Cost and Managerial Accounting

 

Assignment A

 

1. ‘Cost accounting is becoming more and more relevant in the emerging economic scenario in India’. Comment.

 

2. ‘ An efficient system of costing is essential factor for industrial control under modern conditions of business and as such may be regarded as an important part in the efforts of any management to secure business stability’. Elaborate. Solve by 

 

3. From the following transactions extracted from the books of accounts of a manufacturing concern as on 31 April 2011. Work out a) consumption value of raw material in the month and b) value of closing stock as on 31 April 2011 under the FIFO method of pricing issues: 

		Quantity in Units	Rate per unit (Rs.)
2010 April 1	Opening Stock	300	9.7
2010 April 3	Purchases	250	9.8
2010 April 11	Issues	400
2010 April 15	Purchases	300	10.5
2010 April 20	Issues	210
2010 April 25	Purchases	150	10.3
2010 April 29	Issues	100

 

4. From the following information prepare a cost sheet showing cost profit per unit

 

5. Answer any three questions of the following:

a. Explain product cost and period cost with 2 examples of each

 

.

 

b. What is meant by direct material cost?

 

c. Find out the cost of raw material purchased from the data given below:

 

Particular	Amount
Prime cost	200000
Closing stock of raw material	20000
Direct labour cost	100000
Expenses on purchases	10000

 

e. Define batch costing. Give examples of industries which adopt batch costing.

 

Assignment B

Answer all questions.

 

1. Mosaic Co. Ltd has three production depts A, B & C and two service depts D & E.  Info:

Rent Rs. 5000 Indirect wages Rs. 1500

Power Rs.1500 Depreciation of Machinery Rs.10000 

General lighting Rs. 600 Sundry expenses Rs. 10000

 

Floor space (sq.ft.) Light points Direct wages (Rs.) H.P. of machines Value of machines (Rs.)	Total	A	B	C	D	E
	20000 120 10000 150 250000	4000 20 3000 60 60000	5000 30 2000 30 80000	6000 40 3000 50 100000	4000 20 1500 10 5000	1000 10 500 - 5000

Prepare a statement showing distribution of overheads to various departments.

 

2. The following information is provided to you:

Selling price per unit Rs. 40

Variable cost Rs. 24

Fixed costs                        Rs. 6

Profit Rs. 10

Present sales volume is 2000 units

Calculate:

(a) P/V ratio (b) BEP (c) Margin of safety   (d) profit at a sales volume of 2500 units (e) sales required to earn a profit of Rs. 26,000

 

3. What are budget and budgetary control? Discuss the advantages and essential for success of budgetary control.

 

 

Read the case below and answer the questions given at the end

 

 Case Study

 

Coffee Cart Supreme sells hot and iced coffee beverages and small snacks. The following is last month’s income statement.

 

Particulars	Amount $	Amount $
Revenue		5000
Cost of Beverage & snacks	2000
Cost of napkins, straws etc	500
Cost of rent cart	500
Employee wages	1000	4000
Pre tax profit		1000
Taxes		250
After tax profit		750

 

Questions

1. What is the total cost function for Coffee Cart Supreme? What is the tax rate for Coffee Cart Supreme?

 

2. Calculate the amount of sales needed to reach a target after-tax profit of $1,500.

 

3. What was Coffee Cart Supreme’s degree of operating leverage and Coffee Cart Supreme’s margin of safety in revenue last month?

 

Assignment C

Answer all questions.

Tick mark (√) the most appropriate answer.

1. Which of the following statement measures the financial position of the entity on   particular time?

1. Income Statement

2. Balance Sheet

3. Cash Flow Statement

4. Statement of Retained Earning

2. The Process of cost apportionment is carried out so that--

1. Cost may be controlled 

2. Cost unit gather overheads as they pass through cost centers 

3. Whole items of cost can be charged to cost centers 

4. Common costs are shared among cost centers

3. Direct materials cost is Rs. 80,000. Direct labor cost is Rs. 60,000. Factory overhead is Rs. 90,000. Beginning goods in process were Rs. 15,000. The cost of goods manufactured is Rs. 245,000. What is the cost assigned to the ending goods in process? 

1. Rs. 45,000 

2. Rs. 15,000 Rs. 

3. 30,000 

4. There will be no ending Inventory Solution: 

 

4. When prices are rising over time, which of the following inventory costing methods will result in the lowest gross margin/profits? 

1. FIFO 

2. LIFO 

3. Weighted Average 

4. Cannot be determined

 

5. The main difference between the profit center and investment center is-- 

1. Decision making

2.  Revenue generation 

3. Cost in occurrence

4.  Investment

 

6. Which of the following is a characteristic of process cost accounting system? 

1.  Material, Labor and Overheads are accumulated by orders 

2. Companies use this system if they process custom orders 

3. Opening and Closing stock of work in process are related in terms of completed units

4.  Only Closing stock of work in process is restated in terms of completed units

 

7. Which of the following manufacturers is most likely to use a job order cost accounting system? 

1.  A soft drink producer

2.  A flour mill 

3. A textile mill 

4. A builder of offshore oil rigs

 

8. Production volume of 1,200 units cost incurred Rs. 10,000 and production volume of 1,400 units cost incurred Rs.20, 000. The variable cost per unit would be?

1. Rs. 50.00 per unit 

2. Rs. 8.33 per unit 

3. Rs. 14.20 per unit 

4. Rs. 100 per unit

 

9. Cost accounting concepts include all of the following EXCEPT--

1. Planning

2. Controlling

3. Sharing 

4. Delegating.

10. The main purpose of cost accounting is to--

1. Maximize profits 

2. Help in inventory valuation 

3. Provide information to management for decision making 

4. Aid in the fixation of selling price

 

11. Period costs are --

1.  Expensed when the product is sold 

2. Included in the cost of goods sold

3.  Related to specific Period

4.  Not expensed

 

12. An organization sold units 4000 and have closing finished goods 3500 units and opening finished goods units were 1000.The quantity of unit produced would be--

1.  7500 units 

2. 6500 units 

3. 4500 units

4. 5500 units

 

13. Examples of industries that would use process costing include all of the following EXCEPT--

1. Beverages

2. Food

3. Hospitality

4. Petroleum

 

14. The components of the prime cost are--

 

1. Direct Material + Direct Labor + Other Direct Cost 

2. Direct Labor + Other Direct Cost + FOH 

3. Direct Labor + FOH

4. None of the given options

 

15. Opportunity cost is the best example of--

1. Sunk Cost 

2. Standard Cost 

3. Relevant Cost 

4. Irrelevant Cost

 

16. Fixed cost per unit decreases when--

 

1. Production volume increases. 

 

2. Production volume decreases. 

 

3. Variable cost per unit decreases. 

 

4. Variable cost per unit increases. 

 

17.  Prime cost + Factory overhead cost is-- 

 

1. Conversion cost. 

 

2. Production cost. 

 

3. Total cost. 

 

4. None of given option. 

 

18.  Find the value of purchases if Raw material consumed Rs. 90,000; Opening and closing stock of raw material is Rs. 50,000 and 30,000 respectively. 

 

1. 1. Rs. 10,000 

 

1. 2. Rs. 20,000 

 

1. 3. Rs. 70,000 

 

1. 4. Rs. 1,60,000 

 

19. Annual requirement is 7800 units; consumption per week is 150 units. Unit price Rs 5, order cost Rs 10 per order. Carrying cost Rs 1 per unit and lead time is 3 week, The Economic order quantity would be--

1.          365 units.

2.          300 units 

3.         250 units 

4.        150 units

 

20. For which one of the following industry would you recommend a Job Order Costing system? 

1. 1. Oil Refining 

   2. Grain dealing 

   3. Beverage production 

   4. Law Cases

21.  ______________ method assumes that the goods received most recently in the stores or produced recently are the first ones to be delivered to the requisitioning department. 

 

1. 1. FIFO 

   2. Weighted average method 

   3. Most recent price method 

   4. LIFO 

22. Cost of production report is a _________________. 

 

1. 1. Financial statement 

   2. Production Process report

   3. Order Sheet

   4. None of above

 

. 

 

23. Opening work in process inventory can be calculated as under-- 

 

1. 1. FIFO and Average costing 

 

1. 2. LIFO and Average costing 

 

1. 3. FIFO and LIFO costing 

 

1. 4. None of given option 

 

24. Jan 1; finished goods inventory of Manuel Company was Rs.3, 00,000. During the year Manuel’s cost of goods sold was Rs. 19, 00,000, sales were Rs. 2, 000,000 with a 20% gross profit. Calculate cost assigned to the December 31; finished goods inventory. 

 

1. 1. Rs. 4,00,000 

 

1. 2. Rs. 6,00,000 

 

1. 3. Rs. 16,00,000 

 

1. 4. None of given options 

 

25. The cost expended in the past that cannot be retrieved on product or service-- 

 

1. 1. Relevant Cost 

 

1. 2. Sunk Cost 

 

1. 3. Product Cost 

 

1. 4. Irrelevant Cost 

 

26.  When a manufacturing process requires mostly human labor and there are widely varying wage rates among workers, what is probably the most appropriate basis of applying factory costs to work in process? 

1. 1. Machine hours 

   2. Cost of materials used 

   3. Direct labor hours 

   4. Direct labor dollars 

 

27.  A typical factory overhead cost is--

 

1. 1. Audit 

 

1. 2. Compensation of plant manager 

 

1. 3. Design distribution 

 

1. 4. Internal

 

28. Complete the following table--

 

 

1. Constant, Decrease 

 

2. b. Decrease, Decrease 

 

3. c. Increase, Increase 

4. Increase, Decrease.

 

29. The Kennedy Corporation uses Raw Material Z in a manufacturing process. Information as to balances on hand, purchases and requisitions of Raw Material Z is given below--

If a perpetual inventory record of Raw Material Z is maintained on a FIFO basis, it will show a month end inventory of--

 

1. 1. $240 

 

1. 2. $784 

 

1. 3. $759 

 

1. 4. $767 

 

30. The difference between total revenues and total variable costs is known as--

1. Contribution margin 

2. Gross margin 

3. Operating income 

4. Fixed costs 

 

31. Percentage of Margin of Safety can be calculated in which one of the following ways? 

1. 1. Based on budgeted Sales 

   2. Using budget profit 

   3. Using profit & Contribution ratio 

   4. All of the given options 

 

32.  Which of the following represents a CVP equation? 

1. 1. Sales = Contribution margin (Rs.) + Fixed expenses + Profits 

   2. Sales = Contribution margin ratio + Fixed expenses + Profits 

   3. Sales = Variable expenses + Fixed expenses + profits

   4. Sales = Variable expenses – Fixed expenses + profits

 

33. For which one of the following industry would you recommend a Process Costing system? 

1. 1. Grain dealer 

   2. Television repair shop 

   3. Law office 

   4. Auditor

 

34. If 120 units produced, 100 units were sold @ Rs. 200 per unit. Variable cost related to production & selling is Rs. 150 per unit and fixed cost is Rs. 5,000. If the management wants to decrease sales price by 10%, what will be the effect of decreasing unit sales price on profitability of company? (Cost & volume profit analysis keep in your mind while solving it) 

1. 1. Remains constant 

   2. Profits will increased 

   3. Company will have to face losses 

   4. None of the given options

 

35. If 120 units produced, 100 units were sold @ Rs. 200 per unit. Variable cost related to production & selling is Rs. 150 per unit and fixed cost is Rs. 5,000. If the management wants to increase sales price by 10%, what will be increasing sales profit of company by increasing unit sales price? (Cost & volume profit analysis keep in mind while solving)

1. 1. Rs.2,000 

   2. Rs. 5,000 

   3. Rs. 7,000 

   4. None of the given options

 

 

 

36. What is the company's contribution margin ratio? 

1. 1. 30% 

   2. 70% 

   3. 150% 

   4. None of given options 

 

37. What is the company's break-even in units? 

1. 1. 48,000 units 

   2. 72,000 units 

   3. 80,000 units 

   4. None of the given options 

 

38. How many units would the company have to sell to attain target profits of Rs. 600,000? 

1. 1. 88,000 units 

   2. 100,000 units 

   3. 106,668 units 

   4. None of given options

 

39. What is the company's margin of safety in Rs?

1. Rs. 480,000 

2. Rs. 1,600,000 

3. Rs. 2,400,000 

4. None of given options

 

40. Inventory control aims at-- 

a) Achieving optimization 

b) Ensuring against market fluctuations 

c) Acceptable customer service at low capital investment 

d) Discounts allowed in bulk purchase