SUGGESTED ANSWERS TO QUESTIONS

SECTION - A
1. (a)
(i) (D)
(ii) (C)
(iii) (D)
(iv) (D)
(v) (C)
(vi) (C)
(vii) (D)
(viii) (C)
(ix) (B)
(x) (D)

1. (b)
(i) (D)
(ii) (C)
(iii) (A)
(iv) (F)
(v) (G)

1. (c)
(i) True
(ii) False
(iii) False
(iv) False
(v) True

1. (d)
(i) Activity
(ii) CAS – 10
(iii) Budget Manual
(iv) Joint Costs
(v) Idle Capacity

2. (a)

(i) Normal Rate of Wages = ₹ 20

(ii) Material Cost = ₹ 50,000
(iii) Factory cost of products as made by the two workers:
Mohan = D 72,800
Sohan = D 76,000

2. (b)
Machine Hour Rate when Machine is in Operation = D 45.764
Machine Hour Rate when Machine under setup = D 58.264
Total Cost of the Job:
Job 1120 = D 10,610.44
Job 1150 = D 9,652.80

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3. (a)
Objectives and Functions of CASB:
The objectives of the CASB are to develop high quality Cost Accounting Standards to enable the
management to take informed decisions and to enable regulators to function more effectively by integrating
harmonizing and standardizing Cost Accounting Principles and Practices.

The following are the functions of the CASB:

a) To issue the framework for the Cost Accounting Standards.
b) To equip the Cost and Management Accounting professionals with better guidelines on Cost
Accounting Principles.
c) To assist the members in preparation of uniform cost statements under various statutes.
d) To provide from time-to-time interpretations on Cost Accounting Standards.
e) To issue application guidance relating to particular standard.
f) To propagate the Cost Accounting Standards and to persuade the users to adopt them in the
preparation and presentation of general purpose cost statement.
g) To persuade the Government and appropriate authorities to enforce Cost Accounting Standards, to
facilitate the adoption thereof, by industry and corporate entities in order to achieve the desired
objectives of standardization of Cost Accounting Practices.
h) To educate the users about the utility and need for compliance of Cost Accounting Standards.

3. (b)
Journal Entries
Dr. Cr.
Particulars Amount (₹) Amount (₹)
Material Control A/C Dr. 8,00,000
To Creditors A/C 8,00,000
Work in Progress A/C Dr. 6,00,000
To Material Control A/C 6,00,000
Wages Control A/C Dr. 4,80,000
To Cash A/C 4,80,000
Factory Overhead Control A/C Dr. 1,44,000
To Wages Control A/C 1,44,000
Work in Progress Control A/C Dr. 3,36,000
To Wages Control A/C 3,36,000
Factory Overhead Control A/C Dr. 3,80,000
To Cash A/C 3,80,000
Work in Progress Control A/C Dr. 3,60,000
To Factory Overhead Control A/C 3,60,000
S & D O.H. Control A/C Dr. 80,000
To Cash A/C 80,000
Cost of Sales A/C Dr. 80,000
To S & D O.H. Control A/C 80,000
Finished goods Control A/C Dr. 8,00,000
To WIP Control A/C 8,00,000
Debtors A/C Dr. 11,60,000
To Profit & Loss A/C 11,60,000
Cash A/C Dr. 2,76,000
To Debtors A/C 2,76,000

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4. (a)
Tender Price Per Unit D 156.

4. (b)
Total of Process A Account Dr./ Cr. D 9,50,000
Transfer to Process B D 9,00,000
Total of Process B Account Dr./ Cr. D 10,26,000
Transfer to Process C D 9,60,000
Total of Process C Account Dr./ Cr. D 10,64,000
Cost per kg. = ₹ 70
Selling Price per kg. = ₹ 87.50

5. (a)
Operating Cost Statement
(For the month of January, 2023)
Particulars ₹
Total operating charges 2,52,000
Effective Passenger kms. 11,90,400
Cost per passenger km. 0.21

5. (b)
Total Contract A/c Dr./ Cr. D 4,46,000
Profit Transferred to Profit and Loss A/c D 15,000

6. (a)
Optimal Product Mix:
Product A 10,000 units
Product B 20,000 units
Product C 12,000 units
Maximum Profit D 13,00,000

6. (b)
(i) BEP ( in units ) = 2,00,000 units
P/V Ratio = 33.33%
(ii)
(a) New BEP ( in units ) = 5,00,000 units
New P/V Ratio = 16.67%
(b) Sales (units) required = 13,25,000 units

7. (a)
(i) Material Cost Variance = ₹ 150 (A)
(ii) Material Price Variance = D 100 (A)
(iii) Material Quantity Variance = D 50 (A)
(iv) Material Mix Variance = D 47.25 (F)
(v) Material Revised Quantity Variance = D 97.25 (A)
(vi) Material Yield Variance = ₹ 98(A)

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 7. (b)
Cash Budget of Sarathi Ltd.
(for June to August, 2022)
Particulars June (₹) July (₹) August (₹)
Cash Balance 2,50,000 2,14,000 2,84,000
Receipts: 14,20,000 15,14,000 16,18,000
Total Receipts 16,70,000 17,28,000 19,02,000
Total Payments 14,56,000 14,44,000 15,80,000 Total Payments
Cash Balance 2,14,000 2,84,000 3,22,000

8.
(a) Role of Cost Accountant in a Manufacturing Concern:

(i) To analyze various elements of cost of production/services such as material, labour, overhead expenses
etc.
(ii) To introduce appropriate costing methods in the organization so as to facilitate management with
knowledge of cost of production/services for managerial decision-making.
(iii) To determine the cost of the new product/service in order to facilitate management in arriving at the
correct pricing decision.
(iv) To determine the feasibility and profitability of various project proposals considered by the
management.
(v) To analyze variances against standards by reasons to enable concerned department to initiate corrective
action.
(vi) Collection and collation of extraneous information for management to compare the company's
performance with that of peers and the industry for better appreciation and decision-making.
(b) Scope of Cost Accountancy:
Scope of cost accountancy is very wide and includes the following:
(i) Cost Ascertainment: The main objective of cost accounting is to find out the cost of product/services
rendered with reasonable degree of accuracy.
(ii) Cost Accounting: It is the process of accounting for cost which begins with recording of expenditure
and ends with preparation of statistical data.
(iii) Analysis of Cost: It is the process of locating the factors responsible for difference in actual cost from
the budgeted costs and fixing up of responsibility for differences in cost. It provides better cost
management and helps in taking strategic decisions.
(iv) Cost Control: It is the process of regulating the action so as to keep the element of cost within the set
parameters.
(v) Cost Reports: This is the ultimate function of cost accounting. These reports are primarily prepared
for use by the management of different levels. Cost reports helps in planning and control, performance
appraisal and managerial decision-making.
(c) Advantages of a Centralized Stores System:
(i) Better control can be exercised over stores because all stores are housed in one department. The risk
of obsolescence of stores can be minimized.
(ii) The economy of staff-experts, or clerical, floor space, records and stationery are available.
(iii) Better supervision is certainly possible.
(iv) Obsolescence of the stores items can be kept under strict vigil and control.
(v) Centralized material handling system can be put into operation thus further economizing on space,
personnel and equipment.
(vi) Investment in stocks can be minimized.
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(d) Responsibility Accounting:
Responsibility accounting is a system of accounting that recognizes various responsibility centres throughout
the organization and reflects the plans and actions of each of these centres by assigning particular revenues and
costs to the one having the pertinent responsibility. It is also called profitability accounting and activity
accounting.
Responsibility accounting is a system in which the person holding the supervisory posts as president, function
head, foreman, etc. are given a report showing the performance of the company or department or section as the
case may be. The report will show the data relating to operational results of the area and the items of which he
is responsible for control. Responsibility accounting follows the basic principles of any system of cost control
like budgetary control and standard costing. It differs only in the sense that it lays emphasis on human beings
and fixes responsibilities for individuals. It is based on the belief that control can be exercised by human
beings, so responsibilities should be fixed for individuals.
Principles of responsibility accounting are as follows:
(i) A target is fixed for each department or responsibility centre.
(ii) Actual performance is compared with the target.
(iii) The variances from plan are analysed so as to fix the responsibility.
(iv) Corrective action is taken by higher management and is communicated.

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