4,50,00,000
Lighting, heating and power 2,15,00,000
Repairs and renovation 1,23,50,000
Laundry charges 80,50,000
Interior decoration 74,00,000
Sundries 1,53,00,000

Provide profit @ 20% on total taking and assume 360 days in a year.
You are required to CALCULATE the rent to be charged for each type of suite.

(b) ‘Humara - Apna’ bank offers three products, viz., deposits, Loans and Credit Cards. 10
The bank has selected 4 activities for a detailed budgeting exercise, following activity
based costing methods.
The bank wants to know the product wise total cost per unit for the selected
activities, so that prices may be fixed accordingly.
The following information is made available to formulate the budget:
Activity Present Estimation for the budget
Cost (`) period
ATM Services:
(a) Machine Maintenance 4,00,000 All fixed, no change.
(b) Rents 2,00,000 Fully fixed, no change.
(c) Currency Replenishment 1,00,000 Expected to double during budget
Cost period.

7,00,000 (This activity is driven by no. of

ATM transactions)
Computer Processing 5,00,000 Half this amount is fixed and no
change is expected.
The variable portion is expected
to increase to three times the
current level.

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 (This activity is driven by the
number of computer transactions)

Issuing Statements 18,00,000 Presently, 3 lakh statements are

Computer Inquiries
made. In the budget period, 5
lakh statements are expected.
For every increase of one lakh
statement, one lakh rupees is the
budgeted increase.
(This activity is driven by the
number of statements)
2,00,000 Estimated to increase by 80%
during the budget period.
(This activity is driven by
telephone minutes)

The activity drivers and their budgeted quantifies are given below:

Activity Drivers Deposits Loans Credit

Cards

No. of ATM Transactions 1,50,000 --- 50,000

No. of Computer Processing 15,00,000 2,00,000 3,00,000
Transactions
No. of Statements to be issued 3,50,000 50,000 1,00,000
Telephone Minutes 3,60,000 1,80,000 1,80,000

The bank budgets a volume of 58,600 deposit accounts, 13,000 loan accounts,
and14,000 Credit Card Accounts.
Required:
(i) CALCULATE the budgeted rate for each activity.
(ii) PREPARE the budgeted cost statement activity wise.
(iii) COMPUTE the budgeted product cost per account for each product using (i)
and (ii) above.

4(a) Aditya Brothers supplies surgical gloves to nursing homes and polyclinics in the 5
city. These surgical gloves are sold in pack of 10 pairs at price of ` 250 per pack.
For the month of April 2018, it has been anticipated that a demand for 60,000 packs
of surgical gloves will arise. Aditya Brothers purchases these gloves from the
manufacturer at ` 228 per pack within a 4 to 6 days lead time. The ordering and
related cost is ` 240 per order. The storage cost is 10% p.a. of average inventory
investment.
Required:
(i) CALCULATE the Economic Order Quantity (EOQ)
(ii) CALCULATE the number of orders needed every year
(iii) CALCULATE the total cost of ordering and storage of the surgical gloves.
(iv) DETERMINE when should the next order to be placed. (Assuming that the
company does maintain a safety stock and that the present inventory level is
10,033 packs with a year of 360 working days).

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(b) Journalise the following transactions assuming cost and financial accounts are 5
integrated :

(`)
(i) Materials issued :
Direct 3,25,000
Indirect 1,15,000
(ii) Allocation of wages (25% indirect) 6,50,000
(iiii) Under/Over absorbed overheads:
Factory (Over) 2,50,000
Administration (Under) 1,75,000
(iv) Payment to Sundry Creditors 1,50,000
(v) Collection from Sundry Debtors 2,00,000
.
(c) A contractor has entered into a long term contract at an agreed price of ` 17,50,000 10
subject to an escalation clause for materials and wages as spelt out in the
contractand corresponding actual are as follows:
Standard Actual
Materials Qty (tons) Rate (`) Qty (tons) Rate (`)
A 5,000 50.00 5,050 48.00
B 3,500 80.00 3,450 79.00
C 2,500 60.00 2,600 66.00
Wages Hours Hourly Rate (`) Hours Hourly Rate (`)
X 2,000 70.00 2,100 72.00
Y 2,500 75.00 2,450 75.00
Z 3,000 65.00 3,100 66.00
Reckoning the full actual consumption of material and wages, the company has
claimed a final price of ` 17,73,600. Give your ANALYSIS of admissible escalation
claim and indicate the final price payable.

5(a) Aaradhya Ltd.manufactures a commercial product for which the standard cost per 10
unit is as follows:
(`)
Material:
5 kg. @ ` 4 per kg. 20.00
Labour:
3 hours @ `10 per hour 30.00
Overhead
Variable: 3 hours @ `1 3.00
Fixed: 3 hours @ `0.50 1.50
Total 54.50
During Jan. 20X8, 600 units of the product were manufactured at the cost shown
below:
(`)
Materials purchased:
5,000 kg. @ `4.10 per kg. 20,500
Materials used:
3,500 kg.
Direct Labour:
1,700 hours @ ` 9 15,300
Variable overhead 1,900
Fixed overhead 900
Total 38,600

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 The flexible budget required 1,800 direct labour hours for operation at the
monthly activity level used to set the fixed overhead rate.
COMPUTE:
(a) Material price variance, (b) Material Usage variance; (c) Labour rate
variance; (d) Labour efficiency variance; (e) Variable overhead expenditure
variance; (f) Variable overhead efficiency variance; (g) Fixed overhead
expenditure variance; (h) Fixed overhead volume variance; (i) Fixed overhead
capacity variance; and (j) Fixed overhead efficiency variance.
Also RECONCILE the standard and actual cost of production.
(b) A machine shop cost centre contains three machines of equal capacities. Three 10
operators are employed on each machine, payable ` 20 per hour each. The factory
works for 48 hours in a week which includes 4 hours set up time. The work is
jointly done by operators. The operators are paid fully for the 48 hours. In addition,
they are also paid a bonus of 10% of productive time. Costs are reported for this
company on the basis of thirteen, four-weekly period.
The company, for the purpose of computing machine hour rate includes the direct
wages of the operator and also recoups the factory overheads allocated to the
machines. The following details of factory overheads applicable to the cost centres
are available:
Original Cost of each machine - ` 52,000
Depreciation on the original cost of the machine -` 10% p.a.
Maintenance & Repair per week per machine - ` 60
Consumable Stores per week per machine - ` 75
Power: 20 units per hour per machine - 80 paise per unit

Apportionment to the cost centre:

Rent per annum ` 5,400
Heat and Light per annum ` 9,720
Foreman's Salary per annum ` 12,960
Calculate:
(i) the cost of running one machine for a four week period.
(ii) machine hour rate.
.
6 Attemt Any four
(a) DIFFERENTIATE between Cost Accounting and Management Accounting. 5
(b) DISCUSS the treatment of by-product cost in Cost Accounting. 5
(c) Define ‘Labour Turnover’. How is it measured? Explain. 5
(d) DISTINGUISH between Fixed and flexible budget. 5
(e) Explain 'Cost Unit' and 'Cost Centre'. 5

D/S. Live Guidance for CA Inter May 22 (B-R-B)

Date [Today] at [6:30 PM),
watch on https://meet.google.com/rbq-xxkd-apb.
By CA R. C. Sharma Sir.
Vidya Sagar Int. : Mob 7821821250

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