LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.B.A. DEGREE EXAMINATION – BUSINESS ADMINISTRATION
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SIXTH SEMESTER – April 2009
BU 6600 – ADV. COST MANAGEMENT ACCOUNTS
Date & Time: 25/04/2009 / 9:00 – 12:00 Dept. No. Max. : 100 Marks
PART A
Answer ALL questions (10×2=20)
- Idle time variance
- Master budget
- Limiting factor
- Economic batch quantity
- Internal rate of return
- Joint and by-products
- A Ltd plans to purchase a machine costing Rs.5,00,000. It has a life of 5 years and no salvage value. If the company expects to earn a profit of Rs.2,50,000 per annum, before depreciation and tax, calculate the pay back period. Tax rate is 50%. Provide depreciation under Straight Line Method.
- X ltd expects to sell 1,00,000 units of product A in the month of July 2009. Each unit of product A requires 2 kgs of material X. calculate the quantity of X to be purchased, from the following data.
A (units) X (kgs)
Estimated stock on 1/7/09 30,000 25,000
Desired stock on 31/7/09 50,000 45,000
- 100 units are introduced in Process 1. The total expenses for the process if RS.9,000. 80 units are completed and transferred to Process 2. 20 units, 50% complete remained as closing work in progress. Prepare Process 1 account.
- A owns a lorry of 6 ton capacity. During the month it made 20 trips covering a distance of 200 kms every trip. 40% of the time it ran empty. It carried an average load of 80% of capacity during the period. Calculate the total ton kilometers for the month.
PART B
Answer FIVE questions choosing at least TWO from each section. (5×8=40)
Section 1
- Distinguish between ‘Job costing” and “Process costing”
- R Ltd gives you the following data. In respect of a truck of 5 ton capacity.
Cost of truck Rs.90,000
Estimated life 10 years
Diesel, oil etc. Rs.15 per trip each way
Repairs and Maintenance Rs.500 per month
Driver’s wages Rs.500 per month
Cleaner’s wages Rs.250 per month
Insurance Rs.4,800 per annum
Tax Rs.2,400 per annum
Supervision Rs.4,800 per annum
The truck carries goods to and from the city, covering a distance of 50 kms each way. While going to the city it runs with full capacity, but on the return journey, it carries only 20% of its capacity. The truck runs on an average 25 days a month. Calculate the operating cost per ton kilometer.
- R Ltd gives you the following data in respect of a contract for Rs. 8,00,000, for the year ending 31st December 2008:
Rs.
Materials issued from stores 1,50,000
Wages paid 2,20,000
General charges 8,000
Plant installed at site on 1st July 2008 40,000
Materials on hand on 31st December 2008 8,000
Wages accrued on 31st December 2008 8,000
Cash received being 75% of works certified 3,000
Works uncertified 12,000
Materials transferred to other contracts 8,000
Materials received from other contracts 2,000
Depreciate Plant at 10% per annum.
Prepare Contract account for the year ending 31st December 2008.
- While manufacturing Product X, a by-product Y is obtained, which after further processing is sold. The joint expenses incurred is Rs.39,000. Expenses after split off were Rs.25,000 for X and Rs.6,200 for Y. 400 kgs of X and 100 kgs of Y are produced. Y is sold at Rs.240 per kg on which the profit earned is estimated at 30% of the selling price.
Calculate the profit made on product X, if X is sold at Rs.300 per kg.
Section 2
- Marginal costing is an invaluable aid for managerial decision making. Explain.
- Prepare a flexible budget for overheads on the basis of the following data, at 50% and 70% of operating capacity. Also calculate the overhead rate per labor hour:
At 60% capacity
(Rs.)
Variable overheads:
Indirect material 6,000
Indirect labour 18,000
Semi variable overheads:
Electricity (40% fixed) 30,000
Repairs (20% variable) 3,000
Fixed overheads:
Depreciation 16,500
Insurance 4,500
Salaries 15,000
———-
Total overheads 93,000
Estimated direct labor hours 1,86,000
- 100 workers are employed in a factory. The standard wage rate is Re.1 per hour. The standard working time per week is 48 hours. During a week in march, 50 workers were paid at Re.1.10 p per hour, 20 workers at Re.1 per hour and 30 workers at 90 p per hour. The factory did not work for 8 hours due to power failure. Calculate labor variances.
- A company manufacturers 3 products A,B and C, all of which use the same raw material. On the basis of the following data, calculate the product mix, which will give the highest profit assuming the company has only 1 lakh kgs of raw material available.
A B C
Raw material at Rs.10 per kg Rs.100 Rs.60 Rs.150
Labor cost per unit Rs.15 Rs.25 Rs.20
Selling price per unit Rs.125 Rs.100 Rs.200
Maximum demand in units 6,000 4,000 3,000
PART C
Answer any TWO questions choosing at least 1 from each section 2×20=40
Section 1
- The following figures are available from the financial accounts for the year ending 31st March 2008:
Rs.
Direct material consumed 2,00,000
Direct wages 1,00,000
Factory overheads 75,000
Administration overheads 2,25,000
Selling and distribution overheads 2,40,000
Fines paid 30,000
Preliminary expenses written off 40,000
Legal charges 20,000
Dividend received 50,000
Interest on bank deposits 20,000
Sales (1,20,000 units) 18,00,000
Closing stock (30,000 units) 1,60,000
The cost accounts reveal the following:
Direct material consumed 2,20,000
Direct wages 80,000
Factory overheads – 20% on prime costs
Administration overheads – Rs.2 per unit produced
Selling and distribution overheads – Rs.2 per unit sold
Ascertain the profits shown as per Cost Accounts and Financial Accounts.
Also prepare a statement reconciling the two profits.
- A product of a company passes through two processes A and B. 20,000 units are issued to Process A at a cost of Rs.10,000. Other details relating to the process are as follows:
Process A Process B
Direct labor (Rs.) 14,000 10,000
Manufacturing expenses (Rs.) 1,000 1,000
Normal loss (%age of input) 2% 5%
Sale value of scrap (Rs.) 1 1.20
Output in units 19,500 18,800
Prepare Process accounts, Normal Loss A/c, Abnormal Loss A/c and Abnormal Gain A/c.
Section 2
- A factory produces an article X using two materials A and B, mixed in the ratio of 60% and 40%. The
standard price for material A and B is Rs.4 per kg and Rs. 3 per kg resp. standard loss in production is
estimated at 10%. During a week 364 kgs of product X were produced, using, 280 kgs of material X at
Rs.3.80 per kg and 120 kgs of material Y at Rs.3.60 per kg. Calculate material variances.
- X Ltd is considering the purchase of a machine. Two models A and B are available. The cost of each model is Rs.75,000. Each machine has a life of 5 years. The net profit, before tax but after depreciation for each machine are given below:
Year Machine A Machine B PV of Re.1 at 10%
(Rs.) (Rs.)
1 18,000 6,000 0.91
2 21,000 16,000 0.83
3 28,000 22,000 0.75
4 20,000 28,000 0.68
5 13,000 25,000 0.62
Calculate for each machine:
- Pay back period
- Return on investment
- Net present value, assuming cost of capital is 10%.
Tax rate is 50%.
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