To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
TEST PAPER – 03
(Chapters Covered – Marginal Costing, Standard Costing and Budgetary Control)
COST ACCOUNTING
Time Allowed: 3 Hours Full Marks: 100
Section A contains Question Number 1. All parts of this question are compulsory.
Working notes should form part of the relevant answer.
SECTION-A
1. Choose the correct answer from the given alternatives (you may write only the
Roman number and the alphabet chosen for your answer) (2×15 = 30 Marks)
(i) The sales and profit of a firm for the year 2016 are ₹ 1,50,000 and ₹ 20,000 and for
the year 2017 are ₹1,70,000 and ₹25,000 respectively. The P/V Ratio of the firm is:
(a) 30%
(b) 25%
(c) 20%
(d) 15%
(ii) Which of the following is not an element of master budget?
(a) Operating Expenses Budget
(b) Capital Expenditure Budget
(c) Production Schedule
(d) All of these
(iii) Marginal costing technique follows the following basis of classification.
(a) Identifiability-wise
(b) Element-wise
(c) Function-wise
(d) Behaviour-wise
SUMIT RASTOGI CLASSES (9810226733) 1
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
(iv) Z Ltd. is planning to sell 1,00,000 units of product A for ₹12.00 per unit. The fixed
costs are ₹2,80,000. In order to realize a profit of ₹2,00,000, what would the variable
costs be?
(a) ₹7,20,000 (c) ₹9,20,000
(b) ₹4,80,000 (d) ₹9,00,000
(v) A budget that gives a summary of all the functional budgets and projected Profit and
Loss A/c is known as:
(a) Discretionary budget
(b) Master budget
(c) Flexible budget
(d) Performance budget
(vi) The breakeven point of GOMIN LTD. is 3,20,000. The fixed cost is ₹1,28,000 and the
variable cost per unit is ₹12. What will be the P/V Ratio?
(a) 50%
(b) 40%
(c) 30%
(d) 45%
(vii) During a period 2560 labour hours were worked at a standard rate of ₹7.50 per hour.
The direct labour efficiency variance was ₹825 (A). How many standard hours were
produced.
(a) 2550
(b) 2500
(c) 2450
(d) 2400
(viii) Which of the following factors are responsible for change in the break-even point:
(a) Change in variable cost
(b) Change in selling price
(c) Change in fixed cost
(d) All of the above
SUMIT RASTOGI CLASSES (9810226733) 2
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
(ix) The management’s time is saved by reporting only the deviations from the
predetermined standards is called:
(a) Management by Exception
(b) Standard Costing
(c) Budgetary Control
(d) Management by objectives
(x) Which of the following is generally a long-term budget?
(a) Cash budget
(b) Sales budget
(c) Capital expenditure budget
(d) Research and Development budget
(xi) Standard hours for 100 units of output are 800 @₹4 per hour and actual hours taken
are 760 @₹4.50 per hour. What is the labour rate variance?
(a) ₹100 (Favourable)
(b) ₹380 (Adverse)
(c) ₹480 (Adverse)
(d) ₹400 (Adverse)
(xii) From cost control point of view the standard most commonly used is:
(a) Normal standard
(b) Theoretical standard
(c) Expected standard
(d) Basic standard
(xiii) In a factory of ZINB Ltd. operating Standard Costing System, 2000 kgs of a material
@₹12 per kg were used for a Product, resulting in Material cost variance of ₹3000
(FAV). The standard material cost of actual production is:
(a) ₹25,000
(b) ₹30,000
(c) ₹27,000
(d) ₹24,000
SUMIT RASTOGI CLASSES (9810226733) 3
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
(xiv) In a system whereby all activities are revaluated each time a budget is formulated and
starts with assumption that requirement of funds does not exist is called:
(a) Zero-based Budgeting
(b) Performance Budgeting
(c) Programme Budgeting
(d) Flexible Budgeting
(xv) The fixed-variable cost classification has a special significance in the preparation of:
(a) Capital budget
(b) Flexible budget
(c) Master budget
(d) Cash budget
SUMIT RASTOGI CLASSES (9810226733) 4
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
SECTION-B
Answer any five questions from question number 2 to 8. 14x5=70
2 (a) PANCHAL LTD., a toy manufacturer earns an average net profit of ₹1.80 per piece
on a selling price of ₹16.50 by producing and selling 12,000 pieces or 60% of the
capacity. His cost of sales per toy is as under:
Particulars Amount (₹)
Direct Material 4.25
Direct Wages 1.60
Works overheads (40% Fixed) 7.15
Sales overheads (30% Fixed) 0.90
During the current year, he intends to produce the same number of toys but anticipates that fixed
cost will go up by 10%. Direct wages and material will increase by 6% and 4% respectively but
he has no option of increasing the selling price. Under this situation, he obtains an offer for
further sale of 20% of the capacity.
Required: What minimum price you will recommend for acceptance of the offer to ensure
the manufacturer an overall profit of ₹30,100? (Show your calculations up to 3 decimal
points). (7 marks)
2 (b) PENTAX LTD., has prepared its Expense Budget for 20,000 units in its factory for a
year as detailed below:
Particulars Units/₹
Direct Material 50
Direct labour 20
Variable overhead 15
Direct expenses 6
Selling expenses (20% Fixed) 15
Factory expenses (100% Fixed) 7
Administrative expenses (100% Fixed) 4
Distribution expenses (85% Variable) 12
Total 129
Required: Prepare an Expenditure Budget for the production of 15,000 units and 18,000
units. (7 marks)
SUMIT RASTOGI CLASSES (9810226733) 5
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
3(a) SBZ Ltd., a manufacturing company using a standard costing system has the
following production budget for November, 2022:
Product A = 20000 units and Product B = 40,000 units
A standard hour represents 10 units of A and 8 units of B. The standard wage rate per hour is
0.50.
During the month 7500 hours were paid (₹0.60 per hour) which included 350 unproductive
hours due to unbudgeted holidays as also loss of production of 250 units of Product A due
to machine breakdown.
Actual production for the month was 24,000 units of A and 38,000 units of B.
Calculate:
(i) Direct Labour Rate Variance
(ii) Direct Labour Idle Time Variance
(iii) Direct Labour Efficient Variance
(iv) Direct Labour Total Variance
(7 marks)
3(b) M/s. Jolly Ltd. Manufactures product X and product Y during the year ending on 31st
March 2023. It is expected to sell 7,500 kg. of product X and 37,500 kg. of product ₹60
and ₹32 per kg., respectively.
The direct materials A, B and C are mixed in the proportion of 4:4:2 in the manufacture of
Product X and in the proportion of 3:5:2 in the manufacture of product Y. The actual and
budget inventories for the year are as follows:
Particulars Opening Stock Expected Closing Stock Anticipated Cost per
(kg.) (kg.) kg. (₹)
Material A 3,000 2,400 10
Material B 2,500 5,800 8
Material C 16,000 17,300 6
Product X 1,500 2,000 -
Product Y 3,000 3,500 -
Required:
Prepare the Production Budget and Materials Budget showing the Purchase Cost of
materials for the year ending 31st March, 2023.
(7 marks)
SUMIT RASTOGI CLASSES (9810226733) 6
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
4(a) Following particulars relate to a manufacturing factory for the month of March,
2017:
• Variable cost per unit ₹ 14
• Fixed factory overhead ₹ 5,40,000
• Fixed selling overhead ₹ 2,52,000
• Sales price per unit ₹ 20
(i) What is the break-even point expressed in rupee sales?
(ii) How many units be sold to earn a target net income of ₹60,000 per month?
(iii) How many units must be sold to earn a net income of 25% on cost?
(iv) What should be the selling price per unit if break-even point is to be brought
down to 1,20,000 units?
(7 marks)
4 (b) The standard cost card of A & Co. shows the following costs:
Particulars Units/₹
Material Cost - 2 Kg. @ ₹2.50 Each ₹5 per unit
Wages Cost - 2 Hours @ ₹50 Paisa Each ₹1 per unit
The actual data from business operations are as follows:
Production 8,000 units
Actual Total Cost of Production:
Material Cost - 16,500 Kg. @ ₹2.40 Each ₹39,600
Wages Cost - 18,000 Hours @ ₹40 Paisa Each ₹7,200
Calculate the following variances:
(i) Material Cost Variance (MCV);
(ii) Material Price Variance (MPV);
(iii) Material Usage Variance (MUV);
(iv) Labour Cost Variance (LCV);
(v) Labour Rate Variance (LRV);
(vi) Labour Efficiency Variance (LEV).
(7 marks)
SUMIT RASTOGI CLASSES (9810226733) 7
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
5 (a) Following are the summarized revenue and expenditure figures of Sarthi Ltd. For the
month of March to August, 2022:
Month Sales (₹) Purchases (₹) Wages (₹) Expenses (₹)
March 13,00,000 8,00,000 2,40,000 1,00,000
April 14,00,000 9,60,000 3,00,000 1,00,000
May 15,00,000 9,00,000 3,00,000 1,20,000
June 16,00,000 9,60,000 3,60,000 1,20,000
July 16,40,000 8,00,000 3,60,000 1,60,000
August 17,80,000 10,00,000 4,00,000 1,60,000
The following further information is available:
(i) 10% Purchases and sales are on cash basis.
(ii) Advance payment of income tax in August, 2022 is ₹2,20,000
(iii) Plant purchased and price to be paid in June, 2022 is ₹1,00,000
(iv) Time lag:
Credit sales 2 months
Credit purchases 1 month
Wages ½ month
Expenses ½ month
Prepare: Cash Budget for 3 months starting on 1st June, 2022 when cash balance is
2,50,000. (7 marks)
5 (b) M/s. Moon Light Ltd. produces three products A, B and C and furnishes the
following information for the year 2022-23:
Particulars Products
A B C
Selling price per unit 500 375 250
Profit Volume Ratio 12% 20% 40%
Raw Material content as a % of Variable Cost 50% 50% 50%
Maximum Market Demand (units) 22,000 20,000 12,000
Fixed costs are estimated at ₹20 lakhs. The firm uses same raw material in all the three products.
Raw material is in 'Short Supply'. The firm has a quota for the supply of raw materials of the
value of ₹61 lakhs for the year 2022-23 for the production of three products to meet sales
demand.
Required: Determine the optimal product mix and ascertain the maximum profit there
from. (7 marks)
SUMIT RASTOGI CLASSES (9810226733) 8
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
6 (a) The following information pertains to labour force of UDHHAMI LTD. engaged in a
week of November 2014 for a JOB-PH.
Particulars Skilled Semi-Skilled Unskilled Total
No. of Workers in Standard Gang 16 12 8 36
Standard Rate Per Hour (₹) 60 30 10
No. of Workers in Actual Gang - - - -
Actual Rate Per Hour (₹) 70 20 20
In a 40 hours’ week, the gang produced 1080 standard hours. The actual number of semi-
skilled workers is two times of the actual number of unskilled workers. Total numbers of
actual workers are same as standard gang. The rate variance of semi-skilled workers is
₹6400 (F).
You are required to find the following:
(i) The Actual Number of Workers/Labours in Each Category.
(ii) Labour Gang (Mix) Variance.
(iii) Labour Sub-Efficiency Variance.
(iv) Labour Rate Variance.
(v) Labour Cost Variance.
(7 marks)
6 (b) Ambuja Enterprises is currently working at 50% capacity and produces 10,000 units.
At the current operating level, the product costs ₹180 per unit and is sold at ₹200 per
unit. The cost of ₹180 is made up as follows:
Particulars Cost per unit (₹)
Material 100
Wages 30
Factory overheads (40% Fixed) 30
Administrative overheads (50% Fixed) 20
At 60% working, raw material cost increases by 2% and the selling price falls by 2%. At
80% working, raw material cost increases by 5% and the selling price falls by 5%.
Prepare: A Marginal Cost Statement showing the estimated profit of the business
when it is operated at 60% and 80% capacity.
(7 marks)
SUMIT RASTOGI CLASSES (9810226733) 9
To Buy classes visit our website
WWW.SUMITRASTOGICLASSES.COM
and for further queries contact us on
8826965733, 9811229279, and
9560978857.
7 (a) A company is at present working at 90% of its capacity and producing 13,500 units
per annum. It operates a flexible budgetary control system. The following figures are
obtained from its budget:
Particulars 90% (₹) 100% (₹)
Sales 15,00,000 16,00,000
Fixed Expenses 3,00,500 3,00,600
Semi-Fixed Expenses 97,500 1,00,500
Variable Expenses 1,45,000 1,49,500
Units made 13,500 15,000
Labour and materials costs per unit are constant under present conditions. Profits margin is 10%.
(i) You are required to determine the differential cost of producing 1,500 units by increasing
capacity to 100%.
(ii) What would you recommend for an export price for these 1,500 units, taking into account
that the overseas prices are much lower than the indigenous prices?
(7 marks)
7 (b) SUNRISE LTD., A Manufacturing Company using standard costing furnishes the
following information:
The standard mix to produce one unit of product X is as under:
Material A 2 kg. @ ₹20 per kg.
Material B 3 kg. @ ₹25 per kg.
Material C 4 kg. @₹ 15 per kg.
During the month of March 2019, 20 units of product X were actually produced and
consumption of material was as under:
Material A 35 kg. @ ₹22 per kg.
Material B 60 kg. @ ₹24 per kg.
Material C 90 kg. @ ₹16 per kg.
Required: Calculate the following Material Variances:
(i) Material Cost Variance
(ii) Material Price Variance
(iii) Material Usage Variance
(iv) Material Mix Variance
(v) Material Yield Variance (7 marks)
8 (a) Distinguish between Absorption Costing and Marginal Costing. (5 marks)
8 (b) What are the Advantages of Standard Costing? (5 marks)
8 (c) Write a brief note on Master Budget. (4 marks)
SUMIT RASTOGI CLASSES (9810226733) 10
