Paper-3: Cost and Management Accounting

REVISION TEST 3 [STANDARD COSTING & BUDGETARY CONTROL] NOV 2022

TOTAL MARKS – 50 TIME – 2 Hours [2:00 to 4:00 pm] 12-Sep-22

Answer any 4 out of questions 1 to 5

Working Notes shall form part of your answer
Question No. 1 4 x 2 = 8 Marks
a) Calculate Efficiency and Capacity ratio from the following figures:
Budgeted production 80 units
Actual production 60 units
Standard time per unit 8 hours
Actual hours worked 500 hours.
b) The standard labour employment and the actual labour engaged in a 40 hours week for a
job are as under:
Standard Actual
Category of
No. of Wage Rate No. of Wage Rate
Workers
workers per hour (`) workers per hour (`)
Skilled 65 45 50 50
Semi-skilled 20 30 30 35
Unskilled 15 15 20 10
Standard output: 2,000 units; Actual output: 1,800 units
Abnormal Idle time 2 hours in the week
Calculate:
1) Labour Cost Variance
2) Labour Efficiency Variance
3) Labour Idle Time Variance.

Question No. 2 8 Marks

Gama Ltd. has furnished the following standard cost data per' unit of production:
Material 10 kg @ `10 per kg.
Labour 6 hours @ `5.50 per hour
Variable overhead 6 hours @ `10 per hour.
Fixed overhead `4,50,000 per month

Fixed overhead is based on a normal volume of 30,000 labour hours. The actual cost data for
the month of August 2022 are as follows:

Material used 50,000 kg at a cost of `5,25,000.

Labour paid `1,55,000 for 31,000 hours worked

Variable overheads `2,93,000

Fixed overheads `4,70,000
Actual production 4,800 units.
Calculate:
1) Material Cost Variance.
2) Labour Cost Variance.
3) Fixed Overhead Cost Variance.
4) Variable Overhead Cost Variance.
 REVISION TEST 1
PROCESS COSTING + SERVICE COSTING 7-Sep-22

Question No. 3 8 Marks

SJ Ltd. has furnished the following information:
Standard overhead absorption rate per unit `20
Standard rate per hour `4
Budgeted production 12,000 units
Actual production 15,560 units
Actual overheads were `2,95,000 out of which `62,500 fixed .

Actual hours 74,000

Overheads are based on the following flexible budget
Production (units) 8,000 10,000 14,000
Total Overheads (`) 1,80,000 2,10,000 2,70,000

You are required to calculate the following overhead variances (on hour’s basis) with
appropriate workings:
(i) Variable overhead efficiency and expenditure variance
(ii) Fixed overhead efficiency and capacity variance.

Question No. 4 8 Marks

XY Co. Ltd manufactures two products viz., X and Y and sells them through two divisions,
East and West. For the purpose of Sales Budget to the Budget Committee, following
information has been made available for the year 2021-22:
Budgeted Sales Actual Sales
Product
East Division West Division East Division West Division
X 400 units at `9 600 units at `9 500 units at `9 700 units at `9
Y 300 units at `21 500 units at `21 200 units at `21 400 units at `21
Adequate market studies reveal that product X is popular but under priced. It is expected
that if the price of X is increased by `1, it will, find a ready market. On the other hand, Y is
overpriced and if the price of Y is reduced by `1 it will have more demand in the market.
The company management has agreed for the aforesaid price changes. On the basis of these
price changes and the reports of salesmen, following estimates have been prepared by the
Divisional Managers:
Percentage increase in sales over budgeted sales
Product East Division West Division
X + 10% + 5%
Y + 20% + 10%
With the help of intensive advertisement campaign, following additional sales (over and
above the above mentioned estimated sales by Divisional Mangers) are possible:
Product East Division West Division
X 60 units 70 units
Y 40 units 50 units
You are required to prepare Sales Budget for 2022-23 after incorporating above estimates.

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 REVISION TEST 1
PROCESS COSTING + SERVICE COSTING 7-Sep-22

Question No. 5 8 Marks

A Light Motor Vehicle manufacturer has prepared sales budget for the next few months, and
the following draft figures are available:
Month No. of vehicles
October 4,000
November 3,500
December 4,500
January 6,000
February 6,500
To manufacture a vehicle a standard cost of `2,85,700 is incurred and sold through dealers at
an uniform selling price of `3,95,600 to customers. Dealers are paid 12.5% commission on
selling price on sale of a vehicle.
Apart from other materials four units of Part-X are required to manufacture a vehicle. It is a
policy of the company to hold stocks of Part-X at the end of the each month to cover 40% of
next month’s production. 4,800 units of Part-X are in stock as on 1st October.
There are 950 nos. of completed vehicles are in stock as on 1st October and it is policy to have
stocks at the end of each month to cover 20% of the next month’s sales.
You are required to
1. Prepare Production budget (in nos.) for October, November, December and January.
2. Prepare a Purchase budget for Part-X (in units) for October, November & December.
3. Calculate the budgeted gross profit for the quarter October to December.
Question No. 6 8 Marks
SP Limited produces a product 'Tempex' which is sold in a 10 Kg. packet. The standard
cost card per packet of 'Tempex' are as follows:
(`)
Direct materials 10 kg @ `45 per kg 450
Direct labour 8 hours @ `50 per hour 400
Variable Overhead 8 hours @ `10 per hour 80
Fixed Overhead 200
1,130
Budgeted output for the third quarter of a year was 10,000 Kg. Actual output is 9,000 Kg.
Actual cost for this quarter are as follows :
(`)
Direct Materials 8,900 Kg @ `46 per Kg. 4,09,400
Direct Labour 7,000 hours @ `52 per hour 3,64,000
Variable Overhead incurred 72,500
Fixed Overhead incurred 1,92,000
You are required to calculate :
1) Material - Usage Variance / Price Variance / Cost Variance
2) Labour - Efficiency Variance / Rate Variance / Cost Variance
3) Variable Overhead Cost Variance
4) Fixed Overhead Cost Variance.

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 REVISION TEST 1
PROCESS COSTING + SERVICE COSTING 7-Sep-22

Question No. 7 10 Marks

a) S Ltd. has prepared budget for the coming year for its two products A and B.
Product A (`) Product B (`)
Production & Sales unit 6,000 units 9,000 units
Raw material cost per unit 60.00 42.00
Direct labour cost per unit 30.00 18.00
Variable overhead per unit 12.00 6.00
Fixed overhead per unit 8.00 4.00
Selling price per unit 120.00 78.00
After some marketing efforts, the sales quantity of the Product A & B can be increased by
1,500 units and 500 units respectively but for this purpose the variable overhead and fixed
overhead will be increased by 10% and 5% respectively for the both products.
You are required to prepare flexible budget for both the products:
1. Before marketing efforts
2. After marketing efforts.
b) Jigyasa Pharmaceuticals Ltd. is engaged in producing dietary supplement ‘Funkids’
for growing children. It produces ‘Funkids’ in a batch of 10 kgs. Standard material inputs
required for 10 kgs. of ‘Funkids’ are as below:
Material Quantity (in kgs.) Rate per kg. (in `)
Vita-X 5 110
Proto-D 3 320
Mine-L 3 460
During the month of March, 2014, actual production was 5,000 kgs. of ‘Funkids’ for which
the actual quantities of material used for a batch and the prices paid thereof are as under:
Material Quantity (in kgs.) Rate per kg. (in `)
Vita-X 6 115
Proto-D 2.5 330
Mine-L 2 405
You are required to calculate the following variances based on the above given information
for the month of March, 2022 for Jigyasa Pharmaceuticals Ltd.:
1) Material Cost Variance; Price Variance & Usage Variance;
2) Material Mix Variance & Yield Variance.

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