Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2018 Summer 2nd Sem 2820001 Cost And Management Accounting Previous Question Paper
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 02? ? EXAMINATION ? MAY 2014
Subject Code: 2820001 Date:29/05/2018
Subject Name: Cost and Management Accounting
Time: 10:30 AM To 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks
Q-1 a. Answer the following MCQs 06
1. Describe the method of costing to be applied in case of Nursing Home:
A. Operating Costing B. Process Costing
C. Unit costing D. Job Costing
2. Cost of abnormal wastage is:
A. Charged to the product cost B. Charged to the profit & loss account
C. Charged partly to the product
and partly profit & loss
account
D. Not charged at all.
3. Blanket overhead rate is:
A. One single overhead
absorption rate for the whole
factory
B. Rate which is blank or nil rate
C. rate in which multiple
overhead rates are calculated
for each production
department, service
department etc.
D. Always a machine hour rate
4. Statutory cost audit are applicable only to:
A. Firm B. Company
C. Individual D. All mentioned
5. Currently, a company has fixed costs of Rs.32,500, a contribution ratio of
65%, and is selling its product for Rs. 12 per unit. If the sales price per unit
is increased by ? 4, how much less will the break-even point in sales be
when compared to the current condition?
A. ? 14411 B. ? 13414
C. ? 17500 D. ? 5932
6. The standard unit (SQ) were 5200, the standard price (SP) was 3.25, and
the material quantity variance (AV) was ? 325 favorable. The actual unit
will be ??.
A. 5300 B. 5000
C. 5100 D. 5200
Q-1 b. Explain the following terms 04
a. Period Cost
b. Cost object
c. Discretionary cost
d. Abnormal Gain
Q-1 c. Actual output 400 units
Standard price ? 2 per kg
04
FirstRanker.com - FirstRanker's Choice
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 02? ? EXAMINATION ? MAY 2014
Subject Code: 2820001 Date:29/05/2018
Subject Name: Cost and Management Accounting
Time: 10:30 AM To 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks
Q-1 a. Answer the following MCQs 06
1. Describe the method of costing to be applied in case of Nursing Home:
A. Operating Costing B. Process Costing
C. Unit costing D. Job Costing
2. Cost of abnormal wastage is:
A. Charged to the product cost B. Charged to the profit & loss account
C. Charged partly to the product
and partly profit & loss
account
D. Not charged at all.
3. Blanket overhead rate is:
A. One single overhead
absorption rate for the whole
factory
B. Rate which is blank or nil rate
C. rate in which multiple
overhead rates are calculated
for each production
department, service
department etc.
D. Always a machine hour rate
4. Statutory cost audit are applicable only to:
A. Firm B. Company
C. Individual D. All mentioned
5. Currently, a company has fixed costs of Rs.32,500, a contribution ratio of
65%, and is selling its product for Rs. 12 per unit. If the sales price per unit
is increased by ? 4, how much less will the break-even point in sales be
when compared to the current condition?
A. ? 14411 B. ? 13414
C. ? 17500 D. ? 5932
6. The standard unit (SQ) were 5200, the standard price (SP) was 3.25, and
the material quantity variance (AV) was ? 325 favorable. The actual unit
will be ??.
A. 5300 B. 5000
C. 5100 D. 5200
Q-1 b. Explain the following terms 04
a. Period Cost
b. Cost object
c. Discretionary cost
d. Abnormal Gain
Q-1 c. Actual output 400 units
Standard price ? 2 per kg
04
Actual price ? 3 per kg
Actual quantity 2000 kg
Standard quantity 4 kg per unit
Calculate Material cost variance, material price variance and material-usage
variance
Q-2 a. Write a short note on Cost Accounting Standards (CAS). 07
b. A company has five department. P, N, R, S are production department and
T is a service department. The actual costs for a period are as follows:
Repairs 2000 Insurance 1500
Rent 2500 Lightning 1800
Depreciation 1200 Employers liability
insurance
600
Supervision 4000
07
The following data are available in respect of the five departments:
Department
P N R S T
Area (sq.ft) 140 120 110 90 40
No of workers 25 20 10 10 5
Total Wages 10000 8000 5000 5000 2000
Value of Plant 20000 18000 16000 10000 6000
Value of stock 15000 10000 5000 2000 -
Apportion the cost to various departments on equitable bases
OR
b. A factory uses a job costing system. The following data are available from
the books at the year ending on 31st March 2013.
Particular Amount
Direct Material 1800000
Direct wages 1500000
Profit 1218000
Selling and distribution Overhead 1050000
Administrative overhead 840000
Factory overhead 900000
Required:
A. Prepare a job cost sheet showing the prime cost, works cost, production
cost, cost of sales and sales value.
B. In the year 2013-14 the factory has received an order for a number of jobs.
It is estimated that the direct material would be ?.2400000 and direct labor
would cost Rs.1500000. What would be the price for these jobs if the factory
intends to earn the same rate of pro?t on sales, assuming that the selling and
distribution overheads have gone up by 15%. The factory recovers factory
overhead as a percentage of direct wages and administrative and selling and
distribution overhead as a percentage of works cost respectively, based on
the cost rates prevalent in the previous year.
07
Q-3 a. Write a short note on characteristics and features of operating costing. 07
b. A food- processing company produces four product from a single raw
material. The four products are obtained simultaneously at the point of
separation. The product R does not require further processing before being
taken to the market. The other three products P, Q and S require further
processing before being sold. The company follows the net market value
method for allocating common cost to product. The cost of raw material used
for the year just ended was ? 18000. The initial processing costs were ?
07
FirstRanker.com - FirstRanker's Choice
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 02? ? EXAMINATION ? MAY 2014
Subject Code: 2820001 Date:29/05/2018
Subject Name: Cost and Management Accounting
Time: 10:30 AM To 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks
Q-1 a. Answer the following MCQs 06
1. Describe the method of costing to be applied in case of Nursing Home:
A. Operating Costing B. Process Costing
C. Unit costing D. Job Costing
2. Cost of abnormal wastage is:
A. Charged to the product cost B. Charged to the profit & loss account
C. Charged partly to the product
and partly profit & loss
account
D. Not charged at all.
3. Blanket overhead rate is:
A. One single overhead
absorption rate for the whole
factory
B. Rate which is blank or nil rate
C. rate in which multiple
overhead rates are calculated
for each production
department, service
department etc.
D. Always a machine hour rate
4. Statutory cost audit are applicable only to:
A. Firm B. Company
C. Individual D. All mentioned
5. Currently, a company has fixed costs of Rs.32,500, a contribution ratio of
65%, and is selling its product for Rs. 12 per unit. If the sales price per unit
is increased by ? 4, how much less will the break-even point in sales be
when compared to the current condition?
A. ? 14411 B. ? 13414
C. ? 17500 D. ? 5932
6. The standard unit (SQ) were 5200, the standard price (SP) was 3.25, and
the material quantity variance (AV) was ? 325 favorable. The actual unit
will be ??.
A. 5300 B. 5000
C. 5100 D. 5200
Q-1 b. Explain the following terms 04
a. Period Cost
b. Cost object
c. Discretionary cost
d. Abnormal Gain
Q-1 c. Actual output 400 units
Standard price ? 2 per kg
04
Actual price ? 3 per kg
Actual quantity 2000 kg
Standard quantity 4 kg per unit
Calculate Material cost variance, material price variance and material-usage
variance
Q-2 a. Write a short note on Cost Accounting Standards (CAS). 07
b. A company has five department. P, N, R, S are production department and
T is a service department. The actual costs for a period are as follows:
Repairs 2000 Insurance 1500
Rent 2500 Lightning 1800
Depreciation 1200 Employers liability
insurance
600
Supervision 4000
07
The following data are available in respect of the five departments:
Department
P N R S T
Area (sq.ft) 140 120 110 90 40
No of workers 25 20 10 10 5
Total Wages 10000 8000 5000 5000 2000
Value of Plant 20000 18000 16000 10000 6000
Value of stock 15000 10000 5000 2000 -
Apportion the cost to various departments on equitable bases
OR
b. A factory uses a job costing system. The following data are available from
the books at the year ending on 31st March 2013.
Particular Amount
Direct Material 1800000
Direct wages 1500000
Profit 1218000
Selling and distribution Overhead 1050000
Administrative overhead 840000
Factory overhead 900000
Required:
A. Prepare a job cost sheet showing the prime cost, works cost, production
cost, cost of sales and sales value.
B. In the year 2013-14 the factory has received an order for a number of jobs.
It is estimated that the direct material would be ?.2400000 and direct labor
would cost Rs.1500000. What would be the price for these jobs if the factory
intends to earn the same rate of pro?t on sales, assuming that the selling and
distribution overheads have gone up by 15%. The factory recovers factory
overhead as a percentage of direct wages and administrative and selling and
distribution overhead as a percentage of works cost respectively, based on
the cost rates prevalent in the previous year.
07
Q-3 a. Write a short note on characteristics and features of operating costing. 07
b. A food- processing company produces four product from a single raw
material. The four products are obtained simultaneously at the point of
separation. The product R does not require further processing before being
taken to the market. The other three products P, Q and S require further
processing before being sold. The company follows the net market value
method for allocating common cost to product. The cost of raw material used
for the year just ended was ? 18000. The initial processing costs were ?
07
30000 for the same period. The output, sales and further processing costs for
the last year were as follows:
Product Output (Units) Sales Further
Processing cost
(?)
P 4000 36000 5000
Q 3500 14000 1750
R 2500 20000 -
S 1200 12000 3250
You are required to.
a. Prepare a comparative profit and loss statement showing the
profit/loss made on each of for products:
b. Assess the change in the profit/loss (given in answer to (a)
above], if a proposal (stated below) made by the top
management is accepted.
Proposal: To sell all the products directly to other processor just
after separation without any further processing. The expected
price per unit for the products are
P - ? 7, Q- ? 3.5, R - ? 8 and S - ? 9
OR
Q-3 a. Explain the assumptions of CVP analysis in detail. 07
b. Following information is available regarding process A for the month of
February, 2012 :
Production Record
Units in process as on 1.2.2012 4,000
(All materials used, 25% complete for labour and overhead)
New units introduced 16,000
Units completed 14,000
Units in process as on 28.2.2012 6,000
(All materials used, 33-1/3% complete for labour and overhead)
Cost Records
Work-in-process as on 1.2.2012 (?)
Materials 6,000
Labour 1,000
Overhead 1,000
8,000
Cost during the month (?)
Materials 25,600
Labour 15,000
Overhead 15,000
55,600
Presuming that average method of inventory is used, prepare:
(i) Statement of equivalent production.
(ii) Statement showing cost for each element.
(iii) Statement of apportionment of cost.
07
Q-4 a. What is cost plus pricing? Which are the most common methods of cost
plus pricing?
07
b. Auto link Ltd has an annual production of 90000 units for a motor
component. The component?s cost structure is as follows
Material ? 270 per unit
Labour (25% fixed) ? 180 per unit
Expenses
07
FirstRanker.com - FirstRanker's Choice
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 02? ? EXAMINATION ? MAY 2014
Subject Code: 2820001 Date:29/05/2018
Subject Name: Cost and Management Accounting
Time: 10:30 AM To 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks
Q-1 a. Answer the following MCQs 06
1. Describe the method of costing to be applied in case of Nursing Home:
A. Operating Costing B. Process Costing
C. Unit costing D. Job Costing
2. Cost of abnormal wastage is:
A. Charged to the product cost B. Charged to the profit & loss account
C. Charged partly to the product
and partly profit & loss
account
D. Not charged at all.
3. Blanket overhead rate is:
A. One single overhead
absorption rate for the whole
factory
B. Rate which is blank or nil rate
C. rate in which multiple
overhead rates are calculated
for each production
department, service
department etc.
D. Always a machine hour rate
4. Statutory cost audit are applicable only to:
A. Firm B. Company
C. Individual D. All mentioned
5. Currently, a company has fixed costs of Rs.32,500, a contribution ratio of
65%, and is selling its product for Rs. 12 per unit. If the sales price per unit
is increased by ? 4, how much less will the break-even point in sales be
when compared to the current condition?
A. ? 14411 B. ? 13414
C. ? 17500 D. ? 5932
6. The standard unit (SQ) were 5200, the standard price (SP) was 3.25, and
the material quantity variance (AV) was ? 325 favorable. The actual unit
will be ??.
A. 5300 B. 5000
C. 5100 D. 5200
Q-1 b. Explain the following terms 04
a. Period Cost
b. Cost object
c. Discretionary cost
d. Abnormal Gain
Q-1 c. Actual output 400 units
Standard price ? 2 per kg
04
Actual price ? 3 per kg
Actual quantity 2000 kg
Standard quantity 4 kg per unit
Calculate Material cost variance, material price variance and material-usage
variance
Q-2 a. Write a short note on Cost Accounting Standards (CAS). 07
b. A company has five department. P, N, R, S are production department and
T is a service department. The actual costs for a period are as follows:
Repairs 2000 Insurance 1500
Rent 2500 Lightning 1800
Depreciation 1200 Employers liability
insurance
600
Supervision 4000
07
The following data are available in respect of the five departments:
Department
P N R S T
Area (sq.ft) 140 120 110 90 40
No of workers 25 20 10 10 5
Total Wages 10000 8000 5000 5000 2000
Value of Plant 20000 18000 16000 10000 6000
Value of stock 15000 10000 5000 2000 -
Apportion the cost to various departments on equitable bases
OR
b. A factory uses a job costing system. The following data are available from
the books at the year ending on 31st March 2013.
Particular Amount
Direct Material 1800000
Direct wages 1500000
Profit 1218000
Selling and distribution Overhead 1050000
Administrative overhead 840000
Factory overhead 900000
Required:
A. Prepare a job cost sheet showing the prime cost, works cost, production
cost, cost of sales and sales value.
B. In the year 2013-14 the factory has received an order for a number of jobs.
It is estimated that the direct material would be ?.2400000 and direct labor
would cost Rs.1500000. What would be the price for these jobs if the factory
intends to earn the same rate of pro?t on sales, assuming that the selling and
distribution overheads have gone up by 15%. The factory recovers factory
overhead as a percentage of direct wages and administrative and selling and
distribution overhead as a percentage of works cost respectively, based on
the cost rates prevalent in the previous year.
07
Q-3 a. Write a short note on characteristics and features of operating costing. 07
b. A food- processing company produces four product from a single raw
material. The four products are obtained simultaneously at the point of
separation. The product R does not require further processing before being
taken to the market. The other three products P, Q and S require further
processing before being sold. The company follows the net market value
method for allocating common cost to product. The cost of raw material used
for the year just ended was ? 18000. The initial processing costs were ?
07
30000 for the same period. The output, sales and further processing costs for
the last year were as follows:
Product Output (Units) Sales Further
Processing cost
(?)
P 4000 36000 5000
Q 3500 14000 1750
R 2500 20000 -
S 1200 12000 3250
You are required to.
a. Prepare a comparative profit and loss statement showing the
profit/loss made on each of for products:
b. Assess the change in the profit/loss (given in answer to (a)
above], if a proposal (stated below) made by the top
management is accepted.
Proposal: To sell all the products directly to other processor just
after separation without any further processing. The expected
price per unit for the products are
P - ? 7, Q- ? 3.5, R - ? 8 and S - ? 9
OR
Q-3 a. Explain the assumptions of CVP analysis in detail. 07
b. Following information is available regarding process A for the month of
February, 2012 :
Production Record
Units in process as on 1.2.2012 4,000
(All materials used, 25% complete for labour and overhead)
New units introduced 16,000
Units completed 14,000
Units in process as on 28.2.2012 6,000
(All materials used, 33-1/3% complete for labour and overhead)
Cost Records
Work-in-process as on 1.2.2012 (?)
Materials 6,000
Labour 1,000
Overhead 1,000
8,000
Cost during the month (?)
Materials 25,600
Labour 15,000
Overhead 15,000
55,600
Presuming that average method of inventory is used, prepare:
(i) Statement of equivalent production.
(ii) Statement showing cost for each element.
(iii) Statement of apportionment of cost.
07
Q-4 a. What is cost plus pricing? Which are the most common methods of cost
plus pricing?
07
b. Auto link Ltd has an annual production of 90000 units for a motor
component. The component?s cost structure is as follows
Material ? 270 per unit
Labour (25% fixed) ? 180 per unit
Expenses
07
Variable ? 90 per unit
Fixed ? 135 per unit
Total ? 675
a. The purchase manager has an offer from a supplier who is willing to supply
the component at ? 540. Should the component be purchased and production
stopped?
b. Assume the resources now used for this component?s manufacture are to
be used to produce another new product for which the selling price is Rs. 485
In the latter case, the material price will be ? 200 per unit. 90000 units of
this product can be produced on the same cost basis as above for labour and
expenses. Discuss whether it would be advisable to divert the resources to
manufacture the new product, on the footing that the component presently
being produced would, instead of being produced, be purchased from the
market.
OR
Q-4 a. What do you mean by budgetary control? Mention the necessary features of
Budget?
07
b. XYZ corporation produces three product A, B and C. The master budget
called for the sale of 10000 units of A at ? 12, 6000 units of B at ? 15 and
8000 units of C at ? 9.The firm actually sold 11000 units of A at ? 11.50,
5000 units of B at ? 15.10 and 9000 units at ? 8.55
Calculate all sales variance based on Turnover.
07
Q-5 Data 1-2-3 is a top-selling electronic spreadsheet product. Data is about to
release version 5.0. It divides its customers into two groups: new customers
and upgrade customers (those who previously purchased Data 1-2-3, 4.0 or
earlier versions). Although the same physical product is provided to each
customer group, sizable differences exist in selling prices and variable
marketing costs:
New Customer Upgrade customer
Selling Price 210 120
Variable cost
Manufacturing 45 20
Marketing 45 20
Contribution Margin 120 80
The fixed costs of Data 1-2-3, 5.0 are ? 14,000,000. The planned sales mix
in units is 60% new customers and 40% upgrade customers.
1. What is the Data 1-2-3, 5.0 breakeven point in units, assuming that
the planned 60%:40% sales mix required is attained?
2. If the sales mix is attained, what is the operating income when
200,000 total units are sold?
3. Show how the breakeven point in units changes with the following
customer mixes:
a. New 50% and Upgrade 50%
4. What should be the sales to attain the targeted income of ? 2000000,
assuming the ratio of sales to be 60% for new customer and 40% of
upgraded customer and income tax rate of 30%?
14
OR
Q-5 Wigan Associates is a recently formed law partnership. Ellery Hanley, the
managing partner of Wigan Associates, has just finished a tense phone call
with Martin Offiah, president of Widnes Coal. Offiah strongly complained
about the price Wigan charged for some legal work done for Widnes Coal.
14
FirstRanker.com - FirstRanker's Choice
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 02? ? EXAMINATION ? MAY 2014
Subject Code: 2820001 Date:29/05/2018
Subject Name: Cost and Management Accounting
Time: 10:30 AM To 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks
Q-1 a. Answer the following MCQs 06
1. Describe the method of costing to be applied in case of Nursing Home:
A. Operating Costing B. Process Costing
C. Unit costing D. Job Costing
2. Cost of abnormal wastage is:
A. Charged to the product cost B. Charged to the profit & loss account
C. Charged partly to the product
and partly profit & loss
account
D. Not charged at all.
3. Blanket overhead rate is:
A. One single overhead
absorption rate for the whole
factory
B. Rate which is blank or nil rate
C. rate in which multiple
overhead rates are calculated
for each production
department, service
department etc.
D. Always a machine hour rate
4. Statutory cost audit are applicable only to:
A. Firm B. Company
C. Individual D. All mentioned
5. Currently, a company has fixed costs of Rs.32,500, a contribution ratio of
65%, and is selling its product for Rs. 12 per unit. If the sales price per unit
is increased by ? 4, how much less will the break-even point in sales be
when compared to the current condition?
A. ? 14411 B. ? 13414
C. ? 17500 D. ? 5932
6. The standard unit (SQ) were 5200, the standard price (SP) was 3.25, and
the material quantity variance (AV) was ? 325 favorable. The actual unit
will be ??.
A. 5300 B. 5000
C. 5100 D. 5200
Q-1 b. Explain the following terms 04
a. Period Cost
b. Cost object
c. Discretionary cost
d. Abnormal Gain
Q-1 c. Actual output 400 units
Standard price ? 2 per kg
04
Actual price ? 3 per kg
Actual quantity 2000 kg
Standard quantity 4 kg per unit
Calculate Material cost variance, material price variance and material-usage
variance
Q-2 a. Write a short note on Cost Accounting Standards (CAS). 07
b. A company has five department. P, N, R, S are production department and
T is a service department. The actual costs for a period are as follows:
Repairs 2000 Insurance 1500
Rent 2500 Lightning 1800
Depreciation 1200 Employers liability
insurance
600
Supervision 4000
07
The following data are available in respect of the five departments:
Department
P N R S T
Area (sq.ft) 140 120 110 90 40
No of workers 25 20 10 10 5
Total Wages 10000 8000 5000 5000 2000
Value of Plant 20000 18000 16000 10000 6000
Value of stock 15000 10000 5000 2000 -
Apportion the cost to various departments on equitable bases
OR
b. A factory uses a job costing system. The following data are available from
the books at the year ending on 31st March 2013.
Particular Amount
Direct Material 1800000
Direct wages 1500000
Profit 1218000
Selling and distribution Overhead 1050000
Administrative overhead 840000
Factory overhead 900000
Required:
A. Prepare a job cost sheet showing the prime cost, works cost, production
cost, cost of sales and sales value.
B. In the year 2013-14 the factory has received an order for a number of jobs.
It is estimated that the direct material would be ?.2400000 and direct labor
would cost Rs.1500000. What would be the price for these jobs if the factory
intends to earn the same rate of pro?t on sales, assuming that the selling and
distribution overheads have gone up by 15%. The factory recovers factory
overhead as a percentage of direct wages and administrative and selling and
distribution overhead as a percentage of works cost respectively, based on
the cost rates prevalent in the previous year.
07
Q-3 a. Write a short note on characteristics and features of operating costing. 07
b. A food- processing company produces four product from a single raw
material. The four products are obtained simultaneously at the point of
separation. The product R does not require further processing before being
taken to the market. The other three products P, Q and S require further
processing before being sold. The company follows the net market value
method for allocating common cost to product. The cost of raw material used
for the year just ended was ? 18000. The initial processing costs were ?
07
30000 for the same period. The output, sales and further processing costs for
the last year were as follows:
Product Output (Units) Sales Further
Processing cost
(?)
P 4000 36000 5000
Q 3500 14000 1750
R 2500 20000 -
S 1200 12000 3250
You are required to.
a. Prepare a comparative profit and loss statement showing the
profit/loss made on each of for products:
b. Assess the change in the profit/loss (given in answer to (a)
above], if a proposal (stated below) made by the top
management is accepted.
Proposal: To sell all the products directly to other processor just
after separation without any further processing. The expected
price per unit for the products are
P - ? 7, Q- ? 3.5, R - ? 8 and S - ? 9
OR
Q-3 a. Explain the assumptions of CVP analysis in detail. 07
b. Following information is available regarding process A for the month of
February, 2012 :
Production Record
Units in process as on 1.2.2012 4,000
(All materials used, 25% complete for labour and overhead)
New units introduced 16,000
Units completed 14,000
Units in process as on 28.2.2012 6,000
(All materials used, 33-1/3% complete for labour and overhead)
Cost Records
Work-in-process as on 1.2.2012 (?)
Materials 6,000
Labour 1,000
Overhead 1,000
8,000
Cost during the month (?)
Materials 25,600
Labour 15,000
Overhead 15,000
55,600
Presuming that average method of inventory is used, prepare:
(i) Statement of equivalent production.
(ii) Statement showing cost for each element.
(iii) Statement of apportionment of cost.
07
Q-4 a. What is cost plus pricing? Which are the most common methods of cost
plus pricing?
07
b. Auto link Ltd has an annual production of 90000 units for a motor
component. The component?s cost structure is as follows
Material ? 270 per unit
Labour (25% fixed) ? 180 per unit
Expenses
07
Variable ? 90 per unit
Fixed ? 135 per unit
Total ? 675
a. The purchase manager has an offer from a supplier who is willing to supply
the component at ? 540. Should the component be purchased and production
stopped?
b. Assume the resources now used for this component?s manufacture are to
be used to produce another new product for which the selling price is Rs. 485
In the latter case, the material price will be ? 200 per unit. 90000 units of
this product can be produced on the same cost basis as above for labour and
expenses. Discuss whether it would be advisable to divert the resources to
manufacture the new product, on the footing that the component presently
being produced would, instead of being produced, be purchased from the
market.
OR
Q-4 a. What do you mean by budgetary control? Mention the necessary features of
Budget?
07
b. XYZ corporation produces three product A, B and C. The master budget
called for the sale of 10000 units of A at ? 12, 6000 units of B at ? 15 and
8000 units of C at ? 9.The firm actually sold 11000 units of A at ? 11.50,
5000 units of B at ? 15.10 and 9000 units at ? 8.55
Calculate all sales variance based on Turnover.
07
Q-5 Data 1-2-3 is a top-selling electronic spreadsheet product. Data is about to
release version 5.0. It divides its customers into two groups: new customers
and upgrade customers (those who previously purchased Data 1-2-3, 4.0 or
earlier versions). Although the same physical product is provided to each
customer group, sizable differences exist in selling prices and variable
marketing costs:
New Customer Upgrade customer
Selling Price 210 120
Variable cost
Manufacturing 45 20
Marketing 45 20
Contribution Margin 120 80
The fixed costs of Data 1-2-3, 5.0 are ? 14,000,000. The planned sales mix
in units is 60% new customers and 40% upgrade customers.
1. What is the Data 1-2-3, 5.0 breakeven point in units, assuming that
the planned 60%:40% sales mix required is attained?
2. If the sales mix is attained, what is the operating income when
200,000 total units are sold?
3. Show how the breakeven point in units changes with the following
customer mixes:
a. New 50% and Upgrade 50%
4. What should be the sales to attain the targeted income of ? 2000000,
assuming the ratio of sales to be 60% for new customer and 40% of
upgraded customer and income tax rate of 30%?
14
OR
Q-5 Wigan Associates is a recently formed law partnership. Ellery Hanley, the
managing partner of Wigan Associates, has just finished a tense phone call
with Martin Offiah, president of Widnes Coal. Offiah strongly complained
about the price Wigan charged for some legal work done for Widnes Coal.
14
Hanley also received a phone call from its only other client (St. Helen?s
Glass), which was very pleased with both the quality of the work and the
price charged on its most recent job.
Wigan Associates operates at capacity and uses a cost-based approach to
pricing (billing) each job. Currently it uses a simple costing system with a
single direct-cost category (professional labor-hours) and a single indirect-
cost pool (general support). Indirect costs are allocated to cases on the basis
of professional labor-hours per case. The job files show the following:
Widnes Coal St. Helen?s Glass
Professional labor 104 hours 96 hours
Professional labor costs at Wigan Associates are ?70 an hour. Indirect costs
are allocated to cases at ?105 an hour. Total indirect costs in the most
recent period were ?21,000.
Hanley asks his assistant to collect details on those costs included in the
?21,000 indirect-cost pool that can be traced to each individual job. After
analysis, Wigan is able to reclassify ?14,000 of the ?21,000 as direct costs:
Other direct cost Widnes Coal St. Helen?s Glass
Research support labor ?1,600 3400
Computer time 500 1300
Travel and allowances 600 4400
Telephones/faxes 200 1000
Photocopying 250 750
Total 3150 10850
Hanley decides to calculate the costs of each job as if Wigan had used six
direct cost-pools and a single indirect-cost pool. The single indirect-cost pool
would have ?7,000 of costs and would be allocated to each case using the
professional labor-hours base.
Required
1. Compute the costs of the Widnes Coal and St. Helen?s Glass jobs
using Wigan?s simple costing system.
2. What is the revised indirect-cost allocation rate per professional
labor-hour for Wigan Associates Required when total indirect costs
are ?7,000?
3. Compute the costs of the Widnes and St. Helen?s jobs if Wigan
Associates had used its refined costing system with multiple direct-
cost categories and one indirect-cost pool.
4. Compare the costs of Widnes and St. Helen?s jobs in requirement 1
with those in requirement 3 of Problem. Comment on the results.
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This post was last modified on 19 February 2020