CA INTERMEDIATE

SUBJECT- COST AND MANAGEMENT

ACCOUNT
Test Code – IMP 2223
(Date :)
(Marks - 100)
TOPIC : FULL COURSE

QUESTION :1(A)

During a particular period ABC Ltd has furnished the following data:
Sales Rs. 10,00,000
Contribution to sales ratio 37% and
Margin of safety is 25% of sales.
A decrease in selling price and decrease in the fixed cost could change the
"contribution to sales ratio" to 30% and "margin of safety" to 40% of the revised sales.
Calculate:
(i) Revised Fixed Cost.
(ii) Revised Sales and
(iii) New Break-Even Point.
(5 MARKS)

QUESTION : 1(B)
The annual demand for an item of raw material is 48,000 units and the purchase price
is Rs. 80 per unit. The cost of processing an order is Rs. 1,350 and the annual cost of
storage is Rs. 15 per unit.
(i) DETERMINE is the optimal order quantity and total relevant cost for the order?
(ii) If the cost of processing an order is Rs. 800 and all other data remain same, then
DETERMINE the differential cost?
(iii) If the supplier offers bulk purchase of 48,000 units at a price of Rs. 72 and cost of
placing the is Nil, SHOULD the order be accepted?
(5 MARKS)
QUESTION : 1(C)

AUX Ltd. has an Annual demand from a single customer for 60,000 Covid-19 vaccines. The
customer prefers to order in the lot of 15,000 vaccines per order. The production cost
of vaccine is Rs. 5,000 per vaccine. The set-up cost per production run of Covid-19
vaccines is Rs. 4,800. The carrying cost is Rs. 12 per vaccine per month.
You are required to:
(i) Find the most Economical Production Run.
(ii) Calculate the extra cost that company incurs due to production of 15,000 vaccines
in a batch.
(5 MARKS)
QUESTION : 1(D)
A machine costing Rs. 10 lakhs, was purchased on 01-04-2021. The expected life of the
machine is 10 years. At the end of this period its scrap value is likely to be Rs. 10,000. The
total cost of all the machines including new one was Rs. 90 lakhs.
The other information is given as follows:
(i) Working hours of the machine for the year was 4,200 including 200 non-
productive hours.
(ii) Repairs and maintenance for the new machine during the year was Rs. 6,000.
(iii) Insurance Premium was paid for all the machine Rs. 9,000.
(iv) New machine consumes 8 units of electricity per hour, the rate per unit being
Rs. 3.75
(v) The new machine occupies 1/10th area of the department. Rent of the
department is Rs. 2,400 per month.
(vi) Depreciation is charged on straight line basis.

COMPUTE machine hour rate for the new machine.

(5 MARKS)
QUESTION : 2(A)
JBL Sisters operates a boutique which works for various fashion houses and retail
stores. It has employed 26 workers and pays them on time rate basis. On an average an
employee is allowed 8 hours for boutique work on a piece of garment. In the month of
December 2020, two workers M and J were given 15 pieces and 21 pieces of garments
respectively for boutique work. The following are the details of their work:

M J
Work assigned 15 pcs. 21 pcs.
Time taken 100 hours 140 hours
Workers are paid bonus as per Halsey System. The existing rate of wages is Rs. 60 per
hour. As per the new wages agreement the workers will be paid Rs. 72 per hour w.e.f.
1stJanuary 2021. At the end of the month December 2020, the accountant of the
company has wrongly calculated wages to these two workers taking Rs. 72 per hour.
Required:

(i) CALCULATE the loss incurred due to incorrect rate selection.

(ii) CALCULATE the loss incurred due to incorrect rate selection, had Rowan scheme of
bonus payment followed.
(iii) CALCULATE the loss/ savings if Rowan scheme of bonus payment had followed.
(iv) DISCUSS the suitability of Rowan scheme of bonus payment for JBL Sisters?
(10 MARKS)
QUESTION : 2(B)
The following data are available from the books and records of Q Ltd. for the month of April
2020 :
Direct Labour Cost = Rs. 1,20,000 (120% of Factory Overheads)
Cost of Sales = Rs. 4,00,000
Sales = Rs. 5,00,000
Accounts show the following figures :
1st April, 2020 30th April, 2020
(Rs.) (Rs.)
Inventory :
Raw material 20,000 25,000
Work – in – progress 20,000 30,000
Finished goods 50,000 60,000
Other details :
Selling expenses 22,000
General & Admin. Expenses 18,000
You are required to prepare a cost sheet for the month of April 2020 showing :
(i) Prime Cost
(ii) Works Cost
(iii) Cost of Production
(iv) Cost of Goods sold
(v) Cost of Sales and Profit earned.
(10 MARKS)
QUESTION : 3(A)
TQM Ltd. has furnished the following information for the month ending 30th June, 2020:
Master Budget Actual Variance
Units produced and sold 80,000 72,000
Sales (Rs.) 3,20,000 2,80,000 40,000 (A)
Direct material (Rs.) 80,000 73,600 6,400 (F)
Direct wages (Rs.) 1,20,000 1,04,800 15,200 (F)
Variable overheads (Rs.) 40,000 37,600 2,400 (F)
Fixed overhead (Rs.) 40,000 39,200 800 (F)
Total Cost 2,80,000 2,55,200
The Standard costs of the products are as follows :

Per unit (Rs.)

Direct material (1 kg. at the rate of Rs. 1 per kg.) 1.00
Direct wages (1 hour at the rate of Rs. 1.50) 1.50
Variable overheads (1 hour at the rate of Rs. 0.50) 0.50
Actual results for the month showed that 78,400 kg. of material were used and 70,400
labour hours were recorded.
Required:
(i) PREPARE Flexible budget for the month and compare with actual results.
(ii) CALCULATE Material, Labour, Sales Price, Variable Overhead and Fixed Overhead
Expenditure variance and Sales Volume (Profit) variance.
(16 MARKS)
QUESTION : 3(B)
EXPLAIN the difference between Cost Accounting and Management Accounting.
(4 MARKS)
QUESTION : 4(A)
The following account balances and distribution of indirect charges are taken from the
accounts of a manufacturing concern for the year ending on 31st March, 2021:
Total Production Departments Service
Item
Amount Departments
(Rs.) X (Rs.) Y (Rs.) Z (Rs.) A (Rs.) B (Rs.)
Indirect Material 5,00,000 80,000 1,20,000 1,80,000 1,00,000 20,000
Indirect Labour 10,40,000 1,80,000 2,00,000 2,80,000 2,40,000 1,40,000
Supervisor's Salary 3,84,000 - - 3,84,000 - -
Fuel & Heat 60,000
Power 7,20,000
Rent & Rates 6,00,000
Insurance of Assets 72,000
Canteen Charges 2,40,000
Depreciation 10,80,000
The following departmental data are also available :

Production Departments Service Departments

X Y Z A B

Area (Sq. ft.) 4,400 4,000 3,000 2,400 1,200

Capital Value of

Assets (Rs.) 40,00,000 60,00,000 50,00,000 10,00,000 20,00,000

Kilowatt Hours 3,500 4,000 3,000 1,500 -

Radiator Sections 20 40 60 50 30

No. of Employees 60 70 120 30 20

Expenses charged to the service departments are to be distributed to other departments

by the following percentages:
X Y Z A B

Department A (%) 30 30 20 - 20

Department B (%) 25 40 25 10 -

PREPARE an overhead distribution statement to show the total overheads of production

departments after re-apportioning service departments' overhead by using simultaneous
equation method. Show all the calculations to the nearest rupee.
(10 MARKS)
QUESTION : 4(B)
Hill manufacturing Ltd uses process costing to manufacture Water density sensors for hydro
sector. The following information pertains to operationsfor the month of May.

Particulars Units
Beginning WIP, May 1 16,000
Started in production during May 1,00,000
Completed production during May 92,000
Ending work in progress, May 31 24,000

The beginning work in progress was 60% complete for materials and 20% complete for
conversion costs. The ending inventory was 90% complete for material and 40% complete
for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are material Rs.27,670, direct labour Rs.30,120 and factory
overhead Rs. 12,720
Cost incurred during May are material used, Rs. 4,79,000, direct labour Rs.1,82,880, factory
overheads Rs. 3,91,160.

CALCULATE:
(i) Using the FIFO method, the equivalent units of production for material.
(ii) Cost per equivalent unit for conversion cost.
(10 MARKS)
QUESTION : 5(A)

Harry Transport Service is a Delhi based national goods transport service provider, owning
five trucks for this purpose. The cost of running and maintaining these trucks are as
follows:

Particulars Amount

Diesel cost Rs.15 per km.

Engine oil Rs. 4,200 for every 14,000 km.

Repair and maintenance Rs.12,000 for every 10,000 km.

Driver’s salary Rs. 20,000 per truck per month

Cleaner’s salary Rs. 7,000 per truck per month

Supervision and other general expenses Rs.15,000 per month

Cost of loading of goods Rs. 200 per Metric Ton (MT)

Each truck was purchased for Rs. 20 lakhs with an estimated life of 7,20,000 km. During
the next month, it is expecting 6 bookings, the details of which are as follows:
 No. Journey Distance Weight - Up Weight - Down
(in km) (in MT) (in MT)
1. Delhi to Kochi 2,700 15 7

2. Delhi to Guwahati 1,890 13 0

3. Delhi to Vijayawada 1,840 16 0

4. Delhi to Varanasi 815 11 0

5. Delhi to Asansol 1,280 13 5

6. Delhi to Chennai 2,185 11 9

Total 10,710 79 21

Required:

(i) CALCULATE the total absolute Ton-km for the next month.
(ii) CALCULATE the cost per ton-km.
(10 MARKS)
QUESTION: 5(B)
Textile Ltd. pays following overtime premium for its labour beside normal wages of Rs.
100per hour:

Before and after normal working hours 80% of basic wage rate
Sundays and holidays 150% of basic wage rate
During the previous year 2019-20, the following hours were worked:

Normal time 3,00,000 hours

Overtime before and after normal working hours 60,000 hours
Overtime on Sundays and holidays 15,000 hours
Total 3,75,000 hours
During the current year 2020 – 21, the following hours have been worked on job ‘Spinning’ :

Normal 4,000 hours

Overtime before and after normal working 400 hours
hours
Overtime on Sundays and holidays 100 hours
Total 4,500 hours

You are required to CALCULATE the labour cost chargeable to job ‘Spinning’ and overhead
in each of the following instances:
(a) Where overtime is worked regularly throughout the year as a policy due to the
workers’ shortage.
(b) Where overtime is worked irregularly to meet the requirements of production.
(c) Where overtime is worked at the request of the customer to expedite the job.
(10 MARKS)
QUESTION : 6

(A) How apportionment of joint costs up-to the point of separation amongst the joint
products using market value at the point of separation and net realizable value
method is done? DISCUSS.
(5 MARKS)
(B) EXPLAIN the difference between Cost Accounting and Management Accounting
(5 MARKS)
(C) DISCUSS the Escalation Clause in a Contract.
(5 MARKS)
(D) DISCUSS short notes on (i) Discretionary Cost Centre and (ii) Investment Centre
(5 MARKS)