100 MARCKS SAMPLE PAPER 2 39

100 MARKS SAMPLE PAPER 2

Question No. 1 is compulsory.
Answer any four questions out of the remaining five questions.
Working notes should form part of the answer.

(4 × 5 = 20 Marks)
1. Answer the followings:

(a) M/s. SD Private Limited commenced a contract on 1st July, 2017 and the company closes its account
for the year on 31st March every year. The following information relates to the contract as on 31st March 2018:
Material issued `9,48,000
Direct wages `4,57,200
Prepaid direct wages as on 31.03.2018 `1,08,000
Administration charges `7,20,000
A supervisor, who is paid `50,000 per month, has devoted two-third of his time to this contract. A plant
costing `7,85,270 has been on the site for 185 days, its working life is estimated at 9 years and its scrap value
is `75,000.
The contract price is `42,00,000. On 31.03.18 two-third of the contract was completed. The architect
issued certificate covering 50% of the contract price and contractor has been paid `15,75,000 on account.
Assuming 365 days in a year.
You are required to:
(a) Prepare Contract Account showing works cost.
(b) Calculate Notional Profit or Loss as on 31st March 2018.

(b) A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of `30 per hour. The standard time per unit
for a particular product is 4 hours. Mr. P, a machine man, has been paid wages under the Rowan Incentive Plan
and he had earned an effective hourly rate of `37.50 on the manufacture of that particular product.
What could have been his total earnings and effective hourly rate, had he been put on Halsey Incentive
Scheme (50%)?

(c) Journalise the following transactions assuming cost and financial accounts are integrated:
(i) Materials issued:
Direct `3,25,000
Indirect `1,15,000
(ii) Allocation of wages (25% indirect) `6,50,000
(iii) Under/Over absorbed overheads:
Factory (Over) `2,50,000
Administration (Under) `1,75,000
(iv) Payment to Sundry Creditors `1,50,000
(v) Collection from Sundry Debtors `2,00,000

(d) The books of Adarsh Manufacturing Company present the following data for the month of April, 2017.
Direct labour cost `17,500 being 175% of works overheads. Cost of goods sold excluding administrative
expenses `56,000. Inventory accounts showed the following opening and closing balances:
April 1 April 30
Raw materials 8,000 10,600
Works in progress 10,500 14,500
Finished Goods 17,600 19,000

Other data are:

Selling expenses 3,500
General and administration expenses 2,500
 100 MARCKS SAMPLE PAPER 2 40
Sales of the month 75,000

You are required to:

(1) Compute the value of materials purchased.
(2) Prepare a cost statement showing the various elements of cost and also the profit earned.

2. (a) X Ltd. is committed to supply 24,000 bearings per annum to Y Ltd. on a steady basis. It is estimated that
it costs 10 paise as inventory holding cost per bearing per month and that the set up cost per run of bearing
manufacture is `324.
(i) What should be the optimum run size for bearing manufacture?
(ii) Assuming that the company has a policy of manufacturing 6,000 bearings per run, how much
extra costs the company would be incurring as compared to the optimum run suggested in (a)
above?
(iii) What is the minimum inventory holding cost?
(10 Marks)

(b) A product passes through three processes A, B, and C. The normal wastage and actual output of each
process is as follows:
Process Actual Output Normal Loss
Process A 9,500 units 3%
Process B 9,100 units 5%
Process C 8,100 units 8%

Wastage of Process A was sold 25 Paise per unit, that of Process B at 50 Paise per unit and that of
Process C at `1 per unit. 10,000 units were issued to Process A in the beginning of October 2016 at a cost of `1
per unit the other expenses were as follows:

Name of Expenses Process A (`) Process B (`) Process C (`)

Sundry Materials 1,000 1,500 500
Labour 5,000 8,000 6,500
Direct expenses 1,050 1,188 2,009

Selling and distribution expenses are `850 and sale value per unit is `6.00.
Prepare all accounts.
(10 Marks)

3. (a) A Company uses three raw materials A, B, and C for a particular product for which the following data
apply:
Usage for one ROQ Price per Delivery period (in weeks) ROL Mini.
RM
unit of product (in kg) kg Mini. Average Max. (in kg) level
A 10 kg 10,000 0.10 1 2 3 8,000 -
B 4 kg 5,000 0.30 3 4 5 4,750 -
C 6 kg 10,000 0.15 2 3 4 - 2,000 kg

Weekly production varies from 175 to 225 units, averaging 200 units of the said product.

What would be the following quantities?

(i) Minimum stock of A (ii) Maximum stock of B (iii) Re-order level of C (iv) Average stock level of A
(10 Marks)

(b) A company is considering three alternative proposals for conveyance facilities for its sales personnel who
have to do considerable travelling approximately 20,000 Kms every year. The proposals are as follows:
(i) Purchase and maintain it’s own fleet of cars. The average cost of a car is `6,00,000.
 100 MARCKS SAMPLE PAPER 2 41
(ii) Allow the executive to use his own car and reimburse expenses at the rate of `10 per kilometer
and also bear insurance costs.
(iii) Hire cars from an agency at `1,80,000 per year per car. The Company will have to bear costs of
petrol, taxes and tyres.

The following further details are available:

(a) Petrol `6 per km.
(b) Repairs and maintenance `0.20 per km.
(c) Tyres `0.12 per km.
(d) Insurance `1,200 per car per annum.
(e) Taxes `800 per car per annum.
(f) Life of the car 5 years with annual mileage of 20,000 kms.
(g) Resale value `80,000 at the end of the fifth year.

Work out the relative costs of three proposals and rank them.
(10 Marks)

4. (a) RST Limited is presently operating at 50% capacity and producing 30,000 units. The entire output is sold
at a price of `200 per unit. The cost structure at 50% level of activity is as under:
Direct Material `75 per unit
Direct Wages `25 per unit
Variable Overheads `25 per unit
Direct Expenses `15 per unit
Factory Expenses (25% Fixed) `20 per unit
Selling and Distribution Expenses (80% Variable) `10 per unit
Office and Administrative Expenses (100% Fixed) `5 per unit

The company anticipates that the variable costs will go up by 10% and fixed costs will go up by 15%.

You are required to prepare an Expense Budget, on the basis of marginal cost for the company at 50%
and 60% level of activity and find out the profit at respective levels.
(10 Marks)

(b) A Ltd produces ‘M’ as a main product and gets two by products ‘P’ and ‘Q’ in the course of processing.
Following information are available for the month of October 2017:
Particulars M P Q
Cost after separation - `60,000 `30,000
No. of units produced 4,500 2,500 1,500
Selling price per units `170 `80 `50
Estimated net profit as percentage to sales value - 30% 25%

The joint cost upto separation point amounts to `2,50,000. Selling expenses amounting to 85,000 are to be
apportioned to the three products in the ratio of sales units. There are no beginning or closing inventories.

Prepare statement showing:

(i) Allocation of joint cost;
(ii) Product-wise and overall profitability and
(iii) Advise the company regarding results if the by product ‘P’ is not further processed and is sold at the
point of separation at `60 per unit without incurring selling expenses.
(10 Marks)

5. (a) The following information has been provided by a company:

No of units produced and sold 6,000 units
Standard labour rate per hour `8
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Standard hours required for 6,000 units ?
Actual hours required 17,094 hours
Labour efficiency 105.3%
Labour rate variance `68,376 A

You are required to calculate:

(i) Actual labour rate per hour
(ii) Standard hours required for 6,000 units
(iii) Labour efficiency variance
(iv) Standard labour cost per unit
(v) Actual labour cost per unit
(10 Marks)

(b) ABC Ltd. manufactures a single product and absorbs the production overheads at a pre-determined rate
of `10 per machine hour. At the end of financial year 1998-99, it has been found that actual production
overheads incurred were `6,00,000. It included `45,000 on account of 'written off' obsolete stores and `30,000
being the wages paid for the strike period under an award.

The production and sales data for the year 1998-99 is as under:
Production:
Finished goods 20,000 units
Work-in-progress 8,000 units
(50% complete in all respects)
Sales:
Finished goods 18,000 units

The actual machine hours worked during the period were 48,000. It has been found that one third of the under
absorption of production overheads was due to lack of production planning and the rest was attributable to
normal increase in costs.

You are required to:

(i) Calculate the amount of under absorption of production overheads during the year 1998-99 and
(ii) Show the accounting treatment of under absorption of production overheads.
(10 Marks)

6. Answer any Four of the followings: (4 × 5 = 20 Marks)

(a) Explain ‘Job Costing’ and ‘Batch Costing’.

(b) Why are cost and management accounting information required by the staff at operational level?
Describe.
(c) A company gives the following information:
Margin of safety : `3,75,000
Total cost : `3,87,500
Margin of safety in units : 15,000 units
Break even sales in units : 5,000 units
You are required to calculate:
(i) Selling price per unit, (ii) Profit, (iii) Profit/Volume ratio, (iv) Break even sales (in `), (v) Fixed
cost

(d) Explain integrated accounting system and state its advantages.

(e) What are the limitations of marginal costing?