Management Account1n & Contro l S stems

340 Alfa Ltd.- m:mufactures and sells product ·B'. The sale price per unit of the product . IDIII
• The company will incur a loss of Rs.5._()() per uml . se 11s 4 ,000 umts
. ,"f ti . · a~d tf
· the volu
IS R_s 35
. ..
. uract sufficient demand lo utilize full capacity would require a \ 5% reduction m the
raised 10 12,000 wtits , the company will make a profit o f Rs.4.50 per unit. T he brktncea cv is J44- f o a nt selling price and Rs.5,000 advcn ising cost. Advise the manaoemenl on the future
point in wiits is en curre . "
course of acuon.
a. 5,700 a. Accept the proposal as net income is Rs.25,000
b. 6,612 Accept the proposal as net income is Rs.31,200
b.
C. 5,250 Accept the proposal as net income is Rs.21 ,570
d. 6,162 c.
d. Reject the proposal as net income is Rs.15,400
e. 6,006.
e. Reject the proposal as net income is Rs. I 0,900.
341. The sales value of A.'CN Ltd. for the year 2002-03 was Rs. 15,65,560 which was more tha
the previous year sales by Rs.84,000 and the profit for the year 2002-03 was Rs.19 3/ . predicted that if the company opts for a special marketing campaign at an additional
greater than the previous year. The fixed cost of the company for the year 2002--03 • O 34S. 1ldts rtising cost of Rs. I 5,000 it can operate at full capacity and maintain its selling price at
ajls.ve2. Advise the management on th e future course or actton.
·
Rs.3,80,000. 1be profit or loss for the year 2003--04 on a forecast sales value of Rs.18,20.000 is was 3
a. Rs.19,921 (loss) a. Accept the proposal as net profit is Rs.63,000
b. Rs.39,24 1 (loss) b. Accept the proposal as net profit is Rs.39,200
c. Rs.30,600 (profit) c. Reject the proposal as net profit is Rs.40,100
d Rs.38,600 (profit) d. Reject the proposal as net profit is Rs.75,000
e. Rs.601 (profit). e. Reject the proposal as net profit is Rs.60,900.
Decisions Involving Alternative Choices Based on the follow ing inf ormatio n answer the questions 346 and 347
X Co., Ltd., is estimated to be operating at 75% capacity for the next financial year. The details of Toe X Co. Ltd., is planning to open _a petrol stafion. 1be selling pri_ce of diesel would be Rs.4.40
which are given below: ·tre The variable charges includmg cost of dtesel, vending etc., ts about Rs.4.00 per htre.
per l1 •
Sales 9,000 units at Rs.32 Rs.2,88,000 Toe fixed costs for a month are
Less: Direct materials Rs.54,000 Rs.
Direct Wages 72,000 2 ,000
Rent
Production Overhead: Taxes t,000
Fixed 42,000 Labor wages 3,000
Variable 18,000 1,86,000 Employee welfare 400
Gross Profit Electricity (24 hour continuous operation) 300
1,02,000
Less: Administration selling and Other fixed costs HO
d istribution costs: 346. The break even pomt m rupees tor the month 1fthe above costs are applied
Fixed 36,000 a. Rs.90,140
Variable 27,000 63,000 b. Rs.1,05,600
Net profit 39,000 c. Rs.2,10,000
342. The break even pomt m sales 1s d . Rs.30,120
e. Rs.74,910 .
a. Rs. 1,54,000 347. Toe break even point in rupees for the month if the rent was increased b y 7 5%
b. Rs. 1,92,000
a. Rs.91,410
C. Rs.3 ,02,500
b. Rs.75,620
d. Rs.2,75,000
C. Rs.40,560
e. Rs.2,92,000.

343. 1f the selling price were reduced lo Rs.28, the increased demand would utilize 90% of the
\ d. Rs.1,10,220
c. Rs.l ,75,750.
company ' s capacity without any additional expenditure. The management should ~... The break even pomt · m· rupees for the month I·r the rent re mained at. Rs ·2 •000
.,...,, . but conunission
a. Reject the proposal as net income is Rs.19,200 of Rs.0.02 was given to the employees as a group bonus for every litre sold is
b. Accept the proposal as net income is Rs. 19,200 a. Rs.61 , 122
c. Reject the proposal as net income is Rs.29,500 b. Rs.1,10 ,250
d. Reject the proposal as net income is Rs.31,500 C. Rs.78,852
e. Accept the proposal as net income is Rs.45,000. d. Rs.50,555
252 e. Rs.1,25,650.
2s:
 . b k oint in rupees if the selling price is reduced to Rs.4.30 and lmII
349. Fmd out the rea even P . d Rs no . d out the budgeted Profit/Loss for 2002 for Nonh
commission was paid but the rent remame at .2,000 . 351, Fin .
a. Rs. 1,50,600 Loss
a. Rs.1 ,10,620 Rs.2, 15.000 Profit
b.
b. Rs.97,610 Rs.98,000 Loss
c.
c. Rs.1,27,925 Rs.55,600 Profit
d.
d. Rs.79,600 e. Rs.61 ,200 Loss.
e. Rs.62,580. . find out the budgeted Profit/Loss for 2002 for South.
The X Co. Ltd .. is planning to open a petrol station. The selling price of diesel would be 352
350 a. Rs.3.92,500 Loss
• Rs. 4 .4 0 per liter. The variable charges including cost of diesel, vendmg etc., 1s about Rs.4.00
b. Rs.1,90,200 Profit
per liter.
The fixed costs for a month are: c. Rs.2,29,800 Profit
Rs. d. Rs.4,9 1,700 Loss
Rent 2,000 e. Rs.3,28,000 Profit.
Taxes 1,000
3,000 353, find out the budgeted Profit/Loss in total for 2002.
Labor wages
400 a. Rs.2,30,000 Profit
Employee welfare
300 b. Rs.3,75,000 Profit
Electricity
(24 hour continuous operation) c. Rs.4, I 0,000 Profit
Other fixed costs 110 d. Rs.3,75,000 Loss
State how many liters would need to be sold per month at Rs.4.40 if the costs were in the
c. Rs. I , I 6,200 Profit.
original form to achieve profit of Rs.2,800.
354, X Co., Ltd., manufactures a Product Y production capacity of the factory is 1,50,000 units
a. 24,025 liters per annum. The summanzed Profit and Loss account for the year is given:
b. 35,675 liters
Rs.
c. 40, 195 liters
Sales @ Rs.15 per unit 15,00,000
d. 14,485 liters
e. 50,625 liters. Direct Materials 3,00,000
Based on the following information answer the questions 351-353. Direct Labor 1.00,000
A trading company sells three products A, B and C in two areas North and South. The information
Production overhead:
for the year 2002 is as follows:
Variable 50,000
A B C
Selling Price/Unit Rs.40 Rs.48 Rs.60 Fixed 2,00,000
Purchase Price/Unit Rs.32 Rs.36 Rs.44 Administration overhead:
Sales in units: Fixed 75,000
North 92,000 40,000 28,000
Selling overhead:
South 30,000 40,000 40,000
Variable 75,000
Number of Orders:
North 40,000 20,000 10,000 Fixed 1,75,000
South 6,000 10,000 8,000 Profit
5,25,000
Volume of cu.m/unit 2.0 1.5 1.0 : e chairman felt that the packaging of the product required improvement. He wanted to
. ow the sales required to earn a target profit of I 0% on turnover with the introduction of an
improved packing at an additional cost of 30 paise per unit is
Rupees thousand
Other Costs a. Rs.11 ,12,300. 15
Variable Fixed Basis of apponionment
b. Rs.12,24,360.40
Selling 188 376 No.of orders
C.
Distribution 432 648 Volume sold Rs.8,49,056.60
d. Rs.10,25,600.86
Advertising 270 540 Units sold
Administration e. Rs.6,40,920.75.
64 256 Sales value

254
255
 s lmD
MJ•u ement Accoun ting & C o nt rol System ·s a Produc t AAA Prod UChon capa t f
er Co. Ltd., rnanufactun. . . ci Y O the factory 15 1 5U 000
•7 Sup•ts per annum. The summ anzed Profit and Loss a ,
produc tion capaci ty of_thefac tory is 1,50,0 0o uni J, · ccoum ,or th c year is given: . .
355. x Co. Ltd., manufactures a Product ABX
Loss accoun t for the year 1s g iven:
ts uni
per annum . The summ arized Profit and Rs.
Rs. Sales @ Rs. 15 per unit 15.00.000
15,00,0 00 Direct Materia ls
Sales @ Rs. 15 per unit 3,00,00 0
3,00,0 00 Direct Labor
Direct Materi als 1,00.00 0
1,00,0 00 Produ ction o verhea d:
Direct Labor
Variable
Produc tion overhe ad: 50,000
Variab le 50,000 Fixed 2.00.0 00
2,00,0 00 Admin istration overhead:
Fixed
Admin istratio n overhe ad: Fixed 75.000
75,000 Sellin g overhe ad:
Fixed
Selling overhe ad: Variab le 75,000
Variab le 75,000 Fixed
1,75,0 00 1,75,00 0
Fixed Profit 5,25,0 00
Profit 5,25,0 00 . .
of r opined that the se lli ng pnce should be reduced to R 12
retaile r was interes ted to take a regula r order The produc tion manag e
f s.the
per urut. tn
The MD conve yed to the board that a large ·der saJes mau.e -'· t and thus to achieve full util;=n·
a specia l price. This would m no way affect the volum e or price of order to reac ab WI - on o produc hon
30,000 units per aMwn at on · th fi ·r th · tion manager is followed.
the regula r sales of the compa ny. Selling
and Disrrib ution costs @ 0 .40ps will be saved resources. F100 out e pro it I e adVJse of produc
ed t~ collec t the pr°<!u ct from the company
this score becaus e the retiile r was prepar a. Rs.5,6 2,500
mg would be requrr ed for displa y purposes
wareh ouse at regula r interva ls only specia l packag b. Rs.9,7 9,200
additio nal 20 paise per unit He wante d to know for this information
and this would cost an c. Rs.2, 14, 100
l order would break even and the price for quoting
the price per unit at which the specia Rs. 11, 10,300
d.
purpo ses, provid ing a contrib ution ofRs.6 0,000.
e. Rs.10, 50,600.
a. Rs. 11.15
tion capacity of the factory is 1,50,00 0 units per
b. Rs.7.0 5 358. AB Ltd., rnanufactur_e s a Produ ct CD. Produc the is given:
annum. The summ anzed Profit and Loss accoun t for
C. Rs.J0. 15
Rs.
d. Rs.3.13
Sales @ Rs. 15 per unit 15,00,0 00
e. Rs.4. 15.
tion capaci ty of the factor y is 1,50,0 00 units Direct Mater ials 3,00.0 00
356. ACE Co. Ltd., manuf acture s a Produ ct B
produc
. The summ arized Profit and Loss accoun t for the year is given: Direct Labor 1,00.000
per annum
Rs. Produ ction overhe ad:

Sales @ Rs. 15 per unit 15,00, 000 Variab le 50,000

3,00,0 00 Fixed 2,00,0 00
Direc t Mater ials
Direc t Labor 1,00,0 00
Admin istrati on overhe ad:
Produ ction overh ead: Fixed 75,000
Variab le 50,000
2,00,0 00 Sellin g overhe ad:
Fixed
Variab le 75,000
Admin istrati on overhe ad:
75,000 Fixed 1,75,00 0
Fixed
Profit 5,25.0 00
Sellin g overhe ad:
75,000 sive advertJ.sement campaign was the
Variable The finance directo r JS of the op1D1o n that aggres
1,75,0 00 how nwch that would cost ifit were to improv e sales to 1,40.00 0 units
Fixed
.
answer. He wonde red
oflhe turnov er.
Profit
5,25,0 00 15 per annwn yieldin g a profit of 10%
0,000 and the price of t
_ he produ~ t
by Rs.2,4 a. Rs. 14, 10,000
If the advert ising expen ses are increa sed om
expec ted that the sales would be mcrea sed
simult aneou sly increa sed by 20% then it is in this case. b. Rs.7,0 5,000
annum. Find out the total profit
1,00,0 00 units to 1,20,0 00 unit per C. Rs.2,2 0,200
a. Rs. 14,60, 000
d Rs. 16, 17, 180
b. Rs.2, 70,000 e. Rs. 11,72, 300.
C. Rs.5,6 5,000
d. Rs.8,40,000
e. Rs.11, 10,000 . 257

256
 Management Accounting & Control Systems

359. JP Co. Ltd., manufactures a Product E. Production capacity of the factory is 1,50,000 Units
Ranbax Lid. manufactures two products - ' R and B. Producrio .
per annum. The summarized Profit and Loss account for the year 1s given: 1 . _n capacny of the company 1s
J6 · 1. i·ted to 30 000 machme hours per annum There 1-s no restnctmn
Rs. 1m • . . . · on dire 1b h
c 1 a or ours. The
company has furnished the following information penaining to two prod UCtS:
Sales@ Rs.15 per unit 15,00,000
Paniculars Product R
3,00,000 Product B
Direct Materials Estimated demand (units) 3,000 4,500
Direct Labor 1,00,000
Selling price per unit (Rs.) 20 18
Production overhead:
Variable cost per unit 8 9
Variable 50,000
Fixed cost per unit 6
2,00,000 5
Fixed
Machine hours per unit 5 4
Administration overhead:
Direct labor hours per unit 3.5 2
Fixed 75,000
The company absorbs cost al a rate per machine hour based upon full capacity. The number
Selling overhead:
of units of product R and B to be produced per annum in order to maximize the profit are
Variable 75,000
a. 3,000 units 4,500 units respectively
Fixed 1,75,000
b. 2,400 units 4,500 units respectively
Profit 5,25,000
c. 2,400 units 3,750 units respectively
The personnel director pleaded for a change m the method of wage remuneration. At presen~ d. 3,000 units 3,750 units respectively
direct labor is paid a piece rate of Rs.1.50 per unit. If a group bonus scheme were introduced,
e. 3,000 units 3,000 units respectively.
the output would be better. The proposal was to set a target of 2000 units per week
throughout the company's 50 week year. For each 2% increase in production, there would be 362. Marphy Company manufactures radios, which are sold at Rs.1,600 per unit. The total cost
an increase of I% on the basic wages of each employee. No employee would suffer a consists of 30% for direct materials, 40% for direct wages and 30% for overheads. An
reduction in basic wages. It was forecast that if the selling price were increased by 10% and increase in material price by 30% and in wage rates by 10% is expected in the fonhcoming
advertising were increased by Rs. 1,50,000, sales of 1,20,000 units per annum would be year, as a result of which the profit at current selling price may decrease by 400/o of the
achieved. Find out the net profit if the advise of personnel director is followed: present profit per unit.
a. Rs.5,60,000 The current and future profit at present selling price are
b. Rs. I 0, I 0,000 a. Rs.208.00 and Rs.235.47 respectively
c. Rs.9,18,000 b. Rs.520.00 and Rs.587.60 respectively

d. Rs.12,45,000 c. Rs.392.45 and Rs.235.47 respectively

Rs.14,50,000. d. Rs.235.47 and Rs.392.45 respectively

e.
e. Rs.392.45 and Rs.277 .38 respectively.
360. PQR Ltd. manufactures three components - P, Q, and R . The company has furnished the
following information pertaining to the cost per unit of three products: 363. N-Joy Ltd. manufactures three components - A, B, and C. The company bas furnished the
p (Rs.) R (Rs.) following information pertaining to the cost per unit of the three products:
Particulars Q (Rs.)
Particulars A (Rs.) B (Rs.) C (Rs.)
Fixed cost 7.00 5.00 4.50
Fixed cost 3 3 5
Variable cost 8.00 6.00 6.00
Variable cost 11 17 13
Total cost 15.00 11.00 10.50
Total cost 14 20 18
Alwin Company has offered to supply the components to PQR Ltd., at the followmg prices:
P- Rs. 10.00 per unit Alwin Company has offered to supply the components to N-Joy Ltd at the following prices:
A- Rs. 13 per unit
Q - Rs.5.00 per unit
B - Rs. 16 per unit
R- Rs.7.50 per unit
C- Rs.20 per unit
Which of the following decisions should be considered by PQR Ltd.?
Which of the following decisions made by N-Joy Ltd. is most profitable?
a. Make all the three components. a. M3\'e all the three components.
b. Buy all the three components. b. Buy all the three components.
c. Make component P and buy components Q and R. C.
Make component C and buy components A and B.
d. Make components P and Q and buy component R. d. Make components A and B and buy component C.
e. Make components P and R and buy component Q . e. Make components A and C and buy component B.

258 259
 p IDIII
11\EiPW::iffA ,FiiEAi-MtAt
11le rctum on capital employed using replacement cost for fixed assets value and
Cost Analysis and Pricing Decisions . J6'- dcJ>f"ciaUOn IS
. • for the supply of 2 crore pieces of Y per month •. 60.65%
364. X Ltd. has received ad~-u~° ~ ; n o equipment have to b.: purchased for Rs.8000() .,.,_is
coougb capaoty but a wuona1 - -., , . ' "r
b. 56.65%
other details are:
70 10DDCS at Rs.5 .50 per kg.
,. 43.54%
Paper 39.88%
Ink Rs.5 pcr - 1,000 pjcccs ofY d.
Packing cost Rs. I5 per 1.00,000 pieces of y e. 23.86%.
Labor hours I 500 bows (including - 500 hours o,-ertimc) ..,,_, questions 367 and 368 based on the following information
,.,, . . oduc 3 oduct
Labor rate ~5 per boor (double Btc for overtime:) X Co. Ltd. is plamung to mtr e new pr whose demand is expected to be as follows:
Ovcmcads
Scllipg cxpcnscs
Rs.20,000 per moDlh
Rs.30,000 per month
- l)c-DlaDd Units Probability
0.20
Since the paper required is in high demand, purchases have to be done on cash basis. "'Oricing 10,000
capilal required will be 50% of the sales value. 12,000 0.25
The c o ~ expects a l'Cllll1I of25% on the additional capital required for the order.
15,000 0.15
The picc of the order is
17,000 0.15
a. Rs.2,29,56054
19,000 0.25
b. Rs.3,72,140.99
IS planning to acqum: a machine. There are two models of the
C. Rs.6,49,142.86 367• To prociucc the product, X
machine p and Q. Model P can be rented for Rs. 1,000 and the variable COS\ of production per
d Rs.7,89,995.76
aDit is Rs.0.25. Model Q, oo the other band, can be rented for Rs.3,000 but its variable cost of
C. Rs.8,01,,234.65. prociuctioo per unit is only Rs.0.10. X Co. lid. cm go for Model Q as its nmning cost is less
Answ questions 365 and 366 based on hr following information •-hm compared to Model P by:
X C-o. Ltd. - cslablisbod in 2001. I.I bas been follo1"ing lhe mlucing balance method for a. Rs.234.44
calculating dq,n:,ciatioa. the ra1e being 33 1/3%. b. Rs.550.22
Assume that the fixed asseu pun:hascd at lhc bc:ginniog of the ycu and capital Cf11>loycd c. Rs.453.00
is takm al year-end values..
d Rs.182.50
Additional dcwls an: gi\al below:
e. Rs.332.45.
Plant and Machinery Womng capila] at year-aid Profit before depmciatioo
Cost
368. To produce the product, X is plamring to acquire a machine. There are two models of the
Year of Purchase
machine- P and Q. MO<kl P can be rented for Rs.1,000 and the variable cost o f production
2001 3,24,000 per unit is Rs.0.25. Model Q, on the other band, can be rented for Rs.3,000 but its variable
2002 81 ,000 cost ofpnxiuction per unit is only Rs.0. 10. lfthe demand is precisely known to be at 10,000
2003 54,000 1,50,000 1, 80,000 miits then, Model P is pre ferred as its running cost is lower when compared to Model Q by:
The following aIC lhc: pnce indices: a. Rs. l ,000
End of Index b. Rs.500
2000 250.00 C. Rs.2,200
2001 257.50
d Rs.100
2002 265.23
e. Rs. l ,350.
2003 273. 18
Answer questions 369 and 370 based on the following information
36S. The return on capital employed using historical cost and net book value to value fixed assets
IS X Co. ltd after revamping its production wants to increase the selling price from Rs.5 .25 to
Rs.5.75. The sales in units cum:ntly are 48,000. The likely demand at the new prices is:
a. 30.19"/4
b. 45.99% Dmiand in units at Probability
C. 54.90% Rs.5.7 5
d 65.89% 35,000 0.25
e. 80.15%.
40,000 0.60
50,000 0. 15

260
261
 The cost is currently at Rs.5.00 per unit, which is made up of f he following arc 1hc likely variable costs for the coming year
Rs. ~ ble costs Rs. Probabi!i1y
2.50 0.75
Direct Materials i--- 4.90
Direct Labor 1.00
5.20 0. 15
Variable Overhead 1.00
0.50 4.75 0.10
Fixed Cost
5.00 costs for the current year are Rs.l 4 ,ooo per annum The hkely fixed costs for the next
The following are the hkely vanable costs for the coming year: year are
Variable costs Probability ~ d costs Rs. Probability
Rs. 0.2
25.oOO
4.90 0.75 0.6
5.20 0. 15 27,oOO
0.2
4.75 0.10 30,000
Fixed costs for the current year are Rs.24,000 per annum The likely fixed costs for the next _The expected demand for the product 1fthc price per product is Rs.6.25
371
year are
a. 30,oOO units
Fixed costs Probability
b. 20,500 units
Rs.
0.2 c. 40,000 uni ts
25,000
27,000 0.6 d. 42,340 units
30,000 0.2 t 5,400 units.
e.
369. The expected demand for the product 1fthe pnce per product is Rs.5.75 • The expected profit/loss if the selling price per unit is Rs.6.25
372
a. 33,000 units
a. Loss Rs.5,000
b. 40,250 units
C. 55,000 units b. Profit Rs.3,000
d. 56,990 units c. Profit Rs.1,550
e. 29,760 units. d. Loss Rs.140
370. The expected profit/loss if the selling price per unit is Rs.5.75 Profit Rs.4,000.
e.
a. Profit Rs. 1,116
Answer questions 373 and 374 based on the following information
b. Loss Rs.2,953
X college wants to start a cafeteria in their premises. The management of X college feels that
c. Profit Rs.3,007
the cafeteria should be run on a no profit no loss basis, but they are not averse to the idea of
d. Loss Rs.4,500 profit. The college management has also decided to allocate necessary funds of Rs.50,000 for
e. Profit Rs.5.805. the purchase of equipment like tables, chairs, kitchen equipment, etc. The funds are to be
Answer questions 371 and 372 based on the following information repaid over a period of 5 years at an interest of 14%. The equipment is to be depreciated at
20% p.a. on a straight line basis. Running costs are expected to be Rs.20,000 for the first
X Co. Ltd. after revamping its production wants to increase the selling price from Rs.5 .25 to year, increasing by Rs.2,000 there afterwards. Additional charges arc Rs.7,500 p.a. The
Rs.6.25. The sales in units currently are 48,000. management expects the cafeteria to achieve capacity utilization of 50% in the first two years
The likely demand at the new prices is: and 100% capacity thereafter.
Demand in units at Rs.6.25 Probability The eatables are to be priced at double the cost. The present value at I4% discount factor.
10,000 0.25
Year 0 I 2 3 4 5
20,000 0.60
40,000 0.15
Factor I 0.877 0.769 0.675 0.592 0.5 19
The cost is currently at Rs.5.00 per un it, which is made up of 373. What Will be the sales for the first two years, tf break even is to be achieved over the 5 year
period'!
Rs.
a. Rs.59,916.44
Direct Materials 2.50
Direct Labor 1.00 b. Rs.40,340.88
Variable Overhead 1.00 C. Rs.37,895.75
Fixed Cost 0.50 d. Rs.26,850.00
Rs.5.00 e. Rs. I 9. 750.00.

262 263
 &¥1¥¥:W·&fliA#i +id&fiWrell
374. Thc sales value for the subsequent years, will be f1118' questiOns 377 and 378 based on the following information
ft,11 . . ion R is a profit center. wtuch produces three products _ v y
a. Rs-1 ,90,880.32 0W15 I mark.cl "' and Z. Each product has
Rs. 1,19,832.88 an cxtcrna

Rs.3,00,450.00 ( in Rs.)
c.
X y z
d. Rs.4,01,230.00
Extc:rnal mark.ct p rice per unit 48 46 40
c. Rs2,.55,000.00. . . . . Variable cost of production in Division R 33 24
- - ' - - ' ,L... follo..,.,,., figures for ilS radiator caps d1v1S1on: 28
37S. X Co. Ltd. bas rn'CiiK-U .... ---.. 1,.abor hrs- per unit . __ 3 4 2
Qmall AssctS Rs.4,00,000
Produel ry can be ~fcrrcd to D1V1s1on S, but the maximum m .. n,jty that · ht be
· 300 uruts ofY -.- nug
· ed
rcquu
Long-tmn Assc1S Rs.6,00,000 for tran51CJ IS •

Production output 2,00,000 radiator caps per month. ThcThc fhcdcdt costs perd_mo_nth alllOunt to 11ic maximum cxtcmal sales arc:
and the variable cost is Rs.5 per umt. ra ia or caps 1V1s1on's pre,;idcnt X - 800 urulS
00 000
30% of the moothly residual income as bonus. The corq>any requires Return On y - 500uni1S
O
Total Assc1S (ROI) of 30% and uses an ilqllJICd cost of 151/o to calculate Retum On Tota] z - JOO units
M;ets(ROI) . tnstead of receiving transfers ofproduct Y from Division R, Division s could buy similar
The bonus to be paid to the president based on the selling price of radiator caps so as to achieve produci in the open market at a slightly chc:apo- price ofRs.45 per unit.
the~ROlis 377. What should ~ - transfer price for-~ unit for 300 mtits of Y, if the total labor hours
availablc in Division R are 3,800 hours.
a. Rs.31.350
a. Rs.86 per unit
b. R537,990
b. Rs.23 per unit.
C. Rs.45,000 c. Rs.44 per unit
d. Rs.50,980 d. Rs.74perunit
C. Rs.65,880. c. Rs.56 per unit.
376. The Northrop Aviation bas a radar C004)00CDl division manufacturing vari~ c~ooits. :r,s. What sbould 1bc transfer price be for each 1111it for 300 nnits of Y, if the total labor hours
One of them being the Pulsar whose details for the month of November are given: available in Division Rare 5,600 hours?
L Rs.25.
Sales 2,00,000 units
@ Rs.120 per unit 2,40,00,000 b. Rs.45.
Less: C. R,s.34.

Variable Costs
d. Rs.43.
Direct Materials @ Rs.30 60,00,000 C. Rs.29.

Direct Labor @ Rs20 40,00,000 An- questions 379 and 3IO based on the following infonnatio.'I
Variable Ovcrhead @ Rs.10 20,00,000 Enlapriscc D P I W I ~ cigm:lllc liglms and scUs at a pcicc of Rs.20 per ligbtcr.
Owing the )QC, the coq,my cpcnbi at 5()-4 of ua:hiut:iy ap:ity and prodllccd and sold
Sales Commission @ 20% of sales 60,00,000 50,000 tigblas. The rost of cacl! ligba was as follows:
Other Variable Expenses DiectM.ucrial Rs.6
@ Rs.JO 20,00,000 200,00,000
Wap:s Rs.2
Contnbution 40,00,000 WcxbOwmcad (50"/4 fixed) Rs.5
Less: Fixed Costs 20,00,000 Sales Expenses (25% variable) Rs.2
Profit 20,00.000 The ooq,any alllicipucd dial during the Jail" the COSls will go up as follows:
Pulsar is the major input for Textron. Textron procures about 30,000 units per month frr,m FmciChqcs 10%
Zetex, which llllfortunatcly has ~ l y suspended production. Textron has asked the
Dna:t Labor- 20%
salesman from NOlthrop to supply the 3 months requirement at Rs.90 per unit. The salesman
has informed that he will accept Rs.10,00,000 in lieu of 20% commission. Northrop 15 Maaaial 5%
currently operating at 'JJ3 capacity. The Northrop can go for sales to Textron because it helps Then: will be DO cbaogc in scl1iag price.
in increasing the profit by: The COlqJlny mccived an additional order for 20,000 lighters for the year.
379• The amoum of profit
a. Rs. 4,60,990 earned during the previous year was
L Rs.2.,5(),()()()
b. Rs.5,03,900
b. Rs.3,91,230
C. Rs.8,00,000 c. Rs.4,67,000
d. Rs7,00,000 d. Rs.5,70,990
e. Rs.3,54,000. C. Rs.5,78,000.

264 265
 11
arr·t!!HitMf.ffiMaM
lmII
. th mpany can quote so that it can earn the same profit in 200 3 04 p,.nswer questions 384 and 385 based on the following information
380. The lowest pnce e co - as in o Ltd. manufactures a product 'K ". The total normal capiial d
the previous year is Arnr · f 9 00 000 , . emp1oye was Rs.12.50,000.
' ,hich consists
. o· Rs. f , ,· I ,or fi xed portion of capital employed, and Rs .3.)- 0 per unll. 1s
a. Rs.24.79 ' variable portion o capita employed. Normal production level is at l ,00,000 uni!S.
the
b. Rs.43.00 The esti mated cost structure of product 'K · is given below:
c. Rs.29.76 Material per unit
d. Rs. 14.45 Rs.10.00
(4 kg. @ Rs.2.50)
e. Rs.30.60. Labor per unit
Rs.12.00
Answer questions 381 to 383 based on the following infor:mation (3 hours @ Rs.4.00)
A company currently operating at 80% capacity has the following particulars: Variab le Overheads per unit Rs.3.00
Rs. Fixed O verheads Rs.5,00,000
per year
Sales 32,00,000
Amro Ltd. wishes to obtam 15% return on capital employed after 35% of corporate tax.
Direct Materials 10,00,ooo"
4,00,000 384_The mark-up on cost is
Direct Labor a. 13.88%
Variable Overheads 2,00,000
b. 9.62%
Fixed Overheads 6,50,000 c. 4.44%
An export order has been received that would utilize half of the capacity of the factory. The d. 21.99%
order cannot be split i.e., it has either to be taken in full and executed @ I 0% below the e. 17.98%.
normal domestic prices or reject totally.
385. The selling price needed to achieve the planned return on capital erqiloyed is
The alternatives available to the management are:
a.
Rs.44.99
a. Reject the order and continue with the domestic sales only (as at present), or
b. Rs.47.75
b. Accept the order, split capacity between overseas and domestic sales and tum away
c. Rs.50.00
excess domestic demand, or
d. Rs.32.89
c. Increase the capacity so as to accept the export order and maintain the present domestic
e. Rs.26.76.
sales by
i. Buying an equipment that will increase capacity by I 0%. This will result in an Answer questions 386 and 387 based on the following information
increase of Rs.50,000 in fixed costs, and Perfect Electronics Ltd. is manufacturing electronic goods. Following is the cost budget of the
company at a production level of 35,000 units as against the normal capacity of 56,000 units.
ii. Work overtime to meet the balance of required capacity. In that case, labor will be
paid at one and a halftimes the normal wage rate. Particulars Rs.
381- The profit earned if the first alternative is adopted is Direct Materials 3,85,000
Direct Labor 5,60,000
a. Rs.11 ,40,000
Variable Overheads 3,15,000
b. Rs.6,50,000
Semi-Variable Overheads 2,00,000
C. Rs.9,50,000 Fixed Overheads 1,50,000
d. Rs.11,80,000 The fixed overhead would remain stable up to 65% activity level, which increases by
e. Rs.12,00,000. Rs.60,000 for higher activity. The fixed component of semi-variable overhead is Rs.60,000.
382. The profit earned if the second alternative is adopted 386. The per unit cost at the activity level of 22,400 units is
a. Rs.11 ,50,000 a. Rs.57 .76 I per unit
b. Rs. 15,00,000 b. Rs.23.453 per unit
C. Rs.19,80,000 c. Rs.60.500 per unit
d. Rs.21 ,00,000 d. Rs.34. 547 per unit
e. Rs.23,90,000. e. Rs.49 .375 per unit.
387
383. The profit earned if the third alternative is adopted · The per unit cost at the activity level of 39,200 level is
a. Rs.9,00,000 a. Rs.64.65 per unit
b. Rs. I 1,30,000 b. Rs.55.54 per unit
C. Rs. J3,50,000 c. Rs.46.89 per unit
d. Rs. 14,25,000 d. Rs.32.00 per unit
e. Rs.16,50,000. e. Rs.29.88 per unit.

266 267
"'anageme nt Accounting & Control Systems lmII
Following is the cost b Ud gctof wants make profit of
d . • El cc·tronics
Ltd. is manufacturing electronic. goods.
the The discount price to be offered to the wholesale r 1f Tordy Ltd. 10
388. Nanm, agalllSt norma I capacity of 56,00o Units. the 3,0. 00 000 on the sale of 2,500 umts ,s
company al a production level of 35,000 units as 1
Rs. , ·
Rs.
Particula~ a. Rs.280.00
3.85,000
Direct Materials b. Rs. 180.00
5,60,000
Direct Labor
3,15,000 c. Rs.198.00
Variable Overhead s
Semi-Variable Overheads 2,00,000 d. Rs.350.00
s 1,50,000
Fixed Overhead c. Rs.470.00 .
The fixed overhead would remain stable up to 65% activity level, which inc reases b
. . . . . _Twinkle Ltd. manufactures a product of electronic goods.
overhead is Rs.60.00Q Y
Rs.60,000 for higher acttv1ty. The fr,ed compone nt of senu-van ablc 391
activity level where profit is · 1lle cost data for the current productio n are:
You are required to find out per unit sale price at 800/o 10
as 20% on sales.
be Rs.
considered particulars
a. Rs.67.00 Marginal cost per unit
65.00
b. Rs.75.98 Direct Material
45.00
Direct Labor
C. Rs.57.53 20.00
Variable P roduction Overhead s
d. Rs.46.89 130.00
rrotal Variable Cost
e. Rs.29.65. Total fixed overhead expenditu re
tion 1,50,000
Answer questions 389 and 390 based on the followin g informa Productio n
1,00.000
Tordy Ltd. manufactures a product of electronic goods. Administration
Marketing 2,50,000
The cost data for the current production are:
Rs.10,00,0 00 for 10,000 wnts of production, wbich is 66 213% of
normal
Total contributJon IS
Particulm Rs. capacity.
discount price. Existing
Marginal cost per unit A wholesaler is willing to take 2,500 units of electronic goods at a special
Fi.'led productio n ovmiead will increase by Rs.90,000 per annum but
sales will not be affected.
Direct Materials 65.00 by Rs.20,000 if the offer is accepted by the convany.
marketing expenses will be reduced
an additiona l profit of
Direct Labor 45.00 Without making offer to wholesal er, Twinkle is willing to make
productio n. lf the ftxed
Rs.2,20,0 00 by increasin g the sales volume by 100/o of CUITenl
Variable Production Overheads 20.00 by Rs.40,000 and
productio n overhead and advertise ment expenditu re are increased
would be the minim.un selling price per unit of
Total Variable Cost 130.00 Rs.60,000 respectiv ely, then what
productio n?
Total fixed overhead e,cpenditure
a. Rs.204
Productio n 1,50,000
b. Rs.340
Administ ration 1,00.000
C. Rs.200
Marketin g 2,50,000 d. Rs.250
n, which is 66 2/3% of
Total contnb_ut10n 1s Rs.10,00, 000 for 10,000 units of productio e. ~.116.
normal capacity. of 12% after tax on
· 392. Hind Ltd. produces only one product. The company expects a return
A wholesale r is willing to take 2 ' 500 um·ts O f e Iectromc goods at a special discount price. . The capital employed consists of fixed capital of Rs. I 0,00,000
and
E · · . capital employed
a::i:i 1
es ;l~ot be affected: Fixed productio n overhead will increase by Rs.90,000 per
u mar e g expenses will be reduced by Rs.20' 000 if the offer
is accepted by the
working capital equal to 20% on sales. The tax rate is 40%
below:
for the company . Other

company. informati on of the product is given

Units produced 20,000

389. The sale price per unit based on current productio n data is
a. Rs.230.00 Direct material Rs.1 ,25,000

b. Rs.320.50 Direct labor Rs. 1,75,000

C. Rs.453.00 Productio n overhead Rs.\ ,20,000

d. Rs.170.00 Administ rative overhead Rs.80 ,000

e. Selling and distributi on costs 20% on sales

Rs.500.00 .

268 269
EFi&M4,,14:ir·m;•1m1mr1··t!Mtt•lfffl@i9 lillDII
. duct should be sold in the market in order to meet th n,pany"s return on investment is
The sale price at which the pro e rellJlll 39S. The co
requirement is a. 25.56%
a. Rs.56.00
b. 16.67%
b. Rs.23.56
c. )0.98%
C. Rs.35.67
d. 11.25%
d. Rs.54.76
e. 22.34%.
e. Rs.46.05.
. h d the following cost data per unit of product: 'dual income for the year 1999-2000, is
393. A Company has fu m1s e J96, Res1
Rs. a. Rs.3,00,000
Direct materials 52.50 Rs.2,50,000
27.50
b.
Direct labor (2.5 hours)
10.00 c. Rs. J ,40,000
Variable overhead (2.5 hours)
Fixed overhead per annum: d. Rs.95,000
Factory overhead 6,00,000
e. Rs.87,000.
Selling and administration overhead 4,00,000
Answer questions 397 to 404 based on the following information
The annual sales of the company are 40,000 umts.
A company has two divisions viz., LD and KO. LD operates_at full capacity and KO operates
The investment of the company in fixed capital is Rs. I 0,00,000. Working capital is 20% on at 50% capacity. LD produces two products, LX and LY usmg the same labor force for each
sales. The company wants to earn a post-tax return of 12.3% on capital employed. The product. The direct wage rate per production hour is Rs.5. During the next year, its budgeted
corporate tax rate is 38.5%. capacity of 42,000 direct labor hours invol~es a commitment to sell 6,000 kg. of LY. The
At which selling price per unit, would the company be able achieve its objective? balance capacity will be used for the production of LX.
a. Rs.125.00 Estimated direct material and labor cost per kg. of LX and LY are
b. Rs.145.89 LX LY
C. Rs.178.90 Direct Materials 36 28
d. Rs.209.00
Direct Wages 30 20
e. Rs.235.54.
The company's overheads amount to Rs.7.56,000 per annum relating to LX and LY in
394. Tool Manufacturing Company manufactures Product 'X'. There is a great demand for the proportion to their direct wages. At full capacity Rs.4,20,000 of this overhead is variable. LD
product in the market. The cost structure of the Product 'X' is given below: prices its products with 50% mark-up on its total costs. KO wishes to buy 2,000 kg. of LX
Rs. from LD for processing into KX which can be sold at Rs.300 per kg. The processing material
Direct Material 30 and wages cost Rs.30 per kg. and the variable overheads amount to Rs.4 per kg. The fixed
Direct Labor (4 hours) 24 costs amount to Rs.1,00,000 per annum. If LD transfers LX to KO, the variable costs of LX,
Variable Overhead (based on direct labor hour) 16 in respect of sales to KD, would be reduced by Rs.4 per kg.
Total 70 397. The profit/loss of the LD division if LD transfers LX at a price applicable to outside
The selhng pnce of Product ' X' ts Rs.90. The labor force is currently working at full capacity
customers on the basis of total cost is
and there is no idle time. A customer has approached the company with a special order of
Rs.30,000. The cost of executing the order would be Rs.12,000 for direct material and 1250 a. Profit Rs.6,29,000
labor hours will be required for special order. The company should: b. Loss Rs.5,00,000
a. Accept the order as the profit is Rs.2,000 C. Profit Rs.4,76,000
b. Reject the order as the profit is Rs.1,500 d. Loss Rs.3,56,000
c. Accept the order as the profit is Rs.3,000 e. Profit Rs.2,39,600.
d. Reject the order as the loss is Rs.750 398. The profit /loss of the KD division if LD transfers LX at a price applicable to outside
e. Reject the order as the loss is Rs. I 00. customers on the basis of total cost is
Answer questions 395 and 396 based on the following information a. Profit Rs.2,43,000
Perfect Pistons Ltd. produces piston for its customer. The company reported the following b. Profit Rs.3,45,900
results for 1999-2000.
c. Loss Rs.90,000
Rs. d.
Income Loss Rs.4,40,000
5,00,000 e.
Sales revenue Profit Rs. I ,20,000.
28.00,000
l.nvested caoital 30,00,000
The company's req111red rate of return on invested capital is 12%.
270 271
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.vision if LD rransfers LX at a price based on total costs les sells the entire regular production 10 outside customers 3 1 th e .
usual pnce).
I oss o f Lo di
399 The profit/I . . . s credit t (LD
· llin d d. 1n·b 1·0 n expenses of Rs.4 per kg. which will not be incurred in resp ect Of the or l,oSS Rs.1,78,000
SC g an IS u I a.
sale is 1,oss Rs.2,00,000
b.
a. Profit Rs.2,60,000 c. LoSS Rs. t ,65,000

Loss Rs.3,50,000 d. Profit Rs.1,28,000

b.
Profit Rs.2,65,000.
C. Profit Rs.4,00,000 e.
- Perfect Ltd., Progressive .
Ltd. and Pioneer 1,td•• are compeutors .
, rn companies
40S- '"-•ee . • . m the
d. Loss Rs.3,50,000 Jeeping-bag industry. 8 as1c comparative data for the year 2002 200) are as o11ows:
e. Profit Rs.6,21 ,000. -s

CompaDY
Operating assets
(Rs.)
Operating costs
(Rs.)
Net sales
CRs.l
400. The profit/loss of the KO division if the LO transfers LX at a pri_ce based on total costs less 30,00,000
credit for selling and distnbuuon expenses of Rs.4 per kg. which will not be incurred in Perfect Ltd. 48,00,000 54,00,000
respect of the sale is progressive Ltd. 40,00,000 38,00,000 42,00,000
Pioneer Ltd. 32,00,000 32,00,000 40,00,000
a.
b.
Loss Rs.82,000
Profit Rs.3,89,000
- The return on capital employed of Perfect Ltd., Progressive Ltd. and Pioneer Ltd. is
C. Profit Rs.2,00,000 a. 30"/c,; 20% and 25% respectively

Profit Rs.I , 16,000 b. 20"/o; 25% and 10% respectively

d.
e. Loss Rs.6,00,000. c. 25%; 20"/o and 10% respectively
401. The profit/loss of the LO division if LO transfers LX at a price based on marginal cost d. 25%; 20"/o and 30% respectively
reduced by Rs.4 per kg. of selling and distnl>ution expenses will be e. 20"/o; 10"/o and 25% respectively.
a. Profit Rs.1,20,000 406. Consider the following data pertaining to the Product ' P ' of AB Ltd.:
b. Loss Rs.45,000 Variable cost (Rs.) 1.20,000
c. Profit Rs.1,67,000 (Rs.) 1,50,000
Fi'Ced cost
d. Loss Rs.3,00,000
Average investment for the product (Rs.) 2 ,50,000
e. Profit Rs.3,51,000.
Production (Units) 10,000
402. The profit/loss of the KD division if LO transfers LX at a price based on marginal cost
reduced by Rs.4 per kg. of selling and distribution expenses is lfthe company desires to earn 12% return on investment after tax (Income tax rate 40%), the
selling price per unit would be
a. Profit Rs.2,90,000
a. Rs.15
b. Loss Rs.3,12,900
b. Rs.17
C. Profit Rs.3,89,000
C. Rs.20
d. Profit Rs·. 1,88,000
d. Rs.30
e. Loss Rs.2,00,000.
e. Rs.32.
403. What will be The profit/loss of the LO division if it manufactures the quanttty of LX required 407. The following information pertains to Ace Ltd. for the year 2002-2003:
by KD by employing overtime payable at double the normal wage rate and transfers at
marginal cost less Rs.4 per kg. being selling and distribution costs not incurred in respect of Particulars Rs.
sale to KD. (LO sells the entire regular production to outside customers at the usual price). Total sales 10,00,000
a. Profit Rs.3,40,000 Profit from the business 1,80,000
b. Profit Rs.6,2 1,000 Average investtnent in the business 6,00,000
C. Profit Rs.2,78,000
lfthe tmputed mteres~rate of the corq>any 1s 20%, the residual mcome of the company is
d. Loss Rs. 1,90,000 a. Rs.4,00,000
e. Loss Rs.4,90,000. b. Rs.2,20,000
40<1. What will be the profit/loss of KD division if LO division manufactures the quantity of LX C. Rs.1,20,000
required by KD by employing overtime payable at doublt: the normal wage rate and rransfers d. Rs. 60,000
at marginal cost less Rs.4 per kg. being selling and distribution costs not incurred in respect e.
of sale to KD. Rs.36,000.

21:
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"·-· hed the following. data relating to a product fo r the year 2002- 2003 In a manufacturing process, 12 kgs of raw materials are used as input to obtain 9 _6 kgs of
408. ATC Ltd has 1uuuS
1,500 412, output. If the cost per kg of raw material 1s Rs. 16, the cost per kg. of output is
Units produced
(Rs.) 2,70,000 a. Rs.25.00
Direct materials Rs.23.25
(Rs.) 2, 10,000 b.
Direct labor Rs.20.00
c.
(Rs.) 80,000 (25% fixed)
Manufacruring o\'erheads d. Rs. 18.50
Selling and administrative overheads (Rs.) 1,00,000 (40% fixed) e. Rs. 17 .60.
If the company manufacrures 2,000 units in the next year, the cost per umt would b-;-- _ South Division of T iru Ltd. has furnished the following financial information for the year
413
2002-2003:
a. Rs.520 Rs. in T housands
Particulars
b. Rs.460 Average plant and machinc:ry 1,8 15
C. Rs.430 Cost of goods sold 3,660
Rs.420 Net sales 4,480
d.
General and administrative expenses 170
e. Rs.400.
Average working capital 785
409. If the rerurn on investment and percentage of income to sales for a period are 22.0S'¼O . .
and If the company treats the South D1v151on as an investment center for measurement of
35% respectively, the asset turnover ratio for the period is
performance, the Return on Investment (ROI) for the year is
a. 1.59
a. 35.62%
b. 0.87 31.54%
b.
C. 0.63
C. 25.00%
d. 0.21
d. 23.25%
e. 0.08
e. 22.00%
41 0. Consider the following data pertaining to a product of KBC Ltd. 414. Mr.Bansilal is the general Manager of Fine Product Division and h.is performance is
Variable cost per unit (Rs.) 40 measured using the residual income method. He has estimated the following cashtlows for
Fixed cost (Rs.) his division for the next year:
30,000
Profit Particulars Rs.
(Rs.) 8,000
Production units Investment in Plant and equipment 17,20,000
250
Investment in Working capital 8,10,000
The mark-up percentage on \'anable cost 1s
a. 80% Revenue I 1,50,000
b. 120% If the imputed mterest cost is 12% and Mr .Bar1Silal desires to ach.ieve a residual income of
C. 300% Rs.2, 17,000, the total costs, in order to achieve the target, would be

380% a. Rs.9,33,000
d.
b. Rs.8,46,400
e. 400%.
C. Rs.6,29,400
411. Consider the following overhead costs ofa company fo r the productton of 2,400 units:
d. Rs.5,20,600
Particulars
Rs. e.
Rs.4, 73,400.
Variable overhead costs
76,800 41 5, Quality Fabrics Ltd. (QFL) has the followin11. cost components for 50,000 units of product
Fixed overhead costs •
60,000 'KS' for the year 2003-2004:
Total overhead costs
1,36,800 Particulars Rs.
The total overhead costs for 2,000 umts are
Direct materials 3.90,000
a. Rs. l ,13.330
Direct labor 3,60,000
b. Rs.1,20,000
Manufac turing overheads 3,69.000
c. Rs. 1,24,000
L Selling and administrative overheads 2,5 1,000
d. Rs.1,32,000
e. Rs. 1,36,800.

274 275
 ptfM:lff•ili!fM4GB lmD
eEffl&i4ui4:i1•33;:•JmllW! . 000 of manufacturing overheads and Rs.6() OOo
r Rs I 50, 1bc flXed portion of capllal employed is Rs.50,000 and the varying portion
All costs are variable _except o
selling and administr.1ttve expenses.
The . ·
total cost of 53,000 units is ' Of is 40% of sales
ver. 11ie company desires to cam a profit of 12% on capital employed after
payment of
~ t 40%. TI1e selling price o f the product is
a. Rs.11,60,000 a. Rs.20.00
b. Rs.12,35,300 b. Rs.14.69
c. Rs.13.68,400 c. Rs.15.88
Rs.14,52,200 d. Rs. I 1.09
d.
c. Rs. 8;50.
e. Rs.14,39,600. . % capacity level. The production under nonnai
70 cunko Ltd. has furnished the following data relating to its product for the year
Ltd is currently operating at . bl cost per unit is Rs.16 and lhe total fixed 420 2002-2003 :
416. K omaI . 00 000 units 11ie vana e
capacity level is I, , · 4 00
ts to earn a profit of Rs. . •000, lhen lhe pnce
.
costs
of the
- AnJ'Blal production (units) 30,000
000. If the company wan r.taterial cost (Rs.) 90,000
arc Rs .8,00
product per unit should be Other variable costs (Rs.) 1,80,000
a. Rs.33.14 Fixed cost (Rs.) 60,000
Total cost (Rs.) 3,30,000
b. Rs.15.00
Apportioned investmen t (Rs.) 3,00,000
c. Rs.12.00
Assuming mcomc tax rate of 40%, if the company desires to earn a post tax
profit of 15% on
d Rs.\0.86 listed sate price when trade discount is 35%, the net sale price per unit would
be
c. Rs.I 0.00. a. Rs.35.00
. f ,many for the year 2002-2003
.de the following data o a C0,..,.-- b. Rs-30.00
417. CollSl r (Rs.) ~0
Variable cost pct unit c. Rs.27.50
(Rs.) 8,00,000 Rs25.00
Fixed costs d
(Rs.) 3,90,000 e. Rs.17 .88.
Estimated profit
(units) 10,000 421. Sharada Ltd. services washing machines and clothes dryers. It charges
Normal volume of production customers for
spare materials with marlrup on cost. The company has five employees , each earning the
The mark-up on toeal cost is Rs.
6,000 per year and spending 1,000 hours per year on service calls. It sells
parts that cost Rs.
a. 78J)O% 45,000 annually. The company has other costs of Rs. 25,000 a year, which
is allocated two-
thirds to labor and the remainder to material. The amount of markup on parts,
b. 48.75% if the target
profit of the company is Rs. 20,000 per annum, is
C. 40.00% a. Rs.72,000
d. 30.00% b. Rs.75,000
C 25.00"/4. C. Rs-30,000
· . ·
washing machines and cloth dryers. It charges customers on t1IDe
418. Amazon Company ~ces same markup d. Rs.45,000
00 both types of costs. The company has IMC
and matmal bas1S, with the din hours per annum on service e. Rs.27,000 .
employees, each earning Rs.64,800 per yRsear80and000speannualn 2400
The company has other costs of
The rnmru1ny sells parts that cost · , 422. A timber merchant purchased 1,000 cft. of timber logs on April OI, 2003
at the rate of
caUs. -·...-· . . Y·
thirds to labor and remainder to material . The Rs. I 00 per cft and stored them in his tini>er yard for six months for seasoning
Rs.94,640 a year, which IS a ---•--'
n ~ two- . In the timber
company desires to cam a profit of Rs.70,000 per annum. yard the following iterflS of expenses were incurred during the period of seasoning
:
What should be the price the co~y charges to the customer for labor per Rent -Rs. 1,250 per month
bour?
Salaries of 4 guards at the rate of Rs. 250 per month
a. Rs.49.95
lncidental expenditu re for maintenance, power, lighting, etc. Rs. 750 per month
b. Rs.27.00
Annual share of administr ation overheads Rs. 10,000.
C. Rs.43.20
50% of the floor area of the godown and other cOODCcted operations were
incurred for stocking
d. Rs.33.89 the 5Casooed timber. Loss in volwne of the~ due to seasoning should be taken at 10%.
e. Rs.36.72. I~ the timber merchant desires a profit of I 5% on cost, the selling price
of the seasoned
.
419. Consider the following data of Product 'KN' of a company for productio and sales of timber per cft as on January O1, 2004 is
n
50,000 units: a. Rs. 142.47
Material Rs.1,00,000
b. Rs. 128.23
C. Rs. i \ l.50
Labor Rs. 80,000
Overheads
d. Rs. 123.89
Rs.3,20,00 0
C. Rs. 132.28.
276
277
b
 l1'1NIH4,U4,,r·w,•m 11mitr· lml
. . tO comput~ costs for its three products for pricing purpose·
423. Megha Ltd. ts attempfitmgd • ufacturing costs of Rs. 4,92,000. The variable costt lhe sider the follo,..mg deta ils penainmg to Yamha Ltd. for the month of December 2003:
4%6. Con

-
company has annual 1xe man of the
company's products are as follows : --;;;;; icu Iars Rs.
Variable costs of Sales 40,000
Product manufacrure (per unit)
D irect materials 17,500
(Rs.)
D irect labor 10,000
X 6
y 9 v ariable overheads 5,000

12 C apital employed 25,000

z
The return on investment m December 2003 1s 12.5%. In the month of January 2004, it is
The company expects to produce and sell 60,000 units of X, 80,000 units of Y, and I •00,000 expected that the volume of sales increases by 15%, the selling price increases by 2% and
units of z annually. Company policy is to add a markup of 30 percent to each product's total
there is a reduction of all the costs by 2%. The change in the return on investment for the
manufacturing costs to compute the tentative sellmg pnce.
month of January 2004 is
The selling prices of product X, Y and Z, if fixed costs are allocated on the basis of Dumber
a. Increase of 12.5%
of units produced, are
b. Increase of 92.16%
a. Rs. 18.265, Rs. I 0.465 and Rs. I 4.365 respectively
C. Decrease of 92.16 %
b. Rs.14.365, Rs.14.04 and Rs.10.465 respectively
d. Decrease of 6.5%
c. Rs.10.465, Rs.I 1.065 and Rs.18.265 respectively
e. Increase of 24.02%.
d. Rs.10.465, Rs.14.365 and Rs.18.265 respectively
427. The estimated annual production of products A and B are 5,000 and 15,000 respecti\'ely. The
e. Rs.l0.465, Rs.14.365 and Rs.14.05 respectively. budgct~d cost details of these products are as under:
Answer questions 424 and 425 based on the following information
Particulars A B
424. Moin Limited manufactures plastic bags. The company's directors have projected the
following sales for the next three months: Direct materials per unit Rs.40 Rs.47
January 2004 2, I 0,000 Units Direct labor per unit (@ Rs.9 per hour) Rs.36 Rs.27
Febru~ry 2004 3,60,000 Units Selling overheads per unit (40% variable) Rs. 5 Rs.to
March 2004 4, I 0,000 Units The other overheads are charged to the products as under:
Opening stock offinished goods on January 01, 2004 is 30,000 units. The company has some
Factory overheads (60% fixed) I 00% of direct wages
problems recently in supplying its customers promptly and the directors have decided to aim
for a I0% increase in finished goods closing stock at the end of each of the three months. Administrative overheads (100% fixed) 5% of factory cost
Each bag uses 1.5 kg of plastic that costs Rs.6 per kg. The stock o f plastic on January 01, The fixed capital investnient is Rs. I 0,00,000 and the working capital requirement is
2004 is 50,000 kg. The raw material is readily obtainable, but in order to ensure that the equivalent to 6 months stock of cost of sales of both the products. A return on investment of
company will not run out of stock, the directors would like to increase the closing stock of 25% is expected.
plastic by I 0% each month for the next three months.
The expected return on capital employed is
The amount ofraw material to be purchased during the month of March 2004 will be
a. Rs.41 ,67,060 a. Rs.3,30,275
b. Rs.42, I0,260 b. Rs.3,00,000
C. Rs.38,47,260 C. Rs.4,35,375
d. Rs.38,04,060 d. Rs.4,50,275
e. Rs.38,40,060. e. Rs.5,80,500.
425. The value of closing stock of raw materials at the end of March would be 428
a. Rs.3 ,99,300 - lft~e asset turnover and profit margin ofa company are 2.5 and 0.75 respectively, the return
on mvestment is
b. Rs.4,03,400 a. 1.875
C. Rs.3,63,000 b. 1.785
d. Rs.3,00,000
C. 1.850
e. Rs.4 ,03,300.
d. 1.000
e. 1.650.
278
279
 l15611r1erc:2s:r·1ru•mflM p lmll
j\.ssunlC
that the company·s profits are taxed at the rate of S0°/4o.
Budgeting and Budgetary Control . . .
. nd 430 based on the following information Afler the expansion, the company has two alternatives for operating the expanded plant as
Answer questions 429 a . . .
The cost of article X al a capacity level of 10,000 _u~1ts 1s given under A below. l'o under:
. . . .' a
. bo or below this level. the md1v1dual expenses vary as indicated in Sales can be increased up lo 8 lakh units by spending Rs.1,00.000 on special
vana110n m capacity a ve 13 3
• advertisement campaign lo explore new market or
belw
0

A (Rs.} B Sales can be increased to I O lakh units subject to the following:

b.
Material Cost 75,000 100% varying i. By an overall price reduction of Re.1.00 per unit on all units sold.
Labor Cost 30,000 I 00% varying
ii. By increasing the variable selling and administrative expenses by 5% .
Power 3,000 80% varying
Repairs & 3,500 80% varying iii. The direct material costs would go down by I% due lo discounts o n bulk buying.
Maintenance _ Whal is Profit/Loss, at the level of 5 lakh units under a fle xible budgeting exercise?
Stores 2,000 100% varying 431
1,400 25% varying a. Profit Rs.6,00.000
Inspection
Depreciation 10,000 100% varying b. Loss Rs.2,00,000
Administration 3,600 25% varying
c. Profit Rs.3,00,000
Overhead
Selling Overhead 4 500 500/o varying d. Profit Rs.5,80,000
Total I 33,000 e. Loss Rs.2,90,000.
Cost OCT unit 13.30
_The break even point in rupees at the level of 5 lakh units is
429. The mut cost of the product at produclJOn level of8,000 units is 432
a. Rs.40,00,000
a. Rs.13.48
b. Rs.19.00 b. Rs24,00,000

C. Rs.24.89 c. Rs.43,00,000
d Rs.30.00 d Rs.26,00,000
e.Rs.34.90. e. Rs.32,00,000.
430. The unit cost of the product at production level of 12,000 units is
433. What is the profit and loss at the level of 8 lakhs units wider a flCX1ble budgeting exercise?
a. Rs.40.00 Profit Rs.3,50,000
a.
b. Rs.38.90
b. Loss Rs.2,00,000
C. Rs.24.56
C. Profit Rs. l,50,000
d. Rs.13.18
d. Profit Rs.2,50,000
e. Rs.4.50.
e. Loss Rs. l ,00,000.
Answer questions 431 to 436 based on the following information
A manufacturing company having a capacity of 6 lakh units has prepared the following cost 434. The break even point in rupees at the level of 8 lak.h units is
sheet: a. Rs.35,90,000
Per Unit b. Rs.57 ,33,000
Direct Materia ls Rs.2.50
C. Rs.65,00,000
D irect Wages Rs. LOO
Factory Overheads ( 50% flexible} Rs.2.00 d Rs.42,70,000
Selling Overheads ( 1/3 variable) Rs. I.SO C. Rs.30,00,000.
Selling Price Rs.8.00 435. What is the profit and loss at the level of IO lakhs units of production under a flexil:
Dunng the year I 9x l , the sales volume achieved by the company was 5 lakh units. The budgeting exercise?
company has launched an expansion program, the details of which are as under:
a. Loss Rs.2 ,50,000
a. The capacity will be increased to IO lakh units.
b. Profit Rs.2,00,000
b. The additional fixed overheads will amount to Rs.6 )akh up to 8 lakh units and will
C. Profit Rs. l ,50,000
increase by Rs.2 lakh more beyond 8 lakh units.
d. Loss Rs.5,00,000
c. The cost of investment on expansion is Rs. IO lakh, which is proposed to be financed
through bank borrowings carrying interest at 15% per annum. e. Profit Rs.3,50,000.
d. The a verage depreciation rate on new investment is I 0% based on straight line method-

280
 lhFieFGl4ni4,\i•ffl•J'IOtlV-t··tdtz.IELSI . .
. . ces at the level of IO lakh unlls ,s
436. The break-even point Ill rup Ltd .. a manufacture r of electncal appliances has set the following budget for 2003 .
439, X Co-:_::~ - - - -~ - -:;::.:.:.-=::--:;:-~--_..,,:._::~:.::.::.'.'.::...:_
a. Rs.90,89,000 Air Table Lamps Toasters Room Heaters
Coolers
b. Rs. 78,75,000 production (unit_s) 40,000 10.000 50,000 30,000
c. Rs.65,87,000 Selling price/unit Rs.35 .00 Rs.50.00 Rs.60.00 Rs.80.00
Rs.54,00,000 cost per umc
d. Direct materials 6.00 13.50 10.50 24.00
e.Rs.49,78,000. . I . Direct labor 7.50 10.00 18.00 24.00
A The company 1s unab e to sustain competitio . Variable o verhead 4.50 10.00 12.00 13.00
L d manufacrures produc I · f 6 300 • n and It
437. X Co.. t · f ?O% which represents an output o , umts, but it is forecasted fixed overhead 8.00 9.00 19.00 25 .00
operaung at a level O . • Id be in the level of 50% of the capacity. that profit/ Loss) 4 .50 . 6.50 1.50 5.00)
for the next budget penod sa1es wou The sales director put a proposal to increase_the sales by 20,000 additional units for which the
Level of activity
acity existed. The add1t1onal 20,000 uruts could be one product or any combinallon of
60% 70% 80% ~~ucts. Toe proposal was accepted by the comminee.
Rs.42,000 Rs.49,000 Rs.56,000 ~e company also decided that the production_capacity_for the next year i.e., 2004. could be
Direct materials
Rs.18,000 Rs.2 1,000 Rs.24,000 set in such a way that there would_be a further mcrease m the output by 50,000 units over and
Direct wages above the increase of 20,000 units envisaged earher. The additional production of 50.000
Rs.37,600 Rs.41,200 Rs.44,800
Production overhead units would be of table lamps only for which a new plant would be acquired which would
Rs.31 ,500 Rs.31,500 Rs.31,500
Administration overhead add an additional fixed expense of Rs.70,000 per annum. During 2004, raw material and
Rs.42,300 Rs.44,100 Rs.45,900
Selling overhead labor costs are expected to mcrease by 10% but the other costs and selling expenses would
Rs.1,71,400 Rs.1,86,800 Rs.202,200 remain the same.
Total Cost
Profit is 25% of selhng pnce. The net profit/loss if the increased output materializes is
What would be the total sales ofX Co. Ltd., at 50% capacity? a. Profit Rs.7,56,000
a. Rs.3,67,000 b. Loss Rs.3,00,000
b. Rs.3,00,000 c. Profit Rs.2,50,000
Rs.2,08,000 d. Profit Rs.8,86,500
c.
Rs.1,59,000 e. Loss Rs.5,00,000.
d.
440. For problem no.439, assuming that the increased output of 50.000 may not rnateriali2e, what
e. Rs.1,78,000.
would be the number of units of table lamps required to be sold in 2004 at the given price in
438. x Co. Ltd., a manufacturer of electrical appliances has set the following budget for 2003: order to ensure that profitability at least at 2003 level is maintained?
Air Coolers Table Lamps Toasters Room Heaters
a. 45,800 units
Production (units) 40,000 10,000 50,000 30,000
b. 29,000 units
Selling price/unit Rs.35.00 Rs.50.00 Rs.60.00 Rs.80.00
C. 43,000 units
Cost per unit:
d. 44,960 units
Direct materials 6.00 13.50 10.50 24.00
e. 34,700 units.
Direct labor 7.50 10.00 18.00 24.00
441. The following are the details regarding the X Co. Ltd:
Variable overhead 4.50 10.00 12.00 I 3.00
Month Sales <Rs.)
Fixed overhead 8.00 9.00 19.00 25.00 February 14,000
Profit/(Loss) 4.50 6.50 1.50 (5.00) March 15,000
The sales director put a proposal to mcrease the sales by 20,000 additional units for which the April 16,000
capacity existed. TI1e additional 20,000 units could be one product or any combinauon of May 17,000
products. The proposal was accepted by the cormnittee. June 18,000
Credit terms are:
What would be the maximum profit if the additional capacity of 20,000 units is utilized'!
a. Rs.4,56.000 Sales/Debtors - 10% sales are on cash. 50% of the credit sales are collected next month and
the balance the following month.
b. Rs.5,02,000
What is the total cash from Sales/Debtors for the month of June?
C. Rs.6,70,000
a. Rs.16,650
d. Rs.7,65,000
b. Rs.23,000
e. Rs.8,00,000. C. Rs.9,050
d. Rs. 19,000
e. Rs.20, 1 SO.
282
283
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loe1enw¥re:,rr·xu,.n11m.1 ii•ihil•lfffliil.LI
questions 445 to 447 based on the following information
d ·1 egarding the ·X Co. Ltd.:
442. The followmg arc th e eta1s r 1,11sV18' •ng are the details regarding the X Co. Ltd.:
'J1,e folloWI
Month Materials (Rs.)
i.
February 9,600 Sales Materials Wages Overheads
l',{ontb Rs. Rs.
Rs. Rs.
9.000
March 9 ,600 3,000 1,700
9,200 February 14,000 3,000 1,900
April 15,000 9,000
March 3,200 2,000
16,000 9,200
May 10,000 pril 2,200
17 000 10,000 3,600
10,400 May 1s 'ooo 10 400 4 000 2.300
JW>C JUJlC •
.. Credit terms arc
Credit termS are: n.
Creditors _ Materials 2 Months Sa)es/Dcbtors - I 0% sales are oo cash, 50% of the credit sales arc collected next month
and the balance the following month.
What would be the total creditors for materials for the month ended June?
Creditors - Materials 2 months
a. Rs.12,000
Wages 1/4 month
b. Rs.10,400
Overheads 1/2 month
C. Rs.10,000
d Rs.9,200 iii. Cash balance on I st April, 2003 is expected to be Rs.6,000.
Rs.9,600.
C. iv. Other relevant information is:
.«3. The following arc the details regarding the X Co. Ltd.: • Plant and machinery will be installed in February at a cost of Rs.96,000. The
monthly installments of Rs.2,000 is payable from April onwards.
Month Wages (Rs.)
February 3,000 • Dividends @ 5% on preference shuc capitll of Rs.2,00,000 will be paid on 1st
March 3,000 June.
April 3,200 • Advance to be received for sale of vehicles Rs.9,000 in June.
May 3,600 • Dividends from investments amounting to Rs.1000 are expected to be received in
June 4,000 June.
Credit terms arc
• Income tax (advance) to be paid in June is Rs2,000.
Creditors - ¼ Month
445. What is the closing cash balance for the month of April?
What is the total balance of wages for the month of June?
a. Rs.3,000 a. Rs.3,000

b. Rs.3,900 b. Rs.2,000
c. Rs.3,150 C. Rs.3,950
d. Rs.3,500 d. Rs2, l 50
e. Rs.4,000. e. Rs.4,870.
444. The following are the details regarding the X Co. Ltd.: 446. What is the closing cash balance for the month of May?
Month Overheads (Rs.)
a. Rs.3,950
February 1,700
b. Rs.3,000
March 1,900
April 2,000 C. Rs2,750
May 2,200 d. Rs.4,900
June 2,300
C. Rs.5,000.
Credit terms
Creditors - Overheads ½ Month 447. What would be the closing cash balance for the month of June?

What is the total balaoce ofoverheads for the month of June? a. Rs.3,9 50
a. Rs.1,950 b. Rs.3,000
b. Rs.2, 100 C. Rs.300
c. Rs.3,000 d. Rs.7 67
d. Rs.2,250
e. Rs.890.
e. Rs.2,750

284 285
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. and 449 based on the following information
448 ral adn11 nistration overheads are budgeted at R~.37,000. At the begmning of ihc period
Answer questions h ·cals MAN and PAN . It sells them in one liter c
, n1res two c enu · · . ont• 1· Gene . st packed stocks are expected to be:
X Co. Ltd . manu,ac b ch of I 00 hters are: • ners. i.e. Apn 1 1 ' .
The specifications for the two products per at 2 000 htc rs
MAN PAN
MA N ,
N 3 000 liters
Materials PA ti nd ~f the period i.e., 30th September, it is desired that the closing stocks of the two
120 liters 100 liters 8[od~~: will be 3,000
Delta liters and 4,000 liters respectively.
20 kg. 10 kg.
Gamma
Containers - cost per I 00 Rs.JOO Rs.JOO P t profit/loss for the period for the company as a whole is
The ne
Direct Labor Profit Rs.64,200
Manufacturing 12 man- J6man- a.
hours hours Profit Rs.76,000
b.
Primary Packing 5 man- 5 man- Profit Rs.22,400
hours hours c.
Materials are expected to cost Re. I a hter of Delta and Rs.8 a kg. of Gamma. Manufacturing Profit Rs. J ,40,200
d.
·
wages are esumate d a t Rs .6 per hour and packing wages at Rs.4 per hour.
e. Loss Rs.1,00,000.
448. What is standard prime cost per I00 liters of product MAN? % capacity ( 1,00,000 hours), the monthly production overhead budget for a fac1ory
451. At 100 o
a. Rs.500.00 was as follows:
b. Rs.625.65 Rs. Category
C. Rs.375.90 60,000 C
Salaries
d. Rs.4 72.00
Indirect wages 8,000 B
e. Rs.330.45.
Repairs and Maintenance 5,000 B
449. What would be standard prime cost per I 00 liters of product PAN?
Rs.396.00 Consumable Stores 5,000 A
a.
b. Rs.330.00 Miscellaneous 5,000 B
c. Rs.302.90 Spoilage 2,000 A
d. Rs.286.00 Fuel and Power 15,000 B
e. Rs.267.80. 100,000
450. X Co. Ltd., manufactures two chemicals MAN and PAN. It sells them in one liter containers.
The behavior of vanous categones of expenses was as follows:
The specifications for the two products per batch of 100 liters are:
MAN Activity as a percentage of capacity Multiplier applicable to
PAN
Materials budget
Delta 120 liters 100 liters A B C
Gamma 20kg. 10 kg.
Containers - cost per I 00 Rs. 100 Rs.JOO 80 0.85 1.00 1.00
Direct Labor 1.00
90 0.93 1.00
Manufacturing 12 man-hours 16 man- hours
Primary Packing 5 man-hours 5 man- hours 100 1.00 1.00 1.00
During the six months ending 30th September, the company expects to sell 15,000 liters of 110 1.06 1.00 1.00
MAN @ Rs.9 per liter and 25,000 liter of PAN at Rs.7 per liter. Materials are expected to
cost Re. I a liter of Delta and Rs.8 a kg. of Gamma. 120 1.1 2 1.00 1.00
Manufacturing wages are estimated at Rs.6 per hour and packing wages at Rs.4 per hour. 130 1.18 1.10 1.00
Flexible overhead expense budgets are operated for manufacturing and packing departments 140 1.23 1.10 1.00
based on the number of man-hours worked. These budgets for the six months endmg
September are: 150 1.28 1.10 1.20
Manufacturing Dept. There are three products and 111 a month, the total production was expected to be:
Primary Packing Dept.
Man-hours Overheads Rs. Man-hours P I 0,000 units
Overheads Rs.
5000 40,000 1700 Q 20,000 units
26,000
6000 50,000 1900 28,000 R 10,000 units
7000 60,000 2100 30.000 The Standard hours per unit of the three products were 3, 4 and 2 respectively.
8000 80.000 2300 32,000
286
 86FOI errs :mrrulDJ!I•
.
You are requrred to ca1cu1ate
the production cost for a panicular month: lmll
Inventory Forecast:
a. Rs.91 ,870 A Units B Units
b. Rs.1,04,560 °RawMaterials:
Estimated Closing Stock 16,000 4,000
C. Rs.1,65,890
0pcning Stock 12,000 2,000
d. Rs2,00,000 finished Goods
Rs.2,24,900.
e
Alpha Delta
· . to 460 based on the following information Estimated Closing Stock 2,200 I ,000
Answer questions 452 . ,nnntinl?. Stock 200 2,000
--~ h•- twO products Alpha and Delta. The following data is g·
The X Co. Ltd., manwac,-- oven: v. Toe selling. d1stnoution and administrat1on expenses are forecast at Rs. S,OOO.
6
Balance Sheet as on 30th September, 2002.
I. vi. 1be cost o~ raw material purchases, direct labor, factory ovemeads, selling. distnoution
Shue Capital Rs.4,00,000 expenses will be met m full m cash.
Rs.32,000 Rs.4,32 000
Retained Income By 30th September, 2003, it is estimated that the outstanding debtors and creditors will stand
Represented by: at Rs.50,000 and Rs.16,000 respectJvcly. Tax owing at the begimring of the year will be paid
Plant and Machinery Rs.4,00,000
during the year.
Less:
Profits are taxed at the average of 50% . Machinery purchases during the year estimated to
Provision for
Depreciation Rs.1,00,000 Rs.3,00,000 cost Rs.40,000 will be paid during the year.
Raw Materials Rs.38,000 451. The to1al direct material cost would be
Finished Goods Rs.80,000 Rs.1,18,000
Rs.30,000
a. Rs.1,57 ,800
Debtors
C»h Rs.20,000 b. Rs.l ,45,000
Rs.4 ,68,000 c. Rs.1,26,000
Less: Rs.1,35,670
Rs. 16,000 d.
Creditors
Provisioo for tax Rs.20,000 Rs.36,000 c. Rs.l , 19,000.
Rs.4 ,32,000 453. The IDlal direct 1abc.- cost is
ii. The sales forecast gives a sales volume of 8,000 uruts of Alpha and 5 ,000 units of Delli a. Rs.70,000
at an expected selling price per unit ofRs.30 and Rs.40 respectively.
b. Rs.86,000
iii. Toe machining department and the finishing department are concerned with production.
c. Rs.90,000
Materials A and B are used in the manufacture of the products. 1be direct material ml
direct labor content in each unit of finished product are: d. Rs.l ,00,000
c. Rs.1,11,000.
Al ha Delta
Finished Product: 454. The total factory overheads would be
Material A @ Rs.3 per unit 2 units 4 units a. Rs.1,50,000
Material B @ Rs. I per unit I unit 2 units b. Rs. l ,24,500
Direct Labor:
C. Rs.l,09,150
Machining Department 2 hours I hour
Finishin D nt I hour 1 hour d. Rs.75,000
Direct labor cost in the finishing department is Rs.3 per labor hour for both Alpha and C. Rs.67,890.
Delta. Direct labor cost in the machining department is Re. I per labor hour for Alpha and 455. The value of closing finished stock. is
Rs.2 per labor hour for Delta.
a. Rs.l,24,560
iv. Factory overheads are applied on the basis of direct labor hours. Al the expected output b. Rs.l,13,450
levels the foUowing costs arc forecasted:
c. Rs.S6,000
Machining Dept Rs. Finishmg Dept Rs. d. Rs.97,890
Fixed Costs: c. Rs.66,900.
Indirect labor 14,000 6,000 4
56. The tolal collection from debtors is
Repairs 4,000 1,000 a. Rs.4,40,000
Rates 12,000 2,000 b. Rs.4,20,000
Depreciation 16,000 4,000 C. Rs.4,50,()()()
Power 2,000 1,000
Variable cost/labor hour d. Rs.4,67,000
0 .50 1.50
e. Rs.4,35,900.

288
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de co creditors is cion and Sales 2.00.000 units
457. The 101al amount of payment ma produc
Rs.7.00 per unit
a. Rs.1,40,000 selling price
Rs. I .40 per unit
b. Rs.1 ,56.000 Direct materials
Rs.2.40 per unit
c. Rs.1,68,600 Direct wages
Rs. 1,98,000 Variable Overheads Same as for produce X. The fixed overheads will remain the same
d. Other h d ·11 . b .
nd the va riable over ca s w1 continue to e incurred at the same rate as in 2002.
e. Rs. I ,24,600. the year 2002 was
~e overall profit of the company for
458. The amount of total retained income would be
a. Rs.97,560 ..
461 · Rs.24.56 lakh
b. Rs.19.70 lakh
b. Rs.1 ,02,000
c. Rs.28. 78 lakh
C. Rs.67,450
d. Rs.30.00 lakh
d. Rs.87,900 e. Rs.32.00 lakh.
e. Rs. J, I0,000. verall profit of the company for the year 2003 was
462. The 0
459. The closing balance of cash is a. Rs. I 0.00 lakh
a. Rs.43,000 b. Rs.9.90 lakh
b. Rs.30,000 c. Rs.7.35 lakh
C. Rs.23,000 d. Rs.8.97 lakh
d. Rs.20,000 e. Rs.6.76 lakh.
e. Rs.21 ,450. The following are the details of acrual data of cost, price and output relating to four varieties
463
460. The total of balance sheet is · of resistors of X Co. Ltd. manufacrured by them during the year 2002:
Rs.3,01,980
a. A B C D
Rs.2,35,000
b. Output (units) 16,000 10,000 8,000 12,000
Per unit Rs. Rs. Rs. Rs.
Rs.5,00,000
c.
Selling price 150 3 00 375 250
Rs.4,67,450
d.
Direct materials 30 70 80 30
Rs.4,00.000.
e.
25 40 75 30
Answer questions 46 1 and 462 based on the following informatio n Direct wages
150 60
X Co. Ltd., manufactured and sold two products during 2002. The following details are
given Variable 50 80
below: overheads
ProductX ProductY Fixed overheads 50 80 150 601

7,00,000 3,00,000 The profit for the year 2002 was

Quantity \wlits)
Rs/ unit Rs./unit a. Rs.5.20 lakh
Seiling Price Rs.6.00 Rs.9,00 b. Rs.6.78 lakh
Direct Materials Rs.2.00 Rs.2.00 C. Rs.3.34 lakh
Direct Wages Rs.LOO Rs.2.00 d. Rs.3.76 lakh
Other Overheads ( 50% variable) Rs.LOO Rs.0.60
e. Rs.4.20 lakh.
Variable factory overheads are absorbed as a percentage of direct wages. The summariztd
varieties
statement ofprofitability for 2002 is as under: 464. The following are the details of acrual data of cost, price and output relating to four
of resistors ofX Co. Ltd. manufactur ed by them during the year 2002:
Rs.lakh
A B C D
Sales 75.00
Output (units) 16.000 10,000 8,000 12,000
Direct Materials 20.00 Per unit Rs. Rs.
Rs. Rs.
Direct Wages 13.00 Selling price 150 300 375 250
Factory Overh_eads 13.50 Direct materia Is 30 70 80 30
(Rs.6.00 lakh fixed) Direct wages 25 40 75 30
Other overheads 8.8 (50% fixed) Variable 50 80 150 60
'.viii be overheads
For th e year ~003, due to fall in demand, the production and sales of product X
reduced by 3 0 1/o and that of product Y will be reduced by 50%. It is, therefore, decided
to Fixed overheads 50 80 150 60
mtroduce a new product Z the cost particulars "o hi h · b J
• " r w c are given e ow:

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following . of increase in prices and costs
. th b dget for the year 2003, the company anticipa tes the increases . fhe budgete d profit afler taking into consideration the effect
In prepann g e u 1
n 465, .
costs and prices: . 00Jy 1s
bs rb an increase of 5% in the pnces of each of the four p=~
_..., -11 I I . •vuuc1s . Rs.3.79 lakh
a The u......et WI a o as m the year 200z. , If ll)C a.
· volume of sales in quantities is maintained at the same eve Rs.4 .27 lakh
b.
b. The unit cost increases
are expected to be: Rs.5.00 lakh
c.
i. Direct materials 5%. d. Rs.5.21 lakh
ii. Direct wages I0%. Rs.4 .98 lakh.
e.
Variable overheads 10"/o. s re la ting to A and 8 are only
iii. _ You are required to compute the budgete d profit if proposal
C.
The fixed overheads will go up by Rs.80,00 0. 466
impleme nted.
The budgeted profit for the year 2003 is a. Rs.J .45 lakh
a. Rs.2.73 lalch b. Rs.3.67 lakh
b. Rs.3.24 lalch Rs.3.89 lakh
c.
C. Rs.4.34 lakh Rs.4.83 lak.h
d.
Rs.5.45 lalch
d.
e. Rs.5.00 lak.h.
information
e. Rs.3.34 lakh. ArlsWer questio ns 467 to 469 based on the followin g
inform ation for a yearly period:
Answer questions 465 and 466 based on the following The followin g data are availabl e for a manufac turing company
details of actual data of cost, price and output relating to four v . . (Rs.in lakh)
The following are the anebes
tured by them during the year 2002:
of resistors ofX Co. Ltd. manufac
Fixed expense s:
A 8 C D
Wages and salaries 9.5
Output (units) 16,000 10,000 8,000 12,000 6.6
Rent, Rates and Taxes
Per unit Rs. Rs. Rs. Rs. 7.4
Depreci ation
Selling price 150 300 375 250 6 .5
Sundry administ rative expense s
Direct materials 30 70 80 30
Semi-va riable expenses (at 50% of capacity):
Direct wages 25 40 75 30
Mainten ance and repairs 3.5
Variable overheads 50 80 150 60
Indirect labor 7.9
Fixed overheads 50 80 150 60
. . tes the following increases in Sales departm ent's salaries, etc. 3.8
In prepanng the budget for the year 2003, the company antictpa
Sundry administ rative expense s 2 .8
costs and pnces:
Variable expense s (at 50"/o of capac ity):
The market wiU absorb increase o~ 5% in the prices of each of the four products, if the
Materia ls 21.7
volume of sales m quan\Jlles IS mamtained at the same level as in the year 2002.
Labor 20.4
The unit cost increases are expected to be: 7.9
Other exper1Ses
i. Direct materials 5%. 98.0
Total Cost
ii. Direct wages 10%. levels of producti on; semi-va riable
Assume that the fixed expense s remain constant at all
iii. Variable overheads 10%. between 45 percent and 65 percent of capacity, increas ing by I 0
exper1Ses remain cor1Stant
by 20 percent between 80 percent
The fixed overheads will go up by Rs.80,000. percent between 65 percent and 80 percent capacity and
and I 00 percent ca pacity.
In order to fight cost increases the following ideas were put forth.
to be as under:
a. Product A· The price of prod t A ·11 be further increase d b y I0% ( making in all a Sales at various leve ls of capacity utilizatio n are expected
total of 15o/c) . th uc WI
0
resu1tmg ereby ma reduction in the volume of sales by 5%. Capacity Utilizati on Sales
b. Product B: Substitution of dir t · (Rs.~ lak.h)
about a red 1- . d " cc matena1s of product B by cheaper materials will bring I
uc ion m 1rect materials c os I b Y R s. 15 per wiit. This will reduce the sa es 50% 100
volume by 5%.
. . . 60% 120
c. Product C: An allowance of ·. J
all quantities sold .11 . specia sa1es comm1ss1on of 2% on the increase d pnce on 75% 150
wi mcrease the sales volume by 10%.
d. Product D: A reductio 1. Ir . 90% 180
!e
increase in sales volume~y ~ 5 1/o. mg pnce by 5% on the_ price
of 2002 will yield an
100% 200
The direc t labor hour rate in 2002 • Rs 2
cannot be increased in 2003 _ IS • .00 per hour and the number of direct labor ho~

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467. The profit for the company at 50% operating level is The closing cash balance for the month ending November 2003 is
a.
Rs.4.00 lakh 47 t. Rs. 19,000
a.
b.
Rs.3.56 lakh b. Rs.20,000
c.
Rs.2.00 lakh c. Rs.32,860
d.
Rs.1.97 lakh
d. Rs.24,540
c. Rs.0.54 lakh.
e. Rs-18,900.
468. What is the profit for the company if the company operates at 60% level?
losing cash balance for the month ending December 2003 is
Rs.23.00 lakh
a. 472, The C
a. Rs.34,560
Rs.20.05 lakh
b.
c. Rs. 19.00 lakh b. NIL
c. Rs.3,000
d. Rs. 12.00 lakh
e. Rs.14.40 lakh. d. Rs.43,990
469. What would the profit for the company if the company operates at 90% level? e. Rs.!,009.
Artswer questions 473 to 476 based on the following information
a. Rs.49.00 lakh
b. Rs.38.40 lakh Tipsy Ltd., produces 2 products A and B. Estimated data related to some cost and revenue
c. Rs.50.00 lakh factors are given below for the year ended 31st March, 2003.
d. Rs.30.90 lakh Product A Product B
e. Rs.29.89 lakh. Budgeted sales (units) 10,000 6,000
Answer questions 470 to 472 based on the following information Opening stock of finished goods (units) 1.000 1,200
Mis ABCL Corporation has given the following particulars: Closing stock of finished goods (units) 1,400 1,300
a. Budgeted selling price (per unit) (Rs.) 26 22
Raw materials per unit of production
Months Sales (Rs.) Materials (Rs.) Wages (Rs.) Overheads (Rs.)
X 4 kg. 3 kg.
August 60,000 30,600 11,400 5,700 y 3 kg. 2kg.
September 63,000 30,000 11,400 6,300
October 69,000 29.400 12,000 6,900
November 75,000 30,000 12,600 Raw material X Raw material Y
7,200
December 90,000 32,400 13,500 7,500 Opening stock (kg.) 1,000 900
b. Credit terms are Closing stock (kg.) 1,400 1,300
i. Debtors: 50% of credit sales are collected next month and the balance in the Cost per kg. Of material purchase (Rs.) 1.00 1.50
following month. 473. The estunated productton m uruts would be
ii. Sales: 10% on cash basis. a. A - 9,000; B - 4,900
iii. Creditors: Materials- 2 months lag b. A - 4,500; B - 4,500
Wages-1/5-month Jag c.
A- 7,800; B - 9,000
Overhead - Ii2-month lag. A - 5,600; B - 7,000
d.
C. e. A- 10,400; B- 6,100.
Cash balance on !st October, 2003 is expected to be Rs.24,000.
d. A machinery ·11 b · t 474. The total sales will be
installment ofRswt e tnS alled in August, 2003 at a cost of Rs.3,00,000. The monthly
. . . I S,OOO is payable from October onwards. a. Rs.2,78,000
e. DIVldend @ IO'¼O fi b. Rs.2,56,000
December, 2003. on pre erence share capital of Rs·9,00,000 WI·11 be paid on 1
51
C. Rs.3,92,000
f. Advance to be received for sale of vehicle of Rs 60 000 . D b d. Rs.3,67,000
g. Income Ta ( d · , m ecem er.
47 x a vance) to be paid in December Rs 15 000 e. Rs.4,56,000.
0. The closing cash balance for the month ending Octo~er ~0~3 is. 475
a. Rs.22, 170 • The total cost of material purchased would be
b. Rs.45,000
a. Rs. 1,26,000
c. Rs.39,870 b. Rs. I ,45,900

d. Rs.27,000 c. Rs.1,78,000

e. Rs.13,450. d. Rs.2,09,000
e. Rs.2, 12,980.
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terial used in productJon is fit if the company operates at 90% operating level would be
476. The total cost of raw ma The pro 1
480· Profit Rs. 11 ,00.000
a. Rs.1,00,000 a. 000
Profit Rs.13,95,
b. Rs.1,34,500
b. LOSS Rs.1,02,980
c. Rs.1,56,000 c.
[.OSS Rs.97,000
d. Rs.1,67,000 d. 00
I I f . Profit Rs. 15,65,5 •
Rs.1,25,000.
e
· ~11 t0 481 based on the follow ng n ormatton
.
e. fit if the C001)3JIY decides to operate at 100% operating level would be
Answer questions .. . • 48). n,epro
. mpany bas the ptoductJon ·capacity of 1,00,000 units per an"
·••lint. ,.,_ Profit Rs.7,60,000
A manufactunn g co 40 000 ·
lling price for ptoducuon at • units for the Year ended "" a.
expenses, profit and se ar,
b.
Profit Rs. I 2,42,000
furnished below: Profit Rs.14,76,00 0
Per unit (Rs.) c.
20 (100% variable) d. Profit Rs. I 5.94,000
Material
]2 (100% variable) e. Profit Rs. I 9,00,000.
Labor
4 ( I00% fixed) ,war questions 482 to 489 based on the following information
Supervisor's salary
6 (40% fixed) An ABC Ltd., manufactures 2 products from raw materials. The company operates a budgetary
Other expenses in factory
4 (]00% flXcd) control system.
Overall administrative
The following infonnation is relevant.
expenses
Selling and distribution 5 (60% fixed) i. Sales volume forecast in units:
1st 2nd 3rd 4th 5th
expenses
Total cost
- 51
Particulars
Quarter Quarter Quarter Quarter Quarter
Profit 19 2000-01 2000-01 2000--01 2000-01 2001-02
I---
Selling price 70 2000 1500 1500 2000 2000
Product A
It 15 noted that fixed e-'<pcnses remam constant up to 75% capacity level, which increase
by
Product 8 2500 3000 2500 3000 3000
Rs. I 0,000 per annum for every increase of I 00/o of capacity utilization or any pan thcr?o[
Management tnm of the c o ~ meet lo discuss selling price for the future. Marlcct sun-ey ii. Raw matcnals requrrement forecast:
that selling price will be reduced as follows: The standard quantities of raw materials X and Y which should be used in
the
At 60% to 80-/4 capacity - by 10% of40% capacity price manufacture of the above products and the price of these raw materials have been
estimated as follows:
Above 80"/o capacity by I5% of 40% capacity price.
Standard quantities and cost:
477. The profit/Joss al 40"/o operating level is
Raw material X - 3 units @ Rs. 12 for each unit of Product A.
a. Profit Rs.6,67,000
Raw material Y - 4 units @ Rs.9 for each unit of Product 8 .
b. Loss Rs.6,98,000
Usage variance - 4% is provided to cover spoilage and scrap in case of raw material X
C. Profit Rs.7, 60,000 and 5% in case of raw material Y.
d. Profit Rs.8,79,000 iii. Stock forecast:
e. Loss Rs. I,90,000. Particulars Finished Product A Finished Product 8 Raw Material X Raw Material Y
478. The profit/Joss if the company operates at 70% operating level would be Opening 1000 units 1500 units 1900 units 3700 units
a. Profit Rs.7,60,000 Stock
b. Profit Rs.I 2,42,000 The planned closing stock at the end of each quarter is as follows:
C. Profit Rs. I0,00,000 Finished stock - One half of the expected sales of the following quarter.
d. Loss Rs.6, 78,000 Raw material stock - One half of the expected sales of the following quarter.
e. Profit Rs.9,87,000. 482. The nwnber of units produced in respect of products A and 8 with respect to I st Quarter is
479 a. A - 1500; 8 - 1750
· The profit/Joss iflhe company operates at 80% operating level would be
a. Profit Rs.14,76,000 b. A - 1450; 8 - 2000
b. Profit Rs.12,45,000 C. A- 1800; 8 - 2,550
c. Loss Rs.3,00,000 d. A - 1750; 8 - 2500
d. Profit Rs.15,56,000 e. A - 1900; B - 4000.
e. Loss Rs.67,000.

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ber of units produced in respect of products A and B , vj h
483. What would be the num t resPect t swer questions 490 to 496 based on the following information
0
2nd Quarter
fill Praxair Ltd .. manufactures lwo Products - Product A and Product 8 . Product A is roduccd
a. A - 2400; B - 2200 bY using raw materials X1 and X, m the raho of 4:1 and Product 8 od db p
dy h · f 1 Th IS pr ucc y usm1, ,,_,
b. A - 1500; B - 2750 materials y i an . ' .m t e ratio o : 1. e weights of finished products A anu., 8· an: cqua110
the weights of their 111puts.
c. A _ 2000; B - 2500
The sales expected of Products A and 8 during July 2002 arc :
d. A - 2250; B - 2400
Product A - 100 tons
e. A - 1900; B - 2000. .
- produced in respect of products A and B with respect to 3rd Qu Product B - 1SO tons
484. The nurnber of uru15 arter is
a. A - 1750; B - 2750
All the materials required_during the mon_th wiH
be purchased at the beginning of the month.
The expected purchase pnce of raw material dunng July 2002 is as follows·
b. A - 1600; B - 2000
Raw material Expected purchase price of raw materials per ton (Rs.)
c. A - 1550; B - 1760
X1 80
d. A - 1790; B - 2000 X, 120
e. A - 2000; B - 2350 Y1 150
485• The number of units produced in respect of products A and B with respect to 4th Quaner Y, 100
would be The opemng and closmg mventory of raw maten al and fm,shed products (in tons) are
a. A - 1500; B - 2000 expected to be as follows:
b. A - 2250; B - 3250 Raw Material Opening Inventory Closing Inventory
c. A - 2000; 8- 3000 X1 60 50
d. A - 3000;.B- 1500 X, so 60
e. A - 2500; 8- 2250. 70
Y1 80
486. What would be the value of raw material purchased (budgeted) for Quarter I with respect to
raw material X and Y Ye 80 70
a. X - Rs.69,720; Y - Rs.1,15,200 Finished Product
b. X - Rs.70,980; Y - Rs.1,24,000 A 30 40
c. X- Rs.60,000; Y - Rs.1,20,000 B 40 30
d. X - Rs.59,700; Y - Rs.99,000
490, The number of tons that should be produced with respect to Product A (for the month of Jul y
e. X- Rs 56,750; Y -Rs.1 ,34,000. 2002) would be
487. The value of raw material purchased (budgeted) for Quarter 2 with respect to raw materials X a. 156 tons
and Y would be
a. X - Rs.60,340; Y - Rs.1 ,02,900 b. IOI tons
b. X - Rs.76,800; Y - Rs.1,23,000 c. 116 tons
C. X - Rs.67,890; Y - Rs.1,32,450 d. I 10 tons
d. X - Rs.80,000; Y - Rs.1,01 ,100 e. 134 tons.
e. X - Rs.56,160; Y - Rs.94,950. 491. The number of tons that should be produced with respect to Product B (for the month of July
488. The value of raw material purchased (budgeted) for Quarter 3 with respect to raw materials X 2002) would be
and Y would be a. 123 tons
a. X - Rs.65,980; Y - Rs.1,02,900 b. 140 tons
b. X - Rs.74,520; Y - Rs.1 ,12,950
C. 135 tons
C. X - Rs.79,450; Y - Rs. 1,23,450
d. X - Rs.65,750; Y - Rs.1 ,24,900 d. 111 tons
e. X - Rs. 76,900; Y - Rs. 1,22,200. e. 98 tons.
489. What would be the value of raw material purchased (budgeted) for Quarter 4 with respect 10 492, The raw material X required to be purchased for the month of July 2002 is
I
raw matenals X and Y
a. 78 tons
a. X - Rs.65,750; Y - Rs. 1,03,420
b. 87 tons
b. X- Rs.68.860; Y - Rs.1,24,900
C. 65 tons
c. X - Rs.74,880; Y - Rs. l , 13,400
d. X - Rs.78,760; Y - Rs.98,500 d. 56 tons
e. X - Rs.86,600; Y - Rs.99,000. e. 89 tons.

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. uired to be purchased for the month of July 2002. . Sales value at different activity levels is given below:
493_
The 111w matcnal X2 req ,v. ~ =-=----:-:-: --.-,-;:;-::-;:-----;-:-;:--:---,
o p acity utiliza~on Sales value (Rs.)
a. 45 tons 60% 30lakh
b. 50 tons 75% 40 lalch
c. 32 tons 90% 50 lakh
d. 26 tons JOO% 55 lakh
c 28 tons. '7,n...t would be the operatmg income ,f the company decides to operate at 60% operating
· •· -"·' y required to be purchased for the month of July 2002. 497. .. ,-
494. The raw ma1.ernu I leVel?
a. 50 toos a. Rs.6,30,000
b. 98 tons b. Rs.3, 76,000
c. JOO tons c. Rs.2,56,700
d. 80 tons d. Rs.4.30,000
e. 73 tons. e. Rs.4,19,850.
495. The raw material Y2 req.rired to be purchased for the month of July 2002.
What would be the operating income as a percentage of sales if the company decides to
498
a. 55 tons • operate at 75% operating level?
b. 57 tons a. 25.99%
C. 69 tons b. 29.66%
d 71 tons 32.23%
c.
e. 60 tons. 19.78%
d.
496. The total cost of raw material purchased is
e. 21.67%.
a. Rs.33,500.
499. What would be the operating income as a percentilge of sales if the company decides to
b. Rs.28,080. operate at 90% operating level?
C. Rs.20,000.
a. 26.76%
d Rs.23,450.
b. 28%
e. Rs.32,000.
c. 32.98%
Answer questions 497 to 500 based on the following information
d 36%
The foUowing data arc available for Twin Product Ltd. for the period 2002-03:
i. Capacity utilization 60"/4 e. 38%.

ii. Expenses Rs. S00. The operating income if the company decides to operate at 1OOo/e operating level would be
a. Variable expenses a. Rs.10,39,000
b. Rs.16,49,000
Materials 5,10,000
C. Rs.17,00,000
labor 6,30,000
d. Rs.19,34,000
Other expenses l,50,000
e. Rs22,45,000.
b. Semi-variable expenses
Answer quutions 501 and 502 based on the following information
Indirect Labor 3,85,000 The budget manager of IMP India Ltd is preparing a lleXIble budget for the financial year
Maintcnaocc and Repairs 1,80,000 2002-03.
SWJdry administrative expenses 1,15,000 The company manufactures Product ABX.
C. Fixed expenses Product ABX requires
Salaries 3,10,000 Direct material costs Rs. IO per unit
Rent, rates and taxes Direct labor Rs.4 per hour
l ,90,000
Sundry administrative expenses Labor hot1r 1. 80 hours per unit
1 00 000
. '. , mi·
iii. The fixed expenses remain
. constant lfTCspecbve of capacity utilization level, SC,..,,, Overhead expenses have been estimated in the following amounts under specified volume of
variable expenses by lu,• production.
remam constant up t0 7,,,,¾ I . .
between 70% and 85'¾0 . v ,o 1eve of capacity, mcrease
capacny, and by 20% between 85% and I 00% capacity.
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