Final Mock Test

Cost and Management Accounting

Sec: CAP II Dec 23 Date:Kartik 21, 2080
Full Marks: 100 Time: 3 hrs

Note:- All the questions are compulsory. Working notes will form part of the answer.
Q.1. A company produces and sells five types of dolls for children using one common material, which is available
as per requirement at Rs 4 per kg. Skilled labour required for production is in short supply and is currently limited
to 17,500 hours per month at Rs 30 per hour. Variable production overhead is Rs 10 per labour hour and fixed
production costs amount to Rs 80,000 p.m , variable selling and distribution overhead is 10% of Sales value,
while fixed selling, distribution and administration cost is Rs 70,000 pm. Further details are as under:-
Dolls Current Demand Selling price Raw material Direct Labour hours
units per Unit (Rs ) required per unit in required per unit (hours )
Kgs
A 4,800 90 5 1.0
B 5,000 80 4 0.9
C 4,000 60 3 0.7
D 6,000 40 2 0.5
E 4,500 100 6 1.2
Required:
a) Optimum product –mix you would recommend.
b) Profit likely to be earned as per mix suggested by you in (i) above.
c) The company has just received an export order for 5,000 units of E to be supplied within a month. It will
be possible to manufacture this quantity only by engaging labour on overtime paying double the normal
rate. An Extra amount of Rs 12,000 have to be incurred on production overhead. If the company wants
10% profit on sales, what price it should quote? [20 marks]

Q.2. Sky & Co., an unregistered supplier under VAT, purchased material from Vye Ltd. Which is registered
under VAT. The following information is available for one lot of 5,000 units of material purchased:

Listed price of one lot Rs 2,50,000

Trade discount @ 10% on listed price
VAT (Credit Not available) 13%
Cash discount @ 10%
(Will be given only if payment is made within 30 days.)
Toll Tax paid Rs 5,000
Freight and Insurance Rs 17,000
Demurrage paid to transporter Rs 5,000
Commission and brokerage on purchases Rs 10,000
Amount deposited for returnable containers Rs 30,000
Amount of refund on returning the container Rs 20,000
Other Expenses @ 2% of total cost

20% of material shortage is due to normal reasons.

The payment to the supplier was made within 21 days of the purchases.

You are required to CALCULATE cost per unit of material purchased by Sky & Co. [8 marks]
Q.3. Following information are available from the cost records of BMR Limited, CALCULATE Labour turnover
rate under different methods.
No. of Employees as on 01.04.2021 = 9,400
No. of Employees as on 31.03.2022 = 10,600

During the year, 160 Employees left while 640 Employees were discharged and 1,500 Employees were
recruited during the year; of these, 400 Employees were recruited because of exits and the rest were recruited in
accordance with expansion plans. [8 marks]

Q.4. Pretz Ltd. is a manufacturing company having two production departments, ‘A’ & ‘B’ and two service
departments ‘X’ & ‘Y’. The following is the budget for March, 2022:

Total (Rs) A (Rs) B (Rs) X (Rs) Y (Rs)

Direct material 2,00,000 4,00,000 4,00,000 2,00,000
Direct wages 10,00,000 4,00,000 2,00,000 4,00,000
Factory rent 9,00,000
Power (Machine) 5,10,000
Depreciation 2,00,000
General Lighting 3,00,000
Perquisites to employees 4,00,000
Additional information:
Area (Sq. ft.) 500 250 250 500
Capital value of assets (Rs lakhs) 40 80 20 20
Light Points 10 20 10 10
Machine hours 1,000 2,000 1,000 1,000
Horse power of machines 50 40 15 25
A technical assessment of the apportionment of expenses of service departments is as under:
A B X Y
Service Dept. ‘X’ (%) 55 25 – 20
Service Dept. ‘Y’ (%) 60 35 5 –

You are required to:

(a) PREPARE a statement showing distribution of overheads to various departments.
(b) PREPARE a statement showing re-distribution of service departments expenses to production
departments . [10 marks]
Q.5. The financial records of Riva Private Limited showed a net profit of Rs1,69,500 for the year ended 31st
March, 2022. The cost accounts, however, disclosed a net loss of Rs 88,500 for the same period. The following
information were revealed as a result of scrutiny of the figures of cost accounts and financial accounts:

(Rs)
(i) Administrative overhead under recovered 63,750.0
(ii) Factory overhead over recovered 3,37,500.0
(iii) Depreciation under charged in Cost Accounts 65,000.0
(iv) Dividend received 50,000.0
(v) Loss due to obsolescence charged in Financial Accounts 42,000.0
(vi) Income tax provided 1,09,000.0
(vii) Bank interest credited in Financial Accounts 34,000.0
(viii) Value of opening stock:
In Cost Accounts 4,12,500.0
In Financial Accounts 3,62,500.0
(ix) Value of closing stock:
In Cost Accounts 3,13,750.0
In Financial Accounts 3,30,000.0
(x) Goodwill written-off in Financial Accounts 62,500.0
(xi) Notional rent of own premises charged in Cost Accounts 1,50,000.0
(xii) Provision for doubtful debts in Financial Accounts 37,500.0
Prepare a reconciliation statement by taking costing net loss as base. [8 marks]

Q.6. Brostom Ltd. manufactures 'Stent' that is used by hospitals in angioplasty, a procedure used to open blocked
coronary arteries without open-heart surgery. As per the estimates provided by Pharmaceutical Industry Bureau,
there will be a demand of 1 crore 'Stents' in the coming year. Brostom Ltd. is having a market share of 10% of
the total market demand of the Stents. It is estimated that it costs Rs 3.00 as inventory holding cost per stent per
month and that the set-up cost per run of stent manufacture is Rs 450.
Required:
(i) WHAT would be the optimum run size for Stent manufacture?
(ii) WHAT is the minimum inventory holding cost?
(iii) Assuming the company has a policy of manufacturing 6000 ‘Stents’ per run, how much extra cost the
company would be incurring as compared to the optimum run size suggested in (i) above?
[8 marks]
Q.7. A contractor prepares his accounts for the year ending 31st March each year. He commenced a contract on
1st July, 2021.
The following information relates to the contract as on 31st March, 2022:
(Rs)

Material issued 12,55,000

Wages 28,28,000
Salary to Foreman 4,06,500

A machine costing Rs 13,00,000 has been on the site for 4.8 months, its working life is estimated at 7 years and
its final scrap value at Rs 75,000.
A supervisor, who is paid Rs 40,000 p.m. has devoted one-half of his time to this contract. All other expenses
and administration charges amount to Rs 6,82,500.
Material in hand at site costs Rs 1,77,000 on 31st March, 2022.
The contract price is Rs 1,00,00,000. On 31st March, 2022 2/3rd of the contract was completed. The architect
issued certificates covering 50% of the contract price, and the contractor had been paid Rs 37,50,000 on account.
PREPARE Contract A/c and show the notional profit or loss as on 31st March, 2022. [10 marks]

Q.8. SM Pvt. Ltd. manufactures their products in three consecutive processes. The details are as below:
Process A Process B Process C
Transferred to next Process 60% 50%
Transferred to warehouse for sale 40% 50% 100%
In each process, there is a weight loss of 2% and scrap of 8% of input of each process. The realizable value of
scrap of each process is as below:
Process A @ Rs 2 per ton
Process B @ Rs 4 per ton
Process C @ Rs 6 per ton.

The following particulars relate to April, 2022:

Process A Process B Process

C
Materials used (in Tons) 1,000 260 140
Rate per ton Rs 20 Rs 15 Rs 10
Direct Wages Rs 4,000 Rs 3,000 Rs 2,000
Direct Expenses Rs 3,160 Rs 2,356 Rs 1,340
PREPARE Process Accounts- A, B and C & calculate cost per ton at each process. [10 marks]
Q.9. The standard output of a Product 'D' is 50 units per hour in manufacturing department of a Company
employing 100 workers. In a 40 hours week, the department produced 1,920 units of product 'D' despite 5% of
the time paid was lost due to an abnormal reason. The hourly wage rates actually paid were Rs 12.40, Rs 12.00
and Rs 11.40 respectively to Group 'A' consisting 10 workers, Group 'B' consisting 30 workers and Group 'C'
consisting 60 workers. The standard wage rate per labour is same for all the workers. Labour Efficiency Variance
is given Rs 480 (F).
You are required to COMPUTE:
(i) Total Labour Cost Variance.
(ii) Total Labour Rate Variance.
(iii) Total Labour Gang Variance.
(iv) Total Labour Yield Variance, and
(v) Total Labour Idle Time Variance. [10 marks]

Q.10. Write Short Note on: [2*2 Marks]

a) Escalation clause
b) Sunk Cost

Q.11. Difference between: [2*2 Marks]

a) Controllable cost and Uncontrollable cost
b) Marginal costing and Absorption Costing

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