QP CODE: 21001055 21001055

  Reg No : .....................

    Name : .....................

M COM DEGREE (CSS) EXAMINATION, JULY 2021

Fourth Semester
Faculty of Commerce
CORE - CM010401 - ADVANCED COST AND MANAGEMENT ACCOUNTING
M.COM FINANCE AND TAXATION, M.COM FINANCE AND TAXATION (SF),M.COM MARKETING
AND INTERNATIONAL BUSINESS (SF),M.COM MANAGEMENT AND INFORMATION
TECHNOLOGY (SF)
2019 Admission Onwards
CC736AD0
Time: 3 Hours Weightage: 30

Part A (Short Answer Questions)

Answer any eight questions.
Weight 1 each.
 

1.   What do you mean by Activity Based Costing?

2.   Write a short note on facility level activities and product level activities.

3.   What is customer cost analysis ?

4.   Write a short note on cost-volume profit analysis.

The P/V ratio of a firm dealing in Precision Instruments is 50% and MOS is 40%. You are required to work out the BEP , Fixed cost
5.    and net profit if sales volume is Rs 50,00,000.
A firm incurs a fixed cost of Rs.1,20,000 at 60% capacity. At 0% capacity, fixed cost is only Rs.40, 000. If its VC Ratio is 80%, find
6.   out the Shutdown point.

7.   Describe two pricing practices in which non-cost reasons are  important,  when  setting prices.

8.   What is variances?

9.   What is labour efficiency variance?

RST group has two divisions, Division A and Division B. Division A manufactures an item that is transferred to Division B. The item
10.   has no external market and 6000 units produced are transferred internally each year. The cost of each division are as follows:
  Division A Division B
Variable Cost
Rs. 100/unit
Rs. 120/unit

Fixed Cost each year Rs. 1,20,000 Rs. 90,000

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 Head office management decided that a transfer price should be set that provides a profit of Rs.30, 000 to Division A. What should
be the transfer price per unit?

(8×1=8 weightage)

Part B (Short Essay/Problems)

Answer any six questions.
Weight 2 each.
 

11.   Explain various categories of customer costs under Activity Based Cost Management.

12.   Pilot Pens Ltd manufacture two products –“Gel Pen” and” Ball Pen”. It furnishes the following data
for the year 2019.
Annual Total Machine Total Number of Purchase Total Number of Set
Product
Output(Units) Hours Orders ups
Gel 
Pen
5,500
24,000
240
30

Ball 24,000 54,000 440 56

Pen
The annual overheads are as under
Particulars Amount
Volume related Activity Costs
4,75,020

Set up related Costs

5,79,988

Purchase related Costs 5,04,992

Calculate the overhead cost per unit of each product Gel Pen and Ball Pen on the basis of Activity
Based Costing.

13.   What is profit volume graph? Explain how it is drawn? What are the important limitations?
A company manufactures three components. These components pass through two of the company’s departments P and Q. the
14.   machine hour capacity of each department is limited to 6000 hours in a month. The monthly demand for components and cost data
are as under:
Components A B C
Demand (units) 900 900 1350
  Rs Rs Rs
Direct Material/units 45 56 14
Direct labour/units 36 38 24
Variable Overheads/unit 18 20 12
Fixed overheads P @ Rs 8 per hour 16 16 12
Q @ RS 10 per hour 30 30 10
Total 145 160 72

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 Components A and C can be purchased from market at RS 129 each and Rs70 each respectively.

You are required to prepare a statement to show which of the components in what quantities should be purchased to minimize the
cost.

15.   "Decision making under incremental pricing involves analysis of various aspects". Comment on this
statement.
Hind Metals Manufactures an alloy product 'Incop' by using iron and copper. The metals pass through two plants, X and Y. The
16.   company gives you the following details for the manufacture of one unit of Incop:

Materials                             Iron : 10Kgs @ Rs 5 per Kg

                                            Copper: 5 kgs. @ Rs 8 per kg

Wages                                  3 hours @ Rs 15 per hour in Plant X

                                              5 hours @ Rs 12 per hour in Plant Y

Overhead recovery         On the basis of direct labour hours

Fixed overheads              Rs 8 per hour in Plant X

                                         Rs 5 per hour in Plant Y

Variable Overheads          Rs 8 per hour in plant X

                                         Rs 5 per hour in plant Y

Selling overheads            (fully variable)- Rs 20 per unit

1. Find out the minimum price to be fixed for the alloy, when the alloy is new to the market. Briefly explain this pricing
strategy
2. After the alloy is well established in the market. What should be the minimum selling price ? Why?

From the following data ,compute Material Mix Variance ( MMV)

17.                                        Std. Mix                                                              Actual Mix

Material A           120 Kgs.@ Rs.50                                                160 Kgs. @ Rs. 50

Material B             80 Kgs. @ Rs. 100                                            140 Kgs. @ Rs. 100

                                200                                                                         300

Division A is a profit center, which produces four products P, Q, R and S. Each product is sold in the external market also. Data for
18.   the period is as follows.
  P Q R S
Market price/unit Rs 350 Rs 345 Rs 280 Rs 230
Variable cost/unit Rs 330 Rs 310 Rs 180 Rs 185
Labor hours/unit 3 4 2 3

Product S    can be transferred to division B, but the maximum quantity that might be required for transfer is 2000 units of S.

The maximum sales in the external market are;

P 3000 units, Q 3500 units, R 2800 units, S 1800 units.

Division B can purchase the same product at a slightly cheaper price of Rs 225/unit instead of receiving transfers of product S from
division A. What should be the transfer price for each unit for 2000 units of S, if the total labor hours available in division A is 24,000
hours?

(6×2=12 weightage)

Part C (Essay Type Questions)

Answer any two questions.
Weight 5 each.
 

Page 3/5 Turn Over

19.   XYZ Ltd. manufactures four products, namely A, B, C and D using the same plant and process. The following information relates to
a production period:
Product A B C D
Output in units
720
600
480
504

Cost per unit: Direct Material Rs. 42 Rs. 45 Rs. 40 Rs. 48

Direct labour 10 9 7 8
Machine hours per unit 4 hrs. 3 hrs. 2 hrs. 1 hr
The four products are similar and are usually produced in production runs of 24 units and sold in batches of  12 units. Using
machine hour rate currently absorbs the production overheads. The total overheads incurred by the company for the period is as
follows:
  Rs.
Machine operation and Maintenance cost 63,000
Setup costs 20,000
Store receiving 15,000
Inspection 10,000
Material handling and dispatch 2,592
During the period the following cost drivers are to be used for the overhead cost:
Cost Cost driver
Setup cost No. of production runs
Store receiving Requisition raised
Inspection No. of production runs
Material handling and dispatch Orders executed
It is also determined that:

Machine operation and maintenance cost should be apportioned between setup cost, store receiving and inspection
activity in 4:3:2.
Number of requisition raised on store is 50 for each product and the no. of order executed is 192, each order being
for a batch of 12 of a product.

Required:

1. Calculate the total cost of each product, if all overhead costs are absorbed on machine hour rate basis.
2. Calculate the total cost of each product using activity base costing.
3.  Comment briefly on differences disclosed between overheads traced by present system and those traced by activity
base costing.

The following particulars are extracted from the records of a company:

20.  
  PRODUCT A PRODUCT B
Sales                            (Rs.) 100 120
Consumption of material 2 Kg 3 Kg
Material cost               (Rs.) 10 15
Direct wages cost       (Rs.) 15 10
Direct expenses           (Rs.) 5 6
Machine hours used 3 Hrs 2 Hrs
Overhead expenses:    
Fixed                           (Rs.) 5 10
Variable                      (Rs.) 15 20
             Direct wages per hour is Rs. 5

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 1. Comment on profitability of each product (both use the same raw material) when :
1. Total sales potential in units is limited;
2. Total sales potential in value is limited;
3. Raw material is in short supply;
4. Production capacity (in terms of machine hours) is the limiting factor.
2. Assuming raw material as the key factor, availability of which is 10,000 kgs. and each product  cannot be sold more
than 3,500 units find out the product mix which will yield the maximum profit.

From the following data of A Co. Ltd. relating to budgeted and actual performance for the month of March, 2021 compute the Direct
21.   Material and Direct Labour Cost Variances. Budgeted data for March:

Units to be manufactured: 1,50,000

Units of Direct Material required (based on std. rates): 4,95,000  

Planned Purchase of Raw Materials (units): 5,40,000

 Average Unit Cost of Direct Material; Rs.8

Direct Labour Hours per unit of finished goods: 3/4 hr.

Direct Labour Cost (total): Rs. 29,92,500

Actual data at the end of March:

Units actually manufactured: 1,60,000

Direct Material Cost (purchase cost based on units actually issued): Rs. 43,41,900  

Direct Material Cost (purchase cost based on units actually purchased): Rs. 45,10,000  

Average Unit Cost of Direct Material: Rs. 8.2

Total Direct Labour Hours for March: 1,25,000

Total Direct Labour Cost for March: Rs.33,75,000 

22.   What do you mean by transfer pricing? How is it determined?

(2×5=10 weightage)

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