LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

# AP 16

SIXTH SEMESTER – APRIL 2008

# BU 6600 – ADV. COST MANAGEMENT ACCOUNTS

Date : 16/04/2008             Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

# SECTION     A

Answer ALL Questions                                                             10 x 2= 20

1. State any two reasons for the difference between the profit shown by cost accounts

and the profit shown by financial accounts.

2 What is meant by equivalent production?

1. Write any TWO distinctions between job costing and process costing.
2. What is meant by flexible budget?
3. What are the advantages of pay back period?
4. Distinguish between joint product and by-product.
5. Calculate the ton kilometers run by a truck from the following details.

Distance traveled 200 kms per day

Percentage of vehicles under repair 5%

Effective days in a month 25.

8.A project requires an investment of Rs. 50,000 and has a scrap value of Rs. 2,000

after five years. It is expected to yield profit after taxes and depreciation during the

five years amounting to Rs. 4,000, Rs. 6,000,Rs. 7,000, Rs. 5,000 and Rs. 5,000.

Calculate the average rate of return on investment.

1. Data relating to a job are thus;

Standard rate of wages per hour    Rs10

Standard hours                                  300

Actual rate of wages per hour        Rs 12

Actual hours                                     200

Calculate 1)Labour cost variance 2)Labour rate variance

10.Notional Profit on a contract is Rs.90,000 and 40% of the contract is completed. Cash received is 80%

of work certified. Calculate the amount of Profit to be reserved for contingencies.

SECTION    B

Answer any FIVE questions, choosing not less than TWO from each group   (5 x 8=40)

GROUP    I

11.Write short notes on the following: (1) Inter process profits, (2) Work certified

(3) Abnormal gain (4) Batch Costing.

12.Alpha Company has a contract to run a tourist car on a 20 Kms route (one way)

for the chief executive of a firm.  The company  buys a car for Rs. 1,50,000 which has

life of 5 years. The company  estimates the following expenses:

Insurance Rs. 4,500 p.a.; Taxes Rs. 900 p.a.; Garage rent Rs. 500 p.m.; Repairs Rs. 4,800 p.a.; Drivers wages Rs. 300 p.m.; In addition the driver has to be paid 10% of the collections as commission.  Petrol will cost Re. 1 per Km. The car will make 4 round trips each day and will operate for 25 days in a month. If Alpha Company wants a profit of 15% on collection how much must the company charge per round trip?

1. Profit disclosed by a company’s accounts for the year was Rs. 50,000 whereas

The net profit as disclosed by the financial accounts was Rs. 29,750.  Following

information is available:

• Overheads as per cost accounts were estimated at Rs. 8,500. The charge for

The year shown by the financial accounts was Rs. 7,000.

• Director’s fees shown in the financial accounts only for Rs. 2,000
• The company allowed Rs. 5,000 as provision for doubtful debts.
• Work was commenced during the year on a new factory and expenditure of

Rs. 30,000 was made.  Depreciation at 5% p.a. was provided for in the

financial accounts for 6 months.

• Share-transfer fees received during the year were Rs. 1,000
• Provision for income-tax was Rs. 15,000

From the above, prepare a statement reconciling the figures shown by cost and financial accounts.

1. A company manufactures three joint products A,B and C. The actual joint-expenses

Rs. 8,000.  Profit on each product as a percentage of sales would be 30%, 25% and

15% respectively.  Subsequent expenses were as follows:

A                           B                         C

Rs.                         Rs.                      Rs.

Materials                                   100                         75                       25

Labour                                       200                       125                       50

Sales                                       6,000                    4,000                  2,500

Prepare a statement apportioning joint expenses on the basis of reverse cost method.

GROUP II

1. Write short notes on the following: (a) features of capital budgeting, (b) advantages

of budgetary control.

16.Following information has been made available from the cost records of United

Automobiles Ltd.

Direct Materials                                                                         Per Unit(Rs.)

X                                                                                             8

Y                                                                                             6

Direct Wages

X                                                                                            6

Y                                                                                            4

Fixed cost (total)                  Rs. 750

Selling Price

X                                                                                            25

Y                                                                                            20

The directors want to adopt anyone of the following alternative sales mixes in the

following period.

• 250 units of X and 250 units of Y, (b) 400 units of Y only, (c) 150 units of X and

350 units of Y. State which of the alternative sales mixes you would recommend to the management.?

17.Prepare a cash budget for the month of May, June and July 2004 on the basis of

following information.

Months              Sales                    Credit Purchases    Wages                 Overheads

March          Rs. 80,000                        Rs. 36,000    Rs. 9,000             Rs. 10,000

April                   82,000                              38,000          8,000                     9,000

May                    85,000                               33,000        10,000                   12,000

June                    78,000                               35,000          8,500                     9,000

July                     80,000                               39,000          9,500                   10,500

1. Cash balance on 1st May 2004 is Rs. 8,000
2. Cash sales is 25% of sales
3. Period of credit allowed by suppliers, two months and to customers, one month
4. Lag in payment of wages, one month
5. Advance Tax is payable in June of Rs. 8,000.
1. From the following particulars, calculate all Material variances:

Material                       Standard                          Actual

Quantity    Price             Quantity    Price

Kg.          Rs.                 Kg.           Rs.

A                                 10             8                   10             7

B                                    8             6                    9             7

C                                    4            12                   5            11

22                                 24________

# SECTION   C

Answer any TWO Questions                    2 x 20=40

1.  (a)   R commenced a contract on 1-4-2005.  The contact price was fixed at

Rs. 3,00,000  and the following expense were incurred on the contract upto

31-3-2006.

Materials issued Rs. 51,000 , plant issued Rs. 15,000, wages Rs. 81,000 and other

expense Rs. 5,000 , Cash received on the contract upto 31-3-2006 amounted to

Rs. 1,28,000, being 80% of the work certified.  Of the plant and materials charged to the contract, plant costing Rs. 3,000 and material costing Rs. 2,500 were lost.  Work uncertified on 31-3-2006 was Rs. 1,000 and materials at site on that date was Rs. 2,300, Depreciate plant at 15% p.a.

Prepare the contract account as on 31-3-2006 and show how the relevant items would appear in the  balance sheet as on that date.

(or)

19.(b)  Product ‘Z’ is obtained after it passes three distinct processes.  The following

Information is obtained from the accounts for the month ending March 2005:

Process

Items                                                           _________________________________

Total                       I                        II                      III

Rs.                      Rs.                    Rs.                     Rs.

Direct Material                       7,542                  2,600                 1,980                 2,962

Direct Wages                         9,000                  2,000                  3,000                4,000

Production Overheads           9,000                      –                         –                        –

%of Normal Loss to input                                   5%                      10%                  15%

Output(in units) during the month                      950                      840                   750

Value of Scrap per unit (Rs.)                                 2                         4                       5

1,000 units at Rs. 3 each were introduced to process I.  There was no stock of material

or work-in progress at the beginning or end of the period.  The output of each process passess direct to the next process and finally to finished stores.  Production overhead is recovered on 100 percent of direct wages.

Prepare process  cost accounts and other related accounts.

20.(a) Prepare a flexible budget for overheads on the basis of the following data.

Ascertain overheads at 50% 60% and 70% capacity.

Rs.

Indirect material                                              6,000

Indirect labour                                               18,000

Electricity (40% fixed 60% variable)                30,000

Repairs (80% fixed 20% variable)                      3,000

Depreciation                                                    16,500

Insurance                                                          4,500

Salaries                                                           15,000

(or)

20.(b) A Co. plants to buy a machine for Rs. 80,000.  It is expected to have a life of 5

years and a scrap value of Rs. 10,000 at the end of its life.  The machine is expected to generate the following profits before depreciation and tax.

Year     Profit before Dep & tax (Rs.)     P.V. of Re 1 @ 10%

1                          20,000                                0.909

2                          40,000                                0.826

3                          30,000                                0.751

4                          25,000                                0.683

5                          16,000                                0.621

If the tax rate is 50% and the cost of capital is 10%, calculate

• Pay Back Period, (b)Net Present Value

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