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254 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
COST AND MANAGEMENT ACCOUNTING
BASIC ASPECTS OF COST ACCOUNTING
Objectives -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
The relationship of value, function and cost can be expressed as Cost = Value/Function.
[Ref : Q1. (b)(iv), June ’07 / Paper-8] 1
Descriptive & Practical Questions :
Q1. State the distinguishing features of standard cost. [Ref : Q5. (a), Dec ’07 / Paper-8] 5
MATERIALS
Objectives -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
ABC analysis is made on the basis of unit prices of materials.
[Ref : Q1. (b)(iii), June ’09 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
The annual demand of a certain component bought from the market is 1,000 units. The cost of
placing an order is Rs. 60 and the carrying cost per unit is Rs. 3 p.a. The Economic Order
Quantity for the item is ___________ . (200, 400, 600)
[Ref : Q1. (c)(i), June ’09 / Paper-8] 1
Q3. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover
according to flux method is ___________ . (5.04, 4.03, 9.08)
[Ref : Q1. (c)(iv), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. Write short note on JIT. [Ref : Q8. (a), Dec ’08 / Paper-8] 3
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 255
LABOUR
Objective -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
Time and motion study which is a function of the engineering department is useless for
determination of wages. [Ref : Q1. (c)(ii), Dec. ’08 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end. During the year 120 persons left service and 96 replacements were made. The labour
turnover according to flux method is ___________ %. (5.04, 4.03, 9.08)
[Ref : Q1. (e)(i), Dec. ’08 / Paper-8] 1
Q3. State whether the following statements are True (T) or False (F) :
Time and motion study which is a function of the engineering department is useles for
determination of wages. [Ref : Q1. (b)(ii), June ’09 / Paper-8] 1
Q4. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover
according to flux method is ___________ . (5.04, 4.03, 9.08)
[Ref : Q1. (c)(iv), June ’09 / Paper-8] 1
Q5. In the following cases, choose the correct answer :
A worker has time rate of Rs. 15/hr. He makes 720 units of a component (standard time :
5 minutes/ unit in a week of 48 hours). His total wages including Rowan bonus for the week is
_________ .
A : Rs. 792;
B : Rs. 820;
C : Rs. 840;
D : Rs. 864. [Ref : Q1. (e)(v), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. What is idle time? Explain the causes for idle time. [Ref : Q2. (a), Dec ’08 / Paper-8] 5
Q2. A worker is allowed 60 hours to complete a job on a guaranteed wage of Rs. 10 per hour. He
completes the job in 48 hours. For the saving in time, how much he will get under Halsey
Premium Plan (@ 50% Bonus)? [Ref : Q2. (b), Dec ’08 / Paper-8] 5
256 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
Q3. Discuss the essentials of a good incentive scheme. [Ref : Q2. (a), June ’09 / Paper-8] 5
Q4. The standard hours for job X is 100 hours. The job has been completed by Amar in 60 hours,
Akbar in 70 hours and Anthony in 95 hours. The bonus system applicable to the job is as
follows :
Percentage of time saved to time allowed Bonus
Saving up to 10% 10% of time saved
From 11% to 20% 15% of time saved
From 21% to 40% 20% of time saved
From 41% to 100% 25% of time saved
The rate of pay is Rs. 10 per hour. Calculate the total earnings of each worker and also the rate
of earnings per hour. [Ref : Q2. (b), June ’09 / Paper-8] 5
DIRECT EXPENSES
Objective -Type Questions :
Q1. If an expenses can be identified with a specific cost unit, it is treated as direct expenses.
[Ref : Q1. (c)(i), Dec. ’08 / Paper-8] 1
Q2. If an expenses can be identified with a specific cost unit, it is treated as direct expenses.
[Ref : Q1. (b)(i), June ’09 / Paper-8] 1
Q3. The monthly cost of maintenance of machinery for 12,000 machine hours run is Rs. 1,70,000
and for 18,500 hours it is Rs. 2,02,500. The cost of maintenance for 14,000 hours is Rs. ________
(1,90,000, 1,80,000, 1,85,000) [Ref : Q1. (c)(ii), June ’09 / Paper-8] 1
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 257
INDIRECT EXPENSES
Objective -Type Questions :
Q1. Fill in the blanks :
The term used to charge overheads to cost units is called __________ .
[Ref : Q1. (b)(i), Dec. ’08 / Paper-8] 1
Descriptive & Practical Questions :
Q1. A company makes components for television sets using two service departments and two
production departments. The inter-departmental relationship and overhead costs are given
below :
Percentage of service provided to
Maintenance Scheduling Moulding Assembly
From :
Maintenance — 10% 40% 50%
Scheduling 20% — 50% 30%
Total overhead cost (Rs.) 7,50,000 4,00,000 3,78,000 2,76,00
You are required to show the amount of Scheduling Department costs and Maintenance
Department costs to be allocated to the Production Department, using Simultaneous Equation
Method. [Ref : Q2. (c), Dec ’08 / Paper-8] 5
Q2. A company has three production departments, A, B and C and two service departments, P and
Q. The following figures are available from the primary distribution summary.
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
From primary distribution (Rs.) 3,150 3,700 1,400 2,250 1,000
The expenses of the services departments are to be apportioned on a percentage basis as follows :
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
P (%) 40 30 20 — 10
Q (%) 30 30 20 20 —
Prepare secondary summary as per the simultaneous equations method.
[Ref : Q2. (c), June ’09 / Paper-8] 5
258 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
JOB, BATCH, CONTRACT AND PROCESS COSTING
Objective -Type Questions :
Q1. Choose the correct answer from the brackets :
The output of three different products P, Q and R in a factory are 20000 Kg, 15000 Kg. and 15000
Kg. respectively. If the costs are in proportion 4 : 6 : 7, then the cost per equivalent product unit
is Rs. __________ . (10, 7, 5) [Ref : Q1. (c)(v), June ’09 / Paper-8] 1
Q2. Identify the correct answer from the given alternatives of the following questions :
(i) “Conversion cost” refers to
A. Manufacturing costs incurred to produce units of output
B. All costs associated with manufacturing other than direct labour costs
C. The sum of direct material costs and all factory overhead costs
D. The sum of raw material costs and overheads costs
[Ref : Q1. (d)(ii), Dec ’08 / Paper-8] 1
Q3. Choose the correct answer from the brackets :
The output of three different products P, Q and R in a factory are 20000 kg, 15000 kg and 15000
kg respectively. If costs are in proportion 4 : 6 : 7, then the cost per equivalent unit is
Rs. __________ . (10, 7, 5) [Ref : Q1. (e)(v), Dec ’08 / Paper-8] 1
Descriptive & Practical Questions :
Q1. The following was the expenditure on a contract for Rs. 12,00,000 commenced in January
2008 :
Rs.
Materials 2,40,000
Wages 3,28,000
Plant 40,000
Overheads 17,200
Cash received on account of the contract up to 31st December was Rs. 4,80,000 being 80% of the
work certified. The value of materials in hand was Rs. 20,000. The plant had undergone 20%
depreciation.
Prepare contract account. [Ref : Q3. (a), Dec ’08 / Paper-8] 5
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 259
Q2. A factory has two production processes. Normal loss in each process is 10% and scrapped
units sell for Re. 0.50 each from process 1 and Rs. 3 each from process 2. Relevant information
for costing purposes relating to period 5 are as follows :
Direct materials added : Process 1 Process 2
Units 2,000 1,250
Cost Rs. 8,100 Rs. 1,900
Direct labour Rs. 4,000 Rs. 10,000
Production overhead 150% of direct 120% of direct
labour cost labour cost
Output to Process 2/finished goods 1,750 units 2,800 units
Actual production overhead Rs. 17,800
Workout cost per unit of output and losses.
[Ref : Q3. (b), Dec ’08 / Paper-8] 10
Q3. State the fundamental principles of Process Costing. [Ref : Q3. (a), June ’09 / Paper-8] 5
Q4. Prabhu Builders Ltd. commenced work on 1st April, 2007 on a contract of which the agreed
price was Rs. 5 lakhs. The following expenditure was incurred during the year up to 31st
March, 2008.
Particulars Amount Rs.
Wages 1,40,000
Plant 35,000
Materials 1,05,000
Head office expenses 12,500
Materials costing Rs. 10,000 proved unsuitable and were sold for Rs. 11,500 and a part of plant
was scrapped and sold for Rs. 1,700. Of the contract price Rs. 2,40,000 representing 80% of
work certified had been received by 31st March, 2008 and on that date the value of the plant on
the job was Rs. 8,000 and the value of materials was Rs. 3,000. The cost of work done but not
certified was Rs. 25,000.
It was decided to (a) Estimate what further expenditure would be incurred in completing the
contract, (b) Compute from the estimate and the expenditure already incurred, the total profit
that would be made on the contract and (c) Ascertain the amount of profit to be taken to the
credit of Profit and Loss Account for the year ending on 31st March, 2008. While taking profit
to the credit of Profit and Loss A/c. that portion of the total profit should be taken which the
260 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
JOINT PRODUCT & BY PRODUCT
Descriptive & Practical Questions :
Q1. Concept of split-off point and joint cost. [Ref : Q8. (e)(i), June ’09 / Paper-8] 3
value of work certified bears to the contract price. Details of the estimates to complete the
contact are given below :
(a) That the contract would be completed by 30th September, 2008.
(b) The wages to complete would amount Rs. 84,750.
(c) That materials in addition to those in stock on 31st March, 2008 would cost Rs. 50,000.
(d) The further Rs. 15,000 would have to be spent on plant and the residual value of the plant
on 30th September, 2008 would be Rs. 6,000.
(e) The head office expenses to the contract would be at the same annual rate as in 2007-08.
(f) That claims, temporary maintenance and contigencies would require Rs. 9,000.
Prepare contract account for the year ended 31st March, 2008 and show your calculations of
the sum to be credited to Profit and Loss A/c. for the year.
[Ref : Q3. (b), June ’09 / Paper-8] 10
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 261
RECONCILIATION BETWEEN COST AND FINANCIAL
PROFIT AND LOSS ACCOUNT
Descriptive & Practical Questions :
Q1. As of 31st March, 2008, the following balances existed in a firm’s cost ledger, which is maintaind
separately on a double entry basis :
Debit Credit
Rs. Rs.
Stores Ledger Control A/c 3,00,000 —
Work-in-progress Control A/c 1,50,000 —
Finished Goods Control A/c 2,50,000 —
Manufacturing Overhead Control A/c — 15,000
Cost Ledger Control A/c — 6,85,000
Total 7,00,000 7,00,000
During the next quarter, the following items arose :
Finished Product (at cost) 2,25,000
Manufacturing overhead incurred 85,000
Raw material purchased 1,25,000
Factory wages 40,000
Indirect labour 20,000
Cost of sales 1,75,000
Materials issued to production 1,35,000
Sales returned (at cost) 9,000
Materials returned to suppliers 13,000
Manufacturing overhead charged to production 85,000
You are required to prepare the Cost Ledger Control A/c., Stores Ledger Control A/c., Work-in
progress Control A/c., Finished Stock Ledger Control A/c., Manufacturing Overhead Control
A/c., Wages Control A/c., Cost of Sales A/c and the Trial Balance at the end of the quarter.
[Ref : Q7. (a), June ’09 / Paper-8] 10
Q2. Explain the need for reconciliation of cost and financial accounts. Also state the reasons for
difference in profit between the two accounts. [Ref : Q7. (b), June ’09 / Paper-8] 5
Q3. Write short note on Profit Centre. [Ref : Q8. (c), June ’09 / Paper-8] 3
262 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
DECISION MAKING TOOLS
Objective -Type Questions :
Q1. Fill in the blanks :
(i) Sales minus Break-even sales is called __________ .
(ii) In absorption costing ___________ cost is added to inventory.
(iii) In Television industry the most appropriate method of costing is ________ costing.
[Ref : Q1. (b), Dec. ’08 / Paper-8] 1×3
Q2. State whether the following statements are True (T) or False (F) :
(i) Fixed costs vary with volume rather than time.
(ii) In break-even analysis it is assumed that variable fosts fluctuate inversely with time.
[Ref : Q1. (b), Dec ’08 / Paper-8] 1×2
Q3. Identify the correct answer from the given alternatives of the following questions :
(i) Which of the following concept is known as cost behaviour-oriented approach to product
costing?
A. Standard costing
B. Marginal costing
C. Process costing
D. Absorption costing
(ii) Which of the following is true at break-even point?
A. Total Sales revenue = Variable cost
B. Profi = Fixed cost
C. Sales revenue = Total cost — Variable cost
D. Contribution = Fixed cost
(iii) Which of the following is the correct valuation base for finished goods stock for balance
sheet purposes?
A. Variable cost per unit
B. Marginal cost per unit
C. Production cost per unit
D. Total cost per unit
(iv) If the raw material prices are affected by inflation, which of the following methods of
valuing stocks will give the lowest gross profit?
A. LIFO
B. Replacement cost
C. FIFO
D. Simple average [Ref : Q1. (d), Dec ’08 / Paper-8] 1×4
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 263
Q4. Choose the correct answer from the brackets :
The variable cost of a product increases by 10% and the management raise the unit selling price
by equal amount. The fixed costs remain unchanged. Then BEP of the firm ___________ .
[increase, decrease, unchanged] [Ref : Q1. (e), Dec ’08 / Paper-8] 1
Q5. Choose the correct answer from the brackets :
A company’s fixed cost amounts Rs. 120 lakhs p.a. and its overall P/V ratio is 0.4. The annual
sales of the company should be Rs. ____________ lakhs to have a Margin of Safety of 25%.
(400, 500, 600) [Ref : Q1. (c)(iii), June ’09 / Paper-8] 1
Q6. Fill in the blanks suitably :
(i) Margin of safety is _____________ or _____________ .
(ii) Profit volume graph shows the relationship between ____________ and ___________.
[Ref : Q1. (d), June ’09 / Paper-8] 1×2
Q7. In the following cases, choose the correct answer :
A Company maintains a margin of safety of 25% on its current sales and earns a profit of Rs. 30
lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales
amount to
A : Rs. 200 lakhs;
B : Rs. 300 lakhs;
C : Rs. 325 lakhs;
D : None of the above. [Ref : Q1. (e)(ii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. Distinguish between Marginal Costing and Absorption Costing.
[Ref : Q7. (a), Dec ’08 / Paper-8] 5
Q2. A company produces 30,000 units of product A and 20,000 units of product B per annum. The
sales value and costs of the two products are as follows :
Sales Value : Rs. 7,60,000 Factory Overheads : Rs. 1,90,000
Direct Material : Rs. 1,40,000 Administrative and Selling Overheads : Rs. 1,20,000
Direct Labour : Rs. 1,90,000
50% of the factory overheads are variable and 50% of the administrative and selling overheads
are fixed. The selling price of A is Rs. 12 per unit and Rs. 20 per unit for B.
The direct material and labour ratio for product A is 2 : 3 and for B is 4 : 5. For both the products,
the selling price is 400% of direct labour. The factory overheads are charged in the ratio of direct
labour and administrative and selling overheads are recovered at a flat rate of Rs. 2 per unit for
A and Rs. 3 per unit for B.
264 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
Due to fall in demand of the above products, the company has a plan to diversify and make
product C using 40% capacity. It has been estimated that for C direct material and direct labour
will be Rs. 2.50 and Rs. 3 per unit respectively. Other variable costs will be the same as applicable
to the product A. The selling price of product C is Rs. 14 per unit and production will be 30,000
units.
Assuming 60% capacity is used for manufacture of A and B, calculate—
(i) Present cost and profit;
(ii) Cost and profit after diversification;
(iii) Give your recommendations as to whether to diversify or not.
[Ref : Q7. (b), Dec ’08 / Paper-8] 10
Q3. Write short note on Benchmarking. [Ref : Q8. (c), Dec ’08 / Paper-8] 3
Q4. New India Engineering Co. Ltd., produces three components A, B and C. The following
particulars are provided :
PRODUCT
A B C
Rs. Rs. Rs.
Per Unit
Sale Price 60 55 50
Direct Material 20 18 15
Direct Labour 15 14 12
Variable overhead expenditure 13 13 17
Fixed Cost is Rs. 1,00,000 per year.
Estimated Sales (in No. of Units) 2000 2000 2000
Due to break-down of one of the machines, the capacity is limited to 12,000 machine hours only
and this is not sufficient to meet the total sales demand.
You are required to work out
(a) what will be most profitable product mix that should be produced, and
(b) the total contribution from the revised product mix.
[Ref : Q4. (a), June ’09 / Paper-8] 5+5
Q5. What are the factors those are taken into account by the Management while considering a Make
or Buy decision? [Ref : Q4. (b), June ’09 / Paper-8] 5
Q6. Write short note on Cost Volume Profit Analysis. [Ref : Q8. (a), June ’09 / Paper-8] 3
Q7. Write short note on Essentials of Inter firm comparison. [Ref : Q8. (d), June ’09 / Paper-8] 3
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 265
OPERATING COSTING
Descriptive & Practical Questions :
Q1. A hotel has a capacity of 100 single rooms and 20 double rooms. The average occupancy of both
single and double rooms is expected to be 80% throughout the year of 365 days. The rent for the
double rooms has been fixed at 125% of the rent of the single room. The costs are as under :
Variable costs : Single room Rs. 220 each per day; Double room Rs. 350 each per day.
Fixed costs : Rs. 49,64,000
Calculate the rent chargeable for single and double rooms per day in such a way that the hotel
earns a margin of safety of 20% on hire of room. [Ref : Q4. (b), Dec ’08 / Paper-8] 10
Q2. Define ‘Operating Costing’ and mention at least five activities where it is applicable.
[Ref : Q6. (b), June ’09 / Paper-8] 5
RELEVANT COSTING
Objective -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
Future costs are not relevant while making managerial decisions.
[Ref : Q1. (c)(iv), Dec ’08 / Paper-8] 1
266 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
BUDGETING
Objective -Type Questions :
Q1. Fill in the blanks suitably :
A flexible budget recognizes the behaviour of _____________ and _____________ .
[Ref : Q1. (d)(iii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. The following are the estimated sales of a company for eight months ending 30. 11.2007
Month Estimated Sales (Units)
April 2007 12,000
May 2007 13,000
June 2007 9,000
July 2007 8,000
August 2007 10,000
September 2007 12,000
October 2007 14,000
November 2007 12,000
As a matter of policy, the company maintains the closing balance of finished goods and raw
materials as follows :
Stock item Closing balance of a month
Finished goods 50% of the estimated sales for the next month
Raw materials Estimated consumption for the next month
Every unit of production requires 2 kg of raw material costing Rs. 5 per kg.
Prepare Prodcution Budget (in units) and Raw Material Purchase Budget (in units and cost) of
the company for the half year ending 30 September 2007. [Ref : Q6. (a), Dec ’08 / Paper-8] 10
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 267
Q2. Write short note on Flexible Budgeting. [Ref : Q8. (e), Dec ’08 / Paper-8] 3
Q3. The following information relates to the production activities of Good Wish Ltd. for 3 months
ending on 31st December, 2006 :
Particulars Amount in Rupees
Fixed Expenses :
Management Salaries 2,10,000
Rent and Taxes 1,40,000
Depreciation of Machinery 1,75,000
Sundry Office Expenses 2,22,000
Total Fixed Expenses 7,47,000
Semi-Variable Expenses at 50% capacity
Plant Maintenance 62,500
Labour 2,47,000
Salesmen’s salaries 72,500
Sundry Expenses 65,000
Total Semi-Variable Expenses 4,47,000
Variable Expenses at 50% capacity
Materials 6,00,000
Labour 6,40,000
Salesmen’s commission 95,000
Total Variable Expenses 13,35,000
It is further noted that semi-variable expenses remain constant between 40% and 70% capacity,
increase by 10% of the above figures between 70% and 85% capacity and increase by 15% of the
above fig. between 85% and 100% capacity. Fixed expenses remain constant whatever the level
of activity. Sales at 60% capacity are Rs. 25,50,000, at 80% capacity Rs. 34,00,000 and at 100%
capacity Rs. 42,50,000. All items produced are sold. Prepare a flexible budget at 60%, 80% and
100% productive capacity. [Ref : Q6. (a), June ’09 / Paper-8] 10
268 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
STANDARD COSTING
Objective -Type Questions :
Q1. Fill in the blanks :
Material usage variance is the sum of _____________ .
[Ref : Q1. (b)(iii), Dec ’08 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
The factory where standard costing is followed, 4600 kg of materials at Rs. 10.50/kg were
actually consumed resulting in a price variance of Rs. 4800 (A) and usage variance of Rs. 4000
(F). The standard cost of actual production is Rs. ___________ . [100000, 96000, 120000]
[Ref : Q1. (e)(iii), Dec ’08 / Paper-8] 1
Q3. If the capacity usage ratio of a prodcution department is 90% and acitivity ratio is 99%, then the
efficiency ratio of the department is __________ %. [120, 110, 90]
[Ref : Q1. (e), Dec ’08 / Paper-8] 1
Q4. Standard hour is the standard time required per unit of production.
[Ref : Q1. (b)(v), June ’09 / Paper-8] 1
Q5. Fill in the blanks suitably :
(i) Material usage variance is the sum of ____________ and ________________ .
(ii) Efficiency is basically a ratio of ____________ and _____________ .
[Ref : Q1. (d)(ii)(v), June ’09 / Paper-8] 1+1
Q6. In the following cases, choose the correct answer :
In a factory of PEE Ltd. where standard costing is followed, the budgeted fixed overhead for a
budgeted production of 4800 units is Rs. 24,000. For a certain period actual expenditure incurred
was Rs. 22,000 resulting in a fixed overhead volume variance of Rs. 3,000 (Adv.). Then actual
production for the period was
A : 5400 units;
B : 4200 units;
C : 3000 units;
D : None of the above. [Ref : Q1. (e)(iii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. State the distinguishing features of standard cost. [Ref : Q5. (a), Dec ’08 / Paper-8] 5
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 269
Q2. The following information was obtained from the records of a manufacturing unit using
standard costing system :
Particulars Standards Actual
Production 4000 units 3800 units
Working days 20 21
Fixed overheads Rs. 40,000 Rs. 39,000
Variable overheads Rs. 12,000 Rs. 12,000
Calculate :
(a) Variable overhead variance;
(b) Fixed overhead expenditure variance;
(c) Fixed overhead volume variance;
(d) Fixed overhead efficiency variance;
(e) Fixed overhead calandar variance. [Ref : Q5. (b), Dec ’08 / Paper-8] 10
Q3. The standard process cost card for a processed item is as under :
Rs. Per kg of
Finished Product
Direct Material — 2 kgs @ Rs. 10 per kg 20
Direct Labour — 3 hours @ Rs. 20 per hour 60
Fixed Overhead 90
Total 170
Budgeted output for the period is 1000 kgs.
Actual production and cost data for a month are as under :
Actual production (on equivalent production basis)
Material = 1400 kgs
Labour = 1140 kgs
Overheads = 1140 kgs
Direct Material 2900 kgs = cost Rs. 32,000
Direct Labour 3300 kgs = cost Rs. 68,000
Fixed Overhead 3300 kgs Rs. 88,000
You are required to work out the following variances :
[Ref : Q5. (a), June ’09 / Paper-8] 10
Q4. Distinguish between Standard Costing and Budgetary Control.
[Ref : Q5. (b), June ’09 / Paper-8] 5
254 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
COST AND MANAGEMENT ACCOUNTING
BASIC ASPECTS OF COST ACCOUNTING
Objectives -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
The relationship of value, function and cost can be expressed as Cost = Value/Function.
[Ref : Q1. (b)(iv), June ’07 / Paper-8] 1
Descriptive & Practical Questions :
Q1. State the distinguishing features of standard cost. [Ref : Q5. (a), Dec ’07 / Paper-8] 5
MATERIALS
Objectives -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
ABC analysis is made on the basis of unit prices of materials.
[Ref : Q1. (b)(iii), June ’09 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
The annual demand of a certain component bought from the market is 1,000 units. The cost of
placing an order is Rs. 60 and the carrying cost per unit is Rs. 3 p.a. The Economic Order
Quantity for the item is ___________ . (200, 400, 600)
[Ref : Q1. (c)(i), June ’09 / Paper-8] 1
Q3. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover
according to flux method is ___________ . (5.04, 4.03, 9.08)
[Ref : Q1. (c)(iv), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. Write short note on JIT. [Ref : Q8. (a), Dec ’08 / Paper-8] 3
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 255
LABOUR
Objective -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
Time and motion study which is a function of the engineering department is useless for
determination of wages. [Ref : Q1. (c)(ii), Dec. ’08 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end. During the year 120 persons left service and 96 replacements were made. The labour
turnover according to flux method is ___________ %. (5.04, 4.03, 9.08)
[Ref : Q1. (e)(i), Dec. ’08 / Paper-8] 1
Q3. State whether the following statements are True (T) or False (F) :
Time and motion study which is a function of the engineering department is useles for
determination of wages. [Ref : Q1. (b)(ii), June ’09 / Paper-8] 1
Q4. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover
according to flux method is ___________ . (5.04, 4.03, 9.08)
[Ref : Q1. (c)(iv), June ’09 / Paper-8] 1
Q5. In the following cases, choose the correct answer :
A worker has time rate of Rs. 15/hr. He makes 720 units of a component (standard time :
5 minutes/ unit in a week of 48 hours). His total wages including Rowan bonus for the week is
_________ .
A : Rs. 792;
B : Rs. 820;
C : Rs. 840;
D : Rs. 864. [Ref : Q1. (e)(v), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. What is idle time? Explain the causes for idle time. [Ref : Q2. (a), Dec ’08 / Paper-8] 5
Q2. A worker is allowed 60 hours to complete a job on a guaranteed wage of Rs. 10 per hour. He
completes the job in 48 hours. For the saving in time, how much he will get under Halsey
Premium Plan (@ 50% Bonus)? [Ref : Q2. (b), Dec ’08 / Paper-8] 5
256 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
Q3. Discuss the essentials of a good incentive scheme. [Ref : Q2. (a), June ’09 / Paper-8] 5
Q4. The standard hours for job X is 100 hours. The job has been completed by Amar in 60 hours,
Akbar in 70 hours and Anthony in 95 hours. The bonus system applicable to the job is as
follows :
Percentage of time saved to time allowed Bonus
Saving up to 10% 10% of time saved
From 11% to 20% 15% of time saved
From 21% to 40% 20% of time saved
From 41% to 100% 25% of time saved
The rate of pay is Rs. 10 per hour. Calculate the total earnings of each worker and also the rate
of earnings per hour. [Ref : Q2. (b), June ’09 / Paper-8] 5
DIRECT EXPENSES
Objective -Type Questions :
Q1. If an expenses can be identified with a specific cost unit, it is treated as direct expenses.
[Ref : Q1. (c)(i), Dec. ’08 / Paper-8] 1
Q2. If an expenses can be identified with a specific cost unit, it is treated as direct expenses.
[Ref : Q1. (b)(i), June ’09 / Paper-8] 1
Q3. The monthly cost of maintenance of machinery for 12,000 machine hours run is Rs. 1,70,000
and for 18,500 hours it is Rs. 2,02,500. The cost of maintenance for 14,000 hours is Rs. ________
(1,90,000, 1,80,000, 1,85,000) [Ref : Q1. (c)(ii), June ’09 / Paper-8] 1
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 257
INDIRECT EXPENSES
Objective -Type Questions :
Q1. Fill in the blanks :
The term used to charge overheads to cost units is called __________ .
[Ref : Q1. (b)(i), Dec. ’08 / Paper-8] 1
Descriptive & Practical Questions :
Q1. A company makes components for television sets using two service departments and two
production departments. The inter-departmental relationship and overhead costs are given
below :
Percentage of service provided to
Maintenance Scheduling Moulding Assembly
From :
Maintenance — 10% 40% 50%
Scheduling 20% — 50% 30%
Total overhead cost (Rs.) 7,50,000 4,00,000 3,78,000 2,76,00
You are required to show the amount of Scheduling Department costs and Maintenance
Department costs to be allocated to the Production Department, using Simultaneous Equation
Method. [Ref : Q2. (c), Dec ’08 / Paper-8] 5
Q2. A company has three production departments, A, B and C and two service departments, P and
Q. The following figures are available from the primary distribution summary.
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
From primary distribution (Rs.) 3,150 3,700 1,400 2,250 1,000
The expenses of the services departments are to be apportioned on a percentage basis as follows :
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
P (%) 40 30 20 — 10
Q (%) 30 30 20 20 —
Prepare secondary summary as per the simultaneous equations method.
[Ref : Q2. (c), June ’09 / Paper-8] 5
258 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
JOB, BATCH, CONTRACT AND PROCESS COSTING
Objective -Type Questions :
Q1. Choose the correct answer from the brackets :
The output of three different products P, Q and R in a factory are 20000 Kg, 15000 Kg. and 15000
Kg. respectively. If the costs are in proportion 4 : 6 : 7, then the cost per equivalent product unit
is Rs. __________ . (10, 7, 5) [Ref : Q1. (c)(v), June ’09 / Paper-8] 1
Q2. Identify the correct answer from the given alternatives of the following questions :
(i) “Conversion cost” refers to
A. Manufacturing costs incurred to produce units of output
B. All costs associated with manufacturing other than direct labour costs
C. The sum of direct material costs and all factory overhead costs
D. The sum of raw material costs and overheads costs
[Ref : Q1. (d)(ii), Dec ’08 / Paper-8] 1
Q3. Choose the correct answer from the brackets :
The output of three different products P, Q and R in a factory are 20000 kg, 15000 kg and 15000
kg respectively. If costs are in proportion 4 : 6 : 7, then the cost per equivalent unit is
Rs. __________ . (10, 7, 5) [Ref : Q1. (e)(v), Dec ’08 / Paper-8] 1
Descriptive & Practical Questions :
Q1. The following was the expenditure on a contract for Rs. 12,00,000 commenced in January
2008 :
Rs.
Materials 2,40,000
Wages 3,28,000
Plant 40,000
Overheads 17,200
Cash received on account of the contract up to 31st December was Rs. 4,80,000 being 80% of the
work certified. The value of materials in hand was Rs. 20,000. The plant had undergone 20%
depreciation.
Prepare contract account. [Ref : Q3. (a), Dec ’08 / Paper-8] 5
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 259
Q2. A factory has two production processes. Normal loss in each process is 10% and scrapped
units sell for Re. 0.50 each from process 1 and Rs. 3 each from process 2. Relevant information
for costing purposes relating to period 5 are as follows :
Direct materials added : Process 1 Process 2
Units 2,000 1,250
Cost Rs. 8,100 Rs. 1,900
Direct labour Rs. 4,000 Rs. 10,000
Production overhead 150% of direct 120% of direct
labour cost labour cost
Output to Process 2/finished goods 1,750 units 2,800 units
Actual production overhead Rs. 17,800
Workout cost per unit of output and losses.
[Ref : Q3. (b), Dec ’08 / Paper-8] 10
Q3. State the fundamental principles of Process Costing. [Ref : Q3. (a), June ’09 / Paper-8] 5
Q4. Prabhu Builders Ltd. commenced work on 1st April, 2007 on a contract of which the agreed
price was Rs. 5 lakhs. The following expenditure was incurred during the year up to 31st
March, 2008.
Particulars Amount Rs.
Wages 1,40,000
Plant 35,000
Materials 1,05,000
Head office expenses 12,500
Materials costing Rs. 10,000 proved unsuitable and were sold for Rs. 11,500 and a part of plant
was scrapped and sold for Rs. 1,700. Of the contract price Rs. 2,40,000 representing 80% of
work certified had been received by 31st March, 2008 and on that date the value of the plant on
the job was Rs. 8,000 and the value of materials was Rs. 3,000. The cost of work done but not
certified was Rs. 25,000.
It was decided to (a) Estimate what further expenditure would be incurred in completing the
contract, (b) Compute from the estimate and the expenditure already incurred, the total profit
that would be made on the contract and (c) Ascertain the amount of profit to be taken to the
credit of Profit and Loss Account for the year ending on 31st March, 2008. While taking profit
to the credit of Profit and Loss A/c. that portion of the total profit should be taken which the
260 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
JOINT PRODUCT & BY PRODUCT
Descriptive & Practical Questions :
Q1. Concept of split-off point and joint cost. [Ref : Q8. (e)(i), June ’09 / Paper-8] 3
value of work certified bears to the contract price. Details of the estimates to complete the
contact are given below :
(a) That the contract would be completed by 30th September, 2008.
(b) The wages to complete would amount Rs. 84,750.
(c) That materials in addition to those in stock on 31st March, 2008 would cost Rs. 50,000.
(d) The further Rs. 15,000 would have to be spent on plant and the residual value of the plant
on 30th September, 2008 would be Rs. 6,000.
(e) The head office expenses to the contract would be at the same annual rate as in 2007-08.
(f) That claims, temporary maintenance and contigencies would require Rs. 9,000.
Prepare contract account for the year ended 31st March, 2008 and show your calculations of
the sum to be credited to Profit and Loss A/c. for the year.
[Ref : Q3. (b), June ’09 / Paper-8] 10
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 261
RECONCILIATION BETWEEN COST AND FINANCIAL
PROFIT AND LOSS ACCOUNT
Descriptive & Practical Questions :
Q1. As of 31st March, 2008, the following balances existed in a firm’s cost ledger, which is maintaind
separately on a double entry basis :
Debit Credit
Rs. Rs.
Stores Ledger Control A/c 3,00,000 —
Work-in-progress Control A/c 1,50,000 —
Finished Goods Control A/c 2,50,000 —
Manufacturing Overhead Control A/c — 15,000
Cost Ledger Control A/c — 6,85,000
Total 7,00,000 7,00,000
During the next quarter, the following items arose :
Finished Product (at cost) 2,25,000
Manufacturing overhead incurred 85,000
Raw material purchased 1,25,000
Factory wages 40,000
Indirect labour 20,000
Cost of sales 1,75,000
Materials issued to production 1,35,000
Sales returned (at cost) 9,000
Materials returned to suppliers 13,000
Manufacturing overhead charged to production 85,000
You are required to prepare the Cost Ledger Control A/c., Stores Ledger Control A/c., Work-in
progress Control A/c., Finished Stock Ledger Control A/c., Manufacturing Overhead Control
A/c., Wages Control A/c., Cost of Sales A/c and the Trial Balance at the end of the quarter.
[Ref : Q7. (a), June ’09 / Paper-8] 10
Q2. Explain the need for reconciliation of cost and financial accounts. Also state the reasons for
difference in profit between the two accounts. [Ref : Q7. (b), June ’09 / Paper-8] 5
Q3. Write short note on Profit Centre. [Ref : Q8. (c), June ’09 / Paper-8] 3
262 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
DECISION MAKING TOOLS
Objective -Type Questions :
Q1. Fill in the blanks :
(i) Sales minus Break-even sales is called __________ .
(ii) In absorption costing ___________ cost is added to inventory.
(iii) In Television industry the most appropriate method of costing is ________ costing.
[Ref : Q1. (b), Dec. ’08 / Paper-8] 1×3
Q2. State whether the following statements are True (T) or False (F) :
(i) Fixed costs vary with volume rather than time.
(ii) In break-even analysis it is assumed that variable fosts fluctuate inversely with time.
[Ref : Q1. (b), Dec ’08 / Paper-8] 1×2
Q3. Identify the correct answer from the given alternatives of the following questions :
(i) Which of the following concept is known as cost behaviour-oriented approach to product
costing?
A. Standard costing
B. Marginal costing
C. Process costing
D. Absorption costing
(ii) Which of the following is true at break-even point?
A. Total Sales revenue = Variable cost
B. Profi = Fixed cost
C. Sales revenue = Total cost — Variable cost
D. Contribution = Fixed cost
(iii) Which of the following is the correct valuation base for finished goods stock for balance
sheet purposes?
A. Variable cost per unit
B. Marginal cost per unit
C. Production cost per unit
D. Total cost per unit
(iv) If the raw material prices are affected by inflation, which of the following methods of
valuing stocks will give the lowest gross profit?
A. LIFO
B. Replacement cost
C. FIFO
D. Simple average [Ref : Q1. (d), Dec ’08 / Paper-8] 1×4
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 263
Q4. Choose the correct answer from the brackets :
The variable cost of a product increases by 10% and the management raise the unit selling price
by equal amount. The fixed costs remain unchanged. Then BEP of the firm ___________ .
[increase, decrease, unchanged] [Ref : Q1. (e), Dec ’08 / Paper-8] 1
Q5. Choose the correct answer from the brackets :
A company’s fixed cost amounts Rs. 120 lakhs p.a. and its overall P/V ratio is 0.4. The annual
sales of the company should be Rs. ____________ lakhs to have a Margin of Safety of 25%.
(400, 500, 600) [Ref : Q1. (c)(iii), June ’09 / Paper-8] 1
Q6. Fill in the blanks suitably :
(i) Margin of safety is _____________ or _____________ .
(ii) Profit volume graph shows the relationship between ____________ and ___________.
[Ref : Q1. (d), June ’09 / Paper-8] 1×2
Q7. In the following cases, choose the correct answer :
A Company maintains a margin of safety of 25% on its current sales and earns a profit of Rs. 30
lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales
amount to
A : Rs. 200 lakhs;
B : Rs. 300 lakhs;
C : Rs. 325 lakhs;
D : None of the above. [Ref : Q1. (e)(ii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. Distinguish between Marginal Costing and Absorption Costing.
[Ref : Q7. (a), Dec ’08 / Paper-8] 5
Q2. A company produces 30,000 units of product A and 20,000 units of product B per annum. The
sales value and costs of the two products are as follows :
Sales Value : Rs. 7,60,000 Factory Overheads : Rs. 1,90,000
Direct Material : Rs. 1,40,000 Administrative and Selling Overheads : Rs. 1,20,000
Direct Labour : Rs. 1,90,000
50% of the factory overheads are variable and 50% of the administrative and selling overheads
are fixed. The selling price of A is Rs. 12 per unit and Rs. 20 per unit for B.
The direct material and labour ratio for product A is 2 : 3 and for B is 4 : 5. For both the products,
the selling price is 400% of direct labour. The factory overheads are charged in the ratio of direct
labour and administrative and selling overheads are recovered at a flat rate of Rs. 2 per unit for
A and Rs. 3 per unit for B.
264 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
Due to fall in demand of the above products, the company has a plan to diversify and make
product C using 40% capacity. It has been estimated that for C direct material and direct labour
will be Rs. 2.50 and Rs. 3 per unit respectively. Other variable costs will be the same as applicable
to the product A. The selling price of product C is Rs. 14 per unit and production will be 30,000
units.
Assuming 60% capacity is used for manufacture of A and B, calculate—
(i) Present cost and profit;
(ii) Cost and profit after diversification;
(iii) Give your recommendations as to whether to diversify or not.
[Ref : Q7. (b), Dec ’08 / Paper-8] 10
Q3. Write short note on Benchmarking. [Ref : Q8. (c), Dec ’08 / Paper-8] 3
Q4. New India Engineering Co. Ltd., produces three components A, B and C. The following
particulars are provided :
PRODUCT
A B C
Rs. Rs. Rs.
Per Unit
Sale Price 60 55 50
Direct Material 20 18 15
Direct Labour 15 14 12
Variable overhead expenditure 13 13 17
Fixed Cost is Rs. 1,00,000 per year.
Estimated Sales (in No. of Units) 2000 2000 2000
Due to break-down of one of the machines, the capacity is limited to 12,000 machine hours only
and this is not sufficient to meet the total sales demand.
You are required to work out
(a) what will be most profitable product mix that should be produced, and
(b) the total contribution from the revised product mix.
[Ref : Q4. (a), June ’09 / Paper-8] 5+5
Q5. What are the factors those are taken into account by the Management while considering a Make
or Buy decision? [Ref : Q4. (b), June ’09 / Paper-8] 5
Q6. Write short note on Cost Volume Profit Analysis. [Ref : Q8. (a), June ’09 / Paper-8] 3
Q7. Write short note on Essentials of Inter firm comparison. [Ref : Q8. (d), June ’09 / Paper-8] 3
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 265
OPERATING COSTING
Descriptive & Practical Questions :
Q1. A hotel has a capacity of 100 single rooms and 20 double rooms. The average occupancy of both
single and double rooms is expected to be 80% throughout the year of 365 days. The rent for the
double rooms has been fixed at 125% of the rent of the single room. The costs are as under :
Variable costs : Single room Rs. 220 each per day; Double room Rs. 350 each per day.
Fixed costs : Rs. 49,64,000
Calculate the rent chargeable for single and double rooms per day in such a way that the hotel
earns a margin of safety of 20% on hire of room. [Ref : Q4. (b), Dec ’08 / Paper-8] 10
Q2. Define ‘Operating Costing’ and mention at least five activities where it is applicable.
[Ref : Q6. (b), June ’09 / Paper-8] 5
RELEVANT COSTING
Objective -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
Future costs are not relevant while making managerial decisions.
[Ref : Q1. (c)(iv), Dec ’08 / Paper-8] 1
266 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
BUDGETING
Objective -Type Questions :
Q1. Fill in the blanks suitably :
A flexible budget recognizes the behaviour of _____________ and _____________ .
[Ref : Q1. (d)(iii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. The following are the estimated sales of a company for eight months ending 30. 11.2007
Month Estimated Sales (Units)
April 2007 12,000
May 2007 13,000
June 2007 9,000
July 2007 8,000
August 2007 10,000
September 2007 12,000
October 2007 14,000
November 2007 12,000
As a matter of policy, the company maintains the closing balance of finished goods and raw
materials as follows :
Stock item Closing balance of a month
Finished goods 50% of the estimated sales for the next month
Raw materials Estimated consumption for the next month
Every unit of production requires 2 kg of raw material costing Rs. 5 per kg.
Prepare Prodcution Budget (in units) and Raw Material Purchase Budget (in units and cost) of
the company for the half year ending 30 September 2007. [Ref : Q6. (a), Dec ’08 / Paper-8] 10
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 267
Q2. Write short note on Flexible Budgeting. [Ref : Q8. (e), Dec ’08 / Paper-8] 3
Q3. The following information relates to the production activities of Good Wish Ltd. for 3 months
ending on 31st December, 2006 :
Particulars Amount in Rupees
Fixed Expenses :
Management Salaries 2,10,000
Rent and Taxes 1,40,000
Depreciation of Machinery 1,75,000
Sundry Office Expenses 2,22,000
Total Fixed Expenses 7,47,000
Semi-Variable Expenses at 50% capacity
Plant Maintenance 62,500
Labour 2,47,000
Salesmen’s salaries 72,500
Sundry Expenses 65,000
Total Semi-Variable Expenses 4,47,000
Variable Expenses at 50% capacity
Materials 6,00,000
Labour 6,40,000
Salesmen’s commission 95,000
Total Variable Expenses 13,35,000
It is further noted that semi-variable expenses remain constant between 40% and 70% capacity,
increase by 10% of the above figures between 70% and 85% capacity and increase by 15% of the
above fig. between 85% and 100% capacity. Fixed expenses remain constant whatever the level
of activity. Sales at 60% capacity are Rs. 25,50,000, at 80% capacity Rs. 34,00,000 and at 100%
capacity Rs. 42,50,000. All items produced are sold. Prepare a flexible budget at 60%, 80% and
100% productive capacity. [Ref : Q6. (a), June ’09 / Paper-8] 10
268 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
STANDARD COSTING
Objective -Type Questions :
Q1. Fill in the blanks :
Material usage variance is the sum of _____________ .
[Ref : Q1. (b)(iii), Dec ’08 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
The factory where standard costing is followed, 4600 kg of materials at Rs. 10.50/kg were
actually consumed resulting in a price variance of Rs. 4800 (A) and usage variance of Rs. 4000
(F). The standard cost of actual production is Rs. ___________ . [100000, 96000, 120000]
[Ref : Q1. (e)(iii), Dec ’08 / Paper-8] 1
Q3. If the capacity usage ratio of a prodcution department is 90% and acitivity ratio is 99%, then the
efficiency ratio of the department is __________ %. [120, 110, 90]
[Ref : Q1. (e), Dec ’08 / Paper-8] 1
Q4. Standard hour is the standard time required per unit of production.
[Ref : Q1. (b)(v), June ’09 / Paper-8] 1
Q5. Fill in the blanks suitably :
(i) Material usage variance is the sum of ____________ and ________________ .
(ii) Efficiency is basically a ratio of ____________ and _____________ .
[Ref : Q1. (d)(ii)(v), June ’09 / Paper-8] 1+1
Q6. In the following cases, choose the correct answer :
In a factory of PEE Ltd. where standard costing is followed, the budgeted fixed overhead for a
budgeted production of 4800 units is Rs. 24,000. For a certain period actual expenditure incurred
was Rs. 22,000 resulting in a fixed overhead volume variance of Rs. 3,000 (Adv.). Then actual
production for the period was
A : 5400 units;
B : 4200 units;
C : 3000 units;
D : None of the above. [Ref : Q1. (e)(iii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. State the distinguishing features of standard cost. [Ref : Q5. (a), Dec ’08 / Paper-8] 5
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 269
Q2. The following information was obtained from the records of a manufacturing unit using
standard costing system :
Particulars Standards Actual
Production 4000 units 3800 units
Working days 20 21
Fixed overheads Rs. 40,000 Rs. 39,000
Variable overheads Rs. 12,000 Rs. 12,000
Calculate :
(a) Variable overhead variance;
(b) Fixed overhead expenditure variance;
(c) Fixed overhead volume variance;
(d) Fixed overhead efficiency variance;
(e) Fixed overhead calandar variance. [Ref : Q5. (b), Dec ’08 / Paper-8] 10
Q3. The standard process cost card for a processed item is as under :
Rs. Per kg of
Finished Product
Direct Material — 2 kgs @ Rs. 10 per kg 20
Direct Labour — 3 hours @ Rs. 20 per hour 60
Fixed Overhead 90
Total 170
Budgeted output for the period is 1000 kgs.
Actual production and cost data for a month are as under :
Actual production (on equivalent production basis)
Material = 1400 kgs
Labour = 1140 kgs
Overheads = 1140 kgs
Direct Material 2900 kgs = cost Rs. 32,000
Direct Labour 3300 kgs = cost Rs. 68,000
Fixed Overhead 3300 kgs Rs. 88,000
You are required to work out the following variances :
[Ref : Q5. (a), June ’09 / Paper-8] 10
Q4. Distinguish between Standard Costing and Budgetary Control.
[Ref : Q5. (b), June ’09 / Paper-8] 5
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