INTER CA MAY Test Code M32 Branch: MULTIPLE Date: (50 Marks) Note: All questions are compulsory.

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Mildred Brooks
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1 (5 Marks) Note: All questions are compulsory. INTER CA MAY 218 COSTING Topic: Contract Costing, Budgetary Control, Labour, Joint & By- Product, Absorption Costing, Overheads, Integral & Non Integral, Marginal Costing. Test Code M32 Branch: MULTIPLE Date: Question 1 (8 marks) a. Escalation Clause: (a) This clause is usually provided in the contracts as a safeguard against any likely changes in the price or utilization of material and labour. If during the period of execution of a contract, the prices of materials or labour rise beyond a certain limit, the contract price will be increased by an agreed amount. Inclusion of such a term in a contract deed is known as an 'escalation clause'. (2 marks) (b) An escalation clause usually relates to change in price of inputs, it may also be extended to increased consumption or utilization of quantities of materials, labour etc (where it is beyond the control of the contractor). In such a situation the contractor has to satisfy the contractee that the increased utilization is not due to his inefficiency. (2 marks) b. Treatment of over and under absorption of overheads are:- (4 marks) (i) Writing off to costing P&L A/c: Small difference between the actual and absorbed amount should simply be transferred to costing P&L A/c, if difference is large then investigate the causes and after that abnormal loss shall be transferred to costing P&L A/c. (ii) Use of supplementary Rate: Under this method the balance of under and over absorbed overheads may be charged to cost of W.I.P., finished stock and cost of sales proportionately with the help of supplementary rate of overhead. (iii) Carry Forward to Subsequent Year: Difference should be carried forward in the expectation that next year the position will be automatically corrected. This would really mean that costing data of two years would be wrong. Question 2 (8 Marks) Note: Joint Costs are apportioned based on the ratio of sales value at split-off point. (1/2 mark for each calculation) Particulars A B C D TOTAL 1.Output in liters 8, liters 4, liters 2, 4, liters liters 2.Sales Price per liter at split-off Rs. 15. Rs.6. Rs 3. Rs. 7.5 point 3.Sal value at split-off point (1*2) Rs.1,2, Rs. 24, Rs. 6, Rs. 3, Rs.1,8, 4.Joint Cost apportioned in above Rs.98,667 Rs.19,733 Rs.4,933 Rs.24,667 Rs.1,48, ratio (12:24:6:3) 5.Proft/(Loss) if all products are Rs.21,333 Rs.4,267 Rs.1,67 Rs.5,333 Rs.32, sold at spilt-off point (3-4) 6.Further Processing Costs(given) Rs.43, Rs.9, - Rs.1,5 Rs.53,5 1 Page

2 7.Final sales value(given) Rs.1,72, Rs.25, Rs.6, Rs.45, Rs.2,48,5 8.Profit/(Loss) if all products are Rs.3,833 (Rs.3,733) Rs.1,67 Rs.18,833 Rs.47, sold after further processing(7-4- 6) 9.Additional Revenue from Rs.52,5 Rs.1, NA Rs.15, further processing(7-3) 1.Additional Processing Rs.43, Rs.9, - Rs.1,5 Costs(given) 11. Additional Profit/(Loss) from Rs.9,5 (Rs.8,) NA Rs.13,5 further processing(9-1) 12.Optimal Decision(based on 11 above) Process Further Sell at Splitoff Sell at Split-off Process Further 13.Sales Revenue as per Optimal Rs.1,72,5 Rs.24, Rs.6, Rs.45, Rs.2,47,5 Decision 14.Joint Costs as per Point 4 Rs.98,667 Rs.19,733 Rs.4,933 Rs.24,667 Rs.1,48, above 15. further processing Costs as Rs.43, NIL NIL Rs.1,5 Rs.44,5 per Optimal Decision (i.e. Only For A and D) 16. Profit as per Optimal Decision ( ) Rs.3,833 Rs.4,267 Rs.1,67 Rs.18,833 Rs.55, Alternatively, Profit as per Optimal Decision can also be Computed as under- Particulars A B C D TOTAL 13. Profit / (Loss) if all products Rs.21,333 Rs.4,267 Rs.1,67 Rs.5,333 Rs.32, are sold at split-off point (as per point 5 above) 14. Additional profit from further Rs.9,5 NA NA Rs.13,5 Rs.23, processing (only for A & D) (as per point 11 above) 15. Profit as per Optimal Decision ( ) Rs.3,833 Rs.4,267 Rs.1,67 Rs.18,833 Rs.55, Question 3 (8 Marks) 2 Page

3 (2 marks) (3 marks) (3 marks) Question 4 (6 Marks) (2 marks for each point) a. Working Notes: Particulars 215 (`) 216 (`) 3 Page

4 Fixed Cost 72,, (` 6 1,2, units) 79,2, (11% of ` 72,,) Variable Cost (125% of ` 18) Calculation of Break-even Point (in units): Since, shelf life of the product is one year only, hence, opening stock is to be sold first. Total Contribution required to recover total fixed cost in 216 and to reach break-even volume. Less: Contribution from opening stock {2, units (` 3 ` 18)} (`) 79,2, 24,, Balance Contribution to be recovered 55,2, Units to be produced to get balance contribution = ` 55,2, = 73,6 packets. (3 marks) ` 3 ` 225 Break-even volume in units for 216(2 marks) Packets From 216 production 73,6 Add: Opening stock from 215 2, 93,6 Question 5 (5 Marks) Labour Turnover by Replacement Method =. Or,.3 =. (, ) Or, No. of worker replaced during the quarter =.3 1,=3 workers (i) Labour Turnover by Separation Method (2 marks). = 1 = 1 =, (, ) 1 =, 1=5% (ii) Labour Turnover by Flux Method (2 marks). ( ) 1 = 1 = 1 =12 % (, ), 4 Page

5 Question 6 (8 Marks) Creditors A/c (1 mark) To Bank A/c 5,8, By Balance b/d 25, To Balance c/d 4, By Stores ledger control A/c 5,95, (Materials purchased)(bal. figure) 6,2, 6,2, Stores Ledger Control A/c (2 mark) To Balance b/d 4, By WIP control A/c (Balancing figure) 5,7, To Creditors A/c (Materials purchased) 5,95, By Balance c/d 65, 6,35, 6,35, Work-in-Process Control A/c (2 marks) To Balance b/d To Stores ledger control A/c To Wages control A/c (8% of` 4,,) 5, By Finished goods control A/c (Balancing 5,7, By Balance c/d: 3,2, - Material 35, - Labour 2, (` 5* 4 hours) - Factory Oh (` 2** 4 hours) To Factory Overhead 1,28, control A/c 1,68, * Direct Labour Hour Rate =` 3,2,/ 6,4 hours =` 5 ** Factory Overhead Rate =` 2,8,/ 1,4, =` 2 Wages Control A/c (1 mark) 8, 1,5, 63, 1,68, To Bank A/c 4,, By WIP control A/c (8% of` 4,,) 4,, By Factory OH Control A/c (2% of` 4,,) 3,2, 8, 4,, 5 Page

Factory Overhead Control A/c (2 mark) To Wages control A/c 8, By WIP control A/c 1,28, (` 2 6,4 hours) To Bank A/c (Indirect expenses) 6, By Balance c/d 12, 1,4, 1,4, Question 7 (8 Marks) Overhead

6 Factory Overhead Control A/c (2 mark) To Wages control A/c 8, By WIP control A/c 1,28, (` 2 6,4 hours) To Bank A/c (Indirect expenses) 6, By Balance c/d 12, 1,4, 1,4, Question 7 (8 Marks) Overhead Distribution Statement (2 marks) Production Departments Service Departments Machine Packing General Stores Shops Plant Allocated Overheads: (`) (`) (`) (`) Indirect labour 8, 6, 4, 1,1, Maintenance Material 34, 16, 21, 28, Misc. supplies 15, 29, 9, 6, Supervisor s salary ,6, -- Cost & payroll salary ,, -- Total allocated overheads 1,29, 1,5, 1,3, 1,44, Add: Apportioned Overheads 18,43,5 7,1,25 2,27,75 7,31,5 (As per Schedule below) 19,72,5 8,6,25 12,57,75 8,75,5 Schedule of Apportionment of Overheads (2 marks) Production Service Departments Item of Cost Basis Departments Machine Packing General Stores Shops (`) (`) Plant (`) (`) Power HP hours 5,46, 78, -- 1,56, (7 : 1 : - : 2) Rent Floor space 3,, 1,2, 6, 2,4, (5 : 2 : 1 : 4) Fuel & Heat Radiator sec. 1,2, 2,4, 8, 1,6, (3 : 6 : 2 : 4) Insurance Investment 75, 22,5 7,5 15, (1 : 3 : 1 : 2) Taxes Investment 52,5 15,75 5,25 1,5 (1 : 3 : 1 : 2) Depreciation Investment 7,5, 2,25, 75, 1,5, (1 : 3 : 1 : 2) 18,43,5 7,1,25 2,27,75 7,31,5 6 Page

(b) Re-distribution of Overheads of Service Departments to Production Departments: (4 marks) Let, the total overheads of General Plant = a and the total overheads of Stores = b a = 12,57,75 +.3b.

7 (b) Re-distribution of Overheads of Service Departments to Production Departments: (4 marks) Let, the total overheads of General Plant = a and the total overheads of Stores = b a = 12,57,75 +.3b...(i) b = 8,75,5 +.2a...(ii) Putting the value of b in equation no. (i) a = 12,57, (8,75,5 +.2a) Or a = 12,57,75+ 2,62,65 +.6a Or.94a = 15,2,4 Or a = 16,17,447 (appx.) Putting the value of a = 16,17,447 in equation no. (ii) to get the value of b b = 8,75, ,17,447 = 11,98,989 (appx.) Particular s Total (`) Machine Shops Packing (`) (`) Allocated and Apportioned 27,78,75 19,72,5. 8,6,25. overheads as per Primary distribution ************ 7 Page

(50 Marks) Date Quantity (Kgs) Rate including Freight(Rs.) Value of Purchases(Rs.) 3 rd March 18 th March 25 th March TOTAL 89,000 54,44,750

(50 Marks) Date Quantity (Kgs) Rate including Freight(Rs.) Value of Purchases(Rs.) 3 rd March 18 th March 25 th March TOTAL 89,000 54,44,750 INTER CA MAY 2018 Sub: Costing Topics: Contract Costing, Labour Cost Control, Stock Valuation & Control, Reconciliation, Joint product & by product, Absorption Costing, Overheads. Test Code M18 Branch: