CMA Inter Suggested Answers | Dec 24 Paper 8 Cost Accounting (CA)
Table of Contents
CMA Inter Dec 24 Suggested Answer Other Subjects Blogs :
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MCQs
(i) Which one of the following classification is meant for distinction between Direct Cost and Indirect Cost?
Answer :
(C) Element
Reason:
Cost classification by Element divides costs into Material, Labour, and Expenses, further distinguishing them as Direct Costs (traceable to a cost object) and Indirect Costs (allocated to cost centers).
(ICMAI book page number 53 | This question is also a part of Konceptca.com question bank)
(ii) Which one of the following costs is the value of the best alternative course of action that was not chosen?
Answer :
(C) Economic Cost
Reason:
(ICMAI book page number 17 | This question is also a part of Konceptca.com question bank)
(iii) Which one of the following is an example of by-product?
Answer :
Reason:
(ICMAI book page number 414 | This question is also a part of Konceptca.com question bank)
(iv) NOB Ltd. is committed to supply 45000 bearings per annum to CINY Ltd., it is estimated that it costs 20 paise as inventory holding cost per bearing per month. If its Economics Batch Quantity (EBQ) is 3000 units (bearings), what will be the minimum inventory holding cost at optimum run size?
Answer :
(A) 3600
Reason:
(v) State which of the following are the characteristics of Job Costing.
(1) Homogeneous Products
(2) Customer – driven production
(3) Complete production possible within a single accounting period
Answer :
(C) (2) and (3) only
Explanation:
(ICMAI book page number 299 | This question is also a part of Konceptca.com question bank)
(vi) SOTON Ltd., producing product NB provides the following information:
|
|
₹ |
|
Royalty paid on sales |
50,000 |
|
Design charges paid for the product |
20,000 |
|
Hire charges of equipment used for production |
6,000 |
Direct expenses will be:
Answer :
(A) ₹ 76,000
Explanation:
Direct expenses are costs that can be directly attributed to the production of a specific product.
Here:
(vii) Which one of CASs deals with the principle and methods of determining the repairs and maintenance cost?
Answer :
(B) CAS – 12 (Limited Revision 2017)
Explanation:
(ICMAI book page number 244 | This question is also a part of Konceptca.com question bank)
(viii) GINT Ltd. made a loss of ₹ 2,00,000 during the year ending on March 31, 2024 as per costing records. If interest on investments, and Directors' fees were ₹ 10,000, and ₹ 40,000 respectively, what will be the Profit / Loss as per financial records?
Answer :
(B) Loss ₹ 2,30,000
Solution:
To reconcile the loss as per costing records to financial records, we adjust for items that are included in financial accounts but not in costing records.
Given:
Directors' Fees = ₹ 40,000 → Expense in financial accounts (deduct).
(ix) RONO Ltd. maintains a Margin of Safety (MOS) of 25% on current sales and earns a profit of ₹ 30 lakhs per annum. If the company has a profit-volume (P/V) ratio of 40%, its current sales amount to:
Answer :
(C) ₹ 300 lakh
30,00,000 / 0.4 = 75,00,000 / 0.25 = ₹ 300 lakh
(x) In the factory of ZAN Ltd. where standard costing is followed, 4000 kg of materials at ₹ 10 per kg were actually consumed resulting in materials price variance of ₹ 2,000 (Adv.). What will be the standard cost of material per kg?
Answer :
(B) ₹ 9.50
Material Price Variance=Actual Quantity×(Standard Price−Actual Price)
(2000) = 4000 * (SP - 10)
SP = 9.5
(xi) MR. KUNT a worker has time rate of ₹ 45 per hour, he takes 40 hours to complete a job. If time allowed for a job is 48 hours, what will be total earning of Mr. Kunt under Rowan Plan (Bonus Scheme)?
Answer :
(A) ₹ 2,100
Basic Wages=40×45=₹1,800
Bonus = TS * AT / TA * RHP
= 8 * 40/48 * 45 = 300
Towal wages = 2100
(xii) Batch costing is applied effectively in the following situation:
Answer :
Explanation:
Batch Costing is a form of job costing that is applied when items are produced in batches (groups) and each batch is treated as a cost unit. It is most suitable when:
(ICMAI book page number 317 | This question is also a part of Konceptca.com question bank)
(xiii) If the raw material prices are suffering from inflation, which of the following methods of valuing stock will give the lowest gross profit?
Answer :
(A) LIFO method
Explanation:
(ICMAI book page number 80 | This question is also a part of Konceptca.com question bank)
(xiv) Fixed costs are treated as
Answer :
(C) Period Costs
Explanation:
Examples of Fixed Costs:
(xv) The Budget that is prepared first of all is
Answer :
(B) Sales Budget assuming that is the key factor
(ICMAI book page number 567 | This question is also a part of Konceptca.com question bank)
Question 2 (a)
The following financial parameters of ZONB Ltd. are available for the month of September 2024.
Accounts shows the following figures:
|
Inventory: |
1st September 2024 (₹) |
30th September 2024 (₹) |
|
Raw material |
20,000 |
35,000 |
|
Work-in-progress |
20,000 |
30,000 |
|
Finished goods |
50,000 |
60,000 |
|
Other details: |
|
|
|
Selling expenses |
|
22,000 |
|
General & Admin expenses |
|
18,000 |
General & Admin expenses are not relating to the production activity.
Required:
Summarize a Cost Sheet for the month of September 2024 showing:
(i) Prime cost
(ii) Work cost
(iii) Cost of goods sold
(iv) Cost of sales and profit earned
Answer :
Question 2 (b)
DONX Ltd. uses three types of materials P, Q, and R for production of product M for which the following data apply:
|
Raw Material |
Usage per unit of product (kgs) |
Re-order quantity (kgs) |
Price per kg. |
Delivery period (in weeks) |
Re-order level (kgs.) |
Minimum level (kgs.) |
||
|
Minimum |
Average |
Maximum |
||||||
|
P |
10 |
10,000 |
0.10 |
1 |
2 |
3 |
8000 |
? |
|
Q |
4 |
5000 |
0.30 |
3 |
4 |
5 |
4750 |
? |
|
R |
6 |
10,000 |
0.15 |
2 |
3 |
4 |
? |
2000 |
Weekly production varies from 175 to 225 units, averaging 200 units of the said product M.
Required:
Calculate the following quantities:
(i) Minimum stock of P.
(ii) Minimum stock of Q.
(iii) Re-order level of R.
(iv) Average stock level of P.
Answer :
Question 3 (a)
DOZIN Ltd. manufactures a single product. It recovers factory overheads at a pre-determined rate of ₹ 20 per man day.
During the year 2023-24, the total factory overheads incurred and the man-days actually worked were ₹ 35.50 lakhs and 1.50 lakh days respectively. Out of the amount of ₹ 35.50 lakhs, ₹ 2.00 lakhs were in respect of wages for strike period and ₹ 1.00 lakh was in respect of expenses of previous year booked in this current year. During the period, 50,000 units were sold. At the end of the period, 12,000 completed units were held in stock but there was no opening stock of finished goods. Similarly, there was no stock of uncompleted units at the beginning of the period but at the end of the period there were 20,000 uncompleted units which may be treated as 65% complete in all respects.
On investigation, it was found that 40% of the unabsorbed overheads were due to factory inefficiency and the rest were attributable to increase in the cost of indirect materials and indirect labour.
Required:
(i) Calculate the amount of unabsorbed overheads during the year 2023-24.
(ii) Analyze the accounting treatment of unabsorbed overheads in cost Accounts.
Answer :
Question 3 (b)
The following information is available from the Financial Books of SONT Ltd., newly established company for the year ended 31st March 2024.
|
|
(Amount in ₹) |
|
Direct Material Consumption |
50,00,000 |
|
Direct Wages |
30,00,000 |
|
Factory Overhead |
16,00,000 |
|
Administrative Overhead |
7,00,000 |
|
Selling and Distribution Overhead |
9,60,000 |
|
Bad Debts |
80,000 |
|
Preliminary Expenses written off |
40,000 |
|
Legal Charges |
10,000 |
|
Dividends Received |
1,00,000 |
|
Interest Received on Deposits |
20,000 |
|
Sales (120000 units) |
1,20,00,000 |
|
Closing Stock: |
|
|
Finished Goods (4000 units) |
3,20,000 |
|
Work-in-progress |
2,40,000 |
|
Profit (Net) for the year 2023-24 |
12,90,000 |
The cost accounts for the same period reveal that the direct material consumption was ₹ 56,00,000. Factory overhead is recovered at 20% on prime cost. Administration overhead is recovered at ₹ 6 per unit of production. Selling and distribution overheads are recovered at ₹ 8 per unit sold.
Required:
(i) Prepare the Profit and Loss Accounts both as per financial records and as per cost records.
(ii) Reconcile the profits as per the two records.
Answer :
Question 4 (a)
PRANO SERVICES Ltd. owns a bus and operates a tourist service on a daily basis. The bus starts from New Town to Sweet Village and return back to New Town the same day. Distance between New Town and Sweet Village is 250 kms. This trip operates for 10 days in a month. The bus also plies for another 10 days between New Town and Rajpur and returns back to New Town the same day. Distance between these two places is 200 kms. The bus makes local sightseeing trips for 5 days in a month covering a total distance of 80 kms per day.
The following data are given below:
While plying to and fro Sweet Village the bus occupies 90% of the capacity and 80% while it plies between New Town to Rajpur (both ways). In the New Town, the bus runs at full capacity. The company earns a profit margin of 25% on takings. (Ignore interest & taxation).
You are required to calculate:
(i) The bus fare rate to be charged to Sweet Village.
(ii) The total earnings from local trips per passenger.
Answer :
Question 4 (b)
XINOS Ltd., a contractor, prepares his accounts for the year ended March 31 each year. The company commenced a contract on July 1, 2023. The following information related to the contract as on March 31, 2024.
|
|
₹ |
|
Material |
2,51,000 |
|
Labour Charges |
5,65,600 |
|
Salary to Foreman |
81,300 |
A machine costing ₹ 2,60,000 has been on the site for 146 days, its working life is estimated at 7 years and its final scrap value at ₹ 15,000.
A supervisor, who is paid ₹ 8,000 p.m., has devoted one-half of his time to this contract. All other expenses and administration charges amount to ₹ 1,36,500.
Material in hand at site costs ₹ 35,400 on 31.03.24. The contract price is ₹ 20,00,000. On March 31, 2024, two-thirds of the contract was completed. The architect issued certificates covering 50% of the contract price, and the contractor had been paid ₹ 7,50,000 on account.
Required:
(i) Prepare Contract Account for the year ended March 31, 2024.
(ii) Calculate the profit to be transferred to Profit & Loss A/c for the year ended March 31, 2024.
Answer :
Question 5 (a)
MONTECH Ltd. is engaged in process engineering industry. Its product ZP passed through two processes A and B. During the month of September 2024, the input to process A of basic Raw Material was 8000 units @ ₹ 9 per unit.
|
Other information for the month is as follows : |
Process A |
Process B |
|
Output units |
7500 |
4800 |
|
Normal loss (% to input) |
5% |
10% |
|
Scrap value per unit (₹) |
2 |
10 |
|
Direct wages (₹) |
12,000 |
24,000 |
|
Direct expenses (₹) |
6,000 |
5,000 |
|
Selling price per unit (₹) |
15 |
25 |
Total overheads ₹ 17,400 were recovered as percentage of direct wages. Selling expenses were ₹ 5,000. They are not allocated to the processes. 2/3rd of the output of Process A was passed on to the next process and the balance was sold. The entire output of Process B was sold. It is assumed that Process A and Process B are not responsibility centres.
Required:
Answer :
Question 5 (b)
The following information is extracted from the record of EMON Ltd., a manufacturing company using Standard Costing System for the week ended October 2024.
|
|
Standard |
Actual |
||
|
|
Quantity |
Unit Price |
Quantity |
Unit Price |
|
Material S |
60% |
₹ 20 |
44 kg. |
₹ 25 |
|
Material T |
40% |
₹ 10 |
66 kg. |
₹ 5 |
|
Processing Loss |
10% |
– |
– |
– |
|
Actual output is 90 kg. |
||||
Required:
From the information stated Supra, analyse the followings variances:
Answer :
Question 6
SENTOR Ltd., a manufacturing company, manufactures a single product with a capacity of 150000 units per annum. The summarized profitability statement for the year is as under:
|
|
₹ |
₹ |
|
|
Sales: 100000 units @ ₹ 15 per unit |
|
15,00,000 |
|
|
Cost of Sales: |
|
|
|
|
Direct Materials |
3,00,000 |
|
|
|
Direct Labour |
2,00,000 |
|
|
|
Production Overhead: |
|
|
|
|
Variable |
60,000 |
|
|
|
Fixed |
3,00,000 |
|
|
|
Administration Overheads (Fixed) |
1,50,000 |
|
|
|
Selling and Distribution Overheads: |
|
|
|
|
Variable |
90,000 |
|
|
|
Fixed |
1,50,000 |
12,50,000 |
|
|
Profit |
|
2,50,000 |
Required:
Evaluate the following options: (Each option is to be treated independently).
(i) Calculate the amount of sales required to earn a target profit of 25% on sales, if the packing is improved at a cost of ₹ 1 per unit.
(ii) There is an offer from a large retailer to purchase 30,000 units per annum, subject to providing a packing with a different brand name at a cost of ₹ 2 per unit. However, in this case, there will be no selling and distribution expenses. Also, this will not, in any way, affect the company’s existing business. Identify the break-even price for this additional offer.
(iii) If an expenditure of ₹ 3,00,000 is made on advertising, the sales would increase from the present level of 1,00,000 units to 1,20,000 units at a price of ₹ 18 per unit. Will that expenditure be justified?
(iv) If the selling price is reduced by ₹ 2 per unit, there will be 100% capacity utilization. Will the reduction of selling price be justified?
Answer :
Question 7 (a)
A department of SONEX Ltd., a manufacturing company, attains sales of ₹ 6,00,000 at 80% of its normal capacity. Its expenses are given below:
|
|
₹ |
Selling Costs |
|
|
Office salaries |
90,000 |
Salaries |
8% of sales |
|
General expenses |
2% of sales |
Travelling expenses |
2% of sales |
|
Depreciation |
7,500 |
Sales office |
1% of sales |
|
Rent and rates |
8,750 |
General expenses |
1% of sales |
|
Distribution costs: |
|||
|
Wages (₹) |
|
15,000 |
|
|
Rent |
|
|
1% of sales |
|
Other expenses |
|
|
4% of sales |
Note: All fixed costs are assumed to remain unchanged, even at 110% capacity.
Required:
Prepare Flexible, Administration, Selling and Distribution Costs Budget, operating at 90 per cent, 100 per cent and 110 per cent of normal capacity for the month of September 2024.
Answer :
Question 7 (b)
Summarize the objectives and scope of Cost Accounting Standard (CAS) – 5 on determination of Average (Equalized) Cost of Transportation.
Answer :
Question 8 (a)
Summarize the objectives of Cost Accounting (any Four).
Answer :
Question 8 (b)
JUST – in TIME (JIT) inventory system focuses on “the right material at the right time, at the right place and in the exact amount” without the safety net of inventory. In this context, enumerate the advantages of Just – in – Time (JIT).
Answer :
Question 8 (c)
Enumerate the disclosures of CAS – 3 on production and operation overheads (Any five).
Answer :
Cost Accounting detailed analysis
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