Test Series: April 2021

MOCK TEST PAPER –II

INTERMEDIATE (NEW): GROUP – I
PAPER – 3: COST AND MANAGEMENT ACCOUNTING
Answers are to be given only in English except in the case of the candidates who have opted for Hindi medium. If a
candidate has not opted for Hindi medium his/ her answer in Hindi will not be valued.
Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
Working notes should form part of the answer.

Time Allowed – 3 Hours Maximum Marks – 100

1. Answer the following:
(a) From the following information, CALCULATE employee turnover rate using – (i) Separation
Method, (ii) Replacement Method, (iii) New Recruitment Method, and (iv) Flux Method :
No. of workers as on 01.04.2020 = 3,800
No. of workers as on 31.03.2021 = 4,200
During the year, 40 workers left while 160 workers were discharged and 600 workers were
recruited during the year; of these, 150 workers were recruited because of exits and the rest were
recruited in accordance with expansion plans.
(b) A company uses three raw materials Pi, Qu and Ar for a particular product for which the following
data applies:
Raw Usage per Re-order Price per Delivery period Re-order Minimum
Material unit of Quantity Kg. (in weeks) level (Kg.) level (Kg.)
product (Kg.) (Rs.)
(Kg.)
Minimum Average Maximum
Pi 5 10,000 0.10 1 2 3 8,000 ?
Qu 2 5,000 0.30 3 4 5 4,750 ?
Ar 3 10,000 0.15 2 3 4 ? 2,000
Weekly production varies from 350 to 450 units, averaging 400 units of the said product.
WHAT would be the following quantities:
(i) Minimum Stock of Pi?
(ii) Maximum Stock of Qu?
(iii) Re-order level of Ar?
(iv) Average stock level of Pi?
(c) The following particulars refer to process used in the treatment of material subsequently,
incorporated in a component forming part of an electrical appliance:
(i) The original cost of the machine used (Purchased in June 2013) was Rs. 1,00,000. Its
estimated life is 10 years, the estimated scrap value at the end of its life is Rs.1 0,000, and
the estimated working time per year (50 weeks of 44 hours) is 2,200 hours of which machine
maintenance etc., is estimated to take up 200 hours.
No other loss of working time expected, setting up time, estimated at 100 hours, is regarded
as productive time. (Holiday to be ignored).
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 (ii) Electricity used by the machine during production is 16 units per hour at cost of a 90 paisa
per unit. No current is taken during maintenance or setting up.
(iii) The machine required a chemical solution which is replaced at the end of week at a cost of
Rs. 200 each time.
(iv) The estimated cost of maintenance per year is Rs.12,000.
(v) Two attendants control the operation of machine together with five other identical machines.
Their combined weekly wages, insurance and the employer's contribution to holiday pay
amount Rs. 1,200.
(vi) Departmental and general works overhead allocated to this machine for the current year
amount to Rs. 20,000.
You are required to CALCULATE the machine hour rate of operating the machine.
(d) An article passes through three successive operations from raw materials stage to the finished
product stage. The following data are available from the production records for the month of
March, 2021:
Operation No. of pieces (Input) No. of pieces (Rejected) No. of pieces (Output)
1 1,80,000 60,000 1,20,000
2 1,98,000 18,000 1,80,000
3 1,44,000 24,000 1,20,000
(i) DETERMINE the input required to be introduced in the first operation in no. of pieces in
order to obtain finished output of 500 pieces after the last operation.
(ii) CALCULATE the cost of raw material required to produce one piece of finished product, if
the weight of the finished piece is 0.5 kg. and the price of raw material is Rs. 80 per kg.
(5 Marks × 4 = 20 Marks)
2. (a) RVP Cinema provides the following data for the year 2020-21:
Particulars Premium Recliner 7D Cafeteria
Hall Hall Hall
(Rs.) (Rs.) (Rs.) (Rs.)
Revenue 11,55,000 18,75,000 9,30,000 5,25,000
Cost of Goods sold - - - 4,51,125
Digital media cost 6,19,800 9,46,875 4,02,900 -
Number of Credit Card transactions 75,000 90,000 60,000 45,000
Number of Tests 12,000 18,000 15,000 7,500
Number of Setups 225 450 150 75
Area in Square feet 3,000 4,500 2,250 750
Number of Customer contacts 2,62,500 3,00,000 1,50,000 37,500
Number of Customer online orders 2,10,000 2,47,500 1,20,000 22,500

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 Cost analysis has revealed the following:
Activity Activity Activity Driver Activity
Cost (Rs.) Capacity
Marketing Expenses 2,25,000 Number of Customer contacts 7,50,000
Website Maintenance 1,50,000 Number of Customer online 6,00,000
Expenses orders
Credit Card Processing Fees 1,35,000 Number of Credit Card 2,70,000
transactions
Cleaning Equipment Cost 3,15,000 Number of square feet 10,500
Inspecting and testing costs 2,62,500 Number of tests 52,500
Setting up machine's costs 4,50,000 Number of set-ups 900
Required:
(i) If RVP Cinema allocates all costs (other than Cost of Goods sold and Digital Media costs) to
the departments on the basis of Activity Based Costing system, CALCULATE the operating
income and percentage of operating income of each department.
(ii) RVP Cinema operated for years under the assumption that profitability can be increased by
increasing net revenue from Cafeteria. However, the Supervisor of RVP Cinema wants to
shut down Cafeteria. On the basis of (i) above, STATE whether the contention of the
Supervisor is valid or not. (10 Marks)
(b) Zed Limited obtained a contract No. 1551 for Rs. 150 lacs. The following details are available in
respect of this contract for the year ended March 31, 2021:
Rs.
Materials purchased 4,80,000
Materials issued from stores 15,00,000
Wages paid 21,00,000
Drawing and maps 1,80,000
Sundry expenses 45,000
Electricity charges 75,000
Plant hire expenses 1,80,000
Sub-contract cost 60,000
Materials returned to stores 90,000
Materials returned to suppliers 60,000
The following balances relating to the contract No. 1551 for the year ended on March 31, 2020
and March 31, 2021 are available:
as on 31st March, 2020 as on 31st March, 2021
Work certified 36,00,000 1,05,00,000
Work uncertified 60,000 1,20,000
Materials at site 45,000 90,000
Wages outstanding 30,000 60,000
The contractor receives 70% of work certified in cash.
PREPARE Contract Account and Contractee's Account. (10 Marks)
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3. (a) The following figures have been taken from the financial accounts of a manufacturing firm for the
year ended 31 st March, 2021:
(Rs.)
Direct material consumption 20,00,000
Direct wages 12,00,000
Factory overheads 6,40,000
Administrative overheads 2,80,000
Selling and distribution overheads 3,84,000
Bad debts 32,000
Preliminary expenses written off 16,000
Legal charges 4,000
Dividend received 40,000
Interest on fixed deposit 8,000
Sales - 48,000 units 48,00,000
Closing stock:
- Finished stock - 4,000 units 3,20,000
- Work-in-process 96,000
The cost accounts for the same period reveal that the Direct Material consumption was
Rs. 22,40,000; Factory overhead is recovered at 20% on prime cost; Administration overhead is
recovered @ Rs. 4.8 per unit of production; and Selling and Distribution overheads are recovered
at Rs. 6.40 per unit sold.
Required:
PREPARE Costing and Financial Profit & Loss Accounts and RECONCILE the difference in the
profit as arrived at in the two sets of accounts. (10 Marks)
(b) Mix Soap Pvt. Ltd., manufactures three brands of soap – Luxury, Herbal and Beauty. The
following information has been obtained for the period from June 1 to June 30, 202 1 relating to
three brands:
Luxury Herbal Beauty
Actual Production (units) 6,750 14,000 77,500
Wages paid (Rs.) 7,500 18,750 1,15,000
Raw materials consumed (Rs.) 20,000 47,000 2,40,000
Selling price per unit (Rs.) 25 15 8
Other data are:
Factory overheads Rs. 80,000
General & administration overheads (equal for all) Rs. 48,000
Selling overheads 20% of Works cost
If the company limits the manufacture to just one brand of soap adopting a single brand
production, then monthly production will be:
Units
Luxury 5,000
Herbal 15,000
Beauty 30,000
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 Further, factory overheads are to be allocated to each brand on the basis of the units which could
have been produced when single brand production was in operation.
You are required to:
(i) FIND out the Factory overhead rate for all the brands.
(ii) PREPARE a cost statement for the month of June showing the various elements of cost and
also the profit earned. (10 Marks)
4. (a) Harry Transport Service is a Delhi based national goods transport service provider, owning f ive
trucks for this purpose. The cost of running and maintaining these trucks are as follows:
Particulars Amount
Diesel cost Rs.15 per km.
Engine oil Rs. 4,200 for every 14,000 km.
Repair and maintenance Rs.12,000 for every 10,000 km.
Driver’s salary Rs. 20,000 per truck per month
Cleaner’s salary Rs. 7,000 per truck per month
Supervision and other general expenses Rs.15,000 per month
Cost of loading of goods Rs. 200 per Metric Ton (MT)
Each truck was purchased for Rs. 20 lakhs with an estimated life of 7,20,000 km.
During the next month, it is expecting 6 bookings, the details of which are as follows:
Sl. Journey Distance Weight - Up Weight - Down
No. (in km) (in MT) (in MT)
1. Delhi to Kochi 2,700 15 7
2. Delhi to Guwahati 1,890 13 0
3. Delhi to Vijayawada 1,840 16 0
4. Delhi to Varanasi 815 11 0
5. Delhi to Asansol 1,280 13 5
6. Delhi to Chennai 2,185 11 9
Total 10,710 79 21
Required:
(i) CALCULATE the total absolute Ton-km for the next month.
(ii) CALCULATE the cost per ton-km. (10 Marks)
(b) The following information relates to Process Q:
(i) Opening Work-in-Progress 16,000 units at Rs.1,50,000
Degree of Completion:
Material 100%
Labour and Overhead 60%
(ii) Input - 3,64,000 units Rs. 14,75,000
(iii) Wages paid Rs. 6,81,200
(iv) Overheads paid Rs. 3,40,600
(v) Units scrapped 28,000
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 Degree of Completion:
Material 100%
Labour and Overhead 80%
(vi) Closing Work - in- Progress 36,000 units
Degree of Completion:
Material 100%
Labour and Overhead 70%
(vii) Units completed and transferred to next process 3,16,000
(viii) Normal loss is 5% of total input including opening WIP
(ix) Scrap value is Rs. 5 per unit to be adjusted out of direct material cost

You are required to COMPUTE on the basis of FIFO:

(i) Equivalent production
(ii) Cost per unit
(iii) Value of units transferred to next process (10 Marks)
5. (a) Following data is available from the costing department of Aarya Ltd. which manufactures and
markets a single product:
Material Rs. 32 per unit Fixed Cost (Rs.) Rs. 10,00,000
Conversion Cost (Variable) Rs. 24 per unit Present Sales (units) 90,000
Dealer’s Margin (10% of Sales) Rs. 8 per unit Capacity Utilization 60 %
Selling Price Rs. 80 per unit

There is acute competition in the market, thus extra efforts are necessary to enhance the sales.
For this, following suggestions have been proposed:
(i) Reducing selling price by 5 per cent.
(ii) Increasing dealer's margin by 20 per cent over the existing rate.
Which of these two suggestions would you RECOMMEND, if the company desires to maintain the
present profit? GIVE REASONS. (10 Marks)
(b) Tricon Co. furnishes the following information for the month of September, 2020.
Particulars Budget Details Static Budget Actual
Units produced & Sold 4,000 3,200
(Rs.) (Rs.)
Direct Material 3 kg p.u. @ Rs. 30 per kg. 3,60,000 3,10,000
Direct Labour 1 hr. p.u. @ Rs. 72 per hr. 2,88,000 2,25,600
Variable Overhead 1 hr. p.u. @ Rs. 44 per hr. 1,76,000 1,47,200
Fixed Overhead 1,80,000 1,68,000
Total Cost 10,04,000 8,50,800
Sales 12,00,000 8,96,000
Profit 1,96,000 45,200
During the month 10,000 kg. of materials and 3,100 direct labour hours were utilized.

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 Required:
(i) PREPARE a flexible budget for the month.
(ii) DETERMINE the material usage variance and the direct labour rate variance for the actual
vs the flexible budget. (10 Marks)
6. (a) DISTINGUISH between cost control and cost reduction.
(b) EXPLAIN the advantages that would accrue in using the LIFO method of pricing for the valuation
of raw material stock.
(c) DISCUSS basic assumptions of Cost Volume Profit analysis.
(d) DESCRIBE the steps necessary for establishing a good budgetary control system.
(4 × 5 = 20 Marks)

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