MTP-QP-D2022-Intermediate Examination- Syllabus – 2016- P08-S1

Paper 8- Cost Accounting

DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
 MTP-QP-D2022-Intermediate Examination- Syllabus – 2016- P08-S1

Paper 8 – Cost Accounting

Full Marks: 100 Time allowed: 3 hours

Part – I

Answer Question Number 1. All parts of this question are compulsory.

1. Answer the following questions

A. Choose the most appropriate alternative for the following (you may write only the Roman
numeral and the alphabet chosen for your answer):
[1×10=10]

(i) In which of the following case/s job costing is used?

(a) Furniture making
(b) Repair shops
(c) Printing press
(d) All of the above

(ii) Accounting record may be considered in ______________________.

(a) Bin Record
(b) Bill of material
(c) Stores ledger
(d) None of these

(iii) Time and Motion Study is conducted by the _________.

(a) Time-keeping department
(b) Personnel department
(c) Payroll department
(d) Engineering department

(iv) Royalty paid on Total Sales ₹89,000 and software development/improvement expenses
related to product is ₹22,000. Calculate Direct Expenses.
(a) ₹1,11,100
(b) ₹1,11,000
(c) ₹1,11,110
(d) ₹1,10,000

(v) Directors remuneration and expenses form a part of ________ .

(a) Production overhead
(b) Administration overhead
(c) Selling overhead
(d) Distribution overhead

(vi) CAS 21 deals with __________ .

(a) Capacity Determination
(b) Joint Cost
(c) Direct Expenses
(d) None of the above

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(vii) Absorption means

(a) Charging or overheads to cost centers
(b) Charging or overheads to cost units
(c) Charging or overheads to cost centers or cost units
(d) None of the above

(viii) Cost of service under operating costing is determined at the time of ___________________.
(a) Cost sheet
(b) Process account
(c) Job cost sheet
(d) Production account

(ix) A property of Variable Cost is that it _____________.

(a) Remains fixed in total
(b) Remains fixed per unit
(c) Varies per unit
(d) Nor increase or decrease

(x) In case of ____________________ materials become key factor.

(a) Quota restrictions exist
(b) Insufficient advertisement prevails
(c) There is low demand
(d) There is no problem with supplies of materials

(b) Match the following: [5×1=5]

Column I Column II
(i) Minimum bonus A. 8.33% of salary
(ii) Pollution Control Cost B. CAS 14
(iii) Direct Expenses C. Avoidable Fixed Cost/Contribution
per unit
(iv) Captive power plant expense D. Treated as part of factory expenses
(v) Shut Down Point (in quantity) E. CAS 10

(c) Say True or False for the following question: [5×1=5]

(i) Flux method is used for measurement of labour turnover.
(ii) Realization value is small in case of waste and scrap material.
(iii) Multiple Costing is preferable for the banking industry.
(iv) A key factor or principal factor does not input the preparation of all other budgets.
(v) P/V ratio remains constant at all levels of activity.

(d) Fill in the blanks: [5×1=5]

(i) In transport costing two example of fixed cost are_______________and __________.

(ii) Under integrated accounting system, the accounting entry for payment of wage is to
debit account and to credit cash account.
(iii) The function of CASB is to assists the members in preparations of uniform
_________________under various statue.
(iv) In Absorption Costing cost is added to inventory.
(v) Lump-sum Direct Expenses should be _________________ over the year.

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 MTP-D2022-INTERMEDIATE EXAMINATION-P08-S1
Part – II
Answer any five questions from question numbers 2 to 8. Each question carries 15 marks
(5×15=75)
2.(a) Y Ltd., a manufacturing concern, supplies you the following data relating to the week
ending 16th March, 2022 for two workers A and B:
A B
Work issued (units) 1,500 3,168
Time Allowed 30 minutes per dozen 2 ½ hours per gross
(1 gross = 144)
Output rejected (units) 400 568
Basic hourly wages rate ₹ 50 ₹ 80
Hours Worked 54 48
Bonus is paid @ 2/3 of the basic rate for all time and for all output without deductions for
rejected output. The working week is 42 hours, the first 6 hours of overtime being paid at
time plus 1/4 and the next 6 hours at time plus ½. Using the above information, compute
for each worker
a) Amount of bonus earned
b) Amount of gross wages
c) Direct wages cost per dozen of finished output when over time is worked—
(i) Regularly throughout the year as company’s policy due to labour shortage; and
(ii) Specifically at the customer’s request to expedite delivery. [8]

(b) A company has two production departments and two service departments. The data relating
to a period are as under:
Production Departments Service Departments
PD 1 PD 2 SD1 SD2
Direct Materials (₹) 80,000 40,000 20,000 30,000
Direct Wages (₹) 95,000 50,000 30,000 20,000
Overheads (₹) 80,000 50,000 40,000 30,000
Power Requirement at
Normal capacity (Kwh) 25,000 30,000 15,000 10,000
operations
Actual power
consumption during
the period (Kwh) 12,000 20,000 8,000 12,000

The power requirement of these departments is met by a power generation plant. The
said plant incurred an expenditure, which is not included above, of ₹1,21,875 out of
which a sum of ₹84,375 was variable and the rest fixed.
After apportionment of power generation plant costs to the four departments, the
service department overheads are to be redistributed on the following bases:
PD1 PD2 SD1 SD2
SD1 50% 40% - 10%
SD2 60% 20% 20% -

You are required to:

(i) What is the total O/H of each of the departments?
(ii) What is the total O/H post re-apportionment of service Department Cost?
[7]
3. (a) What are the scope and objective of cost accounting Standard on Determination of
Average cost of Transportation.
[8]
3. (b) GG Limited provides the following particulars for the year 2022.

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Particulars (₹) Particulars (₹)
Opening stock of raw materials 35,000 Carriage on goods sold 1,500
Purchase of raw materials 75,000 Rent and rates of Workshop 3,500
Raw materials returned to 1,500 Fuel, gas, water etc. 1,000
suppliers
Closing stock of raw materials 17,000 Repairs to plant 600
Wages paid to : Depreciation on Machinery 1,400
Productive workers 20,000 Office expenses 2,000
Non-productive workers 2,500 Direct chargeable expenses 1,000
Salaries paid to office staff 5,000 Advertising 1,500
Carriage on raw materials 1,500 Abnormal loss of raw materials 3,000
purchased
Cash Discounts received 3,000 Loss on sale of investment 5,000
What is the cost of sales? [7]

4.(a) RCB Ltd. undertakes to supply 1,000 units of a component per month of April, May and June.
Every month a batch order is opened against which materials and labour costs are
booked at actual. Overheads are levied on the basis of labour hours. The selling price is
contracted at ₹16 per unit.
From the following data, Calculate the profit per annum of each batch order and the total
profit for 3000 units. Labour is paid at the rate of ₹2 per hour. The other details are:
Months Batch Output Material Labour Cost Overheads Total Labour
(Units Cost (₹) (₹) (₹) (Hours)
January 1,250 6,250 2,500 12,000 4,000
February 1,500 9,000 3,000 9,000 4,500
March 1,000 5,000 2,000 15,000 5,000
[8]

4.(b) XYZ company obtains four different products namely M,N,O and P. The data on production
and sale of these brands during 2022 is reproduced below.
Brand Name M N O P
Production & Sales (units) 5,00,000 3,00,000 40,000 70,000
Sale value (₹ Lakhs) 31 15 1.2 2.8

All the above beauty soaps are manufactured jointly up to a particular process. At split off
point they are formed into cake-sand packed. The annual cost data were as under.

Direct Material Cost ₹ 40 lakhs

Value added
(includes profit at 25% on total cost) ₹ 10 lakhs

Out of the above brands, P is sold in unpacked condition without further processing while
other 3 brands further processed at an additional cost:

M ₹ 1,30,000
N ₹ 1,20,000
O ₹ 50,000
You are required to: -
(a) Work out the profit and cost of each brand of soap after allocating joint cost on the
basis of Net Realisable value at split up point. (Per unit cost not required).
(b) Find out revised cost and profit on each brand if the company decides to sell all
soaps at split up point at following prices: M ₹6.00; N ₹ 4.50; O ₹ 1.50 and P ₹ 4.00 per
unit.

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Assume that for allocation of joint cost net realisable value method is used.
With the working results in (a) and (b) above advise XYZ company about the processing
decision as to which soap to be sold at split of point and which to be processed further so
as to maximize profit. Substantiate your decision with suitable costing technique.
[7]
5. (a) A hotel is being run on a sea side with 60 single rooms. The home offers concessional
rates during six off-season months in a year. During this period, half of the full-room rent
is charged. The management’s profit margin is targeted at 20% of the room rent. The
following are the cost estimates and other details for the year ending – 31st March, 2022
(assume a month to be of 30 days):
(a) Occupancy during the season is 85%, while in the off season is 15% only:
(b) Expenses:
(c) Annual depreciation is to be provided for buildings at 10% and on furniture and
equipment’s at 5% on straight line basis;
(d) Room attendants are paid ₹5 per room day on the basis of occupancy of the rooms
in a month;
(e) Monthly lighting charges are ₹150 per room, except in four months of winter when it
is ₹60 per room and this cost is on the basis of full occupancy for a month, and
(f) Total investments in the home are ₹150 lakhs of which ₹80 lakhs relate to buildings
and balance for furniture and equipment’s.
You are required to compute the room rent per day both during the season and off
season. [8]

(b) A company undertook a contract for construction of a large residual complex. The
construction work commenced on 1st April, 2021 and the following data are available
for the year ended 31st March, 2022.
(₹ ‘000)
Contract Price 35,000
Work Certified 20,000
Progress Payments Received 15,000
Materials Issued to Site 8,500
Planning & Estimating Costs 1,000
Direct Wages Paid 4,020
Materials Returned From Site 270
Plant Hire Charges 2,000
Wage Related Costs 500
Site office costs 650
Head Office Expenses apportioned 350
Direct Expenses incurred 1,000
Work Not Certified 150

The contractors own a plant which originally cost ₹30 lacs have been continuously in use
in this contract throughout the year. The residual value of the plant after 5 years of life is
expected to be ₹5 lacs. Straight line method of depreciation is in use.
As on 31st March, 2022 the direct wages due and payable amounted to ₹2,50,000 and
the materials at site were estimated at ₹5,00,000.
Required:
(i) Record all the above information in a Contract Account.
(ii) Show the calculation of profit to be taken to the profit and loss account of the year.
[7]

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6. (a) The trading results of R Limited for the two years have been:
Year Sales ( ₹) Profit (₹)
2021 5,50,000 20,000
2022 6,00,000 30,000
Compute the following:
(i) P/V ratio;
(ii) Fixed costs;
(iii) Break-even sales;
(iv) Margin of Safety at a profit of ₹48,000;
(v) Variable costs during the two year. [8]

6. (b) The following is the statement of Y Ltd. for the month of January.
Amount (₹)
Particulars Products Total
A B
Sales 60,000 60,000 1,20,000
Variable costs 42,000 30,000 72,000
Contribution 18,000 30,000 48,000
Fixed Cost 36,000
Net Income 12,000

You are required to calculate the P/V ratio for each product and then compute the P/V
Ratio, break-even point and net profit for the following assumption.
(i) Sales mix 60% Product A & 40% Product B.
(ii) Sales mix 40% Product A & 60% Product B.
Also calculate the profit estimated on sales up to ₹1,80,000/- p.m. for each of the sales mix
provided above. [7]

7. (a) Company Y uses two types of raw material P and Q, from the following information,
calculate the Material Price Variance, Material Usage Variance, Material Mix Variance,
Material Cost Variance and Material Sub-Usage Variance:
Raw Material Standard Actual
P 40 Units @ ₹50 per unit 50 Units @ ₹50 per unit
Q 60 Units @ ₹40 per unit 60 Units @ ₹45 per unit
[8]
7. (b) Production costs of a factory for a year are as follows:

Particulars Amount (₹)

Direct wages 90,000
Direct Materials 1,29,250
Production Overheads, Fixed 30,000
Production Overheads, Variable 70,000
During the forthcoming year it is anticipated that:
a) The average rate for direct labour remuneration will fall from ₹3 per hour to ₹2.50 per
hour;
b) Production will remain unchanged.
c) Direct labour hours will increase by 25%
The purchase price per unit of direct materials and other materials and services which
comprise overheads will remain unchanged. Compute a factory overhead rate, the
overheads being absorbed on the basis of direct wages.What is the total factory cost of
the company? [7]

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8. Write Short note on any three of the following: [5×3=15]
(a) Uses and applications of Breakeven Analysis (any five)
(b) Treatment of Idle time
(c) Cost Classification by Functions and explain any two
(d) Advantages of Cost Control

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