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OMR SHEET
Q.N. Q.N. Q.N.
1. Ⓐ Ⓑ Ⓒ Ⓓ 11. Ⓐ Ⓑ Ⓒ Ⓓ 21. Ⓐ Ⓑ Ⓒ Ⓓ

2. Ⓐ Ⓑ Ⓒ Ⓓ 12. Ⓐ Ⓑ Ⓒ Ⓓ 22. Ⓐ Ⓑ Ⓒ Ⓓ

3. Ⓐ Ⓑ Ⓒ Ⓓ 13. Ⓐ Ⓑ Ⓒ Ⓓ 23. Ⓐ Ⓑ Ⓒ Ⓓ

4. Ⓐ Ⓑ Ⓒ Ⓓ 14. Ⓐ Ⓑ Ⓒ Ⓓ 24. Ⓐ Ⓑ Ⓒ Ⓓ

5. Ⓐ Ⓑ Ⓒ Ⓓ 15. Ⓐ Ⓑ Ⓒ Ⓓ 25. Ⓐ Ⓑ Ⓒ Ⓓ

6. Ⓐ Ⓑ Ⓒ Ⓓ 16. Ⓐ Ⓑ Ⓒ Ⓓ 26. Ⓐ Ⓑ Ⓒ Ⓓ

7. Ⓐ Ⓑ Ⓒ Ⓓ 17. Ⓐ Ⓑ Ⓒ Ⓓ 27. Ⓐ Ⓑ Ⓒ Ⓓ

8. Ⓐ Ⓑ Ⓒ Ⓓ 18. Ⓐ Ⓑ Ⓒ Ⓓ 28. Ⓐ Ⓑ Ⓒ Ⓓ

9. Ⓐ Ⓑ Ⓒ Ⓓ 19. Ⓐ Ⓑ Ⓒ Ⓓ 29. Ⓐ Ⓑ Ⓒ Ⓓ

10. Ⓐ Ⓑ Ⓒ Ⓓ 20. Ⓐ Ⓑ Ⓒ Ⓓ 30. Ⓐ Ⓑ Ⓒ Ⓓ

Marks Scored: / 30

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 NEW SCHEME – MAY 2023
INTERMEDIATE COURSE
PAPER 3 – COST AND MANAGEMENT ACCOUNTING
SYLLABUS 30%
QUESTION PAPER
Roll No. ………………………
Total No. of Questions- 6
Time Allowed –3 hours Maximum Marks – 100 marks

GENERAL INSTRUCTIONS TO CANDIDATES

1. The question paper comprises of two parts, Part I and Part II.

2. Part I comprises of Multiple-Choice Questions (MCQs).

3. Part II comprises questions which require descriptive type answers.

4. Ensure that you receive the question paper relating to both the parts. If you have not
received both, bring it to the notice of the invigilator.
5. Answers to Questions in Part-I are to be marked in OMR answer sheet only. Answers to
questions in Part II are to be written on the descriptive type answer book. Answers to
MCQs, if written in descriptive type answer book, will not be evaluated.
6. OMR Sheet given on the cover page will be in English only for all the candidates, including
for Hindi medium candidates
7. Duration of the examination is 1 hour and 30 mins.

PREPCA sets papers as per ICAI Paper Pattern.

However, we do make changes necessitated by our experts since there is no

fixed pattern that ICAI follows.

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
Q1A) Answer the following (Marks 4*5 = 20)
Prepare the Cost Sheet with as many details as possible and ascertain the Selling Price per unit of
the product.

1. Direct Materials – 12.5% of Selling Price,

2. Direct Labour – 17.5% of Selling Price,
3. Production Overheads – 1/3rd of Prime Cost,
4. General Administration OH – 100% of Factory Cost,
5. Profit (` 750 perunit – 15%ofSales.

You may ignore Direct Expenses, Quality Control Cost, R&D Costs and Administrative OH
attributable to Production.

B.A fire occurred in the Factory Premises on 31st October of a year. The accounting records
have been destroyed. Certain accounting records kept in another building, reveal the following
for the period 1st September to 31st October.

1. Direct Material purchased Rs 2,50,000 6. Sales Revenues Rs 7,50,000

2. Work in Process inventory on Rs 40,000 7.Direct Labour Rs 2,22,250

1st September
3. Direct Material inventory on Rs 20,000 8.Prime Costs Rs 3,97,750
1st September
4. Finished Goods inventory on Rs 37,750 9.Cost of goods available for Rs 5,55,775
1st September sale

5. Indirect Manufacturing Costs 40% of 10.Gross Margin

Conversion percentage % 30%
Costs based on Revenues

The loss is fully covered by insurance. The Insurance Company wants to know the historical cost
of the inventories as a basis for negotiating a settlement, although the settlement is actually to be
based on replacement cost, not historical cost. You are required to compute the following items as
on 31st October – (1) Finished Goods Inventory, (2) Work in Process Inventory, and (3) Direct
Materials Inventory

C). Following details are provided by Mani Private Limited for the quarter ending 30th September.

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
 Amount in Rs.
(i) Direct Expenses 1,80,000
(ii) Direct Wages being 175% of Factory Overheads 2,57,250
(iii) Cost of Goods Sold 18,75,000
(iv) Selling & Distribution Overheads 60,000
(v) Sales 22,10,000
(vi) Administration Overheads are 10% of Factory Overheads

Stock details as per Stock Register: (Rs)

Particulars of Stock 30th June 30th

September
Raw Materials 2,45,600 2,08,000
Work–in–progress 1,70,800 1,90,000
Finished Goods 3,10,000 2,75,000

You are required to prepare a Cost Sheet showing – (a) Raw Material consumed, (b) Prime Cost,
(c) Factory Cost, (d) Cost of Goods Sold, and (e) Cost of Sales and Profit.

D) A Company produces a Machine and sells it for Rs 3,000. There is an increase of 20% in the
Cost of Material, 10% in Labour, and 10% in Overhead Cost. The only figures available are that
Material Cost is 50% of Cost of Sales, Labour Cost is 30% of Cost of Sales and Overhead Cost is
20% of Cost of Sales.
The anticipated increased cost in relation to the present Sales Price would cause a 30% decrease
in the amount of the present Gross Profit. What would be the Selling Price of the machine to give
the same percentage of Gross Profit as before?

Q2A ) XYZ, a Manufacturing Firm, has revealed following information for September –
1st September 30th September
Raw Materials Rs 2,42,000 Rs 2,92,000
Work–in–Progress Rs 2,00,000 Rs 5,00,000

The Firm incurred following expenses for a targeted production of 1,00,000 units during the
month:
Consumable Stores and Spares of Factory 3,50,000
Research and Development Cost for process improvements 2,50,000
Quality Control Cost 2,00,000
Packing Cost (secondary) per unit of goods sold 2
Lease Rent of Production Asset 2,00,000
Administrative Expenses (General) 2,24,000
Selling and Distribution Expenses 4,13,000
Finished Goods (Opening) Nil
Finished Goods (Closing) 5,000 units

Defective Output which is 4% of targeted production, realizes 61 per unit.

Closing Stock is valued at Cost of Production (excluding Administrative Expenses) Cost of
Goods Sold, excluding Administrative Expenses amounts to 78,26,000.

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
 Direct Employees Cost is ½ of the Cost of Material Consumed.
Selling Price of the Output is 110 Rs per unit.

Required – (1) Calculate the Value of Material Purchased,

(2) Prepare Cost Sheet showing the Profit earned by the Firm. ( 10 Marks)

2B) (i) Compute EOQ and the Total Variable Cost for the following: (6 Marks)
 Annual Demand = 5,000 units
 Unit Price = Rs 20.00
 Order Cost = Rs 16.00
 Storage Rate = 2% per
annum
 Interest Rate = 12% per
annum
 Obsolescence Rate = 6% per
annum.
(ii) Determine the Total Variable Cost that would result for the items if an incorrect
price of Rs 12.80 is used. (4
Marks)

Q3A) SAP Ltd requires 25,000 tons of a raw material annually. It costs ` 10,000/– per order and
carrying costs are Rs 50 per ton per annum (including interest of ` 28). It has received the
following quotations from local suppliers for the next year’s supply.

Lot Size Upto 4,999 5,000–9,999 10,000–24,999 25,000 &

tons tons tons above
Unit Rate Rs 100 Rs 98 Rs 95 Rs 90

1. Advise the Company regarding the most optimum order quantity.

2. A German Supplier has offered a price of ` 75 per ton for 25,000 tons in a single shipment. For
this shipment, Additional Special Packing Expenses would be ` 1 Lakh. Advise whether this
offer can be accepted in preference to (1) above.
3. Would your advice to (2) differ, if the Packing Expenses were ` 1,50,000? What will be the
maximum Packing Expenses that can be borne by the SAP Ltd? ( 10 Marks)
Q3B) Prepare a Stores Ledger Account from the following transactions in April of XY Company
Ltd.:
April 1 Opening balance 200 units at Rs 10 per unit.
5 Receipt 250 units costing Rs 2,000
8 Receipt 150 units costing Rs 1,275
10 Issue 100 units
15 Receipt 50 units costing Rs 500
20 Shortage 10 units
21 Receipt 60 units costing Rs 540
22 Issue 400 units
Issues upto 10th April will be priced at LIFO and from 11th April, issues will be priced at FIFO.

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
 Shortage will be charged as OH.
(10 Marks)

Q4A) The Finishing Shop of a Company employs 60 direct workers. Each worker is paid Rs 400
as wages per week of 40 hours. When necessary, overtime is worked upto a maximum of 15
hours per week per worker at time rate plus one–half as premium.
The current output on an average is 6 units per man–hour, which may be regarded as standard
output. If Bonus Scheme is introduced, it is expected that the output will increase to 8 units per
man–hour. The workers will, if necessary, continue to work overtime upto the specified limit
although no premium or incentives will be paid.

The Company is considering introduction of either Halsey or Rowan Scheme of Wage

incentive system. The budgeted weekly output is 19,200 units.
The Selling Price is ` 11 per unit and the Direct Material Cost is Rs 8 per unit. The Variable OH
amount to Rs 0.50 per Direct Labour Hour and the Fixed Overhead is Rs 9,000 per eek.
Prepare a statement to show the effect on the Company’s weekly profit of the proposal to
introduce – (a) Halsey Scheme, and (b)Rowan Scheme.
(10 Marks)
Q4B). Raghupati University conducts a special course on “Computer Applications” for a month
during Summer. For this purpose, it invites applications from graduates. An Entrance Test is
given to the candidates and based on the same, a final selection of a hundred candidates is made.
The Entrance test consists of four objective type of examinations and is spread over four days,
one examination per day. Each candidate is charged a fee of Rs.50 for taking up the Entrance
Test. The following data was gathered for the past two years.

Statement of Net Revenue from the Entrance Test for the course on “Computer Applications”
Particulars Year 1 Year 2
1. Gross Revenue (Fees collected) Rs.1,00,000 Rs.1,50,000
2. Costs: Valuation 40,000 60,000
Question 20,000 30,000
Booklets 8,000 8,000
Hall Rent at Rs.2,000 per day
Honorarium to Chief Administrator 6,000 6,000
Supervision (One Supervisor for every 100 candidates at 4,000 6,000
Rs. 50 per day) General Administration Expenses 6,000 6,000
Total Cost Rs.84,000 Rs.1,16,000
3. Net Revenue Rs.16,000 Rs.34,000

You are required to compute:

1. Budgeted Net Revenue if 4,000 candidates take up the Entrance Test in the next year.
2. Break Even Number of Candidates.
3. Number of Candidates to be enrolled if the Net Income desired is Rs.20,000.

(10 Marks)

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
 Q5A) It is seen from the Job Card for repair of the Customer’s Equipment that a total of
154 Labour Hours have been put in as detailed below –

Worker ‘A’ Paid at Rs 200 Worker ‘B’ Paid at Rs 100 per Supervisory Worker ‘C’ paid of
Particulars
per day of day of Rs300 per day of 8 hours
8Hours 8Hours
Monday 10.5 hours 8 hours 10.5 hours
Tuesday 8 hours 8 hours 8 hours
Wednesday 10.5 hours 8 hours 10.5 hours
Thursday 9.5 hours 8 hours 9.5 hours
Friday 10.5 hours 8 hours 10.5 hours
Saturday – 8 hours 8 hours
Total 49 hours 48 hours 57 hours

In terms of an award in a Labour Conciliation, the Workers are to be paid Dearness Allowance
on the basis of Cost of Living Index figures relating to each month which works out at ` 9,600
for the relevant month. The Dearness Allowance is payable to all workers irrespective of wage
rate if they are present or are on leave with wages on all working days.
Sunday is a weekly holiday and each worker has to work for 8 hours on all week days and 4
hours on Saturdays, the workers are however paid full wages for Saturday (8 hours for 4 hours
worked).
Workers are paid overtime according to the Factories Act for hours worked in excess of normal
working hours on each day. Excluding holidays (including 4 hours work to be put in on
Saturday) the total number of hours work out to 192 in the relevant month. The Company’s
Contribution to Provident Fund and Employee’s State Insurance Premium are absorbed into
Overheads. Ascertain the Wages Payable to each Worker.
(10 Marks)

Q5B) Following are the particulars for April, relating to four employees working in a
Factory exclusively for Job No.201.

Employee Designation Wages

Employee I Foreman Rs 6,400 per month
Employee II Mechanic Rs 180 per day
Employee Machine Operator Rs 150 per day
III
Employee Workman Rs 120 per day
IV

The normal working hours per week of six days are 48 at 8 hours per day. Sundays are
paid holidays and there was no other holiday during the month. Provident Fund
Contribution was 12% of monthly wages by both Employer and Employee. Employees’
State Insurance Contribution was 1.75% of Monthly Wages by Employee and 4.75% of
Monthly Wages by Employer.

From the foregoing data, calculate –

1. Net Wages Payable by the Employer for the month.
2. Total Amount of Provident Fund Contribution to be deposited by Employer.
3. Total Amount of ESI Contribution to be deposited by Employer.

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
 4. Total Labour Cost to the Employer for the month of April, 2010 chargeable to Job
No.201.
5. Total Cost of Job no.201 requiring Material valued at Rs 40,500 and Overheads at 50% of
Prime Cost.
(5 Marks)
Q5C) PLP Ltd sold 2,75,000 units of its product at Rs.37.50 per unit. Variable Costs are Rs.17.50
per unit (Manufacturing Costs of Rs.14 and Selling Costs of Rs.3.50 per unit). Fixed Costs are
incurred uniformly throughout the year and amount to Rs.35,00,000 (including Depreciation of
Rs.15,00,000). There are no beginning or ending inventories. Required –
1. Estimated Break–Even Sales Quantity and Cash Break Even Sales Level
Quantity.
2. Estimate the PV Ratio.
3. Estimate the number of units that must be sold to earn an Income (EBIT) of
Rs.2,50,000.
4. Estimate the Sales Level to achieve an After–Tax Income (PAT) of
Rs.2,50,000. Assume 40% Corporate Income Tax Rate.
(5 Marks)

Q6A) Ram Ltd manufactures a product at the rate of 10 pieces per hour. The Company has
been producing and selling 3,30,000 units annually during the previous 6 years. However,
during this year the Company was able to produce 3,16,000 units only.
The Company’s Overheads for this year amounted to Rs 6,75,000.
The Company has 15 machines (of the same type) and works on single shift only, i.e. 8 hours
per day. During a year, statutory and festival–related holidays are expected to be 65 days. The
quarterly preventive maintenance and repairs work can be taken at 250 hours. Calculate –
1.Maximum Capacity, Practical Capacity, Normal Capacity, Actual Capacity and Idle Capacity
in terms of hours and units,
2.Hourly Rate of Recovery of Overhead for Maximum, Practical, Normal and Actual
Capacities.
3.Cost of Idle Capacity
(5 Marks)

Q6B) An Engine manufacturing Company has two Production Departments – (i) Snow
Mobile Engine, and (ii) Boat Engine, and two Service Departments – (i) Maintenance,
and (ii) Factory Office. Budgeted Cost and relevant cost drivers are –
Department Snow Mobile Boat Engine Factory Office Maintenance
Engine
Costs in Rs Rs 6,00,000 Rs 17,00,000 Rs 3,00,000 Rs 2,40,000

Cost Drivers are as under –

Department Factory Office Department Maintenance Department

Cost Driver Number of Employees Number of Work Orders

Snow Mobile Engine Department 1,080 Employees 570 Orders

Boat Engine Department 270 Employees 190 Orders
Factory Office Department –– 40 Orders
Maintenance Department 150 Employees ––

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
 Total 1,500 Employees 800 Orders
1. Compute the Cost Driver Allocation percentage and then use these percentages to allocate
the Service Department Costs by using Direct Method.
2. Compute the Cost Driver Allocation percentage and then use these percentages to allocate
the Service Department Costs by using Non–Reciprocal Method / Step Method.
( 5 Marks)
Q6C) Gold Coast Ltd gives you the following information to compute the production hour
rate of recovery of Overheads in three Production Departments A, B and C.
Production Departments Service
Departments
Particulars A B C P Q Total
Rent 2,400 4,800 2,000 2,000 800 12,000
Electricity 800 2,000 500 400 300 4,000
Indirect Labour 1,200 2,000 1,000 800 1,000 6,000
Machinery 2,500 1,600 200 500 200 5,000
Depreciation
Sundries 910 2,143 847 300 300 4,500
Total OH 7,810 12,543 4,547 4,000 2,600 31,500
Working Time 1,000 2,500 1,400
(Hours)
Expenses of Service Departments P and Q are to be apportioned as under –
Particulars A B C P Q
P 30 40 20 – 10
Q 10 20 50 20 –
Compute the OH recovery rates of the three departments. (Use Repeated Redistribution
Method). (5Marks)

Q6D) E–Books is an online book retailer having 4 departments. Two sales departments are
Corporate Sales & Consumer Sales. The two Support Departments are Administrative (H.R. &
Accounting) & Information system. Each Sales Department conducts merchandising & marketing
operations independently. The following data relate to October.
Departments Revenues No. of Processing time Cost incurred for Oct.
Employees used
Corporate Sales ` 16,67,750 42 2,400 minutes 12,97,751
Consumer Sales ` 8,33,875 28 2,000 minutes 6,36,818
Administrative Nil 14 400 minutes 94,510
Information Nil 21 1,400 minutes 3,04,720
System

The Company uses number of employees as a basis to allocate Administrative Cost, and
processing time as basis to allocateInformation System costs.

Required:
1.Allocate the Support Department Costs to the Sales Department using Direct Method.
2.Rank the Support Departments based on percentage of their services rendered to other Support
Departments. Use this ranking to allocate Support Costs based on the step down allocation
method.
3.How could you have ranked the support departments differently?

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
4.Allocate the Support Department Cost to two Sales Departments using Reciprocal Allocation
method.
(5 Marks)
Q6E). What are the limitations of Marginal Costing?
(5 Marks)

CMA 30%
(Subject Name) (30%/50%/70%/100A/100B)
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