Contact http://solvedhub.com or email solvedhub@gmail.com for best and lowest co st solution IMT 58: MANAGEMENT ACCOUNTING M1 PART - A Q1.

What do you understand by cost ascertainment? How is it different from cost estimation? Why are both important to a manufacturing firm? Q2. The following particulars relating to the year 1999 have been taken from the books of a chemical works manufacturing and selling a chemical mixture: Stock on 1 January, 1999 Kg. Rs. Raw Material 2,000 2,000 Finished Mixture 500 1,750 Factory Stores 7,250 Purchases Raw Material 1,60,000 1,80,000 Factory Stores 24,250 Sales Finished Mixture 1,53,050 9,18,000 Factory Scrap 8,170 Factory Wages 1,78,650 Power 30,400 Depreciation of Machinery 18,000 Salaries : Factory 72,220 Office 37,220 Selling 41,500 Expenses : Direct 18,500 Office 18,200 Selling 18,000 Stock on 31 December, 1999 Raw Material 1,200

Finished Mixture 450 Factory Stores 5,550 The stock of finished mixture at the end of 1994 is to be valued at the factory cost of the mixture for that year. The purchase price of raw materials remained unchanged throughout 1999. Prepare a statement giving the maximum possible information about cost and its b reak-up for the year 1999. 3. Following is the information about the production and amount of overhead expe nses of a seasonal factory; Month Direct labour Hours Direct Labour wages Factory overhead January 1050 600 300 February 1100 700 350 March 1600 750 400 April 1800 750 450

May 2500 1250 550 June 3050 1600 600 July 2500 1300 550 August 1750 750 500 September 1500 750 400 October 1250 600 350 November 1000 500 300 December 900

450 250 Calculate the overhead rates on the basis of (i) direct labour hours, and (ii) d irect labour wages. State which of the two bases you reconsider equitable. Find out the cost of the Job No. 101 applying the rates worked out above. The di rect costs of the job are: Rs. Direct materials 40 Direct labour hours 20 Direct labour wages 20 Q4. Discuss the concept of departmentalization of factory overheads. Q5. The following details are extracted from the costing records of an oil mill for the year ended 31st March 1994. Purchase of 500 tonnes Copra Rs. 2,00,000 Crushing Refining Finishing Rs. Rs. Rs. Cost of Labour 2,500 1,000 1,500 Electric Power 600 360 240 Sundry Materials 100 2,000 Steam 600 450 450 Repairs of Machinery 280 330 140 Factory Expenses 1,320 660 220 Cost of Casks 7,500 300 tonnes of Crude oil were produced. 250 tonnes of Oil were produced by the refining process. 248 tonnes of Refined Oil were finished for delivery. Copra sacks sold for Rs. 400. 175 tonnes of Copra residue were sold for Rs. 11,000. Loss in weight in crushing 25 tonnes, 45 tonnes of by-products obtained from ref ining process Rs. 6,750. You are required to show the accounts in respect of each of the following stages of manufacture for the purpose of arriving at the cost per tonne of each proces s and the total cost per tonne of the finished Oil:

(a) Copra crushing process (b) Refining process (c) Finishing process including casking PART - B Q1. Explain process costing and enumerate its principles. Q2. (a) Neodrug manufactures and processes a product, a plant food, through thre e distinct processes, the product of one process being passed on to the next pro cess, and so on till the finished product. Raw materials, labour and direct expenses incurred on each of the processes are as follows: Particulars Process A Process B Process C Rs Rs Rs Raw Materials 1,000 800 200 Labour 500 600 700 Direct Expenses 150 250 500 The overhead expenses for the period amounted to Rs 3,600 and is to be distribut ed to the processes on the basis of labour wages. There were no stocks in any of the processes at the beginning or at the close of the period. Ignore wastages. Assuming that the output was 1000 kilos, show the process accounts A, B, and C i ndicating also the unit cost per kilo under each element of cost and the output in each process. (b) If 10% of the output is estimated to be lost in the course of sale and sampling, what should be the selling price per unit (correct to two decimal plac es) so as to provide for gross profit of 331/3% on selling price. Q3. What do you understand by absorption costing and marginal costing? Point out the differences between the two. Q4. An analysis of Sultan Manufacturing Co. Ltd. led to the following informatio n: Cost element Variable cost Fixed costs (% of sales) Rs Direct Material 32.8 Direct Labour - 28.4 Factory Overheads 12.6 1,89,900 Distribution Overheads 4.1 58,400

General Administration Overheads 1.1 66,700 Budgeted sales are Rs 18,50,000. You are required to determine: (i) The break-even sales volume. (ii) The profit at the budgeted sales volume (iii) The profit if actual sales: (a) drop by 10% (b) increase by 5% from budgeted sale Q5. Explain the concept of decision making in the context of management accounti ng. What are the steps involved in decision making? PART - C (a) A company is manufacturing three products, details of which for the year are given below: Product Price Variable Per cent cost of total Rs Rs Sales value A 20 10 40 B 25 15 35 C 20 12 25 Total Fixed Costs per Year Rs 1,10,000 Total Sales Rs 5,00,000 You are required to work out the break-even point in rupee sales for each produc t assuming that the sales mix is to be retained. (b) The management has approved a proposal to substitute product C by product D in the coming year. The latter product has a selling price of Rs 25 with a varia ble cost of Rs 12.50 per unit. The new sales mix of A ,B and D is expected to be 50: 30 : 20. Next year fixed costs are expected to increase by Rs 31,000. Total sales are expected to remain at Rs 5,00,000. You are required to work out the n ew break-even point in rupees sales and units for each product. (c) What is your comment on the decision of the management regarding changing pr oduct mix? Q2. Briefly examine the concept of responsibility accounting. Q3. For production of 10,000 electrical automatic irons, the following are the b udgeted expenses: Per unit Direct Materials Rs 60

Direct Labour 30 Variable Overheads 25 Fixed Overheads (Rs 1,50,000) 15 Variable Expenses (Direct) 5 Selling Expenses (10% fixed) 15 Administration Expenses (Rs 50,000 rigid for all levels of production) 5 Distribution Expenses (20% fixed) 5 Total Cost of Sale per Unit 160 Prepare a budget for production of 6,000, 7,000 and 8,000 irons showing distinct ly the marginal cost and total costs. Q4. 'Calculation of variances in standard costing is not an end in itself, but a means to an end.' Explain. Q5. In department A the following data is submitted for the week ended 31 Octobe r: Standard Output for 40 hours per Week 1,400 units Standard Fixed Overhead Rs 1,400 Actual Output 1,200 units Actual Hours Worked 32 hours Actual Fixed Overhead Rs 1,500 Prepare a statement of variances. CASE STUDY - 1 The expenses budgeted for production of 10,000 units in a factory are furnished below: Per Unit Rs Materials 70 Labour 25 Variable Factory Overheads 20 Fixed Factory Overheads (Rs.1,00,000) 10 Variable Expenses (Direct) 5 Selling Expenses (10% fixed) 13 Distribution Expenses (20% fixed) 7

Administrative Expenses (Fixed - Rs 50,000) 5 Total cost of sales per unit 155

Prepare a budget for the production of 6000 units and 8000 units. CASE STUDY - 2 A company is presently working at 90 per cent capacity and producing 13,500 unit s per annum. It operates a flexible budgetary control system. The following figu res are obtained from its budget: 90 per cent 100 per cent

Sales Rs 15,00,000 Rs 16,00,000 Fixed Expenses Rs 3,00,500 Rs 3,00,500 Semi-fixed Expenses Rs 97,500 Rs 1,00,500 Variable Expenses Rs 1,45,000 Rs 1,49,500 Units Made Rs 13,500 Rs 15,000

Labour and material cost per unit are constant under present conditions. Profit margin is 10 per cent. (i) Determine the differential cost of producing 1500 units by increasing c apacity to 100 per cent. (ii) What would you recommend for an export price of these 1500 units taking int o consideration that overseas prices are much lower than indigenous prices? Contact http://solvedhub.com or email solvedhub@gmail.com for best and lowest co st solution