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Seat No.: Enrolment No.
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA (PART TIME) - SEMESTER 3 - EXAMINATION WINTER- 2018
Subject Code: 3539905 Date: 07/12/ 2018
Subject Name: COST & MANAGEMENT ACCOUNTING (CMA)
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Time:10:30 AM to 1:30 PM Total Marks: 70
Instructions:
- Attempt all questions.
- Make suitable assumptions wherever necessary.
- Figures to the right indicate full marks.
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Q.1 Define the following terms: 14
- Sunk Cost
- Replacement Cost
- Cost Object
- Marginal Costing
- Joint Cost
- Spilt-off point
- Margin of safety
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Q.2 (a) From the following information, prepare a statement showing the cost and profit. 07
| Particulars | Opening | Closing |
|---|---|---|
| Raw Materials | Rs. 17,700 | Rs. 21,600 |
| Work-in-progress Materials | 8,160 | 7,200 |
| Wages | 6,600 | 9,900 |
| Works Overheads | 3,960 | 5,940 |
| Finished Goods | 200 units @ Rs. 50.4 | 1,600 units |
Purchases raw materials'Rs. 1,14,000, Carriage on purchases, Rs. 900,
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Sale of scrap of raw materials Rs.3,000
Wages Rs.1,78,200
Works overheads are 60% of direct labour cost.
Administration overheads are absorbed at Rs.7.20 per unit produced.
Selling & Distribution overheads are absorbed at 20% of selling price.
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Sales — 7,600 units @ profit of 10% on sales price.
(b) What is Cost Accounting? Distinguish between ‘Cost Accounting’ and 07
‘Financial Accounting’.
OR
(b) Explain the Make or Buy Decisions in context of the following under 07
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mentioned statements: If Purchase Price < Variable Cost, go for purchase
proposition. If Purchase Price > Variable Cost, go for manufacturing
proposition.
Q.3 (a) Explain the concept of Transfer Pricing. 07
(b) Write a note on Kaizen costing & Life cycle costing. 07
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OR
Q.3 (a) Explain the various steps involved in the decision — making process? 07
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(b) Standard material required for manufacturing 100kg. chemical X is given 07
below:
45 kg. of Material A at Rs 2 per kg.
40kg. of Material B at Rs. 4 per kg.
25 kg. of Material C at Rs. 6 per kg.
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The standard loss is 10 kg.
During the 42" week, 2000 kg. of chemical X were produced and the
actual usage of material were as follows:
Material A- 1000 kg. at Rs. 1.90 per kg.
Material B- 850 kg. at Rs. 4.20 per kg.
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Material C-450 kg. at Rs. 6.50 per kg.
You are required to calculate all the necessary variances.
Q.4 (a) A Bright Ltd. manufactures two products- Bright and Delight, using the 07
same equipment and similar processes. The following information is
extracted from the production department pertaining to the two products
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for the quarter ending 31 December 2007:
| Particulars | Bright | Delight |
|---|---|---|
| Quantity produced (units) | 10000 | 15000 |
| Direct labour hours per unit | 2 | 4 |
| Machine-hours per unit | 3 | 1 |
| Number of set-ups in the period | 20 | 80 |
| Number of orders handled in the period | 30 | 120 |
The production overheads recovered for the period has been analysed as
follows:
| Particulars | Rs. |
|---|---|
| Relating to machine activity | 4,50,000 |
| Relating to production run set-ups | 40,000 |
| Relating to handling of orders | 90,000 |
| 5,80,000 |
You are required-to calculate the production overheads to be absorbed by
each unit of the-products using the following costing methods:
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- A traditional coating approach, using a direct labour hour rate to absorb overheads.
- An ABC approach, using suitable cost drivers to trace overheads to products.
(b) XYZ Ltd. manufactures toys. Fixed Cost amount to Rs. 2,70,000 per year. 07
Variable costs per toy are Rs. 23, and the average price per toy is Rs. 50.
- How many toys must XYZ Ltd. sell to break even?
- If XYZ Ltd. sells 16,000 toys in a year, what is the operating income?
- If XYZ Ltd. variable costs decreases to Rs. 20 per toy while the price and fixed costs remain unchanged, what is the new break-even point?
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OR
Q4 The following records are available from the records of a manufacturing 14
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Q.5
Q.5
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company for two level of activity:
| Particulars | 60% (Rs.) | 100% (Rs.) |
|---|---|---|
| Direct Material | 9000 | 15000 |
| Direct wages | 6000 | 10000 |
| Indirect wages | 3000 | 5000 |
| Repair & Maintenance | 6500 | 9500 |
| Power & fuel | 3750 | 5750 |
| Rent | 12000 | 12000 |
| Depreciation | 10000 | 10000 |
| Insurance | 6000 | 6000 |
| Administrative overheads | 10000 | 14000 |
| Selling overheads | 6000 | 8000 |
Total production at 100% capacity is 5000 units. Draw up Flexible Budget
at 70 % , 90% and 110% of normal capacity.
CASE STUDY: 14
Rahul Ltd. is engaged in process engineering industry. During the month
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of April, 2,000 units were introduced in Process A. The normal loss was
estimated at 5 % of input. At the end of the month, 1,400 units had been
produced and transferred to Process B, 460 units were incomplete. The
entire process had to be scrapped. The incomplete units had reached the
following stages of completion:
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Materials 75 % completed
Labour 50 % completed
Overheads 50 % completed
Following are the additional information on Process A:
Cost 0f 2,000 units Rs. 58,000
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Additional Direct Materials Rs. 14,400
Direct Labour Rs. 33,400
Direct Overheads Rs. 16,700
Units scrapped realized Rs.10-each
You are required to prepare the following:
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- Statement of Equivalent Production,
- Statement of Cost per Equivalent Units,
- Statement of Evaluation;
OR
CASE STUDY:
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Vinayak Ltd. operating at 75% level of activity produces and sells two
products, A and B. The cost sheets of the two products are as under:
| Particulars | Product A | Product B |
|---|---|---|
| Units produced and sold | 600 | 400 |
| Direct Materials Rs. | 2 | 4 |
| Direct Labour Rs. | 4 | 4 |
| Factory overheads (40% fixed) Rs. | 5 | 3 |
| Selling and administration overheads (60% fixed) Rs. | 5 | 5 |
| Total cost per unit Rs. | 19 | 16 |
| Selling price per unit Rs. | 23 | 19 |
Factory overheads are absorbed on the basis of machine-hours which is
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limiting factor. The machine hour rate is Rs. 2 per hour.
The company received an offer from the purchase of product A at a price
of Rs. 17.5 per unit. Alternatively, the company has another offer from the
Middle East for the purchase of product B at a price of Rs. 15.5 per unit.
In both the cases, a special packing charge of Rs. 0.50 per unit has to be
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borne by the company.
The company can accept either of the two export orders by utilizing the
balance of 25% of its capacity.
You are required to prepare:
- A statement showing the economics of the two export proposals 07 giving your recommendations as to which proposals should be accepted, and
- A statement showing the overall profitability of the company after 07 incorporating the export proposals recommended by you.
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