sample paper Cost & Management Accounting Question Bank

8/10/2019 sample paper Cost & Management Accounting Question Bank

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SRI BALAJI SOCIETY

Question Bank

Cost and Management Accounting

1) What do you mean by cost accounting? Distinguish between cost accounting andmanagement accounting?

2) Cost accounting is not a legal requirement. Elucidate this statement.

3) What do you mean by elements of cost? Explain in detail and how these elements are presented in the form of a cost sheet?

4) What is costing? Discuss the various techniques of costing used in the business.

5) The method of costing depends on the nature of product, production methods and specific business conditions. Explain this statement.

6) Give five examples for each of the followings.a. Variable Costs

b. Semi Variable Costsc. Fixed Costs

7) Cost sheet is a statement prepared to show the different components of total cost. Do youagree? Give reasons.

8) Explain the concept of marginal costing and distinguish between marginal costing andabsorption costing.

9) What do you understand by the term break even analysis and how does this help in businessdecisions?

10) The rate of earning profit mainly depends upon the magnitude of the angle of incidents projected on break even chart. Explain as to whether this statement is correct. Whatmeasures can be adopted to increase the magnitude of the angle of incidents?

11) Mention the broad principles on which overhead expenses are generally apportioned. Uponwhat basis would you apportion the following expenses to individual cost centers in anengineering unit?

a. Rent and Rates b. Powerc. Life insurance premiumd. Lighting


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12) What is budget and budgetary control? State and explain the various budgets which can beestablished in the following functional areas of operation.

a. Production b. Financec. Sales and Marketing

13) What are the main steps in budgetary control? State the main objectives of budgetary control

14) Distinguish between fixed budget and flexible budget?

15) What do you understand by master budget? Into what sections it is usually divided and whatis the purpose of divisions?

16) State the distinction between the two terms in each of the following vining examples:a. Cost allocation and cost Apportionment

b. Direct and Indirect Cost

c.

Fixed and variable Costd. Indirect expenses and overheads.

17) Distinguish between direct labor and indirect labors. Give four examples of indirect laborthat may arise in a factory.

18) What are overheads? How should overheads be classified? To what extent will you includeoverhead charges in your valuation of

a. Work in Progress b. Finished goods.

19) Distinguish between allocation, apportionment and absorption in connection with factoryoverhead expenses.

20) What are the general considerations that should decide your choice of basis for distributionsof overhead costs to departments?

21) What is means by absorption of overheads? What factors should be considered in obtaining arate of absorption of overheads?

22) Some of the major problems of cost accounting are associated with the allocation of indirectexpenditure, why is this so? Give a brief account of the several methods of allocation knownto you and indicate the circumstances which would lead you to regard each of them in turn asappropriate.

23) Write a critical note about the usage, application, advantages and limitations of marginalcosting techniques.

24) Marginal cost determines the rate of change in costs if the volume of output is increased ordecreased by one unit. Explain with example.


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25) Short Notes :

a. Master Budget b. Cost Centre and Cost Unitc. Margin of Safety

d. Sunk Coste. Profit Volume Ratio

26) From the following information, prepare a statement showing the cost and profit per unit.Direct material consumed Rs.4,00,000Direct labour 40% of direct material costDirect expenses 50% of direct labour costFactory overheads 25% of prime cost

Office and administrative expenses have been absorbed @ Rs.150 per 10 units producedSelling and distribution expenses have been applied @ Rs.500 per 100 units sold.

Opening finished stock 800 units @ Rs 85.50 per unitClosing finished stock 400 unitsFinished goods sold 16,400Profit 1/5 th of cost of sales.

27) Music India Ltd. Has furnished the following information in relation to the production of1,000 compact discs manufactured by it during the year 2013:

Rs.(i) Cost of Materials 1,00,000(ii) Direct wages paid 70,000(iii) Cost of Power & Consumable stores (20% Fixed) 15,000(iv) Factory indirect wages paid (40% Fixed) 20,000(v) Cost of lighting in the factory (Fixed) 10,000(vi) Office expenses incurred (Fixed) 30,000(vii) Selling expenses paid (70% Variable) 50,000(viii) Depreciation of plant (under straight line method) 10,000

The entire output was sold at Rs. 350 per unit. For the year 2014, it is estimated that the production will be increased by 50% by utilizing the spare capacity and the rates for materialsand direct wages will increase by 10% and 20% respectively.

The expenses of the company are either fixed or variable and the company assumes that thenature of the expenses will not change in the coming days.

You are required to prepare:

(i) A cost sheet for the year 2013 showing the cost per unit.(ii) A statement showing estimated cost and profit for the year 2014, assuming that all the

goods produced would be sold at a price of Rs. 340 per unit.


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28) From the following particulars of a product, prepare a cost sheet, indicating cost per unitalso:

Raw Material

- Opening Stock 20,000- Purchases 1,50,000- Closing Stock 10,000

Direct Labor Rs.60, 000, Factory Overhead Rs.22, 500, Office Overhead Rs.27, 500

Finished Stock: Opening Stock 500 units @ 11.20 per unit; Closing Stock 1,500 units @current cost price. Profit on sales 20%; Selling and Distributive expenses Rs. 20,000; Units

produced -25,000

29) From the following information for the month of January, prepare a cost sheet to show thefollowing components: a) Prime cost b) Factory cost c) Cost of production d) Total cost

Rs RsDirect material 57,000 Plant Depreciation 1,250Direct wages 28,500 Factory Heating and Lighting 400Factory Rent and rates 2,500 Factory managers salary 2,000Office rent & rates 500 Office salaries 1,600Plant repairs and maintenance 1,000 Directors Remuneration 1,500 Telephone and Postage 200 Advertisement 1,500Printing and Stationery 100 Sales mans Salaries 2,500Legal Charges 150 Showroom rent 500Sales 1,16,000

30) From the following information, prepare a statement showing cost and profit per unit:

Direct material Rs 45,000

Direct labours 33 1/3% of direct material

Direct Expenses 20% of direct material cost and direct labour cost

Factory overheads 1/9 th of prime cost

Office and administrative expenses 25% of works cost

Selling and distribution expenses 10% of cost of goods sold

Units produced 100

Units remain unsold 10% of units produced

Profit 1/5 th of cost of sales.


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31) Tata Ltd. has three production departments A, B and C and two service departments X andY. The data available for the month of March-2012 concerning the organization

Rs.Rent 15,000

Municipal Taxes 5,000Electricity 2,400Indirect Wages 6,000Power 6,000Depreciation on Machinery 40,000Canteen Expenses 30,000Other labor related costs 10,000

Following particulars are also available-

The expenses of service departments are to be allocated in following manner.

A B C X YX 20% 30% 40% 10%Y 40% 20% 30% 10%

You are required to calculate the overhead absorption rate per hour in respect of the three production departments.

32) In a factory the following particulars have been extracted for the quarter ending 30 th June2010 in respect of P1, P2 and P3 and service departments S1 and S2. Compute thedepartmental overhead rate for each of the production departments, assuming that overheadsare absorbed as a percentage of direct wages.

Particulars P1 P2 P3 S1 S2Direct Wages (Rs.) 30,000 45,000 60,000 15,000 30,000Direct Material(Rs.) 15,000 30,000 30,000 22,000 22,000

No. of Workers 150 225 225 75 75Power (K W Hrs.) 6,000 4,500 3,000 1,500 1,500Asset Value 60,000 40,000 30,000 10,000 10,000

Total A B C X YFloor Space (Sq. Mts.) 5,000 1,000 1,250 1,500 1,000 250Light Points (Nos.) 240 40 60 80 40 20Direct Wages (Rs.) 40,000 12,000 8,000 12,000 6,000 2,000HP of Machines 150 60 30 50 10Cost of Machines (Rs.) 200,000 48,000 64,000 80,000 4,000 4,000Working Hours 2,335 1,510 1,525


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A B C D ED 20% 30% 40% 10%E 40% 20% 30% 10%

Find the rate per hour if the working hours are as under.A Department 6226B Department 4028C Department 4066

34) a) Following details are available:

Sales TotalCost

Rs. Rs.Period I 39,000 34,800Period II 43,000 37,600

Calculate Variable cost, fixed cost and contribution for each period.

b) Following details are available:

Sales ProfitRs. Rs.

Period I 2,00,000 20,000Period II 3,00,000 40,000

Find out Break Even Sales.

35) A. Sales Rs. 1,00,000; Profit Rs. 10,000; Variable Cost 70%. Find out (a) P/V ratio (b) Fixedcosts and (c) Sales to earn a profit of Rs. 40,000.

B. From the following information find (a) BEP in rupees and (b) number of units to be soldto earn a net income of 10% of sales : Selling Price Rs. 20 per unit; Variable Cost Rs. 12

per unit; Fixed Cost Rs. 2,40,000.


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C. The ratio of variable cost to sales is 70%. The Break-even point occurs at 80% ofcapacity. Find 100% capacity sales when fixed cost is Rs. 6 lakhs.

36) a) Following details are available:

Rs.Actual Sales 20,000Break Even Sales 10,000Fixed Cost 5,000

Find out the profit at actual sales.

b) Find out the Break Even point and profit if sales are Rs. 50,00,000 and P/V Ratio is 50% andMargin of safety is 40%.

37) A. From the following, calculate : (a) P/V Ratio, and (b) Margin of safety for 2003

(Rs.)2002 2003

SalesProfit

50,00010,000

80,00025,000

B. The following figures relate to a company manufacturing a varied range of products :

Particulars Total Cost Total SalesYear ending 31-12-2002Year ending 31-12-2003

19,83,60021,43,200

22,23,00024,51,000

Calculate from the above particulars: (a) P/V ratio; (b) Fixed cost and its percent to sales; (c)Break-even-point (d) Margin of safety for both the year.

38)

Following information is made available to you about a company for two periods.Period Sales (Rs.) Profit (Rs.)(I) 1,20,000 9,000(II) 1,40,000 13,000


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Find out:

a. Profit Volume Ratio b. Break Even Point for salesc. Profit when sales are Rs. 1,00,000.d. Sales required to earn a profit of Rs. 20,000.e. Safety Margin in period II.

39) Calculate the Break Even Point is units and in rupees and also arrive at Margin of Safetyratio from the following information.

Estimated Sales (1,00,000 Units) Rs. 20,00,000Variable Cost Rs. 12,00,000Fixed Cost Rs. 4,00,000Total Cost Rs 16,00,000

Net Profit Rs 4,00,000

40) A Company has three production departments and two service departments. Distributesummary of overheads is as follows:

Production Department Service DepartmentA - Rs 3000 1 - Rs 234B - Rs. 2000 2 - Rs 300C - Rs. 1000

The expenses of service departments are charged on a percentage basis which is as follows:

A B C 1 2

1. 20% 40% 30% - 10%

2. 40% 20% 20% 20% -

Find out the total overheads of production departments using the following methods:

a) Simultaneous Equation Method (b) Repeated Distribution Method

41) BB Ltd is a manufacturing company having three production departments, A, B and C andtwo service departments X and Y . The following is the budget for december2004:

Total A B C X Y

Rs Rs Rs Rs Rs Rs

Direct materials 1,000 2,000 4,000 2,000 1,000


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Production department X 1,000 Production department Y 650

Power and light 6000

Rent and rates 2800

Insurance on assets 1000

Meal charges 3000

Depreciation p.a 6% on capital values

From the above prepare a Departmental Distribution Summary with following departmental data:

Item Production Department Service Department

Area (sq.mt.)

Capital value ofassets (Rs)

k W h

No. of workers

A

400

1,00,000

4,000

90

B

400

1,20,000

4,400

120

C

300

80,000

1,600

30

X

200

60,000

1,500

40

Y

100

40,000

500

20

43) J K Ltd sells two products Jay and Kay in four areas North, South, East and West. Thefollowing sales are budgeted for the month of january2013:

North - Jay 5,000 units @ Rs30 each, and Kay 3,000 units @ Rs15 each

South - Kay 6,000 units @ Rs15 each

East - Jay 7,500 units @ Rs30 each

West - Jay 4,000 units @ Rs30 each and Kay 2,500 units @Rs15 each

Actual sales for the same period were as follows:

North - Jay 5750 units @ Rs30 each and Kay 3,500 units @ Rs15 each

South - Kay 6,250 units @ Rs15 each

East - Jay 8,250 units @ Rs30 each

West - Jay 4,750 units @ Rs30 each and Kay 2,625 units @Rs15 each


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On the basis of all the relevant factors, the following sales are budgeted for the month ofFebruary 2013.

North - Jay 6,000 units and Kay 3,250 units

South - Kay 6,500 units

East - Jay 8,500 units

West - Jay 4,500 units and Kay 2,750 units

It was decided that additional advertising campaign will be undertaken in south and East which willresult in additional sales of 1,500 units of Jay in South and 2,500 units of Kay in East.

You are required to prepare a sales budget for the month of Feb, 2013 for presentation to managementalso showing the budgeted and actual sales for the month of Jan 2013which are to be provided as a guidein preparing the sales budget.

44) Prepare a Cash Budget for the three months ending 30 june 2012, from the informationgiven below:

Month Sales

Rs

Matarials

Rs

Wages

Rs

Overheads

Rs

February

March

April

May

June

14,000

15,000

16,000

17,000

18,000

9,600

9,000

9,200

10,000

10,400

3,000

3,000

3,200

3,600

4,000

1,700

1,900

2,000

2,200

2,300

Other Informations:

a) Credit terms are:Sales and debtors -10% of sales are on cash, 50% of the credit sales are collected next month andthe balance in the following month:Creditors - Matarials 2 months

Wages monthsOverheads months

b) Cash and bank balance on 1 April 2012 is expected to be Rs 6,000.


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c) Other relevant informations are:(i) Plant and machinery will be installed in February 2012 at a cost of Rs 96000.

The monthly instalment of Rs 2,000 is payable from April onwards.(ii) Dividend @ 5% on Preference Share Capital of Rs 2,00,000 will be paid on 1 june.(iii) Advances to be received for sale of vehicles Rs 9000 in June.

(iv)

Dividends from investments amounting to Rs 1,000 are expected to be received in June.(v) Income tax (advance) to be paid in June is Rs 2,000.

45) The expenses budgeted for production of 10,000 units in a factory are furnished below:

Rs per unit

Matarials 70

Labour 25

Variable overheads 20

Fixed overheads (Rs1,00,000) 10

Variable overheads (direct) 5

Selling expenses (10% fixed) 13

Distribution expenses (20% fixed) 7

Administration expenses (Rs50,000) 5

Total 155

Prepare a budget for the production of (a) 8,000 units, and (b) 6,000 units. Assume thatadministration expenses are rigid for all levels of production.

46) The following details are forecasted by a company for the purpose of effective cashutilisation and management.

(i) Estimated sales and cost:

Year andMonth

2012

Sales

Rs

Matarials

Rs

Wages

Rs

Overhead

Rs

April 4,20,000 2,00,000 1,60,000 45,000


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June 1,200 800

July 1,000 900

It is anticipated that:

(a) There will be no work-in-progress at the end of any month:

(b) Finished units equal to half the anticipated sales for the next month will be in stock at the end ofeach month (including December 2012) The budgeted production and production and productioncosts for the year ending 31 st December 2013 are as follows:

Product X Product Y

Rs Rs

Production (units) 11,000 12,000

Direct materials per unit 12 19

Direct wages per unit 5 7

Other manufacturing charges 33,000 48,000

(Apportionable to each type of product)

You are required to prepare:

(a) A production budget showing the number of units to be manufactured each month.(b) A summarized production cost budget for the 6-month-period-January to June 2013.

48) A company manufactures two products. A and B by making use of two types of materialsviz, X and Y. Product A requires 10 units of X and 3 units of Y. Product B requires 5 units ofX and 2 units of Y. The price of X is Rs. 2 per unit and that of Y Rs. 3 per unit.

The sales manger has estimated the sales of product A to be 5,000 units and that of product B10,000 units. The estimate opening stork of material X for the budget period is 2,500 units andthat of Y is 3,000 units. The desired closing stork of material X is 5,000 units and that of Y is4,000 units.

Prepare the Material Usage Budget and Materials Purchase Budget for the year ending 31 st Dec.2013.

49) The following are the estimated sales of a company for eight months ending 30-10-2003

Months Estimated SalesApril 2003 12,000


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May 2003 13,000June 2003 9,000July 2003 8,000August 2003 10,000September 2003 12,000October 2003 14,000

November 2003 12,000

As a matter of policy, the company maintains the closing balance of finished goods and rawmaterials as follows:Stock item Closing balance of a monthFinished goods 50% of the estimated sales for the next monthRaw materials Estimated consumption for the next monthEvery unit of production requires 2 kg of raw material costing Rs. 5 per kg.

Prepare Production Budget (in units) and Raw Material Purchase Budget (in units and cost) ofthe company for the half year ending 30 September 2003.

50) Form the following budgeted figures prepare a cash budget in respect of three months to June30.

Months Sales Materials Wages OverheadsJanuary 60000 40000 11000 6200February 56000 48000 11600 6600

March 64000 50000 12000 6800April 80000 56000 12400 7200May 84000 62000 13000 8600June 76000 50000 14000 8000

Expected cash balance on 1 st April Rs. 20,000.Other information:

(a) Materials and overhead are to be paid during the month following the month of supply(b) Wages are to be paid during the month in which they are incurred.(c) Terms of sales: The terms of credit sales are payment by the end of the month following the

month of sales; of the sales are paid when due the other half to be paid during the nextmonth. 5% sales commission is to be paid within the month following actual sales.

(d) Preference dividend for Rs. 30,000 is to be paid on 1 st may.(e) Share call money for Rs. 25,000 is due on 1 st April and 1 st June.(f) Plant and machinery worth Rs. 10,000 is to be installed in the month of January and the

payment is to be made in the month of June.


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51) A factory engaged in manufacturing plastic toys is working at 40% capacity and produces,10, 000 toys per month. The present cost break up for one toy is as under.

Material: Rs.10Labor: Rs.3

Overheads: Rs.5 [60% fixed]

The selling price is Rs.20 per toy. If it is decided to work the factory at 50% capacity, theselling price falls by 3%. At 90% capacity, the selling price falls by 5% accompanied by a similar fall inthe price of material. You are required to prepare a statement showing the profits/losses at 40%, 50%and 90% capacity utilizations.

52) For production of 10,000 fans, the following are the budgeted expenses:

Per Unit costDirect material Rs 25Direct labour Rs 30

Direct expenses Rs 10Variable overheads Rs 15Fised overheads (Rs 50, 000) Rs 15Selling ( 20% fixed) Rs 15Distribution expenses (30% fixed) Rs 10Administrative expenses Rs 5( Rs 80,000 rigid for all levels of production)

Total cost of sales per unit Rs 160

Prepare a budget for production of 7000, 8000 and 9000 fans, showing distinctly marginalcost and total cost.

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