REG NO:

ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – DECEMBER 2021
B.B.A. (Regular) – V SEMESTER
M1 15 MC 501 : COSTING FOR BUSINESS DECISIONS
Duration: 3 Hours Max. Marks: 70
SECTION - A
I) Answer any TEN questions. Each carries 1 mark. (10x1=10)
1. Calculate the closing balance of cash from the following information.
Opening balance – Rs. 15.500; Total Payments – Rs. 23,000 which includes
Depreciation of Rs. 2,750; Total Receipts – Rs. 28750 which includes cash
received from debtors of Rs. 8,750.
2. Identify the following expenses as variable or fixed:
a. Salaries
b. Direct Material
c. Wages
d. Insurance
3. Find out the amount of contribution of ABC Ltd. if it incurs a fixed cost of Rs.
8,000 and earns and profit of Rs. 5,600.
4. Markus Ltd. desires a profit of Rs. 15,000. It has a profit volume ratio of 25%
and incurs a fixed cost of Rs. 12,000. What should be the amount of sales to
earn the desired profit?
5. The fixed expenses of a manufacturing company is Rs. 5,00,000. If the
company continues to manufacture using its plant, it will incur a loss of Rs.
6,00,000. Should the Plant be shut down? Give reasons.
6. The total variable expenses of manufacturing a product is Rs. 10 per unit.
Fixed expenses is Rs. 2.50. The same product is available in the market for Rs.
11.50. Should the product be made or bought? Give reasons.
7. Complete the following:
a. Labour Efficiency Variance = ----------- + Idle Time Variance + Labour Yield
Variance.
b. ------------------ = Material Price Variance + Material Usage Variance.
8. Mention any two advantages of Standard Costing.
9. Bring out any four Relevant costs.
10. What are non-cash expenses? Are they relevant while making a business
decision?
11. Mention any two disadvantages of Life Cycle Costing.
12. Explain the Learning and Growth perspective in Balance Score Card.

SECTION - B
II) Answer any THREE questions. Each carries 6 marks. (3x6=18)
13. A company is expecting to have Rs. 25,000 cash in hand on 1 st April 2021 and
it requires you to prepare cash budget for the three months, April to June,

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 2021. The following information is supplied to you:

Months Sales Purchases Wages Expenses

February 70,000 40,000 8,000 6,000
March 80,000 50,000 8,000 7,000
April 92,000 52,000 9,000 7,000
May 1,00,000 60,000 10,000 8,000
June 1,20,000 55,000 12,000 9,000

Other information:
i. Period of credit allowed to suppliers is 2 months.
ii. 25% of sales is for cash and the period of credit allowed to customers
for credit sales is 1 month.
iii. Delay in payment of wages and expenses 1 month.
iv. Income tax Rs. 25,000 is to be paid in June, 2021.

14. From the following prepare break even chart

Fixed cost Rs. 40,000
Variable cost per unit Rs. 10
Selling price per unit Rs. 15
What will be the selling price per unit if the break-even point is brought down
to 5,000 units?

15. A manufacturer makes an average profit of Rs. 2.5 on a selling price of Rs.
14.5. He produces and sells 60,000 units at 60% capacity. His cost of sales is
per unit.

Direct Materials Rs. 4

Direct Wages Rs. 1
Factory overheads (Variable) Rs. 3
Selling overheads (Variable) 0.25 paise
Total fixed cost Rs. 2,25,000
During the current year he intends to produce the same number of units but
anticipates that:
(a) Fixed cost will increase by 10%

(b) Material and labour cost will increase by 5% each under these
circumstances.
(c) He obtains an offer for further 20% utilization of his capacity.
What minimum price would you recommend to accept your offer so as to
ensure an overall profit of Rs. 1,60,000.

16. What do you mean by Standard Costing? Explain the steps in Standard
Costing.

17. Glorious Ltd. manufactures 20,000 shirts. These are exported at a cost of
Rs.150 per shirt. These shirts were rejected because of defects. The rejected

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 shirts can be sold for Rs.120 per shirt in the local market. If the defects are
rectified by spending Rs.30 per shirt, the same can be sold for Rs.160.
i) What are the relevant costs
ii) Should the rectification be done
iii) What is the gain or loss if not rectified

SECTION - C
III) Answer any TWO questions. Each carries 15 marks. (2x15=30)
18. The following information at 50% capacity is given. Prepare a flexible budget
and forecast the profit or loss at 60%, 70% and 90% capacity.

Fixed expenses: Expenses at 50% capacity

Salaries 50,000
Rent and Taxes 40,000
Depreciation 60,000
Administration expenses 70,000
Variable expenses:
Materials 2,00,000
Labour 2,50,000
Others 40,000
Semi-variable expenses:
Repairs 1,00,000
Indirect Labour 1,50,000
Others 90,000

It is estimated that fixed expenses will remain constant at all capacities. Semi
variable expenses will not change between 45% and 60% capacity, will rise by
10% between 60% and 75% capacity, a further increase of 5% when capacity
crosses 75%.
Estimated sales at various levels of capacity are:

Capacity Sales
60% 11,00,000
70% 13,00,000
90% 15,00,000

19. Fill up the blanks for each of the following independent situations:
Situations
Particulars A B C D E
Selling price per - 50 20 - 30
unit (Rs.)
Variable cost as % of 60 - 75 75 -
sales
No. of units sold 10,000 4,000 - 6,000 5,000
Contribution (Rs.) 20,000 80,000 - 25,000 50,000
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 Fixed Cost (Rs.) 12,000 - 1,20,000 10,000 -
Profit/ Loss (Rs.) - 20,000 30,000 - 15,000

20. The standard material input required for 1,000 kgs of a finished product are
given below:
Material Quantity (Kg) St. Rate per kg (Rs.)
P 450 20
Q 400 40
R 250 60
1100
Standard Loss 100
Standard Output 1000
Actual production in a period was 20,000 kg of finished product for which the
actual quantities of material used and the prices paid thereof were as under:
Material Quantities (Kg) Purchase process per kg (Rs.)
P 10,000 19
Q 8,500 42
R 4,500 65

Calculate (i) Material Cost Variance (ii) Material Price Variance (iii)
Material Usage Variance (iv) Material Mix Variance and (v) Material Yield
Variance.
Present a reconciliation among the variances.

21. What ABC Costing? Explain its advantages and disadvantages.

SECTION - D
IV) Case Study – Compulsory question. (1x12=12)
22. A company currently operating at 80% capacity has the following particulars:
Rs.
Sales 32,00,000
Direct materials 10,00,000
Direct labour 4,00,000
Variable overheads 2,00,000
Fixed overheads 13,00,000
An export order has been received that would utilize half the capacity
of the factory. This order cannot be split, i.e., it has to be taken in full
and executed at 10% below the normal domestic prices or rejected
totally.

The alternatives that are available to the management are:

Reject the order and continue with the domestic sales only (as at
present), OR
Accept the order, split capacity between overseas and domestic sales
and turn away excess domestic demand OR
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 Increase capacity to accept the export order and maintain the present
domestic sales by

(a) Buying an equipment that will increase capacity by 10%. This

will result in an increase of Rs. 1,00,000 in fixed cost

(b) Work overtime to meet balance of required capacity. In that case,

labour will be paid at 1½ times the normal wage rate.

Prepare a comparative statement of profitability and suggest the best

alternative.

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