MTP_Intermediate_Syllabus 2016_Dec2023_Set1

Paper 8- Cost Accounting

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
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Paper-8: Cost Accounting

Full Marks: 100 Time allowed:3 hours
Section - A
Answer the following questions:

1. (a) Choose the correct answer from the given four alternatives: [10 ×1 = 10]

(i) Cost Unit of Hospital Industry is

a. Tonne
b. Student per year
c. Kilowatt Hour
d. Patient Day

(ii) Depreciation is an example of-

a. Fixed Cost
b. Variable Cost
c. Semi Variable Cost
d. None

(iii) Idle time is

a. Time spent by workers in factory
b. Time spent by workers in office
c. Time spent by workers off their work
d. Time spent by workers on their job

(iv) Over time is

a. Actual hours being more than normal time
b. Actual hours being more than standard time
c. Standard hours being more than actual hours
d. Actual hours being less than standard time

(v) 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

(vi) Operating costing is applicable to:

a. Hospitals
b. Cinemas
c. Transport undertaking
d. All of the above

(vii) If sales are `90,000 and variable cost to sales is 75%. Contribution is
a. `21,500
b. `22,500
c. `23,500
d. `67,500

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(viii) P/V Ratio will increase if the
a. There is a decrease in fixed cost
b. There is an increase in fixed cost
c. There is a decrease in selling price per unit
d. There is a decrease in variable cost per unit.

(ix) Difference between standard cost and actual cost is called as

a. Wastage
b. Loss
c. Variance
d. Profit

(x) Sales Budget is a …

a. Expenditure budget
b. Functional budget
c. Master budget
d. None

(b) Match the statement in Column I with the most appropriate statement in Column II:
[1×5 =5]
Column I Column II
(i) Job Ticket (A) A Technique of Inventory Control
(ii) Escalation Clause (B) BEP Chart
(iii) VED Analysis (C) Contract Costing
(iv) Angle of Incidence (D) Labour Cost Plus Factory Overhead
(v) Conversion Cost (E) A Method of Time Booking

(c) State whether the following statements are True' or 'False': [1x5=5]

(i) A flexible budget is one, which changes from year to year

(ii) Variances are calculated for both material and labour.
(iii) Multiple Costing is suitable for the banking Industry.
(iv) Contact costing is variant of job costing
(v) Closing stock of finished goods should be valued on the basis of cost of sales.

(d) Fill in the blanks suitably: [1x5=5]

(i) Administration overheads are usually absorbed as a percentage of ______

(ii) Variable cost per unit is _____
(iii) Bin card shows ____ details of materials.
(iv) Sum of material price variance and material usage variance is equal to _______ variance.
(v) Contribution earned on Break-even sales equals to ____________ of the firm.

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Section - B
(Answers any five Questions, working notes should form part of the answer.)

2. (a) M Two workmen, Gyani and Jeetu, produce the same product using the same material. Their
normal wage rate is also the same. Gyani is paid bonus according to the Halsey System, while
Jeetu is paid bonus according to the Rowan System. The time allowed to make the product is 40
hours. Gyani takes 25 hours while Jeetu takes 32 hours to complete the product. The factory
overheads are charged @ 125% of direct labour cost.
The factory cost for the product for Gyani is ₹8,925 and for Jeetu it is ₹9,456. You are required
to:
(i) find the normal rate of wages;
(ii) find the cost of materials;
(iii) Prepare a statement comparing the element wise factory cost of the products as made by
the two workmen. [21/2+21/2+5=10]

(b) A factory has three production departments A, B and C and also two service departments ‘X’ and
‘Y’. The primary distribution of the estimated overheads in the factory has just been completed.
These details and the quantum of service rendered by the service departments, to the other
departments are given below:
A B C X Y
Primary distribution (`) 2,40,000 2,10,000 2,50,000 1,40,000 96,000
Service rendered by
Dept ‘X’ 30% 20% 35% - 15%
Dept ‘Y’ 25% 40% 25% 10% -

Prepare a statement showing the distribution of service dept. overheads to the production
departments, by the simultaneous equation method. [5]

3. (a) How classification of costs is determined under CAS-1 [5]

(b) The following balances are shown in the Cost Ledger of Spark Ltd. as on 1st October, 2022:
Particulars Dr. (`) Cr. ( `)
Work in progress Account 7,056
Factory overheads suspense Account 360
Finished stock Account 5,274
Stores Ledger Control Account 9,450
Administration Overheads Suspense A/C 180
General Ledger Adjustment Account 22,320

Transactions for the year ended 30th September, 2022

Particulars `
Stores issued to production 45,370
Stores purchased 52,400
Material purchased for direct issued to production 1,135
Wages paid (including indirect labour ` 2,520) 57,600
Finished goods sold 1,18,800
Administration expenses 5,400
Selling expenses 6,000

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Factory overheads 15,600
Store issued for Capital work-in-Progress 1,500
Finished goods transferred to warehouse 1,08,000
Store issued for factory repairs 2,000
Factory overheads recovered to production 16,830
Administration overheads charged to production 4,580
Factory overheads applicable unfinished work 3,080
selling overheads allocated to sales 5,500
Stores lost due to fire in store (not insured) 150
Administration expenses on unfinished work 850
Finished goods stock on 30.9.2017 14,274

You are required to record the entries in the cost ledger for the year ended 30th September, 2022.
[10]

4. (a) A work order for 100 units of a commodity has to pass through four different machines of which
the machine hour rates are: Machine P – ` 1.25, Machine Q – ` 2.50, Machine R – ` 3 and
Machine S – ` 2.25.
Following expenses have been incurred on the work order – Materials `8,000 and Wages `500.
Machine - P has been engaged for 200 hours. Machine - Q for 160 hours, Machine - R for 240
hours and Machine - S for 132 hours. After the work order has been completed, materials worth `
400 are found to be surplus and are returned to stores. Office overhead used to be 40% of works
costs, but on account of all-round rise in the cost of administration, distribution and sale, there
has been a 50% rise in the office overhead expenditure. Moreover, it is known that 10% of
production will have to be scrapped as not being up to the specification and the sale proceeds of
the scrapped output will be only 5% of the cost of sale. If the manufacturer wants to make a
profit of 20% on the total cost of the work order, find out the selling price of a unit of commodity
ready for sale. [6]

(b) A product passes through three processes — A, B and C. 10,000 units at a cost of `1.10 were
issued to Process A. 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’ was sold at `0.25 per unit and that of ‘B’ at `0.50 per unit and that of
C at ` 1.00.
The overhead charges were 160% of direct labour. The final product was sold at `10 per unit
fetching a profit of 20% on sales. Find out the percentage of wastage in Process ‘C’. [9]

5. (a) Hera Transport Service Company is running four (4) buses between two cities, which are 40
kilometres apart. Seating capacity of each bus is 40 passengers. The following particulars are
furnished by the company for March 2023:
Particulars Amount (`)
Salaries of Office Staff 1,50,000
Wages of drivers, conductors and cleaners 3,60,000
Diesel oil & other Lubricants 3,50,000

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Repairs & Maintenance 1,00,000
Insurance, Taxation etc. 2,60,000
Depreciation 2,50,000
Interest & Other Expenses 2,00,000
Total 16,70,000

Passengers carried were 80% of seating capacity. All buses run on all days of the month. Each
bus made one round trip per day.
Find out the cost per passenger – Kilometre. [7]

(b) New Construction Ltd. is engaged in a contract during the year. Following information is
available at the year end.
Particulars Amount Contract
(`)
Contract price 6,00,000
Material delivered direct to site 1,20,000
Materials issued from stores 40,000
Materials returned to stores 4,000
Materials at site at the end of year 22,000
Direct labour payments 1,40,000
Direct expenses 60,000
Architect's fees 2,500
Establishment charges 24,500
Plant installed at cost 80,000
Value of plant at the end of year 65,000
Accrued wages at the end of year 10,000
Accrued expenses at the end of year 6,000
Cost of contract not certified by architect 23,000
Value of contract certified by architect 4,20,000
Cash received from contractor 3,78,000

During the period, materials amounting to `9,000 have been transferred to another contract to
another place.
You are required to show the Contract A/c. [8]

6. (a) The sales turnover and profit during two periods were as follows:
Period Sales (`) Profit (`)
1 3,50,000 20,000
2 4,50,000 40,000

What would be probable trading results with sales of `2,80,000? What amount of sales will
yield a profit of `1,00,000? [7]

(b) Mr. Young has `1,50,000 investment in a business. He wants a 15% profit on his money. From
an analysis of recent cost figures, he finds that his variable cost of operating is 60% of sales; his
fixed costs are `75,000 per year. Show supporting computations for each answer.
(i) What sales volume must be obtained to break-even?
(ii) What sales volume must be obtained to his 15% return on investment?
(iii) Mr. Young estimates that even if he closed the doors of his business he would incur
`25,000 expenses per year. At what sales would be better off by locking his sales up? [8]

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7. (a) The standard labour complement and the actual labour complement engaged in a week for a job
are as under:
Skilled workers Semi-skilled Unskilled
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 during the week 28 18 4
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.
Calculate
1) Labour Efficiency Variance
2) Mix Variance
3) Rate of Wages Variance
4) Labour Cost Variance [9]

(b) Draw a Material Procurement Budget (Quantitative) from the following information: Estimated
sales of a product 40,000 units. Each unit of the product requires 3 units of material A and 5 units
of material B. Estimated opening balances at the commencement of the next year: Finished
product = 5,000 units Material A = 12,000 units B= 20,000 units Material on order: Material A =
7,000 units Material B = 11,000 units The desirable closing balance at the end of the next year:
Finished product = 7,000 units Material A = 15,000 units Material B= 25,000 units Material on
order: Material A = 8,000 units Material B= 10,000 units. [6]

8. Write short notes on any three of the following: [5x3=15]

(a) Cost Centre

(b) Financial Accounting and Cost Accounting
(c) Just-in-Time (JIT)
(d) Limitations of Marginal Costing

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