AEREN FOUNDATIONS

Maharashtra Govt. Reg. No.: F-11724

AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL

MARKS: 80

SUB: Cost Accounting and Financial Management

N. B.: 1)
2)

Attempt any Four Questions

All questions carries equal mark

1. X is the manufacture of Mumbai purchased three chemicals A, B and C from U.P. The bill
gave the following information:
Chemical A:
Chemical B:
Chemical C:
VAT
Railway Freight
Total Cost

6000 kgs @ Rs. 4.20 per kg

10000 kgs @ Rs. 3.80 per kg
4000 kgs @ Rs. 4.75 per kg

Rs

25,200
38,000
19,000
2,055
1,000
85,255

A shortage of 100 kgs in chemical A, of 140 Kgs in chemical B and Of 50 kgs in chemical C was
noticed due to breakages. At Mumbai, the manufacture paid octroi duty @ 0.20 kg. He also paid
hamali, Rs 20 for the chemical a, Rs 58.12 for chemical B and Rs 35.75 for chemical C. Calculate the
stock rate that you would suggest for pricing issue of chemicals assuming a provision of 4 % towards
further deterioration and also show the quantity (kgs) of chemicals available for issue.

Solution:

Statement showing the Issue Rate of Chemicals

X
Rs
Purchase Price
Add: Sales Tax @ 2.4% of purchase price
Add: Railway Freight in the ratio of
6:10:4
Add: Octroi @ Re. 0.20 per kg. on the
quantity of material received
Add: Cartage
Total Price
Rate of issue per Kg = Total Price / Qty.
available for issue

Chemicals
Y
Rs

Z
Rs

25,200
605

38,000
912

19,000
456

600

1,000

400

1,180
20
27,605

1,972
58.12
41,942

790
35.75
20,682

Rs.4.87

Rs. 4.43

Rs. 5.45

Working Notes:
1. Statement showing the quantity of chemicals
available for issue
Quantity purchased
Less: Shortage
Quantity received at the store
Less: Provision for further deterioration 4%
Quantity available for issue
2. Rate of sales Tax= Sales Tax / Total Purchase of
Chemicals X 100

6000

10000 4000

100

140

5900

9860

50
395
0

236

394.4
9465.
60

158
379
2

5664
2055/85255
x 100

2.41

2. ABC Ltd has collected the following data for its two activities. It calculates activity cost rates
based on cost driver capacity.
Activity
Power

Cost driver
Kilowatt hours

Capacity
50000 Kilowatt Hrs

Cost
Rs 200000

Quality Inspection

Numbers of inspection

10000 inspection

Rs 300000

The Company makes three products, A, B and C.For the year ended March 31, 2004, the following
consumption of cost drivers was reported:
Product
A
B
C

Kilowatt-hours
20000
40000
30000

Quality Inspection
7000
5000

Compute the costs allocated to each product from each activity

Solution:
Product

Power (Refer to working

notes)

Quality Inspection

A
Rs

B
Rs

80000

210000

Working Notes:
Rate per unit of cost
driver:
Power:

(Rs.200000/50,000kwh)

Quality Inspection

(Rs 300000/10000
inspections)

160000

C
Rs
1200
00

Total
Rs
3600
00

150000

1800
00

5400
00

Rs. 4/ kwh
Rs. 30 per
inspection

Calculate the cost of unused capacity for each activity.

Solution:
Rs

Power
Quality Inspection

200000 - 360000
300000 - 540000

-160000
-240000

3. Reliable company wishes to discontinue the sale of one of the products in vew of unprofitable
operations. Following details are available with regard to turnover, cost and activity for the
current year ending 31st March.
P
Sales Turnover
Rs.600000
Cost of sales
350000
Storage area (square meters)
40000
Number of cartons sold
200000
Number of bills raised
100000

Products
Q
Rs.1000000
800000
60000
300000
120000

R
Rs.500000
370000
70000
150000
80000

Rs.100000
120000
60000
20000

Basis of Apportionatement
Number of bill raised
Sales turnover
Storage area
Number of cartons

S
Rs.900000
480000
30000
350000
100000

Overhead costs and basis of apportionatement are:

Fixed Expenses
Administration wages & salaries
Salesmen salaries a & expenses
Rent and insurance
Depreciation
Unfixed Expenses
Commission
Packing material & wages
Stationery

3 % of sales
Re 1 per carton
Re 0.50 per bill

You have to prepare

1. Staement showing summary of Selling & Distribution Costs to the products
Solution:
Particluars

Basis of
apportionment

Total
P

Fixed Cost:
Administrative wages
and salaries
Salesmen's salaries
and expenses
Rent and insurance
Depreciation
TOTAL (a)

Number of bills
raised
Sales Turnover
Storage area
Number of
cartons

Rs.
1,00,000
Rs.
1,20,000

Products
Q
R

Rs. 25,000

Rs. 30,000

Rs. 24,000

Rs. 40,000

Rs. 60,000

Rs. 12,000

Rs. 18,000

Rs.
20,000
Rs.
20,000
Rs.
21,000

Rs. 20,000
Rs.
3,00,000

Rs. 4,000
Rs.
65,000

Rs. 6,000
Rs.
94,000

Rs. 3,000
Rs.
64,000

S
Rs.
25,000
Rs.
36,000
Rs.
9,000
Rs.
7,000
Rs.
77,000

Variable Costs:
Commission

4% of sales

Rs.
1,20,000

Packing materials and

wages

Re. 0.50 per

carton

Rs.
5,00,000

Rs.
1,00,000

Rs.
1,50,000

stationery

Re. 0.20 per bill

Rs. 80,000

Rs. 20,000

Rs. 24,000

Rs.
75,000
Rs.
16,000

TOTAL (b)

Rs.
7,00,000

Rs.
1,44,000

Rs.
2,14,000

Rs.
1,11,000

Rs.
36,000
Rs.
1,75,00
0
Rs.
20,000
Rs.
2,31,00
0

Total Selling and

distribution costs

Rs.
10,00,00
0

Rs.
2,09,000

Rs.
3,08,000

Rs.
1,75,000

Rs.
3,08,00
0

Rs. 24,000

Rs. 40,000

Rs.
20,000

2. Profit & Loss Statement showing contribution and profit or loss of each of the products to
enable the Company take an appropriate decision on discontinuance of the sale of a product.
Solution
Particulars

Total
P

Sales revenue
Less: variable
cost
Cost of sales
Other variables
selling and
distribution
overheads
Total
Contribution
Less: Fixed
selling and
distribution
overheads

Products
R
S
Rs.
Rs.
Rs.
10,00,000
5,00,000
9,00,000

Rs.
30,00,000

Rs.
6,00,000

Rs.
20,00,000

Rs.
3,50,000

Rs.
8,00,000

Rs.
3,70,000

Rs.
4,80,000

Rs.
7,00,000
Rs.
3,00,000

Rs.
1,44,000
Rs.
1,06,000

Rs.
2,14,000
Rs.
-14,000

Rs.
1,11,000
Rs.
19,000

Rs.
2,31,000
Rs.
1,89,000

Rs.
3,00,000

Rs.
65,000
Rs.
41,000

Rs. 98,000
Rs.
-1,08,000

Rs.
64,000
Rs.
-45,000

Rs.
77,000
Rs.
1,12,000

NIL

Note: It is suggested that product Q may be discontinued.

4. The Tata Infrastructure Co. is involved in two contracts Contract 69 & Contract 96 during the
current year. The following information relates to these contracts, which were started on
January 1 and July 1, respectively.
Contracts
Contract Price
Direct material issued
Material returned to store
Direct Labour
Wages accrued on Dec 31
Plant installed (at cost)
Establishment Charges
Direct Expenses
Direct expenses accrued, December 31
Work certified by architect
Cost not work not yet certified
Material on site, 31 December
Cash received from contractees
Depreciation of plant p.a

A
Rs.300000
55000
1500
36000
2000
30000
20000
20000
2000
280000
10000
11000
160000
12 %

Prepare Contract & Contractees Account for Contract 69 & Contract 96.

B
Rs.400000
40000
2500
22000
2500
40000
15000
30000
3000
140000
30000
5500
50000
34%

5. A company manufactures a product which involves two processes, namely, pressing and
polishing. For the months of January, the following information is available:
Opening Stock
Inputs of unit in process
Units completed
Unit under process
Material Cost
Conversion Cost

Pressing

Polishing

1200
1000
200
Rs.69000
328500

1000
750
250
Rs.17500
82500

For incomplete unit in process, charge material costs at 100% and conversion costs at 60% in the
pressing process and 50 % in the polishing process. Prepare a statement of cost and calculate the
selling price per unit which will result in 25 % on the sale price.
Solution
Statement of equivalent production
Input
(Units)

Particulars

Pressing
Units
1200 introduced
Units
completed
Work-inprogress
1200
Polishing
Units
1000 introduced
Units
completed
Work-inprogress
1000

Units

Stage of completion
(%)
Materi Conversation
al
Cost

Equivalent units produced

Materi Conversation
al
Cost

1000

100

100

1000

1000

200
1200

100

60

200
1200

120
1120

750

100

100

750

750

250
1000

100

50

250
1000

125
875

Statement of Cost
Particulars
Pressing:
Material Cost
Converstion Cost

Total Cost
Produced

Polishing:
Cost transferred from pressing
process (Rs.350.80 X 1000)
Material Cost
Converstion Cost

Equivalent
Units
69000
328500

1200
1120

57.50
293.30
350.80

350800
17500
82500

1000
1000
875

350.80
17.50
94.29
462.59

Determination of selling price

Cost per unit
= Rs. 462.59
(Add: 25% profit on selling on 33 1/3% on cost) = Rs. 154.18
Selling Price = Rs. 462.59 + Rs. 154.18 = Rs. 616.77

Cost per
unit

6. M/s Modern Company Ltd furnishes the following summary of Trading & Profit and Loss
account for the current year ending March 31.
To Raw Material
140000
By sales (12000 units)
510000
To direct wages
72000
By finished stock (200 units) 6000
To production overheads
45000
By work in Process
To selling & distribution overheads
43500
Material
26800
To administration overheads
41010
Wages
11786
To Preliminary Expenses w/off
3250
Production overheads 8000 46586
To Goodwill w/off
2541
By interest on securities (gross) 5000
To dividend (net)
4000
To income-tax
5870
To net profit
210415
567586

567586

The Company manufactures a standard unit. The scrutiny of cost records for the same period shows
that1. factory overheads have been allocated to production at 20 percent on prime cost
2. Administration overheads have been charged at Rs.3 per cent on units produced
3. Selling & distribution expenses have been charged at Rs.4 per unit on unit sold.
You are required to prepare a statement of cost, to work out profit as per cost accounts, and to
reconcile the same with that shown in the financial accounts.