Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Chapter 2: Materials Cost

Q.No.1 Computation of Stock Levels
Multistock Ltd gives you the following information –
 Emergency Stock (to arrange spot purchasing) is 32,000 units.
 Usually it takes atleast 4 weeks to obtain fresh supply.
 A cushion of 75% is added to Minimum Usage Rate to determine Average Stock Usage Rate.
 Materials Consignments have always been received within 8 weeks from the date of the Purchase Order.
 Economic Order Quantity: 50,000 units.
Compute the Stock Levels. State your assumptions clearly.

Q.No.2 Material Turnover Ratios

The inventory records of Akash Brothers, for a year show the following:
Material Opening Stock Purchases Closing Stock
A 700 kg 11,500 kg 200 kg
B 200 litres 11,000 litres 1,200 litres
C 1,000 kg 1,800 kg 1,200 kg
Materials are valued as under: A – ` 50 per kg, B – ` 12 per litre and C ` 22 per kg. You are required to –
(a) Calculate the Material Turnover Ratio for each item.
(b) Compute the number of days the average inventory held.
(c) Identify the fast and slow moving materials.
(d) List the remedial action in respect of slow–moving items.

Q.No.3 ABC Analysis

A Firm has 5 different items of stock in its inventory. Perform ABC Analysis from the given data.
Item No. 1 2 3 4 5
Average Number of Units in Inventory 20,000 28,000 32,000 10,000 60,000
Average Cost per unit ` 60 ` 10 ` 11 ` 100 ` 3.40

Q.No.4 Discount Negotiation

Big Fortune Ltd manufactures a product from a Raw Material which is purchased at ` 60 per kg. The Company incurs a
handling cost of ` 360 plus freight ` 390 per order. The incremental carrying cost of inventory is ` 0.50 per kg per month.
In addition, the cost of Working Capital Finance on the investment in inventory of Raw Material is ` 9 per kg per annum. The
annual production of the finished product is 1,00,000 units. 2½ units are obtained from every kg of the Raw Material.
Required:
1. What should be the optimum order size for Raw Materials?
2. How frequently should orders for procurement be placed?
3. If the Company proposes to rationalise placement of orders on quarterly basis, what percentage of discount in the price
of Raw Materials should be negotiated?

Q.No.5 EOQ without Material Prices – Savings Approach

Cost–Savers Ltd uses 200 tons of a Raw Material per annum. The cost of ordering is ` 1,000 per order and the cost of
stockholding is ` 10 per ton per annum. Quantity Discounts are available as under –
Quantity ordered (in tons) 1–49 50–99 100–199 200–249 250 & above
Discount per ton NIL 2 2.5 3 3.60
Compute EOQ (i) with Discount and (ii) without Discount.

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Q.No.6 Material Cost Accounting

Bhanu Ltd gives the following details in respect of one of its Raw Materials:
 Purchase Quantity: 16,000 kg per annum.
 Purchase Cost including Insurance & Carriage Inwards, etc.: ` 17.50 per kg.
 Normal Loss in Storage, Handling, Production Losses, etc: 5% of the total Purchase Quantity.
 Quantity issued for production during the year: 14,800 kg.
 Loss in Stores due to Fire: 100 kg.

Compute the following – (a) Effective Cost of Materials per kg, (b) Cost of Raw Materials Consumed, (c) Value of Abnormal
Loss, and (d) Value of Closing Stock.

Chapter 3: Employee Cost

Q.No.1 Labour Cost – Wages and Amenities
From the following data, compute the cost per day of 8 hours of engaging a particular type of labour –
(a) Monthly Salary (Basic plus Dearness Allowance) ` 8,000
(b) Leave Salary, Annual Bonus etc. equated at 10%
(c) EPF Contribution and related expenditure 18% of Salary
(d) ESI Contribution and related expenditure 12% of Salary
(e) Pro–rata expenditure on amenities to Labour ` 2,000 per head per month
(f) Number of working hours in a month 200

Q.No.2 Labour Turnover Rates – With Expansion

From the following data of Big–One Ltd, calculate Labour Turnover.
 Number of workers on the payroll at the beginning of the month: 1,800
 Number of workers on the payroll at the end of the month: 2,200
 During the month, 20 workers left, 80 workers were discharged and 500 workers were recruited. Of these, 60 workers
were recruited in the vacancies of those separated, while the rest were engaged due to expansion.

Q.No.3 Different Systems of Wage Payment

During one week, Kumar manufactured 200 articles. He receives wage for a guaranteed 44–hour week at the rate of ` 50
per hour. The estimated time to produce one article is 15 minutes and under incentive scheme the time allowed is increased
by 20%. Calculate his Gross Wages under – (a) Time–Rate, (b) Piece–Work with a Guaranteed Weekly Wage, (c) Rowan
System, (d) Halsey System.

Q.No.4 Allocation of Group Bonus

Rahul, Ajit and Nayan were engaged on a group task for which a payment of ` 7250/– was to be made. In addition to this,
the group is entitled for a bonus for the time saved. The bonus rate is ½ of the percentage of time saved bears to the
standard time. The Bonus Rate is applied on an average wage rate of ` 70 per day. Calculate the bonus and the total
earnings of each worker if the time allowed for the job is 133 man days. The following information is made available to you.
Name of Worker Rahul Ajit Nayan
Time basis wages per day ` 80 ` 60 ` 50
Days worked 25 30 40

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Q.No.5 Capital Investment Decision – Impact of Additional Labour Cost

The current output details of a manufacturing Company are given below –
Average Output per Week 50,000 units
Number of Employees 200
Sales Value of Output ` 2,50,000
Contribution towards Fixed Expenses and Profit (Note: Contribution = Sales Less Variable Cost.) ` 96,000

There is a proposal for further mechanisation at a capital cost of ` 1,00,800. The benefits would be to reduce the number of
employees to 150, but the average individual output will increase by 60%. To ensure the increased output, it was decided to
increase the Piecework Rate of ` 1 per article by 1%, for every 2% increase in average individual output achieved. There
would however be no change in the Selling Price. You are required to calculate the extra weekly contribution and advice the
Management regarding the acceptance of the project.

Chapter 4: Overheads Cost – Absorption Costing

Q.No.1 Step Ladder and Simultaneous Equations Method
Twins Ltd, a manufacturing Company has two Production Departments P 1 and P2 and two Service Departments S1 and S2.
The Department Distribution Summary showed the following expenses for March –
 Production Departments: P1 ` 9,000 P2 ` 4,000
 Service Departments: S1 ` 3,500 S2 ` 3,000
The expenses of Service Departments are apportioned as follows:
Departments P1 P2 S1 S2
S1 40% 50% – 10%
S2 50% 30% 20% –
Prepare a statement showing the apportionment of Service Departments OH Expenses to Production Departments by using
– (i) Step Method allocating S1 Costs first, and (ii) Simultaneous Equation Method.

Q.No.2 Simultaneous Equations Method

Varyfix Ltd has two Production Departments P–1 and P–2 and two Service Departments S–1 and S–2. The data relating to a
period are as under –
Particulars P–1 P–2 S–1 S–2
Direct Materials ` 80,000 ` 40,000 ` 10,000 ` 20,000
Direct Wages ` 95,000 ` 50,000 ` 20,000 ` 10,000
Overheads ` 80,000 ` 50,000 ` 30,000 ` 20,000
Power required at normal capacity operations (kwh) 20,000 25,000 12,500 17,500
Actual power consumption during the period (kwh) 13,000 23,000 10,250 10,000

A Power Generation Plant meets the power requirement of these departments. This Plant incurred an expenditure, which is
not included above, of ` 1,21,875 out of which a sum of ` 84,375 was variable and the rest fixed.

After apportionment of Power Generation Plant Costs to the four departments, the Service Department Overheads are to be
redistributed on the following bases –
Department P–1 P–2 S–1 S–2
S–1 50% 40% – 10%
S–2 60% 20% 20% –
You are required to –
1. Apportion the Power Generation Plant Costs to the 4 Departments.
2. Re–apportion Service Department Costs to Production Departments.

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

3. Calculate the Overhead Rates per Direct Labour Hour of Production Departments, given that the Direct Wage Rates of
P1 and P2 are ` 5 and ` 4 per hour respectively.

Q.No.3 Capacity Concepts

Excel Ltd manufactures a product at the rate of 80 pieces per hour. The Company has been producing and selling 1,60,000
units annually during the previous 6 years. However, during this year the Company was able to produce 1,46,000 units only
during an operating time of 1,837 hours. The Company’s Fixed Overheads for this year amounted to ` 5,84,000.

The Company works on single shift only at 8 hours per day and 6 days a week. The Company has declared 13 holidays during
this year. The quarterly preventive maintenance and repairs work involved 77 hours. Calculate –
1. Maximum Capacity, Practical Capacity, Normal Capacity, Actual Capacity and Idle Capacity in terms of hours,
2. Hourly Rate of Recovery of Overhead for Maximum, Practical, Normal and Actual Capacities.

Q.No.4 Machine Hour Rate with Set–Up Time and Costs

Set–Up Ltd, having 25 different types of automatic machines, furnishes you the following data for a year for Machine B.
Cost of Machine: ` 50,000, Useful life: 10 years with no scrap value.

Overhead Expenses:
 Factory Rent: ` 50,000 per annum,
 Factory Lighting: ` 40,000 per annum,
 Supervision Charges: ` 1,50,000 per annum,
 Operator Wages: ` 24 per day of 8 hours
 Maintenance Cost is ` 5,000 per annum (This is incurred for a reserve machine for Machine B)
 Power Cost is ` 12 per hour while in operation.

Other Information:
 Area of the Factory: 80,000 square feet while area occupied by Machine B is 3,000 square feet.
 An Operator attends to 1 machine when it is under set–up and 2 machines while under operation.
 Estimated Operation Hours: 3,600 per annum and Estimated Set–Up Time per annum: 400 hours

Determine the Comprehensive Machine Hour Rate and determine the Overhead Cost of the following jobs:
Job X Y
Set up Time in hours 80 40
Operation Time in hours 130 160

Q.No.5 Treatment of Absorption differences

The following data is available in respect of a multi department factory.
Department I II III
Predetermined Rates ` 10 per M/c Hour ` 12 per Direct Lab. Hr 30% of Direct Labour Cost
Units sold 5,000 units 12,000 units 9,000 units
Closing Stock of FG 500 units 800 units 900 units
Closing Stock of WIP 750 units (2/3 complete)
rd – 1000 units (10% complete)
Actual Data 2,11,000 Machine hours 15,000 Labour hours Direct Labour Costs = ` 9,00,000
Balance in FOH A/c ` 29,70,000 ` 2,50,000 ` 2,50,000

Scrutiny of FOH A/c for Department I reveals that the following are included in the total of ` 29,70,000.
(a) ` 20,000 pertaining to Consumables, bought 4 years ago, now paid after settlement of dispute.
(b) ` 1,50,000 being wages paid for strike period under an award of the Labour Court.

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

(c) ` 40,000 being written off Obsolete Stores.

(d) ` 2,50,000 being penalty paid to the Customs Department.
It is observed that 75% of balance OH were attributed to normal increase in costs, while 25% is due to factory inefficiency.

For Department II, the FOH A/c scrutiny did not reveal much details. The Department Manager estimates that 60% of the increase
is due to lack of production planning while the balance is attributable to increase in OH Costs.

` 10,000 FOH for Department III is still payable for which no entry has yet been passed in the books.
Required:
1. Calculate the amount of Department wise over/under absorption.
2. Analyse the reason for difference in overhead and give its treatment in Cost Accounts.
3. Pass the necessary journal entries and give the impact on profit.

Chapter 5: Activity Based Costing

Q.No.1 Computation of ABC Rates and Idle Capacity Costs M 04(PE 2)
MST Ltd has collected the following data for its 2 activities. It calculates activity cost rates based on the cost driver capacity.
Activity Cost Driver Capacity Cost
Power Kilowatt Hours 50,000 kilowatt hours ` 2,00,000
Quality Inspections Number of inspections 10,000 inspections ` 3,00,000
The Company makes three products – M, S and T. For the year ended 31 st March, the following consumption of cost drivers
was reported –
Product Kilowatt hours Quality Inspection
M 10,000 3,500
S 20,000 2,500
T 15,000 3,000
Required: 1.Calculate the costs allocated to each product from each activity.
2.Calculate the cost of unused capacity for each activity.

Q.No.2 Product–wise Profitability Statements under Traditional and ABC Systems

The following budgeted information relates to Narayan Ltd for the forthcoming period:
Product L M N
Sales and Production (units) 50,000 40,000 30,000
Selling Price (per unit) ` 45 ` 95 ` 73
Prime Cost (per unit) ` 32 ` 84 ` 65
Machine Department (Machine Hours per unit) 2 hours 5 hours 4 hours
Assembly Department (Direct Labour Hours per unit) 7 hours 3 hours 2 hours

Overheads allocated and apportioned to Production Departments (including Service Cost Centre Costs) were to be
recovered in product costs as: Machine Department at ` 1.20 per Machine Hour, Assembly Department at ` 0.825 per DLH.
Scrutiny of accounts reveals that the above Overheads could be re–analysed into ‘Cost Pools’ as follows:
Cost Pool Amount in ` Cost Driver Quantity for the period
Machining Services 3,57,000 Machine Hours 4,20,000
Assembly Services 3,18,000 Direct Labour Hours 5,30,000
Set–up Costs 26,000 Set–ups 520
Order Processing 1,56,000 Customer Orders 32,000
Purchasing 84,000 Suppliers’ Orders 11,200

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The following data is also provided:

Products L M N
Number of Set–ups 120 200 200
Customer Orders 8,000 8,000 16,000
Suppliers’ Orders 3,000 4,000 4,200
Prepare Profit Statements using: (1) Conventional Absorption Costing System, and (2) Activity – Based Costing System.

Q.No.3 Cost Statements under Traditional and ABC Systems M 19 (New)

MNO Ltd manufactures two types of Equipment A and B and absorbs Overheads on the basis of Direct Labour Hours. The
Budgeted Overheads and Direct Labour Hours for March are ` 15,00,000 and 25,000 hours respectively. The information
about the Company’s products is as follows:
Particulars Equipment A Equipment B
Budgeted Production Volume 3,200 units 3,850 units
Direct Material Cost ` 350 per unit ` 400 per unit
Direct Labour Cost 3 hours @ ` 120 per hour = ` 360 per unit 4 hours @ ` 120 per hour = ` 480 per unit

OH ` 15,00,000 can be identified with 3 major activities:

Order Processing: ` 3,00,000, Machine Processing: ` 10,00,000, Product Inspection: ` 2,00,000
These activities are driven by the Number of Orders Processed, Machine Hours worked and Inspection Hours respectively.
The data relevant to these activities is as follows:
Equipment Orders Processed Machine Hours worked Inspection Hours
A 400 22,500 5,000
B 200 27,500 15,000
Total 600 50,000 20,000
Required:
1. Prepare a Statement showing the Manufacturing Cost per unit of each product using the Absorption Costing Method
assuming the Budgeted Manufacturing Volume is attained.
2. Determine Cost Driver Rates and prepare a Statement showing the Manufacturing Cost per unit of each product using
Activity Based Costing, assuming the Budgeted Manufacturing Volume is attained.
3. MNO Ltd’s Selling Prices are based heavily on cost. By using Direct Labour Hours as an application base, calculate the
amount of cost distortion (under–costed or over–costed) for each equipment.

Q.No.4 Cost Statements under Traditional and ABC Systems Jan 21 (New)
ABC Ltd manufactures three Products X, Y and Z using the same Plant and resources. It has given the following information
for the year ended on 31st March:
Particulars X Y Z
Production Quantity (units) 1,200 1,440 1,968
Cost per unit Direct Material (`) 90 84 176
Direct Labour (`) 18 20 30
Budgeted Direct Labour Rate was ` 4 per hour and the Production Overheads, shown in the table below, were absorbed to
products using Direct Labour Hour Rate. The Company followed Absorption Costing Method.

However, the Company is now considering adopting Activity Based Costing Method.
Budgeted OH Cost Driver Remarks
Material ` 50,000 No.of Orders No. of Orders was 25 units for each product.
Procurement

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Set–up ` 40,000 No. of Production Runs All 3 products are produced in Production Runs of 48 units.
Quality Control ` 28,240 No. of Inspections Done for each production run.
Maintenance ` 1,28,000 Maintenance Hours Total Maintenance Hours were 6,400 and was allocated
in the ratio of 1:1:2 between X,Y & Z.
Required:
1. Calculate the Total Cost per unit of each product using the Absorption Costing Method.
2. Calculate the Total Cost per unit of each product using the Activity Based Costing Method.

Chapter 6: Cost Accounting Systems &

Reconciliation of Costing and Financial Profit
Q.No.1 Interpretation of Account Balances
The following ledger balances were extracted from the books of Ram Manufacturing Co.
 Stores Ledger Control Account ` 1,28,960
 Production Overhead Suspense Account ` 13,230
 Job Ledger Control Account ` 96,180
 Finished Stock Control Account ` 1,53,460
 General Ledger Adjustment Account ` 3,91,830
1. What system of accounting (i.e. Integrated or Non–Integrated) does the Company follow?
2. What is the nature of each of the account balances indicated above? (i.e. Debit or Credit)
3. What do each of the above account balances represent?

Q.No.2 Integrated Accounts – Journal Entries

Pass the Journal Entries for the following transactions under Integrated System of Accounting.
Raw Materials purchased (50% on credit) 6,00,000
Materials issued to production 4,00,000
Wages paid (50% Direct) 2,00,000
Wages charged to Production (` 20,000 is Abnormal Idle Time Wages) 80,000
Factory Overheads incurred 80,000
Factory Overheads charged to production 1,00,000
Selling and Distribution Overheads incurred 40,000
Finished Goods at cost 5,00,000
Sales (50%credit) 7,50,000
Closing Stock NIL

Q.No.3 Non–Integrated System

Akash Manufacturing Company provides the following information. Write up the various accounts as you envisage in the
Cost Ledger and prepare a Trial Balance as on 31st March.
(a) Balances as on 1st April (beginning) Rupees in Thousands
Materials Control 1,240 Production Overhead 84
WIP Control 625 Administrative Overhead 120 (Cr.)
Finished Goods Control 1,240 Selling Overhead 65
General Ledger Control 3,134

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

(b) Transactions for the year ended 31st March:

Material Purchased 4,801 Material Issued to: Jobs 4,774
Carriage Inwards 84 Maintenance Works 412
Direct Wages 1,493 Administration Office 34
Indirect Wages 650 Selling Department 72

POH AOH SOH Finished Goods produced 9,584

Incurred 2,423 740 642 Finished Goods sold 9,773
Absorbed 3,591 677 820 Sales Realization 12,430

Q.No.4 Reconciliation Statement with part information

You are required to prepare the Reconciliation Statement between cost and financial profits. The following information only
could be gathered from the Company’s records –
1. From the Costing Records: Materials consumed: 1,200 kg at ` 80, Direct Wages: 2,000 hours at ` 40, Production OH
– 30% of Labour, Administration OH – ` 60,000, Selling OH –?, Profit – ` 34,000.
2. From the Financial Records: Materials Cost – ?, Direct Wages – ?, Production OH – ?, Admin OH –?, Selling OH – `
36,000, Provision for Doubtful Debts – ` 12,000, Profit – ?
3. From MIS Reports: Materials Cost was ` 8,300 higher in Cost Records. Actual Wages paid was ` 83,300,
Production OH overabsorbed ` 3,600, Administration OH underabsorbed – ` 8,100, SOH underabsorbed – ` 4,000,
Investments bearing 8% interest – ` 1,00,000.
Ascertain the profits under Financial Records. Reconcile the differences between Cost and Financial Profits.

Chapter 7: Job and Batch Costing

Q.No.1 Quotation using Job Cost Sheet

The Direct Material Cost of a job is likely to be ` 10,000 and Direct Labour Cost is likely to be ` 2,000. In Machine Shop, it
will require machining by Machine No.1 for 25 hours and Machine No.2 for 9 hours. Machine Hour rates for Machine No.1
and Machine No. 2 are ` 16 and ` 20 considering only Machine Shop Cost.
The Direct Wages in all other shops last year amounted to ` 1,60,000 as against ` 96,000 Factory Overheads.

Last year, Factory Cost of all jobs amounted to ` 5,00,000 as against ` 75,000 Office Expenses.

Prepare a quotation which guarantees 20% profit on Selling Price.

Q.No.2 EBQ and Related Computations Jan 21 (New)

GHI Ltd manufactures ‘Stent’ that is used by hospitals In heart surgery. As per the estimates provided by Pharmaceutical
Industry Bureau, there will be demand of 40 Million ‘Stents’ in the coming year. GHI Ltd is expected to have a market share
of 2.5% of the total market demand of the Stents in the coming year. It is estimated that it costs ` 1.50 as Inventory Holding
Cost per Stent per month and that the Set–Up Cost per run of Stent manufacture is ` 225. Answer the following –
1. What would be the Optimum Run Size for Stent manufacture?
2. What is the minimum Inventory Holding Cost?
3. Assuming that the Company has policy of manufacturing 4,000 Stents per run, how much extra costs the Company
would be incurring as compared to the optimum run suggested in (1) above?

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Chapter 8: Contract Costing

Q.No.1 Contract Costing – Computation of Basic Data

Ravi Builders follows Financial Year for its accounting purposes, and had commenced a contract for ` 4,80,000 at the
beginning of the current financial year. At the end of the year, the following data about the contract were gathered–
1. Contract Costs comprise Materials, Labour, Depreciation and Expenses, which were incurred in the ratio 25:13:5:2.
2. WDV of Plant (used on the contract for the entire year) after charging 15% Depreciation was ` 1,70,000.
3. Ravi Builders estimated the Contract Works were 75% completed as the end of the financial year. However, the
Architects had given Certificates covering only 65% of the Contract Value.

From the above, you are required to –

1. Find the amount of Contract Costs incurred till date, under each head – Materials, Labour, Depreciation and Expenses.
2. Determine the Value of Work Certified and Work Uncertified, if any.
3. Compute the Profit on the Contract till 31st March.

Q.No.2 Application of Escalation Clause

Deluxe Ltd undertook a contract for ` 5 Lakhs on 1st April. At the end of the financial year, when the accounts were closed,
the following details about the contract were gathered.
Materials purchased 1,00,000 Wages accrued: 31st March 5,000
Wages paid 40,000 Work certified 2,00,000
General expenses 10,000 Cash received 1,50,000
Plant purchased 50,000 Work uncertified 15,000
Materials in hand: 31 March
st 25,000 Depreciation of plant 5,000

The Contract contained an Escalation Clause that read as follows: “In the event of increase(s) of prices of materials and
rates of wages by more than 5%, the contract price would be increased accordingly by 25% of the rise of the cost of
materials and wages beyond 5% in each case.”
It was found that since the date of signing of the agreement, the prices of materials and wage rates increased by 25%. The
value of work certified does not take into account the effect of the above clause. From this data, prepare the Contract A/c.

Q.No.3 Estimation of Total Profit and Profit Recognition

Buildwell Ltd commenced a contract on 1st July in Year 1. The total contract was for ` 10,00,000 (estimated by the
Contractee) and was accepted by Buildwell Ltd at 10% less. It was decided to estimate the Total Profit on the contract on
the basis of expenditure already incurred and estimated to be incurred.
Actual expenditure in Year 1 and estimated expenditure in Year 2 are given below –
Particulars Year 1 (July to Dec.) – ` Year 2 – (Jan to Sept.) – `
Materials 1,50,000 2,60,000
Labour: Paid 1,00,000 1,20,000 (for Year 2)
Accrued at end 10,000 –
Plant Purchased 80,000 –
Expenses 40,000 69,000
Plant returned to Store (at Cost) (on 31 Dec.) 20,000
st (after 9 months) 60,000
Materials at Site 10,000 –
Work Certified 4,00,000 Full
Work Uncertified 15,000 –
Cash Received 3,00,000 Full

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The Plant is subject to annual depreciation at 20% of cost. The Contract is likely to be completed on 30th September in
Year 2. Prepare the Contract Account.

Q.No.4 Profit / Loss Recognition on Incomplete Contracts

Mani Constructions provide the following information on contracts–in–progress as on 31 st March.
Contract A B C D
Contract Value ` 15 Lakhs ` 40 Lakhs ` 9 Lakhs ` 12 Lakhs
Estimated Total Costs thereon ` 12 Lakhs ` 32.5 Lakhs ` 10 Lakhs ` 10 Lakhs
Cost incurred till 31st March ` 11 Lakhs ` 7 Lakhs ` 5.6 Lakhs ` 7.4 Lakhs
Work Certified till 31st March ` 10 Lakhs ` 10 Lakhs ` 5.4 Lakhs ` 11.4 Lakhs
Progress Payments ` 8 Lakhs ` 8 Lakhs ` 3 Lakhs ` 6.84 Lakhs
Compute the Percentage of Completion. Determine the amounts transferred to Costing P&L A/c for the above contracts.

Chapter 9: Single / Unit / Output Costing

Q.No.1 Income Statement – Semi Variable Costs and Pricing Decisions M 19 (New)
“A” Private Limited has a normal production capacity of 36,000 units of toys p.a. The Estimated Costs of Production are–
 Direct Material ` 40 per unit.
 Direct Wages ` 30 per unit (subject to a minimum of ` 48,000 per month).
 Factory Overheads
 Fixed: ` 3,60,000 per annum.
 Variable: ` 10 per unit.
 Semi–Variable: ` 1,08,000 per annum up to 50% capacity and additional ` 46,800 for every 20% increase in
capacity or any part thereof.
 Administrative OH ` 5,18,400 per annum. (fixed)
 Selling Overheads ` 8 per unit.
 Each Unit of Raw Material yields scrap which is sold at the rate of ` 5 per unit.
The Factory worked at 50% capacity for the first 3 months during the year, but it is expected to work at 80% capacity for the
remaining nine months.
The Selling Price per unit was ` 145 during the first 3 months. You are required to –
1. Prepare a Cost Sheet showing Prime Cost, Works Cost, Cost of Production and Cost of Sales.
2. Calculate the Selling Price per unit for the remaining nine months to yield a Total Annual Profit of ` 8,76,600.

Chapter 12: Operating Costing / Service Sector Costing

Q.No.1 Charge per Passenger Km – Commission as % of Takings
A private Transport Company has been given a route 20 Kms. long to run a bus. The bus costs the Company a sum of `
14,50,000. It has been insured at 3% p.a. and the annual tax will amount to ` 15,000. Garage rent is ` 3,500 per month. Actual
repairs will be ` 12,500 per annum and the bus is likely to run for 5 years.
Driver’s Salary will be ` 7,500 per month and Conductor’s Salary will be ` 6,200 per month in addition to 10% of the Takings
as Commission ( to be shared by the Driver and Conductor equally).
General Office Expenses would be ` 8,500 per month, while Diesel and Oil will be ` 120 per 10 Km.
The bus will make 3 round trips daily, for 25 days per month carrying on the average 40 passengers on each trip.
Assuming 15% profit on takings, calculate the Bus Fare to be charged from each Passenger.

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Q.No.2 Rate of Reimbursement

Mohan is a Traveling Sales Officer for Gogetter Ltd. He uses his own car and the Company reimburses him at ` 10.00 per
km. Mohan claims that he needs atleast ` 12.50 per km just to break even. A scrutiny of his expenses by the Company
reveals the following:
 Oil and Consumables charges after every 7,800 Kms = ` 8,800
 Maintenance (other than oil) after every 7,800 Kms = ` 10,000
 Yearly Insurance (Comprehensive with accident benefits) ` 16,000
 Cost of Car, with an average residual value of ` 1,50,000 (useful life of 3 years) is ` 3,60,000
 Petrol Cost averages ` 120 per litre and Mohan gets 12 kms per litre from his car. When Mohan is on the road, he
averages 240 kms a day. He works 5 days a week, has 10 days vacation in a year besides 6 holidays and spends 15
working days in a month in the office.
Determine an equitable rate of reimbursement on the basis of the expenses and schedule he presently follows.

Q.No.3 Hotel Services – Computation of Room Rent N 19 (New)

A hotel is being run in a Hill Station with 200 single rooms. The Hotel offers concessional rates during six off–season months
in a year. During this period, half of the full–room rent is charged. The Management’s Profit Margin is targeted at 20% of the
Room Rent. The following are the cost estimates and other details for the year ending 31 st March:
1. Occupancy during the season is 80% while in the off–season it is 40%.
2. Total Investment in the Hotel is ` 300 Lakhs of which 80% relates to Buildings and the balance to Furniture and Other
Equipment.
3. Room Attendants are paid ` 15 per room per day on the basis of occupancy of rooms in a month.
4. Expenses:
 Staff Salary (excluding that of Room Attendants) ` 8,00,000
 Repairs to Buildings ` 3,00,000
 Laundry Charges ` 1,40,000
 Interior Charges ` 2,50,000
 Miscellaneous Expenses ` 2,00,200
5. Annual Depreciation is to be provided on Buildings @ 5% and 15% on Furniture and other Equipments on SLM basis.
6. Monthly Lighting Charges are ` 110, except in four months in winter when it is ` 30 per room and this cost is on the
basis of full occupancy for a month.
You are required to work out the room rent chargeable per day both during the season and the off–season months using the
foregoing information. (Assume a month to be of 30 days and winter season to be considered as part of off–season).

Q.No.4 Canteen Services M 18

A Company wants to outsource the operation of its Canteen to a Contractor. The Company will provide space for cooking,
free electricity and furniture in the Canteen. The Contractor will have to provide lunch to 300 workers of which 180 are
Vegetarian (Veg) and the rest are Non–Vegetarian (Non–Veg). In the case of Non–Veg Meals, there will be a Non–Veg Item
in addition to the Veg Items. A Contractor who is interested in the contract has analysed the costs likely to be incurred. His
analysis is given below:

 Cereal : ` 8 per Plate

 Veg Items : ` 5 per Plate
 Non–Veg Items : ` 15 per Plate
 Spices : ` 1 per Plate
 Cooking Oil : ` 4 per Plate
 One Cook : Salary ` 13,000 per month

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

 Three Helpers: Salary ` 7,000 per month per head

 Fuel : Two Commercial Cylinders per month, Price ` 1,000 each.
On an average the canteen will remain open for 25 days in a month. The Contractor wants to charge the Non–Veg Meals at
1.50 times of the Veg Meals. You are required to calculate:
(I) Price per Meal (Veg and Non–Veg separately) that Contractor should quote it he wants a profit of 20% on his Takings.
(II) Price per Meal (separately for Veg and Non–Veg) that a Worker will be required to pay if the Company provides 60%
Subsidy for meals out of Welfare Fund.

Chapter 13: Standard Costing and Variance Analysis

Q.No.1 Material Cost Variances – with Purchase Price Variance
SV Ltd manufactures Product BXE by mixing three materials. For every batch of 100 kg of BXE, 125 kgs of Raw Materials
will be used. During April, 60 batches were prepared to produce an output of 5,600 kg of BXE. The standard and actual
particulars during April are given below. Calculate all relevant variances.
Standard Actual Purchase
Material Quantity
Mix Price per kg Mix Price per kg
A 50% ` 20 60% ` 21 5,000 kg
B 30% ` 10 20% `8 2,000 kg
C 20% `5 20% `6 1,200 kg

Q.No.2 Labour Cost Variances – with Grades of Labour

The standard labour complement and the actual labour complement engaged in a week for a job are as under –
Category of Workers Skilled Semi–skilled Unskilled
Standard number of workers in the group 32 12 6
Standard Wage Rate per hour (`) 30 20 10
Actual number of workers employed in the gang during the week 28 18 4
Actual Wage Rate per hour (`) 40 30 20
During the 40 hour working week, the group produced 1,800 standard labour hours of work. Calculate – (1) Labour
Efficiency Variance. (2) Labour Mix Variance, (3) Rate of Wages Variance, and (4) Total Labour Cost Variance.

Q.No.3 Labour Cost Variances – with Idle Time Effect

The standard output of product ‘EXE’ is 25 units per hour in manufacturing department of a Company employing 100
workers. The Standard Wage Rate per Labour Hour is ` 60.
In a 42 hour week, the department produced 1,040 units of ‘EXE’ despite 5% of the time paid was lost due to an abnormal
reason. The hourly wage rate actually paid were ` 62, ` 60 and ` 57 respectively to 10, 30 and 60 of the workers. Compute
relevant variances.

Q.No.4 VOH Variances

The following data is given. Calculate VOH Variances.
Particulars Production Man hours to produce the output VOH (in `)
Budget 400 units 8,000 10,000
Actual 360 units 7,000 9,150

Q.No.5 FOH Variances

A Company has a normal capacity of 120 machines, working 8 hours per day of 25 days in a month. The Fixed Overheads
are budgeted at ` 1,44,000 per month. The standard time required to manufacture one unit of product is 4 hours.

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

In April, the Company worked 24 days of 840 machine hours per day and produced 5,305 units of output. The Actual Fixed
Overheads were ` 1,42,000. From the above, compute all FOH related variances.

Q.No.6 FOH Variances Jan 21 (New)

Premier Industries has a small factory where 52 workers are employed on an average for 25 days a month and they work 8
hours per day. The normal down time is 15%. The Firm has introduced Standard Costing for cost control. Its monthly budget
for November, shows that the Budgeted Variable and Fixed Overhead are `1,06,080 and `2,21,000 respectively.
The Firm reports the following details of actual performance for November, after the end of the month:
Actual Hours worked 8,100 hrs.
Actual Production expressed in Standard Hours 8,800 hrs.
Actual Variable Overheads ` 1,02,000
Actual Fixed Overheads ` 2,00,000
You are required to calculate –
1. Variable Overhead Variances – (a) Variable OH Expenditure Variance, (b) Variable OH Efficiency Variance.
2. Fixed Overhead Variances – (a) FOH Budget Variance, (b) FOH Capacity Variance, (c) FOH Efficiency Variance.
3. Control Ratios – (a) Capacity Ratio. (b) Efficiency Ratio, (c) Activity Ratio.

Q.No.7 Budget Ratios Calculation

(a) A Company produced 30% more output than its budget during a month. It was observed that –
 Budgeted Days and Actual Days were 25 & 30 respectively.
 Average Capacity Utilisation was 80%.
Find out the Efficiency Ratio for the month.
(b) A Company manufactures two products X and Y. Product X requires 5 hours to produce while Y requires 10 hours. In
July, of 25 effective working days of 8 hours a day, 1,000 units of X and 600 units of Y were produced. The Company
employs 50 workers in the Production Department to produce X and Y. The budgeted hours are 1,02,000 for the year.
Calculate Capacity Ratio, Activity Ratio and Efficiency Ratio. Also establish their inter–relationship.

Chapter 15: Budgeting

Q.No.1 Production, Materials Usage and Purchase Budgets
Prepare a quantitative Production, Material Usage & Purchase Budget from the following data of a month.
Particulars Product A Product B
Budgeted Sales quantity 15000 units 17500 units
Material consumption per unit
 Material P (` 3 per kg) 2 kgs 4 kgs
 Material Q (` 2 per kg) 3.125 kgs 1 kg

Stocks of Products and Materials are as under –

Particulars Product A (units) Product B (units) Material P (kgs) Material Q (kgs)
Opening Stock 750 875 12000 9000
Closing Stock 1750 3375 ? ?
The Company wishes to operate a JIT material inventory system. As an initial procedure, it wishes to maintain minimum stock
of materials equivalent to 2 days consumption. There are 28 working days in a month.

Q.No.2 Labour Utilisation and Labour Cost Budgets

The Direct Labour Hour requirement of three of the products, manufactured in a factory, each involving more than one
labour operation, are estimated as follows. Direct Labour Hours per unit (in minutes)

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Rapid Revision Classes for CA Intermediate Cost and Management Accounting

Product X Y Z
Operation A 18 42 30
Operation B –– 12 24
Operation C 12 6 ––

The Factory works 8 hours per day, 6 days in a week. The budget quarter is taken as 13 weeks, and during a quarter, lost
hours due to leave and holidays and other causes are estimated to be 124 hours. The budgeted hourly rates for the workers
manning the operation A, B and C are ` 20, ` 25 and ` 30 respectively. The budgeted sales of the products during the
quarter are X – 9,000 units, Y – 15,000 units and Z – 12,000 units.

There is an Opening Stock of 5,000 units of Y and 4,000 units of Z and it is proposed to build up a stock at the end of the
budget quarter as X – 1,000 units and Z – 2,000 units. Prepare a Manpower Budget showing for each operation – (a) Direct
Labour Hours, (b) Direct Labour Cost, and (c) Number of Operatives.

Q.No.3 Quarter–wise Production Budgets, Cost Statement, BEP

Look–ahead Ltd produces and sells a single product. Its Sales Budget for a calendar year, quarter–wise is as under:
Quarter I II III IV
Units to be sold 12,000 15,000 16,500 18,000
There is an Opening Stock of 4000 units of the product and Closing Stock is estimated to be 25% above.
Production is customarily scheduled to provide for 2/3rd of the current quarter’s sales plus 1/3rd of the next quarter’s sales
demand. Thus production anticipates sales volume by about a month.
The Standard Cost per unit of the product is as under –
(a) Direct Materials 10 kgs at ` 0.50 per kg.
(b) Direct Labour 1 hour 30 minutes at ` 4 per hour
(c) Variable Overheads at ` 1 per labour hour
(d) Fixed OH at ` 2 per labour hour based on a budgeted sales volume of 90000 hours for the year.

Required:
 Prepare a Production Budget for the year showing quarter–wise, quantity to be produced, and costs of Materials,
Labour and OH.
 If the Selling Price is ` 17 per unit, what is the annual budgeted profit?
 In which quarter of the year, does the Company break even?

Q.No.5 Budget Ratios M 19 (New)

Following data is available for ABC Ltd. Calculate the following ratios – (1) Efficiency Ratio, (2) Activity Ratio, (3) Standard
Capacity Usage Ratio, (4) Actual Capacity Usage Ratio. (5) Actual Usage of Budgeted Capacity Ratio.
Standard Working Hours 8 hours per day of 5 days per week
Maximum Capacity 60 employees
Actual Working 50 employees
Actual Hours expected to be worked per four week 8,000 hours
Standard Hours expected to be earned per four weeks 9,600 hours
Actual Hours worked in the four– week period 7,500 hours
Standard Hours earned in the four– week period 8,800 hours
The related period is of 4 weeks.

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