Cec Case Study of 20 Marks
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Front page will be declared later:
CEC case study of 20 marks.
There will be 10 questions per group and each question will carry
2 marks.
That means 10 * 2 = 20marks
CEC case study declaration date 13th of March 12, 2013
CEC case study submission date 30th of March 12, 2013,
After last date no case study will be accepted.
They will be given zero marks in their assignment submission of
10 marks.
Viva of the above question will be declared later on.
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Questions for group number 1
1. Samsnit Ltd. uses process cost system to manufacture a special type of kit for the
textile industry. The company has furnished the following information pertaining tooperations for the month of June 2004:
Particulars Units
Opening work-in-process (June 01, 2004) 650
Introduced in production during June2004 7,800
Closing work-in-process (June 30, 2004) 580
There is no loss in the manufacturing process. The opening inventory was 80% complete for
materials and 60% complete for conversion costs. The closing inventory was 75% complete for
material and 65% complete for conversion costs.
Costs pertaining to the month of June 2004 are as follows:
Opening work in process:
Materials Rs. 19,850
Conversion Rs. 21,250
During the month:
Materials Rs.4,98,240
Conversion Rs.5,49,990
The total cost of closing work-in-process on June30, 2004, using FIFO method,
2. Mani Ltd. has 3 identical machines manned by 4 operators. The operators are fully
engaged on machines. The total original cost of these 3 machines is Rs.12,00,000. The
company has furnished the following information pertaining to operations for 1st quarter
ending
June 30, 2004:
Normal available hours per month per operator 500 hours
Absenteeism (without pay) 50 hours
Leave (with pay) 70 hours
Normal idle time (unavoidable) 10 hours
Average rate of wages per hour Rs.20
Estimated production bonus 8% on wages
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Value of power consumed Rs.28,500
Supervision and indirect labor Rs.42,400
Electricity and lighting Rs.19,600
Repairs and maintenance per quarter 1% on value of machines
Depreciation per annum 10% on original cost
Miscellaneous expenses per annum Rs.48,000
General management expenses per annum Rs.80,000
The comprehensive machine hour rate for the machine shop for the quarter ending June 30,
2003 is
3. Plastic Furniture Ltd. manufactures plastic TV stands. The company is working at
80% capacity level, which represents 24,000 units per month. The cost break-up per
TV stands is as under:
Materials Rs.140
Labor Rs. 60
Overheads Rs. 80 (50% fixed)
The selling price is Rs.360 per unit. The company is planning to produce at 90% capacity
level. At 90% capacity level the selling price falls by Rs.20 accompanied by 5% fall in the
price of materials.
The break-even point in units and profit at 90% level of capacity of the company are
4. XY Ltd. wants to buy a new machine to replace the old one, which is having frequent
breakdowns. The company received offers for two models M1 and M2. The details of
the two models are as under:
Particulars Model M1 Model M2
Installed capacity in units 25,000 25,000
Fixed overhead expenses per annum Rs.6,00,000 Rs.2,50,000
Estimated profit at the above capacity Rs.4,00,000 Rs.2,50,000
The sale price per unit of product manufactured by these types of machines is Rs.80.
The level of sales at which both the models will earn the same profit
5. Mohan Constructions undertook a contract for construction of a large complex in
Secunderabad. The construction work commenced on April 01, 2003 and the
following data are available for the year ended March 31, 2004:
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Particulars Rs.
Total contract price 1,25,00,000
Work certified 79,00,000
Progress payment received 62,50,000
Material issued to site 40,80,000
Direct wages paid 16,50,000
Materials returned from site 51,500
Plant hire charges 1,25,000
Wage related costs 99,500
Direct expenses incurred 63,500
Work not certified 11,11,500
Materials at site 40,500
Accrued wages 34,000
The contractors own a plant which originally cost Rs.12,00,000 and has been continuously in
use in this contract throughout the year. The salvage value of the plant after 10 years is nil.
The company uses the straight-line method of depreciation. The total of work-in-process and
plant at site to be shown in the balance sheet as on March 31, 2004 is
6. Thaparia Ltd., using process costing, manufactures a single product, which passes
through two processes process 1 and process 2, the output of process 1 becoming
the input to process 2. The company has furnished the following information relatingto the product for the month of June 2004:
I.Raw material issued to process 1 was 4,500 units at a cost of Rs.11.80 per unit.
II. There was no opening or closing work-in-progress but opening and closing stocks
of finished goods were Rs.15,130 and Rs.14,500 respectively.
III. Normal losses and abnormal losses are defective units having a scrap value and
cash is received at the end of the period for all such units.
Other information:
Particulars Process 1 Process 2
Normal loss as a percentage of input 10% 5%
Output in units 4,200 3,970
Scrap value per unit (Rs.) 3.80 2.90
Additional components introduced (Rs.) 1,800 1,150
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Direct wages incurred (Rs.) 6,500 7,250
Direct expenses incurred (Rs.) 3,235 3,799
Production overhead as a % of direct
wages
60 40
The cost of goods sold of the product for the month of June 2004 is
7. A product, which uses 100 tons as input per month, passes through two processes
Process 1
and Process 2. The details of cost of process 1 for the month of June 2004 are as
follows:
Process 1 Cost per ton (Rs.) of input
Direct material cost 1,550
Direct labor cost 1,200
Overhead costs 1,349
The total loss in process 1 is 2% of input and the scrap is 6% of the input with a value of
Rs.850 per ton. The material is transferred to process 2 at cost. The direct labor cost of
Process 2 is Rs.1,250 per ton of input. The overhead is 60% of direct labor cost. The scrap
at process 2 is 10% of input with a value of Rs.850 per ton.
The cost per unit of finished goods in process 2 is
8. Shiv Sankar Ltd. manufactures four products A, B, C & D, which emerge from a
particular process of operation. The total cost of input for the period ended March 31,
2004 is Rs.4,80,000. The details of output, additional cost after split-off point and
sales value of the products are as follows:
Product
s
Output
(Kg.)
Additional processing
cost
after split-off point (Rs.)
Sales value after
further process
(Rs.)
A 12,000 22,000 2,40,000
B 6,000 20,000 1,44,000
C 8,000 4,000 1,44,000
D 4,000 18,000 80,000
If the products are sold at split-off point without further processing, the sales value would
have been:
A Rs.2,16,000
B Rs.1,26,000
C Rs.1,40,000
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D Rs. 56,000
The maximum amount of profit of the company from the four products is
9. Kappa Ltd. uses a process cost system to manufacture product - K. The company has
furnished the following information pertaining to operation for the month of June
2004:
Particulars Units
Opening work-in-process inventory, June 1, 2004 5,500
Unit introduced during June 2004 29,000
Unit completed during June 2004 32,500
Closing work-in-process inventory, June 30, 2004 2,000
The opening inventory was 60% complete for materials and 50% complete for conversion
costs. The closing inventory was 80% complete for materials and 60% complete for
conversion costs.
Costs pertaining to the process for the month of June 2004 were as follows:
I) Opening inventory costs are: Materials Rs.22,500, Labor cost Rs.16,200
Factory Overhead Rs.7,500
II) Costs incurred during the month: Materials used Rs.1,65,000, Labor cost
Rs.1,10,000
Factory overhead Rs.62,500
Using the weighted average method, the equivalent unit cost of material for the month of
June2004 is
10. Consider the following data pertaining to inventories of CBX Ltd. for the month of
June 2004:
Particulars Opening inventory
(Rs.)
Closing inventory
(Rs.)
Raw materials 16,330 18,540
Work-in-process 9,320 6,520
Finished goods 4,300 4,440
Other information:
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i. Raw materials used Rs.78,390
ii. Total manufacturing costs charged to product
(it includes raw materials, direct labor and
factory overheads applied at the rate of 50%
of direct labor cost) Rs. 2,85,960
iii. Cost of goods available for sale Rs.3,25,600
iv. Selling and general expenses Rs.6,300
The costs of raw materials purchased and the direct labor are
Group number 2
11. The budgeted working conditions of a cost center of Super T Ltd. are as follows:
Normal working per week 42 hours
No. of machines 8
Normal weekly loss of hours on
maintenance etc 4 hours per machine
No. of weeks worked per year 50
Estimated annual overheads Rs.3,04,000
Estimated wage rate Rs12 per hour
Actual results in respect of a 4 week period are:
Wages incurred Rs.17,000
Overheads incurred Rs.23,300
Machines used 1,200 hours
The amount of under or over absorption of wages and overheads respectively are
12. Moonstar Ltd. had the following inventories at the beginning and end of the month of
June 2004:
Particulars June 1, 2004 (Rs.) June 30, 2004 (Rs.)
Finished goods 85,000 81,000
Work-in-process 72,000 63,500
Direct materials 90,000 82,500
The following additional manufacturing data were available for the month of June 2004:
Particulars (Rs.)
Direct materials purchased 2,93,400
Purchase returns and allowances 2,600
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Transportation 2,900
Direct labor 2,68,000
Actual factory overhead 1,65,000
The company applies factory overhead at a rate of 40% of direct labor cost, and any over
applied or under applied factory overhead is deferred until the end of the year 2004-05.The manufacturing cost of the company for the month of June 2004 was
13.Bismat Ltd. manufactures and sells a special type of product K. Presently, the
company manufactures 8,000 units, which is 80% of the potential capacity. The
present cost structure per unit of the product K is given below:
Direct materials Rs.200
Direct labor Rs.150
Factory overhead Rs. 100 (40% fixed)
Selling overhead Rs. 80 (50% fixed)
The company estimates to produce the same number of units of the product during the
following year and anticipates that fixed cost will go up by 10% while the rates of direct
materials and direct labor will increase by 8% and 6% respectively. The company has no
intention to increase its present sale price of Rs.580 per unit. Under these circumstances,
the company obtained an offer to supply 1,000 units of the product to a special customer.
The minimum sale price per unit of additional order of 1,000 units to be quoted to the
customer if the company desires to earn an overall profit of Rs.2,50,000 is
14. Santaram Ltd. manufactures a single product at the operated capacity of 20,000
units while the normal capacity of the plant is 25,000 units per annum. The
company has estimated 20% profit on sales realization and furnished the followingbudgeted information:
Particulars25,000 units
(Rs.)
20,000 units
(Rs.)
Fixed overheads 2,00,000 2,00,000
Variable overheads 4,00,000 3,20,000
Semi-variable overheads 2,50,000 2,20,000
Sales realization 15,00,000 12,00,000
The company has received an order from a customer for a quantity equivalent to 10% of
the normal capacity. It is noticed that prime cost per unit of product is constant. If the
company desires to maintain the same percentage of profit on selling price, the minimum
price per unit to be quoted for new order is
15. Jyothi Ltd. is attempting to compute costs for its three products for pricing
purposes. The company has annual fixed manufacturing costs of Rs.5,32,000. The
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variable costs of the companys products are as follows:
ProductVariable costs of manufacture
(per unit) (Rs.)
A
B
C
20
30
40
The company expects to produce and sell 5,000 units of A, 6,000 units of B, and 8,000
units of C annually. The policy of the company is to add a markup of 25% to each
products total manufacturing costs to compute the tentative selling price. The selling
prices of product A, B and C, if fixed costs are allocated on the basis of number of units
produced, are
16. Motilal Ltd. manufactures and sells a single product. The estimated activity of the
company for the month of June 2004 is as follows:
Sales Rs.8,50,000
Gross profit on sales 30%
Increase in inventory during the month Rs.25,800
Increase in sundry debtors Rs.19,500
Total selling and administrative expensesRs.50,000 + 2.5% on
sales
Depreciation expenses which is included in
fixed selling and administrative expenses Rs.20,000
The net cash surplus or deficit for the month of June 2004 is
17. Shira Ltd. pays commission to its salesmen in the month the company receives
cash for sales, which is equal to 4% of the cash inflows. The company has
budgeted sales of Rs.6,50,000 for July 2004, Rs.7,00,000 for August 2004 and
Rs.7,50,000 for September 2004. 50% of the sales are on credit. Experience
indicates that 70% of the budgeted credit sales will be collected in the month
following the sales. 25% are expected to be realized in the second month following
the month of sales and remaining 5% will be non-recoverable.
The total amount of sales commission for the month of September 2004 is
18. Tripty Ltd. has a policy of maintaining a minimum cash balance of Rs.50,000 at the
end of each month. Any deficit below Rs.50,000 will be financed through bank
borrowings and any surplus will be utlised to repay the outstanding bank borrowing
and the balance will be invested in short-term securities. For this purpose, the
company has an agreement with the bank to borrow in multiples of Rs.5,000
whenever a need arises subject to a maximum of Rs.60,000. The rate of interest is
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12% per annum payable monthly on the amount borrowed.
50% of the sales are on credit and is expected to be collected in the month following the
month of sales. 25% of the purchases are on credit and will be paid in the month following
the month of purchases. The salaries and other expenses are to be paid in the month for
which they relate. The following is the budgeted information for the quarter ending
September 2004:
Particulars July 2004
Rs.
August
2004
Rs.
September
2004
Rs.
Sales 20,000 30,000 40,000
Purchases 20,000 30,000 30,000
Salaries 10,000 10,000 10,000
Manufacturing and otheradministrative expenses
10,000
10,000
10,000
If the closing cash balance as on July 31, 2004 is Rs.50,000, the cash balance as on
October 01, 2004 before borrowing will be
19. XY Ltd. has prepared the following budget for the year 2004-05:
Particulars Percentage to total sales(Rs.)
Direct materials 40
Direct labor 20
Factory overheads Variable
10
Fixed 8
Selling and administrative overheads Variable
12
Fixed 06
Profit 04
Total 100
After evaluating the first quarter performance, it was observed that the company would be
able to achieve only 80% of the original budgeted sales. The revised budgeted sales as
envisaged above was estimated at Rs.2,400 lakh after taking into account a reduction in
selling price by 20%.The original budgeted sales at original price is
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20. Sreyi Ltd. has furnished the following data relating to a product for the year 2003
04:
Units produced 4,000
Direct materials
(Rs.)5,20,000
Direct labor (Rs.) 3,40,000
Manufacturing overheads
(Rs.)2,00,000 (25% fixed)
Selling and administrative overheads
(Rs.)1,50,000 (40% fixed)
If the company manufactures 4,400 units in the next year, the total cost per unit would be
Group number 3
21.Leo Ltd. manufactures toy cats with moving parts and a built-in voice box.
Projected sales for 5 months are as follows:
Month Projected sales in units
July 2004 3,500
August 2004 3,900
September 2004 4,200
October 2004 4,500
November 2004 4,800
Each toy requires direct materials from a supplier at Rs.80 for moving parts. Voice boxes
are purchased from another supplier at Rs.20 per toy. Labor cost is Rs.30 per toy and
variable overhead cost is Rs.5 per toy. Fixed manufacturing overhead applicable to
production is Rs.51,000 per month. It is the practice of the company to manufacture an
output in a month which is equivalent to 1.2 times of the following months sales.
The production budget for the month of August 2004 and the production cost budget for
the month of September 2004 are
22.The flexible budget for the month of July 2004 was for 12,000 units with direct
material cost at Rs.25 per unit. Direct labor was budgeted at 45 minutes per unit
for a total cost of Rs.1,44,000. Actual output for the month was 10,800 units with
Rs.2,70,000 in direct material and Rs.1,30,000 in direct labor expenses. The direct
labor standard of 45 minutes was maintained throughout the month. The variance
analysis of the performance for the month of July 2004 would show a(n)
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23. Avoy Ltd. manufactures two products X and Y, using same facilities and similar
process. The company has furnished the following information pertaining to two
products for the year ending March 31, 2004.
Particulars Product X Product Y
Direct labor hours per unit 4 2.5
Machine hours per unit 5 4
Number of set ups during the period 22 18
Number of orders handled during the period 16 19
Production units 6,000 4,340
Total production overhead costs for the period are as follows:
Particulars Rs.
Machine activity costs 2,40,000
Set-ups costs 56,000
Order handling costs 52,500
3,48,500
The absorption of total production overheads of both the products on the basis of a
suitable cost driver, using Activity Based Costing method, is
Product X (Rs.) Product Y (Rs.)
24.Acer Ltd. manufactures 6,000 units of Product PT at a cost of Rs.150 per unit.
Presently, the company is utilizing 60% of the total capacity. The information
pertaining to cost per unit of the product is as follows:
Material Rs.80
Labor Rs.20
Factory overheads Rs.30 (40% fixed)
Administrative overheads Rs.20 (50% fixed)
Other information:
i. The current selling price of the product is Rs.200 per unit.
ii. At 70% capacity level Material cost per unit will increase by 2% and
current selling price per unit will reduce
by 2%.
iii. At 90% capacity level Material cost per unit will increase by 5% and
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current selling price per unit will reduce
by 5%.
The profit per unit of the product of the company at 70% and 90% capacity levels will be
25. Sri Ram Ltd. uses a Standard costing system. The following details have been
extracted from the standard cost card in respect of direct materials for the monthof June 2004.
Material usage per unit 5 kg at the rate of Rs.15 per kg
Budgeted production 1000 units
The company has furnished the following data relating to direct material for the month of
June 2004:
Materials purchased 5,400 kg at a price of Rs.86,400
Materials issued to production 4,670 kgs
Actual production 900 units
The material price and material usage variances are
26. Mina Processors Ltd. produces a commodity by blending two raw materials A and
B. The following are the details regarding the raw materials:
Material Standard mix Standard price per kg.
A 60% Rs. 8
B 40% Rs.10
The standard process loss is 10%. During the month of June 2004, the company produced5,000 kg. of finished product. The position of stock and purchases for the month of June
2004 is as under:
Material Stock as on June
01, 2004
Kg.
Stock as on June
30, 2004 Kg.
Purchases during June
2004
Kg. Rs.
A 120 50 3,000 24,900
B 80 30 2,500 24,000
The material yield variance of the company is
27. SD Ltd. uses a standard absorption costing system. The following data have been
extracted from its budget for the month of June 2004:
Fixed production overhead cost Rs.1,20,000
Production 12,000 units
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In June 2004, the fixed production overhead cost was under absorbed by Rs.10,500 and
the fixed production overhead expenditure variance was Rs.2,800 (Adverse).The actual
number of units produced was
28. VK Ltd. has furnished the following data pertaining to a product for the month of
June 2004:Particulars Budget Actual
Production units 10,000 10,400
Labor hours 5,000 4,800
Fixed overheads (Rs.) 85,000 87,200
Number of working days 25 24
The fixed overhead volume variance is
29. Sri Durga Pump Ltd. manufactures water pumps and uses a standard cost system.The following standard factory overhead costs per water pump are based on direct
labor hours:
Variable overheads (40 hours at the rate of Rs.20 per hour) Rs.800
Fixed overheads (40 hours at the rate of Rs.15 per hour) Rs.600
The additional information is available for the month of June 2004:
i. 4,000 pumps were produced although 4,200 had been scheduled for production
ii. The normal capacity level was 1,68,000 direct labor hours per month
iii. 1,59,000 direct labor hours were worked at a total cost of Rs.38,16,000
iv. The standard direct labor rate is Rs.25 per hour
v. The standard direct labor time per unit is 40 hours
vi. Variable overhead costs were Rs.33,20,000
vii. Fixed overhead costs were Rs.25,50,000
The fixed overhead expenditure variance and direct labor efficiency variance are
30. Consider the following data pertaining to overhead cost for the month of June 2004:
i. Overhead cost variance Rs.5,200 (A)
ii. Overhead volume variance Rs.3,800 (A)
iii. Budgeted hours for the month 2,500
iv. Budgeted overheads for the month Rs.20,000
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v. Rate of recovery of overheads Rs.20 per hour
The actual overhead incurred by the company is
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Group number 4
31. X Ltd. operates under a standard cost system. Factory overhead cost is applied to
products on a direct labor hour basis. At normal operating level, the company
utilizes 2,00,000 direct-labor hours per year. The budgeted overhead cost at normal
capacity level is as follows:
Variable Rs.6,50,000
Fixed Rs.4,20,000
During the year 2003-04, the actual labor hours were 2,20,000 to get production that
should have required only 1,80,000 hours. The overhead efficiency variance is
32. MN Ltd. uses standard process costing method. The standard process cost card per
month shows that 4 hours of direct labor is required to produce one kg. of finished
product and the fixed overheads, which are recovered on direct labor hours,amount to Rs.180 per kg. of output. The budgeted output is 4,000 kgs. per month.
Actual production during the month of June 2004 is 3,800 kgs. and the direct labor hours
utilized during the month were 14,800.
The details of opening and closing work-in progress (WIP) are as under:
Opening work-in-progress 300 kgs.(Degree of completion of labor and overheads 60%)
Closing work-in-progress 480 kgs.(Degree of completion of labor and overheads 20%)
The company uses FIFO method for evaluation of stocks.
The fixed overhead efficiency variance is
33. The standard labor component and the actual labor component for a job in a week
are given below:
ParticularsSkilled
workers
Semi-skilled
workers
Unskilled
workers
i. Standard number of workers in the
gang40 30 20
ii. Standard wage rate per hour (Rs.) 20 16 10
iii. Actual number of workers employedin the gang during the week
36 20 34
iv. Actual wage rate per hour (Rs.) 32 23 8
During the 40 hours working week, the gang produced 3,400 standard labor hours of work.
The labor efficiency variance is
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34. The data relating to Sinha Ltd. for the month of June 2004 are as follows:
Output (units)
Wages paid for 4,850 hours
Material purchased 2,500 kg
5,000
Rs. 87,300
Rs. 40,000
Variances:
Variances Rs.
Labor rate
Labor efficiency
Labor idle time
Material price
Material usage
2,130 (A)
2,250 (F)
300 (A)
2,560 (F)
2,940 (F)
The standard prime cost per unit is
35. Consider the following details pertaining to Srikanth Ltd. for the month of June
2004:
Particulars Rs.
Sales 60,000
Direct materials 18,500
Direct labor 14,000
Variable overheads 8,000
Capital employed 1,20,000
The return on investment in June 2004 is 12.5%. In the month of July 2004, it is expected
that the volume of sales will be increased by 15%, the selling price will be increased by 2%
and there will be a reduction of all other costs by 2%. The change in the return on
investment for the month of July 2004 will be
36. Consider the following data of AB Ltd. for the quarter ending June 30, 2004:
Projected sales 5,000 units
Raw materials per unit of finished goods 4 kg
Opening stock of finished goods 675units
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Closing stock of finished goods 850units
Opening stock of raw materials 4,500 kg
Closing stock of raw materials 6,200 kg
The total quantity of materials purchased during the quarter is
37. Siva Ltd. manufacturers cabinets and outsources handles of the cabinet. Eachcabinet requires four handles. The direct labor time for assembly work is 30
minutes per cabinet. The closing stock of finished cabinets in a month is estimated
to be 50% of projected unit sales for the next month. The closing stock of handles
in a month is planned to be 60% of the requirement for the second following month.
The company has furnished the following projected unit sales:
July 2004 300 cabinets
August 2004 310 cabinets
September 2004 320 cabinets
October 2004 350 cabinets
The closing inventory of the company for the month of June 2004 are as follows:
Cabinets 150
Handles 800
The number of handles to be purchased in the month of July 2004 is
38. ABC Constructions Ltd. has taken two contracts on April 01, 2003. The position of
the contracts as on March 31, 2004 is as follows:
ParticularsContract A
(Rs.)
Contract B
(Rs.)
Contract price 54,00,000
1,20,00,000
Materials 11,60,00
0
21,60,000
Wages paid 22,48,00
0
33,00,000
Other expenses 56,000 1,20,000
Plant at site 3,20,000 6,00,000
Unused materials at site 80,000 1,20,000
Wages accrued 72,000 1,08,000
Other expenses due 8,000 18,000
Work certified 32,00,00
0
60,00,000
Cash received 24,00,00 45,00,000
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0
Work completed but not yet certified 1,60,000 1,80,000
The plant at site is to be depreciated at 12% per annum.
The values of work in progress of each contract respectively are
39. Aditya Ltd., using process costing, manufactures a single product, which
passes through two processes process 1 and process 2, the output of
process 1 becoming the input to process 2. The company has furnished
the following information relating to the product for the month of
September 2004:
i) Raw material issued to process 1 was 3,000 units at a cost of Rs.5 per unit.
ii) There was no opening or closing work-in-progress but opening and closing
stocks of finished goods were Rs.20,000 and Rs.23,000 respectively.
iii) Normal losses and abnormal losses are defective units having a scrap
value and cash is received at the end of the period for all such units.
Other information:
Particulars Process 1 Process 2
Normal loss as a percentage of input 10% 5%
Output in units 2,800 2,600
Scrap value per unit (Rs.) 2 5
Additional components introduced (Rs.) 1,000 780
Direct wages incurred (Rs.) 4,000 6,000
Direct expenses incurred (Rs.) 10,000 14,000
Production overhead as a % of direct
wages
75 125
The cost of goods sold of the product for the month of September 2004 is
40. Marphy Company manufactures radios, which are sold at Rs.1,600 per
unit. The total cost consists of 30% for direct materials, 40% for directwages and 30% for overheads. An increase in material price by 30%
and in wage rates by 10% is expected in the forthcoming year, as a
result of which, the profit at current selling price may decrease by 40%
of the present profit per unit. The future selling price to maintain same
profit percentage is
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Group number 5
41. The cost data pertaining to Product X of XL Ltd. are as follows:
Maximum capacity 30,000 units
Normal capacity 15,000 units
Increase in inventory 1,880 units
Variable cost per unit Rs.12
Selling price per unit Rs.50
Fixed manufacturing overhead
costs
Rs.3,60,000
If the profit under Absorption costing method is Rs.1,01,000, the profit under
Marginal costing method would be
42. JIT Ltd. has a factory where four products are manufactured in a common
process. During September 2004, the costs of the common process were
Rs.1,60,000. The data pertaining to four products is as follows:
Product
Production
SalesSales value per
unit
A 600 units
B 400 units
C 500 units400
units
Rs. 70
D 600 units450
units
Rs.100
Products A and B are further processed to make finished products X and Y
respectively. The data relating to Products X and Y is given below.
Product Production Sales Cost of furtherprocessing Sales value perunit
X 600 units600
units
Rs.10,000 Rs.100
Y 400 units 300unit
Rs.25,000 Rs.200
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s
There was no opening stock. Company uses sales value at split off point as basis
for apportionment of common costs.
The profits of product Y and product C are
43.Bharti Ltd. has furnished the following data pertaining to manufacturing
operations for the month of September 2004:
Particulars Rs.
Raw materials (September
1,2004)
6,000
Direct labor cost 25,000 (125% of factory
overhead )
Work-in-progress (September
1,2004)
7,000
Finished goods (September
1,2004)
12,000
Cost of goods sold 88,000
Selling expenses 8,500
Raw materials (September
30,2004)
6,800
Work-in-progress (September
30,2004)
6,500
Finished goods (September
30,2004)
12,800
Sales for the month 1,12,500
The materials purchased and profit earned by the company for the month of
September 2004 are
44. Two manufacturing companies AB Ltd and XY Ltd. have decided to merge
their business operations. They have furnished the following operation details:
Particulars AB Ltd XY Ltd
Capacity utilization (%) 90 60
Sales (Rs. in lacs) 540 300
Variable costs (Rs. in
lacs)
396 225
Fixed costs (Rs. in lacs) 80 50
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The profitability of the merged plant at 80% capacity level is
45. XLNT Ltd. has furnished the following information pertaining to the
forthcoming year:
Budgeted Variable
costs
60% of sales
value
Budgeted Fixed costs
20% of salesvalue
If the company increases the selling price by 10% but the fixed costs, variable cost
per unit and sales volume remain unchanged, the effect on contribution would be
46. Quadila Ltd. has furnished the following information pertaining to its product
for the period ended September 30,2004:
Selling price perunit
Rs.80
Variable cost perunit
Rs.35
Fixed cost Rs.5,96,000
The company plans to improve the quality of its sole product by
i. Replacing a component that costs Rs.6.25 with a higher-grade unit that costs
Rs.8.00.
ii. Acquiring a packing machine of Rs.80,000.
The company will depreciate the machine over a period of 10 years with no
estimated salvage value by the Straight Line Method of depreciation. The income tax
rate is 40%. If the company desires to earn a post-tax profit of 10% on sales in the
next period, the units to be sold by the company in the next period are
47. Sams Ltd. manufactures and sells two products M and N. The following data
are estimated for the quarter ending September 30, 2004 .
ParticularsProduct
M
Product
N
Sales (Units) 80,000 1,20,000
Sale price per unit
(Rs.)20 16
Variable cost per unit 12 10
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(Rs.)
The annual fixed costs are estimated at Rs.8,16,000. The break-even point in sales
value with the current sales mix is
48. ACD Ltd. has been approached by a foreign customer who wants to place an
order for 1,500 units of Product C at Rs.22.50 a unit although the company
currently sells this item for Rs.39 a unit, and the item has a cost of Rs.29 per
unit. Further analysis reveals that the company will not pay sales
commission of Rs.2.50 a unit on these sales and its packaging requirement
will save an additional amount of Rs.1.50 per unit. However, the additional
graphics required on this job will cost Rs.3,000. The fixed costs amounting to
Rs.4,00,000 for the production of 50,000 units of such products by the
company will not change. Accepting this job by the company will
49. Ponchu Das Pvt.Ltd. of Kolkata is currently operating at 80% capacity. The
following is the income statement furnished by the company:
Particulars Rs. in lakh Rs. in lakh
Sales 640
Cost of sales:
Direct materials
200
Direct expenses 80
Variable
overheads
40
Fixed overheads 260
Total cost 580
Net income 60
The Managing Director has been discussing an offer from Middle East of a quantity,
which will require 50% capacity of the factory. The price is 10% less than the current
price in the local market. Order cannot be split. The capacity of factory can be
augmented by 10% by adding facilities at an increase of Rs.40 lakh in fixed cost. If
the proposal is accepted with the increased facilities, the profit will be increased by
50. PQR Ltd. manufactures three components P, Q, and R. The company has
furnished the following information pertaining to the cost per unit of threeproducts:
Particulars P (Rs.) Q (Rs.) R (Rs.)
Fixed cost 7.00 5.00 4.50
Variable cost 8.00 6.00 6.00
Total cost 15.00 11.00 10.50
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Alwin Company has offered to supply the components to PQR Ltd at the following
prices:
P Rs. 10.00 per unit
Q Rs. 5.00 per unit
R Rs. 7.50 per unit
Which of the following decisions should be considered by PQR Ltd.?
Group number 6
51. MNR Ltd. has furnished the following information for two years:
Particulars 2002-03 (Rs.) 2003-04 (Rs.)
Sales 8,00,000 ?
P/V Ratio 50 % 37.5%
Margin of safety as % of Sales 40 21.87
There has been substantial saving in the fixed cost for the year 2003-04 due to
restructuring of process. The companys sales quantities of both the years are same.
Selling price for the year 2003-04 is reduced. The fixed cost for the year 2003-
04 is
52. Bhavani Ltd.is operating at 80% capacity has a sales value of Rs.8,00,000 at
Rs.25 per unit. The cost data are as under:
Material cost Rs.7.50 per unit. Labour Rs.6.25 per unit. Semi variable cost (including
variable cost of Rs.3.75 per unit) Rs.1,80,000. Fixed cost Rs1,90,000 up to 80% level
of output, beyond this an additional cost of Rs.20,000 will be incurred. The activity
level at break even point is
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53. The comparative profit statement of two quarters is as below:
Particulars 1st quarter 2nd quarter
Units sold 2,500 3,750
Direct Material (Rs.) 87,500 ?
Direct wages (Rs.) 62,500 ?
Fixed and variable factory overheads
(Rs.)
75,000 95,000
Sales (Rs.) 2,75,000 ?
Profit (Rs.) 50,000 40,000
In 2nd quarter, direct material price has increased by 20%. There was a saving of
Rs.5,000 in fixed overhead in the second quarter. The other costs remained same.
The quantity that should have been sold in the second quarter to maintain the profitof 1st quarter is.
54.. Delta Ltd. manufactures four products P,Q,R & S, which emerge from a particular
process of operation. The total cost of input for the year ended March 31, 2004 is
Rs.2,80,000. The details of output, additional cost after split-off point and sales value
of the products are as follows:
Product
s
Output
(Kg.)
Additional processing
cost
after split-off point
(Rs.)
Sales value after further
process
(Rs.)
P 10,000 20,000 2,20,000
Q 3,000 20,000 1,15,000
R 6,000 17,000 1,05,000
S 4,000 50,000 1,70,000
If the products are sold at split-off point without further processing, the sales value
would have been:
Rs.1,90,00
0
Rs.1,00,00
0
Rs.
85,00
0
Rs.1,05,00
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0
The maximum amount of profit of the company from the four products is
55. Ajex Ltd. had the following inventories at the beginning and end of the month
of March 2005:
Particulars March 1, 2005 (Rs.) March 31, 2005 (Rs.)
Finished goods 1,25,000 1,17,000
Work-in-process 2,35,000 2,51,000
Direct materials 1,34,000 1,24,000
The following additional manufacturing data were available for the month of March
2005:
Particulars (Rs.)
Direct materials
purchased1,89,000
Purchase returns 1,000
Transportation 3,000
Direct labor 3,00,000
Actual factory overhead 1,75,000
The company applies factory overhead at a rate of 60% of direct labor cost and anyoverapplied or underapplied factory overhead is deferred until the end of the year
2004-05.
The manufacturing cost of the company for the month of March 2005 was
56. For a department, the standard overhead rate is Rs.2.50 per hour and
overhead allowances are as follows:
Activity level
(hours)
Budgeted overhead
allowance (Rs.)
3,000 10,000
7,000 18,000
11,000 26,000
The normal capacity level, on the basis of which the standard overhead rate has
been worked out, is
57. Sai Plastics Ltd. manufactures plastic chairs. The company is working at 60%
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capacity level, which represents 4,800 chairs per month. The cost break-up
per chair is as under:
Materials Rs.62
Labor Rs.32
Overheads Rs.40 (60% fixed)
The selling price is Rs.180 per chair. The company is planning to produce at 80%
capacity level. At 80% capacity level the selling price falls by 5% accompanied by a
similar fall in the price of materials.
The break-even point in units and profit at 80% level of capacity of the company are
58. A machine shop has 5 identical machines manned by 3 operators. The
operators are fully engaged on machines. The total original cost of these 5
machines is Rs.8,00,000. The company has furnished the following
information pertaining to operations for the last quarter ending March 31,
2005:
Normal available hours per month peroperator
200 hours
Absenteeism (without pay) 12 hours
Leave (with pay) 20 hours
Normal idle time (unavoidable) 8 hours
Average rate of wages per hour Rs.8
Estimated production bonus 10% on wages
Value of power consumed Rs.7,265
Supervision and indirect labor Rs.4,100
Electricity and lighting Rs.3,800
Repairs and maintenance per quarter 1% on value of machines
Depreciation per annum 10% on original cost
Miscellaneous expenses per annum Rs.7,200
General management expenses per annum Rs.45,800
The comprehensive machine hour rate for the machine shop for the quarter ending
March 31, 2005 is
59. Monark Ltd. has undertaken to supply 2,000 units of product MONO per
month for the months of April, May and June 2005. Every month a batch order
is opened against which materials and labor cost are booked at actual.
Overheads are absorbed at a rate per labor hour. The selling price is
contracted at Rs.15 per unit. The company has furnished the following data
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pertaining to the costs for 3 months:
MonthBatch
Production(Units)
Material
cost
(Rs.)
Labor
cost
(Rs.)
Overhead
cost
(Rs.)
Total
labor
hours
April 2005 2,500 12,5005,00
024,000 8,000
May 2005 3,000 18,0006,00
018,000 9,000
June 2005 2,000 10,0004,00
030,000 10,000
The rate per labor hour is Rs.2. The overall profit of the order of 4,400 units is
60. HP Ltd. has furnished the following information pertaining to its 3 products:
Department Allocation BaseProduct
A
Product
B
Product
C
Overhead
costs
Production Machine Hours 1,000 2,000 500 Rs.14,00,000
Purchasing Purchase Orders 100 300 150 Rs. 5,00,500
Inspection Labor Hours 200 200 200 Rs. 3,00,000
Assuming overhead is allocated based on activities, using ABC basis, how much
would be allocated to Product B?
Group number seven
61. AB Ltd. has furnished the following information for its product:
Direct material - Rs.10 per unit
Direct labor - Rs. 6 per unit
Variable overhead - Rs. 3 per unit
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Fixed overhead - Rs. 4 per unit
Budgeted production - 12,000 units
Actual production - 10,000 units
There is no overhead spending variance
Sales - 9,000 units
Selling price - Rs.28 per unit
Using Absorption costing, what is the cost per unit based upon actual costs?
62. Baisakhi Ltd. has 3 production departments P1, P2 and P3 and 2 service
departments S1 and S2. The company has furnished the following overhead
costs of production as well as service departments:
Departmen
t
Overhead costs (Rs.)
P1 13,600
P2 14,700
P3 12,800
S1 9,000
S2 3,000
The company has provided the expenses of service departments which are charged
to production as well as service departments on the following percentage basis:
Department
P1 P2 P3 S1 S2
S1 40% 30% 20% - 10%
S2 30% 30% 20% 20% -
The total overhead expenses of P1 and P3 are
63. Mahan Ltd. uses a historical cost system and applies overheads on the basis
of predetermined rates. The following data are furnished by the company for
the year ended March 31,2005:
Particulars Rs.
Manufacturing overheads 13,84,000
Manufactured overheads
applied
14,00,000
Work-in-progress 3,00,000
Finished goods 8,00,000
Cost of goods sold 9,00,000
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The amount of under absorbed overheads to be adjusted to work-in-progress, using
supplementary rate, is
64. ADC Ltd. has furnished the following data pertaining to its business:
DepartmentEmployee
s Sq.ft
Costs
Rs.
Direct
Hours
Allocation
Base
Personnel 3 1,00
0
1,80,000 Employees
Cleaning 5 2,22,750 Square
feet
Operating Dept.
A
30 3,75
0
25,00,00
0
45,00
0
Hours
Operating Dept.
B
10 3,00
0
30,00,00
0
27,00
0
Hours
Using the Step Method to allocate Personnel Department and Cleaning Departmentcosts, what is the appropriate overhead allocation rate to Department B?
65. APW Ltd. uses process cost system to manufacture Dust Density Sensors for
the mining industry. The following pertains to operations for the month of
March 2005:
Particulars Units
Opening work-in-process (March 01, 2005)1,28
0
Introduced in production during March 20057,20
0
Closing work-in-process (March 31, 2005) 950
There is no loss in the manufacturing process. The opening inventory was 60%
complete for materials and 50% complete for conversion costs. The closing inventory
was 80% complete for material and 60% complete for conversion costs.
Costs pertaining to the month of March 2005 are as follows:
Particulars Rs.
Opening work in process:
Materials 20,500
Conversion 16,350
During the month:
Materials1,12,83
0
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Conversion 89,520
The total cost of closing work-in-process on March 31, 2005, using FIFO method, i
66. During the month of March 2005, Murphi Ltd. manufactured 5,000 units of
product P at a cost of Rs.60,000, exclusive of spoilage allocation. The
company sold 2,500 units of product P during the month. An additional 1,000
units, costing Rs.8,000, were completed to the extent of 50% by March 31,
2005. All units were inspected between the completion of manufacturing and
transfer to finished goods inventory. Normal spoilage for the month was
Rs.2,000 and abnormal spoilage of Rs.5,000 was also incurred during the
month. The portion of total spoilage that should be charged against revenue in
the month of March 2005 is
67. Sigma Chemicals Ltd. produces high-quality plastic sheets in a continuous
manufacturing operation. All materials are introduced at the beginning of the
process. Conversion costs are incurred evenly throughout the process. A
quality control inspection occurs when units are 80% through with themanufacturing process, when some units are separated out as inferior quality.
The following data are available for the month of March 2005:
Material costs Rs.36,000
Conversion costs Rs.19,500
Units introduced 8,000
Units completed 7,000
There is no opening or closing work-in-progress. Past experience indicates that
approximately 8% of the units introduced are found to be defective on inspection byquality control.
The cost of abnormal loss for the month of March 2005 is
68. Anjani Ltd. makes one model of a product known as Brand D. The company
has provided the following balances as on October 01, 2004:
Finished goods 500 units
Work-in-process Rs.7,450
Raw materials Rs.16,120
The following data are available as on March 31, 2005
Indirect labor Rs.16,100
Freight in Rs.7,500
Direct labor Rs.43,240
Raw material Rs.6,490
Factory overhead expenses Rs.31,300
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Work-in-process Rs.6,800
Sales (15,000 units) Rs.3,60,000
Indirect material Rs.25,500
Total manufacturing costs incurred Rs.2,15,500
There were 1,500 units of finished goods of Brand D as on March 31, 2005.
The amount of raw materials purchased during the half-year ended March 31, 2005
was
69. Srirupa Ltd. manufactures a single product at the operated capacity of 8,000
units while the normal capacity of the plant is 10,000 units per annum. The
company has estimated 25% profit on sales realization and furnished the
following budgeted information:
Particulars 10,000 units (Rs.) 8,000 units (Rs.)
Fixed overheads 1,50,000 1,50,000
Variable overheads 50,000 40,000
Semi-variable overheads 1,00,000 88,000
Sales realization 8,00,000 6,40,000
The company has received an order from a customer for a quantity equivalent to
10% of the normal capacity. It is noticed that prime cost per unit of product is
constant.
If the company desires to maintain the same percentage of profit on selling price,
the minimum price per unit to be quoted for the new order is
70. Dcent Ltd. pays commission to its salesmen in the month the company
receives cash for sales, which is equal to 5% of the cash inflows. The
company has budgeted sales of Rs.4,25,000 for April 2005, Rs.5,25,000 for
May 2005 and Rs.5,85,000 for June 2005. 60% of the sales are on credit.
Experience indicates that 60% of the budgeted credit sales will be collected in
the month following the sales. 35% are expected to be realized in the second
month following the month of sales and remaining 5% will be non-
recoverable.
The total amount of sales commission for the month of June 2005 is