MTP D2022 S2016 Qpmans P08 S2

MTP-QA-Dec2022-Intermediate Examination- Syllabus2016-P08-S2
Paper 8- Cost Accounting
DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
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): [1x10=10]
(i) is a segment of a business that is responsible for all the activitiesinvolved

in the production and sales of products, systems and services.
(a) Cost centre
(b) Profit centre
(c) Service cost centre
(d) Responsibility centre
(ii) is the value of alternatives foregone by adopting a particularstrategy or employing

resources in specific manner.
(a) Relevant cost
(b) Opportunity cost
(c) Imputed cost
(d) Replacement cost
(iii) is a quantitative record of receipts, issues and closing balance ofitems of stores.
(a) Bin Card
(b) Stores ledger
(c) Stores Ledger
(d) None of the above
(iv) The _________is an analytical method of stock control which aims atconcentrating
efforts on those items where attention is needed most.
(a) ABC Analysis
(b) VED Analysis
(c) JIT Analysis
(d) FSN Analysis
(v) Idle time is

(a) Time spent by workers in office
(b) Time spent by workers on their job
(c) Time spent by workers in factory
(d) Time spent by workers off their work
(vi) __________are those which vary in total direct proportion to the volume ofoutput. These
costs per unit remain relatively constant with changes in production.
(a) Fixed overhead
(b) Semi Variable overhead
(c) Variable overhead
(vii) When the amount of overhead absorbed is less than the amount of overheadincurred, it is
called
(a) Over-absorption of overhead
(b) Under-absorption of overhead
(c) Proper absorption of overhead
(viii) CAS 13 stands for

(a) Interest and financing charges
(b) Employee Cost
(c) Joint Cost
(d) Cost of Service cost centre
(ix) Which of the following items is not included in preparation of cost sheet?
(a) Carriage inward
(b) Purchase returns
(c) Sales commission
(d) Interest paid
(x) Cost Price is not fixed in case of

(a) Cost plus contracts
(b) Escalation clause
(c) Deescalation clause
(d) All of the above
(b) Match the statement in column I with the most appropriate statement in column II [5×1=5]
Column I Column II
(i) Primary packing Materials A. Total sales less BEP sales
Consumed
(ii) Direct Expenses B. Difference in Fixed Cost/ Difference in
contribution per unit
(iii) Indifference point (in units C. Treated as direct expenses
(iv) Margin of safety D. CAS 10
(v) Abnormal loss is transferred to E. Costing Profit and loss account
Answer: 1 (b)
(i)C (ii)D (iii)B (iv)A (v)E
(c) State whether the following statements are ‘True’ or ‘False’ [5×1=5]
(i) Closing stock of work-in-progress should be valued on the basis of Cost of Sales.
(ii) Cost Accounting Standard Board should have minimum three eminentpracticing
members of the institute of Cost Accounts of India.
(iii) Cash discounts are generally included completely from the costs.
(iv) Finance cost is not Direct Expense.
(v) Slow moving materials have a high turnover ratio.
Answer: 1 (c)
(i)False (ii)False (iii)False (iv)True (v)False
(d) Fill in the blanks: [5×1=5]

(i) Statement of cost per unit of equivalent production shows the per unit cost ___ .
(ii) Goods Received Note is prepared by the .
(iii) _______________cost are historical costs which are incurred in the past.
(iv) Marginal cost is the of sales over contribution
(v) Wages sheet is prepared by department.
Answer: 1 (d)
(i) Element Wise

(ii) Receiving Department
(iii) Sunk
(iv) Excess
(v) Pay Roll Department
Part-II
Answer any five questions from question numbers 2 to 8. Each question carries 15 marks
[5 ×15= 75]
2.(a) MVC Ltd. manufactures a special product, which requires ‘ABB’. The followingparticulars
were collected for the year 2021-22:
(i) Monthly demand of Zed : 6,500 units
(ii) Cost of placing an order : ₹ 500
(iii) Re-order period : 5 to 8 weeks
(iv) Cost per unit : ₹ 50
(v) Carrying cost % p.a. : 10%
(vi) Normal usage : 500 units per week
(vii) Minimum usage : 250 units per week
(viii) Maximum usage : 750 units per week
Required:
(i) Re-order quantity
(ii) Re-order level
(iii) Minimum stock level
(iv) Maximum stock level
(v) Average stock level [8]
(b) In a manufacturing concern ABC Ltd. the machine shop has 8 identical machines manned by 6
operators. The machines need an operator wholly warning on them. The total cost of the machines
is ₹ 12,00,000. Followinginformation relates to a six monthly period ended 31st December, 2021:
 Normal available hours per month 208
 Absenteeism (without pay) hours per month 18
 Leave(with pay)hours per month 20
 Normal idle time(unavoidable) hours per month 10
 Average rate of wages per day of 8 hours ₹ 200
 Production bonus 25 % on wages

 Power and fuel consumption ₹ 20,000
 Supervision & indirect labour ₹ 10,000
 Electricity ₹ 6,000
The following particulars are on yearly basis
 Repairs and maintenance 5%of value of
machines
 Insurance ₹ 72,000
 Depreciation 10 % on original cost
 Other factory expenses ₹ 28,000
 Allocated general management expenses ₹ 85,000
You are required to work out a comprehensive machine hour rate for themachine shop.
[7]
Answer 2.(a)
(i) Re-order quantity:
2 ×A×O 2 ×6500 ×12 × 500
= = = 3,950 units
C 50 ×10%
(ii) Re-order level= Maximum re-order period × Maximum usage
= 8 weeks × 750
= 6,000 units
(iii) Minimum stock level = Re-order level – (Normal rate of consumption × Average
time of inventory delivery i.e., lead time)
= 6000 – (500 × 6.5)
= 6000 – 3,250
= 2,750 units
(iv) Maximum stock level = Re-order level + Re-order quantity – (Minimum Consumption
× Minimum re-order period)
= 6,000 + 3,950 – (250 × 5)
= 8,700 units
(v) Average stock level = (Minimum stock level + Maximum stock level) ÷ 2
= (2,750 + 8,700) ÷ 2
= 5,725 units
Answer 2.(b)
Calculation of effective machine hours per month:

Normal available hours per month 208
Less: Absenteeism hours 18
Leave 20
Normal idle hours 10 48
Effective machine hours per month 160
Computation of Machine hour rate for the machine shop:
Wages payable for 6 months [W.N. 1] 1,71,000

Production bonus [ 25% of ₹ 1,71,000] 42,750
Power & Fuel consumption 20,000

Supervision & indirect labour 10,000
Electricity 6,000
Repairs & Maintenance [ 5% of ₹ 12,00,000 ×6/12] 30,000
Insurance [₹ 72,000 × 6/12] 36,000
Depreciation [ 10% of 12,00,000×6/12] 60,000
Other factory expenses [₹ 28,000 × 6/12] 14,000
Allocated general management [ ₹ 85,000 × 6/12] 42,500
expenses
Total overhead of machine shop 4,32,250
Machine hour rate [ ₹ 4,32,250 ÷ 5760 hours(W.N 2)] ₹ 75.04
Working Notes:
1. Wages = [(208-18) × 6 ×6×₹ 200÷8]
= [190 ×6×6×₹ 25]
= ₹ 1,71,000
2. Total machine hours for 6 months
For 6 operators = [effective machine hours×6×6]
= [160 ×6×6]
= 5760 hours
3. (a) Write a short note on CAS-3 [6]
(b) The following figures have been extracted from financial accounts of a manufacturingfirm
for the first year of its operation.
Direct material consumption 50,00,000

Direct wages 30,00,000
Factory OH 16,00,000
Administration OH 7,00,000
Selling and distribution OH 9,60,000
Bad debts 80,000
Preliminary expenses written off 40,000
Legal charges 10,000
Dividends received 1,00,000
Interest on deposit received 20,000
Sales (1,20,000 units) 1,20,00,000
Closing stock
Finished stock – 4,000 units 3,20,000
Work-in-progress 2,40,000
The cost accounts for the same period reveal that the direct material consumption was
₹56,00,000. Factory OH recovered at 20% on prime cost; Administration OH is recovered @ ₹ 6
per unit of production; Selling and Distribution OH are recovered at ₹ 8 per unit sold. Reconcile
the profit as per Financial recordeds with that of cost records. [9]
Answer 3(a)
CAS-3: COST ACCOUNTING STANDARD ON “PRODUCTION AND OPERATION OVERHEADS”
This standard deals with the principles and methods of determining the Production orOperation
Overheads. This standard deals with the principles and methods of classification, measurement
and assignment of Production or Operation Overheads, fordetermination of the cost of goods
produced or services provided and for thepresentation and disclosure in cost statements.
Objectives
The objective of this standard is to bring uniformity and consistency in the principles and methods
of determining the Production or Operation Overheads with reasonable accuracy.
Scope
This standard shall be applied to cost statements, which require classification,measurement,
assignment, presentation and disclosure of Production or Operation Overheads including those
requiring attestation.
Disclosures
The cost statements shall disclose the following:
1. The basis of assignment of Production or Operation Overheads to the cost objects.
2. Production or Operation Overheads incurred in foreign exchange.
3. Production or Operation Overheads relating to resources received from or supplied to
related parties.
4. Any Subsidy, Grant, Incentive or any amount of similar nature received or receivable
reduced from Production or Operation Overheads.
5. Credits or recoveries relating to the Production or Operation Overheads.
6. Any abnormal cost not forming part of the Production or Operation Overheads
7. Any unabsorbed Production or Operation Overheads.
Answer 3(b)
Dr. Costing P & L Account Cr.
Particulars Amount Particulars Amount
(₹) (₹)
To Materials 56,00,000 By Sales 1,20,00,000
To Direct wages 30,00,000
To Prime cost 86,00,000
To Factory OH‟s (20%) 17,20,000
1,03,20,000
Less: Closing WIP 2,40,000
Factory Cost 1,00,80,000
To Admin. OH‟s (1,24,000×6) 7,44,000
Cost of production 1,08,24,000
Less: Closing stock of FG 3,49,161
(1,08,24,000×4000/1,24,000)
Cost of goods sold 1,04,74,839
To Selling overheads 9,60,000
To Profit 5,65,161
1,20,00,000 1,20,00,000
Dr. Financial Trading and P & L Account Cr.
Particulars Amount (₹) Particulars Amount(₹)
To Materials A/c 50,00,000 By Dividend A/c 1,00,000
To Wages A/c 30,00,000 By Interest on deposit 20,000
To Factory OH A/c 16,00,000 By Sales A/c 1,20,00,000
To Admin. OH A/c 7,00,000 By Closing stock A/c
To S & D OH A/c 9,60,000 Finished goods 3,20,000
To Bad debts A/c 80,000 WIP 2,40,000
To Preliminary expenses written 40,000
Off
To Legal charges A/c 10,000
To Net profit 12,90,000
1,26,80,000 1,26,80,000
Statement of Reconciliation
Particulars Amount Amount
(₹) (₹)
Profit as per financial Accounts 12,90,000
Add : Over Valuation of Closing stock of Finished goods in cost
Accounts 29,161
Pure financial expenses not considered in Cost Accounts 1,30,000 1,59,161
(80,000+40,000+10,000)
Less : Over recovery of material 6,00,000
Over recovery of FOH 1,20,000
Over recovery of AOH 44,000
Financial incomes not considered in Cost Accounts 1,20,000 8,84,000
Profit as per Cost Accounts 5,65,161
4.(a). In the current quarter, ABC company has undertaken two jobs. The data relating to thesejobs are
as under:
Job A Job B
Selling price ₹ 1,07,325 ₹ 1,57,920
Profit as percentage on cost 8% 12%
Direct Materials ₹ 37,500 ₹ 54,000
Direct wages ₹ 30,000 ₹ 42,000
It is the policy of the company to charge Factory overheads as percentage on direct wages
and selling and administration overheads as percentage on Factory Cost.
The company has received a new order for manufacturing of a similar job. The estimate of direct
materials and direct wages relating to the new order are ₹ 75,000 and ₹ 50,000 respectively. A
profit of 20% on sales is required. You are required to compute:
(i) The rates of Factory overheads and selling and Administration overheads to be charged.
(ii) The selling price of the new order. [8]
4. (b) A product passes through three processes: A, B and C 10,000 units at a cost of ₹1.10 were issued to
process L. The other direct Expenses were as follows:
Process A Process B Process C

(₹) (₹) (₹)
Sundry materials 1,500 1,500 1,500
Direct Labour 4,500 8,000 6,500
Direct Expenses 1,000 1,000 1,503
The wastage of process A was 5% and in process B 4%. The wastage of process A wassold
at ₹0.25 per unit and that of B at ₹ 0.50 per unit and that C at ₹ 1.00 per unit. Theoverhead
charges were 160% of direct labour. The final product was sold at ₹10 per unit
fetching a profit of 25% on cost. Prepare process A/c and also find out percentage of
wastage in Process C. [7]
Answer: 4(a)
Computation of Factory Overhead rates and Selling & Distribution Overhead rates:
Let the Factory overhead rate be X and Selling and Distribution Overheads rates be Y
Job Cost Sheet

Particulars Job A Job B
(₹) (₹)
Direct Materials 37,500 54,000
Direct wages 30,000 42,000
Prime cost 67,500 96,000
Add: Factory overhead 30,000X 42,000X
Factory Cost 67,500+30,000X 96,000+42,000X
Add: Selling & Administrative
expenses (67,500+30,000X)Y (96,000+42,000X)Y
Total Cost (67,500+30,000X)(1+Y) (96,000+42,000X)(1+Y)
Profit (% on cost) 8% 12%
Total Cost [1,07,325/108×100] [1,57,920/112×100]
=99,375 =1,41,000
67,500+30,000X+67,500Y+30,000XY = ₹99,375
Or 30,000X+67,500Y+30,000XY = ₹31,875 .................................. (i)
96,000+42,000X+96,000Y+42,000XY = ₹1,41,000
Or 42,000X+96,000Y+42,000XY = ₹45,000 ................................. (ii)
Multiplying equation (i) by 4.2 & (ii) by 3 we get,
126,000X+2,83,500Y+126,000XY = ₹1,33,875… ...................................... (iii)
126,000X+2,88,000Y+126,000XY= ₹1,35,000… ...................................... (iv)
Solving equation (iii) & (iv), we get
4,500Y =1,125 Y =
1,125/4500
Y= 0.25 i.e., 25%
Substituting the value of Y in equation (i), we get
30,000X+67,500Y+30,000XY= ₹31,875
30,000X + 67,500×0.25 + 30,000 × X ×0.25 = ₹31,875
30,000X + 16,875 + 7,500X = ₹31,875
37,500X = 15,000
X = 0.4 i.e., 40%
Hence,
Factory Overhead rate on Direct Wages = 40%
Selling & Administration overhead rate on factory cost = 25%
(ii) Computation of selling price of the new order:
Particulars Amount
(₹)
Direct Materials 75,000
Direct Wages 50,000
Prime Cost 1,25,000
Factory Overhead [40% of Direct wages] [40% of 50,000] 20,000
Factory Cost 1,45,000
Selling & Administration Overhead [25% of Factory cost] [25% of 1,45,000] 36,250
Total Cost 1,81,250
Add : Profit [1,81,250/80×20] 45,313
Selling Price 2,26,563
Answer 4(b)
Dr. Process A A/c Cr.

Particulars Units (₹) Particulars units (₹)
To Cost of Basic 10,000 1.10 11,000 By Normal loss
Raw Material 500 0.25 125
To Sundry Materials 1,500 By Process B A/c 9,500 2.6395 25,075
To Direct Labour 4,500
To Direct Expenses 1,000
To Overheads
(160% ×4,500)
7,200
10,000 25,200 10,000 25,200
Dr. Process B A/c Cr.

Particulars Units (₹) Particulars units (₹)
To Process A A/c 9,500 2.6395 25,075 By Normal loss 380 0.50 190
To Sundry Materials 1,500 By Process C 9,120 5.283 48,185
A/c
To
Overheads(160% ×
8,000) 12,800
9,500 48,375 9,500 48,375
Dr. Process C A/c Cr.

Particulars units (₹) Particulars units (₹)
To Process B A/c 9,120 5.283 48,185 By Normal loss X 1.00 X
To Sundry Materials 1,500 By Finished 9,120- 8 68,088
output A/c X -X

To
Overheads(160% ×
6,500) 10,400
9,120 68,088 9,120 68,088
Selling Price per unit ₹ 10
Less: Profit ₹ 2
Cost per unit of F.G ₹ 8
Cost per unit of F.G = Total cost – Scrap Value of Normal loss
Total units Input – units of Normal loss
₹ 8 = 68,088 - X
9,120-X
X = 696 units
% age of Normal loss in relation to input in Process N
= 696 units × 100
9120 units
= 7.63%
Dr. Process C A/c Cr.
Particulars units (₹) Particulars units (₹)
To Process B A/c 9,120 5.283 48,185 By Normal loss 696 1.00 696
To Sundry Materials 1,500 By Finished 8,424 8 67,392
output A/c
To
Overheads(160% ×
6,500) 10,400
9,120 68,088 9,120 68,088
5.(a) Mr. Nl started transport business with a fleet of 10 taxis. The various expenses incurredby him are given
below:
(a) Cost of each taxi ₹1,20,000
(b) Salary of office staff ₹ 6,500 p.m.
(c) Salary of garage staff ₹3,500 p.m.
(d) Rent of garage ₹ 10,000 p.m.
(e) Drivers salary per taxi ₹5,000 p.m.
(f) Road tax and repairs per taxi ₹30,000 p.a.
(g) Insurance premium @ 5% of cost p.a.
The life of a taxi is 3,00,000 Km. and at the end of which it is estimated to be sold at ₹ 30,000. A taxi
runs on an average 5,000 km. per month of which 20% it runs empty. Petrolconsumption is 10 Km. per litre of
petrol costing ₹70 per litre. Oil and other sundry expenses amount to ₹50 per 100 Km. Calculate the effective
cost of running a taxi per Km.
Show the Cost & Profit breake up if the hire charge is ₹ 15/km [8]
5.(b) The following details are available from the books of accounts of a contractor withrespect to a
particular construction work for the year ended 31st March, 2022:
(₹)
Contract price 91,00,000
Cash received from contracted (90% of work certified) 71,91,000
Material sent to site 35,82,600
Planning and estimation cost 3,50,000
Direct wages paid 32,62,700
Cost of plant installed at site 8,00,000
Direct expenses 1,68,000
Establishment expenses 2,50,000
Material returned to store 15,000
Head office expenses apportioned 2,50,000
Cost of work uncertified 3,17,000
On 31st March, 2019:
Material at site 85,000
Accrued direct wages 77,300
Accrued direct expenses 12,000
Value of plant(as revalued) 7,16,000
Required:
(i) Prepare the Contract account for the year ended 31st March, 2022
(ii) Show the relevant Balance Sheet entries. [7]
Answer 5(a)
OPERATING COST SHEET
Particulars Workings Per Per Km
month (₹)
Fixed costs per taxi:
1. Salary of Office staff [6,500 ÷ 10] 650
2. Salary of garage staff [3,500 ÷ 10] 350
3. Garage rent [10,000 ÷ 10] 1,000
4. Driver‟s Salary 5,000
5. Road tax and repairs [30,000 ÷ 12] 2,500
6. Insurance [ (5% on 1,20,000) ÷ 12] 500
Fixed cost per taxi 10,000
Fixed cost per effective Km [10,000 ÷ 4,000(W.N 1)] 2.50
Variable costs:
1. Depreciation (1,20,000- 30,000)/2,40,000[W.N 2] 0.375
2. Petrol per monthPer (70 × 5,000)/10 = ₹35,000
effective Km. ₹ 35,000 ÷ 4,000 Km 8.75
3. Oil and other sundries per [50 × 5,000/100] = ₹2,500
month ₹ 2,500 ÷ 4,000 Km
Per effective Km. 0.625
Operating cost per
effective Km. 12.25
Calculation of profit in First Year
Particulars Amount (₹)

Hire Charges per Km. 15.00
Operating cost effective per Km 12.25
Profit per effective km 2.75
Profit for one year (4,80,000 km[W.N 3] @ 2.75 per km) = ₹ 13,20,000
Working Notes:
1. Effective Km. per month = 5,000 – 20% = 4,000 km
2. Effective Km of life of a taxi = [3,00,000 – 20% of 3,00,000] = 2,40,000 km
3. Effective km for first year of operation for all the 10 taxis = 4,000 × 12 × 10 = 4,80,000 km
Answer 5(b)
Contract Account for the year ended 31st March, 2022
Dr. Cr.
Particulars (₹) Particulars (₹)
To Material sent to site 35,82,600 By Materials returned 15,000
To Direct wages: Paid 32,62,700 By Materials at site 85,000
Accrued 77,300 33,40,000 By Work-in-progress :
To Planning and
estimation cost 3,50,000 Cost of work uncertified 3,17,000
To Direct expenses:
Paid Accrued 1,68,000 Value of work certified
12,000 1,80,000 [71,91,000 × 100/90] 79,90,000
To Depreciation onplant
[ 8,00,000 – 7,16,000] 84,000
To Establishment 2,50,000
expenses
To Head officeExpenses 2,50,000
To Notional Profit C/d 3,70,400

84,07,000 84,07,000
To P & L A/c 2,22,240 By Notional Profit B/d 3,70,400
To Reserve 1,48,160
3,70,400 3,70,400
Workings :
Work Certified
% of Completion = ×100
Contract Price
79,90, 000
= ×100 = 87.80%
91,00, 000
Since the completion of contract is greater than 50% but not greater than 90%, 2/3 rd of the
Notional Profit in the ratio of Cash received to work certified will be transferred to profit &Loss
A/c.
Profit transferred to P & L A/c
= 2 × profit × Cash Received
3 Work certified
= 2 × 3,70,400 × 71,91,000 = ₹2,22,240

3 79,90,000
Extract of Balance sheet as on 31st March, 2019

Liabilities Amount Amount Assets Amount Amount
(₹) (₹) (₹) (₹)
P & L A/c 2,22,240 Work-in-progress:
Accrued Wages 77,300 Value of work certified 79,90,000
Accrued Expenses 12,000 Cost of work uncertified 3,17,000
83,07,000
Reserved profit (1,48,160)
81,58,840
Answer to MTP_Intermediate_Syllabus 2016_Dec 2022_Set 4
Cash received (71,91,000) 9,67,840

Material at site 85,000
6.(a) A company budgets for a production of 2,00,000 units. The variable cost per unit is ₹13 and fixed
cost is ₹2 per unit. The company fixes its selling price to fetch a profit of 20% on cost.
(a) What is the minimum units required for recovering the fixed cost?
(b) What is the ratio of cost to sales?
(c) If it reduces its selling price by 5%, how does the revised selling price affect the breakeven
point and the Profit-Volume ratio?
(d) If a profit increase of 10% is desired more than the budget, what should be the sale at the
reduced prices? [8]
(b) A factory engaged in manufacturing plastic buckets is working at 40% capacity and
produces 10,000 buckets per month. The present cost breakup for one bucket is as under:
Materials ₹ 25
Labour ₹8
Overheads ₹ 10(50% fixed)
The selling price is ₹50 per bucket. If it is decided to work the factory at 50% capacity, theselling
price falls by 3%. At 80% capacity, the selling price falls by 5% accompanied by a
similar fall in the price of materials.
You are required to prepare a statement showing the profits at 50% and 80% capacitiesand
also determine the breakeven points at each of these production levels. [7]
Answer 6(a)
Budgeted production (in units) 2,00,000

Variable cost (per unit) ₹ 13.00
Fixed cost(per unit) ₹ 2.00
Selling price (W.N.1) ₹ 18.00
Contribution(per unit) ₹ 5.00
Total fixed cost (2,00,000 units × ₹ 2) ₹ 4,00,000
Total fixed cost

a) Break-even point =
Contribution p.u
4, 00, 000
=
5.00
= 80,000 units
Contribution p.u
b) Profit-volume ratio = ×100
Selling price p.u
5.00
= × 100
18.00
= 27.78%
c) (i) Break-Even point under revised selling price (see W.N.2)
Total fixedcost
=
Contribution p.u
4, 00, 000
=
4.10
= 97,560.97 units or 97,561 units
(ii) Profit-Volume Ratio under revised selling price
Revised contribution p.u

= × 100
Revised selling price
4.10
= × 100 = 23.98% or 24%
17.10
d) No. of units to be sold under desired profit:

Total FixedCost +Desired Profit
=
Contribution p.u
4,00,000 + 6,60,000
=
4.10
= 2,58,537 units
Working Notes:
1. Total cost of producing a unit = ₹15.00

Add: 20% of profit on ₹15 = 3.00
Selling price per unit = ₹18.00
2. Revised selling price = (Original Selling price less by 5%)
= (₹18.00 - ₹ 0.90)
= ₹17.10
Contribution per unit
Under revised selling price = (₹17.10 - ₹ 13.00)
= ₹4.10
3. Desired profit:
Budgeted Profit = ₹6, 00,000
(2,00,000 × 3)
10% increase in profit =₹ 60,000
Desired profit ₹ 6,60,000
Answer 6(b)
Statement showing the profit at various capacity levels

Particulars 40% 50% 80%
Production & sales(units) 10,000 12,500 20,000
Selling price (₹) 50.00 48.50 47.50
Sales [a] 5,00,000 6,06,250 9,50,000
Variable cost:
Materials @ ₹ 25 2,50,000 3,12,500 5,00,000
Labour @ ₹ 8 80,000 1,00,000 1,60,000
Variable overheads @ ₹5
[₹ 10 × 50/100] 50,000 62,500 1,00,000
Total [b] 3,80,000 4,75,000 7,60,000
Contribution [a-b] 1,20,000 1,31,250 1,90,000
Less: Fixed overheads @ ₹5
[₹ 10 × 50/100] 50,000 50,000 50,000
Profit 70,000 81,250 1,40,000
Contribution per unit 1, 20, 000 1, 31, 250 1,90, 000
= = =
10, 000 12, 500 20,000
=12.00 =10.50 =9.50
Break-even point
[Fixed OH/Contribution p.u] 4,167 4,762 5,263
7.(a) The Standard labour complement and the actual labour complement engaged in a weekfor
a job are as under:
Skilled Semiskilled Unskilled
workers workers workers
a) Standard no. of workers in the gang 32 12 6
b) Standard wage rate per hour (₹) 3 2 1
c) Actual no. of workers employed in the gang 28 18 4
during the week
d) Actual wage rate per hour (₹) 4 3 2
During the 40 hour working week the gang produced 1,800 standard labour hours of work.Show that
the labour cost variance is equivalent to the total of labour rate variance, labourefficiency
variance, [8]
(b) Prepare Sales Overhead Budget for the month of April, May June for theestimates given
below: (₹)
Advertisement 3,000
Salaries of the Sales Department 4,000
Expenses of the Sales Department 2,000
Counter Salesmen‟s Salaries and Dearness Allowance 6,000
Counter Salesmen‟s commission is 2% on their sales.
Travelling Salesmen‟s commission at 10% on their sales and expenses at 5% on their sales.The
sales during the period were estimated as follows:
Month Counter Sales Travelling Salesmen’s Sales
(₹) (₹)
April 1,00,000 20,000
May 1,50,000 30,000
June 1,75,000 40,000
Answer 7(a) [7]
Analysis of Given Data

Amount (₹)
Standard Data Actual Data
Hours Rate Value Hours Rate Value
(₹) (₹)
Skilled 32×40=1,280 3 3,840 Skilled 28×40=1,120 4 4,480
Semi-skilled 12×40= 480 2 960 Semi-skilled 18×40= 720 3 2,160
Unskilled 6×40= 240 1 240 Unskilled 4×40= 160 2 320
2,000 5,040 2000 6,960
Computation of Required Values

Amount (₹)
SRSH(1) SRRSH(2) SRAH(3) ARAH(4)
Men 3×1,152=3,456 3,840 3×1,120=3,360 4,480
Women 2×432 = 864 960 2×720=1,440 2,160
Boys 1×216 = 216 240 1×160= 160 320
4,536 5,040 4,960 6,960
Computation of SH
SH = SH for that worker × AQ for that worker
 SH for all the worker 

1, 280
For Skilled Worker = × 1,800 = 1,152
 2, 000 
480
For Semiskilled worker = × 1,800 = 432
 2,240
000 
For Unskilled worker = × 1,800 = 216
 2,000 
Where (1) SRSH = Standard Cost of Standard Labour = ₹4,536
(2) SRRSH = Revised Standard Cost of Labour = ₹5,040
(3) SRAH = Standard Cost of Actual Labour = ₹4,960
(4) ARAH = Actual Cost of Labour = ₹6,960
Computation of Labour Variances:

a. Labour Sub-Efficiency Variance = (1) – (2) = ₹504 (A) [₹(4,536 – 5,040)]
b. Labour Mix or Gang Variance = (2) – (3) = ₹80 (F) [₹(5,040 – 4,960)]
c. Labour Efficiency Variance = (1) – (3) = ₹424 (A) [₹(4,536 – 4,960)]
d. Labour Rate Variance = (3) – (4) =₹ 2,000 (A) [₹(4,960 – 6,960)]
e. Labour Cost Variance = (1) – (4) = ₹2,424 (A) [₹(4,536 – 6,960)]
Answer 7(b)
Sales Overhead Budget (For the month of January, February and March)
Particulars January February March

Variable Overheads:
Commission to counter salesmen @ 2% on their sales 2,000 3,000 3,500
Travelling salesmen‟s commission @ 10% on their sales 2,000 3,000 4,000
Travelling salesmen‟s expenses @ 5% on their sales 1,000 1,500 2,000
Total variable overheads [A] 5,000 7,500 9,500
Fixed Overheads
Advertisement 3,000 3,000 3,000
Salaries of Sales department 4,000 4,000 4,000
Expenses of Sales Department 2,000 2,000 2,000
Salaries to the counter salesmen 6,000 6,000 6,000
Total Fixed Overhead [B] 15,000 15,000 15,000
Total Sales overhead [A]+[B] 20,000 22,500 24,500
8. Short Note (any three) [3×5=15]

(a) List the differences between Cost Control and Cost Reduction
(b) Write any two factors to be considered in Production Budget?
(c) What is Just-In-Time (JIT) system? List out its main benefits.
(d) How would you classify costs based on behavior? Give an example to explain eachclass.
Answer 8.(a)
Both Cost Control and Cost Reduction are efficient tools of management but their
concepts and procedure are widely different. The differences are summarized below:
Cost Control Cost Reduction

 Cost Control represents efforts made  Cost Reduction represents theachievement
towards achieving target or goal. in reduction of cost.
 The process of Cost Control is to set up a  Cost Reduction is not concern with
target, ascertain the actual performance maintenance of performanceaccording to
and compare it withthe target, investigate standard.
the variances, and take remedial measures.
 Cost Control assumes the existence of  Cost Reduction assumes the existence of
standards or norms which are not concealed potentialsavings in standards or
challenged. norms which are therefore subjected to a
constant challenge with a view to
improvement by bringing out savings.
 Cost Control is a preventive function. Costs  Cost Reduction is a corrective function. It
are optimized before they areincurred. operates even when an efficient cost
control system exists. There is room for
reduction in the achieved costs under
controlled conditions.
 Cost Control lacks dynamicapproach.  Cost Reduction is a continuous process of
analysis by various methods of all the factors
affecting costs, efforts and functions in an
organization. The main stress is upon the why
of a thing and the aim is to have continual
economy in costs.
(b) Factors to be considered in Production Budget:

Next to the sales budget, the main function of a business concern is the production andfor this, a
budget is prepared simultaneously with the sales budget. It is the forecast ofproduction during the
period for which the budget is prepared. It can also be prepared intwo parts viz., production volume
budget for the physical units i.e., the number of units, thetonnes of production etc., and the cost of
production or manufacture showing details ofall elements of the manufacture. While preparing the
production budget, the following factors must be taken into consideration:-
(a) Production plan:-
Production planning is an important part of the preparation of the production budget. Optimum
utilization of plant capacity is taken by eliminating or reducing the limiting factors and thereby
effective production planning is made.
(b) The capacity of the business concern:-
It is to be ensured that the capacity of the organization will coincide the budgeted production
or not. For this purpose, plant utilization budget will also be necessary. Theproduction budget must
be based on normal capacity likely to be achieved and it should not be too high or too low.
(c) Inventory Policy:-
While preparing the production budget it is also necessary to see to what extent materials are
available for producing the budgeted production. For that purpose, apurchase budget or a
purchase plan must also be studied. Similarly, on the other hand, it is also necessary to verify the
extent to which the inventory of finished goods isto be carried.
(d) Sales budgets must also be considered before preparing production budget becauseit may so
happen that the entire production of the concern may not be sold. In such a case the production
budget must be in line with the sales budget.
(e) A plan of the sequence of operations of production for effective preparation of a

production budget should always be there.
Last, but not the least, the policy of the management should also be considered before preparing
the production budget.
(c) Just-in-Time:
Just in time (JIT) is a production strategy that strives to improve a business return on investment by
reducing in-process inventory and associated carrying costs. Inventory is seen as incurring costs,
or waste, instead of adding and storing value, contrary to traditional accounting. In short, the
Just-in-Time inventory system focuses on “the right material, at the right time, at the right place, and in
the exact amount” without the safety net of inventory.
The advantages of Just-in-Time system are as follows:-
(a) Increased emphasis on supplier relationships. A company without inventory does not want a
supply system problem that creates a part shortage. This makes supplier relationships extremely
important.
(b) Supplies come in at regular intervals throughout the production day. Supply is synchronized
with production demand and the optimal amount of inventory is on hand at any time. When
parts move directly from the truck to the point of assembly, the need for storage facilities is
reduced.
(c) Reduces the working capital requirements, as very little inventory is maintained.
(d) Minimizes storage space.
(e) Reduces the chance of inventory obsolescence or damage.
(d) Classification based on Behaviour – Fixed, Semi-variable or Variable

Costs are classified based on behaviour as fixed cost, variable cost and semi-variable cost
depending upon response to the changes in the activity levels.
Fixed Cost:
Fixed cost is the cost which does not vary with the change in the volume of activity in theshort run.
These costs are not affected by temporary fluctuation in activity of an enterprise. These are also
known as period costs. Example: Rent, Depreciation...etc.
Variable Cost:
Variable cost is the cost of elements which tends to directly vary with the volume of activity.
Variable cost has two parts (i) Variable direct cost (ii) Variable indirect costs.Variable indirect
costs are termed as variable overheads. Example: Direct labour, Outward Freight...etc.
Semi-Variable Costs:
Semi variable costs contain both fixed and variable elements. They are partly affected by
fluctuation in the level of activity. These are partly fixed and partly variable costs and vice versa.
Example: Factory supervision, Maintenance...etc

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MTP-QA-Dec2022-Intermediate Examination- Syllabus2016-P08-S2

Paper 8- Cost Accounting

Full Marks: 100 Time allowed: 3 hours

1. Answer the following questions

(i) is a segment of a business that is responsible for all the activitiesinvolved

(ii) is the value of alternatives foregone by adopting a particularstrategy or employing

(v) Idle time is

(viii) CAS 13 stands for

(x) Cost Price is not fixed in case of

(i)C (ii)D (iii)B (iv)A (v)E

(d) Fill in the blanks: [5×1=5]

(ii) Goods Received Note is prepared by the .

(iv) Marginal cost is the of sales over contribution

(v) Wages sheet is prepared by department.

(i) Element Wise

 Production bonus 25 % on wages

Calculation of effective machine hours per month:

Computation of Machine hour rate for the machine shop:

Wages payable for 6 months [W.N. 1] 1,71,000

Power & Fuel consumption 20,000

3. (a) Write a short note on CAS-3 [6]

Direct material consumption 50,00,000

Process A Process B Process C

Job Cost Sheet

Dr. Process A A/c Cr.

Dr. Process B A/c Cr.

Dr. Process C A/c Cr.

To Direct Labour 6,500

Calculation of profit in First Year

Particulars Amount (₹)

To Notional Profit C/d 3,70,400

= 2 × 3,70,400 × 71,91,000 = ₹2,22,240

Extract of Balance sheet as on 31st March, 2019

Cash received (71,91,000) 9,67,840

Budgeted production (in units) 2,00,000

Total fixed cost

Revised contribution p.u

d) No. of units to be sold under desired profit:

1. Total cost of producing a unit = ₹15.00

Statement showing the profit at various capacity levels

Answer 7(a) [7]

Analysis of Given Data

Computation of Required Values

SH = SH for that worker × AQ for that worker

 SH for all the worker 

Computation of Labour Variances:

Particulars January February March

8. Short Note (any three) [3×5=15]

Cost Control Cost Reduction

(b) Factors to be considered in Production Budget:

(e) A plan of the sequence of operations of production for effective preparation of a

(d) Classification based on Behaviour – Fixed, Semi-variable or Variable

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