Day Page |1 Eid eal COMMERCE KE LIYE HAMESHA PRATHAM INTERMEDIATE COURSE — TEST SERIES FOR JAN. 2025 EXAM PAPER 4 — COST AND MANAGEMENT ACCOUNTING ‘Marks: 100 Extra) Wednesday Time: 3 hours (Reading Time 15 Date: 18 December, 2024 a Q2 2.3. Part I: Objective Questions (30 Marks) Case Study 1 ‘ABC Pvt Ltd is engaged in the manufacture of a Product Q. The product has the following standard production requirements determined by the technical team of the company post satisfactory completion of test run. Raw Material Z—2 units @ & 2 per unit Skilled labour of - 2.5 hours @ 5 per hour Fixed Overheads ~ 7.5 per unit The input of Raw material Z has a yield of 80% everytime when infused into production. The actual quantity of 24,000 units. The Usage variance of Material. Raw material Z consumed for production during the year was was 2,000 Favourable. Further the actual amount of material cost for the material consumed amounted to % 45,000. During the said year, the actual working hours were 30,000 for which the labour cost paid by the company 1e variance amounted to 10,000 Adverse. amounted to %1,20,000. The idle The actual fixed overheads incurred for the year amounted to & 1,50,000 and the expenditure variance was 25,000 Favourable. In the context of the above, the following needs to be determined: fost (A), @ =Soeoo KE The Actual output of Product Q produced during the year is: =(o0oe Are ~ 179998 (c) 25,000 units (d) 15,000 units [2 Marks] 00h (b) 12,500 units {a) 10,000 units ie a Sid. he ces The Material price and material cost variance are: (a) Price variance — 3,000 Adverse, Cost Variance ~ 5,000 Adverse Lb) Price variance ~ 3,000 Favourable, Cost Variance ~ 5,000 Favourable (c) Price variance ~ 3,000 Favourable, Cost Variance ~ 8,000 Adverse (d) Price variance ~ 5,000 Adverse, Cost Variance - 3,000 Favourable [2 Marks] The Standard Hours, Net Actual hours and the idle time are: (a) Standard Hours ~ 27,500 Net Actual Hours ~ 28,000 hours Idle Time — 2,000 hours (b) standard Hours ~ 22,500 Net Actual Hours ~ 28,500 hours Idle Time ~ 1,500 hours (c) Standard Hours ~ 24,000 Net Actual Hours ~ 29,000 hours Idle Time ~ 1,000 hours [2 Marks] (d) Standard Hours ~ 25,000 hours Net Actual Hours ~28,000 hours Idle Time - 2,000 hoursQ4,_abour Efficiency variance and Labour rate variance are: (a) Labour Efficiency Variance ~ 30,000 Favourable Labour rate Variance ~ 25,000 Adverse (b) Labour Efficiency Variance ~ 25,000 Favourable, Labour rate Variance ~ 30,000 Adverse (c) Labour Efficiency Variance ~ 25,000 Adverse, Labour rate Variance ~ 30,000 Favourable Ad) Labour Efficiency Variance ~ 30,000 Adverse Labour rate Variance ~ 25,000 Favourable Q.5.) Fixed Overhead volume variance is: (a) Fixed Overhead volume variance ~ 1,00,000 Favourable (b) Fixed Overhead volume variance ~ 50,000 Adverse (c) Fixed Overhead volume variance ~ 1,00,000 Adverse {a Fixed Overhead volume variance ~ 50,000 Favourable > Case Study 2: Popular company produces various articles for student purposes. It has been in industry since last 25 years, Company had a very humble start but gained popularity over the years due to excellent quality products which were sold at very competitive prices, Company has huge reserves and feel that it is also obligated to give back to the society from which it has grown List year management decided to produce and supply special quality school bags, water bottles, & geometry boxes to NGOs, at no Price, as a social responsibility. These articles were simple looking but were more durable, that would not have wore-off easily and could have been used for long-term. This year management wants to add another dimension to this social work. It approached charitable schools and government run schools and offered them the supply of the same articles, at cost. This will help students in these schools to get these things at a very low price compared to market. The variable costs are % 100, & 80, and & 40 for school bags, water bottles, and geometry boxes, respectively. These articles are made using a single machine. 0.20 hours of machine operation is required for manufacturing of water bottle and geometry box is 0.15 hours and 0.10 hours, respectively. Fixed overhead related to machine is & 7,40,000 er year. Machine can 1 unit of schoo! bag. Similarly, machine hours required for each ur ‘Operate for 8,000 hours ina year. Company has decided to sell its 80% capacity production in markets. Rest is divided amongst the 2 undergoing social works, equally. All Schools requests these items in the ratio of 2 : 3:5, as per their demand by the school students. Company wants to set a price for these articles to be offered to the schools. Management has few questions they need the answers to, They assigned the task to their team. Team made rough calculations but as there were too many people on the team, each came up with different answers. As a Chartered accountant, you have been approached. Understand the case closely, find the correct answers and help management to set 2 price. Answer the following: een is allocated fixed cost per unit of School bags, water bottles, and geometry boxes? (a 2 Marg [2 Marks} ) 18.5, 13.875,9.75 fof 18.5, 13.875, 9.25 (c) 18.5, 13.785,9.25 (d) 18.5, 13.785,9.50 [2 Marks} oe (ED egaswlts wore 200; © seat. 100, whet wodd be the obra break-even poe Gael ipsa Je fixed cost allocated to these supplies? }) 308.33 units (b) 500 units to} 508.33 units (d) 1,000 units - maximum number 4 {b) 200, 300, (c) 101, 152, 254 (d) 100, 150, 250 a [2 Marks} of units of each article that can be given at the prices given in Part (ii), (2 Marks) '7 F f.9. ) what will be the maximum units that can be s ‘ \ (a) 1203, 1645, 2726 } noe (a 26 {by1093, 1655, 2748 (c) 1185, 1777, 2962 (d) 1133, 1675, 2958 [2 Marks) Q.10. What should be the correct price for each item as per th ich item as per the management's decision? (a) 118.50, 93.875, 49.75 (b) 118.50, 93.785, 49.25 (c) 128.50, 93.785, 49.50 (d) 118.50, 93.875, 49.25 [2 Marks) ce accountant for Brilliant Tools Ltd applies overhead based on machine hours. The budgeted overhead machine hours for the year are & 1,30,000 and f : a i. 8,000 hours, respectively. The actual overhead and machine jours incurred were & 1,37,500 and 10,000 hours. The cost of goods sold and inventory data compiled for the year is as follows: j Direct Material % 25,000 Cost of Goods Sold % 2,25,000 Units: WIP 50,000 and Finished Goods 75,000 What is the amount of over/under absorbed overhead for the year? {a) Over absorbed by & 25,000 (b) Under absorbed by & 25,000 (c) Over a absorbed by & 32,500 (d) Under absorbed by & 32,500 [2 Marks) Q.12. The following information is available in respect of Process |: Raw material purchased and introduced 10,000 units @ 5 per unit Raw Material received from store 4000 units @ 6 per unit Direct Labour 40,000 Overheads 28,000 Output of Process is 13,500 units, Normal wastage 5% of inputs Scrap value of wastage 4 per unit The value of Abnormal Gain is: (a)% 2,062.68 (b) & 2,135.34 (c)% 2,103.70 (d) % 2,093.2 [2 Marks] ( 200% + B6u0%) + (30720% + 230UOR)= 266NIZ0O / BSUUO ~ x Q.13. 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 Premiaiit room will be double of Deluxe room. Hotel is expecting a profit of Va ef 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] 14. ALC Ltd. is a insurance company. It launched a new term insurance policy Names a5 Protection Plus. The total cost for the policy during the year is ¥ 1,60,00,000. Total number of polices sold 's 410 and total insured value of policies is € 920 crore. What is the cost per rupee of insured value? (a)% 0.0017 (b) 70.18 ep 575 (d)% 2.24 [2 Marks) 5. A business manufactures a single product and is preparing its production budget for the year ahead. It is timated that 2,00,000 units of the product can be sold in the year and the opening inventory is currently a aa vite, The inventory level sto be reduced by 40% by the end of the year. Whats production budget in \. HOO ee 000 ae _B941,90,000 units (c)1,84,000 units (d) 1,75,000 units [2 Marks} (fa) 1,95, 90, Sader = Opt Per: =O. goop00 « 28000 +% (S000 SL —_— ee ——Pa. 10. one is compulsory from the remaining ould be made and indicated in id form part of the answer aes five questions wer by the candidate ansv herever app Working notes shou! from a single Process The joint processin6 costs during a ro) Qt. ia} A factory produces two products, ‘A’ and 'B particular month are: Direct Material 30,000 Direct Labour coo Variable Overheads 12,000 Fixed Overheads % 32,000 sales: A- 100 units @ € 600 per unit; B -120 units © % 200 per unit. i {Apportion joints costs on the basis of j (i) Physical Quantity of each product {i) Contribution Margin method, and (ii) Determine Profit or Loss under both the methods. [5 Marks} WO Following are the details ofthe product Phomex for the month of April 2021: Standard quantity of material required per unit 5 kg. ‘Actual output 1000 units Actual cost of materials used = 7,14,000 | Material price variance % 51,000 (Fav) Actual price per kg, of materials found to be less than standard price per KE- of material by © 10. You are required to calculate: | (i) Actual quantity and Actual price of materials used. (i) Material Usage Variance. i (ii) Material Cost Variance. pAeel ‘ (@) _ Following information given of a newly setup organisation for the year ended on 34st march, 2022. | Number of workers replaced during period a Number of workers left and discharged during the period 25 500 ‘Average Number of workers on the roll during the period You are required to: {LI Compute the employee turnover rates using Separation Method and Flux Method. Equivalent Employee Tumover Rates for (i) above, given that the organisation was setup on 31st w January, 2021. [4 Marks}Q2, XP Ltd. furnishes you the following information relating to process I Opening work-in-progress ~ NIL Units introduced 42,000 units @ ¥ 12 Expenses debited to the process: {a) Direct material © 61,530 (b) Labour © 88,820 (c) Overhead ® 1,76,400 Normal loss in the process = 2% of input Closing work-in-progress - 1,200 units Degree of completion» Materials 100% Labour 50% Overhead 40% Finished output - 39,500 units Degree of completion of abnormal loss - Material 100% Labour 80% Overhead 60% Units scraped as normal loss were sold at & 4.50 per unit. All the units of abnormal loss were sold at € 9 per unit. Prepare: (a) Statement of equivalent production; (b) Statement showing the cost of finished goods, abnormal loss and closing WIP; (c) Process il account and abnormal loss account. [8 Marks} (AST A machine costing & 10 lakhs was purchased on 1.4,2021, The expected life of the machine is 10 years. At the end of this period its scrap value is likely to be € 10,000. The total cost of all the machines including new one was £90 lakhs, The other information is given (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 & 5,000. (lil) Insurance Premium was paid for all the machine & 9,000. (iv) New machine consumes 8 units of electricity per hour, the ri follows: per unit being ® 3.75. (v) The new machine occupies we area of the department. Rent of the department is & 2,400 per month. (vi) Depreciation is charged on straight line basis, Compute machine hour rate for the new machine, [6 Marks}Q3. fa) (b) manufacture products, namely A, B, Cand D using the same plant and process. The following information relates to a pro-duction period: Product A B c D Dutput in Unit 720 «600 «480-504 The four products are similar and are usually produced in production runs of 24 units and sold in batches of 12 ints, The total overheads incurred by the company for the period are as follows ®) Machine operation and maintenance cost 63,000 Setup costs 20,000 Store receiving 15,000 Inspection 10,000 2,592 Material handling and dispatch During the period the following cost drivers are to be used for the over-head cost Cost Driver Cost No. of production runs Setup cost Requisitions raised Store receiving No. of production runs Inspection, Material handling and dispatch Orders executed It is also determined that: Machine operation and maintenance cost should be apportioned between setup cost, store receiving and inspection activity in the ratio 4 : 3:2 Number of requisition raised on store is 50 for each product and the No. of orders executed is 192, each order being for a batch of 12 units of a product. Calculate the total overhead cost per unit of each product using activity based costing after finding activity [8 Marks} wise overheads allocated to each product. Following are the data pertaining to Infotech Pvt. Ltd. for the year 2020-21; ®) Salary to Software Engineers (5 persons) 15,00,000 Salary to Project Leaders (2 persons) 9,00,000 Salary to Project Manager 6,00,000 Repairs & maintenance 3,00,000 12,00,000 ‘Administration overheads ‘The company executes a Project XYZ, the details of the same are as follows: Project duration - 6 months One Project Leader and three Software Engineers were involved for the entire duration of the project, whereas Project Manager spends 2 months’ efforts, during the execution of the project. Travel expenses incurred for the project ~® 1,87,500 Two Laptops were purchased at a cost of % 50,000 each, for use in the project and the life of the same is estimated to be 2 years Prepare Project cost sheet considering overheads are absorbed on the basis of salary. [6 Marks}a. {a) A Ltd. produces a single product X. During the month of December 2021, the company has produced 14,560 tonnes of X. The details for the month of December 2021 are as follows (i) Materials consumed @ 15,00,000 (ii) Power consumed 13,000 Kwh @ 27 per Kwh (iii) Diesels consumed 1,000 litres @ % 93 per litre (iv) Wages & salary paid - 64,00,000 () Gratuity & leave encashment paid -% 44,20,000 (vi) Hiring charges paid for HEMM - 13,00,000 (vii) Hiring charges paid for cars used for official purpose - @ 80,000 (viii) Reimbursement of diesel cost for the cars - % 20,000 (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 time of despatch) 7,000 (oi) AMC cost of CCTV installed at weighing bridge (used for weighing of final goods at the time of despatch) and factory premises is € 6,000 and & 18,000 per month respectively. (xii) TA/DA and hotel bill paid for sales manager - 16,000 (xi ‘The company has 180 employees works for 26 days in a month. Required: {a) _ Prepare a Cost sheet for the month of December 2021. (b) Compute Earnings per manshift (EMS) and Output per manshift (OMS) for the month of December 2021 [9 Marks] (b) Discuss basic assumptions of Cost Volume Profit analysis. [5 Marks] Qs. {a) ACE Ltd. produces a product EMM using a material ‘REX’. To produce one unit of EMM 0.80 kg of 'REX' is required, As per the sales forecast conducted by the company it will be able to sell 45,600 units of product “EMM in the coming year. There is an opening stock of 3.150 units of product EMM and company desires to 386° maintain closing stock equal to one month's forecasted sale. Following is the information regarding material REX: (i) Purchase price per ke 225 (ii) Cost of placing order % 240 per order (il) Storage cost 2% per annum {iv) Interest rate 10% per annum (v) Average lead time 8 days (vi) _ Difference between minimum and maximum lead time 6 days (vi) Maximum usage 150 ke (vil) Minimum usage 90 kg ning stock of material ‘REX’ is 2,100 ke. and closing stock will be 10% more than opening stock.Page |g Required: () Compute the £0Q and total cost as per EOQ. (i) Compute the re-order level and maximum level (iii) tf the compa ' places an order of 7,500 kg. of REX at a time, it gets 2% discount, should the offer be accepted? (7 Marks} (b) MLK. Ltd. manufactures and sells a single product X whose selling price is % 40 per unit and the variable cost is & 16 per unit. (i) Ifthe Fixed Costs for this year are 4,80,000 and the annual sales are at 60% margin of safety, calculate the rate of net return on sales, assuming an income tax level of 40%. (ii) For the next year, it is proposed to add another product line Y whose selling price would be & 50 per unit and the variable cost % 10 per unit, The total fixed costs are estimated at % 6,66,600. The sales mix values of X : Y would be 7: 3. Determine at what level of sales next year, would M.K. Ltd. break even? Give separately for both X and Y the break-even sales in rupee and quantities, (7 Marks] fa) Briefly explain the essential features of a good cost accounting system. [5 Marks} \UtbY” Explain briefly the concept of 'Flexible Budget’, [5 Marks] (c)__ Explain the following terms: (i) Cost Object (ii) Cost Driver (iii) Cost Pool. [4 Marks} oR (c)__ List the Financial Expenses which are not included in cost. [4 Marks] See