TEST PAPER - 01
(Chapters Covered – Basic Costing, Cost Sheet, Material Cost and Employee Cost)
COST ACCOUNTING
Time Allowed: 3 Hours Full Marks: 100
Section A contains Question Number 1. All parts of this question are compulsory.
Working notes should form part of the relevant answer.
SECTION-A
1. Choose the correct answer from the given alternatives (you may write only the Roman
number and the alphabet chosen for your answer) (2×15 = 30 Marks)
(i) Which of the following is not an element of works overhead?
(a) Factory repairman’s wages
(b) Sales manager’s salary
(c) Plant manager’s salary
(d) Product inspector’s salary
(ii) The sum of direct labour and factory overhead is termed as:
(a) Variable cost
(b) Conversion cost
(c) Sunk cost
(d) Fixed cost
(iii) There were 5000 workers in a factory on 1st April, 2016. New entrants in service
during the year 2016-17 were 250 and separations were 130. Calculate Labour
Turnover Rate using Flux Method.
(a) 2.75%
(b) 3.75%
(c) 5.75%.
(d) 6.75%
(iv) For the purpose of cost sheet preparation, costs are classified based on:
(a) Variability
(b) Functions
(c) Nature
(d) Relevance
(v) A work measurement study was carried out in a firm for 10 hours. The information
generated was: Units produced 350; Idle time 15%; Performance rating 120%; and
Relaxation Allowance 10% of standard time. What is the standard time for each unit
produced?
(a) 1.333 minutes
(b) 2.223 minutes
(c) 1.943 minutes
(d) 2.333 minutes
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(vi) Cost which relates to an item where the input has an explicit physical relationship
with the output is known as:
(a) Opportunity cost
(b) Imputed cost
(c) Engineered cost
(d) Managed cost
(vii) The allotment of whole items of cost of centers or cost unit is called:
(a) Cost allocation
(b) Cost apportionment
(c) Overhead absorption
(d) None of these
(viii) Prime Cost = ₹12,50,000; Works Cost = ₹20,00,000 and office overheads are 30% of
factory overheads. What is the Cost of Production?
(a) ₹20,75,000
(b) ₹22,25,000
(c) ₹22,75,000
(d) None of the above.
(ix) At the economic ordering quantity level, the following is true:
(a) The carrying cost is minimum
(b) The ordering cost is minimum
(c) The purchase price is minimum
(d) The ordering cost is equal to the carrying cost
(x) Time and motion study is conducted by the:
(a) Payroll department
(b) Time-keeping department
(c) Engineering department
(d) Personnel department
(xi) Material with invoice value ₹10,000 was received in the Stores Dept. The transport
cost was ₹200. Since the material leaked in transit, damage to other goods of ₹350 had
to be paid to the transporter. What would be the material cost?
(a) ₹10,200
(b) ₹10,800
(c) ₹10,600
(d) ₹10,400
(xii) Cost units of Automobile Industry is:
(a) Number of calls
(b) Cubic meter
(c) Bed Night
(d) Number of vehicle
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(xiii) A Company buys in lots of 6,250 units, which is a 3 month’s supply. The cost/unit is
₹2.40. Each order costs ₹45 and the inventory carrying cost is 15% of the average
inventory value. Calculate the EOQ.
(a) 2,000 units
(b) 2,500 units
(c) 3,000 units
(d) None of the above.
(xiv) 10,000 units of material 'X' are consumed per year having per unit cost of 20. Cost of
processing an order is ₹50 while annual interest rate is 5%. If annual carrying cost
per unit of material 'X' is 15% (other than interest), calculate the EOQ and number
of orders per year.
(a) 250 units 40 orders
(b) 400 units 25 orders
(c) 500 units 20 orders
(d) None of the above
(xv) When a direct worker is paid on a monthly fixed salary basis, the following is true:
(a) There is no idle time lost
(b) Idle time cost is separated and treated as overhead
(c) There is no idle time cost
(d) The salary is fully treated as factory overhead cost
SECTION-B
Answer any five questions from question number 2 to 8. 14x5=70
2 (a) A company requires 1,00,000 units of an item annually. The cost per unit is ₹10. Ordering
cost is 500 per order and inventory carrying cost is 50% per unit per annum.
(i) Find the Economic Order Quantity (EOQ).
(ii) The supplier offers a discount of 3% for order quantity 4500-5999 and 3.5% for order
quantity 6000 and above.
Work out a statement comparing the total inventory management costs for the EOQ, 4500
and 6000 units of order and comment on your findings. Advise the company on how much
to order. (7 marks)
2 (b) Mohan and Sohan are two workers who produce the same product using the same material.
Their normal wage rate is also same. Mohan is paid bonus according to the Rowan Plan,
while Sohan is paid bonus according to Halsey Premium Plan. The time allowed to make
the product is 1,000 hours. Mohan takes 600 hours while Sohan takes 800 hours to
complete the product. The factory overhead rate is 10 per man-hour actually worked. The
factory cost for the product for Mohan is ₹72,800 and for Sohan it is ₹76,000.
You are required:
(i) to find the normal rate of wages;
(ii) to find the cost of materials; and
(iii) to prepare a statement comparing the factory cost of the products as made by both the
workers. (7 marks)
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3 (a) From the following particulars with respect to a particular item of materials of a
manufacturing company, Calculate the Best Quantity to order:
Ordering Quantities (ton) Price per ton (Rs.)
Less than 250 6.00
250 but less than 800 5.90
800 but less than 2,000 5.80
2,000 but less than 4,000 5.70
4,000 and above 5.60
The annual demand for the material is 4,000 tons. Stock holding costs are 25% of
material cost p.a. The delivery cost per order is Rs. 6. (7 marks)
3 (b) M/s Sun (India) Ltd. is an export-oriented unit manufacturing communication equipment
of a standard size. It has to send a tender price quotation (in rupee terms) to its foreign
buyer in the UK. Company submits the following figures relating to year 2023:
Output: 50,000 units
Expenses Incurred ₹ Expenses Incurred ₹
Local Raw Material Consumed 20,00,000 Excise Duty 4,00,000
Imports of Raw Material 2,00,000 Administrative Office Expenses 4,00,000
(Actual Consumption) Salary of the Managing Director 2,00,000
Direct Labour in works 17,00,000 Fees of Directors 40,000
Direct Expenses 3,00,000 Expenses on Advertising 3,20,000
Indirect Labour in works 4,00,000 Selling Expenses 5,00,000
Stores and Spare Parts 1,40,000 Packing and Distribution Expenses 3,40,000
Fuel 3,00,000
Depreciation on Plant 2,00,000
Salaries of Works Personnel 2,00,000
Other information:
(i) Local raw material now costs 10% more.
(ii) A profit margin of 20% on sales is maintained.
(iii) The Government grants subsidy of ₹40 per unit of export.
Required: Prepare a statement showing tender price per unit to be submitted to the UK
buyer. (7 marks)
4 (a) ZINTES LTD. a manufacturing company has its factories at two locations. Rowan plan is
in use at location A and Halsey plan at location B. Standard time and basic rate of wages
are same for a job which is similar and is carried out on similar machinery. Time allowed
is 60 hours.
Job at location A is completed in 36 hours while at B, it has taken 48 hours. Conversion
costs at respective places are Rs.1224 and Rs.1500. Overheads amount to Rs.20 per hour.
Required:
(i) Find out the normal wage rate, and
(ii) Compare conversion costs. (6 marks)
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4 (b) ZOXIN LTD. Manufactures two types of pens Super pen and Normal pen. The cost data
for the year ended on 31st March 2022 is as follows:
Direct Materials 8,00,000
Direct Wages 4,48,000
Production Overhead 1,92,000
Total 14,40,000
It is further ascertained that:
1. Direct materials cost in Super Pen was twice as much as direct material in Normal Pen
2. Direct Wages for Normal Pen were 60% of those for Super Pen
3. Production overhead per unit was at the same rate for both the types
4. Administration overhead was 200% of direct labour for each
5. Selling cost was ₹ 1 per Super Pen
6. Production and sales during the year were as follow:
Production Sales
No. of Units No. of Units
Super Pen 40,000 Super Pen 36,000
Normal Pen 1,20,000
7. Selling price was ₹ 30 per unit for Super Pen.
Required: Prepare a cost sheet for 'Super Pen' showing:
(i) Total work cost
(ii) Cost per unit and Total Cost
(iii) Profit per unit and Total Profit (8 marks)
5 (a) The following summarized information is available from the records of Oil Ltd. for the
month of March, 2017:
Sales for the month: ₹19,25,000
Opening Stock as on 1 March, 2017: 1,25,000 litres @ ₹6.50 per litre
Purchases (including freight and insurance):
March 5 1,50,000 litres @ ₹7.10 per litre
March 27 1,00,000 litres @ ₹7.00 per litre
st
Closing stock as on 31 March, 2017: 1,30,000 litres
Expenses for the month are ₹45,000. Pricing of material issues is being done at the end of
the month after all receipts during the month.
On the basis of above information, calculate the following using FIFO and LIFO methods
of pricing:
(i) Value of closing stock as on 31st March, 2017.
(ii) Cost of goods sold during March, 2017.
(iii) Profit or loss for March, 2017.
(7 marks)
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5 (b) The existing Incentive system of SHRISTI LTD. is as under:
Normal working week : 5 days of 8 hours each plus 3 late shifts of 3 hours each
Rate of Payment : Day work : Rs.160 per hour
Late shift : Rs.225 per hour
Average output per operator for 49-hours week i.e. including 3 late shifts: 120 articles.
In order to increase output and eliminate overtime, it was decided to switch on to a system
of payment by results. The following information is obtained:
Time-rate (as usual) : Rs. 160 per hour
Basic time allowed for 15 articles : 5 hours
Piece-work rate : Add 20% to basic piece-rate
Premium Bonus : Add 50% to time
Required:
Prepare a Statement showing hours worked, weekly earnings, number of articles produced
and labour cost per article for one operator under the following systems:
(i) Existing time-rate
(ii) Straight piece-work
(iii) Rowan system
(iv) Halsey premium system
Assume that 135 articles are produced in a 40-hour week under straight piece work, Rowan
Premium System, the Halsey Premium System above and worker earns half the time saved
under Halsey Premium System. (7 marks)
6 (a) ZION LTD uses three types of materials A, B and C for production of Product-P for which
the following data apply:
Raw Usage per unit Reorder Price Delivery Period Reorder Minimum
Material of Product quantity per Kg (in weeks) level level (kgs)
(kgs) (kgs) (Re.) (kgs)
Minimum Average Maximum
A 10 10000 0.10 1 2 3 8000 ?
B 4 5000 0.30 3 4 5 4750 1550
C 6 10000 0.15 2 3 4 ? 2000
Weekly production varies from 175 to 225 units, averaging 200 units of the said
product.
What would be the following quantities?
(i) Minimum stock of A,
(ii) Maximum stock of B,
(iii) Re-order level of C,
(iv) Average stock level of A. (7 marks)
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6 (b) Z Ltd. manufactured and sold 200 typewriters in the year 2017. Its summarized Trading and
Profit & Loss Account for the year 2017 is as follows:
Output: 200 units
Particulars Amount Particulars Amount
To Cost of Raw Material Consumed 1,20,000 By Sales 6,00,000
To Direct Wages 1,80,000
To Manufacturing Charges 75,000
To Gross Profit 2,25,000
6,00,000 6,00,000
To Management Expenses 90,000 By Gross Profit 2,25,000
To General Expenses 30,000
To Rent, rates and taxes 15,000
To Selling Expenses 45,000
To Net Profit 45,000
2,25,000 2,25,000
For the year 2018, it is estimated that
(i) The output and sales will be 300 typewriters.
(ii) Price of material will rise by 25% compared to previous year level.
(iii) Wages per unit will rise by 10%.
(iv) Manufacturing charges will increase in proportion to the combined cost of material
and wages.
(v) Selling expenses per unit will remain unchanged.
(vi) Other expenses will remain unaffected by the rise in output.
Required: Prepare a Cost Sheet showing the cost at which typewriters will be
manufactured in 2018 and give price at which it should be marketed so as to show profit of
10% on selling price. (7 marks)
7 (a) M/s Peacock Ltd. is in the process of evaluation of employees' welfare scheme of the
company. In this regard, it has selected three workers - K, L, and M to study their wage
earnings. The company furnishes the following particulars for the month of April, 2023 as
under:
K L M
(i) Job completed (Units) 10,000 8,000 14,400
(ii) Out of above output rejected and 400 160 1,600
unsaleable (Units)
(iii) Time allowed for 100 units 2 Hrs. 36 Min. 3 Hrs. 1 Hr. 30 Min.
(iv) Basic wage rate per hour (₹) 25 40 30
(v) Time taken (Hours) 200 216 184
The normal working hours per month are fixed at 176 hours. Bonus is paid @ 60% of the
basic wage rate for gross time worked and gross output produced without deduction for
rejected output. The rate of overtime for first 20 hours is paid at time plus 1/3 and for next
20 hours is paid at time plus 1/2.
From the above information, you are asked by the management to calculate the
following for each worker:
(i) Number of bonus hours and amount of bonus earned;
(ii) Total wages earned including basic wages, overtime premium and bonus;
(iii) Direct wages cost per 100 saleable units. (7 marks)
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7 (b) The following information is provided by GA Ltd. For the year ended on 31 st March
2017:
Production and Sales will be 20,000 units
Particulars Amount
Direct Material 30,00,000
Direct Wages 22,50,000
Factory Overhead 20,62,500
Office and Administration Overheads 8,50,000
Selling and Distribution Overheads 2,50,000
Sales 1,00,95,000
The following estimates have been made for the year 2017-18:
(a) Production and sales will be 30,000 units.
(b) Material prices per unit will increase by 25% but due to economy in consumption
there will be a saving of 12% on the revised value.
(c) The wage rate per unit will increase by 20%.
(d) Factory overheads of ₹7,50,000 are fixed. The remaining factory overheads will be in
the same proportion to materials consumed plus wages as in last year.
(e) The Office and Administrative overheads will increase by 20%.
(f) Selling and Distribution overheads per unit will be reduced by 20%.
(g) Percentage of profit on cost desired = 5% plus rate of profit on cost in the last year.
You are required to prepare a statement showing total cost and profit both in value (to the
nearest rupee) and on per unit basis for the year 2017-18. (7 marks)
8 (a) List out the various measures to reduce the Labour Turnover (Any Four) (4 marks)
8 (b) State two main differences between Scrap and Spoilage. (5 marks)
8 (c) What is the role of a Cost Accountant in manufacturing organization? (5 marks)
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