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IMPORTANT INSTRUCTIONS

• This PDF contains Costing Super 100 Questions (The most comprehensive
100 practical questions of Costing covering all concepts & all varieties of
adjustments.

• In order to have a good conceptual understanding of Costing, refer our 7

Hour Costing Marathon on YouTube:
https://youtube.com/playlist?list=PL_zH8wj_XM2tIxhcVhICakWAYHW5vO
X4l&si=7JveXHRnCG9v7dx_

• This will be very useful for last day revision. Questions are picked from
Study material, Past Papers, RTPs & MTP’s.

• If you want a detailed explanation of these 100 questions, you can refer to
our Super 100 Questions discussion. It is available on our website
www.thinkwithtabish.com at just encryption cost.

• In order to purchase our Regular (or) Exam Oriented Classes for CA Inter
Costing, CA Final AFM, please visit our website www.thinkwithtabish.com

• To get all Notes & Files, join our Telegram Group:

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• Other Free Resources for CA Inter Costing: We also have Most Important
Theory Questions PDF & Costing Free MCQ PDF t help you maximise your
marks in Costing.

HAPPY LEARNING MY DEAR WARRIORS!!!

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COSTING SUPER 100 QUESTIONS

(FOR May 24 & Onwards)

Chapter Name Super 100 Questions List

(Question Numbers is as per Tabish Sir’s
Costing Question Bank)
Material Costing Question: 4, 6, 8, 9, 11, 12, 16, 20, 21, 25, 26,
28, 39
Labour Costing Question: 1, 2, 7, 9, 11, 18, 19, 20, 24
Overheads Question: 4, 7, 8, 13, 14, 15, 19, 20, 25, 28
Activity Based Question: 1, 4, 5, 6, 7, 15, 16
Costing
Service Costing Question: 2, 3, 7, 9, 12, 13, 15, 21, 23, 38
Process Costing Question: 3, 5, 8, 9, 11, 13, 15, 19
Joint Product, By Question: 4, 5, 6, 8, 12, 13, 18
Product
Marginal Costing Question: 4, 15, 16, 23, 26, 28, 30, 33, 34,
38, 41, 42, 43, 44
Standard Costing Question: 3, 4, 7, 8, 9, 10, 14, 16, 19, 21, 22,
25, 26, 27, 28
Budgetary Control Question: 3, 4, 5, 8, 9, 12,15, 16
Unit Costing, Batch Question: 2, 3, 7, 8, 9, 17
Costing
Job Costing Question: 2, 3, 4
Cost Sheet Question: 3, 6, 9, 10, 11, 12
Cost Accounting Question: 1, 2, 4, 5, 6, 10, 11
System

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Chapter 1
MATERIAL COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Material Costing
• Timings: 17 minutes to 51 minutes

Question No. 4 (Study Material)

A Company manufactures a special product which requires a component ‘Alpha’. The following
particulars are collected for the year 2022-23:

(i) Annual demand of Alpha 8,000 units

(ii) Cost of placing an order ₹ 200 per order
(iii) Cost per unit of Alpha ₹ 400
(iv) Carrying cost p.a. 20%
The company has been offered a quantity discount of 4 % on the purchase of ‘Alpha’ provided
the order size is 4,000 components at a time.

Required:
(i) COMPUTE the economic order quantity
(ii) STATE whether the quantity discount offer can be accepted.

Question No. 6 (Study Material)

(a) EXE Limited has received an offer of quantity discounts on its order of materials as under:

Price per ton (₹) Ton (Nos.)

1,200 Less than 500
1,180 500 and less than 1,000
1,160 1,000 and less than 2,000
1,140 2,000 and less than 3,000
1,120 3,000 and above.

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The annual requirement for the material is 5,000 tons. The ordering cost per order is ₹1,200
and the stock holding cost is estimated at 20% of material cost per annum. You are required to
COMPUTE the most economical purchase level.

(b) WHAT will be your answer to the above question if there are no discounts offered and the
price per ton is ₹1,500?

Question No. 8: (Past Paper, Nov 20, 10 marks)

An automobile company purchases 27,000 spare parts for its annual requirements. The cost
per order is ₹240 and the annual carrying cost of average inventory is 12.5% . Each spare
parts cost ₹50. At present, the order size is 3,000 spare parts (assume that number of
days in a year=360 days)

FIND OUT:

i) How much the company’s cost would be saved by opting EOQ model ?
ii) The Re-order point under EOQ model if lead time is 12 days
iii) How frequently should orders for procurement be placed under EOQ model?

Question No. 9: (Past Paper, May 22, 5 marks)

A Limited, a toy company purchases its requirement of raw material from S Limited at ₹120
per kg. The company incurs a handling cost of ₹400 plus freight of ₹350 per order. The
incremental carrying cost of inventory of raw material is ₹ 0.25 per kg per month. In
addition the cost of working capital finance on the investment in inventory of raw material is
₹ 15 per kg per annum. The annual production of the toys is 60,000 units and 5 units of toys
are obtained from one kg. of raw material.

Required:

(i) Calculate the Economic Order Quantity (EOQ) of raw materials.

(ii) Advise, how frequently company should order to minimize its procurement cost. Assume
360 days in a year.

(iii) Calculate the total ordering cost and total inventory carrying cost per annum as per
EOQ.

Question No. 11: (Study Material)

From the details given below,
CALCULATE:
(i) Re-ordering level
(ii) Maximum level
(iii) Minimum level
(iv) Danger level.

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Re-ordering quantity is to be calculated on the basis of following information:

• Cost of placing a purchase order is ₹20
• Number of units to be purchased during the year is 5,000
• Purchase price per unit inclusive of transportation cost is ₹50
• Annual cost of storage per units is ₹ 5.
• Details of lead time: Average- 10 days, Maximum- 15 days, Minimum- 5 days.
For emergency purchases- 4 days.
• Rate of consumption : Average: 15 units per day, Maximum: 20 units per day.

Question No.12: (Study Material)

A Company uses three raw materials A, B and C for a particular product for which the following
data apply:

Raw Usage per Re-order Price per Delivery Re- Minimu

Material unit of quantity Kg. period (in weeks) order m level
Product (Kgs.) level (Kgs.)
(Kgs.) (Kgs)
Minimum Average Maximum
A 10 10,000 10 1 2 3 8,000 ?
B 4 5,000 30 3 4 5 4,750 ?
C 6 10,000 15 2 3 4 ? 2,000

Weekly production varies from 175 to 225 units, averaging 200 units of the said product.
COMPUTE the following quantities:

i. Minimum stock of A,
ii. Maximum stock of B,
iii. Re-order level of C,
iv. Average stock level of A.

Question No. 16: (Study Material)

From the following data for the year ended 31st March, 2023, CALCULATE the inventory
turnover ratio of the two items and put forward your comments on them.
Material A (₹) Material B (₹)
Opening stock 1.04.2022 10,000 9,000
Purchase during the year 52,000 27,000
Closing stock 31.03.2023 6,000 11,000

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Question No. 20: (Study Material)

Imbrios India Ltd. is recently incorporated start-up company back in the year 2019. It is
engaged in creating Embedded products and Internet of Things (IoT) solutions for the
Industrial market. It is focused on innovation, design, research and development of products and
services. One of its embedded products is LogMax, a system on module (SoM) Carrier board for
industrial use. It is a small, flexible and embedded computer designed as per industry
specifications. In the beginning of the month of September 2022, company entered into a job
agreement of providing 4800 LogMax to NIT, Mandi. Following details w.r.t. issues, receipts,
returns of Store Department handling Micro-controller, a component used in the designated
assembling process have been extracted for the month of September, 2022

Sep. 1 Opening stock of 6,000 units @ ₹285 per unit

Sep. 8 Issued 4875 units to mechanical division vide material requisition no.Mech009/22
Sep. 9 Received 17,500 units @ ₹276 per unit vide purchase order no.159/22
Sep. 10 Issued 12,000 units to technical division vide material requisition no.Tech 012/22
Returned to stores 2375 units by technical division against materialrequisition no.
Sep. 12
Tech 012/22.
Sep. 15 Received 9,000 units @ ₹288 per units vide purchase order no. 160/22
Returned to supplier 700 units out of quantity received vide purchase order no.
Sep. 17
160/22.
Sep. 20 Issued 9,500 units to technical division vide material requisition no.Tech 165/22

On 25th September, 2022, the stock manager of the company expressed his need to leave for
his hometown due to certain contingency and immediately left the job same day. Later, he also
switched his phone off.
As the company has the tendency of stock-taking every end of the month to check and report
for the loss due to rusting of the components, the new stock manager, on 30th September,
2022, found that 900 units of Micro-controllers were missing which was apparently
misappropriated by the former stock manager. He, further, reported loss of 300 units due to
rusting of the components.
From the above information you are required to prepare the Stock Ledger account using
‘Weighted Average’ method of valuing the issues.

Question No. 21: (Study Material)

‘AT’ Ltd. furnishes the following store transactions for September, 2022:

1-9-22 Opening balance 25 units value ₹162.50

4-9- 22 Issues Req. No. 85 8 units

6-9- 22 Receipts from B & Co. GRN No. 26 50 units @ ₹5.75 per unit

7-9- 22 Issues Req. No. 97 12 units

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10-9- 22 Return to B & Co. 10 units

12-9- 22 Issues Req. No. 108 15 units

13-9- 22 Issues Req. No. 110 20 units

15-9- 22 Receipts from M & Co. GRN. No. 33 25 units @ ₹6.10 per unit

17-9- 22 Issues Req. No. 121 10 units

Received replacement from B & Co.

19-9- 22 GRN No. 38 10 units

Returned from department, material

20-9- 22 5 units
of M & Co. MRR No. 4

Transfer from Job 182 to Job 187 in

22-9- 22 5 units
the dept. MTR 6
26-9- 22 Issues Req. No. 146 10 units
Transfer from Dept. “A” to
29-9- 22 5 units
Dept. “B” MTR 10
30-9- 22 Shortage in stock taking 2 units

PREPARE the priced stores ledger on FIFO method and STATE how would you treat the
shortage in stock taking.

Question No. 25 (Past Paper, Jul 21, 5 marks)

MM ltd has provided the following information about the items of its inventory.

Item code Units Unit cost

101 25 50

102 300 01

103 50 80

104 75 08

105 225 02

106 75 12

MM has policy of classifying item constituting 15% or above of Total Inventory cost as A, 6% or
less of Total Inventory cost as C and Remaining as B Category

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REQUIRED:
(i) Rank the item on basis of % of total inventory cost

(ii) Classify inventory into A,B,C based on policy adopted by MM ltd.

Question No 26: (Study Material)

An invoice in respect of a consignment of chemicals A and B provides the following

information:

₹
Chemical A: 10,000 kgs. at ₹10 per kg. 1,00,000
Chemical B: 8,000 kgs. at ₹ 13 per kg. 1,04,000
Basic custom duty @ 10% (Credit is not allowed) 20,400
Railway freight 3,840
Total cost 2,28,240

A shortage of 500 kgs. in chemical A and 320 kgs. in chemical B is noticed due to normal
breakages. You are required to COMPUTE the rate per kg. of each chemical, assuming a
provision of 2% for further deterioration.

Question No. 28: (Study Material)

M/s Tyrotubes trades in four-wheeler tyres and tubes. It stocks sufficient quantity of tyres of
almost every vehicle. In year end 2022-23, the report of sales manager revealed that M/s
Tyrotubes experienced stock-out of tyres.
The stock-out data is as follows:

Stock-out of Tyres No. of times of Stock Out

100 2
80 5
50 10
20 20
10 30
0 33

M/s Tyrotubes loses ₹ 150 per unit due to stock-out and spends ₹ 50 per unit on carrying
of inventory.

DETERMINE optimum safest stock level.

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Question No. 39: (MTP Mar 22, 5 marks)

SKY Company Ltd., not registered under GST, purchased material ‘RPP’ from a company,
registered under GST.
The following information is available for one lot of 5,000 units of material purchased:
• Listed price of one lot ₹7,50,000
• Trade discount @ 10% on Listed price.
• CGST and SGST (Credit Not available) 12% (6% CGST + 6% SGST)
• Road Tax paid ₹15,000
• Freight and Insurance ₹51,000
• Detention Charges ₹15,000
• Commission and brokerage on purchases ₹30,000
• Amount deposited for returnable containers ₹90,000
• Amount of refund on returning the container ₹60,000
• Other Expenses @ 2% of total cost
• 20% of material shortage is due to normal reasons.
• You are required to CALCULATE cost per unit of material purchased to SKY Company Ltd.

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Chapter 2
LABOUR COSTING & DE

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Labour Costing & DE
• Timings: 51 minutes to 67 minutes

Question No. 1: (Study Material)

The Accountant of Y Ltd. has computed employee turnover rates for the quarter ended 31 st
March, 2023 as 10%, 5% and 3% respectively under ‘Flux method’, ‘Replacement method’ and
‘Separation method’ respectively. If the number of workers replaced during that quarter is 30,
FIND OUT the number of workers for the quarter

(i) recruited and joined and (ii) left and discharged and (iii) Equivalent employee turnover rates
for the year.

Question No. 2: (Study Material)

The management of B.R Ltd. is worried about their increasing employee turnover in the factory
and before analyzing the causes and taking remedial steps; it wants to have an idea of the profit
foregone as a result of employee turnover in the last year.

Last year sales amounted to ₹ 83,03,300 and P/V ratio was 20 per cent. The total number of
actual hours worked by the direct employee force was 4.45 lakhs. The actual direct employee
hours included 30,000 hours attributable to training new recruits, out of which half of the hours
were unproductive. As a result of the delays by the Personnel Department in filling vacancies
due to employee turnover, 1,00,000 potentially productive hours (excluding unproductive training
hours) were lost.

The costs incurred consequent on employee turnover revealed, on analysis, the following:

Settlement cost due to leaving ₹43,820

Recruitment costs ₹ 26,740
Selection costs ₹ 12,750

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Training Costs ₹ 30,490

Assuming that the potential production lost as a consequence of employee turnover could have
been sold at prevailing prices, FIND the profit foregone last year on account of employee
turnover.

Question No. 7: (Study Material)

Two workmen, ‘A’ and ‘B’, produce the same product using the same material. Their normal wage
rate is also the same. ‘A’ is paid bonus according to the Rowan system, while ‘B’ is paid bonus
according to the Halsey system. The time allowed to make the product is 50 hours. ‘A’ takes 30
hours while ‘B’ takes 40 hours to complete the product. The factory overhead rate is ₹ 5 per
man-hour actually worked. The factory cost for the product for ‘A’ is ₹ 3,490 and for ‘B’ it is ₹
3,600.

Required:
(a) COMPUTE the normal rate of wages;
(b) COMPUTE the cost of materials cost;
(c) PREPARE a statement comparing the factory cost of the products as made by the two
workmen.

Question No. 9. (Study Material)

A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of ₹ 30 per hour. The standard time
per unit for a particular product is 4 hours. Mr. P, a machine man, has been paid wages under the
Rowan Incentive Plan and he had earned an effective hourly rate of ₹ 37.50 on the manufacture
of that particular product.

STATE what could have been his total earnings and effective hourly rate, had he been put on
Halsey Incentive Scheme (50%)?

Question No. 11. (Study Material)

Mr. A. is working by employing 10 skilled workers. He is considering the introduction of some

incentive scheme - either Halsey Scheme (with 50% bonus) or Rowan Scheme - of wage payment
for increasing the Employee productivity to cope with the increased demand for the product by
25%. He feels that if the proposed incentive scheme could bring about an average 20% increase
over the present earnings of the workers, it could act as sufficient incentive for them to
produce more and he has accordingly given this assurance to the workers.

As a result of the assurance, the increase in productivity has been observed as revealed by the
following figures for the current month:
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Hourly rate of wages (guaranteed) ₹ 40

Average time for producing 1 piece by one worker at the 2 hours
previous performance (This may be taken as time allowed)
No. of working days in the month 25
No. of working hours per day for each worker 8
Actual production during the month 1,250 units

Required:

(i) CALCULATE effective rate of earnings per hour under Halsey Scheme and Rowan scheme.

(ii) CALCULATE the savings to Mr. A in terms of direct labour cost per piece under the schemes.

Question No. 18. (Study Material)

CALCULATE the earnings of A and B from the following particulars for a month and allocate the
employee cost to each job X, Y and Z:

A B
(i) Basic Wages (₹) 10,000 16,000
(ii) Dearness Allowance 50% 50%
(iii) Contribution to provident Fund (on basic wages) 8% 8%
(iv) Contribution to Employee’s State Insurance (on 2% 2%
basic wages)
(v) Overtime (Hours) 10 --

The normal working hours for the month are 200. Overtime is paid at double the total of normal
wages and dearness allowance. Employer’s contribution to state Insurance and provident Fund
are at equal rates with employees’ contributions. The two workers were employed on jobs X, Y
and Z in the following proportions:

Jobs X Y Z

Worker A 40% 30% 30%

Worker B 50% 20% 30%

Overtime was done on job Y.

Question No. 19 (Study Material)

It is seen from the job card for repair of the customer’s equipment that a total of 154 labour
hours have been put in as detailed below:

Worker ‘A’ Worker ‘B’ Process -

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paid paid Worker ‘C’

at ₹ 200 per at ₹ 100 per paid
day day of 8 hours at ₹ 300 per
of 8 hours day
of 8 hours
Monday (hours) 10.5 8.0 10.5
Tuesday (hours) 8.0 8.0 8.0
Wednesday (hours) 10.5 8.0 10.5
Thursday (hours) 9.5 8.0 9.5
Friday (hours) 10.5 8.0 10.5
Saturday (hours) -- 8.0 8.0
Total (hours) 49.0 48.0 57.0

In terms of an award in employee conciliation, the workers are to be paid dearness allowance on
the basis of cost-of-living index figures relating to each month which works out @ ₹ 968 for the
relevant month. The dearness allowance is payable to all workers irrespective of wages rate if
they are present or are on leave with wages on all working days.

Each worker has to work for 8 hours on weekdays. Saturday and Sunday will be weekly holiday,
however workers may work on Saturdays due to exigency of work for 4 hours, though full
payment of 8 hours will be made with no other payments.

Overtime is paid twice of ordinary wage rate if a worker works for more than nine hours in a day
or fourty eight hours in a week. Excluding holidays, the total number of hours works out to 176
in the relevant month. The company’s contribution to Provident Fund and Employees State
Insurance Premium are absorbed into overheads.
CALCULATE the wages payable to each worker.

Question No. 20. (Study Material)

In a factory, the basic wage rate is ₹ 100 per hour and overtime rates are as follows:
Before and after normal working hours 175% of basic wage
rate
Sundays and holidays 225% 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 ‘Z’

Normal 1,000 hours
Overtime before and after working hrs. 100 hours.

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Sundays and holidays 25 hours.

Total 1,125 hours
You are required to CALCULATE the labour cost chargeable to job ‘Z’ and overhead in
each of the following instances:
(a) Where overtime is worked regularly throughout the year as a policy due to the
workers’ shortage.
(b) Where overtime is worked irregularly to meet the requirements of production.
(c) Where overtime is worked at the request of the customer to expedite the job.

Question No. 24. (Study Material)

A worker is paid ₹ 10,000 per month and a dearness allowance of ₹ 2,000 p.m. Worker
contribution to provident fund is @ 10% and employer also contributes the same amount as the
employee. The Employees State Insurance Corporation premium is 6.5% of wages of which 1.75%
is paid by the employees. It is the firm’s practice to pay 2 months’ wages as bonus each year.
The number of working days in a year are 300 of 8 hours each. Out of these the worker is
entitled to 15 days leave on full pay. CALCULATE the wage rate per hour for costing purposes.

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Chapter 3
OVERHEAD:
ABSORPTION COSTING METHOD

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Overhead: Absorbtion costing method
• Timings: 66 minutes to 97 minutes

Question No.4: (Study Material)

Sanz 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 1,00,000 2,00,000 4,00,000 2,00,000 1,00,000
material
Direct wages 5,00,000 2,00,000 8,00,000 1,00,000 2,00,000

Factory rent 4,00,000

Power 2,50,000

Depreciation 1,00,000

Other 9,00,000
overheads

Additional information:
Area (Sq. ft.) 500 250 500 250 500
Capital value of 20 40 20 10 10
assets ( ₹ lakhs)
Machine hours 1,000 2,000 4,000 1,000 1,000
Horse power of 50 40 20 15 25
machines
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A technical assessment of the apportionment of expenses of service departments is as under:

A B C X Y
Service Dept. ‘X’ (%) 45 15 30 – 10
Service Dept. ‘Y’ (%) 60 35 – 5 –

Required:

(i) PREPARE a statement showing distribution of overheads to various departments.

(ii) PREPARE a statement showing re-distribution of service departments expenses
to production departments using Trial and error method.

Question No 7 (Study Material)

Modern Manufactures Ltd. has three Production Departments P1, P2, P3 and two Service
Departments S1and S2 details pertaining to which are as under:

P1 P2 P3 S1 S2

Direct wages (₹) 3,000 2,000 3,000 1,500 195

Working hours 3,070 4,475 2,419 - -

Value of machines (₹) 60,000 80,000 1,00,000 5,000 5,000

H.P. of machines 60 30 50 10 -

Light points 10 15 20 10 5

Floor space 2,000 2,500 3,000 2,000 500

(sq. ft.)

The following figures extracted from the Accounting records are relevant:

(₹)
Rent and Rates 5,000
General Lighting 600
Indirect Wages 1,939
Power 1,500
Depreciation on Machines 10,000
Sundries 9,695

The expenses of the service departments are allocated as under:

P1 P2 P3 S1 S2
S1 20% 30% 40% - 10%

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S2 40% 20% 30% 10% -

DETERMINE the total cost of product X which is processed for manufacture in Departments P1,
P2 and P3 for 4, 5 and 3 hours respectively, given that its Direct Material Cost is ₹ 50 and
Direct Labour Cost is ₹ 30.

Question No.8 (Study Material)

Deccan Manufacturing Ltd., have three departments which are regarded as production
departments. Service departments’ costs are distributed to these production departments using
the “Step Ladder Method” of distribution. Estimates of factory overhead costs to be incurred
by each department in the forthcoming year are as follows. Data required for distribution is also
shown against each department:

Department Factory Direct labour No. of Area insq.m.

overhead(₹) hours employees
Production:

X 1,93,000 4,000 100 3,000

Y 64,000 3,000 125 1,500
Z 83,000 4,000 85 1,500
Service:

P 45,000 1,000 10 500

Q 75,000 5,000 50 1,500

R 1,05,000 6,000 40 1,000

S 30,000 3,000 50 1,000

The overhead costs of the four service departments are distributed in the same order, viz. P, Q,
R and S respectively on the following basis.

Department Basis
P Number of employees
Q Direct labour hours
R Area in square meters
S Direct labour hours

You are required to:

(a) PREPARE a schedule showing the distribution of overhead costs of the four service
departments to the three production departments; and

(b) CALCULATE the overhead recovery rate per direct labour hour for each of the three
production departments.

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Question No.12 (Study Material)

A machine shop cost centre contains three machines of equal capacities. To operate these three
machines, nine operators are required i.e. three operators on each machine. Operators are paid
₹20 per hour. The factory works for fourty eight hours in a week which includes 4 hours set up
time. The work is jointly done by operators. The operators are paid fully for the fourty eight
hours. In additions they are paid a bonus of 10 per cent of productive time. Costs are reported
for this company on the basis of thirteen four-weekly period.

The company for the purpose of computing machine hour rate includes the direct wages of the
operator and also recoups the factory overheads allocated to the machines. The following details
of factory overheads applicable to the cost centre are available:

(i) Depreciation 10% per annum on original cost of the machine. Original cost of the each
machine is ₹ 52,000.
(ii) Maintenance and repairs per week per machine is ₹60.
(iii) Consumable stores per week per machine are ₹75.
(iv) Power: 20 units per hour per machine at the rate of 80 paise per unit. No power is
used during the set-up hours.
(v) Apportionment to the cost centre: Rent per annum ₹5,400, Heat and Light per annum
₹9,720, foreman’s salary per annum ₹12,960 and other miscellaneous expenditure per
annum ₹18,000.
Required:

CALCULATE the cost of running one machine for a four week period.

Question No.13 (Study Material)

Gemini Enterprises undertakes three different jobs A, B and C. All of them require the use of a
special machine and also the use of a computer. The computer is hired and the hire charges work
out to ₹ 4,20,000 per annum. The expenses regarding the machine are estimated as follows:
(₹)

Rent for a quarter 17,500

Depreciation per annum 2,00,000
Indirect charges per annum 1,50,000

During the first month of operation the following details were taken from the job register:

JOB
Number of hours the machine was used A B C
Without the use of the computer 600 900 -

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With the use of the computer 400 600 1000

You are required to COMPUTE the machine hour rate:

(a) For the firm as a whole for the month when the computer was used and when the computer
was not used.
(b) For the individual jobs A, B and C.

Question No.14 (Study Material)

A machine shop has 8 identical Drilling machines manned by 6 operators. The machine cannot be
worked without an operator wholly engaged on it. The original cost of all these machines works
out to Rs. 8 lakhs. These particulars are furnished for a 6 months period:
Normal available hours per month 208
Absenteeism (without pay) hours 18
Leave (with pay) hours 20
Normal idle time unavoidable-hours 10
Average rate of wages per worker for 8 hours a day ₹ 800
Production bonus estimated 15% on wages
Value of power consumed ₹ 80,500
Supervision and indirect labour ₹ 33,000
Lighting and electricity ₹ 12,000

These particulars are for a year

Repairs and maintenance including consumables- 3% of value of machines.
Insurance- ₹ 40,000
Depreciation- 10% of original cost.
Other sundry works expenses- ₹ 12,000
General management expenses allocated- ₹ 54,530.
You are required to COMPUTE a comprehensive machine hour rate for the machine shop.

Question No.18 (Study Material)

The total overhead expenses of a factory is ₹ 4,46,380. Taking into account the normal working
of the factory, overhead was recovered in production at ₹ 1.25 per hour. The actual hours
worked were 2,93,104. STATE how would you proceed to close the books of accounts, assuming
that besides 7,800 units produced of which 7,000 were sold, there were 200 equivalent units in
work-in-progress?
On investigation, it was found that 50% of the unabsorbed overhead was on account of increase
in the cost of indirect materials and indirect labour and the remaining 50% was due to factory
inefficiency.

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Question No.19 (Study Material)

In a factory, overheads of a particular department are recovered on the basis of ₹ 5 per
machine hour. The total expenses incurred and the actual machine hours for the department for
the month of August were ₹ 80,000 and 10,000 hours respectively. Of the amount of ₹
80,000, ₹ 15,000 became payable due to an award of the Labour Court and ₹ 5,000 was in
respect of expenses of the previous year booked in the current month (August). Actual
production was 40,000 units, of which 30,000 units were sold. On analysing the reasons, it
was found that 60% of the under-absorbed overhead was due to defective planning and the
rest was attributed to normal cost increase.

SHOW the treatment of over/under-absorbed overhead in the cost accounts ?

Question No.24 (Study Material)

In an engineering company, the factory overheads are recovered on a fixed percentage basis
on direct wages and the administrative overheads are absorbed on a fixed percentage basis
on factory cost.

The company has furnished the following data relating to two jobs undertaken by it in a
period:

Job 101 Job 102

(₹) (₹)
Direct materials 54,000 37,500
Direct wages 42,000 30,000
Selling price 1,66,650 1,28,250
Profit percentage on Total Cost 10% 20%

Required:

(i) COMPUTATION of percentage recovery rates of factory overheads and

administrative overheads.
(ii) CALCULATION of the amount of factory overheads, administrative
overheads and profit for each of the two jobs.
(iii) Using the above recovery rates DETERMINE the selling price of job 103.
The additional data being:
Direct materials ₹ 24,000

Direct wages ₹ 20,000

Profit percentage on selling price 12-½%

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Question No.27 (Study Material)

A light engineering factory fabricates machine parts for customers. The factory commenced
fabrication of 12 nos. machine parts as per customers’ specifications, the expenditure incurred
on the job for the week ending 21st August is as tabulated below:

(₹) (₹)
Direct materials (all items) 780.00
Direct labour (manual) 20 hours @ ₹ 15 per 300.00
hour
Machine facilities :
Machine No. I : 4 hours @ ₹ 45 180.00
Machine No. II : 6 hours @ ₹ 65 390.00 570.00
Total 1,650.00
Overheads @ ₹ 8 per hour on 20 manual hours 160.00
Total cost 1,810.00

The overhead rate of ₹ 8 per hour is based on 3,000 man hours per week; similarly, the machine
hour rates are based on the normal working of Machine Nos. I and II for 40 hours out of
45 hours per week.
After the close of each week, the factory levies a supplementary rate for the recovery of full
overhead expenses on the basis of actual hours worked during the week. During the week ending
21st August, the total labour hours worked was 2,400 and Machine Nos. I and II had worked
for 30 hours and 32.5 hours respectively.
PREPARE a Cost Sheet for the job for the fabrication of 12 nos. machine parts duly levying
the supplementary rates.

Answer:
Fabrication of 12 nos. machine parts (job No.............................................)

Date of commencement: 16th AugustDate of Completion:

Cost sheet for the week ending, August 21st:

(₹) (₹)
Direct materials (all items) 780.00
Direct labour (manual) 20 hours @₹ 15 300.00
per hour
Machine facilities:
Machine No. I : 4 hours @ ₹ 45 180.00
Machine No. II : 6 hours @ ₹ 65 390.00 570.00
Total 1,650.00
Overheads @ ₹ 8 per hour on 20 manual 160.00
hours

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Total cost 1,810.00

Supplementary Rates
Overheads 20 hours @ ₹ 2 per hour 40.00
(Refer WN-1)
Machine facilities: (Refer WN-2)
Machine No. I - 4 hours @ ₹ 15 60.00
Machine No. II - 6 hours @ ₹ 15 90.00 190.00
Cost 2,000.00

Working notes (WN):

1. Overheads budgeted: 3,000 man-hours × ₹ 8 = ₹ 24,000

Actual hours: 2,400 man-hours

Actual rate per hour ₹ 24,000 ÷ 2,400 hours = ₹ 10

Supplementary charge ₹ 2 (₹10 – ₹ 8) per hour

2. Machine facilities:

Machine No. I Machine No. II

Budgeted ₹1,800 ₹2,600

(40 × ₹45) (40 × ₹65)

Actual number of hours 30 32.5
Actual rate per hour ₹60.00 ₹80.00
Supplementary rate ₹ 15.00 ₹ 15.00
per hour
(₹60.00 – ₹45.00) ( ₹ 80.00 – ₹65.00)

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Chapter 4
ACTIVITY BASED COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Activity based Costing
• Timings: 97 minutes to 104 minutes

Question No. 1:
ABC Ltd. is a multiproduct company, manufacturing three products A, B and C. The budgeted
costs and production for the year ending 31st March are as follows:
A B
Production quantity (Units) 4,000 3,000 1,600
Resources per Unit:
- Direct Materials (Kg.) 4 6 3
- Direct Labour (Minutes) 30 45 60

The budgeted direct labour rate was ₹ 10 per hour, and the budgeted material cost was ₹ 2 per
kg. Production overheads were budgeted at ₹ 99,450 and were absorbed to products using the
direct labour hour rate. ABC Ltd. followed the Absorption Costing System.

ABC Ltd. is now considering to adopt an Activity Based Costing system. The following additional
information is made available for this purpose.

1. Budgeted overheads were analysed into the following:

(₹)
Material handling 29,100
Storage costs 31,200
Electricity 39,150

2. The cost drivers identified were as follows:

Material handling Weight of material handled
Storage costs Number of batches of material
Electricity Number of Machine operations

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3. Data on Cost Drivers was as follows:

A B
For complete production:
Batches of material 10 5 15
Per unit of production:
Number of Machine operations 6 3 2

You are requested to:

1. PREPARE a statement for management showing the unit costs and total costs of
each product using the absorption costing method.
2. PREPARE a statement for management showing the product costs of each product
using the ABC approach.
3. STATE what are the reasons for the different product costs under the two
approaches?

Answer:
1. Traditional Absorption Costing
A B C D
Quantity (units) 4,000 3,000 1,600 8,600
Direct labour (minutes) 30 45 60 -
Direct labour hours (a × b) ÷ 60 2,000 2,250 1,600 5,850
minutes

Overhead rate per direct labour hour:

= Budgeted overheads ÷ Budgeted labour hours
= ₹ 99,450 ÷ 5,850 hours
= ₹ 17 per direct labour hour

Unit Costs:
A (₹) B (₹) C (₹)
Direct Costs:
- Direct Labour 5.00 7.50 10.00
- Direct Material 8.00 12.00 6.00
Production 8.50 {(₹17 x 30) ÷ 12.75 {(₹17 x 45) ÷ 17.00 {(₹17 x 60) ÷
Overhead: 60} 60} 60}
Total unit costs 21.50 32.25 33.00
Number of units 4,000 3,000 1,600
Total costs 86,000 96,750 52,800

2. Activity Based Costing

A B C Total
Quantity (units) 4,000 3,000 1,600 --
Material Weight per unit (Kg.) 4 6 3 --

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Total material weight 16,000 18,000 4,800 38,800

Machine operations per unit 6 3 2 --
Total operations 24,000 9,000 3,200 36,200
Total batches of Material 10 5 15 30

Material handling rate per kg. = ₹ 29,100 ÷ 38,800 kg.

= ₹ 0.75 per kg.
Electricity rate per machine operations = ₹ 39,150 ÷ 36,200
= ₹ 1.081 per machine operations

Storage rate per batch = ₹ 31,200 ÷ 30 batches

= ₹ 1,040 per batch
Unit Costs:
A (₹) B (₹) C (₹)
Direct Costs:
- Direct Labour 5.00 7.50 10.00
- Direct Material 8.00 12.00 6.00
Production
Overhead:
Material Handling 3.00 (₹0.75 x 4) 4.50 (₹0.75 x 6) 2.25 (₹0.75 x 3)
Electricity 6.49 (₹1.081 x 6) 3.24 (₹1.081 x 3) 2.16 (₹1.081 x 2)
Storage 2.60 1.73 9.75
{₹10 x ( ₹1,040 ÷ { ₹5 x (₹1,040 ÷ {₹15 x (₹1,040 ÷
4,000)} 3,000)} 1,600)}
Total unit costs 25.09 28.97 30.16
Number of units 4,000 3,000 1,600
Total costs ₹ 1,00,360 ₹ 86,910 ₹ 48,256

3. Comments: The difference in the total costs under the two systems is due to the
differences in the overheads borne by each of the products. The Activity Based
Costs appear to be more precise.

Question No.4:
‘Humara - Apna’ bank offers three products, viz., deposits, Loans and Credit Cards. The bank
has selected 4 activities for a detailed budgeting exercise, following activity based costing
methods. The bank wants to know the product wise total cost per unit for the selected
activities, so that prices may be fixed accordingly. The following information is made available to
formulate the budget:
Activity Present Estimation for the budget period
Cost (₹)
ATM Services:
(a) Machine Maintenance 4,00,000 All fixed, no change.
(b) Rents 2,00,000 Fully fixed, no change.
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(c) Currency Replenishment Cost 1,00,000 Expected to double during budget period.
7,00,000 (This activity is driven by no. of ATM
transactions)
Computer Processing 5,00,000 Half this amount is fixed and no change is
expected.
The variable portion is expected to
increase to three times the current level.
(This activity is driven by the number of
computer transactions)
Issuing Statements 18,00,000 Presently, 3 lakh statements are made. In
the budget period, 5 lakh statements are
expected.
For every increase of one lakh statement,
one lakh rupees is the budgeted increase.
(This activity is driven by the number of
statements)
Computer Inquiries 2,00,000 Estimated to increase by 80% during the
budget period.
(This activity is driven by telephone
minutes)

The activity drivers and their budgeted quantifies are given below:
Activity Drivers Deposits Loans Credit Cards
No. of ATM Transactions 1,50,000 -- 50,000
No. of Computer Processing 15,00,000 2,00,000 3,00,000
Transactions
No. of Statements to be 3,50,000 50,000 1,00,000
issued
Telephone Minutes 3,60,000 1,80,000 1,80,000

The bank budgets a volume of 58,600 deposit accounts, 13,000 loan accounts, and 14,000 Credit
Card Accounts.
Required:
i. CALCULATE the budgeted rate for each activity.
ii. PREPARE the budgeted cost statement activity wise.
iii. COMPUTE the budgeted product cost per account for each product using (i) and (ii)
above.

Question No. 5:
RST Limited specializes in the distribution of pharmaceutical products. It buys from the
pharmaceutical companies and resells to each of the three different markets.
i. General Supermarket Chains
ii. Drugstore Chains
iii. Chemist Shops
The following data for the month of April in respect of RST Limited has been reported:

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General Drugstore Chemist

Supermarket Chains (₹) Shops (₹)
Chains (₹)
Average revenue per delivery 84,975 28,875 5,445
Average cost of goods sold per delivery 82,500 27,500 4,950
Number of deliveries 330 825 2,750
In the past, RST Limited has used gross margin percentage to evaluate the relative profitability
of its distribution channels.
The company plans to use activity–based costing for analysing the profitability of its
distribution channels.
The Activity analysis of RST Limited is as under:
Number of deliveries Cost Driver
Customer purchase order processing Purchase orders by customers
Line-item ordering Line-items per purchase order
Store delivery Store deliveries
Cartons dispatched to stores Cartons dispatched to a store per delivery
Shelf-stocking at customer store Hours of shelf-stocking
The April month’s operating costs (other than cost of goods sold) of RST Limited are ₹8,27,970.
These operating costs are assigned to five activity areas. The cost in each area and the quantity
of the cost allocation basis used in that area for the month of April are as follows:
Activity Area Total costs (₹) Total Units of Cost
Allocation Base
Customer purchase order processing 2,20,000 5,500 orders
Line-item ordering 1,75,560 58,520-line items
Store delivery 1,95,250 3,905 store deliveries
Cartons dispatched to store 2,09,000 2,09,000 cartons
Shelf-stocking at customer store 28,160 1,760 hours

Other data for the month of April include the following:

General Drugstore Chemist
Supermarket Chains Shops
Chains
Total number of orders 385 990 4,125
Average number of line items per order 14 12 10
Total number of store deliveries 330 825 2,750
Average number of cartons shipped per 300 80 16
store delivery
Average number of hours of shelf- 3 0.6 0.1
stocking per store delivery

Required:
i. COMPUTE gross-margin percentage for each of its three distribution channels and
compute RST Limited’s operating income.

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ii. COMPUTE the rate per unit of the cost-allocation base for each of the five activity
areas.
iii. COMPUTE the operating income of each distribution channel using the activity-
based costing information. Comment on the results. What new insights are available
with the activity-based cost information?
iv. DESCRIBE four challenges one would face in assigning the total operating costs of ₹
8,27,970 to five activity areas.

Question No. 6:
Family Store wants information about the profitability of individual product lines: Soft drinks,
Fresh produce and Packaged food. Family store provides the following data for the current year
for each product line:
Soft drinks Fresh Packaged
produce food
Revenues ₹ 39,67,500 ₹ ₹ 60,49,500
1,05,03,000
Cost of goods sold ₹ 30,00,000 ₹ 75,00,000 ₹ 45,00,000
Cost of bottles returned ₹ 60,000 ₹0 ₹0
Number of purchase orders placed 360 840 360
Number of deliveries received 300 2,190 660
Hours of shelf-stocking time 540 5,400 2,700
Items sold 1,26,000 11,04,000 3,06,000

Family store also provides the following information for the current year:
Activity Description of activity Total Cost Cost-allocation
base
Bottles Returning of empty bottles ₹ 60,000 Direct tracing to soft
returns drink line
Ordering Placing of orders for purchases ₹ 7,80,000 1,560 purchase orders
Delivery Physical delivery and receipt of ₹ 12,60,000 3,150 deliveries
goods
Shelf Stocking of goods on store ₹ 8,64,000 8,640 hours of shelf-
stocking shelves and on- going restocking stocking time
Customer Assistance provided to ₹ 15,36,000 15,36,000 items sold
Support customers including check-out

Required:
i. Family store currently allocates support cost (all cost other than cost of good sold)
to product lines on the basis of cost of goods sold of each product line. CALCULATE
the operating income and operating income as a % of revenues for each product line.
ii. If Family Store allocates support costs (all costs other than cost of goods sold) to
product lines using and activity-based costing system, CALCULATE the operating
income and operating income as a % of revenues for each product line.

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Question No. 7:
Alpha Limited has decided to analyse the profitability of its five new customers. It buys bottled
water at ₹ 90 per case and sells to retail customers at a list price of ₹ 108 per case. The data
pertaining to five customers are:
Customers
A B C D E
Cases sold 4,680 19,688 1,36,800 71,550 8,775
Listed ₹108 ₹108 ₹ 108 ₹ 108 ₹ 108
Selling Price
Actual ₹108 ₹106.20 ₹ 99 ₹ 104.40 ₹ 97.20
Selling Price
Number of 15 25 30 25 30
Purchase
orders
Number of 2 3 6 2 3
Customer
visits
Number of 10 30 60 40 20
deliveries
Kilometres 20 6 5 10 30
travelled per
delivery
Number of 0 0 0 0 1
expedited
deliveries

Its five activities and their cost drivers are:

Activity Cost Driver Rate
Order taking ₹ 750 per purchase order
Customer visits ₹ 600 per customer visit
Deliveries ₹ 5.75 per delivery Km travelled
Product handling ₹ 3.75 per case sold
Expedited deliveries ₹ 2,250 per expedited delivery

Required:
i. COMPUTE the customer-level operating income of each of five retail customers now
being examined (A, B, C, D and E). Comment on the results.
ii. STATE what insights are gained by reporting both the list selling price and the
actual selling price for each customer.

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Question No. 15:

Woolmark Ltd. manufactures three types of products namely P, Q and R. The data relating to a
period are as under:
Particulars P Q R
Machine hours per unit 10 18 14
Direct Labour hours per unit 4 12 8
Direct Material per unit (₹) 90 80 120
Production (units) 3,000 5,000 20,000

Currently the company uses traditional costing method and absorbs all production overheads on
the basis of machine hours. The machine hour rate of overheads is ₹ 6 per hour. Direct labour
hour rate is ₹ 20 per hour. The company proposes to use activity based costing system and the
activity analysis is as under:
Particulars P Q R
Batch size (units) 150 500 1,000
Number of purchase orders per batch 3 10 8
Number of inspections per batch 5 4 3

The total production overheads are analysed as under:

Machine set up costs............................................. 20%
Machine operation costs....................................... 30%
Inspection costs..................................................... 40%
Material procurement related costs................. 10%

Required
i. CALCULATE the cost per unit of each product using traditional method, of
absorbing all production overheads on the basis of machine hours.
ii. CALCULATE the cost per unit of each product using activity based costing
principles.

Question No. 16:

BABYSOFT is a global brand created by Bio-organic Ltd. The company manufactures three
ranges of beauty soaps i.e. BABYSOFT- Gold, BABYSOFT- Pearl, and BABYSOFT- Diamond. The
budgeted costs and production for the month of December are as follows:
BABYSOFT- Gold BABYSOFT- Pearl BABYSOFT-
Diamond
Production of soaps 4,000 3,000 2,000
(Units)
Resources per Unit: Qty Rate Qty Rate Qty Rate
Essential Oils 60 ml ₹200 / 55 ml ₹ 300 / 65 ml ₹ 300 /
100 ml 100 ml 100 ml
Cocoa Butter 20 g ₹ 200 / 20 g ₹ 200 / 20 g ₹ 200 /
100 g 100 g 100 g

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Filtered Water 30 ml ₹ 15 / 30 ml ₹ 15 / 30 ml ₹ 15 /
100 ml 100 ml 100 ml
Chemicals 10 g ₹ 30 / 12 g ₹ 50 / 15 g ₹ 60 /
100 g 100 g 100 g
Direct Labour 30 ₹ 10 / 40 ₹ 10 / 60 ₹ 10 /
minutes hour minutes hour minutes hour

Bio-organic Ltd. followed an Absorption Costing System and absorbed its production overheads,
to its products using direct labour hour rate, which were budgeted at ₹ 1,98,000.

Now, Bio-organic Ltd. is considering adopting an Activity Based Costing system. For this,
additional information regarding budgeted overheads and their cost drivers is provided below:
Particulars (₹) Cost drivers
Forklifting cost 58,000 Weight of material lifted
Supervising cost 60,000 Direct labour hours
Utilities 80,000 Number of Machine operations

The number of machine operations per unit of production are 5, 5, and 6 for BABYSOFT- Gold,
BABYSOFT- Pearl, and BABYSOFT- Diamond respectively.

(Consider (i) Mass of 1 litre of Essential Oils and Filtered Water equivalent to 0.8 kg and 1 kg
respectively (ii) Mass of output produced is equivalent to the mass of input materials taken
together.)
You are requested to:
i. PREPARE a statement showing the unit costs and total costs of each product using
the absorption costing method.
ii. PREPARE a statement showing the product costs of each product using the ABC
approach.
iii. STATE what are the reasons for the different product costs under the two
approaches.

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Chapter 5
SERVICE COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Service Costing
• Timings: 49 Minutes to 74 Minutes

Question No. 2

ABC Transport Company has given a route 40 kilometres long to run bus.
(a) The bus costs the company a sum of ₹ 10,00,000

(b) It has been insured at 3% p.a. and

(c) The annual tax will amount to ₹ 20,000

(d) Garage rent is ₹ 20,000 per month.

(e) Annual repairs will be ₹ 2,04,000

(f) The bus is likely to last for 2.5 years

(g) The driver’s salary will be ₹ 30,000 per month and the conductor’s salary will be ₹

25,000 per month in addition to 10% of takings as commission [To be shared by the

driver and conductor equally].

(h) Cost of Stationery will be ₹ 1,000 per month.

(i) Manager-cum-accountant’s salary is ₹ 17,000 per month.

(j) Petrol and oil will be ₹ 500 per 100 kilometres.

(k) The bus will make up 3 up and down trips carrying on an average 40 passenger on

each trip.

(l) The bus will run on an average 25 days in a month.

Assuming 15% profit on takings, CALCULATE the bus fare to be charged per Passenger-
kilometre.

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Question No. 3:
SMC is a public school having five buses each plying in different directions for the transport of
its school students. In view of a larger number of students availing of the bus service the buses
work two shifts daily both in the morning and in the afternoon. The buses are garaged in the
school. The work-load of the students has been so arranged that in the morning the first trip
picks up senior students and the second trip plying an hour later picks up the junior students.
Similarly, in the afternoon the first trip takes the junior students and an hour later the second
trip takes the senior students’ home.
The distance travelled by each bus one way is 8 km. The school works 25 days in a month and
remains closed for vacations in May, June and December. Bus fee, however is payable by the
students for all 12 months in a year.
The details of expenses for a year are as under:
Driver’s salary ₹4,500 per month per driver
Cleaner’s salary ₹3,500 per month
(Salary payable for all 12 months)

(One cleaner employed for all the five buses)

License fee, taxes, etc. ₹8,600 per bus per annum

Insurance ₹10,000 per bus per annum

Repairs & maintenance ₹35,000 per bus per annum

Purchase price of the bus ₹15,00,000 each

Life of each bus 12 years

Scrap value of buses at the end of life ₹3,00,000

Diesel cost ₹45.00 per litre

Each bus gives an average mileage of 4 km. per litre of diesel.
Seating capacity of each bus is 50 students.
The seating capacity is fully occupied during the whole year.

Students picked up and dropped within a range up to 4 km. of distance from the school are
charged half fare and fifty percent of the students travelling in each trip are in this category.
Ignore interest. Since the charges are to be based on average cost you are required to:

(i) PREPARE a statement showing the expenses of operating a single bus and the
fleet of five buses for a year.
(ii) WORK OUT the average cost per student per month in respect of –
(A) students coming from a distance of upto 4km. from the school and
(B) students coming from a distance beyond 4km. from the school.

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Question No.7:
A lodging home is being run in a small hill station with 100 single rooms. The home offers
concessional rates during six off- season months in a year when number of visitors are limited.
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 on 31st March. [Assume a month to be of 30 days].
(i) Occupancy during the season is 80% while in the off-season it is 40% only.
(ii) Total investment in the home is ₹ 200 lakhs of which 80% relate to buildings and balance
for furniture and equipment.

(iii) Expenses:
Staff salary [Excluding room attendants] : ₹ 5,50,000
Repairs to building : ₹ 2,61,000
Laundry charges : ₹ 80,000
Interior : ₹ 1,75,000
Miscellaneous expenses : ₹ 1,90,800
(iv) Annual depreciation is to be provided for buildings @ 5% and on furniture and
equipment @ 15% on straight-line-basis.

(v) Room attendants are paid ₹ 10 per room day on the basis of occupancy of the rooms
in a month.

(vi) Monthly lighting charges are ₹ 120 per room, except in four months in winter when
it is ₹ 30 per room.

You are required to WORK OUT the room rent chargeable per day both during the season and
the off-season months on the basis of the foregoing information

Question No. 9

ABC Hospital runs a Critical Care Unit (CCU) in a hired building. CCU consists of 35 beds and 5
more beds can be added, if required.
Rent per month- ₹ 75,000
Supervisors – 2 persons - ₹ 25,000 per month – each
Nurses – 4 persons - ₹ 20,000 per month – each
Ward boys – 4 persons - ₹ 5,000 per month – each
Doctors paid ₹ 2,50,000 per month – paid on the basis of number of patients attended and the
time spent by them
Other expenses for the year are as follows:
Repairs (Fixed) - ₹ 81,000
Food to Patients (Variable) - ₹ 8,80,000
Other services to patients (Variable) - ₹ 3,00,000
Laundry Charges (Variable) - ₹ 6,00,000

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Medicines (Variable) - ₹ 7,50,000

Other fixed expenses - ₹ 10,80,000
Administration expenses allocated - ₹ 10,00,000
It was estimated that for 150 days in a year 35 beds are occupied and for 80 days only 25 beds
are occupied.

The hospital hired 750 beds at a charge of ₹ 100 per bed per day, to accommodate the flow of
patients. However, this does not exceed more than 5 extra beds over and above the normal
capacity of 35 beds on any day.

You are required to –

(a) CALCULATE profit per Patient day, if the hospital recovers on an average ₹ 2,000
per day from each patient

(b) FIND OUT Breakeven point for the hospital.

Question No.12
GTC has a lorry of 6-tonne carrying capacity. It operates lorry service from city A to city B for
a particular vendor. It charges ₹ 2,400 per tonne from city ‘A’ to city ‘B’ and ₹ 2,200 per tonne
for the return journey from city ‘B’ to city ‘A’. Goods are also delivered to an intermediate city
‘C’ but no extra changes are billed for unloading goods in-between destination city and no
concession in rates is given for reduced load after unloading at intermediate city. Distance
between the city ‘A’ to ‘B’ is 300 km and distance from city ‘A’ to ‘C’ is 140 km.
In the month of January, the truck made 12 journeys between city ‘A’ and city ‘B’. The details of
journeys are as follows:
Outward journey No. of journeys Load (in tonne)
‘A’ to ‘B’ 10 6
‘A’ to ‘C’ 2 6
‘C’ to ‘B’ 2 4
Return journey No. of journeys Load (in tonne)
‘B’ to ‘A’ 5 8
‘B’ to ‘A’ 6 6
‘B’ to ‘C’ 1 6
‘C’ to ‘A’ 1 0

Annual fixed costs and maintenance charges are ₹ 6,00,000 and ₹ 1,20,000 respectively. Running
charges spent during the month of January are ₹ 2,94,400 (includes ₹ 12,400 paid as penalty for
overloading).
You are required to:
i. CALCULATE the cost as per (a) Commercial tonne-kilometer. (b) Absolute tonne-
kilometer.
ii. CALCULATE Net Profit/ loss for the month of January.

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QUESTION 13
Coal is transported from two mines X & Y and unloaded at plots in a railway station. X is at
distance of 15 kms and Y is at a distance of 20 kms from the rail head plots. A fleet of lorries
having carrying capacity of 4 tonnes is used to transport coal from the mines. Records reveal
that average speed of the lorries is 40 kms per hour when running and regularly take 15 minutes
to unload at the rail head.

At Mine X average loading time is 30 minutes per load, while at mine Y average loading time is 25
minutes per load.

Additional Information:
Driver’s wages, depreciation, insurance and taxes, etc. ₹ 12 per hour
Operated Fuel, oil tyres, repairs and maintenance, etc. ₹ 1.60 per km

You are required to prepare a statement showing the cost per tonne kilometre of carrying
coal from each mine 'X' and 'Y'.
(Past Paper, May 22, 5 marks)

Question 15
BHG Toll Plaza Ltd built a 60 km. long highway and now operates a toll plaza to collect tolls from
passing vehicles using the highway. The company has estimated that a total of 12 crore vehicles
(only single type of vehicle) will be using the highway during the 10 years toll collection tenure.
Toll Operating and Maintenance cost for the month of April are as follows:
(i) Salary to –
➢ Collection Personnel (3 shifts and 4 persons per shift) - ₹ 550 per day per
person
➢ Supervisor (2 shifts and 1 person per shift) - ₹ 750 per day per person
➢ Security personnel (3 shifts and 6 persons per shift) - ₹ 450 per day per
person
➢ Toll Booth Manager (2 shifts and 1 person per shift) - ₹ 900 per day per
person
(ii) Electricity - ₹ 8,00,000
(iii) Telephone - ₹ 1,40,000
(iv) Maintenance cost - ₹ 30 Lakh
Monthly depreciation and amortisation expenses will be ₹ 1.5 crore. Further, the company
needs 25% profit over total cost to cover interest and other costs.
Required:
(i) CALCULATE cost per kilometre per month.
(ii) CALCULATE the toll rate per vehicle.

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Question 21

A company is considering three alternative proposals for conveyance facilities for its sales
personnel who has to do considerable travelling, approximately 20,000 kilometres every year.
The proposals are as follows:

(i) Purchase and maintain its own fleet of cars. The average cost of a car is ₹ 6,00,000

(ii) Allow the Executive use his own car and reimburse expenses at the rate of ₹ 10 per
kilometre and also bear insurance costs.

(iii) Hire cars from an agency at ₹ 1,80,000 per year per car. The company will have to
bear costs of petrol, taxes and tyres.

The following further details are available:

Petrol ₹ 6 per km Repairs and maintenance ₹ 0.20 per km.
Tyre ₹ 0.12 per km Insurance ₹ 1,200 per car per annum
Taxes ₹ 800 per car per Life of the car: 5 years with annual mileage of
annum 20,000 km.

Resale value: ₹ 80,000 at the end of the fifth year.

WORK OUT the relative costs of three proposals and rank them.

Question 23

Solar Power Ltd has a power generation capacity of 1000 Megawatt per day. On an average it
operates at 85% of its installed capacity. The cost structure of the plant is as under:
Cost Particulars Amount (₹ in lakhs)
1. Employee cost per year 2500
2. Solar panel maintenance cost per year 250
3. Site maintenance cost per year 150
4. Depreciation per year 5940

CALCULATE cost of generating 1kW of power.

[ 1 Megawatt = 1,000 kW]

Question 38 (MTP, Apr 23, 5 marks)

Arnav LMV Pvt Ltd operates cab/car rental service in Delhi/NCR. It provides its service to the
offices of Noida, Gurugram and Faridabad. At present it operates CNG fuelled cars but it is also

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considering to upgrade these into Electric vehicle (EV). The following details related with the
owning of CNG & EV propelled cars are as tabulated below:
Particulars CNG Car EV Car
Car purchase price (₹) 9,20,000 15,20,000
Govt. subsidy on purchase of car (₹) -- 1,50,000
Life of the car 15 years 10 years
Residual value (₹) 95,000 1,70,000
Mileage 20 km/kg 240 km per charge
Electricity consumption per full charge -- 30 kWh
CNG cost per Kg (₹) 90 --
Power cost per kWh (₹) -- 7.60
Annual maintenance cost (₹) 8,000 5,200
Annual insurance cost (₹) 7,600 14,600
Tyre replacement cost in every 5-year (₹) 16,000 16,000
Battery replacement cost in every 8-year (₹) 12,000 5,40,000

Apart from the above, the following are the additional information:
Particulars
Average distance covered by a car in a month 1,500 km
Driver’s salary (₹) 20,000 p.m
Garage rent per car (₹) 4,500 p.m
Share of Office & Administration cost per car (₹) 1,500 p.m

Required:

CALCULATE the operating cost of vehicle per month per car for both CNG & EV options.

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Chapter 6
PROCESS COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Process Costing
• Timings: 74 Minutes to 129 Minutes

Question No. 3.
RST Limited processes Product Z through two distinct processes – Process- I and Process-II.
On completion, it is transferred to finished stock. From the following information for the
current year, PREPARE Process- I, Process- II and Finished Stock A/c:

Particulars Process-I Process-II

Raw materials used 7,500 units --
Raw materials cost per unit ₹ 60 --
Transfer to next process/finished 7,050 units 6,525 units
stock
Normal loss (on inputs) 5% 10%
Direct wages ₹ 1,35,750 ₹ 1,29,250
Direct Expenses 60% of Direct wages 65% of Direct wages
Manufacturing overheads 20% of Direct wages 15% of Direct wages
Realisable value of scrap per unit ₹12.50 ₹37.50
6,000 units of finished goods were sold at a profit of 15% on cost. Assume that there was no
opening or closing stock of work-in-process.

Question No. 5.
A manufacturing unit manufactures a product ‘XYZ’ which passes through three distinct
processes- X,Y and Z. The following data I given:
Process X Process Y Process Z
Material consumed (in ₹) 2,600 2,250 2,000
Direct wages (in ₹) 4,000 3,500 3,000

• The total Production Overhead of ₹15,750 was recovered@ 150% of Direct wages.

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• 15,000 units at ₹2 each were introduced to Process 'X'.

• The output of each process passes to the next process and finally, 12,000 units
were transferred to Finished Stock Account from Process 'Z'.
• No stock of materials or work in progress was left at the end.

The following additional information is given:

Process % of wastage to normal Value of Scrap per unit ( ₹)
input
X 6% 1.10
Y ? 2.00
Z 5% 1.00

You are required to:

i. Find out the percentage of wastage in process 'Y', given that the output of Process
'Y' is transferred to Process 'Z' at ₹ 4 per unit.
ii. Prepare Process accounts for all the three processes X, Y and Z.
(Past Paper, Jul 21, 10 marks)

Question No. 8:
Opening work-in-process 1,000 units (60% complete); Cost ₹ 1,10,000. Units introduced during
the period 10,000 units; Cost ₹ 19,30,000. Transferred to next process - 9,000 units.

Closing work-in-process - 800 units (75% complete). Normal loss is estimated at 10% of total
input including units in process at the beginning. Scraps realise ₹ 10 per unit. Scraps are 100%
complete.

Using FIFO method, COMPUTE equivalent production and cost per equivalent unit. Also evaluate
the output.

Question No. 9:

Refer to information provided in Illustration 4 above and solve this by Weighted Average
Method:

Question No. 11.

Hill manufacturing Ltd uses process costing to manufacture Water density sensors for hydro
sector. The following information pertains to operations for the month of May.
Particulars Units
Beginning WIP, May 1 16,000
Started in production during May 1,00,000
Completed production during May 92,000
Ending work in progress, May 31 24,000

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The beginning work in progress was 60% complete for materials and 20% complete for
conversion costs. The ending inventory was 90% complete for material and 40% complete for
conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are material ₹27,670, direct labour ₹30,120 and factory overhead ₹
12,720.
Cost incurred during May are material used, ₹ 4,79,000, direct labour ₹1,82,880, factory
overheads ₹ 3,91,160.

CALCULATE:
i. Using the FIFO method, the equivalent units of production for material.
ii. Cost per equivalent unit for conversion cost.

Question No. 13.

Following details are related to the work done in Process-I by XYZ Company during the month of
March:
(₹)
Opening work-in process (2,000 units)
Materials 80,000
Labour 15,000
Overheads 45,000
Materials introduced in Process-I (38,000 units) 14,80,000
Direct labour 3,59,000
Overheads 10,77,000

Units scrapped: 3,000 units

Degree of completion: 100%
Materials 80%
Labour and overheads
Closing work-in process: 2,000 units
Degree of completion: 100%
Materials 80%
Labour and overheads
Units finished and transferred to Process-II: 35,000 units

Normal Loss:
5% of total input including opening work-in-process.
Scrapped units fetch ₹ 20 per piece.

You are required to PREPARE using average method:

i. Statement of equivalent production
ii. Statement of cost
iii. Statement of distribution cost, and
iv. Process-I Account, Normal Loss Account and Abnormal Loss Account.
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Question No. 15.

‘Healthy Sweets’ is engaged in the manufacturing of jaggery. Its process involve sugarcane
crushing for juice extraction, then filtration and boiling of juice along with some chemicals and
then letting it cool to cut solidified jaggery blocks.

The main process of juice extraction (Process – I) is done in conventional crusher, which is then
filtered and boiled (Process – II) in iron pots. The solidified jaggery blocks are then cut, packed
and dispatched. For manufacturing 10 kg of jaggery, 100 kg of sugarcane is required, which
extracts only 45 litres of juice.

Following information regarding Process – I has been obtained from the manufacturing
department of Healthy Sweets for the month of January:

(₹)
Opening work-in process (4,500 litre)
Sugarcane 50,000
Labour 15,000
Overheads 45,000
Sugarcane introduced for juice extraction (1,00,000 kg) 5,00,000
Direct Labour 2,00,000
Overheads 6,00,000
Abnormal Loss: 1,000 kg
Degree of completion:
Sugarcane 100%
Labour and overheads 80%
Closing work-in process: 9,000 litres
Degree of completion:
Sugarcane 100%
Labour and overheads 80%

Extracted juice transferred for filtering and boiling: 39,500 litre

(Consider mass of 1 litre of juice equivalent to 1 kg)

You are required to PREPARE using average method:

i. Statement of equivalent production,
ii. Statement of cost,
iii. Statement of distribution cost, and
iv. Process-I Account.

Question No. 19.

A Ltd. produces product ‘AXE’ which passes through two processes before it is completed and
transferred to finished stock. The following data relate for the month of October:

Process -I Process - II Process - III

Opening stock 7,500 9,000 22,500

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Direct materials 15,000 15,750 --

Direct wages 11,200 11,250 --
Factory overheads 10,500 4,500 --
Closing stock 3,700 4,500 11,250
Inter-process profit included in -- 1,500 8,250
opening stock
Output of Process- I is transferred to Process- II at 25% profit on the transfer price. Output
of Process- II is transferred to finished stock at 20% profit on the transfer price. Stock in
processes is valued at prime cost. Finished stock is valued at the price at which it is received
from process II. Sales during the period are ₹ 1,40,000.

PREPARE Process cost accounts and finished goods account showing the profit element at each
stage.

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Chapter 7
JOINT PRODUCT BY PRODUCT

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Joint product by product
• Timings: 129 Minutes to 144 Minutes

Question No. 4.
Inorganic Chemicals purchases salt and processes it into more refined products such as Caustic
Soda, Chlorine, and PVC. In the month of July, Inorganic Chemicals purchased Salt for ₹ 40,000.
Conversion cost of ₹ 60,000 were incurred up to the split off point, at which time two sealable
products were produced. Chlorine can be further processed into PVC.
The July production and sales information is as follows:
Production (in tonne) Sales Quantity (in Selling price per
tonne) tonne (₹)
Caustic Soda 1,200 1,200 50
Chlorine 800 -- --
PVC 500 500 200

All 800 tonnes of Chlorine were further processed, at an incremental cost of ₹20,000 to yield
500 tonnes of PVC. There was no beginning or ending inventories of Caustic Soda, Chlorine, or
PVC in July.
There is active market for Chlorine. Inorganic Chemicals could have sold all its July production
of Chlorine at ₹ 75 per tonne.
Required :
1. SHOW how joint cost of ₹1,00,000 would be apportioned between Caustic Soda and
Chlorine under each of following methods:
a. sales value at split- off point ;
b. physical unit method, and
c. estimated net realisable value.
2. Lifetime Swimming Pool Products offers to purchase 800 tonnes of Chlorine in
August at ₹75 per tonne. This sale of Chlorine would mean that no PVC would be

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produced in August. EXPLAIN how the acceptance of this offer for the month of
August would affect operating income?

Question No. 5.
Smile company produces two main products and a by-product out of a joint process. The ratio of
output quantities to input quantities of direct material used in the joint process remains
consistent on yearly basis. Company has employed the physical volume method to allocate joint
production costs to the main products. The net realizable value of the by-product is used to
reduce the joint production costs before the joint costs are allocated to the main products.
Details of company’s operation are given in the table below. During the month, company incurred
joint production costs of ₹10,00,000/- The main products are not marketable at the split off
point and thus have to be processed further.
Particulars Product-A Product-B By Product
Monthly output in 60,000 1,20,000 50,000
kg.
Selling price per kg. ₹50 ₹30 ₹5
Process costs ₹2,00,000 ₹3,00,000

FIND OUT the amount of joint product cost that Smile company would allocate to the product-B
by using the physical volume method to allocate joint production costs?

Question No. 6.
Sun-moon Ltd. Produces and sells the following products:
Products Units Selling price at Selling price after
split-off point (₹) further processing (₹)
A 2,00,000 17 25
B 30,000 13 17
C 25,000 8 12
D 20,000 10 --
E 75,000 14 20

Raw material costs ₹35,90,000 and other manufacturing expenses cost ₹ 5,47,000 in the
manufacturing process which are absorbed on the products on the basis of their ‘Net realisable
value’. The further processing costs of A, B, C and E are ₹ 12,50,000; ₹ 1,50,000; ₹ 50,000 and
₹ 1,50,000 respectively. Fixed costs are ₹ 4,73,000.
You are required to PREPARE the following in respect of the coming year:
i. Statement showing income forecast of the company assuming that none of its
products are to be further processed.
ii. Statement showing income forecast of the company assuming that products A, B, C
and E are to be processed further.
Can you suggest any other production plan whereby the company can maximise its profits? If
yes, then submit a statement showing income forecast arising out of adoption of that plan.

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Question No. 8.
NN Manufacturing company uses joint production process that produces three products at the
split off point. Joint productions costs during September were ₹ 8,40,000. Product information
for September was as follows:
Products Product A Product B Product C
Units produced 1,500 3,000 4,500
Units sold 2,000 6,000 7,500
Sales prices:
At the split-off ₹100
After further processing ₹150 ₹175 ₹50
Costs to process after split-off ₹1,50,000 ₹1,50,000 ₹1,50,000

Assume that product C is treated as a by-product and the company accounts for the by-product
at net realizable value as a reduction of joint cost. Assume also that Product B&C must be
processed further before they can be sold. FIND OUT the total cost of Product A in
September if joint cost allocation is based on net realizable values?

Question No. 12. (Past Paper, Nov 20, 5 marks)

A company's plant processes 6,750 units of a raw material in a month to produce two products
'M' and 'N'.
The process yield is as under:
Product M 80%
Product N 12%
Process loss 8%
The cost of raw material is ₹80 per unit.
Processing cost is ₹2,25,000 of which labour cost is accounted for 66%. Labour is chargeable to
products 'M' and 'N' in the ratio of 100:80.
Prepare a Comprehensive Cost Statement for each product showing:
i. Apportionment of joint cost among products 'M' and 'N' and
ii. Total cost of the product’s 'M' and 'N'.

Question No. 13. (Past Paper, Jan 21, 10 marks)

Mayura Chemicals Ltd buys a particular raw material at ₹ 8 per litre. At the end of the
processing in Department- I, this raw material splits-off into products X, Y and Z. Product X is
sold at the split-off point, with no further processing. Products Y and Z require further
processing before they can be sold. Product Y is processed in Department-2, and Product Z is
processed in Department-3. Following is a summary of the costs and other related data for the
year 2019-20:
Particulars Department
1 2 3
Cost of Raw Material ₹ 4,80,000 -- --
Direct Labour ₹70,000 ₹4,50,000 ₹6,50,000

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Manufacturing Overhead ₹48,000 ₹2,10,000 ₹4,50,000

Products
X Y Z
Sales (litres) 10,000 15,000 22,500
Closing inventory (litres) 5,000 -- 7,500
Sale price per litre (₹) 30 64 50

There were no opening and closing inventories of basic raw materials at the beginning as well as
at the end of the year. All finished goods inventory in litres was complete as to processing. The
company uses the Net-realisable value method of allocating joint costs.
You are required to prepare:
i. Schedule showing the allocation of joint costs.
ii. Calculate the Cost of goods sold of each product and the cost of each item in
Inventory.
iii. A comparative statement of Gross profit.

Question No. 18. (Past Paper, May 22, 10 marks)

STG Limited is a manufacturer of Chemical 'GK', which is required for industrial use. The
complete production operation requires two processes. The raw material first passes through
Process I, where Chemical 'G' is produced. Following data is furnished for the month April 2022:

Particulars (In kgs.)

Opening work-in-progress quantity 9,500
(Material 100% and conversion 50% complete)
Material input quantity 1,05,000
Work Completed quantity 83,000
Closing work-in-progress quantity 16,500
(Material 100% and conversion 60% complete)
You are further provided that:
Particulars (In₹)
Opening work-in-progress cost
Material cost 29,500
Processing cost 14,750
Material input cost 3,34,500
Processing cost 2,53,100

Normal process loss may be estimated to be 10% of material input. It has no realizable value.
Any loss over and above normal loss is considered to be 100% complete in material and
processing.

The Company transfers 60,000 kgs. of output (Chemical G) from Process I to Process II
for producing Chemical 'GK'. Further materials are added in Process II which yield 1.20 kg.

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of Chemical 'GK' for every kg. of Chemical 'G' introduced. The chemicals transferred to
Process II for further processing are then sold as Chemical 'GK' for ₹ 10 per kg. Any
quantity of output completed in Process I, are sold as Chemical 'G' @ ₹ 9 per kg. The
monthly costs incurred in Process II (other than the cost of Chemical 'G') are:
Input 60,000 kg. of Chemical 'G'
Materials Cost ₹ 85,000
Processing Costs ₹ 50,000

You are required:

i. Prepare Statement of Equivalent production and determine the cost per kg.
Chemical ‘G' in Process I using the weighted average cost method.
ii. Prepare a statement showing cost of Chemical 'G’ transferred to Process II, cost of
abnormal loss and cost of closing work-in progress.
iii. STG is considering the option to sell 60,000 kg. of Chemical 'G' of Process I without
processing it further in Process-II. Will it be beneficial for the company over the
current pattern of processing 60,000 kg in process-II?
(Note : You are not required to prepare process Accounts)
(Past Paper, May 22, 10 marks)

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Chapter 8
MARGINAL COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Marginal Costing
• Timings: 122 Minutes to 182 Minutes

Question No. 4 (Study Material)

PQR Ltd. has furnished the following data for the two years:
Particulars 2021-22 2022-23
Sales ₹ 8,00,000 ?
Profit/Volume Ratio (P/V ratio) 50% 37.5%
Margin of Safety sales as a % of total sales 40% 21.875%

There has been substantial savings in the fixed cost in the year 2022-23 due to the
restructuring process. The company could maintain its sales quantity level of 2021- 22 in 2022-
23 by reducing selling price. You are required to CALCULATE the following:

i. Sales for 2022-23 in Value,

ii. Fixed cost for 2022-23 in Value,
iii. Break-even sales for 2022-23 in Value.

Question No. 15: (Study Material)

A company had incurred fixed expenses of ₹ 4,50,000, with sales of ₹ 15,00,000 and earned a
profit of ₹ 3,00,000 during the first half year. In the second half, it suffered a loss of ₹
1,50,000.

CALCULATE:
i. The profit-volume ratio, break-even point and margin of safety for the first half year.
ii. Expected sales volume for the second half year assuming that selling price and fixed
expenses remained unchanged during the second half year.
iii. The break-even point and margin of safety for the whole year.

Question No. 16: (Study Material)

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The following information is given by Star Ltd.:

Margin of Safety ₹ 1,87,500
Total Cost ₹ 1,93,750
Margin of Safety 3,750 units
Break-even Sales 1,250 units
Required
CALCULATE Profit, P/V Ratio, BEP Sales (in ₹) and Fixed Cost.

Question No. 23: (Study Material)

You are given the following data:
Sales Profit
Year 2021-22 ₹ 1,20,000 8,000
Year 2022-23 ₹ 1,40,000 13,000

FIND OUT –
i. P/V ratio,
ii. B.E. Point,
iii. Profit when sales are ₹ 1,80,000,
iv. Sales required earn a profit of ₹ 12,000,
v. Margin of safety in year 2022-23.

Question No. 26: (Study Material)

M.K. Ltd. manufactures and sells a single product X whose selling price is ₹40 per unit and the
variable cost is ₹ 16 per unit.

i. If the Fixed Costs for this year are ₹ 4,80,000 and the annual sales are at 60% margin
of safety, CALCULATE the rate of net return on sales, assuming an income tax level of
40%
ii. For the next year, it is proposed to add another product line Y whose selling price
would be ₹50 per unit and the variable cost ₹ 10 per unit. The total fixed costs are
estimated at ₹ 6,66,600. The sales mix values of X : Y would be 7 : 3. DETERMINE at
what level of sales next year, would M.K. Ltd. break even? Give separately for both X
and Y the break-even sales in rupee and quantities.

Question No. 28: (Study Material)

Prisha Limited manufactures three different products and the following information has been
collected from the books of accounts:
Products
A B C
Sales Mix 40% 35% 25%
Selling Price ₹300 ₹400 ₹200
Variable Cost ₹150 ₹200 ₹120
Total Fixed Costs ₹18,00,000
Total Sales ₹60,00,000

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The company has currently under discussion, a proposal to discontinue the manufacture of
Product C and replace it with Product E, when the following results are anticipated:
Products
A B E
Sales Mix 45% 30% 25%
Selling Price ₹300 ₹400 ₹300
Variable Cost ₹150 ₹200 ₹150
Total Fixed Costs ₹18,00,000
Total Sales ₹64,00,000

Required:
i. CALCULATE the total contribution to sales ratio and present break-even sales at
existing sales mix.
ii. CALCULATE the total contribution to sales ratio and present break-even sales at
proposed sales mix.
iii. STATE whether the proposed sales mix is accepted or not?

Question No. 30: (Past paper, Nov 20, 5 marks)

Moon Ltd. produces products 'X', 'Y' and 'Z' and has decided to analyse it's production mix in
respect of these three products - 'X', 'Y' and 'Z'.
You have the following information :
X Y Z
Direct Materials ₹(per unit) 160 120 80
Variable Overheads ₹ (per unit) 8 20 12

Direct labour:
Departments Rate per Hour Hours per unit Hours per unit Hours per unit
( ₹) X Y Z
Department-A 4 6 10 5
Department-B 8 6 15 11

From the current budget, further details are as below :

X Y Z
Annual Production at present (in units) 10,000 12,000 20,000
Estimated Selling Price per unit ( ₹) 312 400 240
Sales departments estimate of possible 12,000 16,000 24,000
sales in the coming year (in units)

There is a constraint on supply of labour in Department-A and its manpower cannot be increased
beyond its present level.

Required:
i. Identify the best possible product mix of Moon Ltd.
ii. Calculate the total contribution from the best possible product mix.

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Question No. 33: (Study Material)

The following are cost data for three alternative ways of processing the clerical work for
cases brought before the LC Court System:
A B C
Manual (₹) Semi-Automatic (₹) Fully-Automatic (₹)
Monthly fixed costs:
Occupancy 15,000 15,000 15,000
Maintenance contract -- 5,000 10,000
Equipment lease -- 25,000 1,00,000
Unit variable costs (per
report):
Supplies 40 80 20
Labour ₹200 ₹60 ₹20
(5 hrs × ₹40) (1 hr × ₹60) (0.25 hr × ₹80)

Required:
i. CALCULATE cost indifference points. Interpret your results.
ii. If the present case load is 600 cases and it is expected to go up to 850 cases in
near future, SELECT most appropriate on cost considerations?

Question No. 34: (Study Material)

XY Ltd. makes two products X and Y, whose respective fixed costs are F1 and F2. You are given
that the unit contribution of Y is one fifth less than the unit contribution of X, that the total of
F 1 and F2 is ₹ 1,50,000, that the BEP of X is 1,800 units (for BEP of X, F2 is not considered)
and that 3,000 units is the indifference point between X and Y (i.e. X and Y make equal profits
at 3,000 unit volume, considering their respective fixed costs). There is no inventory buildup as
whatever is produced is sold.

Required
FIND OUT the values F1 and F2 and units contributions of X and Y.

Question No. 38: (Study Material)

XYZ Ltd. has a production capacity of 2,00,000 units per year. Normal capacity utilisation is
reckoned as 90%. Standard variable production costs are ₹ 11 per unit. The fixed costs are
₹3,60,000 per year. Variable selling costs are ₹ 3 per unit and fixed selling costs are ₹2,70,000
per year. The unit selling price is ₹ 20.
In the year just ended on 31st March, the production was 1,60,000 units and sales were
1,50,000 units. The closing inventory on 31st March was 20,000 units. The actual variable
production costs for the year were ₹ 35,000 higher than the standard.

i. CALCULATE the profit for the year

a. by absorption costing method and
b. by marginal costing method.
ii. EXPLAIN the difference in the profits.

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Question No. 41: (Study Material)

Mr. X has ₹ 2,00,000 investments in his business firm. He wants a 15 per cent return on his
money. From an analysis of recent cost figures, he finds that his variable cost of operating is 60
per cent of sales, his fixed costs are ₹ 80,000 per year. Show COMPUTATIONS to answer the
following questions:
i. What sales volume must be obtained to break even?
ii. What sales volume must be obtained to get 15 per cent return on investment?
iii. Mr. X estimates that even if he closed the doors of his business, he would incur
₹25,000 as expenses per year. At what sales would he be better off by locking his
business up?

Question No. 42: (Study Material)

A single product company sells its product at ₹ 60 per unit. In 2021-22, the company operated
at a margin of safety of 40%. The fixed costs amounted to ₹3,60,000 and the variable cost
ratio to sales was 80%.
In 2022-23, it is estimated that the variable cost will go up by 10% and the fixed cost will
increase by 5%.
i. FIND the selling price required to be fixed in 2022-23 to earn the same P/V ratio
as in 2021-22.
ii. Assuming the same selling price of ₹ 60 per unit in 2022-23, FIND the number of
units required to be produced and sold to earn the same profit as in 2021-22.

Question No. 43: (Study Material)

An automobile manufacturing company produces different models of Cars. The budget in respect
of model 007 for the month of March is as under:
Budgeted Output 40,000 Units
₹ In lakhs ₹ In lakhs
Net Realisation 2,10,000
Variable Costs:
Materials 79,200
Labour 15,600
Direct expenses 37,200 1,32,000
Specific Fixed Costs 27,000
Allocated Fixed Costs 33,750 60,750
Total Costs 1,92,750
Profit 17,250
Sales 2,10,000

CALCULATE:
i. Profit with 10 percent increase in selling price with a 10 percent reduction in sales
volume.
ii. Volume to be achieved to maintain the original profit after a 10 percent rise in
material costs, at the originally budgeted selling price per unit.

Question No. 44: (Study Material)

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An Indian soft drink company is planning to establish a subsidiary company in Bhutan to produce
mineral water. Based on the estimated annual sales of 40,000 bottles of the mineral water, cost
studies produced the following estimates for the Bhutanese subsidiary:
Total annual costs Percent of Total Annual
Cost which is variable
Material 2,10,000 100%
Labour 1,50,000 80%
Factory Overheads 92,000 60%
Administration Expenses 40,000 35%

The Bhutanese production will be sold by manufacturer’s representatives who will receive a
commission of 8% of the sale price. No portion of the Indian office expenses is to be allocated
to the Bhutanese subsidiary.
You are required to
i. COMPUTE the sale price per bottle to enable the management to realize an estimated
10% profit on sale proceeds in Bhutan.
ii. CALCULATE the break-even point in rupees sales as also in number of bottles for the
Bhutanese subsidiary on the assumption that the sale price is ₹ 14 per bottle.

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Chapter 9
STANDARD COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Standard Costing
• Timings: 77 Minutes to 122 Minutes

Question No. 3 (Study Material)

The standard cost of a chemical mixture is as follows:
40% material A at ₹ 20 per kg
60% material B at ₹ 30 per kg
A standard loss of 10% of input is expected in production. The cost records for a period showed
the following usage:
90 kg material A at a cost of ₹ 18 per kg
110 kg material B at a cost of ₹ 34 per kg
The quantity produced was 182 kg of good product.

CALCULATE
a. Material cost variance,
b. Material price variance,
c. Material usage variance.

Question No. 4 (Study Material)

ABC Ltd. produces an article by lending two basic raw materials. It operates a standard costing
system and the following standards have been set for raw materials:
Material Standard mix Standard price (₹ per kg)
A 40% 4
B 60% 3

The standard loss in processing is 15%. During April, the company produced 1,700 kgs. of
finished output.
The position of stock and purchases for the month of April are as under:

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Material Stock on Stock on Purchased during

01.04.2021 30.04.2021 April 2021
(Kg.) (Kg.) (Kg.) (₹)
A 35 5 800 3,400
B 40 50 1,200 3,000

Opening stock of material is valued at standard price.

CALCULATE the following variances:
i. Material price variance
ii. Material usage variance
iii. Material yield variance
iv. Material mix variance
v. Total Material cost variance

Question No. 7 (Study Material)

GAP Limited operates a system of standard costing in respect of one of its products which is
manufactured within a single cost centre. Following are the details.
Budgeted data:
Material Qty Price (₹) Amount (₹)
A 60 20 1,200
B 40 30 1,200
Inputs 100 2,400
Normal Loss 20 0
Output 80 2,400
Actual data:
Actual output 80 units.
Material Qty Price (₹) Amount (₹)
A 70 ? ?
B ? 30 ?
Material Price Variance (A) ₹ 105A
Material cost variance ₹ 275A

You are required to CALCULATE:

i. Actual Price of material A
ii. Actual Quantity of material B
iii. Material Price Variance
iv. Material Usage Variance
v. Material Mix Variance
vi. Material Sub Usage Variance

Question No. 8 (Study Material)

One kilogram of product K requires two chemicals A and B. The following were the details of
product K for the month of June 2023:
a. Standard mix for chemical A is 50% and chemical B is 50%.
b. Standard price kilogram of chemical A is ₹ 12 and chemical B is ₹ 15.

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c. Actual input of chemical B is 70 kilograms.

d. Actual price per kilogram of chemical A is ₹ 15
e. Standard normal loss is 10% of total input
f. Total Material cost variance is ₹ 650 adverse.
g. Total Material yield variance is ₹ 135 adverse.

You are required to CALCULATE:

i. Total Material mix variance
ii. Total Material usage variance
iii. Total Material price variance
iv. Actual loss of actual input
v. Actual input of chemical A
vi. Actual price per kg. of chemical B

Question No. 9 (Study Material)

J.K. Ltd. manufactures NXE by mixing three raw materials. For every batch of 100 kg. of NXE,
125 kg. of raw materials are used. In the month of April, 60 batches were prepared to produce
an output of 5,600 kg. of NXE. The standard and actual particulars for the month of April, are
as follows:
Raw Materials Standard Actual Quantity of
Mix Price Mix Price Raw Materials
per kg. per Kg. Purchased
(%) (₹) (%) (₹) (Kg.)
A 50 20 60 21 5,000
B 30 10 20 8 2,000
C 20 5 20 6 1,200

You are required to CALCULATE:

i. Material Price variance
ii. Material Usage Variance

Question No. 10 (Study Material)

Following data is extracted from the books of XYZ Ltd. for the month of January:

(i) Estimation-
Particulars Quantity (kg.) Price (₹) Amount (₹)
Material-A 800 ? --
Material-B 600 30.00 18,000
--
Normal loss was expected to be 10% of total input materials.

(ii) Actuals-
1,480 kg of output produced.
Particulars Quantity (kg.) Price (₹) Amount (₹)
Material-A 900 ? --

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Material-B ? 32.50 --
59,825

(iii) Other Information-

Material Cost Variance = ₹ 3,625 (F)
Material Price Variance = ₹ 175 (F)

You are required to CALCULATE:

i. Standard Price of Material-A;
ii. Actual Quantity of Material-B;
iii. Actual Price of Material-A;
iv. Revised standard quantity of Material-A and Material-B; and
v. Material Mix Variance.

Question No.14 (Study Material)

The standard output of product ‘EXE’ is 25 units per hour in manufacturing department of a
company employing 100 workers. The standard wage rate per labour hour is ₹ 6.

In a 42 hours week, the department produced 1,040 units of ‘EXE’ despite 5% of the time
paid being lost due to an abnormal reason. The hourly wages actually paid were ₹6.20, ₹6 and
₹5.70 respectively to 10, 30 and 60 of the workers.
CALCULATE relevant labour variances.

Question No.16 (Study Material)

The standard labour employment and the actual labour engaged in a week for a job are as under:
Skilled Semi-skilled Unskilled
workers workers workers
Standard no. of workers in the gang 32 12 6
Actual no. of workers employed 28 18 4
Standard wage rate per hour 3 2 1
Actual wage rate per hour 4 3 2

During the 40 hours working week, the gang produced 1,800 standard labour hours of work.
CALCULATE:
i. Labour Cost Variance
ii. Labour Rate Variance
iii. Labour Efficiency Variance
iv. Labour Mix Variance
v. Labour Yield Variance

Question No.19 (Study Material)

From the following information of G Ltd., calculate (i) Variable Overhead Cost Variance; (ii)
Variable Overhead Expenditure Variance and (iii) Variable Overhead Efficiency Variance:
Budgeted Production 6,000 units
Budgeted Variable Overhead ₹ 1,20,000
Standard time for one Unit of output 2 hours

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Actual Production 5,900 units

Actual Overhead Incurred ₹ 1,22,000

Question No.21 (Study Material)

The cost detail of J&G Ltd. for the month of September is as follows:
Budgeted Actual
Fixed overhead ₹ 15,00,000 ₹ 15,60,000
Units of production 7,500 7,800
Standard time for one unit 2 hours --
Actual hours worked -- 16,000 hours

Required:
CALCULATE
i. Fixed Overhead Cost Variance
ii. Fixed Overhead Expenditure Variance
iii. Fixed Overhead Volume Variance
iv. Fixed Overhead Efficiency Variance and
v. Fixed Overhead Capacity Variance.

Question No.22 (Study Material)

A company has a normal capacity of 120 machines, working 8 hours per day of 25 days in a
month. The fixed overheads are budgeted at ₹ 1,44,000 per month. The standard time required
to manufacture one unit of product is 4 hours.

In April 2021, the company worked 24 days of 840 machine hours per day and produced 5,305
units of output. The actual fixed overheads were ₹ 1,42,000. COMPUTE the following Fixed
Overhead variance:
1. Efficiency variance
2. Capacity variance
3. Calendar variance
4. Expenditure variance
5. Volume variance
6. Total Fixed overhead variance

Question No.25 (Study Material)

The following data has been collected from the cost records of a unit for computing the various
fixed overhead variances for a period:
Number of budgeted working days 25
Budgeted man-hours per day 6,000
Output (budgeted) per man-hour (in units) 1
Fixed overhead cost as budgeted ₹1,50,000
Actual number of working days 27
Actual man-hours per day 6,300
Actual output per man-hour (in-units) 0.9
Actual fixed overhead incurred ₹1,56,000

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CALCULATE fixed overhead variances:

i. Expenditure Variance
ii. Volume Variance,
iii. Fixed Cost Variance.

Question No.26 (Past Paper, Nov 20, 10 marks)

ABC Ltd. has furnished the following information regarding the overheads for the month of
June 2020:
(i) Fixed Overhead Cost Variance ₹ 2,800 (Adverse)
(ii) Fixed Overhead Volume Variance ₹ 2,000 (Adverse)
(iii) Budgeted Hours for June, 2020 2,400 hours
(iv) Budgeted Overheads for June,2020 ₹ 12,000
(v) Actual rate of recovery of overheads ₹ 8 Per Hour

From the above given information

Calculate:
i. Fixed Overhead Expenditure Variance
ii. Actual Overheads Incurred
iii. Actual Hours for Actual Production
iv. Fixed Overhead Capacity Variance
v. Standard hours for Actual Production
vi. Fixed Overhead Efficiency Variance

Question No.27 (Study Material)

The overhead expense budget for a factory producing to a capacity of 200 units per month is as
follows:
Description of overhead Fixed cost Variable cost per Total cost
per unit in ₹ unit in ₹ per unit in ₹
Power and fuel 1,000 500 1,500
Repair and maintenance 500 250 750
Printing and stationary 500 250 750
Other overheads 1,000 500 1,500
₹3,000 ₹1,500 4,500

The factory has actually produced only 100 units in a particular month. Details of overheads
actually incurred have been provided by the accounts department and are as follows:
Description of overhead Actual cost
Power and fuel ₹ 4,00,000
Repair and maintenance ₹ 2,00,000
Printing and stationary ₹ 1,75,000
Other overheads ₹ 3,75,000

You are required to CALCULATE the Overhead volume variance and the overhead expense
variances.

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Question No.28 (Study Material)

The following information was obtained from the records of a manufacturing unit using standard
costing system.
Standard Actual
Production 4,000 units 3,800 units
Working days 20 21
Machine hours 8,000 hours 7,800 hours
Fixed Overhead ₹ 4,00,000 ₹3,90,000
Variable Overhead ₹1,20,000 ₹1,20,000

You are required to CALCULATE the following overhead variance:

i. Variable overhead variances
ii. Fixed overhead variances

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Chapter 10
BUDGETARY CONTROL

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Budgetary Control
• Timings: 182 Minutes to 222 Minutes

Question No. 3 (Study Material)

Action Plan Manufacturers normally produce 8,000 units of their product in a month, in their
Machine Shop. For the month of January, they had planned for a production of 10,000 units.
Owing to a sudden cancellation of a contract in the middle of January, they could only produce
6,000 units in January.

Indirect manufacturing costs are carefully planned and monitored in the Machine Shop and the
Foreman of the shop is paid a 10% of the savings as bonus when in any month the indirect
manufacturing cost incurred is less than the budgeted provision.

The Foreman has put in a claim that he should be paid a bonus of ₹ 88.50 for the month of
January. The Works Manager wonders how anyone can claim a bonus when the Company has lost a
sizeable contract. The relevant figures are as under:

Indirect manufacturing Expenses for a Planned for Actual in costs

normal month January January
(₹) (₹) (₹)
Salary of foreman 1,000 1,000 1,000
Indirect labour 720 900 600
Indirect material 800 1,000 700
Repairs and maintenance 600 650 600
Power 800 875 740
Tools consumed 320 400 300
Rates and taxes 150 150 150
Depreciation 800 800 800
Insurance 100 100 100
5,290 5,875 4,990

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Do you agree with the Works Manager? Is the Foreman entitled to any bonus for the
performance in January? Substantiate your answer with facts and figures. EXPLAIN.

Question No. 4 (Study Material)

During the FY 2021-22, P Limited has produced 60,000 units operating at 50% capacity level.
The cost structure at the 50% level of activity is as under:

(₹)
Direct Material 300 per unit
Direct Wages 100 per unit
Variable Overheads 100 per unit
Direct Expenses 60 per unit
Factory Expenses (25% fixed) 80 per unit
Selling and Distribution Exp. (80% variable) 40 per unit
Office and Administrative Exp. (100% fixed) 20 per unit

The company anticipates that in FY 2022-23, the variable costs will go up by 20% and fixed
costs will go up by 15%.

The selling price per unit will increase by 10% to ₹ 880

Required:
i. CALCULATE the budgeted profit/ loss for the FY 2021-22.
ii. PREPARE an Expense budget on marginal cost basis for the FY 2022-23 for the
company at 50% and 60% level of activity and FIND OUT the profits at respective
levels.

Question No. 5 (Study Material)

ABC Ltd. is currently operating at 75% of its capacity. In the past two years, the levels of
operations were 55% and 65% respectively. Presently, the production is 75,000 units. The
company is planning for 85% capacity level during 2022- 23. The cost details are as follows:

55% (₹) 65% (₹) 75% (₹)

Direct Materials 11,00,000 13,00,000 15,00,000
Direct Labour 5,50,000 6,50,000 7,50,000
Factory Overheads 3,10,000 3,30,000 3,50,000
Selling Overheads 3,20,000 3,60,000 4,00,000
Administrative Overheads 1,60,000 1,60,000 1,60,000
24,40,000 28,00,000 31,60,000

Profit is estimated @ 20% on sales.

The following increases in costs are expected during the year:

In percentage
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Direct Materials 8
Direct Labour 5
Variable Factory Overheads 5
Variable Selling Overheads 8
Fixed Factory Overheads 10
Fixed Selling Overheads 15
Administrative Overheads 10

PREPARE flexible budget for the period 2022-23 at 85% level of capacity. Also ascertain profit
and contribution.

Question No. 8 (Study Material)

A single product company estimated its quarter-wise sales for the next year as under:
Quarter Sales (Units)
I 30,000
II 37,500
III 41,250
IV 45,000

The opening stock of finished goods is 6,000 units and the company expects to maintain the
closing stock of finished goods at 12,250 units at the end of the year. The production pattern in
each quarter is based on 80% of the sales of the current quarter and 20% of the sales of the
next quarter. The company maintains this 20% of sales of next quarter as closing stock of
current quarter.

The opening stock of raw materials in the beginning of the year is 10,000 kg. and the closing
stock at the end of the year is required to be maintained at 5,000 kg. Each unit of finished
output requires 2 kg. of raw materials.

The company proposes to purchase the entire annual requirement of raw materials in the first
three quarters in the proportion and at the prices given below:

Quarter Purchase of raw materials % to total annual Price per

requirement in quantity kg. (₹)
I 30% 2
II 50% 3
III 20% 4

The value of the opening stock of raw materials in the beginning of the year is ₹ 20,000. You are
required to PREPARE the following for the next year, quarter wise:

i. Production budget (in units).

ii. Raw material consumption budget (in quantity).
iii. Raw material purchase budget (in quantity and value).
iv. Priced stores ledger card of the raw material using First in First out method.

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Question No. 9 (Study Material)

A company is engaged in the manufacture of specialised sub-assemblies required for certain
electronic equipment. The company envisages that in the forthcoming month, December, the
sales will be in the ratio of 3 : 4 : 2 respectively of sub-assemblies, ACB, MCB and DP. The
following is the schedule of components required for manufacture:

Component requirements
Sub- Selling Price Base board IC08 IC12 IC26
assembly
ACB 520 1 8 4 2
MCB 500 1 2 10 6
DP 350 1 2 4 8
Purchase 60 20 12 8
price (₹)

The direct labour time and variable overheads required for each of the sub- assemblies are:
Labour hours Variable overheads (₹)
Grade A Grade B
ACB 8 16 36
MCB 6 12 24
DP 4 8 24
Direct wage rate per hour (₹) 5 4 --

The labourers work 8 hours a day for 25 days a month.

The opening stocks of sub-assemblies and components for December are as under:
Sub-assemblies Components
ACB 800 Base Board 1,600
MCB 1,200 IC08 1,200
DP 2,800 IC12 6,000
IC26 4,000

Fixed overheads amount to ₹ 7,57,200 for the month and a monthly profit target of ₹ 12 lacs
has been set.

The company is eager for a reduction of closing inventories for the month of December of sub-
assemblies and components by 10% of quantity as compared to the opening stock. PREPARE the
following budgets for the month of December:
a. Sales budget in quantity and value.
b. Production budget in quantity
c. Component usage budget in quantity.
d. Component purchase budget in quantity and value.
e. Manpower budget showing the number of workers and the amount of wages payable.

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Question No. 12 (Study Material)

K Ltd. produces and markets a very popular product called ‘X’. The company is interested in
presenting its budget for the second quarter of 2022-23.

The following information are made available for this purpose:

i. It expects to sell 1,50,000 bags of ‘X’ during the second quarter of 2022- 23 at the
selling price of ₹ 1,200 per bag.
ii. Each bag of ‘X’ requires 2.5 mtr. of raw – material ‘Y’ and 7.5 mtr. of raw – material ‘Z’.
iii. Stock levels are planned as follows:
Particulars Beginning of End of Quarter
Quarter
Finished Bags of ‘X’ (Nos.) 45,000 33,000
Raw – Material ‘Y’ (mtr) 96,000 78,000
Raw – Material ‘Z’ (mtr) 1,71,000 1,41,000
Empty Bag (Nos.) 1,11,000 84,000

iv. ‘Y’ cost ₹160 per mtr., ‘Z’ costs ₹30 per mtr. and ‘Empty Bag’ costs ₹110 each.
v. It requires 9 minutes of direct labour to produce and fill one bag of ‘X’. Labour cost is
₹70 per hour.
vi. Variable manufacturing costs are ₹60 per bag. Fixed manufacturing costs ₹40,00,000
per quarter.
vii. Variable selling and administration expenses are 5% of sales and fixed administration
and selling expenses are ₹3,75,000 per quarter.

Required
i. PREPARE a production budget for the said quarter in quantity.
ii. PREPARE a raw – material purchase budget for ‘Y’, ‘Z’ and ‘Empty Bags for the said
quarter in quantity as well as in rupees.
iii. COMPUTE the budgeted variable cost to produce one bag of ‘X’.

Question No. 15 (Past Paper, May 22, 10 marks)

SR Ltd. is a manufacturer of Garments. For the first three months of financial year 2022-23
commencing on 1st April 2022, production will be constrained by direct labour. It is estimated
that only 12,000 hours of direct labour hours will be available in each month.

For market reasons, production of either of the two garments must be at least 25% of the
production of the other. Estimated cost and revenue per garment are as follows:
Shirt (₹) Short (₹)
Sales price 60 44
Raw Materials
Fabric @12 per metre 24 12
Dyes and cotton 6 4
Direct labour @ 8 per hour 8 4

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Fixed Overhead @ 4 per hour 4 2

Profit 18 22

From the month of July 2022 direct labour will no longer be a constraint. The company expects
to be able to sell 15,000 shirts and 20,000 shorts in July, 2022. There will be no opening stock
at the beginning of July 2022.
Sales volumes are expected to grow at 10% per month cumulatively thereafter throughout the
year. Following additional information is available:
• The company intends to carry stock of finished garments sufficient to meet 40% of
the next month's sale from July 2022 onwards.
• The estimated selling price will be same as above.
Required:
I. Calculate the number of shirts and shorts to be produced per month in the first
quarter of financial year 2022-2023 to maximize company's profit.
II. Prepare the following budgets on a monthly basis for July, August and September
2022:
i. Sales budget showing sales units and sales revenue for each product.
ii. Production budget (in units) for each product.

Question No. 16 (Study Material)

Following data is available for DKG and Co:

Standard working hours 8 hours per day of 5 days per week

Maximum capacity 50 employees
Actual working 40 employees
Actual hours expected to be worked per four week 6,400 hours
Std. hours expected to be earned per four weeks 8,000 hours
Actual hours worked in the four- week period 6,000 hours
Standard hours earned in the four- week period 7,000 hours.

The related period is of 4 weeks. In this period there was a one special day holiday due to
national event.
CALCULATE the following ratios:
i. Efficiency Ratio
ii. Activity Ratio
iii. Calendar Ratio
iv. Standard Capacity Usage Ratio
v. Actual Capacity Usage Ratio
vi. Actual Usage of Budgeted Capacity Ratio.

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Chapter 11
UNIT & BATCH COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Unit & Batch Costing
• Timings: 0 Minutes to 24 Minutes

Question No. 2 (Study Material)

Arnav Confectioners (AC) owns a bakery which is used to make bakery items like pastries, cakes
and muffins. AC use to bake at most 50 units of any item at a time. A customer has given an
order for 600 muffins. To process a batch of 50 muffins, the following cost would be incurred:
Direct materials- ₹ 500
Direct wages- ₹ 50
Oven set- up cost ₹ 150
AC absorbs production overheads at a rate of 20% of direct wages cost. 10% is added to the
total production cost of each batch to allow for selling, distribution and administration
overheads.

AC requires a profit margin of 25% of sales value.

DETERMINE the selling price for 600 muffins.

Question No. 3 (Study Material)

A jobbing factory has undertaken to supply 200 pieces of a component per month for the
ensuing six months. Every month a batch order is opened against which materials and labour
hours are booked at actual. Overheads are levied at a rate equal to per labour hour. The selling
price contracted for is ₹ 8 per piece. From the following data ,
CALCULATE the cost and profit per piece of each batch order and overall position of the order
for 1,200 pieces.

Month Batch Output Material cost Direct wages Direct labour

(₹) (₹) hours
January 210 650 120 240

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February 200 640 140 280

March 220 680 150 280
April 180 630 140 270
May 200 700 150 300
June 220 720 160 320

The other details are:

Month Overheads Direct labour
(₹) hours
January 12,000 4,800
February 10,560 4,400
March 12,000 5,000
April 10,580 4,600
May 13,000 5,000
June 12,000 4,800

Question No. 7 (Study Material)

M/s. KBC Bearings Ltd. is committed to supply 48,000 bearings per annum to M/s. KMR Fans on a
steady daily basis. It is estimated that it costs ₹ 1 as inventory holding cost per bearing per
month and that the set up cost per run of bearing manufacture is ₹ 3,200

i. DETERMINE the optimum run size of bearing manufacture.

ii. STATE what would be the interval between two consecutive optimum runs.
iii. FIND OUT the minimum inventory holding cost.

Question No. 8 (Study Material)

A Company has an annual demand from a single customer for 50,000 litres of a paint product.
The total demand can be made up of a range of colour to be produced in a continuous production
run after which a set-up of the machinery will be required to accommodate the colour change.
The total output of each colour will be stored and then delivered to the customer as single load
immediately before production of the next colour commences.

The Set up costs are ₹100 per set up. The Service is supplied by an outside company as required.
The Holding costs are incurred on rented storage space which costs ₹ 50 per sq. meter per
annum. Each square meter can hold 250 Litres suitably stacked.
You are required to:
i. CALCULATE the total cost per year where batches may range from 4,000 to 10,000
litres in multiples of 1,000 litres and hence choose the production batch size which will
minimize the cost.
ii. Use the economic batch size formula to CALCULATE the batch size which will minimise
total cost.

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Question No. 9 (Study Material)

X Ltd. is committed to supply 24,000 bearings per annum to Y Ltd. on steady basis. It is
estimated that it costs 10 paise as inventory holding cost per bearing per month and that the
set-up cost per run of bearing manufacture is ₹324.

a. COMPUTE what would be the optimum run size for bearing manufacture?
b. Assuming that the company has a policy of manufacturing 6,000 bearings per run,
CALCULATE how much extra costs the company would be incurring as compared to
the optimum run suggested in (a) above?
c. CALCULATE the holding cost at optimum inventory level?

Question No. 17 (Study Material)

Wonder Ltd. has a capacity of 120,000 units per annum as its optimum capacity. The production
costs are as under:
Direct Material – ₹ 90 per unit
Direct Labour - ₹ 60 per unit
Overheads:
Fixed: ₹ 30,00,000 per annum
Variable: ₹ 100 per unit
Semi Variable: ₹ 20,00,000 per annum up to 50% capacity and an extra amount of ₹ 4,00,000
for every 25% increase in capacity or part thereof

The production is made to order and not for stocks.

If the production programme of the factory is as indicated below and the management desires a
profit of ₹20,00,000 for the year. DETERMINE the average selling price at which each unit
should be quoted.

First 3 months: 50% capacity

Remaining 9 months: 80% capacity
Ignore Administration, Selling and Distribution overheads.

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Chapter 12
JOB COSTING

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Job Costing
• Timings: 0 Minutes to 24 Minutes

Question No. 2 (Study Material)

A shop floor supervisor of a small factory presented the following cost for Job No. 303, to
determine the selling price.
Per unit (₹)
Materials 70
Direct wages 18 hours @ ₹ 2.50 45
(Dept. X 8 hours; Dept. Y 6 hours; Dept. Z 4 hours)
Chargeable expenses 5
120
Add : 33-1/3 % for expenses cost 40
160

Analysis of the Profit/Loss Account (for the current financial year)

(₹) (₹)
Materials used 1,50,000 Sales less returns 2,50,000
Direct wages:
Deptt. X 10,000
Deptt. Y 12,000
Deptt. Z 8,000 30,000
Special stores items 4,000
Overheads:
Deptt. X 5,000
Deptt. Y 9,000
Deptt. Z 2,000 16,000
Works cost 2,00,000
Gross profit c/d 50,000 ---------
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2,50,000 2,50,000
Selling expenses 20,000 Gross profit b/d 50,000
Net profit 30,000 ------
50,000 50,000

It is also noted that average hourly rates for the three Departments X, Y and Z are similar.
You are required to:
i. PREPARE a job cost sheet.
ii. CALCULATE the entire revised cost using current financial year actual figures as basis.
iii. Add 20% to total cost to DETERMINE selling price.

Question No. 3 (Study Material)

In a factory following the Job Costing Method, an abstract from the work-in- progress as on
30th September was prepared as under.
Job No. Materials Direct hrs. Labour (₹) Factory
(₹) Overheads
applied (₹)
115 1,325 400 hrs. 800 640
118 810 250 hrs. 500 400
120 765 300 hrs. 475 380
2,900 1,775 1,420

Materials used in October were as follows:

Materials Job No. Cost
Requisition No. (₹)
54 118 300
55 118 425
56 118 515
57 120 665
58 121 910
59 124 720
3,535

A summary for labour hours deployed during October is as under:

Job No. Number of Hours
Shop A Shop B
115 25 25
118 90 30
120 75 10
121 65 --
124 25 10
275 75
Indirect Labour: Waiting of material 20 10
Machine breakdown 10 5

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Idle time 5 6
Overtime premium 6 5
316 101

A shop credit slip was issued in October, that material issued under Requisition No. 54 was
returned back to stores as being not suitable. A material transfer note issued in October
indicated that material issued under Requisition No. 55 for Job 118 was directed to Job 124.

The hourly rate in shop A per labour hour is ₹ 3 per hour while at shop B, it is ₹ 2 per hour. The
factory overhead is applied at the same rate as in September. Job 115, 118 and 120 were
completed in October.

You are asked to COMPUTE the factory cost of the completed jobs. It is the practice of the
management to put a 10% on the factory cost to cover administration and selling overheads and
invoice the job to the customer on a total cost plus 20% basis. DETERMINE the invoice price of
these three jobs?

Question No. 4 (Study Material)

Ares Plumbing and Fitting Ltd. (APFL) deals in plumbing materials and also provides plumbing
services to its customers. On 12th August, 2022, APFL received a job order for a students’
hostel to supply and fitting of plumbing materials. The work is to be done on the basis of
specification provided by the hostel owner. Hostel will be inaugurated on 5th September, 2022
and the work is to be completed by 3rd September, 2022. Following are the details related with
the job work:

Direct Materials
APFL uses a weighted average method for the pricing of materials issues.
Opening stock of materials as on 12th August 2022:
- 15mm GI Pipe, 12 units of (15 feet size) @ ₹ 600 each
- 20mm GI Pipe, 10 units of (15 feet size) @ ₹ 660 each
- Other fitting materials, 60 units @ ₹ 26 each
- Stainless Steel Faucet, 6 units @ ₹ 204 each
- Valve, 8 units @ ₹ 404 each
Purchases:
On 16th August 2022:
- 20mm GI Pipe, 30 units of (15 feet size) @ ₹ 610 each
- 10 units of Valve @ ₹ 402 each
On 18th August 2022:
- Other fitting Materials, 150 units @ ₹ 28 each
- Stainless Steel Faucet, 15 units @ ₹ 209 each
On 27th August 2022:
- 15mm GI Pipe, 35 units of (15 feet size) @ ₹ 628 each
- 20mm GI Pipe, 20 units of (15 feet size) @ ₹ 660 each
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- Valve, 14 units @ ₹ 424 each

Issues for the hostel job:

On 12th August 2022:
- 20mm GI Pipe, 2 units of (15 feet size)
- Other fitting materials, 18 units
On 17th August 2022:
- 15mm GI Pipe, 8 units of (15 feet size)
- Other fitting materials, 30 units
On 28th August 2022:
- 20mm GI Pipe, 2 units of (15 feet size)
- 15mm GI Pipe, 10 units of (15 feet size)
- Other fitting materials, 34 units
- Valve, 6 units
On 30th August 2022:
- Other fitting materials, 60 units
- Stainless Steel Faucet, 15 units

Direct Labour:
Plumber: 180 hours @ ₹ 50 per hour (includes 12 hours overtime)
Helper: 192 hours @ ₹35 per hour (includes 24 hours overtime)
Overtimes are paid at 1.5 times of the normal wage rate.
Overheads:
Overheads are applied @ ₹ 13 per labour hour.
Pricing policy:
It is company’s policy to price all orders based on achieving a profit margin of 25% on sales
price.

You are required to

a. Calculate the total cost of the job.
b. Calculate the price to be charged from the customer

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Chapter 13
COST SHEET

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Cost Sheet
• Timings: 0 Minutes to 39Minutes

Question No. 3 (Study Material)

The books of Adarsh Manufacturing Company present the following data for the month of April:
Direct labour cost ₹ 17,500 being 175% of works overheads.
Cost of goods sold excluding administrative expenses ₹ 56,000.
Inventory accounts showed the following opening and closing balances:
April 1 (₹) April 30 (₹)
Raw materials 8,000 10,600
Work-in-progress 10,500 14,500
Finished goods 17,600 19,000

Other data are:

(₹)
Selling expenses 3,500
General and administration expenses 2,500
Sales for the month 75,000

You are required to:

i. FIND out the value of materials purchased.
ii. PREPARE a cost statement showing the various elements of cost and also the profit
earned.

Question No. 6 (Study Material)

The following figures are extracted from the Trial Balance of G.K Co. on 31st March:
Dr. Cr.
(₹) (₹)
Inventories:
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Finished Stock 80,000

Raw Materials 1,40,000
Work-in-Process 2,00,000
Office Appliances 17,400
Plant & Machinery 4,60,500
Building 2,00,000
Sales 7,68,000
Sales Return and Rebates 14,000
Materials Purchased 3,20,000
Freight incurred on Materials 16,000
Purchase Returns 4,800
Direct employee cost 1,60,000
Indirect employee cost 18,000
Factory Supervision 10,000
Repairs and factory up-keeping expenses 14,000
Heat, Light and Power 65,000
Rates and Taxes 6,300
Miscellaneous Factory Expenses 18,700
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Dept.—Salaries and Expenses 18,000
Office Salaries and Expenses 8,600
Interest on Borrowed Funds 2,000

Further details are available as follows:

(i) Closing Inventories:
Finished Goods 1,15,000
Raw Materials 1,80,000
Work-in-Process 1,92,000
(ii) Outstanding expenses on:
Direct employee cost 8,000
Indirect employee cost 1,200
Interest on Borrowed Funds 2,000
(iii) Depreciation to be provided on:
Office Appliances 5%
Plant and Machinery 10%
Buildings 4%
(iv) Distribution of the following costs:
• Heat, Light and Power to Factory, Office and Distribution in the ratio 8 : 1 : 1.
• Rates and Taxes two-thirds to Factory and one-third to Office.
• Depreciation on Buildings to Factory, Office and Selling in the ratio 8 : 1 : 1.

With the help of the above information, you are required to PREPARE a condensed Profit and
Loss Statement of G.K Co. for the year ended 31st March along with supporting schedules of:
i. Cost of Sales.

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ii. Selling and Distribution Expenses.

iii. Administration Expenses

Question No. 9 (Past Paper, May 23, 10 marks)

The following information is available from SN Manufacturing Limited's for the month of April
2023.
April 1 April 30
Opening and closing inventories data:
Stock of finished goods 2,500 units ?
Stock of raw materials ₹42,500 ₹38,600
Work-in progress ₹42,500 ₹42,800
Other data are:
Raw materials Purchased ₹ 6,95,000
Carriage inward ₹ 36,200
Direct wages paid ₹ 3,22,800
Royalty paid for production ₹ 35,800
Purchases of special designs, moulds and patterns ₹ 1,53,600
(estimated life 12 Production cycles)
Power, fuel and haulage (factory) ₹ 70,600
Research and development costs for improving the ₹ 31,680
production process (amortized)
Primary packing cost (necessary to maintain quality) ₹ 6,920
Administrative Overhead ₹ 46,765
Salary and wages for supervisor and foremen ₹ 28,000

Other information:
• Opening stock of finished goods is to be valued at ₹ 8.05 per unit.
• During the month of April, 1,52,000 units were produced and 1,52,600 units were sold.
The closing stock of finished goods is to be valued at the relevant month's cost of
production. The company follows the FIFO method.
• Selling and distribution expenses are to be charged at 20 paisa per unit.
• Assume that one production cycle is completed in one month.
Required:
i. Prepare a cost sheet for the month ended on April 30, 2023, showing the various
elements of cost (raw material consumed, prime cost, factory cost, cost of production,
cost of goods sold, and cost of sales).
ii. Calculate the selling price per unit if profit is charged at 20 percent on sales.

Question No. 10 (Study Material)

Arnav Inspat Udyog Ltd. has the following expenditures for the year ended 31st March 2023:
Sl. (₹) (₹)
No.

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(i) Raw materials purchased 10,00,00,000

(ii) GST paid on the above purchases 1,80,00,000
@18% (eligible for input tax credit)
(iii) Freight inwards 11,20,600
(iv) Wages paid to factory workers 29,20,000
(v) Contribution made towards employees’ 3,60,000
PF & ESIS
(vi) Production bonus paid to factory 2,90,000
workers
(vii) Royalty paid for production 1,72,600
(viii) Amount paid for power & fuel 4,62,000
(ix) Amount paid for purchase of moulds 8,96,000
and patterns (life is equivalent to two
years production)
(x) Job charges paid to job workers 8,12,000
(xi) Stores and spares consumed 1,12,000
(xii) Depreciation on:
Factory building 84,000
Office building 56,000
Plant & Machinery 1,26,000
Delivery vehicles 86,000 3,52,000
(xiii) Salary paid to supervisors 1,26,000
(xiv) Repairs & Maintenance paid for:
Plant & Machinery 48,000
Sales office building 18,000
Vehicles used by directors 19,600 85,600
(xv) Insurance premium paid for:
Plant & Machinery 31,200
Factory building 18,100
Stock of raw materials & WIP 36,000 85,300
(xvi) Expenses paid for quality control 19,600
check
Activities
(xvii) Salary paid to quality control staffs 96,200
(xviii) Research & development cost paid for 18,200
improvement in production process
(xix) Expenses paid for pollution control and 26,600
engineering & maintenance
(xx) Expenses paid for administration of 1,18,600
factory work
(xxi) Salary paid to functional mangers:
Production control 9,60,000
Finance & Accounts 9,18,000
Sales & Marketing 10,12,000 28,90,000
(xxii) Salary paid to General Manager 12,56,000
(xxiii) Packing cost paid for:

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Primary packing necessary to maintain 96,000

Quality
For re-distribution of finished goods 1,12,000 2,08,000
(xxiv) Interest and finance charges paid (for
usage of non- equity fund) 7,20,000
(xxv) Fee paid to auditors 1,80,000
(xxvi) Fee paid to legal advisors 1,20,000
(xxvii) Fee paid to independent directors 2,20,000
(xxviii) Performance bonus paid to sales 1,80,000
staffs
(xxix) Value of stock as on 1st April,
2022: 18,00,000
Raw Materials 9,20,000
Work in Progress 11,00,000 38,20,000
Finished Goods
(xxx) Value of stock as on 31st March,
2023:
Raw Materials 9,60,000
Work in Progress 8,70,000
Finished Goods 18,00,000 36,30,000

Amount realized by selling of scrap and waste generated during manufacturing process –
₹86,000/-
From the above data you are required to PREPARE Statement of cost for Arnav Ispat Udyog
Ltd. for the year ended 31st March, 2023, showing
i. Prime cost
ii. Factory cost
iii. Cost of Production
iv. Cost of goods sold and
v. Cost of sales.

Question No. 11 (Past Paper, Nov 19, 10 marks)

XYZ a manufacturing firm, has revealed following information for September ,2019:
1st September 30th September
(₹) (₹)
Raw Materials 2,42,000 2,92,000
Works-in-progress 2,00,000 5,00,000

The firm incurred following expenses for a targeted production of 1,00,000 units during the
month:
(₹)
Consumable Stores and spares of factory 3,50,000
Research and development cost for process improvements 2,50,000
Quality control cost 2,00,000
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Packing cost (secondary) per unit of goods sold 2

Lease rent of production asset 2,00,000
Administrative Expenses (General) 2,24,000
Selling and distribution Expenses 4,13,000
Finished goods (opening) Nil
Finished goods (closing) 5,000 units

Defective output which is 4% of targeted production, realizes ₹ 61 per unit.

Closing stock is valued at cost of production (excluding administrative expenses)
Cost of goods sold, excluding administrative expenses amounts to ₹ 78,26,000.
Direct Employees cost is 1/2 of the cost of material consumed.
Selling price of the output is ₹ 110 per unit.

You are required to :

i. Calculate the Value of material purchased
ii. Prepare cost sheet showing the profit earned by the firm.

Question No. 12 (Past Paper, Nov 20, 10

marks)
X Ltd. manufactures two types of pens 'Super Pen' and 'Normal Pen'. The cost data for the
year ended 30th September, 2019 is as follows:
(₹)
Direct Materials 8,00,000
Direct Wages 4,48,000
Production Overhead 1,92,000
Total 14,40,000

It is further ascertained that :

1. Direct materials cost in Super Pen was twice as much of direct material in Normal
Pen.
2. Direct wages for Normal Pen were 60% of those for Super Pen.
3. Production overhead per unit was at same rate for both the types.
4. Administration overhead was 200% of direct labour for each.
5. Selling cost was ₹ 1 per Super pen.
6. Production and sales during the year were as follows:
Production Sales
No. of units No. of units
Super Pen 40,000 Super Pen 36,000
Normal Pen 1,20,000

7. Selling price was ₹ 30 per unit for Super Pen.

Prepare a Cost Sheet for 'Super Pen' showing:

i. Cost per unit and Total Cost

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ii. Profit per unit and Total Profit

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Chapter 14
COST ACCOUNTING SYSTEM

LET’S FIRST HAVE A QUICK REVISION OF ALL THE CONCEPTS:

• To Watch the Revision Video: Scan the QR Code

• Chapter Name: Budgetary Control
• Timings: 39 Minutes to 77 Minutes

Question No. 1 (Study Material)

As on 31st March, the following balances existed in a firm’s Cost Ledger:
Dr. Cr.
(₹) (₹)
Stores Ledger Control A/c 3,01,435
Work-in-Process Control A/c 1,22,365
Finished Stock Ledger Control A/c 2,51,945
Manufacturing Overhead Control A/c 10,525
Cost Ledger Control A/c ---- 6,65,220
Total 6,75,745 6,75,745

During the next three months the following items arose:

(₹)
Finished product (at cost) 2,10,835
Manufacturing Overhead incurred 91,510
Raw Materials purchased 1,23,000
Factory Wages 50,530
Indirect Labour 21,665
Cost of Sales 1,85,890
Material issued to production 1,27,315
Sales returned at Cost 5,380
Material returned to suppliers 2,900
Manufacturing Overhead charged to production 77,200

You are required to PASS the Journal Entries; write up the accounts and schedule the balances,
stating what each balance represents.

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Question No. 2 (Study Material)

Acme Manufacturing Co. Ltd. opens the costing records, with the balances as on 1 st July as
follows:
(₹) (₹)
Material Control A/c 1,24,000
Work-in-Process Control A/c 62,500
Finished Goods Control A/c 1,24,000
Production Overhead Control A/c 8,400
Administrative Overhead Control 12,000
Selling & Distribution Overhead Control A/c 6,250
Cost Ledger Control A/c 3,13,150
3,25,150 3,25,150

The following are the transactions for the quarter ended 30th September:
(₹)
Materials purchased 4,80,100
Materials issued to jobs 4,77,400
Materials to works maintenance 41,200
Materials to administrative office 3,400
Materials to sales department 7,200
Wages Direct 1,49,300
Wages Indirect 65,000
Transportation for Indirect Materials 8,400
Production Overheads incurred 2,42,250
Absorbed Production Overheads 3,59,100
Administrative Overheads incurred 74,000
Administrative Overheads allocated to production 52,900
Administrative Overheads allocated to sales department 14,800
Selling & Distribution overheads incurred 64,200
Selling & Distribution overheads absorbed 82,000
Finished goods produced 9,58,400
Finished goods sold 9,77,300
Sales 14,43,000

Make up the various accounts as you envisage in the Cost Ledger and PREPARE a Trial Balance as
at 30th September.

Question No. 4 (Study Material)

JOURNALISE the following transactions assuming that cost and financial transactions are
integrated:
(₹)
Raw materials purchased 2,00,000
Direct materials issued to production 1,50,000
Wages paid (30% indirect) 1,20,000
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Wages charged to production 84,000

Manufacturing expenses incurred 84,000
Manufacturing overhead charged to production 92,000
Selling and Distribution costs 20,000
Finished products (at cost) 2,00,000
Sales 2,90,000
Closing stock Nil
Receipts from debtors 69,000
Payments to creditors 1,10,000

Question No. 5 (Study Material)

In the absence of the Chief Accountant, you have been asked to prepare a month’s cost accounts
for a company which operates a batch costing system fully integrated with the financial
accounts. The following relevant information is provided to you:
(₹) (₹)
Balances at the beginning of the month:
Stores Ledger Control Account 25,000
Work-in-Process Control Account 20,000
Finished Goods Control Account 35,000
Prepaid Production Overheads brought forward 3,000
from previous month
Transactions during the month:
Materials Purchased 75,000
Materials Issued:
To production 30,000
To factory maintenance 4,000 34,000
Materials transferred between batches 5,000
Total wages paid:
To direct workers 25,000
To indirect workers 5,000 30,000
Direct wages charged to batches 20,000
Recorded non-productive time of direct workers 5,000
Selling and Distribution Overheads Incurred 6,000
Other Production Overheads Incurred 12,000
Sales 1,00,000
Cost of Finished Goods Sold 80,000
Cost of Goods completed and transferred into 65,000
finished goods during the month
Physical value of work-in-Process at the end of the 40,000
month

The production overhead absorption rate is 150% of direct wages charged to work- in-Process.

Required:
PREPARE the following accounts for the month:
(a) Stores Ledger Control Account.

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(b) Work-in-Process Control Account.

(c) Finished Goods Control Account.
(d) Production Overhead Control Account.
(e) Costing Profit and Loss Account.

Question No. 6 (Study Material)

A fire destroyed some accounting records of a company. You have been able to collect the
following from the spoilt papers/records and as a result of consultation with accounting staff
for the month of January:
(i) Incomplete Ledger Entries:

Materials Control A/c

(₹) (₹)
To Balance b/d 32,000

Work-in-Process Control A/c

(₹) (₹)
To Balance b/d 9,200 By Finished Goods 1,51,000
Control A/c

Payables (Creditors) A/c

(₹) (₹)
To Balance b/d 19,200 By Balance b/d 16,400

Manufacturing Overheads Control A/c

(₹) (₹)
To Bank A/c (Amount 29,600
spent)

Finished Goods Control A/c

(₹) (₹)
To Balance b/d 24,000 By Balance c/d 30,000

(ii) Additional Information:

1. The bank-book showed that ₹89,200 have been paid to creditors for raw-material.
2. Ending inventory of work-in-process included materials of ₹ 5,000 on which 300 direct
labour hours have been booked against wages and overheads.

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3. The job card showed that workers have worked for 7,000 hours. The wage rate is ₹10
per labour hour.
4. Overhead recovery rate was ₹4 per direct labour hour.
You are required to COMPLETE the above accounts in the cost ledger of the company.

Question No. 10 (Study Material)

M/s. H.K. Piano Company showed a net loss of ₹4,16,000 as per their financial accounts for the
year ended 31st March. The cost accounts, however, disclosed a net loss of ₹3,28,000 for the
same period. The following information were revealed as a result of scrutiny of the figures of
both the sets of books:
(₹)
(i) Factory Overheads under-recovered 6,000
(ii) Administration Overheads over-recovered 4,000
(iii) Depreciation charged in financial accounts 1,20,000
(iv) Depreciation recovered in costs 1,30,000
(v) Interest on investment not included in costs 20,000
(vi) Income-tax provided 1,20,000
(vii) Transfer fees (credit in financial books) 2,000
(viii) Stores adjustment (credit in financial books) 2,000

PREPARE a Memorandum reconciliation account.

Question No. 11 (Past paper, Nov 21, 5 marks)

R Ltd. showed a Net Profit of ₹3,60,740 as per their cost accounts for the year ended 31st
March, 2021.
The following information was revealed as a result of scrutiny of the figures from the both sets
of accounts:
Sr. No. Particulars (₹)
(i) Over recovery of selling overheads in cost accounts 10,250
(ii) Over valuation of closing stock in cost accounts 7,300
(iii) Rent received credited in financial accounts 5,450
(iv) Bad debts provided in financial accounts 3,250
(v) Income tax provided in financial accounts 15,900
(vi) Loss on sale of capital asset debited in financial accounts 5,800
(vii) Under recovery of administration overheads in cost accounts 3,600

Required:
Prepare a reconciliation statement showing the profit as per financial records.

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