CA INTERMEDIATE

SUBJECT- COST AND MANAGEMENT

ACCOUNTING
Test Code – IMP 2404
(Date :)
(Marks - 100)
TOPIC : FULL COURSE
(Time allowed : 3 Hours)
PART – I (30 MARKS)

MULTIPLE CHOICE QUESTION :

MCQ No. 1 to MCQ No 10 consist each MCQ of 2 marks
MCQ No. 11 to MCQ No 20 consist each MCQ of 1 marks
1. Which of the following is not a correct match:
Activity Cost Driver
(a) Production Scheduling Number of Production runs
(b) Despatching Number of dispatch orders
(c) Goods receiving Goods received orders
(d) Inspection Machine hours

2. BOT approach means:

(a) Build, Operate and Transfer
(b) Buy, Operate and Transfer
(c) Build, Operate and Trash
(d) Build, Own and Trash

3. Which of the following does not form part of prime cost:

(a) Cost of packing
(b) Cost of transportation paid to bring materials to factory
(c) GST paid on raw materials (input credit cannot be claimed)
(d) Overtime premium paid to workers

4. When costing loss is Rs. 5,600, administrative overhead under-absorbed being Rs. 600,
the loss as per financial accounts should be
(a) Rs. 5,600
(b) Rs. 6,200
(c) Rs. 5,000
Page 1 of 10
 (d) None of the above

5. Unit Costing is applicable where:

(a) Product produced are unique and no 2 products are same
(b) Dissimilar articles are produced as per customer specification
(c) homogeneous articles are produced on large scale
(d) Products made require different raw materials

6. 100 units are processed at a total cost of Rs. 160, normal loss is 10%, & scrap units are sold
@ Rs. 0.25 each. If the output is 80 units, then the value of abnormal loss is:
(a) Rs. 2.50
(b) Rs. 16
(c) Rs. 17.50
(d) Rs. 17.75

7. SG Ltd manufactures two products from a joint milling process. The two products developed
are Mine support (MS) and Commercial building (CB). A standard production run incurs joint
costs of Rs. 1,00,000 and results in 60,000 units of MS and 90,000 units of CB. Each MS sells
for Rs. 200 per unit, and each CB sells for Rs. 450 per unit. Assuming no further processing
work is done after the split-off point, the amount of joint cost allocated to Commercial
building (CB) on a physical quantity allocation basis would be:
(a) Rs. 60,000.
(b) Rs. 180,000.
(c) Rs. 225,000.
(d) Rs. 120,000.

8 A manufacture has set-up a lab for testing of products for compliance with standards, salary
of this lab staffs are part of:
(a) Works overheads
(b) Quality Control Cost
(c) Direct Expenses
(d) Research & Development Cost

Page 2 of 10
9 Assume 550 units were worked on during a period in which a total of 500 good units were
completed. Normal spoilage consisted of 30 units; abnormal spoilage, 20 units. Total
production costs were Rs. 2,200. The company accounts for abnormal spoilage separately
on the income statement as loss due to abnormal spoilage. Normal spoilage is not
accounted for separately. What is the cost of the good units produced?
(a) Rs. 2,080
(b) Rs. 2,115
(c) Rs. 2,200
(d) Rs. 2,332

10 Under Non-integrated accounts, if materials worth Rs. 1,500 are purchased for a special
job, then which account will be debited:
(a) Special job account / Work in Process account
(b) Material Control account
(c) Cost Control account
(d) None of the above
(10 * 2 MARKS = TOTAL 20 MARKS)

11. Which of the following is true about Cost control

(a) It is a corrective function
(b) It challenges the set standards
(c) It ends when targets achieved
(d) It is concerned with future

12. Form used for making a formal request to the purchasing department to purchase
materials is a -:
(a) Material Transfer Note
(b) Purchase Requisition Note
(c) Bill of Materials
(d) Material Requisition Note

13. For the purpose of allocating joint costs to joint products, the sales price at point of sale,
reduced by cost to complete after split-off, is assumed to be equal to the:
(a) Joint costs

Page 3 of 10
(b) Sales price less a normal profit margin at point of sale
(c) Net sales value at split off
(d) Total costs

14. Controllable variances are best disposed-off by transferring to:

(a) Cost of goods sold
(b) Cost of goods sold and inventories
(c) Inventories of work–in–progress and finished goods
(d) Costing profit and loss account

15. Activity Ratio depicts:

(a) Whether actual capacity utilized exceeds or falls short of the budgeted capacity
(b) Whether the actual hours used for actual production were more or less than the
standard hours
(c) Whether actual activity was more or less than the budgeted capacity
(d) None of the above

16. The main difference between marginal costing and absorption costing is regarding the
treatment of:
(a) Prime cost.
(b) Fixed overheads.
(c) Direct materials.
(d) Variable overheads.

17. Budget manual is a document:

(a) Which contains different type of budgets to be formulated only.
(b) Which contains the details about standard cost of the products to be made.
(c) Setting out the budget organization and procedures for preparing a budget including
fixation of responsibilities, formats and records required for the purpose of preparing a
budget and for exercising budgetary control system.
(d) None of the above

18. The standard which is attainable under favourable conditions is:

Page 4 of 10
(a) Theoretical standard
(b) Expected standard
(c) Normal standard
(d) Basic standard

19. If P/V ratio is 40% of sales then what about the remaining 60% of sales:
(a) Profit.
(b) Fixed cost
(c) Variable cost.
(d) Margin of safety

20. Which of the following is true about Cost control:

(a) It is a corrective function
(b) It challenges the set standards
(c) It ends when targets achieved
(d) It is concerned with future
(10 * 1 MARKS = Total 10 MARKS)

PART-II (70 Marks)

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

QUESTION : 1(A)
Answer the following:
The income statement of Neel Gears Ltd. is summarized as follows:
Particulars Rs.
Net Revenue 80,00,000
Less: Expenses (including Rs. 40,00,000 of Fixed cost) 88,00,000
Net Loss (8,00,000)
The manager believes that an increase of Rs. 20,00,000 as fixed expenditure in advertising
outlays will increase the sales substantially. His plan was approved by the Board.
You are required to calculate:
(i) At what sales level will the company have Break Even?
(ii) What sales level will result in a Net Profit of Rs. 4,00,000?
(5 MARKS)
QUESTION : 1(B)

Page 5 of 10
G Ltd. produces a product, which has a monthly demand of 4,000 units. The product
requires a component X, which is purchased at Rs. 20. For every finished product, one unit
of component is required. The ordering cost is Rs. 120 per order and the holding cost is 10%
p.a.
You are required to calculate:
(i) Economic Ordering quantity
(ii) If the minimum lot size to be supplied is 4,000 units, what is the extra cost the
company has to incur? (5 MARKS)

QUESTION : 1(C)
A hotel has a capacity of 100 Single Rooms & 20 Double Rooms. The average occupancy of
both single & double rooms is expected to be 80% throughout the year of 365 days. The
rent for double room has been fixed at 125% of the rent of single room. The costs are as
under:
Variable costs: Single Room: Rs. 2,200 each per day, Double Room: Rs. 3,500 each per day.
Fixed Costs: Single Room: Rs. 1,200 each per day, Double Room: Rs. 2,500 each per day.
Above costs are calculated on the basis of current occupancy level.
Calculate the rent chargeable for the single & double rooms per day in such a manner that
the hotel earns profit of 25% on cost at current occupancy level.
(5 MARKS)

QUESTION : 1(D)
The following details are given to you:
Raw material consumed = Rs. 80,000
Direct Wages: ?
Factory Overheads = 60% of direct wages
Office Overheads = 10% of factory cost
Cost of production = Rs. 1,76,000
Calculate the amount of Direct Wages.
(4 MARKS)
QUESTION: 2(A)
The following data are available from the books and records of A Ltd. for the month of
January, 2023:

Particulars Amount in Rs.

Stock of raw materials on 1.1.2023 3,000
Raw materials purchased 28,000
Stock of raw materials on 31.1.2023 4,500
Manufacturing wages 7,000
Depreciation on plant 1,500
Loss on sale of a part of plant 300

Page 6 of 10
 Factory Rent 3,000
Office Rent 500
General expenses 400
Discount on sales 300
Advertisement expenses 600
Income tax paid 2,000
Sales @ Rs. 15 per unit

The number of units produced during January, 2023 was 3,000. The stock of finished goods
was 200 and 400 units on 1.1.2023 and 31.1.2023 respectively. The total cost of units on
hand on 1.1.2023 was Rs. 2,800. All these have been sold during the month.

You are required to prepare a Cost Sheet for the above period showing the:
(i) Cost of Raw Material consumed
(ii) Factory Cost
(iii) Cost of Production
(iv) Cost of goods sold
(v) Cost of Sales
(8 MARKS)

QUESTION : 2(B)
‘Buttery Butter’ is engaged in the production of Buttermilk, Butter and Ghee. It purchases
processed cream and let it through the process of churning until it separates into buttermilk and
butter. For the month of January, ‘Buttery Butter’ purchased 50 Kilolitre processed cream @ Rs.
100 per 1000 ml. Conversion cost of Rs. 1,00,000 were incurred up-to the split off point,
where two saleable products were produced i.e. buttermilk and butter. Butter can be further
processed into Ghee.
Products Production (in Sales Quantity(in Selling priceper
Kilolitre/tonne) Litre/Kg (Rs.)
Kilolitre/tonne)

Buttermilk 28 28 30

Butter 20 — —

Ghee 16 16 480

All 20 tonne of butter were further processed at an incremental cost of Rs. 1,20,000 to
yield 16 Kilolitre of Ghee. There was no opening or closing inventories of buttermilk, butter or
ghee in the month of January.

Required:

Page 7 of 10
i. SHOW how joint cost would be apportioned between Buttermilk and Butter under Estimated
Net Realisable Value method.
(5 MARKS)

QUESTION: 2(C)
Following data provided of a newly setup organisation for the month of November 2022,
Number of workers on the payroll:
- At the beginning of the month: 500
- At the end of the month: 600

During the month, 5 workers left, 20 workers were discharged and 75 workers were
recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while
the rest were engaged for an expansion scheme.
You are required to compute, the labour turnover rate by applying:
(i) replacement method; and
(ii) separation method.
(4 MARKS)
QUESTION : 3(A)

ABC Ltd. plans to use activity based costing to determine its product costs. It presently uses
a single plant – wide factory overhead rate for allocating factory overheads to products
based on direct labour hours. The total factory overhead cost is as follows:

Department Factory Overhead

Rs.
Production Support 12,25,000
Production (factory overhead only) 1,75,000
Total Cost 14,00,000
The Company determined that it performed four major activities in the Production Support
Department. These activities, along with their budgeted costs, are as follows:

Production Support Activities Budgeted Cost

Rs.
Setup 4,28,750
Production Control 2,45,000
Quality Control 1,83,750
Materials Management 3,67,500
Total 12,25,000

ABC Ltd. estimated the following activity-base usage quantities and units produced for each
of its three products:

Products Number Direct Setups Production Inspections Material

of Labour
Units Hours Orders requisitions
Product K 10,000 25,000 80 80 35 320

Page 8 of 10
 Product L 2,000 10,000 40 40 40 400
Product M 50,000 1,40,000 5 5 0 30

Total Cost 62,000 1,75,000 125 125 75 750

You are required to:

(i) Determine the factory overhead cost per unit for Products K, L and M under the
single plant − wide factory overhead rate method. Use direct labour hours as the
activity base.
(ii) Determine the factory overhead cost per unit for Products K, L and M under activity-
based costing.
(iii) Which method provides more accurate product costing? Why?
(12 MARKS)

QUESTION : 3(B)

Following information is made available from the costing records of a factory:

(i) The original cost of the machine : Rs. 1,00,000

Estimated life : 10 years
Residual value : Rs. 5,000
Factory operates for 48 hours per week : 52 weeks in a year.
Allow 15% towards machine maintenance down time.

(ii) 5% (of productive time assuming unproductive) may be allowed as setting-up time.
(iii) Electricity used by the machine is 10 units per hour at a cost of 50 paise per unit.
(iv) Repairs and Maintenance cost is Rs. 500 per month.
(v) Two operators attend the machine during operations along-with two other machines.
Their total wages including fringe benefits, amounting to Rs. 5,000 per month is paid.
(vi) Other overheads attributable to the machine are Rs. 10,431 per year.
Using above data, calculate machine hour rate.
(5 MARKS)

QUESTION : 4(A)
The following information is given regarding the overheads for the month of March 2023 in
respect of a workshop:

(i) Fixed overhead cost variance – Rs. 1,400 adverse

(ii) Fixed overhead volume variance – Rs. 1,000 adverse
(iii) Budgeted hours for October 2021 – 1,200 hours
(iv) Budgeted overheads for October 2021 – Rs. 6,000
(v) Actual rate of recovery of overheads – Rs. 8 per hour

From the above given information:

Calculate:

(1) Overhead expenditure variance

Page 9 of 10
 (2) Actual overheads incurred
(3) Actual hours for actual production
(4) Overheads capacity variance
(5) Overheads efficiency variance
(6) Standard hours for actual production
(12 MARKS)
QUESTION : 4(B)
The following are the budget estimates of a repairs and maintenance department which are
to be used to construct a flexible budget for the ensuing year:

Planned at 6,000 Planned at 9,000

Direct repair hours Direct repair hours
Rs. Rs.
Employees salaries 28,000 28,000
Indirect repair materials 42,000 63,000
Miscellaneous costs 16,000 20,500

Prepare a flexible budget for the department up to activity level of 10,000 direct repair
hours using increments of 1,000 units. (5 MARKS)

QUESTION : 5(A)
From the following particulars, prepare the following in the books of S Ltd.
(i) Statement of equivalent production
(ii) Statement of apportionment of cost

• Opening stock as on 1st January: 200 units @ Rs. 4 per unit

• Degree of completion: Materials 100%, Labour and Overheads 40%
• Units introduced during January: 1,050 units
• Output transferred to the next process: 1,100 units
• Closing stock as on 31st January: 150 units
• Degree of completion: Materials 100%, Labour and Overheads 70%
• Other relevant information regarding the process:
Materials: Rs. 3,150, labour: Rs. 4,500 and Overheads: Rs. 2,250
(9 MARKS)

QUESTION : 5 (B)
How Service Costing differs from Product Costing? (4 MARKS)

QUESTION : 5 (C)
State what are the advantages of Integrated Accounting? (4 MARKS )
Page 10 of 10