CA Inter Jan 25 Suggested Answers | Costing
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MCQs
Question 1 (A) :
XYZ Company has an option to buy any one of the two machines N or M to manufacture its unique industrial component P. Each of the machines has the capacity to produce the same quantity of component P and are almost identical except for the fact that they are being manufactured by different manufacturers. The specifications for each Machine are:
Machine M: It has the capacity to produce 50,000 components of P per annum, the fixed costs being ₹1,50,000 and could generate a profit of ₹2,25,000 on the sale of all the components produced.
Machine N: It is also having the equal capacity to produce the same number of components as that of Machine M per annum and all the components thus produced could be sold in the open market without any difficulty. Fixed cost of Machine N is ₹60,000 less than that of Machine M and yields a profit of ₹1,60,000 by selling all the components that are produced.
The selling price of each component of P is ₹100.
Required:
(i) Calculate break even sales in value for each machine
(ii) Calculate sales level in units where both the machines are equally profitable.
Answer:
Question 1 (B) :
PQR Ltd. manufactures a product in batches of 2,000 units. The following costs are incurred for each batch:
|
Particulars |
Amount (in ₹) |
|
Direct Material Cost per Batch |
2,40,000 |
|
Direct Labour Cost per Batch |
1,65,000 |
|
Overhead Absorption Rate (variable) |
120 per machine hour |
|
Expected Rejection Rate |
3% |
|
Scrap Value per Rejected Unit |
75 |
Other Information
|
Particulars |
Details |
|
Selling Price per Good Unit |
₹250 |
|
Total Available Machine Hours per month |
3,000 hours |
|
Fixed Overheads per Month |
₹1,25,000 |
|
Batches Manufactured per Month |
10 batches |
Required:
(i) Calculate contribution per unit of good units after adjusting rejected units.
(ii) Calculate the company’s total monthly profit.
Answer:
Question 1 (C) :
The Cost Accountant of a Manufacturing concern has given the following details in respect of a raw material X:
Difference between Minimum lead time and Maximum lead time is 4 days.
Average Lead time to procure the Raw Material X is 7 days.
Reorder Level: 1,80,000 units
Reorder Quantity: 90,000 units
Minimum Stock Level: 1,00,000 units
Maximum Stock Level: 1,90,000 units
Required to Calculate:
(i) Maximum Consumption per day
(ii) Minimum Consumption per day
Answer:
Question 2 (A) :
The following information relates to a manufacturing concern A Ltd. for the year ended 31st March, 2024.
|
Particulars |
As on 1st April, 2023 |
As on 31st March, 2024 |
|
Raw Material (in ₹) |
3,40,000 |
1,80,000 |
|
Work in Progress (in ₹) |
5,50,000 |
3,50,000 |
|
Particulars |
Amount (in ₹) |
|
Raw Material Purchased |
8,00,000 |
|
[Inclusive of GST @18% (Ineligible for ITC)] |
|
|
Packaging Cost (primary) |
3,00,000 |
|
Fee Paid to Independent Directors |
5,00,000 |
|
Production bonus paid to factory workers |
10% of Wages paid to factory workers |
|
Job charges paid to job workers |
41,000 |
|
Salary paid to Supervisor |
6,17,000 |
|
Wages paid to factory workers |
6,30,000 |
|
Salary paid to Production Control Manager |
7,00,000 |
|
Sale of Scrap generated during Manufacturing |
50,000 |
|
Selling Overheads per unit |
2 |
|
Salary paid to General Manager |
12,40,000 |
|
Freight Inwards |
2% on Raw Material Purchased |
|
Expenses Paid for Quality Control check activities |
4,30,000 |
|
Particulars |
Cost Price (₹) |
WDV as on 1st April, 2023 (₹) |
Depreciation Rate |
Insurance Cost per annum |
|
Factory Building |
25,00,000 |
21,57,000 |
10% |
2% of Cost Price |
|
Plant and Machinery |
15,00,000 |
11,56,000 |
15% |
2% of Cost Price |
|
Office Building |
40,00,000 |
36,00,000 |
10% |
Nil |
Additional Information:
Depreciation is charged on the written down value method.
Stock of finished goods as on 1st April, 2023 was 80,000 units having a total cost of ₹8,00,000. The entire stock of opening finished goods is sold during the year, closing stock is 70,000 units. During the period, 4,50,000 units were sold.
A Ltd. wants a profit of 20% on Total Sales.
Required:
Prepare a Cost statement showing the various elements of cost and profit earned for the year ended 31st March, 2024.
Answer:
Question 2 (B) :
A skilled worker has assigned a work. The relevant data is given as follows:
Time rate per hour: ₹25
Time allowed: 9 hours
Time taken: 6 hours
The worker has given an option to choose either Halsey (50% plan) or Rowan plan.
You are required to calculate earnings under both plans and which plan is more beneficial for a worker.
Answer:
Question 3 (A) :
A chemical compound manufactured through two processes namely Process X and Process Y. Process Y is dependent on the output generated by Process X and the semi-finished chemical compound received from Process X shall be mixed up with further materials in Process Y. The details of costs and other particulars for each process are given as follows:
|
Particulars |
Process X |
Process Y |
|
Direct Material |
1,000 kgs @ ₹50 per kg |
700 kgs @ ₹90 per kg |
|
Direct Labour |
₹35,000 |
₹25,000 |
|
Process Plant time |
200 hrs @ ₹60/hr |
120 hrs @ ₹80/hr |
|
Expected output |
75% of input |
80% of input |
|
Actual output |
700 |
1150 |
|
Realizable value of Normal Loss |
₹8 per kg |
₹5 per kg |
Notes:
The departmental overhead for the period was ₹30,000 and is absorbed in each process on direct labour cost.
Process plant time represents the attributable plant run time with respect to each process and is a part of direct process cost.
Assume no finished stock and work in progress either at the beginning or end of the period.
Required:
Prepare Process X Account, Process Y Account, Normal Loss Account and Abnormal Gain Account.
Answer:
Question 3(B) :
SW Limited manufactures Lenin bed covers. The present cost data are as below:
Variable Cost of manufacturing per unit: ₹200
Variable cost of selling and distribution per unit: ₹100
Fixed costs: ₹16,00,000
Selling price per unit: ₹800
Expected Profit for the coming year: ₹8,00,000
The management could sense a stage of stagnation/deterioration in future sales with the new entrant RK Enterprises. The SW limited has approached to one marketing consulting firm for the study of cost volume profit analysis. The firm suggested three alternatives to fuel the sales growth by tinkering with the selling price.
|
Alternatives |
Reduce selling price % |
Projected increase in sales (units) (from the sales level that would generate ₹8,00,000 profit) |
|
1 |
10.00 |
15 |
|
2 |
12.50 |
20 |
|
3 |
15.00 |
25 |
Required:
Calculate the effect on profits under each alternative and recommend which alternative is most likely to be adopted to get the maximum profit.
Answer:
Question 4 (A) :
XYZ Transport is running a bus between town A and town B which are 25 kms apart. The bus will make 4 round trips every day carrying an average 30 passengers on each trip. The bus costs the company a sum of ₹5,00,000. It has been insured at 2% per annum and the annual tax will amount to ₹2,000 and the garage rent is ₹500 per month. Annual repairs will be ₹8,000 and the bus is likely to last for 5 years. The driver’s salary will be ₹15,000 per month and the conductor’s salary will be ₹12,000 per month in addition to 10% of the takings as commission (to be shared by the driver and conductor equally). Cost of stationery will be ₹500 per month. Manager-cum-accountant’s salary is ₹35,000 per month. Petrol and Oil will be ₹1,000 per 100 kms. Assuming 15% profit on takings. Depreciation will be charged at straight line method.
You are required to calculate the bus fare to be charged for per passenger kilometer. The bus will run on an average 25 days in a month.
Answer:
Question 4 (B) :
LMN Foods is a manufacturer of organic snacks. For the year ending 2023, the company compiled the following financial data:
|
Item |
Amount (in ₹) |
|
Opening inventory of raw materials |
2,00,000 |
|
Closing inventory of raw materials |
2,50,000 |
|
Raw material purchases |
12,00,000 |
|
Labour costs |
5,00,000 |
|
Production overheads |
2,50,000 |
|
Marketing and distribution expenses |
1,25,000 |
In 2024, LMN Foods accepted a request for a bulk supply of their best-selling snacks. The estimated costs for fulfilling this order are as follows:
Estimated raw material cost: ₹ 3,00,000
Estimated labour cost: ₹1,50,000
Packaging and transportation cost: ₹49,400
LMN Foods allocates production overhead based on direct labour costs and marketing and distribution expenses as a percentage of the total production cost based on the previous year’s data.
Required:
(i) Calculate the overhead recovery rate for 2023 based on actual costs.
(ii) Prepare a comprehensive cost statement for the bulk order and determine the sales required for achieving a profit margin of 20% of the final sales amount.
Answer:
Question 5 (A) :
The following information has been provided by a company:
Number of units produced and sold: 7,000
Standard labour rates per hour: ₹ 9
Actual hours worked: 17,820 hours
Labour efficiency rate: 106.8%
Labour cost variance is ₹ 71,280 (A)
You are required to calculate:
(i) Actual Labour rate per hour
(ii) Standard hours required for 7,000 units
(iii) Labour efficiency variance
(iv) Standard Labour cost per unit
(v) Actual labour cost per unit
Answer:
Question 5 (B) :
Journalise the following transactions assuming that cost and financial accounts are integrated:
|
Particulars |
Amount (in ₹) |
|
Wages paid (20% indirect) |
2,00,000 |
|
Selling and Distribution Overheads incurred |
50,000 |
|
Deficiency found in stock of Raw Material (Normal) |
80,000 |
|
Factory Overheads (Under Absorbed) |
60,000 |
Question 5 (C) :
Define spoiled work and defective work and discuss the treatment of defective work in the following circumstances:
|
Circumstances |
Treatment |
|
Where a percentage of defective work is allowed in a particular batch as it cannot be avoided. |
|
|
Where the defect is due to bad workmanship. |
|
|
Where defect is due to the Inspection Department wrongly accepting incoming material of poor quality. |
|
Answer:
Question 6 (A) :
Explain the steps involved in the procedure for reconciliation of Cost & Financial accounts. Also explain the circumstances where reconciliation statement can be avoided.
Answer:
Question 6 (B) :
State cost unit of the following Industry Sector:
|
Industry Sector |
Cost Unit |
|
Oil |
|
|
Professional services |
|
|
Education |
|
|
Brick-making |
|
|
Engineering |
|
|
Electricity |
|
|
Hotel/Catering |
|
|
Coal mining |
|
|
Brewing |
|
|
Hospitals |
Answer:
Question 6 (C) :
Explain the methods that can be used for controlling Selling and Distribution Overheads.
Answer:
OR
Question 6 (C) :
Suggest any one basis of re-apportionment of service department overheads over production departments in the following contexts:
|
Cost of the Service Departments |
Basis |
|
Planning and progress |
|
|
Transport Department |
|
|
Personnel Department |
|
|
Fire Protection |
|
|
Power House (electric lighting cost) |
|
|
Computer Section |
|
|
Canteen and Welfare |
|
|
Hospital and Dispensary |
|
Answer:
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