DISTANCE EDUCATION
M.Com.(F DEGREE EXAMINATION, MAY 2016.
COST AND MANAGEMENT ACCOUNTING
(2005 onwards)
Time Three hours Maximum 100 marks
SECTION A — 8 40 marks)
Answer any FIVE questions.
1. What are the steps in installing a cost accounting
system?
2. Explain the relationship between management
accounting and financial accounting?
3. What are the factors that facilitate effective materials
cost control?
4. What are the merits and demerits of LIFO and FIFO?
5. Define and classification of overheads?
6. What are the advantages of zero base budgeting?
7. Write a note on Master budget?
8. Distinguish between cost control and cost reduction?
Sub. Code
13
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SECTION B — 15 60 marks)
Answer any FOUR questions.
9. Enyo Manufacturing Company Ltd. produces three
products — Frytol, Brilliant and Pepsodent. The cost
estimates of each of the products are given below:
Frytol Brilliant Pepsodent
Direct Materials 720 1,280 1,800
Direct Labour:
Production Dept. at Rs. 60/hr 2 hrs 1.5 hrs 2 hrs
Finishing Dept. at Rs. 40/hr. 2 hrs 2.5 hrs 1 hr
Variable Overheads 80 30 40
Fixed overhead cost for the following year is estimated at
Rs.6 million and production is
Frytol 10,000 units
Brilliant 20,000 units
Pepsodent 40,000 units
The directors are considering alternative methods of
absorbing fixed overheads into product costs and you
have been asked, as the Cost Accountant, to calculate the
rates to be applied for the following alternatives:
Direct labour Costs
Percentage of Total Variable Cost.
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10. The following information is available for a firm
producing and selling a single product:
Budgeted costs (at normal activity): Rs. 000
Direct material and labour 2,64,000
Variable production overhead 48,000
Fixed production overhead 1,44,000
Variable selling and administration
overhead
24,000
Fixed selling and administration
overhead
96,000
The overhead absorption rates are based upon normal
activity of 240,000 units per period. During the period
just ended 260,000 units of product were proceed and
230,000 units were sold at Rs 3,000 per unit. At the
beginning of the period 40,000 units were in stock.
These were valued at the budgeted costs shown above.
Actual costs incurred were as per the budget.
Required.
Calculate the fixed production overhead absorbed
during the period and the extent of any over or
under absorption. For both of these calculations you
should use absorption costing.
Calculate profits for the period using absorption
costing and marginal costing respectively.
11. Sakyi Ltd. produces two products, Cake and Bluna, which
use the same raw materials, oil and fat. One unit of Cake
uses 3 liters of oil and 4 kgs of fat. One unit of Bluna uses
5 liters of oil and 2kgs of fat. A litre of oil is expected to
cost Rs. 3,000 and a kg of fat Rs. 7,000 Budgeted Sales for
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2001 are 8,000 units of Cake and 6,000 of Bluna; finished
goods in stock at 1.1.2001 are 1,500 units of Cake and 300
units of Bluna, and the company plans to hold stocks of
600 units of each product at 31.12.2001. Stock of raw
materials are 6,000 liters of oil and 2,800 kgs of fat at
1.1.2001, and the company plans to hold 5,000 liters and
3,500 kgs respectively at 31.12.2001.
The stores manager has suggested that a provision
should be made for damages and deterioration of items
held in store as follows:
Cake loss of 50 units
Bluna loss of 100 units
Oil loss of 500 litres
Fat loss of 200 kgs.
You are required to prepare a material purchases budget
for the year 2001.
12. A company manufactures a single product and has
produced the following flexed budget for the year:
Level of activity
70% 80% 90%
Direct Material 17,780 20,320 22,860
Direct labour 44,800 51,200 57,600
Production overheads 30,500 32,000 33,500
Administration
overheads
17,000 17,000 17,000
Total cost 1,10,800 1,20,000 1,30,960
You are required to prepare a budget flexed at
45% level of activity.
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13. Apple Ltd. makes wooden crates which are sold, to
brewers and soft drinks bottling companies. The
production work involves three production departments,
Sawing, Assembling and Finishing. There are also two
service departments, Maintenance and Materials
Handling. During the year ended 31st December 1991,
40,000 crates were made:
Sawing Assembly Finishing
Cost incurred:
Materials issued
8,00,000
6,00,000
1,00,000
Direct Wages 3,00,000 1,50,000 2,50,000
Overheads 1,20,000 80,000 30,000
Materials handling wages totaled Rs.21,000
Maintenance Wages totaled Rs. 45,000
Consumable stores totaled Rs.15,000(Maintenance)
The departments benefits from the service departments
are as follows
Sawing

Assembly

Finishing

Materials
Handling
Maintenance 30 40 20 10
Materials
handling
50 20 30
Required:
Prepare a Statement showing the overheads
allotted to each production department.
Calculate the unit cost of a wooden rate.
14. The following details are given:
Sales

Profit

2008 10,00,000 2,00,000
2009 15,00,000 4,00,000
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Calculate:
P/V ratio
Fixed cost
Break even point
Profit when sales is Rs. 20,00,000
Sales required to make a profit of Rs. 8,00,000.
Margin of safety.
15. In a factory guaranteed wages at the rate of Rs. 18.00 per
hour are paid in a 48-hour week. By time and motion
study it is estimated that to manufacture one unit of a
particular product 20 minutes are taken. The time
allowed is increased by 25%. During one week Abraham
produced 180 units of the product. Calculate his wages
under each of the following methods:
Time rate
Piece-rate with a guaranteed weekly wage
Halsey premium bonus and
Rowan premium bonus