ca inter suggested answers | Nov 23 Cost Paper

  • Team Koncept
  • 23 November, 2023

ca inter suggested answers | Nov 23 Cost Paper

ca inter nov 23 suggested answers | Cost Paper

Table of Content

  1. Q 1 (A) : ABC Limited manufactures a product ‘AM25’ using material ‘CEE’...
  2. Q 1 (B) : A worker took 60 hours to complete a job in a factory. The....
  3. Q 1 (C) : XYZ Limited manufactures three joint products A, B and C.....
  4. Q 1 (D) : Unique Construction Limited commenced a contract on.... 
  5. Q 2 (A) : The following data the manufacture of product....
  6. Q 2 (B) : HL Limited produces and sells four varictics of beverage.The... 
  7. Q 3 (A) : HCP LTD. is a manufacturing company having two production... 
  8. Q 3 (B) : Royal Hotel offers three types of rooms to its guests.... 
  9. Q 4 (A): JH Plastics Limited manufactures three products S, M...
  10. Q 4 (B) : R Ltd. produces and sells 60,000 units of product ‘AN’, at its...
  11. Q 4 (C) : A product passes through two processes; Process A and..... 
  12. Q 5 (A) : PQR Alloys Ltd. uses a standard costing system Budgeted... 
  13. Q 5 (B) : The following data relate to the manufacture of a product....
  14. Q 5 (C) : Construct journal entries in the following situations...... 
  15. Q 6 (A) : Explain very briefly the following terms used in Cost and.....
  16. Q 6 (B) : State  with  reasons  whether  the  following  independent...
  17. Q 6 (C) : What do you mean by employee productivity ? Point out....
  18. Q 6 (D) : Explain very briefly the following terms : (i) Retention (ii)....
  19. Q 6 (E) : What is meant by cost driver ? Give its different categories....

Question 1 : (A)

ABC Limited manufactures a product ‘AM25’ using material ‘CEE’. The following information is available regarding material ‘CEE’ : 

Purchase price per unit  ₹300 
Cost of placing an order  ₹150 
Carrying cost per unit per annum  6% of purchase price 
Consumption of material ‘CEE’ per annum  1,94,400 units 
Lead time  Average 6 days, Maximum 8 days, Minimum 4 days  

Maximum consumption of material ‘CEE’ per day is 200 kg more than the average consumption per day.  

Required :

Calculate the following in relation to material ‘CEE’ :

(i) Economic Order Quantity. 

(ii) Reorder Level

(iii) Maximum Stock Level. 
(Assume 360 days in a year) 

Answer 1 : (A)

Question 1 : (B)

A worker took 60 hours to complete a job in a factory. The normal rate of wages is ₹80 per hour. The worker is entitled to receive bonus according to the Halsey Premium Plan. Factory-overhead is recovered on the job at ₹60 per man hour actually worked. The factory cost of the job is ₹37,280 and material cost of the job is ₹28,400.

Required :  

(i) Calculate the standard time for completing the job and effective hourly rate under the Halsey Premium Plan.

(ii) Calculate the effective rate of earnings per hour if wages would have been paid under the Rowan Plan. 

Answer 1 : (B)



Question 1 : (C)

XYZ Limited manufactures three joint products A, B and C from a joint process. Product B is sold at split off point whereas product A and C are sold after further processing. 10% of the quantity of product A is lost in further processing. Data regarding these products for the year ending 31st March, 2023 are as follows : 

  A B C
Number of units produced and sold  3,60,000 2,10,000 4,50,000
Selling price per unit at split off point  - ₹6 -
Selling price per unit after further processing  ₹9.50 - ₹12
Further processing costs  ₹8,60,000 - ₹10,40,000

The joint production cost upto the split off point at which A, B and C become separable products is ₹57,26,000. 

Required :  

(i) Prepare a statement showing apportionment of joint cost to the products using Net realizable value method. 

(ii) Assume XYZ Limited ‘has received an offer from D Limited to purchase ;roduct ‘A’ at the split off point at ₹7 per unit and another company PQR Limited has offered to purchase product ‘C' at split off point at ₹9 per unit.  

Advise whether these offers should be accepted or not ?  

Answer 1 : (C)



Question 1 : (D)

Unique Construction Limited commenced a contract on 01.08.2022. The total contract price was ₹96,00,000. The following information was available from their costing records as at 31.03.2023 : 

Material consumed  ₹35,91,000
Wages paid  ₹9,65,000
Wages outstanding as on 31.03.2023  ₹75,000
Plant issued to site on 01.08.2022  ₹7,50,000
Direct expenses  ₹1,96,650
General overheads  ₹2,08,000

A supervisor who was paid 18,000 per month, had spent 40% of his time on this contract. Plant costing ₹60,000 was transferred to other contracts on 31.12.2022. Plant was to be depreciated at 15% per annum on straight line method (SLM) basis. On 31.03:2023, 60% of the contract was completed. The architect’s certificate had been issued covering 50% of the contract price.  

Prepare a Contract account and show the notional profit or loss as on 31.03.2023.   

Answer 1 : (D)

Question 2 : (A)

The following data the manufacture of product BXE for the year ended 31 March, 2023 : 

  Amount  (₹) 
Value of stock as on 1st April, 2022    
Raw materials  27,00,000 
Work in progress 10,60,000  
Finished Goods  25,00,000 
Material purchased  2,48,00,000 
Freight inward  7,50,000 
Direct wages  42,00,000
Power & Fuel  18,75,000
Cost of special drawings   3,60,000
Trade Discount  4,50,000
Insurance on material procured  15,000
Rent of Factory Building ( 1/5th used for office purpose)  7,00,000
Depreciation on machinery  6,25,000
Depreciation on Delivery Vans  1,20,000
Consumable stores and indirect wages  15,20,000
Quality Control cost  9,00,000
Primary packing cost  12,90,000
General Administrative overheads (excluding rent of building)   17,50,000
Salary paid to Marketing Staff  9,60,000
Packing cost for transportation  1,84,000
Value of stock as on 31st March, 2023    
Raw materials 32,60,000
Work in progress 11,80,000
Finished Goods  28,38,000

Additlonnl Informatlon ;  

(i) Further, some of the finlshed product was found defective and the defective products were reetified by Incurring expenditure of additional factory overheads to the extent of ₹33,600, The cost of rectificution i not included in detaily mentioned above.

(ii) An amount of' ₹1,20,600 way realised by selling serap and waste generated during the year, 

Prepare Cost sheet for the year ended 31st March, 2023 showing :

(i) Prime cost,

(ii) Factory cost,

(iii) Cost of production,

(iv) Cost of goods sold, and

(v) Cost of salcs.  

Answer 2 : (A)

Question 2 : (B)

HL Limited produces and sells four varictics of beverage. The past data shows different demand patterns for various quarters during the year. The sales quantity and selling price for the month of September 2023 is as follows : 

  Sales Quantity  Selling Price per unit 
Hot Coffee  1,40,000 Units  ₹20/-  
Cold Coffee  3,40,000 Units  ₹20/-  
Fruit Juice  4,20,000 Units  ₹20/-  
Carbonated Soft Drink  2,70,000 Units  ₹20/-  

For the quarter October to December 2023, it is estimated that due to climate changes the demand for Hot Coffeec would increase every month by 50% of the previous month and the demand for Cold coffee would decrease every month by 30% of the previous month. The demand for Fruit Juice would decrease by 20% in the month of October 2023 and thereafter it will remain constant. HL Limited would be able to sell only 60,000 units and 50,000 units and 30,000 units of Carbonated Soft Drink respectively during the months of October, November and December 2023. There would be no change in the selling price of all the products during the next quarter. 

Standard Quantity of closing stock for the period September 2023 to December 2023 is as follows : 

  hot coffee cold coffee fruit juice carbonated soft drink
September 2023  12,000  13,000 11,000 7,500
October 2023  15,000  14,000 12,000 5,500
November 2023  13,000  15,000 10,000 6,000
December 2023  11,000  16,000 13,000 7,000

You are required to prepare a Production Budget (in units) and Sales Budget (in units and sales value) for the months of October, November and December 2023.

Answer 2 : (B)



Question 3 : (A)

HCP LTD. is a manufacturing company having two production departments, P and Q and two service departments, R and S.' The budgeted cost information for the month of October 2023 is furnished below : 

    Production Departments  Service Departments 
  (₹) P ₹ Q₹ R₹ S₹
Indirect material  1,77,500 94,750  49,750 18,270 14,730
Indirect labour  1,55,000 35,000 75,000 15,000 30,000
Factory Rent  75,000  
Depreciation on machinery  37,500
Power 96,000
Security Expense for Factory Premises   24,000
Insurance- machinery  12,000
Insurance machinery  48,000
Additional information :         
Floor Area (Sq. metres)  1250  750 200 300
Net book value of machinery (₹)  21,00,000 5,00,000 1,00,000 3,00,000
H.P. of machines  800 200 80 120
Machine hours  4,000 1,000 600 800
Number of employees  10 30 6 4
Labour hours  2,000  6,000 1,200 600

The overhead costs of the two service department are distributed using step method in the same order viz. R and S respectively on the following basis : 

Department R- Number of employees

Department S- Machine hours

Required : 

(i) Prepare a statement showing distribution of overheads to various erarunents, clearly showing the basis of distribution. 

(ii) Calculate the total budgeted overheads for both_ production departments after the service departments have been re-apportioned to them.

(iii) Calculate the most appropriate overhead absorption rate for each of the production department. 

Answer 3 : (A)



Question 3 : (B)

Royal Hotel offers three types of rooms to its guests - Deluxe Room Executive Room and Suite Room. Other information is as follows :- 

  Deluxe Room Executive Room Suite Room
Room Tariff per day  ₹1,500  ₹2,400  ₹3,800  
No. of rooms  20  10 4
Average occupancy during the year   80%  60%  75% 
Housekeeping expenses per day   ₹280  ₹320  ₹425 

The hotel provides complimentary breakfast facility to its executive room and suite room guests while swimming pool facility is provided free of cost only to suite rodm guests.  

The restaurant and swimming pool is run by a contractor. The contractor recovers charges of ₹150 per persoh for breakfast and ₹200 per person for using swimming pool facility from Royal Hotel. Besides the above-mentioned charges, annual fixed expenses are as follows : 

Salaries to staff -₹57,60,000

Electricity Expenses -₹24,00,000 

Salaries to staff are apportioned to Deluxe Room, Executive Room and Suite Room in the ratio of 25 : 35 : 40 and electricity expenses are to be apportioned in proportion to occupancy. 

You are required to calculate the total profit of each room type on annual basis.

Note: Assume 360 days in a year and double occupancy in each category of room.  

Answer 3 : (B)



Question 4 : (A)

JH Plastics Limited manufactures three products S, M and L. To date, simple traditional absorption costing system has been used to allocate overheads to products. Total production overheads are allocated on the basis of machine hours. The machine hour rate for allocating production overheads is ₹240 per machine hour under the traditional absorption costing system. Selling prices are calculated by adding mark up of 40% of the product cost. Information related to products for the most recent year is as under :  

  S M L
Units produced and sold  7,500 12,500 9,000
Direct material cost per unit (₹)  158 179 250
Direct labour cost per unit (₹)  40 45 60
Machine hours per unit  0.30 0.40 0.50
Number of Machine setups  120 120 160
Number of purchase orders  90 135 125
Number of purchase orders  100 160 140

The management wishes to introduce activity-based method (ABC) system of attributing production. overheads to products and has identified major cost pools(for production overheads and their associated cost drivers as follows :  

Cost pool  Amount  Cost driver 
Purchasing Department Cost  ₹7,00,000  Number of Purchase  orders
Machine setup Cost  ₹9,00,000   Number of Machine setups  
Quality Control Cost  ₹6,56,000  Number of inspections  
Machining Cost  ₹5,64,000  Machine hours  

Required :  

(i) Calculate the total cost per unit and selling price per unit for each of the three products using :  

(a) The traditional costing approach currently used by JH Plastics Limited; 

(b) Activity based costing (ABC) approach.  

(ii) Calculate the difference in selling price per unit as per (a) and (b) above and show which product is under-priced or over-priced. 

Answer 4 : (A)