MODEL 1/100 MARKS/3 HOURS/15.3.2022


1.HBL Limited produces product ‘M’ which has a quarterly demand of 20,000 units. Each product requires 3 kg and 4kg of material X and Y respectively. Material X is supplied by a local supplier and can be procured  at factory stores at any time. Hence, no need  to keep inventory for material X. The material Y is not locally available, it requires to be purchased from other states in a specially designed truck container with a capacity of 10 hours.

The cost and other information related with the material are as follows:

Particulars                                                                                                                   Material –  X        Material – Y

Purchase price per Kg (excluding GST                                                                       140                             640

Rate of GST                                                                                                                     18%                            18%

Freight per trip (fixed, irrespective of quantity)                                                         –                            28,000

Loss of materials in transit                                                                                             –                                  2%

Loss in process                                                                                                                 4%                               5%

Other information:

– The company has to pay 15% bank for cash credit facility

–  Input credit is available on GST paid on materials.


  1. CALCULATEcost per kg. of material X and y
  2. CALCULATE the Economic Order quantity for both the materials.

2.ADV Pvt.  Ltd. Manufactures a product which requires skill and precision in work to get quality           products. The company has been experiencing high labour cost but without compromising with the quality of work . It wants to introduce a bonus scheme but is indifferent between the Halsey and Rowan scheme of bonus.

For the month of November 2019, the company budgeted for 24,960 hours of work. The workers are paid  80 per hour.


CALCULATE and suggest the bonus scheme where the time taken (in %) to time allowed to complete the works in (a) 100% (b) 75% (c) 50% (d) 25% of budgeted hours.

3.PLR Ltd. Manufacturers a single product and recovers the overheads by adopting a single blanket rate based on machine hours. The budgeted production overheads of the factory for the FY 2019-20 are 50,40,000 and budgeted machine hours are 6,000.

For a period of first six months of the financial year 2019-20, following information were extracted from the books:

Actual production overheads                                                                                                              34,08,000

Amount included in the production overheads:

Paid as per court’s order                                                                                                             4,50,000

Expenses of previous year booked in current year                                                                 1,00,000

Paid to workers for strike period under an award                                                                  4,20,000

Obsolete stores written off                                                                                                             36,000

Production and sales data of the concem  for the first six months are as under:


Finished goods                                                                                                                        1,10,000 units

Works – in –progress

(50% complete in ever respect)                                                                                        80,000 units


Finished goods                                                                                                                              1,10,000 units

Works – in progress                                                                                                                        80,000 units


Finished goods                                                                                                                                  90,000 units

The actual machine hours worked during the period were 3,000 hours. It is revealed from the analysis of information that 40% of the over/under-absorption was due to defective production policies and the balance was alttributable to incress in costs.

You are required:

  1. to  determine the amount of over/under absorption of production overheads for the period.
  2. to show the accounting treatment of over/under-absorption of production overheads, and
  • to  apportion the over/under-absorbed overheads over the items.
  1. SMP Pvt Ltd manufactures three products using three different machines. At present the overheads are changed to products using labour hours. The following statement for the month of setember 2019, using the absorption costing method has been prepared:Particulars                                                      product X                        Product Y                               Product Z                                                                      (using machine A)      (using machine B)              (using machine C)

    Production units                                   45,000                                  52,000                             30,000

    Material cost per unit (₹)                          350                                        460                                   410

    Wages per unit @ ₹80 per

    Hour                                                              240                                        400                                   560

    Overhead cost per unit(₹)                         300                                        500                                   700

    Total cost per unit (₹)                                 890                                     1,360                                1,670

    Selling price (₹)                                    1,112,50                                     1,700                           2,087,50

    The following additional information is available relating to overhead cost drivers.

  2. Cost driver                                        product X                 product y                product Z                   TotalNo. of machine set-ups                            40 160 400         600

    No. of purchase orders                          400 800             1,200                   2,400

    No. of customers       1,000             2,200                   4,800                         8,000

    Actual  Production and budgeted production for the month is same. Workers are paid at standard rate.

    Out of  total  overhead costs. 30% related to machine set-ups, 30% related to customer order processing and customer complaint management. While the balance proportion related to material ordering.



    1. COMPUTER overhead cost per unit using activity based costingmethod
    2. DETERMINE the selling price of each  product based on activity- based costing with the same profit  mark-up on cost.
    3. DFG Ltd. Manufactures leather bags for office and school purpose. The following information is related with the production of leather bags for the month of September 2019.
    4. Leather sheets and cotton clothes are the main inputs. And the estimated requirement per bag is two
    5. Meters of  leather  sheet and one meter of cotton cloth. 2,000meter of leather sheets and 1,000      meter of cotton cloths are purchased at ₹3,20,000 and ₹15,000 respectively. Freight paid on purchases is₹8,500.
    • Stitching and finishing need 2,000 man hours at ₹80 per hours.
    1. Other direct cost of ₹10 per labour is incurred.
    2. DFG has 4 machines at a total  cost of ₹22,00,000. Machine has a life of 10 years with a scrape value of 10% of the original cost. Depreciation is charged on straight line method.
    3. The monthly cost of administrative and sales office staffs are ₹ 72,000 respectively.  DFG pays ₹ 1,20,000
    • Per month as rent for a 2400 sq fest factory premises. The administrative and sales office occupies 240sq. feet and 200 sq feet respectively of factory space.
    • There is no opening and closing stocks for input materials. There is 100 bags stock at the end of the month.


    PREPARE a cost sheet following functional classification for the month of September 2019

    1.      As of 30thSeptember, 2019, the following balances existed in a firm’s cost ledger, which is maintained separately on a double entry basis:
      Debit ₹credit ₹
      Stores ledger control A/C

      Work- in progress control A/C

      Finished goods control A/C

      Manufacturing overhead control A/C

      Cost ledger  control A/C











      35,00,000     35,00,000

       During the next quarter, the following items arose

    2.                                                                                                                                                                     Finished product (at cost)                                                                                                                    11,25,000

      Manufacturing overhead incurred                                                                                                       4,25,000

      Raw material purchased                                                                                                                         6,25,000

      Factory wages                                                                                                                                           2,00,000

      Indirect labour                                                                                                                                          1,00,000

      Cost of sales                                                                                                                                              8,75,000

      Materials issued to production                                                                                                             8,75,000

      Sales    returned (at cost)                                                                                                                          45,000

      Materials returned to suppliers                                                                                                              65,000

      Manufacturing overhead  charged to production                                                                            4,25,000


      PREPARE the cost ledger control A/C, Work-in-progress control A/C , Finished stock ledger control A/C, Manufacturing overhead control A/C, Wages control A/C and the Trial Balance at the end of the quarter.

      Rounak Ltd. Is the manufacture of monitors for PCS.  A monitor requires 4 units of part-M, The following are the details of its operation during 20XB

      Average monthly market demand                                                                                            2,000 Monitors

      Ordering cost                                                                                                                                 ₹ 1,000 per order

      Inventory carrying cost                                                                                                                20% per order

      Cost of part                                                                                                                                    ₹ 350 per part

      Normal usage                                                                                                                                425 parts per week

      Minimum usage                                                                                                                            140 parts per week

      Maximum usage                                                                                                                           710 parts per week

      Lead time to supply                                                                                                                      3-5 weeks

      COMPUTER from the above

      1. Economic  order quantity (EOQ) if the supplier is willing to supply quarterly 30,000

      units of part-M at discount of 5% is it worth accepting?

      1. Recorder level
      • Maximum level of stock
      1. Minimum level of stock

      Sree Ajest Ltd. having fifteen different types of machines furnished information as under for20XB-20X9

      1. Overhead expenses: Factory rent ₹ 1,80,000 (floor area 1,00,000 sq  ft.) Heat and gas ₹ 60,000 and supervision ₹ 1,50,000.
      2. Wages of the operator are ₹ 200 per day of 8 hours. Operator attends to one machine when it is under set up and two machines while they are under operation.

      In respect of machine B (one of the above machines) the following  particulars are furnished:

      1. Cost of machine ₹1,80,000, life of machine-10 years and scrap value at the end of its life ₹ 10,000
      2. Annual  expenses on special equipment attached to the machine are estimated as ₹ 12,000
      • Estimated operation time  of the machine is 3,600 hours while set up time is 400 hours per annum
      1. The machine occupies 5,000 sq. ft of floor area
      2. Power costs ₹ 5 per hour while machine is in operation

      ESTIMATE the  comprehensive machine hour rate of machine B Aiso find out machine costs to be absorbed  in absorbed in respect of use of machine B on the following two work orders.

      Work order- 1                   work order – 2

      Machine set up time (Hours)                                                                                 15                                        30

      Machine operation time (Hours)                                                                          100                                      190


      Family store wants information about the profitability of individual product lines: soft drinks.

      Fresh produce and packaged food. Family store provides te following data for the year 20X7 – X8 for

      Each product line.




                                                                                            Soft drinks                  fresh produce            packaged food

      Revenues                                                                   ₹ 39,67,500                 ₹ 1,05,03,000              ₹ 60,49,500

      Cost of goods sold                                                    ₹ 30,33,000                     ₹ 75,00,000             ₹ 45,00,000

      Cost of bottles returned                                          ₹      60,000                                    ₹ 0                             ₹ 0

      Number of purchase orders placed                                    360                                    840                           360

      Number of deliveries received                                            300                                  2,190                          660

      Hours of shelf- stocking time                                               540                                  5,400                      2,700

      Items sold                                                                       1,26,000                           11,04,000                 3,06,000

      Family store also provides the following information for the year 20X7-8

      Activity Description of activityTotal costCost – allocation base
      BottlesReturning of empty bottles₹60,000Direct  tracing to soft drink line
      OrderingPhysical delivery and receipt of goods₹7,80,0001,560 purchase orders
      Shelf stockingStocking of goods on store Sheives and on-going restocking₹12,60,0003.150 deliveries
      Customer supportAssistance provided to customers including check – out₹15,36,00015,36,000 items sold



      1. Family store currently allocates support cost (all cost other  then cost of goods sold) to product lines on the basis of cost goods sold of each product line. CALCULATE the operating income and operating income as a% revenues for each product line.
      2. If family store allocates support costs (all costs other than cost of goods sold) to product lines using and activity based costing system. CALCULATE the operating income and operating income as a % of revenues for each product line.

      The financial books of a company reveal the following data for the year ended 31st March 20X8




      Opening stock                                                                                                                            ₹

      Finished goods 625 units                                                                                           53,125

      Work- in process1.04.20X7 to 31.03.2                                                                    46,00

                      Raw material consumed                                                                                      8,40,000

      Direct labour                                                                                                          6,10,000

      Factory overheads                                                                                                4,22,000

      Administration overheads (production related)                                             1,98,000

      Dividend paid1,                                                                                                        22,000

      Bad debit                                                                                                                  18,000

      Selling and distribution over head                                                                        72,000

      Interest received                                                                                                      38,000

      Rent received                                                                                                           46,000

      Sales 12.615 units                                                                                             22,80,000

      Closing stock: finished goods 415 units                                                              45,650

      Work- in process                                                                                                     41,200

      The cost records provided as under:

      Ø Factory overheads are absorbed at 70% direct wages

      Ø Administration overheads are recovered at 15% of factory cost.

      Ø Selling and distribution overheads are charged at ₹ 3 per unit sold.

      Ø Opening stock of finished goods is valued at ₹ 120 per unit.

      The company value work-in-process at factory cost for both  financial and cost profit reporting.


      I. PREPARE a statements for the year ended 31st March, 20X8. Show

      Ø The profit as per financial records

      Ø The profit as per costing records.

      II. PREPARE a statement reconciling the profit as per costing records with the profit as per financial records.



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