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Question Paper

Cost & Management Accounting Duration: 75

Details: Test – 6 (Ch-6) Marks: 40

Instructions:

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compulsory wherever required in support of your solution
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your performance.

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Q-1. The books and records of the Anand manufacturing Company present the following
data for the month of August, 2022:

Direct Labour Cost Rs.16,000 (160% of Factory overhead)

Cost of sales Rs.56,000

Inventory accounts showed these opening and closing balance:

August 1 August 31

Raw Materials (Rs.) 8,000 8,600

Work - in - Progress (Rs.) 8,000 12,000

Finished Goods (Rs.) 14,000 18,000

Other Data (Rs.)

Selling Expenses 3,400

General and Administration Expenses 2,600

Sales for the month 75,000

You are required to compute cost of raw material purchased & prepare a statement
showing cost of goods manufactured and sold and profit earned.

(5+5= 10 Marks)

Q-2. Bright Shoe Polish Company manufacturing black and brown polish in one standard size
of retailing at Rs.12.00 and Rs.13.30 respectively.

Following information is supplied to you

Opening Stock

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Black Polish 2,400 tins

Brown Polish 8,000 tins

Closing Stock

Black Polish 5,400 tins

Brown Polish 3,000 tins

Sales:

Black Polish 72,000 tins

Brown Polish 30,000 tins

Direct Materials:

Polish Rs.2,46,000

Tins Rs.1,20,000

Direct Wages Rs.2,04,000

Production overhead Rs.3,06,000

Administration and Selling overhead Rs.1,02,000

The opening stock of black and brown polish was valued at its production cost. The cost of
raw materials for brown polish is 10 percent higher than that the for black, but there is no
difference in the cost of tins. Direct wages for brown polish are 8 percent higher than those
of black polish and production overheads are considered to vary with direct wages.
Administration and selling overhead is absorbed at a uniform rate per tin of polish sold.

Prepare a statement to show the cost and profit per tin of polish.

(6+2=8 Marks)

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Q-3. X Ltd. Manufactures four brands of toys – A, B, C and D. if the company limits the
manufacture to just one brand the monthly production will be:

A- 50,000 units B- 1,00,000 units C- 1,50,000 units D- 3,00,000 units

You are given the following set of information from which you are requested to find out the
factory overheads & profit or loss made on each brand showing clearly the following
elements:

(a) Prime Cost (b) Works Cost (c) Total Cost

Brands

A B C D

Actual Production (units) 6,750 18,000 40,500 94,500

Direct Wages (Rs.) 15,000 27,500 37,500 1,05,000

Direct Material Cost (Rs.) 50,000 92,500 1,27,500 3,80,000

Selling Price per unit (Rs.) 20 15 10 8

Factory overhead expenditure for the month was Rs.1,62,000. Selling and Distribution cost
should be assumed @ 20% of works cost. Factory overhead expenses should be allocated to
each brand on the basis of units which could have been produced in a month when single
brand production was in operation.

(1+2+3=6 Marks)

Q-4. ABC Company is a metal and wood cutting manufacturer, selling products to the home
construction market. Consider the following data for the month of October, 2022:

Particulars Amount in (Rs.)

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Sandpaper 5,000

Material-Handling Costs 1,75,000

Lubricants and Coolants 12,500

Miscellaneous Indirect Manufacturing Labour 1,00,000

Direct Manufacturing Labour 7,50,000

Direct Materials, October 1, 2022 1,00,000

Direct Materials, October 31, 2022 1,25,000

Finished Goods, October 1, 2022 2,50,000

Finished Goods, October 31, 2022 3,75,000

Work-in-Progress, October 1, 2022 25,000

Work-in-Progress, October 31, 2022 35,000

Plant-Leasing Costs 1,35,000

Depreciation-Plant Equipment 90,000

Property Taxes on Plant Equipment 10,000

Fire Insurance on Plant Equipment 7,500

Direct Materials Purchased 11,50,000

Sales Revenues 34,00,000

Marketing Promotions 1,50,000

Marketing Salaries 2,50,000

Distribution Costs 1,75,000

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Customer-Service Costs 2,50,000

Required:

(i) Prepare an Income Statement with a separate supporting Schedule of Cost of Goods
Manufactured.
(ii) For all manufacturing items, indicate by V or F whether each is basically a variable cost
or a fixed cost (where the cost object is a product unit).

(4+4 = 8 Marks)

Q-5. Z ltd., manufactured and sold 200 typewriters in the year 2021. It’s summarized
Trading and Profit & loss account for the year 2021 is as follows:

Total output (in units) 200

Particulars Rs. Particulars Rs.

To Cost of Material consumed 1,20,000 By Sales 6,00,000

To Direct wages 1,80,000

To Manufacturing Charges 75,000

To Gross profit c/d 2,25,000

6,00,000 6,00,000

To Management Expenses 90,000 By Gross Profit b/d 2,25,000

To General Expenses 30,000

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To Rent, Rates & Taxes 15,000

To Selling Expenses 45,000

To Net Profit 45,000

2,25,000 2,25,000

For the year 2022, it is estimated that

I. The output and sales will be 300 typewriters.

II. Price of material will rise by 25% compared to previous year level.
III. Wages per unit will rise by 10%
IV. Manufacturing charges will increase in proportion to the combined cost of material and
wages.
V. Selling expenses per unit will remain unchanged.
VI. Other expenses will remain unaffected by the rise in output.

Required:
Prepare a Cost sheet showing the cost at which typewriters will be manufactured in 2022
and give price at which it should be marketed so as to show profit of 10% on selling price.

(8 Marks)

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