GOBIND KUMAR JHA 9874411552

B. Com. (Semester – IV)

Cost & Management Accounting – II
Exam Practice Series

Joint Product & By-Product

1. X Ltd. manufactures product A which yields two by-products B and C. The actual joint expenses of
manufacturing for a period were ₹ 8,200.
Particulars Main Product A By Product B By Product
(₹) (₹) C(₹)
Material 100 75 25
Direct Labour 200 125 50
Overheads 150 125 75
450 325 150
Sales 6,000 4,000 2,500
Apportion the joint expenses.

2. In manufacturing the main product ‘A’, a company processes the resulting waste material into two by-
products M1 and M2. Using the method of working back from sales value in an estimated cost, you are
required to prepare a comparative Profit and Loss Statement of the three products from the following
data:-
a) Total cost up to separation point was ₹ 1,36,000.
b) Additional data:-
Particulars Product A Product M1 Product M2
Sales (All production) ₹ 3,28,000 ₹ 32,000 ₹ 48,000
Cost after separation - ₹ 9,600 ₹ 14,400
Estimated net profit percentage to sales value - 20% 30%
Estimated selling expenses as percentage of 20% 20% 20%
sales value

3. From the following particulars, find out the cost of production of by-products A and B at the point of their
separation from the main product X:-
Particulars By-product A By-product B
Sales Price per unit ₹ 18/unit ₹ 36/unit
Units produced 750 units 300 units
Cost per unit after separation ₹ 4 per unit ₹ 4 per unit
Selling expenses are 25% of the works cost (consider both pre-separation and post-separation costs).
Selling price have been fixed by adding a profit margin of 20% of total cost (Cost of Sales).
Total cost up to separation point - ₹ 1,60,000.

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4. A Ltd. produces four joint products P1, P2, P3 and P4. During a particular period, the common Joint costs
upto their separation included Direct Material ₹ 1,64,000; Direct Labour Cost ₹ 1,06,000 and Overhead
Cost ₹ 44,000.
The quantities of outputs of the joint products during the year 2023 have been:-
P1:- 10,000 units
P2:- 4,000 units
P3:- 13,000 units
P4:- 3,000 units
A technical survey assigned points for the four products as 3, 8, 5 and 10 respectively. Show the
apportionment of joint cost among the joint products.

5. In a concern engaged in process industry, four products emerge from a particular process of operation.
The total cost of input for the period ended 30th September, 2023 is ₹ 2,53,500. The details of output,
additional cost after split off point and sales value of the products are appended below:-
Product Output (kg) Additional processing cost after Sales (₹)
split-off point (₹)
A 8,000 60,000 1,68,000
B 5,000 10,000 1,10,000
C 3,000 - 60,000
D 4,000 20,000 90,000
If the products are sold at ‘split off point’ without further processing, the sales value would have been:-
A – Rs. 1,15,000
B – Rs. 90,000
C – Rs. 55,000
D – Rs. 80,000
You are required to prepare a statement of profitability based on the products being sold:-
a) After further processing, and
b) At the split off point.

6. A vegetable oil refining company obtains 4 products whose costs details are as under:-
Joint costs of the 4 products:- ₹ 8,29,600
Outputs:- A – 5,00,000 litres; B – 10,000 litres; C – 5,000 litres and D – 9,000 kgs.
Further processing costs:- A ₹ 2,40,000; B ₹ 48,000; C – Nil; and D ₹ 8,030
The products can be sold as intermediates, i.e. at split-off point without further processing.
The sales price are:-
As Finished Product As Intermediate Product
A (per litre) 1.84 1.20
B (per litre) 8.00 4.00
C (per litre) 6.40 6.40
D (per kg.) 26.67 24.00
a) Calculate the product-wise profit allocating joint costs on Net Realisable Value (NRV).
b) Compare the profitability in selling the products with and without further processing.

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CVP or Marginal Costing
7. Information for two successive years are given below:-
Year Units Selling Price (₹) Average Cost(₹)
2022 12,000 50 30
2023 15,000 50 28
Calculate:-
a) P/V Ratio and Fixed Cost.
b) Break Even Sales.
c) Sales to earn profit of ₹ 2,10,000.
d) Selling price to earn a profit of ₹ 1,50,000 by selling 9,000 units.
e) Margin of Safety when profit is ₹ 30,000.

8. The following figures are extracted from the books of a manufacturing concern for the year 2022-23.
Rs.
Direct Materials 4,10,000
Direct Labour 1,50,000
Variable Overheads 2,00,000
Fixed Overheads 1,20,000
Sales 10,00,000
a) Calculate Break Even Point.
b) What will the effect on BEP if there is an increase of 10% in (i) Fixed Expenses, and (ii) Variable
Expenses?

9. Present Production and Sales 8,000 units

Selling Price per unit ₹ 20.00
Variable Cost per unit:-
Direct Material ₹ 5.00
Direct Labour ₹ 2.50
Variable Overhead 100% of direct labour cost
Fixed Cost (Total) ₹ 40,000
a) Calculate:- P/V Ratio, BEP and Margin of Safety (MOS) from the above data.
b) Find the effect on P/V Ratio, BEP and MOS due to changes in each of the following: Selling Price
increase by 10%; Variable Cost increase by 10%; 10% decrease in fixed cost and 10% decrease in
sales volume.

10. The following data are obtained from the records of a factory:-
Particulars ₹ ₹
Sales – 4,000 units @ ₹ 25 each 1,00,000
Materials consumed 40,000
Variable Overheads 10,000
Labour Charges 20,000
Fixed Overheads 18,000 88,000

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Net Profit 12,000
Complute:-
a) The number of units by selling which the company will neither loss nor gain anything.
b) The sales needed to earn a profit of 20% on sales.
c) The extra units which should be sold to obtain the present profit if it is proposed to reduce the
selling price by 20%.
d) The selling price to be fixed to bring down its break-even point to 500 units under present
conditions.
11. The following results of a company for the last two years are as follows:-
Year Sales (₹) Profit (₹)
2022 1,50,000 20,000
2023 1,70,000 25,000
You are required to calculate:-
a) P/V Ratio
b) BEP
c) The sales required to earn a profit of ₹ 40,000
d) Profit when sales are ₹ 2,50,000
e) Margin of Safety at a profit of ₹ 50,000; and
f) Variable costs of the two periods.

Short-term Decision Making

12. Present the following information to show to management:-
a) The marginal product cost and the contribution p.u.
b) The total contribution and profits resulting from each of the following sales mix results.
Particulars Product Per Unit
Direct Materials A 10
Direct Materials B 9
Direct Wages A 3
Direct Wages B 2
Fixed Expenses – ₹ 800.
(Variable expenses are allotted to products at 100% Direct Wages)
Sales Price: A – ₹ 20,; B – ₹ 15
Sales Mixtures:-
a) 100 units of Product A and 200 units of B.
b) 150 units of Product A and 150 units of B.
c) 200 units of Product A and 100 units of B.

13. Due to trade recession, a plant is running at 50% capacity. The following details are available:-
Cost per unit:-
₹
Direct Material 4.00
Direct Labour 2.00

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Variable Overhead 6.00
Fixed Overhead 4.00
16.00
Production per month is 20,000 units.
Total cost per month ₹ 3,20,000
Sales ₹ 2,80,000
Loss ₹ 40,000
An exporter offers to buy 5,000 units per month at the rate of ₹ 13 per unit and the company hesitates to
accept the offer. Advice whether the company should accept or decline the offer, clearly showing your
answer with reasons.

14. The following set of information is supplied to you:-

Product X Product Y
Direct Material per unit @ ₹ 5 per kg 20 10
Direct Wages per unit @ ₹ 1.50 per labour hour 6 7.50
Variable overhead – 100% of direct wages and Fixed Overhead – ₹ 1,600
Selling price per unit (₹) 40 30
Comment on the profitability of each product when:-
a) Total sales value is limited;
b) Units sale is limited;
c) Raw material is in short supply
d) Production capacity is the limiting factor.

15. Gopal Ltd. manufactures 50,000 units of a product with the following cost break up:-
Cost per unit (₹)
Direct Material Cost 5.00
Direct Wages 3.00
Direct Expenses 1.50
Other Variable Costs 2.50
Fixed Costs 4.00
Total Cost 16.00
The product with the same specification is available in the market at a price of ₹ 14, then would you make
to buy the component?
What would be your decision if the supplier offer to sell the product at a price of (a) ₹ 11; and (b) ₹ 12.

ABC Costing
16. A manufacturing company gives you the following information relating to its product:-
X Y
Number of units to be produced 150 50
Machine set up hours per product line 10 10
Direct labour hours per unit 2 2
The budgeted machine set up cost is ₹ 14,400.

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You are required to:-
a) Allocate machine set up related cost to product lines X and Y using direct labour hour rate.
b) Allocate machine set up related cost to the product lines using Activity Based Costing.

17. A company manufactures two products A and B using the same common facilities. Details for a month
are as follows:-
Machine maintenance expenses ₹ 6,00,000
Machine set up expenses ₹ 6,00,000
Purchase order expenses ₹ 70,000
Product A Product B
Production during the month 2,000 units 4,000 units
Machine hour requirement per unit 3 hours 1 hour
Number of machine set ups 30 90
Number of purchase orders 35 140
Compute the Cost Driver Rates using Activity Based Costing.

18. From the following information of XYZ Ltd., prepare a statement of cost under (a) Traditional Method,
and (b) Activity Based Costing Method:-
Product A Product B Product C
Units produced 10,000 20,000 30,000
Direct Material (per unit) ₹ 50 ₹ 40 ₹ 30
Direct Labour (per unit) ₹ 30 ₹ 40 ₹ 50
Labour Hour (per unit) 3 4 5
Machine hours (per unit) 4 4 7
No. of machine set-ups 240 260 300
No. of purchase requisitions 1,200 1,800 2,000
Additional Information:-
a) Production overheads – Rs. 26,00,000 in which Department – 1 Rs. 11,00,0000 and Department – 2
Rs. 15,00,000.
b) Department – 1 is labour intensive and Department – 2 is machines intensive.
c) Total labour hours in Department – 1: Rs. 1,83,333 and total machines hours in Department – 2: Rs.
5,00,000.
d) Production overhead Rs. 26,00,000 split by activity.
e) Receiving and inspecting Rs. 14,00,000.
f) Production schedule and machine set up Rs. 1,20,000.

19. X Ltd. manufactures three products – X, Y and Z. Their per unit cost data are given below:-
Particulars X Y Z Total
Units produced 5,000 10,000 15,000
Direct Material per unit ₹ 50 ₹ 40 ₹ 30
Direct Labour per unit ₹ 30 ₹ 40 ₹ 50
Labour Hours per unit 3 4 5
Machine Hours per unit 4 4 7

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No. of purchase requisitions 600 900 1,000 2,500
No. of machine set-ups 120 130 150 400
Production overheads ₹ 13,00,000 split into two departments:-
Department I – Rs. 5,50,000
Department II – Rs. 7,50,000
Dept. I is labour intensive and Dept. II is machine intensive.
Total Labour Hours in Dept. I – 1,10,000
Total Machine Hours in Dept. II – 2,50,000
Production overheads ₹ 13,00,000 split by activity:-
Receiving and Inspecting – Rs. 7,00,000
Production schedule and machine set-up – Rs. 6,00,000
You are required to prepare product cost statement under:-
a) Traditional Method, and
b) ABC Method.