CA INTERMEDIATE

SUBJECT- COSTING
Test Code – IMP 2203
(Date :)
(Marks - 100)
TOPIC : FULL COURSE

Question 1 is compulsory. Answer any four out of remaining.

Time allowed – 3 hours

QUESTION : 1
(A) X Limited follows non-integrated accounting system and it has appointed you as a
Cost Accountant. It now asks you to pass journal entry for each of the following
transactions separately. [Narration not required].
No. Transactions Amount
i. Material purchased on credit 5,00,000
ii. Materials issued to production 2,00,000
iii. Materials returned from shop floor 20,000
iv. Materials issued to factory for repairs 30,000
v. Materials issued to administration office 20,000
vi. Materials issued to sales office 10,000
vii. Freight incurred for transportation of direct materials 5,000
viii. Freight incurred for transportation of indirect materials 4,000
ix. Materials lost, to be considered as normal loss 3,000
x. Materials lost, to be considered as abnormal loss 2,000
(5 MARKS)

(B) An owner of food stall sells two types of dosas: plain dosa and masala dosa. The
process is such that first plain dosa is made and if required, he adds other materials
and plain dosa is processed further into masala dosa.
He can either make 100 plain dosas or as many number of masala dosas. However,
he sells plain dosas at Rs. 50 per dosa whereas he sells masala dosa at Rs. 70 per
dosa.
The cost of processing 100 plain dosas into masala dosas [including cost of additional
material] is Rs. 1,500. Decide which product he should sell depending upon these
details. Ignore market demand as a factor for making this decision. Also, note that
the only option is to sell either of the product. Combination of both products is not
an option. (5 MARKS)

(C) P/V Ratio is 30% and Margin of Safety is Rs. 4,80,000 [40% of Sales].

Required to find out:

1. Fixed Cost
2. Break Even Sales
3. Amount of Profit on Sales of Rs. 18,00,000.
(5 MARKS)

(D) X Limited provides following details for one of its purchase orders:
Quantity purchased: 1,250 kgs.
 Invoice price: Rs. 20 per kg
Freight: 25% on invoice price
G.S.T.: 8% on invoice price including freight
Trade Discount: 10% on invoice price
Insurance: 1% of aggregate net price
Delivery charges: Rs. 250
Cost of Tin Container: Rs. 60 per tin container for 50 kgs.
Rebate is allowed at the rate of 40 per tin container if returned within 6 weeks [you
can assume that tin containers were returned in the normal course of business].
Cost of loading/unloading: 0.25% of cost of materials ultimately accepted.
Also, note that one tin container load of material was rejected on inspection (i.e. it
was not accepted).
Find out cost of material to the company in total. (5 MARKS)

QUESTION : 2
(A) A C.A. offers three major services to his clients: Statutory Audit, Internal Audit and
Taxation. He wants to find out total cost of these services by apportioning his
overheads of various activities using Activity Based Costing system. He provides you
with following data:
Activity Costs Activity driven by
Handling client queries on 1,00,000 Number of minutes spoken on
phone phone
Handling client queries on 30,000 Number of mails received from
electronic mails client
Handling client queries by 25,000 Number of hours spent in client
meeting them meetings
Appearing in front of tribunal 2,00,000 Attributable to taxation clients
to represent client
Costs incurred for stock 50,000 Equally divided between audit
valuation clients

Following additional information was also available:

The office staff spoke on phone for 120 minutes with those clients who opted for
statutory audits, 680 minutes with those clients who opted for internal audit
whereas it spoke to taxation clients for 1,200 minutes.
His firm received total 100 mails from audit clients out of which 60 mails were from
those clients who opted for statutory audit. Taxation clients sent 100 mails in all.
Similarly, total of 50 hours were spent for audit clients while meeting them to solve
their queries out of which 30 hours were spent for Internal Audit clients. Taxation
clients took 50 hours.
(10 MARKS)
(B) A company which produced and sold 50,000 units incurred Direct Material cost of Rs.
1,00,000 and Direct wages cost of Rs. 2,00,000.
It gives you following budgeted data:
Budgeted Factory Overheads Rs. 2,10,000
Budgeted Administration Overheads Rs. 2,80,000
 [related to production]
Budgeted Level of Activity 70,000 units
It ended up incurring Rs. 1,20,000 of factory overheads whereas it incurred
administration overheads [related to production] of Rs. 2,50,000. Company follows
supplementary rate system to adjust under or over absorption.
There were no other expenses or overheads. Find out cost of production by
preparing Cost Sheet.
Show effect of supplementary rate clearly in cost sheet. Do not prepare Cost Per
Unit column. Assume Sales was Rs. 8,00,000 and find out profit as well.
(10 MARKS)
QUESTION : 3

(A) A power generating company provides following data.

1. Consumption data for materials for the month

Coal 300 MTs @ Rs. 3,600 per MT
Oil 4.5 MTs @ Rs. 40,000 per MT
Cost of Water extraction 6,00,000 litres @ Rs. 1.25 per litre
2. Salaries and Wages per month
For generating plant:
i. 100 workers @ Rs. 3,000 per worker
ii. 150 helpers @ Rs. 1,500 per helper

For Boiler House Staff:

i. Category A: 60 workers @ Rs. 1,500 per worker
ii. Category B: 100 workers @ Rs. 1,000 per worker
3. Steam Boiler [as asset in this type of industry] costs Rs. 20,00,000 with a
residual value of Rs. 2,00,000 after a useful life of 10 years.
4. Cost of generating plant is Rs. 36,00,000 with depreciation to be provided at
10% p.a.
5. Repairs and maintenance cost is Rs. 6,00,000 per annum.
6. Share of administrative charges was Rs. 75,000 per month.
7. Sales value of ash disposal was Rs. 15,000. [Ash is considered as scrap].
8. The firm also used electricity for its activities. Its cost was 10% of Total Cost
[Total cost included cost of electricity used].
9. Number of units generated were 10,00,000 per month out of which
10% was utilised for generator department.
Find out cost per unit of electricity generated for sale.
(10 MARKS)

(B) X Papers furnishes you with following data for the month of April. Prepare Cost
Sheet from the available data.
Direct Materials
 Miscellaneous Materials 2,000 Tons @ Rs. 500 per ton
Paper Pulp 10,000 Tons @ Rs. 800 per ton
Direct Labour
Unskilled 110 Workers for 25 days @ Rs. 400 per day per worker
Skilled 220 Workers for 25 days @ Rs. 600 per day per worker
Direct Expenses
Special Moulds Rs. 50,000
Hire Charges for special equipment Rs. 1,00,000
Factory Overheads
Fixed 50% on direct labour cost
Variable 100% on direct labour cost
Administration Overheads [related to production] were recorded at 10% of Factory
Cost whereas Selling and distribution overheads were 20% on Cost of Goods Sold.
Company produced 10,000 tons of paper, all of which were sold at Rs. 3,000 per
ton. Sale of scrap was Rs. 15,000.
(10 MARKS)

QUESTION : 4
(A) Time required to produce a unit is 10 minutes and normal idle time allowed is 20% of
time required.
Details of two workers are provided to you, Worker A and Worker B. Both workers
produced 600 units, however degree of completion of Worker A was 50% whereas
degree of completion of worker B was 75%. Rate per hour was Rs. 75 per hour.
Management has decided to pay for incomplete production as well, provided the
incomplete units are converted in to completed equivalent units.

Worker A took 40 hours to complete his work whereas Worker B took 60 hours to
complete his work.
Calculate total wages under following systems:
i. Halsey Premium System
ii. Rowan Premium System
iii. Piece Rate System
(10 MARKS)

(B) A product passes through two processes and becomes a finished stock after second
process. Details of its two processes are given as follows:
Particulars Process I Process II
Opening Stock 75,000 90,000
Inter Process Profit included in opening stock --- 15,000
Direct Materials 1,50,000 1,57,500
Direct Labour 1,12,000 1,12,500
Factory Overheads 1,05,000 45,000
Closing Stock 37,000 45,000
 Opening Stock amount of finished goods was 2,25,000, which included inter process
Profit of Rs. 82,500. Closing Stock amount of finished goods was 1,12,500.

Output of Process I is transferred to Process II at a profit of 25% on transfer price.

Output of Process II is transferred to Finished Stock at a profit of 20% on transfer
price.
Stocks are valued at prime cost throughout. Sales during the period were Rs.
14,00,000.
Prepare Process A/C and Finished Goods [Stock] A/C showing profit element at each
stage, assume that company follows weighted average method for stock valuation.
(10 MARKS)
QUESTION : 5
(A) A company provides following information at 100% capacity utilization:
Factory Overheads: Rs. 1,80,000 [50% variable]
Factory Cost: 60% of Sales
Selling Cost: 20% of Sales [75% Variable]
Presently, company operates at 50% capacity, at which level sales are 9,00,000.
Company also anticipates that its sales will increase up to 75% of capacity utilisation.
Prepare profitability statement at 50%, 75% and 100% levels of capacity.
(10 MARKS)
(B) Actual data of a company is as follows:
Production: 15,000 Units
Direct Materials Consumed: 24,500 kgs @ Rs. 5.25 per kg
Direct Labour: 96,000 hours @ Rs. 6 per hour
Budgeted Data is as follows:
For 1 Unit
Direct Material: 1.5 kgs @ Rs. 6 per kg
Direct Labour: 6 hours @ Rs. 5 hour
Calculate all possible variances.
(10 MARKS)
QUESTION : 6
Answer any four
(A) List down any 5 factors that must be considered before installing a costing system.
(5 MARKS)
(B) Explain the treatment of by product in cost accounting:
i. When they are of small value
ii. When they are of considerable total value (5 MARKS)

(C) Write a note on Escalation Clause with reference to Contract Costing. (5 MARKS)

(D) Mention three vital presumptions on which Cost Volume Profit analysis is based.
(5 MARKS)

(E) Give five examples of items which are always considered in Financial Accounts but
are never considered in Cost Accounts.
(5 MARKS)