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NKT/KS/17/4476

Master of Business Administration (M.B.A.) Semester—II (C.B.C.S.) Examination

COST ACCOUNTING
Compulsory Paper—5
(Elective)
Time : Three Hours] [Maximum Marks : 80

N.B. :— (1) All questions are compulsory.

(2) All questions carry equal marks (16 marks each).

1. (A) What do you mean by Cost Accounting ? Explain how cost accounting can be helpful for any
business ? Also state its limitations.
OR
(B) The AIW Manufacturer Ltd. produced and sold 1700 waterproof equipments in year 2016. The
summarised Trading and Profit and Loss Account is given below :
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Cost of Material 1,28,000 By Sales 6,40,000
To Direct Wages 1,92,000
To Manufacturing Expenses 80,000
To Gross Profit c/d 2,40,000
6,40,000 6,40,000
To Office Salaries 96,000 By Gross Profit b/d 2,40,000
To Rent, Rates and Taxes 16,000
To Selling Expenses 32,000
To General Expenses 48,000
To Net Profit 48,000
2,40,000 2,40,000
For the next year 2017, it has been estimated that :
(a) Output and Sales will be 2000 waterproof equipments.
(b) Price of materials will rise by 25% on previous year’s level.
(c) Wages will rise by 12.5%.
(d) Manufacturing expenses will rise in proportion to the combined cost of material and wages.
(e) Selling price per unit will remain unaffected by the rise in output.
(f) Other expenses will remain unaffected by the rise in output.
Prepare a Cost Sheet showing the price at which the waterproof equipments would be marketed
so as to show a profit at 12% on the selling price per unit.

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2. (A) XYZ Co. Ltd. currently producing three products namely A, B and C. Output during financial
year are as follows :
Product A : 10000 Units
Product B : 5000 Units
Product C : 8000 Units
The selling price per unit and cost structure as follows :
A B C
Selling price Rs. 32 p.u. Rs. 30 p.u. Rs. 26 p.u.
Raw Material Rs. 10 p.u. Rs. 8 p.u. Rs. 9 p.u.

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Labour Rs. 6 p.u. Rs. 7 p.u. Rs. 6 p.u.

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Variable O/H Rs. 4 p.u. Rs. 5 p.u. Rs. 3 p.u.

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Fixed Cost Rs. 3 p.u. Rs. 3 p.u. Rs. 2 p.u.

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Looking at the profit level the company is considering to discontinue the production of C and to

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focus on more profitable products A and B. If any of the product is discontinued the production
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of other two products can be increased by 50%. As a Management Accountant, you are required
to suggest whether the company should discontinue production of product C. Also suggest if
there is any other more profitable alternative available with the Company.
OR
(B) Following is the marginal cost statement of a Co. :
Particulars
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Amount
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Sales @ Rs. 15 p.u. 2,40,000

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Variable cost @ Rs. 12 p.u. 1,92,000

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Contribution 48,000
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Fixed Cost 36,000

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Profit 12,000
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Calculate the following :

(i) Required sales to achieve no profit and no loss situation.
(ii) How many units the co. must sell to earn profit of Rs. 48,000.
(iii) How much sales (in Rs.) the co. must make in order to earn a net profit of Rs. 11,000.
Corporate Tax being 45%.
(iv) How many units must be sold to earn a profit of 10% of selling price.
(v) What should be the selling price if Break Even Point is brought down to 10000 Units.

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3. (A) Define and explain the concept of Standard Costing. State its advantages.
OR
(B) From the following information compute (i) Material Cost Variance (ii) Material Price Variance
(iii) Material Usage Variance (iv) Material Mix Variance and (v) Material Sub-usage Variance.
Standard Actual
Material
Qty. Rate Amount Qty. Rate Amount
A 10 2 20 5 3 15
B 20 3 60 10 6 60
C 20 6 120 15 5 75
Total 50 200 30 150
4. (A) Bharat Transport Co. owns a fleet of 10 trucks each costing Rs. 90,000. The company has
employed one Manager who is paid Rs. 900 per month; an Accountant who gets Rs. 500 per
month and a Peon who get Rs. 100 per month. The trucks are insured @ 2% per annum. The
annual tax is Rs. 1,800 per truck. The other expenses are as follows :
Driver’s salary Rs. 150 p.m.
Cleaner’s salary Rs. 60 p.m.
Repairs and Maintenance Rs. 1,800 per year for one week
Mechanic’s salary Rs. 200 p.m.
Diesel consumption 3 kms. per litre @ Rs. 0.90 per litre.
The estimated life of truck is 5 years.
Other information :
(i) Distance travelled by each truck per day 200 km
(ii) Normal loading capacity 100 quintal
(iii) Wastage in loading capacity 10%
(iv) Percentage of truck held up for repairs 5%
(v) Effective days in a month 25 days
Calculate :
(a) Cost per quintal km and
(b) Cost per km.
OR

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(B) You are required to prepare a contract account showing the profit on contract to 31st March,
2016, from the following particulars. Also show how the values would appear in the next year’s
contract account :
Contract price Rs. 1,00,000
Material sent to site Rs. 32,250
Labour engaged on site Rs. 27,400
Plant installed at site Rs. 5,650
Work certified Rs. 71,500
Work uncertified Rs. 65,000
Value of plant as on 31st March Rs. 4,100
Cost of work done but not certified Rs. 1,700
Direct Expenditure Rs. 1,200
Cost of Establishment Rs. 1,625
Wages outstanding on 31st March Rs. 900
Material in hand on 31st March Rs. 700
Direct Expenses outstanding on 31st March Rs. 100
Material returned to stores Rs. 200
5. Write short notes on :
(A) Cost Accounting as a tool of planning and control
(B) Application of Marginal Cost in decision making
(C) Standard Costing as a tool for budgetary control
(D) Escalation clause and cost plus contracts.

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