INTER – MTP -COST MM – 100 DATE – 29.06.

25
Instructions:
 All the questions are compulsory
 Properly mention test number and page number on your answer sheet, Try to upload sheets in arranged
manner.
 In case of multiple choice questions, mention option number only Working notes are compulsory
wherever required in support of your solution
 Do not copy any solution from any material. Attempt as much as you know to fairly judge your
performance.

Notes: 1. Question Paper comprises two part, Part I and Part II

2. Part I is having multiple choice Questions which is compulsory
3. Part II Comprise descriptive Questions and in which Question No. 1 is Compulsory and answer any 4
out of remaining 5 questions
4. Answer new Question on new page

CASE TYPE MCQ-1

The purchase committee of A Ltd. has been entrusted to review the material procurement policy of the
company. The chief marketing manager has appraised the committee that the company at present
produces a single product X by using two raw materials A and B in the ratio of 3:2. Material A is
perishable in nature and has to be used within 10 days from Goods received note (GRN) date otherwise
material becomes obsolete. Material B is durable in nature and can be used even after one year. Material
A is purchased from the local market within 1 to 2 days of placing order. Material B, on the other hand, is
purchased from neighboring state and it takes 2 to 4 days to receive the material in the store.

The purchase price of per kilogram of raw material A and B is ₹ 30 and ₹ 44 respectively exclusive of
taxes. To place an order, the company has to incur an administrative cost of ₹ 1,200. Carrying cost for
Material A and B is 15% and 5% respectively. At present material A is purchased in a lot of 15,000 kg. to
avail 10% discount on market price. GST applicable for both the materials is 18% and the input tax credit
is availed.

The sales department has provided an estimate that the company could sell 30,000 kg. in January 2024
and also projected the same trend for the entire year.
The ratio of input and output is 5:3. Company works for 25 days in a month and production is carried out
evenly.
The following queries/ calculations to be kept ready for purchase committees’ reference:

1.1 For the month of January 2024, what would be the quantity of the materials to be requisitioned
for both material A and B:
(a)9,000 kg & 6,000 kg respectively (b) 18,000 kg & 12,000 kg respectively
(c)27,000 kg & 18,000 kg respectively (d) 30,000 kg & 20,000 kg respectively.

1.2 The economic order quantity (EOQ) for both the material A & B:
(a) 13,856 kg & 16,181 kg respectively (b) 16,197 kg & 17,327 kg respectively
(c)16,181 kg & 17,165 kg respectively (d) 13,197 kg & 17,165 kg respectively

1.3 What would the maximum stock level for material A:

(a) 18,200 kg. (b) 12,000 kg. (c) 16,000 kg. (d) 16,200 kg.

1.4 Calculate saving/ loss in purchase of Material A if the purchase order quantity is equalto EOQ.
(a) Profit of Rs. 3, 21,201. (b) Loss of Rs. 3, 21,201.
(c)Profit of Rs. 2, 52,500. (d) Loss of Rs. 2, 52,500.

1.5 What would the minimum stock level for material A:

(a) 1,800 kg. (b) 1,200 kg. (c) 600 kg. (d) 2,400 kg.
(5 x 2 = 10 Marks)

CASE TYPE MCQ-2

M Ltd. is producing a single product and may expand into product diversification in next one to two years.
M Ltd. is amongst a labour-intensive company where majority of processes are done manually. Employee
cost is a major cost element in the total cost of the company. The company conventionally uses
performance parameters Earnings per man shift (EMS) to measure cost paid to an employee for a shift of
8 hours, and Output per man shift (OMS) to measure an employee’s output in a shift of 8 hours.

The Chief Manager (Finance) of the company has emailed you little information related to the last month.
The email contains the following data related to the last month:
During the last month, the company has produced 2, 34,000 tonnes of output. Expenditures for the last
months are:

(i) Raw materials consumed ₹ 50, 00,000

(ii) Power consumed 13,000 Kwh @ ₹ 8 per Kwh to run the machines for production.
(iii) Diesels consumed 2,000 litres @ ₹ 93 per litre to run power generator used as alternative or backup
for power cuts.
(iv) Wages & salary paid – ₹ 6, 40, 00,000
(v) Gratuity & leave encashment paid – ₹ 64, 20,000
(vi) Hiring charges paid for HEMM- ₹ 30, 00,000. HEMM are directly used in production.
(vii) Hiring charges paid for cars used for official purpose – ₹ 66,000
(viii) Reimbursement of diesel cost for the cars – ₹ 22,000
(ix) The hiring of cars attracts GST under RCM @5% without credit.
(x)Maintenance cost paid for weighing bridge (used for weighing of final goods at the timeof dispatch) – ₹
12,000
(xi) AMC cost of CCTV installed at weighing bridge (used for weighing of final goods at the time of
dispatch) and factory premises is ₹ 8,000 and ₹ 18,000 per month respectively.
(xii) TA/ DA and hotel bill paid for sales manager- ₹ 36,000
(xiii) The company has 1,800 employees works for 26 days in a month.

You are asked to calculate the followings:

2.1 What is the amount of prime cost incurred during the last month:
(a) ₹ 7, 54, 20,000 (b) ₹ 7, 57, 10,000 (c) ₹ 7, 56, 06,000 (d) ₹ 7, 87, 10,000

2.2 What is the total and per shift cost of production for last month:
(a) ₹ 7, 87, 10,000 and ₹ 336.37 respectively (b) ₹ 7, 87, 10,000 and ₹ 1,681.84 respectively
(c) ₹ 7, 87, 28,000 and ₹ 1,682.22 respectively (d) ₹ 7, 87, 28,000 and ₹ 336.44 respectively

2.3 What is the value of administrative cost incurred during the last month:
(a) ₹ 92,400 (b) ₹ 88,000 (c) ₹ 1, 48,400 (d) ₹ 1, 44,000

2.4 What is the value of selling and distribution cost and total cost of sales:
(a) ₹ 36,000 & ₹ 7, 88, 76,400 respectively (b) ₹ 56,000 & ₹ 7, 88, 76,400 respectively
(c) ₹ 36,000 & ₹ 7, 88, 72,000 respectively (d) ₹ 56,000 & ₹ 7, 88, 72,000 respectively

2.5 What is the value EMS and OMS for the last month:
(a) ₹ 1,504.70 & 5 tonnes respectively (b) ₹ 1,367.52 & 5 tonnes respectively
(c)₹ 1,504.70 & 4.37 tonnes respectively (d) ₹ 1,367.52 & 4.37 tonnes respectively
 (5 x 2 = 10 Marks)
3. A worker is eligible for a compulsory bonus of 8.33% of wages earned in the relevant year or Rs. 100,
whichever is greater, as per the Payment of Bonus Act. The bonus may be up to 20% of wages depending
upon the quantum of profits calculated as per the Act. If a worker earned Rs. 10,000 as wages during the
relevant year and the company's profit, as per the Act, is Rs. 50,000, what will be the total bonus amount
received by the worker?
(a) Rs. 833 (b) Rs. 1,000 (c) Rs. 2,000 (d) Rs. 10,000
(2 Marks)

4. What would be Prime cost from below information?

Direct materials Purchased : ₹ 75,000
Direct labour : ₹ 45,000
Direct expenses : ₹15,000
Manufacturing overheads : ₹22,500
Direct materials consumed : ₹ 67,500
(a) ₹ 1,35,000 (b) ₹ 1,27,500 (c) ₹ 1,57,500 (d) ₹ 1,50,000
(2 Marks)

5. A hotel has 200 rooms (120 Deluxe rooms and 80 Premium rooms). The normal occupancy in summer
is 80% and winter 60%. The period of summer and winter is taken as 8 months and 4 months respectively.
Assume 30 days in each month. Room rent of Premium room will be double of Deluxe room. Hotel is
expecting a profit of 20% on total revenue, total cost for the year is 2, 66, 11,200. Calculate the room rent
to be charged for Premium room.
(a)₹ 450 per room day (b) ₹ 900 per room day (c)₹ 380 per room day (d) ₹ 760 per room day
(2 Marks)

6. The standard and actual figures of product ‘Z’ are as under:

Standard Actual
Material quantity 50 units 45 units
Material price per unit ₹ 1.00 ₹ 0.80
The material cost variance is?
(a) ₹ 9 (F) (b) ₹ 14 (A) (c) ₹ 9 (A) (d) ₹ 14 (F)
(2 Marks)

7. XYZ Ltd. has obtained an order to supply 48000 bearings per year from a concern. On a steady basis, it
is estimated that it costs ₹ 0.20 as inventory holding cost per bearing per month and the set-up cost per
run of bearing manufacture is ₹ 384. What is the optimum run size and number of runs for bearing
manufacture?
(a) 3918.19 or 3,920 units (b) 3119.18 or 3,120 units
(c) 3919.18 or 3,920 units (d) 3918.19 or 3,919 units
(2 Marks)

Descriptive Questions
Q-1 (a)
The following details apply to an annual budget for a manufacturing company:
Quarter 1st 2st 3rd 4th
Working Days 65 60 55 60
Production (units per working day) 100 110 120 105
Raw material purchases (% by weight 30% 50% 20% –
of annual total)
Budgeted purchase price / kg (₹) 1 1.05 1.125 –
Quantity of raw material per unit of production 2 kg. Budgeted closing stock of raw material 2,000 kg.
Budgeted opening stock of raw material 4,000 kg (Cost ₹ 4,000).
Issues are pried on FIFO Basis. Calculate the following budgeted figures:
(a) Quarterly and annual purchase of raw material by weight and value.
(b) Closing quarterly stocks by weight and value.
(7 Marks)

Q-1(b)
From the following information, Calculate Labour turnover rate and Labour flux rate:
No. of workers as on 01.01.20X8 = 7,600
No. of workers as on 31.12.20X8 = 8,400
During the year, 80 workers left while 320 workers were discharged and 1,200 workers were recruited
during the year; of these, 300 workers were recruited because of exits and the rest were recruited in
accordance with expansion plans.
(3 Marks)

Q-1(c)
A jobbing factory has undertaken to supply 300 pieces of a component per month for the ensuing six
months. Every month a batch order is opened against which materials and labour hours are booked at
actual. Overheads are levied at a rate per labour hour. The selling price contracted for is ₹ 8 per piece.
From the following data CALCULATE the cost and profit per piece of each batch order and overall position
of the order for 1,800 pieces.
Month Batch Output Material cost Direct wages Direct labour
(₹) (₹) (₹)
January 310 1150 120 240
February 300 1140 140 280
March 320 1180 150 280
April 280 1130 140 270
May 300 1200 150 300
June 320 1220 160 320
The other details are:

Month Chargeable expenses (₹) Direct labour (Hours)

January 12,000 4,800
February 10,560 4,400
March 12,000 5,000
April 10,580 4,600
May 13,000 5,000
June 12,000 4,800

(4 Marks)

Q-2(a)
SMD Limited manufactures four products namely A, B, C and D using the same production and process
facilities. The company has been following conventional method of costing and wishes to shift to activity-
based costing system.
The data pertaining to four products are:
Product Units produced Material per Labour hours Machine hours
unit (₹) per unit per unit
A 1,500 140 1 3
B 2,500 90 3 2
C 10,000 180 2 6
 D 6,000 150 1.5 4

The following activity volumes are associated to the production process for the relevant period –
Number of Inspections Number of Material Number of set-ups
Movements
A 200 15 100
B 250 20 125
C 900 100 600
D 650 85 400

The cost data also states that:

• Direct Labour cost: ₹ 60 per hour
• Machine hour rate: ₹ 280 per hour
• Production overheads are absorbed on machine hour basis.
• For activity-based costing, a thorough, analysis of the production process revealedthat:

Costs relating to set-ups and inspection bears the equal percentage while costs relating tomachinery
accounts for 20% of the production overhead.
Costs relating to material handling stands at 50% of costs relating to machinery. You are
required to:
(i) Prepare a statement showing the unit costs and total costs of each product using the absorption
costing method.
(ii) Prepare a statement showing the unit costs and total costs of each product using activity-based costing
system.
(8 Marks)

Q-2(b)
A factory producing article A also produces a by-product B which is further processed intofinished
product. The joint cost of manufacture is given below:
Material ₹ 5,000 Labour ₹ 3,000 Overhead ₹ 2,000
Subsequent cost in ₹ is given below:
A B
Material 3,000 1,500
Labour 1,400 1,000
Overhead 600 500
5,000 3,000
Selling prices are A ₹ 16,000 B ₹ 8,000
Estimated profit on selling prices is 25% for A and 20% for B.
Assume that selling and distribution expenses are in proportion of sales prices. Show how you would
apportion joint costs of manufacture and prepare a statement showing cost of production of A and B.
(6 Marks)
Q-3(a)
AD Higher Secondary School (AHSS) offers courses for 11th & 12th standard in three streams i.e. Arts,
Commerce and Science. AHSS runs higher secondary classes alongwith primary and secondary classes but
for accounting purpose it treats higher secondary as a separate responsibility centre. The Managing
committee of the school wants to revise its fee structure for higher secondary students. The
accountant of the school has provided thefollowing details for a year:
Amount (₹)
Teachers’ salary (15 teachers × ₹35,000 × 12 months) 63,00,000
Principal’s salary 14,40,000
Lab attendants’ salary (2 attendants × ₹15,000 × 12 months) 3,60,000
Salary to library staff 1,44,000
Salary to peons (4 peons × ₹ 10,000 × 12 months) 4,80,000
Salary to other staffs 4,80,000
 Examinations expenditure 10,80,000
Office & Administration cost 15,20,000
Annual day expenses 4,50,000
Sports expenses 1,20,000

Other information:
(i)
Standard 11 & 12 Primary & Secondary
Arts Commerce Science
No. of students 120 360 180 840
Lab classes in a year 0 0 144 156
No. of examinations in a 2 2 2 2

YEAR
Time spent at library perstudent per year 180 hours 120 hours 240 hours 60 hours
Time spent by principal foradministration 208 hours 312 hours 480 hours 1,400 hours
Teachers for 11 & 12standard 4 5 6 -

(ii) One teacher who teaches economics for Arts stream students also teaches commerce stream students.
The teacher takes 1,040 classes in a year, it includes 208 classes forcommerce students.
(iii) There is another teacher who teaches mathematics for Science stream students also teaches business
mathematics to commerce stream students. She takes 1,100 classes a year, it includes 160 classes
for commerce students.
(iv) One peon is fully dedicated for higher secondary section. Other peons dedicate their 15% time for
higher secondary section.
(v) All school students irrespective of section and age participate in annual functions and sports activities.
Requirement:
(a) CALCULATE cost per student per annum for all three streams.
(b) If the management decides to take uniform fee of ₹ 1,000 per month from all higher secondary students,
CALCULATE stream wise profitability.
(c) If management decides to take 10% profit on cost, COMPUTE fee to be charged from the students of all
three streams respectively.
(10 Marks)

Q-3(b)
Secure lifeline Ltd. operates in life insurance business. It launched a new insurance policy 'Total Secure'.
The company has incurred the following expenditures during the last year for the policy:
Cost of marketing of the policy 74,58,000
Sales support expenses 18,89,250
Policy issuance cost 16,59,735
Claims management cost 2,07,240
Policy development cost 18,56,250
Postage and logistics 16,91,250
Facilities cost 25,14,600
Policy servicing cost 58,09,155
Employees cost 9,24,000
IT cost 1,22,62,800
Office administration cost 26,73,660
Number of policies sold- 844.
Total insured value of policies - ₹ 1,640 [Link]:
(i) CALCULATE total cost for Professionals Protection Plus’ policy segregating the costs into four main
activities namely (a) Marketing and Sales support, (b) Operations, (c) IT and (d)Support functions.
(ii) CALCULATE cost per policy.
(iii)CALCULATE cost per rupee of insured value. (4 Marks)
Q-4(a)
DSM Ltd manufactures speed boats which require propeller TP-M4. The followingparticulars are
collected for the year 2023 -24:
(i) Annual demand of TP-M4 12,000 units
(ii) Cost of placing an order ₹1,200 per order
(iii) Cost per unit of TP-M4 is ₹1,740/-
(iv) Carrying cost p.a. 12%
The company has been offered a quantity discount of 5 % on the purchase of TP-M4,provided the
order size is 6,000 units at a time.
Required to:
(i) COMPUTE the economic order quantity (EOQ)
(ii) ADVISE whether the quantity discount offer can be accepted.
(6 Marks)

Q-4(b)
The following information is available from the cost records of a company for the month of July, 2022:
Sr. No. Particulars Units/ Pieces Amount (Rs.)
1 Material purchased 22,000 pieces 9,00,000
2 Material consumed 21,000 pieces
3 Actual wages paid for 5,150 hours 2,57,500
4 Fixed Factory overhead incurred 4,60,000
5 Fixed Factory overhead budgeted 4,20,000
6 Units produced 1,900
7 Standard rates and prices are:
Direct material 45 per piece
Standard input 10 pieces per unit
Direct labour rate 60 per hour
Standard requirement 2.5 hours per unit
Overheads 80 per labour hour

You are required to CALCULATE the following variances:

(i) Material price variance (ii) Material usage variance
(iii)Labour rate variance (iv)Labour efficiency variance
(v)Fixed overhead expenditure variance (vi)Fixed overhead efficiency variance
(vii)Fixed overhead capacity variance
(8 Marks)

Q-5(a)
M/s Areeba Private Limited has a normal production capacity of 36,000 units of toys perannum. The
estimated costs of production are as under:
(i) Direct Material ₹ 40 per unit
(ii) Direct Labour ₹ 30 per unit (subject to a minimum of ₹ 48,000 p.m.)
(iii) Factory Overheads:
(a) Fixed ₹ 3, 60,000 per annum
(b) Variable ₹ 10 per unit
(c) Semi-variable ₹ 1, 08,000 per annum up to 50% capacity and additional ₹ 46,800 forevery 20%
increase in capacity or any part thereof.
(iv) Administrative Overheads ₹ 5, 18,400 per annum (fixed)
(v) Selling overheads are incurred at ₹ 8 per unit.
(vi) Each unit of raw material yields scrap which is sold at the rate of ₹ 5 per unit.
(vii) In year 2019, the factory worked at 50% capacity for the first three months but it wasexpected
that it would work at 80% capacity for the remaining nine months.
(viii) During the first three months, the selling price per unit was ₹ 145.
 You are required to :
(i) Prepare a cost sheet showing Prime Cost, Works Cost, Cost of Production and Cost ofSales.
(ii) Calculate the selling price per unit for remaining nine months to achieve the total annual profit of ₹ 8,
76,600.
(10 Marks)
Q-5(b)
The following particulars refer to process used in the treatment of material subsequentlyincorporated in
a component forming part of an electrical appliance:
(i) The original cost of the machine used (Purchased in June 2018) was ₹ 10,00,000. Its estimated life is 10
years, the estimated scrap value at the end of its life is ₹ 10,000, and the estimated working time per
year (50 weeks of 44 hours) is 2,200 hours . Out of which machine maintenance etc., is estimated to
take up 200 hours.
No other loss of working time expected, setting up time, estimated at 100 hours, is regarded as
productive time. (Holiday to be ignored).
(ii) Electricity used by the machine during production is 16 units per hour at cost of a ₹ 7 per unit. No
power is consumed during maintenance or setting up.
(iii) The machine required a chemical solution which is replaced at the end of week at a cost of ₹ 2,000
each time.
(iv) The estimated cost of maintenance per year is ₹ 1,20,000.
(v) Two attendants control the operation of machine together with five other identical machines. Their
combined weekly wages, insurance and the employer's contribution to holiday pay amount is ₹
9,000.
(vi) Departmental and general works overhead allocated to this machine for the current year amount
to ₹ 20,000.
You are required to calculate the machine hour rate of operating the machine. (4 Marks)

Q-6(a)
What are the important ledgers to be maintained under non-integrated accounting system in the Cost
Accounting?
(5 Marks)
Q-6(b)
What is the difference between Financial Accounting and Cost Accounting?
(5 Marks)
Q-6(c)
What are direct expenses in cost accounting, and how are they measured and treated inrelation to the
prime cost of a product or service? (4 Marks)
(OR)
Q-6(d)
DISCUSS basic assumptions of Cost Volume Profit analysis.
(4 Marks)