Q1(a)Break-even analysis and profit-volume ratio
5 marks medium
Arnav Ltd. is producing a single product, has the profit-volume ratio of 40%. The company wishes to increase the selling price by 10% which will increase the variable cost by 5%. The fixed overheads will increase from its present level of Rs. 20,00,000 to Rs. 30,00,000.
Q1(b)Economic order quantity and inventory management
5 marks medium
A company manufactures a product from a raw material, which is purchased at Rs. 54 per kg. The company incurs a handling cost of Rs. 1,500 plus freight of Rs. 4,000 per order. The incremental carrying cost of inventory of raw material is Rs. 1.50 per kg per month. In addition, the cost of working capital finance on the investment in inventory of raw material is Rs. 8 per kg per annum. The annual production of the product is 96,000 units and 4 units are obtained from one kg of raw material.
Q1(c)Labour turnover rates and workforce analysis
5 marks medium
RST Company Ltd. has computed labour turnover rates for the quarter ended 31st March, 2017 as 20%, 10% and 5% under flux method, replacement method and separation method respectively. If the number of workers replaced during that quarter is 50, CALCULATE
Q1(d)Economic order quantity for manufacturing
5 marks medium
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 Rs. 1 as inventory holding cost per bearing per month and that the set up cost per run of bearing manufacture is Rs. 3,200
Q2(a)Labour and overhead variance analysis
10 marks hard
Arnav Ltd. manufactures a product Q. Standard cost per unit: Direct Material Rs. 600; Direct labour (Skilled @ Rs. 80 per hour) Rs. 120; Direct labour (Unskilled @ Rs. 60 per hour) Rs. 90; Variable overheads Rs. 75; Fixed overheads Rs. 30; Total Rs. 915. During the month just ended 4,000 units of Q were produced. The actual labour cost was: Skilled rate Rs. 87.50 with cost Rs. 5,77,500; Unskilled rate Rs. 55.00 with cost Rs. 2,97,000. 10% of the labour time was lost due to idle time. The standard idle time was 7.5% of labour time. Arnav Ltd. has budgeted to produce 4,200 units of Q. Arnav Ltd. absorbs its overheads on direct labour hour (effective hours) basis. Actual fixed and variable overheads incurred were Rs. 1,55,000 and Rs. 2,85,000 respectively. CALCULATE:
Q2(b)Accounting records and cost control accounts
10 marks hard
The following information have been extracted from the cost records of JKL Manufacturing Company Ltd: Stores - Opening Balance Rs. 90,000; Purchases Rs. 4,80,000; Transfer from WIP Rs. 2,40,000; Issue to WIP Rs. 4,80,000; Issue for repairs Rs. 60,000; Deficiency found in stock Rs. 18,000. Work-in-Process - Opening Balance Rs. 1,80,000; Direct wages applied Rs. 1,80,000; Overhead charged Rs. 7,20,000; Closing Balance Rs. 1,20,000. Finished Production - Entire production is sold at a profit of 10% on cost from work-in-progress; Wages Paid Rs. 2,10,000; Overhead Incurred Rs. 7,50,000. PREPARE Stores Ledger Control A/c., Work-in-Process Control A/c., Overheads Control A/c. and Costing Profit & Loss A/c.
Q3(a)Relevant costing and profitability analysis
10 marks very hard
Case: DKG Airlines owns single passenger aircraft and operates between Melbourne and Delhi only. Flight leaves Melbourne on Monday and Thursday and departs from Delhi on Wednesday and Saturday. DKG Airlines cannot afford any more flight between Melbourne and Delhi. Only economical class seats are available on its flight and all tickets are booked by travel agents. Seating capacity per plane: 360; Average passengers per flight: 250; Flights per week: 4; Flights per year: 208; Average one-way fare: Rs. 50,000; Variable fuel cost: Rs. 28,00,000 per flight; Food service to passengers (not charged to Pas…
DKG Airlines owns single passenger aircraft and operates between Melbourne and Delhi only. Flight leaves Melbourne on Monday and Thursday and departs from Delhi on Wednesday and Saturday. DKG Airlines cannot afford any more flight between Melbourne and Delhi. Only economical class seats are available on its flight and all tickets are booked by travel agents. Seating capacity per plane: 360; Average passengers per flight: 250; Flights per week: 4; Flights per year: 208; Average one-way fare: Rs. 50,000; Variable fuel cost: Rs. 28,00,000 per flight; Food service to passengers (not charged to Passengers): Rs. 2,600 per passenger; Commission to travel agents: 15% of fare; Fixed annual lease cost allocated to each flight: Rs. 15,30,000 per flight; Fixed ground services (maintenance, check in, Baggage handling cost) allocated to each flight: Rs. 1,70,000 per flight; Fixed salaries of flight crew allocated to each flight: Rs. 6,50,000 per flight. For the sake of simplicity assume that fuel cost is unaffected by the actual number of passengers on a flight.
Q3(b)Machine hour rate calculation and overhead apportionment
10 marks hard
You are given the following information of the three machines of a manufacturing department of X Ltd.: Machines A, B, C with preliminary estimates of expenses (per annum) - Depreciation: A Rs. 20,000, B Rs. 7,500, C Rs. 7,500, Total Rs. 5,000; Spare parts: A Rs. 4,000, B Rs. 4,000, C Rs. 2,000, Total Rs. 10,000; Power: Total Rs. 40,000; Consumable stores: A Rs. 3,000, B Rs. 2,500, C Rs. 2,500, Total Rs. 8,000; Insurance of machinery: Total Rs. 8,000; Indirect employee cost: Total Rs. 20,000; Building maintenance expenses: Total Rs. 20,000; Annual interest on capital outlay: A Rs. 20,000, B Rs. 20,000, C Rs. 10,000, Total Rs. 50,000; Monthly charge for rent and rates: Rs. 10,000; Salary of foreman (per month): Rs. 20,000; Salary of Attendant (per month): Rs. 5,000. The foreman and attendant control all the three machines and spend equal time on each of them. Additional information: Estimated Direct Labour Hours - A: 1,00,000, B: 1,50,000, C: 1,50,000; K.W. Rating ratio: A 3, B 2, C 3; Floor space (sq. ft.): A 40,000, B 40,000, C 20,000. There are 12 holidays besides Sundays in the year, of which two were on Saturdays. The manufacturing department works 8 hours in a day but Saturdays are half days. All machines work at 90% capacity throughout the year and 2% is reasonable for breakdown. CALCULATE predetermined machine hour rates for the above machines after taking into consideration the following factors: An increase of 15% in the price of spare parts; An increase of 25% in the consumption of spare parts for machine B & C only; 20% general increase in wages rates.
Q4(a)Process costing with FIFO method
10 marks hard
The following information relate to Process A: (i) Opening Work-in-Process 8,000 units at Rs. 15,00,000 with Degree of Completion - Material 100%, Labour and Overhead 60%; (ii) Input 1,82,000 units at Rs. 1,47,50,000; (iii) Wages paid Rs. 68,12,000; (iv) Overheads paid Rs. 34,06,000; (v) Units scrapped 14,000 with Degree of Completion - Material 100%, Wages and Overheads 80%; (vi) Closing Work-in-Process 18,000 units with Degree of Completion - Material 100%, Wages and Overheads 70%; (vii) Units completed and transferred to next process 1,58,000 units; (viii) Normal loss 10% of total input including opening WIP; (ix) Scrap value is Rs. 15 per unit to be adjusted out of direct material cost. COMPUTE on the basis of FIFO:
Q4(b)Economic order quantity and cost behavior
10 marks hard
Arnav Motors Ltd. manufactures pistons used in car engines. As per the study conducted by the Auto Parts Manufacturers Association, there will be a demand of 80 million pistons in the coming year. Arnav Motors Ltd. is expected to have a market share of 1.15% of the total market demand of the pistons in the coming year. It is estimated that it costs Rs. 1.50 as inventory holding cost per piston per month and that the set-up cost per run of piston manufacture is Rs. 3,500.
Q5(a)Budgeting and material and labour planning
10 marks hard
C Ltd. manufactures two products using two types of materials and one grade of labour. Budgeted sales: Product-A 2,400 units, Product-B 3,600 units. Budgeted material consumption per unit - Material-X: Product-A 5 kg, Product-B 3 kg; Material-Y: Product-A 4 kg, Product-B 6 kg. Standard labour hours allowed per unit: Product-A 3 hours, Product-B 5 hours. Material-X costs Rs. 4 per kg and Material-Y costs Rs. 6 per kg. Labours are paid Rs. 25 per hour. Overtime premium is 50% and is paid if a worker works for more than 40 hours a week. There are 180 direct workers. The target productivity ratio (or efficiency ratio) for the productive hours worked by the direct workers in actually manufacturing the products is 80%. In addition, the non-productive down-time is budgeted at 20% of the productive hours worked. There are four 5-days weeks in the budgeted period and it is anticipated that sales and production will occur evenly throughout the whole period. Stock at the beginning of the period: Product-A 400 units, Product-B 200 units, Material-X 1,000 kg, Material-Y 500 kg. Anticipated closing stocks for budget period: Product-A 4 days sales, Product-B 5 days sales, Material-X 10 days consumption, Material-Y 6 days consumption. CALCULATE the Material Purchase Budget and the Wages Budget for the direct workers, showing the quantities and values, for the next month.
Q5(b)Traditional costing vs activity-based costing
10 marks hard
Woolmark Ltd. manufactures three types of products namely P, Q and R. The data relating to a period are as under: Machine hours per unit - P: 10, Q: 18, R: 14; Direct Labour hours per unit @ Rs. 20 - P: 4, Q: 12, R: 8; Direct Material per unit (Rs.) - P: 90, Q: 80, R: 120; Production (units) - P: 3,000, Q: 5,000, R: 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 Rs. 6 per hour. The company proposes to use activity based costing system and the activity analysis is as under: Batch size (units) - P: 150, Q: 500, R: 1,000; Number of purchase orders per batch - P: 3, Q: 10, R: 8; Number of inspections per batch - P: 5, Q: 4, R: 3. The total production overheads are analysed as: Machine set up costs 20%; Machine operation costs 30%; Inspection costs 40%; Material procurement related costs 10%.
Q6(a)Cost and management accounting fundamentals
5 marks medium
STATE the limitations of cost and management accounting.
Q6(b)Cost segregation and cost behavior analysis
5 marks medium
DISCUSS with example the level of activity method of segregating semi-variable costs into fixed and variable costs.
Q6(c)Cost accounting tools and statements
5 marks medium
STATE the advantages of Cost-Sheets.
Q6(d)Overhead allocation methods
5 marks medium
EXPLAIN the difference between Allocation and Apportionment of expenses.