STANDARD : INTERMEDIATE Time : 1.

5 Hours

SUBJECT : COST & MANAGEMENT ACCOUNTING Marks : 100

General Instructions:

1. The question paper comprises of two parts, Part I and Part II.
2. Part I comprises of Multiple-Choice Questions (MCQs).
3. Part II comprises questions which require descriptive type answers.
4. You will be allowed to leave the examination hall only after the conclusion of exam. If you have
completed the paper before time, remain in your seat till the conclusion of the exam.
5. Candidate found copying or receiving or giving any help or defying instructions of the invigilator
will be expelled from the examination and will also be liable for further punitive action.

Part-II
1. Working notes should form part of the answer.
2. Answers to the questions are to be given only in English.

Case Scenario

1. The purchase committee of A Ltd. has been entrusted to review the material procurement policy
of the company. The chief marketing manager has appraised the committee that the company at
present produces a single product X by using two raw materials A and B in the ratio of 3:2. Material
A is perishable in nature and has to be used within 10 days from Goods received note (GRN) date
otherwise material becomes obsolete. Material B is durable in nature and can be used even after
one year. Material A is purchased from the local market within 1 to 2 days of placing order.
Material B, on the other hand, is purchased from neighbouring state and it takes 2 to 4 days to
receive the material in the store.
The purchase price of per kilogram of raw material A and B is ₹30 and ₹44 respectively
exclusive of taxes. To place an order, the company has to incur an administrative cost of ₹1,200.
Carrying cost for Material A and B is 15% and 5% respectively. At present material A is
purchased ina lot of 15,000 kg. to avail 10% discount on market price. GST applicable for both the
materials is 18% and the input tax credit is availed.
The sales department has provided an estimate that the company could sell 30,000 kg. in January
2024 and also projected the same trend for the entire year.
The ratio of input and output is 5:3. Company works for 25 days in amonth and production
is carried out evenly.
The following queries/ calculations to be kept ready for purchase committees’ reference:
(6 Marks)
1. For the month of January 2024, what would be the quantity of thematerials to be requisitioned
for both material A and B:
(a) 9,000 kg & 6,000 kg respectively
(b) 18,000 kg & 12,000 kg respectively
(c) 27,000 kg & 18,000 kg respectively
(d) 30,000 kg & 20,000 kg respectively.

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 2. The economic order quantity (EOQ) for both the material A & B:
(a) 13,856 kg & 16,181 kg respectively
(b) 16,197 kg & 17,327 kg respectively
(c) 16,181 kg & 17,165 kg respectively
(d) 13,197 kg & 17,165 kg respectively

3. Calculate saving/ loss in purchase of Material A if the purchase order quantity is equal to EOQ.
(a) Profit of Rs. 3,21,201.
(b) Loss of Rs. 3,21,201.
(c) Profit of Rs. 2,52,500.
(d) Loss of Rs. 2,52,500.

Case Scenario

2. K Ltd. is a manufacturer of a single product A. 8,000 units of the product A has been produced in
the month of March 2024. At the beginning of the year a total 1,20,000 units of the product-A has
been planned for production. The cost department has provided the following estimates of
overheads:
Fixed ₹ 12,00,000 Variable ₹ 6,00,000
Semi-Variable ₹ 1,80,000
Semi-variable charges are considered to include 60 per cent expenses of fixed nature and 40 per
cent of variable character.
The records of the production department shows that the company could have operated for 20
days but there was a festival holiday during the month.
The actual cost data for the month of March 2024 are as follows:
Fixed ₹ 1,19,000 Variable ₹ 48,000
Semi-Variable ₹ 19,200
The cost department of the company is now preparing a cost variance report for managerial
information and action. You being an accounts officer of the company are asked to calculate the
following information for preparation of the variance report:
(6 Marks)

1. What is the amount of variable overhead cost variance for the month of March 2024:
(A) ₹ 10,200 (A)
(B) ₹ 10,400 (A)
(C) ₹ 10,800 (A)
(D) ₹ 10,880 (A)

2. What is the amount of fixed overhead expenditure variance for the month of March 2024:
(A) ₹ 21,520 (A)
(B) ₹ 21,500 (A)
(C) ₹ 21,400 (A)
(D) ₹ 21,480 (A)

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3. What is the amount of fixed overhead cost variance for the month of March 2024:
(A) ₹ 43,320 (A)
(B) ₹ 43,300 (A)
(C) ₹ 43,200 (A)
(D) ₹ 43,380 (A)

Case Scenario

3. M Ltd. is producing a single product and may expand into product diversification in next one to two
years. M Ltd. is amongst a labour-intensive company where majority of processes are done
manually. Employee cost is a major cost element in the total cost of the company. The company
conventionally uses performance parameters Earnings per manshift (EMS) to measure cost paid to
an employee for a shift of 8 hours, and Output per manshift (OMS) to measure an employee’s output
in a shift of 8 hours.
The Chief Manager (Finance) of the company has emailed you few information related to the last
month. The email contains the following data related to the last month:
During the last month, the company has produced 2,34,000 tonnes of output. Expenditures for the
last months are:
(i) Raw materials consumed ₹ 50,00,000
(ii) Power consumed 13,000 Kwh @ ₹ 8 per Kwh to run the machines for production.
(iii) Diesels consumed 2,000 litres @ ₹ 93 per litre to run power generator used as alternative
or backup for power cuts.
(iv) Wages & salary paid – ₹ 6,40,00,000
(v) Gratuity & leave encashment paid – ₹ 64,20,000
(vi) Hiring charges paid for HEMM- ₹ 30,00,000. HEMM are directly used in production.
(vii) Hiring charges paid for cars used for official purpose – ₹ 66,000
(viii) Reimbursement of diesel cost for the cars – ₹ 22,000
(ix) The hiring of cars attracts GST under RCM @5% without credit.
(x) Maintenance cost paid for weighing bridge (used for weighing of final goods at the time
of dispatch) – ₹ 12,000
(xi) AMC cost of CCTV installed at weighing bridge (used for weighing of final goods at the
time of dispatch) and factory premises is ₹ 8,000 and ₹ 18,000 per month respectively.
(xii) TA/ DA and hotel bill paid for sales manager- ₹ 36,000
(xiii) The company has 1,800 employees works for 26 days in a month.
You are asked to calculate the followings:
(6 Marks)
1. What is the amount of prime cost incurred during the last month:
(a) ₹ 7,54,20,000
(b) ₹ 7,57,10,000
(c) ₹ 7,56,06,000
(d) ₹ 7,87,10,000

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2. What is the value of administrative cost incurred during the last month:
(a) ₹ 92,400
(b) ₹ 88,000
(c) ₹ 1,48,400
(d) ₹ 1,44,000

3. What is the value of selling and distribution cost and total cost of sales:
(a) ₹ 36,000 & ₹ 7,88,76,400 respectively
(b) ₹ 56,000 & ₹ 7,88,76,400 respectively
(c) ₹ 36,000 & ₹ 7,88,72,000 respectively
(d) ₹ 56,000 & ₹ 7,88,72,000 respectively

Part - I
Multiple Choice Questions

1. What would be Prime cost from below information? (Chapter 6: Cost Sheet)
Direct materials Purchased : ₹ 75,000
Direct labour : ₹ 45,000
Direct expenses : ₹ 15,000
Manufacturing overheads : ₹ 22,500
Direct materials consumed : ₹ 67,500
(A) ₹ 1,35,000
(B) ₹ 1,27,500
(C) ₹ 1,57,500
(D) ₹ 1,50,000

2. From the following information, calculate the Total cost of Product A and B using the ABC analysis:
Product A Product B
Units 5,000 5,000
Number of purchase orders placed 100 220
Number of deliveries received 70 200
Ordering Cost ₹ 4,00,000
Delivery Cost ₹ 1,35,000
(A) A = ₹ 47,500; B = ₹ 1,27,500
(B) A = ₹ 2,67,500; B = ₹ 2,67,500
(C) A = ₹ 1,60,00; B = ₹ 3,75,000
(D) A = ₹ 1,47,500; B = ₹ 1,47,500

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3. Which method of absorption of Factory Overheads do you suggest in a concern which produces only
one uniform type of product?
(a) Percentage of Direct Wages Basis
(b) Direct Labour Rate
(c) Machine Hour Rate
(d) Rate per unit of output

4. "K Labs" develops a product using a four-step process that moves progressively through four
departments. The Company specializes in overnight service and has the largest drug store chain as
its Primary Customer. Currently, Direct Labour, Direct Materials, and Overhead are accumulated by
departments. The cost accumulation system that best describes the system in the Company is –
(a) Operation Costing
(b) Activity-Based Costing
(c) Job-Order Costing
(d) Process Costing

5. In the Net realisable value method, for apportioning joint costs over the joint products, the basis of
apportionment would be:
(a) Selling price per unit of each of the joint products
(b) Selling price multiplied by units sold of each of the joint products
(c) Sales value of each joint product less further processing costs of individual products
(d) Both (b) and (c)

6. XY ltd. runs a hospital which consists of 25 beds and 5 more extra beds can be accommodated. Unit
was open for all the 365 days. In 2015 onlyu for 120 days, the unit had the full capacity of 25 patients
per day and for another 80 days, it had on the average 20 beds only occupied per day. Extra beds
were hired at a charge pf Rs. 5 per bed per day. The total hire charges for the whole year amounted
to Rs. 2,000. Total patient day for the year =?
(a) 4,600 patient day
(b) 5,000 patient day
(c) 4,800 patient day
(d) 5,160 patient day
(6 x 2 = 12 Marks)

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 1. Question paper comprises 6 Question. Answer Question No. 1 which is compulsory and any
4 out of the remaining 5 Question
2. Working note should from part of the answer.

Part - II
Descriptive Questions

1.(a) PREPARE cost statement of Panipat Thermal Power Station showing the cost of electricity
generated per kwh, from the following data.
Total units generated 16,50,000 kWh
(₹)
Operating labour 21,75,000
Repairs & maintenance 7,25,000
Lubricants, spares and stores 5,80,000
Plant supervision 4,35,000
Administration overheads 29,00,000
Insurance Charges 15,00,000
Fuel Charges 8,00,000
7 kWh. of electricity generated per kg. of coal consumed @ ₹4.75 per kg. Depreciation charges @
5% on capital cost of ₹3,10,00,000.
(5 Marks)

1.(b) A manufacturing process yields the following products out of the raw materials introduced in the
process:
Main Product X 60% of Raw Materials
By-Product Y 15% of Raw Materials
By Product Z 20% of Raw Materials
Wastage 5% of Raw Materials
Other information is as follows:
a. Total Cost: Raw Materials 1,000 units of ₹ 9,200; Labour ₹ 8,200; Overheads ₹ 12,000
b. One unit of product z requires ½ the raw materials required for one unit of product Y, one unit
of product X requires1½ times the raw materials required for product Y.
c. Product X required double the time needed for production of one unit of Y and one unit of Z.
d. Product Z requires ½ the time required for the production of one unit of product Y.
e. Overheads are to be apportioned in the ratio of 6:1:1.
You are required to CALCULATE the total and per unit of cost of each of the products.
(5 Marks)

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1.(c) DESCRIBE Unit Costing. WHAT kind of industries follow this method of costing? (4 Marks)

2.(a) Following information relate to a manufacturing concern for the year ended 31st March, 2023:
(₹)
Raw Material (opening) 2,28,000
Raw Material (closing) 3,05,000
Purchases of Raw Material 43,50,000
Freight Inwards 1,20,000
Direct wages paid 12,56,000
Direct wages-outstanding at the end of the year 1,50,000
Factory Overheads 20% of prime cost
Work-in-progress (opening) 1,92,500
Work-in-progress (closing) 1,40,700
Administrative Overheads (related to production) 1,73,000
Distribution Expenses ₹ 16 per unit
Finished Stock (opening)- 1,320 Units 6,08,500
Sale of scrap of material 7,000
The firm produced 14,350 units of output during the year. The stock of finished goods at the end
of the year is valued at cost of production. The firm sold 14,903 units at a price of ₹579 per unit
during the year.
PREPARE cost sheet of the firm.
(8 Marks)

2.(b) The annual demand for an item of raw material is 48,000 units and the purchase price is ₹ 80
per unit. The cost of processing an order is ₹ 1,350 and the annual cost of storage is ₹ 15 per
unit.
(i) DETERMINE is the optimal order quantity and total relevant cost for the order?
(ii) If the cost of processing an order is ₹ 800 and all other data remain same, then DETERMINE the
differential cost?
(iii) If the supplier offers bulk purchase of 48,000 units at a price of ₹ 72 and cost of placing the is Nil,
SHOULD the order be accepted?
(6 Marks)

3.(a) In a manufacturing company the standard units of production of the year were fixed at 1,20,000
units and overhead expenditures were estimated to be:
Fixed ₹ 12,00,000; Variable ₹ 6,00,000;
Semi-Variable ₹ 1,80,000

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 Actual production during the April, 2019 of the year was 8,000 units. Each month has 20 working
days. During the month there was one public holiday. The actual overheads amounted to:
Fixed ₹ 1,10,000; Variable ₹ 48,000;
Semi-Variable ₹ 19,200
Semi-variable charges are considered to include 60 per cent expenses of fixed nature and 40 per
cent of variable character.

CALCULATE the followings:

(i) Overhead Cost Variance
(ii) Fixed Overhead Cost Variance
(iii) Variable Overhead Cost Variance
(iv) Fixed Overhead Volume Variance
(v) Fixed Overhead Expenditure Variance
Calendar Variance.
(8 Marks)

3.(b) In a factory, the basic wage rate is Rs. 300 per hour and overtime rates are as follows:
Before and after normal working hours 180% of basic wage rate
Sundays and holidays 230% of basic wage rate
During the previous year, the following hours were worked
- Normal time 1,00,000 hours
- Overtime before and after working hours 20,000 hours
Overtime on Sundays and holidays 5,000 hours
Total 1,25,000 hours
The following hours have been worked on job ‘A’
Normal 1,000 hours
Overtime before and after working hrs. 100 hours.
Sundays and holidays 25 hours.
Total 1,125 hours
You are required to CALCULATE the labour cost chargeable to job ‘A’ and overhead in each of
the following instances:
(i) Where overtime is worked regularly throughout the year as a policy due to the workers’
shortage.
(ii) Where overtime is worked irregularly to meet the requirements of production.
(iii) Where overtime is worked at the request of the customer to expedite the job.
(6 Marks)

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4.(a) A company manufactures scooters and sells it at ₹ 3,000 each. An increase of 17% in cost of
materials and of 20% of labour cost is anticipated. The increased cost in relation to the present sales
price would cause at 25% decrease in the amount of the present gross profit per unit.
At present, material cost is 50%, wages 20% and overhead is 30% of cost of sales.
You are required to:
(a) Prepare a statement of profit and loss per unit at present
(b) Compute the new selling price to produce the same percentage of profit to cost of sales as
before.
(8 Marks)

4.(b) SANDY Ltd. is a manufacturing company having three production departments, ‘A’, ‘B’ and ‘C’ and
two service departments ‘X’ and ‘Y’. The following is the budget for December 2022:
Total (₹) A (₹) B (₹) C (₹) X (₹) Y (₹)
Direct material 1,60,000 3,20,000 6,40,000 3,20,000 1,60,000
Direct wages 8,00,000 3,20,000 12,80,000 1,60,000 3,20,000
Factory rent 6,40,000
Power 4,00,000
Depreciation 1,60,000
Other overheads 14,40,000
Additional
information:
Area (Sq. ft.) 800 400 800 400 800
Capital value of 32 64 32 16 16
assets (₹) lakhs)
Machine hours 1,600 3,200 6,400 1,600 1,600
Horsepower of 80 64 32 24 40
machines

Apportionment of expenses of service departments is as under:

A B C X Y
Service Dept. ‘X’ 72 24 48 – 16
Service Dept. ‘Y’ 96 56 – 8 –
Required:
(i) PREPARE a statement showing distribution of overheads to various departments.
PREPARE a statement showing re-distribution of service departments expenses to production
departments using Repeated Distribution method. Also CALCULATE machine hour rate of the
production departments 'A', 'B', 'C'.
(6 Marks)

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 5.(a) DESCRIBE the steps necessary for establishing a good budgetary control system.
(7 Marks)

5.(b) RVP Cinema provides the following data for the year 2020-21:
Particulars Premium Recliner 7D Cafeteria
Hall Hall Hall (Rs.)
(Rs.) (Rs.) (Rs.)
Revenue 11,55,000 18,75,000 9,30,000 5,25,000
Cost of Goods sold - - - 4,51,125
Digital media cost 6,19,800 9,46,875 4,02,900 -
Number of Credit Card transactions 75,000 90,000 60,000 45,000
Number of Tests 12,000 18,000 15,000 7,500
Number of Setups 225 450 150 75
Area in Square feet 3,000 4,500 2,250 750
Number of Customer contacts 2,62,500 3,00,000 1,50,000 37,500
Number of Customer online orders 2,10,000 2,47,500 1,20,000 22,500
Cost analysis has revealed the following:
Activity Activity Activity Driver Activity
Cost (Rs.) Capacity
Marketing Expenses 2,25,000 Number of Customer contacts 7,50,000
Website Maintenance 1,50,000 Number of Customer online 6,00,000
Expenses orders
Credit Card Processing Fees 1,35,000 Number of Credit Card 2,70,000
transactions
Cleaning Equipment Cost 3,15,000 Number of square feet 10,500
Inspecting and testing costs 2,62,500 Number of tests 52,500
Setting up machine's costs 4,50,000 Number of set-ups 900
Required:
(i) If RVP Cinema allocates all costs (other than Cost of Goods sold and Digital Media costs) to the
departments on the basis of Activity Based Costing system, CALCULATE the operating income and
percentage of operating income of each department.
RVP Cinema operated for years under the assumption that profitability can be increased by
increasing net revenue from Cafeteria. However, the Supervisor of RVP Cinema wants to shut
down Cafeteria. On the basis of (i) above, STATE whether the contention of the Supervisor is
valid or not.
(7 Marks)

6.(a) Briefly explain the ‘techniques of costing’.

(5 Marks)

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 OR

6.(a) Identify the methods of costing from the following statements:

(i) Costs are directly charged to a group of products.
(ii) Nature of the product is complex and method cannot be ascertained.
(iii) Costs ascertained for a single product.
(iv) All costs are directly charged to a specific job.
(v) Costs are charged to operations and averaged over units produced.
(5 Marks)

6.(b) “Is reconciliation of cost accounts and financial accounts necessary in case of integrated accounting
system?” EXPLAIN.
(5 Marks)

6.(c) Distinguish between Job costing and Process Costing. (Any five points of differences) (4 Marks)

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