Programe: BBA Semester III

Course Code: BBA305

Course Title: COST AND MANAGEMENT ACCOUNTING

Section A

Q1. What do you mean by elements of cost? Discuss the various elements of cost. (Unit I)

Q2. Distinguish between cost accounting and management accounting. (Unit I)

Q3. Distinguish between cost accounting and financial accounting. (Unit I)

Q4. Define cost accounting. State three advantages of cost accounting to management. (Unit I)

Q5. What is the difference between direct and indirect materials? Give two examples of each. (Unit I)

Q6. “Cost accounting has come to be an essential tool of management.’’ Comment. (Unit I)

Q7. Discuss the limitations of financial accounting and importance of cost accounting. (Unit I)

Q8. What are the elements of cost ? Explain the terms with appropriate examples. (Unit I)

Q9. Define inventory control. Why is inventory control necessary? (Unit II)

Q10. State the distinction between the two terms in each of the following, giving examples:

(a) Cost allocation and cost apportionment.

(b) Direct cost and indirect cost. (Unit III)

Q11. State the distinction between the two terms in each of the following, giving examples:

(a) Fixed cost and variable cost.

(b) Indirect expenses and overheads. (Unit III)

Q12 Distinguish between direct labour and indirect labour. Give four examples of indirect labour that
may arise in a factory. (Unit III)

Q13. Distinguish between allocation, apportionment and absorption in connection with factory
overhead expenses. (Unit III)

Q14. What are different stages by which overhead expenses are analysed, collected and charged to
product? (Unit III)

Q15. The following information is given for company A for year 2002
Factory Overheads Rs 62,000
Direct Labor cost Rs 98,000
Direct labor hours 50,000
Machine hours 70,000
From the above figures prepare the overhead application rates using the following methods:
a) Direct labor hour b) Direct labor cost c) Machine hour. (Unit III)

Q16. Distinguish between job costing and contract costing. Also describe features of contract costing.
(Unit II)
Q17. What do you understand by Job costing explain with example? In which industries is it applied?
(Unit II)
Q18. Explain following with Example:
a) Contract Costing b) Job Costing
(Unit II)
Q19 Explain following with Example:
a) Apportionment of Overhead b) Administrative Overhead
(Unit III)
Q20 What are the different methods of costing? Explain their practical experience.
(Unit I)
Q21. Briefly discuss various basis of classification of overhead.
(Unit III)
Q22. Explain following with Example:
a) Operation Costing b) Batch Costing (Unit II)

Q23. Explain following with Example:

a) Fixed Vs Variable overheads b) Sales and Distribution Overhead (Unit III)
Q24. Define factory cost. Explain the different methods for the absorption of factory overhead.
(Unit III)
Q25. What do you mean by marginal costing? Discuss the usefulness and limitations.
(Unit IV)
Q26. The following transactions took place in respect of a material item:
Receipt Qty Rate Issue quantity
5 July 2015 200 Rs 2
10 July 2015 300 Rs. 2.4
15 July 2015 ---- --- 250
25 July 2015 250 Rs 2.6 ----
30 July 2015 ----- ----- 200

Prepare store ledger by using simple average method. (Unit II)

Q27. Following information is associated with the ABC ltd for Oct 2017
Work Overheads Rs 85,000
Wages Rs 75,000
Material Cost Rs 1,35,000
Machine hours 45,000

From the above figures prepare the overhead application rates using the following methods:
a) Direct material cost b) Direct labor cost c) Machine hour. (Unit III)

Q28. What do you understand by Job costing explain with example? In which industries is it applied?
 (Unit II)
Q29. Distinguish between fixed budget and flexible budget. Briefly state the circumstances in which
flexible budgets are used. (Unit V)

Q30. Prepare store ledger by using FIFO and LIFO method from the following transactions took place
in respect of a material item:
Receipt Qty Rate Issue quantity
5 Nov 2017 500 Rs 5
10 Nov 2017 500 Rs. 5.4
18 Nov 2017 ---- --- 450
20 Nov 2017 250 Rs 5.6 ----
25 Nov 2017 ----- ----- 300
(Unit II)
Q31. Discuss the distinctions between traditional absorption costing and Activity Based Costing.
(Unit III)
Q32. What is Activity Based Costing? Why is it needed? (Unit III)
Q33. Discuss the steps in applying Activity Based Costing? (Unit III)
Q34. A product is sold at a price of Rs 120 per unit and its variable cost is Rs 80 per unit. The fixed
expenses of the business are Rs 8,000 per year. Find (i) BEP in Rs and units, (ii) profits made when
sales are 240 units, (iii) Sales to be made to earn a net profit of Rs 5,000 for the year. (Unit IV)

Q35.
Rs
The sales of a company are @ Rs 200 per unit 20,00,000
Variable cost 12,00,000
Fixed cost 6,00,000
The capacity of the factory 15,000 units

Determine the BEP. How much profit is the company making? (Unit IV)

Q36. The under mentioned information is given below:

(1) The P/V Ratio of a firm is 40%.
(2) The firm wants to increase its selling price by 10%.
(3) The firm’s variable cost is higher now by 5%.
(4) The fixed expenses of the firm have gone up from Rs 2,00,000 to Rs 2,58,500.
Work out the original BEP sales and the revised BEP sales. (Unit IV)

Q37. A factory produces 300 units of a product per month. The selling price is Rs 120 and variable
cost Rs 80 per unit. The fixed expenses of the factory amount to Rs 8,000 per month. Calculate:
(i) the estimated profit in a month wherein 240 units are produced,
(ii) the sales to be made to earn a profit of Rs 7,000 per month. (Unit IV)

Q38. “Fixed costs do not change with changes in volume and it is difficult for management to control
them”. Discuss. (Unit IV)

Q39. Taking suitable data construct a simple break-even chart and show the break-even point, angle
of incidence and margin of safety on the chart. (Unit IV)
Q40 What do you understand by break-even point? Explain the concept of break-even analysis.
(Unit IV)
Q41. Distinguish between P/V ratio and break-even point? Explain the uses of profit volume analysis.
(Unit IV)
Q42. What is budgetary control? Discuss the various preliminaries required for adoption of a system
of budgetary control. (Unit V)
Q43. What are the main steps in budgetary control? State the main objectives of budgetary control.
(Unit V)
Q44. Distinguish between ‘fixed budget’ and ‘flexible budget’. (Unit V)
Q45. Name the different types of budgets that are built up for effective control. (Unit V)
Q46. Define ‘Standard Cost’ and ‘Standard Costing’. What are the applications of standard costing?
(Unit VI)
Q47. Define ‘Variance analysis’. What are the ways of disposing of cost variances? (Unit VI)
Q48. Distinguish clearly between direct and indirect materials. Under what circumstances may direct
materials be charged indirectly to the product? (Unit III)
Q49 Is it necessary to classify costs as “fixed” and “variable”? Describe briefly how this classification
would be of help in costing? (Unit III)
Q50What are the general considerations that should decide your choice of basis for distribution of
overhead costs to departments? (Unit III)

Section B

Q51. A manufacturer has shown an amount of Rs 19,310 in his books as ‘Establishment’ which really
include the following expenses: (Unit I)

Particulars Rs
Interest on debentures 1,200
Agents’ commission 6,750
Warehouse wages 1,800
Warehouse repairs 1,500
Lighting of office 70
Office salaries 1,130
Director’s remuneration 1,400
Travelling expenses of salesmen 1,760
Rent , rates and insurance of warehouse 310
Rent , rates and insurance of office 230
Lighting of warehouse 270
Printing and stationery 1,500
Trade magazines 70
Donations 150
Bank charges 100
Cash discount allowed 770
Bad debts 300
From the above information prepare a statement showing in separate total:

(a) Selling expenses, (c) Administration expenses.

(b) Distribution expenses, (d) Expenses which you would exclude from costs.

Q52. Prepare a cost sheet of the following data relating to the manufacture of Jeans:

Number of Jeans manufactured during the month 1,000

 Rs
Direct materials consumed 20,000
Direct labour 8,000
Indirect labour (in factory) 2,500
Supervision costs (in factory) 1,000
Factory premises rent 1,600
Factory lighting 600

Oil for machines 100

Depreciation of machines 500
Office overheads 8,000
Office salaries 2,000
Misc. office expenses 1,000
Selling and distribution overheads 6,000
Note: A profit margin of 20% on the total cost of goods is expected on the sale of Jeans.

(Unit I)

Q53. From the following information for the month of January, prepare a Cost Sheet to show the
following components : (a) Prime Cost, (b) Factory Cost, (c) Cost of Production, (d) Total Cost.

Rs
Direct material 57,000
Direct wages 28,500
Factory rent and rates 2,500
Office rent and rates 500
Plant repairs and maintenance 1,000
Plant depreciation 1,250
Factory heating and lighting 400
Factory manager’s salary 2,000
Office salaries 1,600
Director’s remuneration 1,500
Telephone and postage 200
Printing and stationery 100
Legal charges 150
Advertisement 1,500
Salesmen’s salaries 2,500
Showroom rent 500
Sales 1,16,000
(Unit I)

Q54. The Bangalore Ltd. supplies you the following information and requires you to prepare a cost
sheet .

Rs
Stock of raw materials on 1st Sept ., 2013 75,000
Stock of raw materials on 30th Sept ., 2013 91,500
Direct wages 52,500
Indirect wages 2,750
Sales 2,00,000
Work-in-progress on 1st Sept ., 2013 28,000
Work-in-progress on 30th Sept ., 2013 35,000
Purchases of raw materials 66,000
Factory rent , rates and power 15,000
Depreciation of plant and machinery 3,500
 Expenses on purchases 1,500
Carriage outward 2,500
Advertising 3,500
Office rent and taxes 2,500
Travellers’ wages and commission 6,500
(Unit I)
Q55. From the following information prepare a cost sheet to show :

(a) Prime cost ; (b) Works cost ; (c) Cost of product ion ; (d) Cost of sales; and (e) Profit .

Rs
Raw materials purchased 32,250
Carriage on purchases 850
Direct wages 18,450
Factory overhead 2,750
Selling overhead 2,450
Office overhead 1,850
Sales 75,000
Sale of factory scrap 250
Opening stock of finished goods 9,750
Closing stock of finished goods 11,100
(Unit I)

Q56. Mr. Gopal furnishes the following data relating to the manufacture of a standard product during
the month of April 2013 :
Raw materials consumed Rs 15,000
Direct labour charges Rs 09,000
Machine hours worked 900
Machine hour rate Rs 5
Administration overheads 20% on works cost
Selling overhead Rs. 0.50 per unit
Units produced 17,100
Units sold 16,000 at Rs 4 per unit
You are required to prepare a cost sheet from the above, showing:
(a) The cost per unit,
(b) cost per unit sold and profit for the period. (Unit I)

Q57. From the following information for the month of January, prepare a cost sheet to show the
following components : (a) Prime Cost , (b) Factory Cost , (c) Cost of Product ion, (d) Total Cost .

Rs
Direct material 57,000
Direct wages 28,500
Factory rent and rates 2,500
Office rent and rates 500
Plant repairs and maintenance 1,000
Plant depreciation 1,250
Factory heating and lighting 400
Factory manager’s salary 2,000
Office salaries 1,600
Director’s remuneration 1,500
Telephone and postage 200
Printing and stationery 100
Legal charges 150
Advertisement 1,500
Salesmen’s salaries 2,500
Showroom rent 500
Sales 1,16,000
(Unit I)
Q58. From the following particulars, prepare a cost statement :
Rs
Stock, 1-1-2013: Raw materials 30,500
Finished goods 20,400
Stock, 31-1-2013: Raw materials 48,500
Finished goods 10.000
Purchase of raw materials 25,000
Work-in-progress, 1-1-2013 8,000
Work-in-progress, 31-1-2013 9,000
Sales 95,000
Direct wages 20,400
Factory expenses 10,500
Office expenses 5,400
Selling expenses 3,800
Distribution expenses 2,500

Also calculate the percentage of works expenses to direct wages and the percentage of office expenses
to works cost. (Unit I)

Q59. Following is the information by XYZ Company Ltd. Related to first week of December, 2013:
The transactions in connection with the materials are as follows:
Days Receipts Issues
Units Rate per unit Rs (units)
1 40 15
2 20 16.5
3 - - 30
4 50 17.1 -
5 - - 20
6 - - 40
Calculate the cost of materials issued under (i) FIFO METHOD; (ii) LIFO method; and (iii) Weighted
average method of issue of materials and value of closing stock under the above methods.
(Unit II)

Q60. From the following you are required to prepare a statement showing the issues made under LIFO
method:
Opening Balance 100 units at Rs10 each
Date
1 Received 200 units at Rs10.50 each
2 Received 300 units at Rs10.60 each
4 Issued 400 units to Job A vide MR No. 3
6 Issued 120 units to Job B vide MR No. 4
7 Received 400 units at Rs11 each
10 Issued 200 units to Job C vide MR No. 5
12 Received 300 units at Rs11.40 each
13 Received 200 units at Rs11.50 each
15 Issued 400 units to Job D vide MR No. 6
(Unit II)

Q61. Prepare a statement showing the pricing of issues, on the basis of (a) Simple Average, and (b)
Weighted Average Methods from the following information pertaining to material ‘X’.

Date
1 Purchased 100 units @ Rs10.00 each.
2 Purchased 200 units @ Rs10.20 each.
5 Issued 250 units to Job A vide MR No. 1
7 Purchased 300 units @ Rs10.50 each
10 Purchased 200 units @ Rs10.80 each
13 Issued 200 units to Job B vide MR No. 2
18 Issued 200 units to Job C vide MR No. 3
20 Purchased 100 units @ Rs11.00 each.
25 Issued 150 units to Job D vide MR No. 4.
(Unit II)

Q62. The stock of material in hand on 1st April, 2013 was 400 units at `50 per unit. The following
receipts and issues were recorded. Prepare a Stores Ledger Account under ‘Base Stock Method’ both
by adopting FIFO and LIFO Methods, Base stock being 100 units.

Date
2 April Purchased 100 units @ Rs55 each
6 April Issued 400 units
10 April Purchased 600 units @ Rs60 each
13 April Issued 500 units
20 April Purchased 500 units @ Rs 65 each
25 April Issued 600 units
10 May Purchased 800 units @ Rs70 each
12 May Issued 500 units
13 May Issued 200 units
15 May Purchased 500 units @ Rs75 each
12 June Issued 400 units
15 June Purchased 300 units @ Rs80 each.
(Unit II)
Q62. From the following transactions, prepare separately the Stores Ledger Accounts, using the
following pricing methods: (i) the FIFO, (ii) the LIFO.

January 1 Opening balance 100 units @ Rs 5 each

January 5 Received 500 units @ Rs 6 each
January 20 Issued 300 units
February 5 Issued 200 units
February 6 Received 600 units @ Rs5 each
March 10 Issued 300 units
March 12 Issued 250 units
(Unit II)

Q63. The following receipts and issues of materials were made during the month of January.
January 1 Opening stock 80 units @ Rs 1.00 each
January 7 Received from vendors 40 units @ Rs 1.10 each
January 12 Received from vendors 60 units @ Rs 1.20 each
January 22 Received from vendors 72 units @ Rs 1.25 each
January 4 Issued 60 units
January 9 Issued 40 units
January 14 Issued 40 units
January 30 Issued 80 units
Prepare the Stores Ledgers maintained under (i) the FIFO, (ii) the LIFO methods. (Unit II)

Q64. The following transactions took place in respect of a material item during the month of March:
Date Receipt Qty. Rate Issue Qty.
March 2 200 2.00
March 10 300 2.40
March 15 250
March 18 250 2.60
March 20 200
Prepare the Stores Ledger Sheet, pricing the issue at the simple average rate and the weighted
average rate. (Unit II)

Q65. The following is an extract of the record of receipt and issues of sulphur in a chemical factory
during
February:
1 Opening balance 500 tons @ Rs 200
3 Issued 70 tons
4 Issued 100 tons
8 Issued 80 tons
13 Received from supplier 200 tons @ Rs 190
14 Returned from Deptt. 15 tons
16 Issued 180 tons
20 Received from supplier 240 tons @ Rs 190
24 Issued 300 tons
25 Received from supplier 320 tons @ Rs 190
26 Issued 115 tons
27 Returned from Deptt. 35 tons
28 Received from supplier 100 tons @ Rs 190
Issues are to be priced on the principle of ‘First-in First-out’. The stock verifiers of the factory had
found a shortage of 10 tons on the 22nd and left a note accordingly. Draw up a priced stores ledger
card for the material showing the above transactions. (Stock on 28th Feb., 555 tons; Rs 1,05,450)
(Unit II)

Q66 What are overheads? How should overheads be classified? To what extent will you include
overhead charges in your valuation of (a) work-in-progress, and (b) finished goods? (Unit III)

Q67. A company is having three production departments X, Y and Z and two service departments
-boiler-house and pump-room. The boiler-house has to depend upon the pump-room for supply of
water and pump-room in its turn is dependent on the boiler-house for supply of steam-power for
driving the pump. The expenses incurred by the production departments are: X – Rs 6,00,000; Y – Rs
5,25,000; and Z - Rs 3,75,000. The expenses for boiler-house are Rs 1,75,500 and pump-room are Rs
2,25,000.
The expenses of the boiler-house and pump-room are apportioned to the production departments on
following basis:

DEPARTMENT Boiler Pump

X Y Z House Room
Expenses of boiler-house 20% 40% 30% --- 10%
Expenses of pump-room 40% 20% 20% 20% ---
Show clearly as to how the expenses of boiler-house and pump-room would be apportioned to X, Y
and Z departments? (Unit III)
Q68. XYZ ltd. has three production departments, A, B and C and two service departments D and E.
the following figures are taken from the company records:
Rs. Rs.
Rent and Rates 5, 000 General lighting 600
Indirect Wages 2, 000 Power 1, 500
Dep. Of Machinery 10, 000 Sundries 10, 000
The following further details are available.
Total A B C D E
Floor Space (Sq. Ft. 10, 000 2000 2500 3000 2000 500
Light Points 60 10 15 20 10 5
Direct Wages (Rs.) 10, 000 3000 2000 3000 1500 500
H.P. of Machinery 150 60 30 50 10 -
Value of Machinery (Rs.) 2, 50, 000 60, 000 80, 000 1, 00, 000 5, 000 5, 000
Apportion the costs to various departments on the most equitable basis. (Unit III)

Q69. From the following information, work out the production hour rate of recovery of overheads in
Dept X, Y and Z.
Total Production Dept Service Dept
Rs X Y Z P Q
Repair of machine (Rs) 1,000 200 400 150 150 100
Power (Rs) 200 50 80 30 20 20
General overheads(Rs) 400 80 160 60 60 40
Amenities to staff (Rs) 4000 1000 1500 1000 300 200
Motive power(Rs) 400 50 50 50 100 150
Fire insurance (Rs) 1000 250 200 200 250 100
Estimated working hrs 1000 2500 1800

Expenses of the service departments P and Q are apportioned as under:

X Y Z P Q
P 30% 40% 20% ---- 10%
Q 10% 20% 50% 20% ------
(Unit III)

Q70. From the following information, Find out the final distribution of total factory overhead in Dept
P, Q and R.
Total Production Dept Service Dept
Rs P Q R S T
Rent and Tax(Rs) 3,000 600 800 600 500 500
Power(Rs) 1000 200 300 200 200 100
Fire Insurance(Rs) 2000 400 500 400 400 300
Plant Depreciation(Rs) 8000 2000 3000 2000 600 400
Transport(Rs) 400 50 50 50 100 150
Manager’s salary 500 100 100 50 150 100
Foremen’s Salary 250 40 60 50 50 50
Estimated working hrs 1000 2500 1800

Expenses of the service departments S and T are apportioned as under:

P Q R S T
S 30% 40% 20% ---- 10%
T 10% 20% 50% 20% ------
(Unit III)

Q71. Prepare store ledger by using weighted average method from the following transactions took
place in respect of a material item:
Receipt Qty Rate Issue quantity
2 March 2015 400 Rs 3
10 March 2015 300 Rs. 3.4
15 March 2015 ---- --- 350
18 March 2015 250 Rs 3.6 ----
20 March 2015 ----- ----- 300

(Unit II)

Q72. A company annually manufactures and sells 20,000 units of a product, the selling price of which
is Rs 50 and Profit earned is Rs 10 per unit.
The analysis of cost of 20,000 units is:
Material cost Rs 3,00,000
Labor cost Rs 1,00,000
Overheads Rs 4,00,000 (50% variable)

You are required to calculate:

(i) Break-even sales in units in Rupees
(ii) Sales to earn a profit of Rs 3,00,000
(iii) Profit When 15,000 units are sold. (Unit IV)

Q73. From the following information, work out the production hour rate of recovery of overheads in
Dept X, Y and Z.
Total Production Dept Service Dept
Rs X Y Z P Q
Repair of machine (Rs) 1,000 200 400 150 150 100
Power (Rs) 200 50 80 30 20 20
General overheads(Rs) 400 80 160 60 60 40
Amenities to staff (Rs) 4000 1000 1500 1000 300 200
Motive power(Rs) 400 50 50 50 100 150
Fire insurance (Rs) 1000 250 200 200 250 100
Estimated working hrs 1000 2500 1800

Expenses of the service departments P and Q are apportioned as under:

X Y Z P Q
P 30% 40% 20% ---- 10%
Q 10% 20% 50% 20% ------
(Unit III)

Q74. The Standard cost of a chemical mixture is as follows:

60% material X at Rs 30 per Kg
40% material Y at Rs 25 per Kg
A standard loss of 15% of input is expected in production. The cost records for a period showed the
following usage:
100 kg material X at a cost of Rs 18 per kg
 140 kg material Y at a cost of Rs 34 per kg
The quantity produced was 182 kg of good product. Calculate all material variances (Unit IV)

Q75. A toy manufacturer makes an average net profit of Rs 2.50 per piece on a selling price of Rs
14.30 by producing and selling 60,000 pieces or 60% of the potential capacity. His cost of sales is:
Direct material Rs 3.50
Direct wages Rs 1.25
Works overhead Rs 6.25 (50% fixed)
Sales overhead Rs 0.80 (25% variable)
During the current year, he anticipates that his fixed charges will go up by 10%, while rates of direct
material and direct labour will increase by 6% and 8% respectively. But he has no option of
increasing the selling price. Under this situation he obtains an offer for an order equal to 20% of his
capacity. The concerned customer is a special customer.
What minimum price will you recommend for acceptance to ensure the manufacturer an overall profit
of Rs 1,67,300? (Unit IV)

Q76. The following data relate to a manufacturing company:

Plant capacity: 4,00,000 units per annum
Present utilisation: 40%
Actuals for the year were:
Selling price Rs 50 per unit
Materials cost Rs 20 per unit
Variable manufacturing costs Rs 15 per unit
Fixed costs Rs 27 lakhs
In order to improve capacity utilisation the following proposals are being considered:
Reduce selling price by 10%.
Spend additionally Rs 3 lakhs on sales promotion.
How many units should be made and sold in order to earn a profit of Rs 5 lakhs per year?
(Unit IV)

Q77.

ABC Ltd. a newly started company wishes to prepare cash budget from January. Prepare a cash
budget for the first six months from the following estimated revenue and expenses.

Month Total Materials Wages Overheads(Rs)

Sales(Rs) (Rs) (Rs)
Production Selling &
Distribution
Jan. 20,000 20,000 4,000 3,200 800
Feb. 22,000 14,000 4,400 3,300 900

March 28,000 14,000 4,600 3,400 900

April 36,000 22,000 4,600 3,500 1,000
May 30,000 20,000 4,000 3,200 900
June 40,000 25,000 5,000 3,600 1,200

Cash balance on Ist January was Rs 10,000. New machinery is to be installed at Rs 20,000 on credit,
to be repaid by two equal instalments in March and April.
Sales commission at @ 5% on total sales is to be paid within a month following actual sales.
Rs 10,000 being the amount of 2nd call may be received in March. Share premium amounting to
Rs 2,000 is also obtainable with the 2nd call.
 Period of credit allowed by suppliers - 2 months
 Period of credit allowed to customers - 1 month
 Delay in payment of overheads - 1 month
 Delay in payment of wages - 1/2 month
Assume cash sales to be 50% of total sales. (Unit V)

Q78. The cost of an article at capacity level of 5,000 units is given under A below. For a variation of
25% in capacity above or below this level, the individual expenses vary as indicated under B below:
A B
Rs
Material cost 25,000 (100% varying)
Labour cost 15,000 (100% varying)
Power 1,250 (80% varying)
Repairs and maintenance 2,000 (75% varying)
Stores 1,000 (100% varying)
Inspection 500 (20% varying)
Depreciation 10,000 (100% fixed)
Administration overheads 5,000 (25% varying)
Selling overheads 3,000 (50% varying)
Total 62,750
Cost per unit 12.55
Find the unit cost of the product under each individual expense at production levels of 4,000 units and
6,000 units. (Unit IV)
Q79. Standard cost of a product in a factory is predetermined as follows:
Rs
Material (5 units @ Rs 4 each) 20
Labour (20 hours @ Rs 1.50 per hour) 30
Overhead expenses 10
Total 60
During a period, 8,000 units were produced whose actual cost was as follows:
Rs
Material (40,500 units @ Rs 5 each) 2,02,500
Labour (1,50,000 hours @ Rs 1.60 each) 2,40,000
Overhead expenses 90,000
Total 5,32,500
Prepare a statement showing standard cost, actual cost and variances. (Unit IV)

Q80. For producing one unit of a product, the materials standard is:
Material X : 6 kg. @ Rs 8 per kg., and
Material Y : 4 kg. @ Rs 10 per kg.
In a week, 1,000 units were produced the actual consumption of materials was:
Material X : 5,900 kg. @ Rs 9 kg., and
Material Y : 4,800 kg. @ Rs 9.50 per kg.
Compute the various variances. (Unit VI)

Q81. In a manufacturing process, the following standards apply:

Standard Price: Raw material A Rs 1 per kg.
Raw materials B Rs 5 per kg.
Standard Mix 75% A; 25% B (by weight)
Standard Yield : 90%
In a period the actual costs, usage and output were as follows:
Used: 4,400 kgs. of A costing Rs 4,650
1,600 kgs. of B costing Rs 7,850
Output: 5,670 kgs. of products
Compute the various variances. (Unit VI)
Q82. The standard material input required for 1,000 kgs. of a finished product are given below:
Material Quantity (Kg.) St. Rate per Kg. (Rs )
P 450 20
Q 400 40
R 250 60
Total 1,100
Standard loss 100
Standard output 1,000
Actual production in a period was 20,000 kg. of finished product for which the actual quantities of
material used and the prices paid therefore were as under:
Material Quantity (Kg.) Purchase price per Kg. (Rs )
P 10,000 19
Q 8,500 42
R 4,500 65
Calculate:
(i) Material cost variance;
(ii) Material price variance;
(iii) Material usage variance; and
(iv) Material yield variance.
(Unit VI)
Q83. A factory, working for 50 hours a week, employs 100 workers on a job work.
The standard rate is Rs 1 an hour and standard output is 200 units per gang hour.
During a week in June, ten employees were paid at 80 p. an hour and five at Rs 1.20 an hour. Rest of
the employees were paid at the standard rate.
Actual number of units produced was 10,200
Calculate Cost Variance, Rate variance, efficiency variance and labour cost variances. (Unit VI)

Q84. The standard labour component and the actual labour component engaged during the month are
given below:
Skilled Semi-skilled Unskilled
(a) Standard number of workers in a group 30 10 10
(b) Standard wage rate (Rupees per hour) 20 12 8
(c) Actual number of workers employed during
the month in the group 24 15 12
(d) Actual wage rate per hour (Rs) 24 10 8
During the month of 200 working hours, the group produced 9,600 standard hours of work.
You are required to calculate:
(i) Wage rate variance; (ii) Labour efficiency variance; (iii) Labour mix variance and (iv) Total labour
cost variance. (Unit VI)
Q85 (A) The following information relates to the month of June, 2013
Budgeted Actual
Output 20,000 units 22,000 units
Rs Rs
Overheads - Variable 1,00,000 1,07,000
- Fixed 1,50,000 1,58,000
Compute the overheads variance. (Unit VI)

(B) The budgeted capacity of a factory per month of 25 days was 2,00,000 hours and the budgeted
fixed overheads were Rs 2,40,000. The management increased the capacity by 20% in the beginning
of October, 2000, the actual number of working days in that month were 23. Compute the variance
that emerge. (Unit VI)
 Section C
Q86.

(A) Bharat Engineering Company manufactured and sold 1,000 sewing machines in 2013. Following
are the particulars obtained from the records of the company :

Rs
Cost of materials 80,000
Wages paid 1,20,000
Manufacturing expenses 50,000
Salaries 60,000
Rent , rates and insurance 10,000
Selling expenses 30,000
General expenses 20,000
Sales 4,00,000
The company plans to manufacture 1,200 sewing machines in 2014. You are required to submit a
statement showing the price at which machines would be sold so at to show a profit of 10% on the
selling price. The following additional information is supplied to you:
(a) The price of materials will rise by 20 per cent on the previous year’s level.
(b) Wage rates will rise by 5 per cent.
(c) Manufacturing expenses will rise in proportion to the combined cost of materials and wages.
(d) Selling expenses per unit will remain unchanged.
(e) Other expenses will remain unaffected by the rise in output.
(Unit I)

Q87.

(A) Flex Shoe Co. manufacture two types of shoes A and B. Costs for the year ended 31-3-2013 were:
Rs
Direct materials 15,00,000
Direct wages 8,40,000
Production overhead 3,60,000
Total 27,00,000
There was no work-in-progress at the beginning or at the end of the year. It is ascertained that :
(a) Direct material in type A shoes consists twice as much as that in type B shoes,
(b) The direct wages for type B shoes were 60% of those of type A shoes,
(c) Product ion overhead was the same per pair of A and B type.
(d) Administrative overhead for each type was 150% of direct wages,
(e) Selling cost was Rs 1.50 per pair.
(j) Product ion during the year were :
Type A 40,000 pairs of which 36,000 were sold;
Type B 1,20,000 pairs of which 1,00,000 were sold.
(g) Selling price was Rs 44 for type A and Rs 28 for type B per pair.
Prepare a statement showing cost and profit. (Unit I)

Q88.

(A) The following direct costs were incurred on Job No. 239 of XYL Co. Ltd.
Materials Rs 6,010
Wages:
Deptt . A — 60 hours @ Rs 30 per hr.
B — 40 hours @ Rs 20 per hr.
C — 20 hours @ Rs 50 per hr.
Overhead for these three departments were estimated as follows :
Variable overheads:
Deptt . A — Rs 15,000 for 1,500 labour hours
B — Rs 4,000 for 200 labour hours
C — Rs 12,000 for 300 labour hours
Fixed overheads: Estimated at Rs 40,000 for 2,000 normal working hours.
You are required to calculate the cost of Job No. 239 and quote the price to give profit of 25% on
selling price.
(Unit I)
(B)
Prepare Stores Ledger Account showing pricing of material issues on Replacement Price basis, from
the following particulars:
Opening Balance 400 units @Rs4 each.
10th March Received 100 units @Rs4.10 each.
15th March Issued 300 units to job XY vide M.R. No. 1
17th March Received 200 units @Rs4.30 each.
20th March Issued 250 units to job AB vide M.R. No. 2.
25th March Received 400 units @Rs4.50 each.
26th March Issued 200 units to job JK vide M.R. No. 3.
27th March Received 100 units @Rs4.60 each.
30th March Issued 300 units to job PQ vide M.R. No. 4.
Replacement price on various dates: 15th March Rs4.20; 20th March Rs4.40; 26th March Rs4.60 and
30th March Rs 4.80. (Unit II)

Q89
(A) X Ltd. has purchased and issued the materials in the following order:
Unit Unit Cost (Rs)
1st January Purchased 300 3
4th January Purchased 600 4
6th January Issued 500
10th January Purchased 700 4
15th January Issued 800
20th January Purchased 300 5
23rd January Issued 100
Ascertain the quantity of closing stock as on 31st January and state what would be its value (in
each case) if issues were made under the following methods:
(i) Average cost.
(ii) First-in First-out.
(iii) Last-in First-out. (Unit II)

(B) Following Information has been extracted from costing records of Jai Engineering Works in
respect of Job no 200
Material Rs 3,450
Wages:
Department A 50 hours @ Rs 3 per hour
Department B 40 hours @ Rs 2 per hour
Department C 20 hours @ Rs 4 per hour
Variable Overhead:
Department A Rs 4,000 for 4000 direct labor hours
Department B Rs 3,000 for 1,500 direct labor hours
Department C Rs 1,000 for 500 direct labor hours
Factory Overheads: Rs 10,000 for 10,000 normal working hours

Calculate the cost of job 200 and calculate the price to be charged so as to give a profit of 25% on
selling price
(Unit III)

Q 90.
(A) Following Information has been extracted from costing records of ABC Ltd in respect of product
line Krish
Material Rs 5000
Wages:
Department X 70 hours @ Rs 3 per hour
Department Y 80 hours @ Rs 2 per hour
Department Z 60 hours @ Rs 4 per hour
Variable Overhead:
Department A Rs 8,000 for 4000 direct labor hours
Department B Rs 4,000 for 2,000 direct labor hours
Department B Rs 2,000 for 1,000 direct labor hours
Factory Overheads: Rs 20,000 for 10,000 normal working hours
Calculate the cost of Krish and calculate the price to be charged so as to give a profit of 25% on cost
price
(Unit III)
(B)
Following particulars are related to a manufacturing concern which has 3 production departments A,
B and C and two service departments X and Y.
Production Deptt. Service Deptt.
A B C X Y
Total Departmental overhead
As per primary distribution (Rs.) 6300 7400 2800 4500 2000
The company decided to charge the service departments cost on the basis of the following percentage:
A B C X Y
X 40% 30% 20% - 10%
Y 30% 30% 20% 20% -
Find the total overheads of production departments by using repeated distribution method.
(Unit III)
Q91
(A) Following figures have been extracted from the accounts of manufacturing concern for the month
of Dec, 2004:
Production Deptt. (X) Production Deptt (Y) Maintenance Deptt (P)
Indirect material 2,200 2,500 850
Indirect Wages: 1000 2,100 2,00
Motive Power 6,000
Rent and rates 2,800
Insurance on assets 1,000
Staff welfare 3,000
Electricity 5,000
Depreciation 40,000

From the following additional information, calculate the share of overheads of each production
department:
Item Production Dept Service Dept
Area(sq feet) 5,000 6000 3000
Capital value of assets 1,00,000 1,20,000 60,000
KWH 3,000 3,400 2,500
Number of employees 90 120 40
Direct labour hrs 4,600 4,200
Number of material requisition 900 600
(Unit III)
(B) Following Information has been extracted from costing records of BHEL in respect of worker
order 22
Material Rs 8,000
Wages:
Department A 40 hours @ Rs 3 per hour
Department B 30 hours @ Rs 2 per hour
Department C 40 hours @ Rs 4 per hour
Variable Overhead:
Department A Rs 8,000 for 4000 direct labor hours
Department B Rs 45,000 for 1,500 direct labor hours
Department C Rs 1,000 for 500 direct labor hours
Factory Overheads: Rs 20,000 for 10,000 normal working
hours

Calculate the cost of job 200 and calculate the price to be charged so as to give a profit of 25% on
selling price
(Unit III)
Q92.
(A) From the following information for the year 2015, Calculate: Cost of Material Consumed,
Prime Cost, and Factory Cost.

Stock of raw materials on 1-04-15 Rs. 25,000

Stock of raw materials on 31-03-16 Rs. 22,000
Purchase of raw materials Rs. 3, 45,000
Purchase returns Rs. 48,000
Freights on purchases Rs 5,400
Expenses on purchase Rs. 600
Factory Rent Rs. 6000
Office Rent Rs. 5000
Repairs of machine Rs. 1200
(Unit I)
(B)
The following transactions occur in the purchase and issue of material during year 2015.
2nd Jan Purchased 4000 units @ Rs 4 per unit
20 Jan Purchased 500 units @ Rs 5.00 per unit
5 Feb Issued 2000 units
10 Feb Purchased 6000 units @ 6.00 per unit
12 Feb Issued 4,000 units
2 March Issued 1,000 units
5 March Issued 2,000 units

a) First-in first-out method b) Last-in first-out method

c) Weighted average method d) Simple average method
(Unit II)
Q93. (A)
In a factory the production was 1,00,000 units and prime cost per unit was thus: Direct materials per
unit Rs 1.80, direct wages Rs 1.20. The net selling price was Rs. 4.70 per unit. All the units were sold.
The following overheads were incurred:
Rent and taxes of factory 2,800 Factory lighting and power 5,200
Depreciation(plant) 7,000 Staff salaries 24,000
Management Salaries 12,000 Coal 9,000
Indirect wages 24,500 Repairs and maintenance of plant 20,000
Cost of rectification of defective work 5,600 Consumable stores 15,000
Selling expenses 14,700 General Expenses 9,200
Receipts from the sale of scrap 2400
Prepare a cost sheet showing Prime cost and factory costs and per unit cost and profit.
(Unit I)

(B) The Standard cost of a chemical mixture is as follows:

40% material A at Rs 20 per Kg
60% material B at Rs 30 per Kg
A standard loss of 10% of input is expected in production. The cost records for a period showed the
following usage:
90 kg material A at a cost of Rs 18 per kg
110 kg material B at a cost of Rs 34 per kg
The quantity produced was 182 kg of good product. Calculate all material variances
(Unit IV)

Q94 (A)
A business produces three products A, B and C for which the standard variable costs and budgeted
selling prices are as follows:
 A B C
Rs Rs Rs
Direct Material 3 6 8
Direct Wages 4 4 10
Variable overhead 3 5 7
Selling price 18 25 48
In two successive periods, sales are as follows:
A B C
Units Units Units
Period I 10,000 10,000 10,000
Period II 20,000 13,000 5,000
The budgeted fixed overheads amounted to Rs 1,35,000 for each period. In spite of increased sales the
profit for the second period has fallen below that of the 1st period. Present figures to management to
show why this fall in profit should, or should not have occurred. (Unit IV)

(B)
A T.V. manufacturing company finds that while it costs to make component X, the same is available
in the market at Rs 5.75 each, with all assurance of continued supply. The breakdown of cost is:
Materials Rs 2.75 each
Labour Rs 1.75 each
Variable overheads Rs 0.50 each
Depreciation and other fixed cost Rs 1.25 each
Total Rs 6.25 each
(a) Should the company make or buy the component?
(b) What should be your decision if the supplier offered component at Rs 4.85 each?
(Unit IV)

Q95. (A)
S. Ltd. manufactures and markets a single product. The following information is available:
Rs per unit
Materials 8.00
Conversion costs (variable) 6.00
Dealer’s margin 2.00
Selling price 20.00
Fixed cost Rs 2,50,000
Present sales, 80,000 units
Capacity utilisation: 60 per cent.
There is acute competition. Extra efforts are necessary to sell. Suggestions have been made for
increasing sales:
(i) By reducing sales price by 5%
(ii) By increasing dealers margin by 25% over the existing rate.
Which of the two suggestions you would recommend if the company desires to maintain the present
profit? Give reasons. (Unit IV)

(B)
The cost of a manufacturing company for the product is:
Rs
 Materials 12.00
Labour 9.00
Variable expenses 6.00
Fixed expenses 18.00
Total 45.00
The unit of product is sold for Rs 51.00.
The company’s normal capacity is 1,00,000 units. The figures given above are for 80,000 units. The
company has received an offer for 20,000 units @ Rs 36 per unit from a foreign customer.
Advice the manufacturer on whether the order should be accepted. Also give your advice if the order
is from a local merchant. (Unit IV)

Q96. (A)
A company has annual fixed cost of Rs 1,68,00,000. In the year 2013-14, sales amounted to Rs
6,00,00,000 as
compared with Rs 4,50,00,000 in the preceding year 2012-13. The profit in the year 2013-14 is Rs
42,00,000
more than that in 2012-13. On the basis of the above information, answer the following:
(i) What is the break-even level of sales of the company?
(ii) Determine profit/loss on the forecast of a sales volume of Rs 80,00,00,000.
(iii) If there is a reduction in selling price by 10% in the financial year 2014-15 and company desires
to earn the same amount of profit as in 2013-14, what would be the required sales volume?
(Unit IV)
(B) Write a note on (i) zero base budget and (ii) performance budget. (Unit V)

Q97. Prepare a cash budget of M/s Novan Television & Co. on the basis of the following information
for the first six months of 2014:
(a) Cost and prices unchanged.
(b) Cash sales - 25% and credit sales - 75%.
(c) 60% of credit sales are collected in the month after sales, 30% in the second month and 10% in the
third. No bad debts are anticipated.
(d) Sales forecasts are as follows:
Rs Rs
October 2013 12,00,000 March 2012 8,00,000
November 2013 14,00,000 April 2012 12,00,000
December 2013 16,00,000 May 2012 10,00,000
January 2014 6,00,000 June 2012 8,00,000
February 2014 8,00,000 July 2012 12,00,000
(e) Gross profit margin 20%.
(f) Anticipated purchases:
Rs
January 2014 6,40,000
February 2014 6,40,000
March 2014 9,60,000
April 2014 8,00,000
May 2014 6,40,000
June 2014 9,60,000
(g) Wages and Salaries to be paid:
Rs
 January 2014 1,20,000
February 2014 1,60,000
March 2014 2,00,000
April 2014 2,00,000
May 2014 1,60,000
June 2014 1,40,000
(h) Interest on Rs 10,00,000 @ 12% on debentures is due by the end of March and June.
(i) Excise deposit due in April Rs 2,00,000.
(j) Capital expenditure on plant and machinery planned for June Rs 1,20,000.
(k) Company has a cash balance of Rs 4,00,000 at 31.12.2013.
(l) Company can borrow on monthly basis.
(m) Rent is Rs 8,000 per month. (Unit V)

Q98.
Following information is available from the records of Jay Ltd. for the year end 31st March 2014.
Rs (lakhs)
Fixed Expenses
Wages and salaries 9.5
Rent, rates and taxes 6.6
Depreciation 7.4
Sundry administrative expenses 6.5
Semi-Variable Expenses
(at 50% of capacity)
Maintenance and repairs 3.5
Indirect labour 7.9
Sales department salaries 3.8
Sundry administrative expenses 2.8
Variable Expenses
(at 50% of capacity)
Materials 21.7
Labour 20.4
Other expenses 7.9
Total 98.0
Assuming that the fixed expenses remain constant for all levels of production, semi-variable expenses
remain constant between 45% and 65% of capacity increasing by 10% between 65% and 80% and by
20% between 80% and 100%.
Sales at various levels are :
Rs (lakhs)
50% capacity 100
60% “ 120
75% “ 150
90% “ 180
100% “ 200
Prepare a flexible budget for the year and forecast the profits at 60%, 75%, 90% and 100% of
capacity.
(Unit V)
Q99 A firm at present operates at 60% of its capacity. At this level and at the level of 50% utilisation
of capacity, the figures relating to its operations could be summarised as stated below:
50% 60%
Rs Rs
Materials 10,00,000 12,00,000
Labour 8,00,000 9,00,000
Manufacturing overheads 6,00,000 6,60,000
Administrative overheads 3,50,000 3,50,000
Selling and distribution overheads 4,50,000 5,00,000
Research and development 1,50,000 2,00,000
Total 33,50,000 38,10,000

Profit 1,50,000 3,90,000

Sales 35,00,000 42,00,000
Draw up the budget at 50%,60%,80% and 80% utilisation of capacity assuming that -
(i) sales at this level can be maintained only by a flat 5% reduction in the selling price;
(ii) economy in purchase of material will equal to 2-1/2% of the current amounts;
(iii) the research and development expenditure will be pegged at Rs 2,50,000 per annum; and
(iv) administrative overheads will require 10% increase.

Q100
Q98. ABC Ltd. produces and sells a single product. Sales budget for the calendar year 2014 for each
quarter is as under:
Quarter No. of Units to be Sold
I 12,000
II 15,000
III 16,500
IV 18,000
The year 2014 is expected to open with an inventory of 4,000 units of finished product and close with
an inventory of 6,500 units. Production is customarily scheduled to provide for two-thirds of the
current quarter’s demand plus one-third of the following quarter’s demand. Thus production
anticipates sales volume by about one month. The standard cost details for one unit of the product is
as follows:
— Direct materials 10 Kgs. @ 50 paise per kg.
— Direct labour 1 hour 30 minutes @ Rs 4 per hour.
— Variable overheads 1 hour 30 minutes @ Rs 1 per hour.
— Fixed overheads 1 hour 30 minutes @ Rs 2 per hour based on a budgeted production
volume of 90,000 direct labour hours for the year.

Answer the following:

(i) Prepare a production budget for the year 2014 by quarters, showing the number of units to be
produced.
(ii) If the budgeted selling price per unit is Rs 17, what would be the budgeted profit for the year as a
whole?
(iii) In which quarter of the year the company is expected to break-even?
(Unit V)

Q101
(A) The following information was obtained from the records of a manufacturing unit using standard
costing system :
Particulars Standards Actual
Production 12000 units 11400 units
Working days 20 21
Fixed overheads Rs 1,20,000 Rs 1,17,000
Variable overheads Rs 12,000 Rs 12,000
Calculate:
(a) Variable overhead variance;
(b) Fixed overhead expenditure variance;
(c) Fixed overhead volume variance;
(d) Fixed overhead efficiency variance;
(e) Fixed overhead calendar variance. (Unit VI)

(B)
The following details are available from a company’s books:

Rs
Stock of raw material on 1-1-2013 10,800
Stock of finished goods on 1-1-2013 28,000
Purchases during the year 2,94,000
Productive wages 1,98,800
Sales of finished goods 5,92,000
Stock of finished goods on 31-12-2013 30,000
Stock of raw material on 31-12-2013 13,600
Works overhead 43,736
Office expenses 35,524

The company is about to send a tender for large plant. The costing department estimates that the
material required for its product ion would cost Rs 20,000 and wages for making the plant would cost
Rs 12,000. Tender is to be made keeping a net profit of 20% on the selling price. State what would be
the amount of the tender, if based on the percentages. (Unit I)

Q102.
(A) Sharda Courier Ltd. started trading on 1st April 2013, manufacturing and selling one product.
The standard cost per unit was:
Direct material: Standard price Rs 10 per kilogram
Standard quantity: 20 kilogram per unit
Direct labour: Standard rate of pay Rs 5.50 per hour
Standard time allowance: 12 hours per unit
Production overhead costs, all classified as fixed, were budgeted at Rs 9,00,000 per annum.
The standard time for producing one unit is 12 machine hours and normal capacity is 60,000
machine hours per annum. Production overhead is absorbed on machine hours. For the year ended
31st March 2014 the costs incurred and other relevant information is given below :
Direct material used— 1,00,000 kilograms at a cost of Rs 10,50,000
Direct wages paid— Rs 3,10,000 for 62,000 hours
Production overhead— Rs 9,26,000
Machine capacity used— 60,000 hours
Actual output— 4,800 units
Assuming no stocks of work-in-progress or finished goods at year end.
You are required to:
Show the standard product cost for one unit.
Calculate variances for material (usage and price), labour (rate and efficiency) and overhead.
(Unit IV)
(B)
The following extracts of costing information relate to commodity X for the year ending 31-12-2013.
Rs
Purchases of raw materials 6,000
Direct wages 5,000
Rent, rates and insurance 2,000
Carriage inwards 100
Stock (1-1-2013) : Raw materials 1,000
Finished products —200 tonnes 800
Stock (31-12-2013) : Raw materials 1,100
Finished products — 400 tonnes –
Cost of factory supervision 400
Sale of finished products 15,000

Advertising and selling cost is 40 paise per tonne sold. 3,000 tonnes of the commodity were sold
during the year. Prepare a Cost Sheet.
(Unit I)
Q103
(A) The accounts of a machine manufacturing company disclose the following information for the six
months ending 31st Dec., 2013.
Rs
Materials used 1,50,000
Direct wages 1,20,000
Factory overhead expenses 24,000
Office expenses 17,640

Prepare a Cost Sheet of the machines and calculate the price which the company should quote for the
manufacture of a machine requiring materials valued at Rs 1,250 and expenditure on productive
wages of Rs 750, so that the price may yield a profit of 20% on the selling price.
For the purpose of price quotation, charge factory overhead as a percentage of direct wages and
charge office overhead as a percentage of works cost.
(Unit I)

(B) Write short note on the following:

(i) Idle Time Variance
(ii) Overhead Variance
(iii) Material Mix Variance
(iv) Labour Yield Variance (Unit VI)

Q104 A company’s production for the year ending 30.3.2014 is given below:
Items Production Departments Office Stores Workshop Total
P1 P2 P3
Dir. Wages(Rs) 20,000 25,000 30,000 75,000
Dir. Materials(Rs) 30,000 35,000 45,000 1,10,000
Ind. Materials(Rs) 2,000 3,000 3,000 1,000 2,000 2,000 13,000
 Ind. Wages(Rs) 3,000 3,000 4,000 10,000 10,000 5,000 35,000
Area in Sq Mtrs 200 250 300 150 100 250 1,250
Book Value of 30,000 35,000 25,000 15,000 1,05,000
Machinery
Total H.P. 15 20 25 5 65
of Machinery
Machine Hours 10,000 20,000 15,000 5,000 50,000
Worked

General Expenses:
(i) Rent Rs 12,500
(ii) Insurance Rs 1,050
(iii) Depreciation 15% of value of machinery
(iv) Power Rs 3,800
(v) Light Rs 1,250
You are required to prepare an overhead analysis sheet for the departments showing clearly the basis
of apportionment when necessary. (Unit III)

Q105.
A factory has two service departments P and Q and three production departments A, B, and C. You
are supplied with the following information:

Particulars Total Production Departments(Rs) Service departments(Rs)

(Rs)
A B C P Q
Rent 12,000 2,400 4,800 2,000 2,000 800
Electricity 4,000 800 2,000 500 400 300
Indirect labour 6,000 1,200 2,000 1,000 800 1,000
Depreciation of machinery 5,000 2,500 1,600 200 500 200
Sundries 4,500 910 2,143 847 300 300
Estimated working hours 1,000 2,000 1,400 4,000 2600

Expenses of Service Departments P and Q are apportioned as under:

A B C P Q
P 30% 40% 20% — 10%
Q 10% 20% 50% 20% —
You are required to show the apportionment of overheads under different methods of apportioning
inter-service departments overheads and also to work-out the production hour rate recovery of
overheads in departments A, B and C. (Unit III)

Q106.
(A) Following information is made available from the costing records of a factory:
(i) The original cost of the machine : Rs 1,00,000
Estimated life : 10 years
Residual Value : Rs 5,000
Factory operates for 48 hours per week : 52 weeks in a year
Allow 15% towards machine maintenance down time.
5% (of productive time assuming unproductive) may be allowed as setting up time.
(ii) Electricity used by the machine is 10 units per hour at a cost of 50 paise per unit.
(iii) Repair and maintenance cost is Rs 500 per month.
(iv) Two operators attend the machine during operations along with two other machines. Their total
wages including fringe benefits, amounting to Rs 5,000 per month is paid.
(v) Other overheads attributable to the machine are Rs10,431 per year. (Unit III)

(B) The following information has been collected from the cost records of a small company for the
year ended 31st March, 2014:

Rs
Direct Materials 2,50,000
Direct Labour 2,00,000
Direct Expenses 20,000
Works Overheads 1,60,000
Office Expenses 94,500

The total number of direct labour hours were 1,00,000 involving 40,000 machine hours. What should
be theprice quoted for a job involving 2,000 labour hours @ Rs 3 per hour, 1,000 machine hours and
Rs 10,000 in direct materials if the profit desired is 20% on the selling price? (Unit III)

Q107
(A)

In respect of a factory the following particulars have been extracted for the year 2013 :
Rs
Cost of materials 6,00,000
Wages 5,00,000
Factory overheads 3,00,000
Administration charges 3,36,000
Selling charges 2,24,000
Distribution charges 1,40,000
Profit 4,20,000
A work order has to be executed in 2014 and the estimated expenses are : Materials Rs 8,000, wages
Rs 5,000.
Assuming that in 2014, the rate of factory overheads has gone up by 20%, distribution charges
have gone down by 10% and selling and administration charges have gone each up by 15%, at what
price should the product be sold so as to earn the same rate of profit on the selling price as in 2013 ?
Factory overheads are based on wages and administration, selling and distribution overheads on
factory cost .
(Unit I)

(B) What is meant by absorption of overheads? What factors should be considered in obtaining a rate
for absorption of overheads?

Q108 (A) The budgeted working conditions of a cost centre are as follows:
Normal working per week 42 hours
No. of machines 14
Normal weekly loss of hours on maintenance etc. 5 hours per machine
No. of weeks worked per year 48
Estimated annual overheads Rs 2,48,640
Estimated direct wage rate Rs 8 per hour
Actual results in respect of a week period are:
Wages incurred Rs 18,000
Overheads incurred Rs 20,400
Machine hours produced 2,000
You are required to calculate:
(i) The overhead rate per machine hour; and
(ii) The amount of under or over-absorption of wages and overheads.
(Unit III)
(B) Explain any two methods of secondary distribution of Overheads. (Unit III)

Q109 (A)
From the following informat ion prepare a cost sheet to show :
(a) Prime cost ; (b) Works cost ; (c) Cost of product ion ; (d) Cost of sales; and (e) Profit.

Rs
Raw materials purchased 32,250
Carriage on purchases 850
Direct wages 18,450
Factory overhead 2,750
Selling overhead 2,450
Office overhead 1,850
Sales 75,000
Sale of factory scrap 250
Opening stock of finished goods 9,750
Closing stock of finished goods 11,100
(Unit I)

(B)
Calculate the machine hour rate from the following:

Rs
Cost of machine 18,000
Cost of installation 2,000
Scrap value after 10 years 2,000
Rates and rent for a quarter for the shop 600
General lighting 200 p.m.
Shop supervisor’s salary Rs 6,000 per quarter
Insurance premium for a machine 120 p.a.
Estimated repair 200 p.a

Power 2 units per hour @ Rs 150 per 100 units

Estimated working hours p.a. 2,000 (Unit III)

Q110 (A)
From the following information for the month of January, prepare a cost sheet to show the following
components : (a) Prime Cost , (b) Factory Cost , (c) Cost of Product ion, (d) Total Cost .
Rs
Direct material 57,000
Direct wages 28,500
Factory rent and rates 2,500
Office rent and rates 500
 Plant repairs and maintenance 1,000
Plant depreciation 1,250
Factory heating and lighting 400
Factory manager’s salary 2,000
Office salaries 1,600
Director’s remuneration 1,500
Telephone and postage 200
Printing and stationery 100
Legal charges 150
Advertisement 1.500
Salesmen’s salaries 2,500
Showroom rent 500
Sales 1,16,000
(Unit I)
(B) The following information is available from the cost records of Sushma & Co.. For the month of
March, 2014:
Material purchased 24,000 kg Rs 1,05,600
Material consumed 22,800 kg
Actual wages paid for 5,940 hours Rs 29,700
Unit produced 2160 units.
Standard rates and prices are:
Direct material rate is Rs 4.00 per unit
Direct labour rate is Rs 4.00 per hour
Standard input is 10 kg. for one unit
Standard requirement is 2.5 hours per unit.
Calculate all material and labour variances for the month of March, 2013. (Unit VI)