St. Joseph’s College of Commerce (Autonomous)
End Semester Examination – March /April 2014
B.Com (Travel & Tourism) – IV Semester
COST ACCOUNTING
Time: 3 hrs Max. Marks: 100
Section – A
- Answer all the questions; each carries two marks: (10×2 =20)
- A transport service company is running four buses between two towns which are 50 kms apart. Seating capacity of each bus is 40 passengers. Actual passengers carried were 75 per cent of the seating capacity. All the four buses ran on all the days of April 2013. Each bus made one round trip per day. Calculate total kms and total passenger kms for the month.
- From the following information calculate the Breakeven Point
- a) in units and b) in sales value:
- Output – 3000 units
- Selling price per unit – Rs 30
- Variable cost per unit – Rs 20
- Total fixed cost – Rs 20,000
- Differentiate between marginal costing and absorption costing?
- What is target costing?
- Define a ‘cost center’.
- How do you treat opening and closing stock of finished goods in a Cost Sheet?
- What is E.O.Q.? Give its utility.
- What is labour turnover? What are the causes of labour turnover?
- What is idle time? What are the causes of idle time?
- Distinguish between allocation and apportionment of overhead.
Section – B
- Answer any four question; each carries five marks: (4 x 5 =20)
- Guestline Resorts operates a lodging house with attached facilities of a shopping arcade and restaurant on a National Highway. The following details are available.
- The lodging house has 40 twin – bedded rooms, which are to be rented for Rs.200 per night on double occupancy basis. The occupancy ratio is expected at 85% and always both the beds in the room will be occupied. The lodging facilities are operated, for 200 days in the year during foreign tourists season time only.
- As per past record the spending pattern of each tourist staying in the lodge will be as under: Rs.50 per day in the shopping arcade and Rs.80 per day in the restaurant.
- Ratios of variable cost to respective sales volume are: Shops 50%, Restaurant 60%
- For the lodging house the variable cost on house – keeping and electricity will amount to Rs.30 per day per occupied room.
- Annual fixed overhead for the entire resort is estimated at Rs.10,00,000
Required:
- Prepare an income statement for the
- The Lodging House Manager suggests a proposal of reducing room rent to Rs.150 per day on double occupancy basis, which will increase occupancy level to 95%. Should the proposal be accepted or not?
- In a manufacturing Co., a material is used as follows:
Maximum consumption – 12,000 units per week
Minimum consumption – 4,000 units per week
Normal consumption – 8,000 units per week
Re-order quantity – 48,000 units
Time required for delivery – Minimum: 4 weeks
Maximum: 6 weeks. Emergency purchases: 2 weeks
Calculate: a) Re-order level (b) Minimum level (c) Maximum level (d) Danger level and (e) Average Stock level.
- A machine costing Rs.10,000 is expected to run for 10 years. At the end of this period its scrap value is likely to be Rs.900/-. Repairs during the whole life of the machine are expected to be Rs.18,000/- and the machine is expected to run 4,380 hours per year on the average. Its electricity consumption is 15 units per hour, the rate per unit being 5 paise. The machine occupies one – fourth of the area of the department and has two points out of a total of ten for lighting. The foreman has to devote about one sixth of his time to the machine. The monthly rent of the department is Rs.300/- and the lighting charges amount to Rs.80/- per month. The foreman is paid a monthly salary of Rs.960/-. Find out the machine hour rate, assuming insurance is @ 1% p.a. and the expenses on oil, etc., are Rs.9 per month.
- A manufacturing company has three production departments and two service departments. In January 2014 the departmental expenses were as under:
Production Departments:
| Rs. | Rs. | |
| A | 8,000 | |
| B | 6,500 | |
| C | 7,000 | 21,500 |
Service Departments :
| Rs. | Rs. | |
| E | 2,340 | |
| F | 3,000 | 5,340 |
| Total | 26,840 |
The Service Department expenses are charged out on a percentage basis viz.,
| Service Department | Production Department | Service Department | |||
| A | B | C | E | F | |
| E | 20 | 25 | 35 | – | 20 |
| F | 25 | 25 | 40 | 10 | – |
Prepare a statement showing the apportionment of the two service department’s expenses to the production departments by Simultaneous Equation Method.
- There are two warehouses for storing finished goods produced in a factory. Warehouse ‘A’ is at a distance of 10 kms., and warehouse ‘B’ is at a distance of 15 kms., from the factory. A fleet of 5 tonne Lorries is engaged in transporting the finished good from the factory. The records show that the Lorries average a speed of 30 kms. per hour when running and regularly take 40 minutes to load at the factory. At warehouse ‘A’ unloading takes 30 minutes per load while at warehouse ‘B’, it takes 20 minutes per load.
Drivers’ wages, depreciation, insurance and taxes amount to Rs 18 per hour operated. Fuel, oil, tyres, repairs and maintenance cost Rs 2.40 per km. Draw up a statement showing the cost per tonne km. of carrying the finished goods to the warehouses.
- The Complete Gardener is deciding on the economic order quantity for two brands of lawn fertilizer: Super Grow and Nature’s Own. Following information is collected:
| Particulars | Fertilizer | |
| Super Grow | Nature’s Own | |
| Annual Demand | 2,000 Bags | 1,280 Bags |
| Relevant ordering cost per purchase order | Rs.1,200 | Rs.1,400 |
| Annual relevant carrying cost per bag | Rs.480 | Rs.560 |
| Cost per bag | Rs.1,000 | Rs.1,200 |
Required:
- Compute EOQ for Super Grow and Nature’s Own.
- For the EOQ, compute the number of deliveries per year for Super Grow and Nature’s Own.
- For the EOQ, what is the sum of the total annual relevant ordering costs and total annual relevant carrying costs for Super Grow and Nature’s Own?
- What will be the Total annual cost that Complete Gardener will incur for each of the fertilizers?
Section – C
- Answer any three; each carries fifteen marks: (3 x 15 = 45)
- Melroy Co. Ltd., has three production departments X, Y Z and two Service departments A and B.
The following estimated figures for a certain period have been made available:
| Rs. | |
| Rent and Rates | 10,000 |
| Lighting and Electricity | 1,200 |
| Indirect wages | 3,000 |
| Power | 3,000 |
| Depreciation on Machinery | 20,000 |
| Other Expenses and sundries | 20,000 |
Following are further details which are also available
| Total | X | Y | Z | A | B | |
| Floor space (Sqr.mts) | 10,000 | 2,000 | 2,500 | 3,000 | 2,000 | 500 |
| Light points (No.) | 1,200 | 200 | 300 | 400 | 200 | 100 |
| Direct wages (Rs.) | 20,000 | 6,000 | 4,000 | 6,000 | 3,000 | 1,000 |
| Horse power of Machinery | 3,000 | 1,200 | 600 | 1,000 | 200 | – |
| Cost of Machinery | 1,00,000 | 24,000 | 32,000 | 40,000 | 2,000 | 2,000 |
| Working hours | – | 4,670 | 3,020 | 3,050 | – | – |
The expenses of the service department A and B are to be allocated by Repeated Distribution Method as follows:
| X | Y | Z | A | B | |
| A | 20% | 30% | 40% | – | 10% |
| B | 40% | 20% | 30% | 10% | – |
You are required to calculate the Overhead absorption rate per hour in respect of the three production departments.
- The following particulars have been extracted in respect of a material. Prepare the stores ledger account showing the receipts and issues, pricing the materials issued on the basis of (a) Simple average (b) Weighted average.
| 2014 | Quantity | (Kg) | Rate per Kg (Rs.) |
| Jan 2 | Received | 2,000 | 10 |
| 6 | Received | 300 | 12 |
| 9 | Issued | 1,200 | – |
| 10 | Received | 200 | 14 |
| 11 | Issued | 1,000 | – |
| 22 | Received | 300 | 11 |
| 31 | Issued | 200 | – |
- Disney Amusement Park charges Rs.4 each for all rides in the park. Variable costs amount to Rs.0.80 per ride and fixed costs are Rs.32,00,000. Last year’s net income was Rs.6,40,000 on sales of Rs.48,00,000. Rising costs have cut sharply into net income for Disney for the last 2 years. This year the management again expects a cost increase of 25% in variable costs and 10% in fixed costs. To help offset these increases, the management is considering raising the price of a ride to Rs.5.
- How many rides did the Disney Amusement Park sell last year?
- If the price increase is not implemented, what is the expected net income for this year assuming the same volume of activity?
- Compute the price indifference point for the new – ride price.
- Compute the break – even point for this year using the old price and the new price
- Should the management raise the price of a ride, if the price increase will reduce ride volume 10% from the last year’s level? In that situation, what will be the expected net income?
- (a) From the following particulars, draw a Break – even chart and find out the Break-even point:
| Rs. | |
| Variable cost per unit | 30 |
| Fixed Expenses | 1,00,000 |
| Selling price per unit | 50 |
(b) What should be the selling price per unit, if the break-even point should be brought down to 4,000 units?
(c) If the present value of sales is Rs.4,00,000, what is the margin of safety on the basis of data given in (a) above?
- Mr. Subramanyam runs a tempo service in the city and has two vehicles. He furnishes to you the following data and wants you to Compute i) The cost per running km & ii) The cost per running tone km:
| Vehicle A | Vehicle B | |
| Rs. | Rs. | |
| Cost of vehicle | 25,000 | 15,000 |
| Road licence per year | 750 | 750 |
| Supervision and Salaries (yearly) | 4,300 | 2,650 |
| Driver’s wages per hour | 4 | 4 |
| Cost of fuel per litre | 1.50 | 1.50 |
| Repairs and Maintenance per km | 1.50 | 2.00 |
| Tyre cost per km | 1.00 | 0.80 |
| Insurance premium (yearly) | 850 | 500 |
| Garage rent per year | 3,600 | 3,600 |
| Kms. Run per litre | 6 | 5 |
| Kms. Run during the year | 15,000 | 6,000 |
| Estimated life of vehicle (kms.) | 1,00,000 | 75,000 |
| Tonnes per km. (average) | 6 | 5 |
Charge interest at 10 percent per annum on the cost of the vehicle. The vehicles run 20 kms., per hour on an average.
Section – D
- Compulsory question: (15 marks)
- i) From the following particulars you are required to prepare a statement showing (a) The cost of materials consumed, (b) Prime cost, (c) Works cost, (d) Total cost, (e) The percentage of works overheads to productive wages, and (f) The percentage of general overheads to works cost:
| Rs. | Rs. | ||
| Stock of finished goods on 1.1.2013 | 72,800 | Stock of finished goods on 31.12.2013 | 78,000 |
| Stock on Raw Materials on 1.1.2013 | 33,280 | Stock on Raw Materials on 31.12.2013 | 35,360 |
| Purchases of Raw Materials | 7,59,200 | Works overhead charges | 1,29,220 |
| Productive Wages | 5,16,880 | Office and general expenses | 70,161 |
| Sales of Finished Goods | 15,39,200 |
- ii) The company is about to send a tender for a large plant. The Costing Department estimated that the materials required would cost Rs.52,000 and the wages to workmen for making the plant would cost Rs.31,200. The tender is to be made at a net profit of 20% on the selling price. Show what the amount of tender would be if based on the above percentages.
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