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Question Paper

Cost Management Accounting Duration:65

Details: Test-3 (ch-3 ) Marks: 35

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Q-1 The management of Twin sharing limited wants to have an idea of the profit lost/foregone
as a result of labour turnover last year.

Last year sales accounted to Rs 66,000,000 and the P/V Ratio was 20%. The total number of
actual hours worked by the direct labour force was 3.45 lakhs. As a result of the delays by the
Personnel Department in filling vacancies due to labour turnover, 75,000 potential productive
hours were lost. The actual direct labour hours included 30,000 hours attributable to training
new recruits, out of which half of the hours were unproductive. The costs incurred consequent
on labour turnover revealed on analysis the following:

Settlement cost due to leaving Rs 27,420

Recruitment costs Rs18, 725

Selection costs Rs12, 750

Training costs Rs16, 105

Assuming that the potential production lost due to labour turnover could have been sold at
prevailing prices, ascertain the profit foregone/lost last year on account of labour turnover.

(5 Marks)

Q-2 The following particulars of Soni & Co. relate to the year ending 31st March, 2013 for 30
workers:

Basic wages 50,000

Dearness allowance 25,000

Night shift allowance 9,600

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Overtime allowance 7,000

PF deposit 12,000

ESI contribution 2,808

Recovery towards house rent 10,200

Recoveries against supply of goods 16,000

Expenditure for employees’ amenities 4,730

PF is paid in equal share by the employer and employee. Contribution to ESI is in proportion of
7:5 by the employer and employee respectively. The workers are entitled to 5% of the total
days worked as leave on full pay. The number of days worked in a year is 300. Normal idle time
is 5%. Assuming that all the items are evenly spread over all the days in a year find out total
wages, total cash payment to workers and per hour per labour wages. The daily working hours
are 8.

(5 Marks)

Q-3 The existing incentive system of a certain factory is:

Normal working week 5 days of 9 hours plus 3 late shifts of 3 hours each

Rate of payment Day work = Rs10.00 per hour

Late shift = Rs15.00 per hour

Additional bonus payable Rs25.00 per day shift

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 Rs15.00 per late shift

Average output per operative for 54 hours week i.e., including 3 late shifts 120 articles

In order to increase output and eliminate overtime it was decided to switch on to a system of
payment by results. The following information is obtained:

Time rate (as usual) Rs10.00 per hour

Basic time allowed for 15 articles 5 hours

Piece-work rate Add: 20% to piece

Premium Add: 50% to time

You are require to show:

(i) Hours worked;

(ii) Weekly earnings;

(iii) Number of articles produced; and

(iv) Labour cost per article for one operative under the following systems:

(a) Existing time rate.

(b) Straight piece-work.

(c) Rowan system.

(d) Halsey-Weir.

Assume that 135 articles are produced in a 45-hour week under (b), (c) and (d) and that the
worker earns half the time saved under the Halsey-Weir System. The additional bonus under
the existing system will be discontinued in the proposed incentive scheme.

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 (8 Marks)

Q-4 A manufacturing unit produces two products X and Y. The following information is
furnished:

Particulars Product X Product Y

Units produced ( Qty) 20,000 15,000

Units Sold (Qty) 15,000 12,000

Machine Hours utilized 10,000 5,000

Design charges 15,000 18,000

Software development charges 24,000 36,000

Royalty paid on sales Rs54,000 [@ Rs2 per unit sold, for both the products]; Royalty paid on
units produced Rs35,000 [@ Rs1 per unit purchased, for both the products], Hire charges of
equipment used in manufacturing process of Product X only Rs5,000, Compute the Direct
Expenses.

(5 Marks)

Q-5 XYZ Ltd. is engaged in BPO industry. One of its trainee executives in the Personnel
department has calculated labour turnover rate 24.92% for the last year using Flux method.
Following is the some data provided by the Personnel department for the last year:

Employees At the Joined Left At the end

beginning
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Data Processors 540 1,080 60 1,560

Payroll Processors ? 20 60 40

Supervisors ? 60 - ?

Voice Agents ? 20 20 ?

Assistant Managers ? 20 - 30

Senior Voice Agents 4 - - 12

Senior Data 8 - - 34

Processors

Team Leaders ? - - ?

Employees transferred from the Subsidiary Company

Senior Voice Agents - 8 - -

Senior Data Processors - 26 - -

Employees transferred to the Subsidiary Company

Team Leaders - - 60 -

Assistant Managers - - 10 -

At the beginning of the year there were total 772 employees on the payroll of the company.
The opening strength of the Supervisors, Voice Agents and Assistant Managers were in the ratio
of 3:3:2.
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The company has decided to abandon the post of Team Leaders and consequently all the Team
Leaders were transferred to the subsidiary company.

The company and its subsidiary are maintaining separate set of books of account and separate
Personnel Department.

You are required to calculate:

(a) Labour Turnover rate using Replacement method and Separation method.

(b) Verify the Labour turnover rate calculated under Flux method by the trainee executive of
the XYZ Ltd.
(7 Marks)

6. MCQs

Case Study 1

Ten men work as a group. When the weekly production of the group exceeds standard (200
pieces per hour) each man in the group is paid a bonus for the excess production in addition to
his wages at hourly rates. The bonus is computed thus:

The percentage of production in excess of the standard amount is found and one-half of this
percentage is considered as the men’s share. Each man in the group is paid as bonus this
percentage of a wage rate of Rs 3.20 per hour. There is no relationship between the individual
workman’s hourly rate and the bonus rate. The following is the week’s records.

Hours Worked Production

Monday 90 22,100

Tuesday 88 22,600

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Wednesday 90 24,200

Thursday 84 20,400

Friday 88 20,400

Saturday 40 10,200

480 1,19,600

(a) Compute the rate and amount of bonus for the week0;

(b) Compute the total pay of Jones who worked 41 ½ hours and was paid Rs2 per hour basic
and of Smith who worked 44 ½ hours and was paid Rs 2.50 per hour basic.

1. Smith worked 44.5 hours and earned ₹2.50 per hour as a basic wage. What is the bonus
component of his earnings?

1. ₹16.50

2. ₹16.31

3. ₹17.49

4. ₹18.00

2. The percentage of bonus earned by each worker is calculated as:

1. 50% of actual production percentage

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2. 50% of the percentage of production in excess of standard

3. Full percentage of production in excess of standard

4. None of the above

Case Study 2

ZED limited is working by employing 50 skilled workers, it is considering the introduction of

incentive scheme-either Halsey scheme (with 50% bonus) or Rowan scheme of wage payment
for increasing the labour productivity to cope up the increasing demand for the product by
40%. It is believed that proposed incentive scheme could bring about an average 20% increase
over the present earnings of the workers; it could act sufficient incentive for them to produce
more.

Because of assurance, the increase in productivity has been observed as revealed by the figures
for the month of April, 2021.

Hourly rate of wages (guaranteed) Rs.30

Average time for producing one unit by one worker at the previous

Performance (this may be taken as time allowed) 1.975 hours

Number of working days in the month 24

Number of working hours per day of each worker 8

Actual production during the month 6,120 units

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3. What is the savings in direct labour cost per unit under the Halsey scheme compared to the
time wage system?

1. ₹6.50

2. ₹5.00

3. ₹5.50

4. ₹6.10

4. What is the effective rate of earnings per hour under the Rowan scheme?

1. ₹33.89

2. ₹35.00

3. ₹36.17

4. ₹37.00

Case Study 3

A total of 108 labour hours have been put in a particular job card for repair work engaging a
semi- skilled and skilled labour (Mr. Deep and Mr. Sam respectively). The hours devoted by
both the workers individually on daily basis for this particular job are given below:

Monday Tuesday Wednesday Thursday Friday

10.5 8.0 10.5 9.5 10.5

The skilled labour also worked on Saturday for 10 hours.

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Sunday is a weekly holiday and each worker has to work for 8 hours on all week days and 5
hours on Saturdays; the workers are however paid full wages for Saturday (8 hours for 5 hours
worked). Semi-skilled and skilled worker is paid ordinary wage @ ₹ 400 and ₹ 600 respectively
per day of 8 hours labour. Further, the workers are also paid dearness allowance @ 20%.

Extra hours worked over and above 8 hours are also paid at ordinary wage rate however,
overtime premium of 100% of ordinary wage rate is paid if a worker works for more than 9
hours in a day and 48 hours in a week.

5. How much is the total basic wages and dearness allowance combined for Mr. Deep per hour?

1. ₹50

2. ₹60

3. ₹75

4. ₹65

(5×1= 5 Marks)

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