Costing Group 1 Important Questions for IPCC November 2017 (Chapters 10 12)

Size: px

Start display at page:

Download "Costing Group 1 Important Questions for IPCC November 2017 (Chapters 10 12)"

Helena George
6 years ago
Views:

1 Costing Group 1 Important Questions for IPCC November 2017 (Chapters 10 12) CHAPTER 10 STANDARD COSTING 1. The standard material cost for a normal mix of one tonne of product Captain based on: Raw Material Usage (in tonne) Price per tonne A ,000 B ,500 C ,000 During the month of July, 2014, 18 tonnes of product Captain were produced from: Raw Material Consumption Cost per tonne (in tonnes) A ,62,000 B ,65,200 C ,07,000 Required to Calculate: i. Material Cost Variance ii. Material Price Variance iii. Material Usage Variance iv. Material Mix Variance v. Material Yield Variance i. Material Cost Variance = Standard Cost Actual Cost Or = SP SQ AP AQ A = ( 12, tonne 0.74) 1,62,000 = 2,160 (A) B = ( 23, tonne 0.40) 1,65,200 = 4,000 (F) C = ( 18, tonne 0.64) 2,07,000 = 360 (F) = 2,200 (F) ii. Material Price Variance = Actual Quantity (Std. Price Actual Price) Or = AQ SP AQ AP A = (13.12 tonne 12,000) 1,62,000 = 1,57,440-1,62,000 = 4,560 (A) B = (7.1 tonne 23,500) 1,65,200 = 1,66,850-1,65,200 = 1,650 (F) C = (11.5 tonne 18,000) 2,07,000 = 2,07,000-2,07,000 = Nil = 2,910 (A) 1

2 iii. iv. Material Usage Variance = Std. Price (Std. Quantity Actual Quantity) Or = SP SQ SP AQ A = ( 12, tonne 0.74) ( 12, tonne) = 1,59,840 1,57,440 = 2,400 (F) B = ( 23, tonne 0.40) ( 23, tonne) = 1,69,200 1,66,850 = 2,350 (F) C = ( 18, tonne 0.64) ( 18, tonne) = 2,07,360 2,07,000 = 360 (F) = 5,110 (F) Material Mix Variance = Std. Price (Revised Std. Quantity Actual Quantity) Or = SP RSQ SP AQ A = ( 12,000 * tonne * 0.74/1.78) ( 12,000 * tonne) = 1,58, ,57,440 = (F) B= ( 23,500 * tonne * 0.4/1.78) ( 23,500 * 7.1 tonne) = 1,67, ,66,850 = (F) C= ( 18,000 * tonne * 0.64/1.78) ( 18,000 * 11.5 tonne) = 2,05, ,07,000 = 1, (A) = (A) v. Material Yield Variance = Std. Price (Std. Quantity - Revised Std. Quantity) Or = SP SQ SP RSQ A= ( 12,000 * 18 tonne * 0.74) ( 12,000 * tonne * 0.74/1.78) = 1,59,840-1,58,243.6 = 1,596.4 (F) B= ( 23,500 * 18 tonne * 0.40) ( 23,500 * tonne * 0.40/1.78) = 1,69,200-1,67, = 1, (F) C= ( 18,000 * 18 tonne * 0.64 ) ( 18,000 * tonne * 0.64/1.78) = 2,07,360-2,05, = 2, (F) = 5, (F) 2. SP Limited produces a product 'Tempex' which is sold in a 10 Kg. packet. The standard cost card per packet of 'Tempex' are as follows: Particulars Amount (Rs) Direct materials Rs. 45 per kg 450 Direct Labour 8 Rs. 50 per hour 400 Variable Overhead 8 Rs. 10 per hour 80 Fixed Overhead 200 TOTAL 1130 Budgeted output for the third quarter of a year was 10,000 Kg. Actual output is 9,000 Kg. Actual cost for this quarter is as follows: Particulars Amount (Rs) Direct materials 8900 Rs. 46 per kg 4,09,400 Direct Labour 7000 Rs. 52 per hour 3,64,000 Variable Overhead incurred 72,500 Fixed Overhead incurred 1,92,000 2

3 You are required to calculate: i. Material Usage Variance ii. Material Price Variance iii. Material Cost Variance iv. Labour Efficiency Variance v. Labour Rate Variance vi. Labour Cost Variance vii. Variable Overhead Cost Variance viii. Fixed Overhead Cost Variance i. Material Usage Variance = Std. Price (Std. Quantity Actual Quantity) = Rs.45 (9,000 kgs. 8,900 kgs.) = Rs. 4,500 (Favourable) ii. Material Price Variance = Actual Quantity (Std. Price Actual Price) = 8,900 kgs. (Rs.45 Rs.46) = Rs. 8,900 (Adverse) iii. Material Cost Variance = Std. Material Cost Actual Material Cost = (SQ SP) (AQ AP) = (9,000 kgs. Rs. 45) (8,900 kgs. Rs. 46) = Rs. 4,05,000 Rs. 4,09,400 = Rs. 4,400 (Adverse) iv. Labour Efficiency Variance = Std. Rate (Std. Hours Actual Hours) = Rs. 50 [(9000/10)* 8 hours 7000 hours] = Rs. 50 (7200 hours 7000 hours) = Rs. 10,000 (Favourable) v. Labour Rate Variance = Actual Hours (Std. Rate Actual Rate) = 7,000 hrs. (Rs. 50 Rs. 52) = Rs. 14,000 (Adverse) vi. vii. viii. Labour Cost Variance = Std. Labour Cost Actual Labour Cost = (SH SR) (AH AR) = (7,200 hrs. Rs. 50) (7,000 hrs. Rs. 52) = Rs. 3,60,000 Rs. 3,64,000 = Rs. 4,000 (Adverse) Variable Cost Variance = Std. Variable Cost Actual Variable Cost = (7,200 hrs. Rs. 10) Rs. 72,500 = Rs. 500 (Adverse) Fixed Overhead Cost Variance = Absorbed Fixed Overhead Actual Fixed Overhead = [(Rs. 200/ 10 Kgs ) * 9,000Kgs]- Rs. 1,92, 000 = Rs. 1,80,000 Rs. 1,92,000 = Rs. 12,000 (Adverse) CHAPTER 11 MARGINAL COSTING 1. Maxim Ltd. manufactures a product N-joy. In the month of August 2014, 14,000 units of the product N-joy were sold, the details are as under: 3

4 Sale Revenue 2,52,000 Direct Material 1,12,000 Direct Labour 49,000 Variable Overheads 35,000 Fixed Overheads 28,000 A forecast for the month of September 2014 has been carried out by the General manger of Maxim Ltd. As per the forecast, price of direct material and variable overhead will be increased by 10% and 5% respectively. Required to calculate: (i) Number of units to be sold to maintain the same quantum of profit that made in August (ii) Margin of safety in the month of August 2014 and September Calculation of Profit made in the month of August 2014 by selling 14,000 units. Particulars Amount per unit (Rs) Amount (Rs) (B) (A) = (B) / Sales Revenue 18 2,52,000 Less: Variable costs Direct Material (8) (1,12,000) Direct Labour (3.5) (49,000) Variable Overheads (2.5) (35,000) Contribution Less: Fixed Overhead (2) (28,000) Profit 2 28,000 (i) To maintain the same amount of profit i.e. Rs.28,000 in September 2014 also, the company needs to maintain a contribution of Rs.56,000. Let, number of units to be sold in September 2014 is x, then the contribution will be 18 x [(8 1.10) ( )] x = 56, x ( ) x = 56, x = 56,000 x=18, units or 18,212 units. (ii) Margin of Safety Particulars August 2014 September 2014 Profit Rs. 28,000 Rs. 28,000 P/V Ratio (Contribution/Sales) *100 4/18 *100 = 22.22% 3.075/18 * 100 = 17.08% WN-1 Margin of safety Rs. 1,26,000 Rs. 1,63, (Profit/PV Ratio * 100) (28,000/22.22%) (28,000/17.08%) WN-1: Calculation of contribution in the month of September, 2014 Particulars Amount (Rs per unit) Selling price per unit 18 4

5 Less: Variable costs Direct Material (8 *1.1) (8.8) Direct Labour (3.5) Variable Overheads (2.5 * 1.05) (2.625) Contribution Arnav Ltd. manufacture and sales its product R-9. The following figures have been collected from cost records of last year for the product R-9: Elements of Cost Variable Cost portion Fixed Cost Direct Material 30% of Cost of Goods Sold NIL Direct Labour 15% of Cost of Goods Sold NIL Factory Overhead 10% of Cost of Goods Sold Rs. 2,30,000 General & Administration 2% of Cost of Goods Sold Rs. 71,000 Overhead Selling & Distribution Overhead 4% of Cost of Sales Rs. 68,000 Last Year 5,000 units were sold at 185 per unit. From the given data find the followings: (a) Break-even Sales (in rupees) (b) Profit earned during last year (c) Margin of safety (in %) (d) Profit if the sales were 10% less than the actual sales SOLUTION Working Notes: (i) Calculation of Cost of Goods Sold (COGS): COGS = {(DM- 0.3 COGS) + (DL COGS) + (FOH COGS + 2,30,000) + (G&AOH COGS + 71,000)} Or COGS = 0.57 COGS + 3,01,000 Or COGS = 3,01,000 / 0.43 = 7,00,000 (ii) Calculation of Cost of Sales (COS): COS = COGS + (S&DOH COS + 68,000) Or COS = 7,00,000 + (0.04 COS + 68,000) Or COS = 7,68,000 / 0.96 = 8,00,000 (iii) Calculation of Variable Costs: Element of Cost Calculation Amount Direct Material 0.3 7,00,000 2,10,000 Direct Labour ,00,000 1,05,000 Factory Overhead ,00,000 70,000 General & Administration ,00,000 14,000 5

6 OH Selling & Distribution OH ,00,000 32,000 TOTAL 4,31,000 (iv) Calculation of total Fixed Costs: Factory Overhead- 2,30,000 General & Administration OH- 71,000 Selling & Distribution OH 68,000 TOTAL 3,69,000 (v) Calculation of P/V Ratio: P/V Ratio = (Contribution / Sales) * 100 = [(Sales Variable Costs) / Sales ] *100 = [ [( 185 * 5,000units) - 4,31,000] / ( 185 * 5,000) ] * 100 = 53.41% (a) Break-Even Sales = Fixed Costs / P / V Ratio = 3,69,000 / 53.41% = 6,90,882 (b) Profit earned during the last year = (Sales Total Variable Costs) Total Fixed Costs = ( 9,25,000-4,31,000) - 3,69,000 = 1,25,000 (c) Margin of Safety (%) = [(Sales Break even sales) / Sales] * 100 = [( 9,25,000-6,90,882)] / 9,25,000 ] * 100 = 25.31% (d) Profit, if the sales were 10% less than the actual sales: Profit = 90% ( 9,25,000-4,31,000) - 3,69,000 = 4,44,600-3,69,000 = 75,600 CHAPTER 12 BUDGETARY CONTROL 1. Little Angel School has a total of 150 consisting of 5 sections with 30 per section. The school plans for a picnic around city during the week-end to places such as the zoo, amusement park, planetarium etc. A Private transport operator has come forward to lease the buses for taking the. Each bus will have a maximum capacity of 50 (excluding 2 seats reserved for the teachers accompanying the ). The school will employ 2 teachers for each bus, paying them an allowance of 50 per teacher. It will also lease out the required number of buses. The following are the other cost estimtes: Particulars Cost per student ( ) Particulars Cost ( ) Breakfast 5 Rent 650 per bus Lunch 10 Special Permit fee 50 per bus 6

7 Tea 3 Entrance fee at Planetarium Entrance fee at zoo 2 Prizes to for games No costs are incurred in respect of accompanying teachers (except the allowance of 50 per teacher) Required: a. Prepare a flexible budget estimating the total cost for levels of 30, 60, 90, 120 and 150. Each item of cost is to be indicated separately showing the variable, semi-variable and fixed costs. b. Compare the average cost per student at these levels c. Give your conclusion regarding the break-even point of, if the school proposes to collect 45 per student. Flexible budget for different levels in Particulars 30 A) Variable Costs Breakfast Lunch Tea Entrance Fee , , TOTAL (A) 600 1,200 1,800 2,400 3,000 Variable cost per student B) Semi-Variable Costs Buses Required Bus Rent Special Permit Fee Allowance for teachers , , , , TOTAL (B) 800 1,600 1,600 2,400 2,400 C) Fixed Costs Entrance fee to Planetarium Prizes for games TOTAL (C) TOTAL COST (A)+(B)+(C) 1,900 3, 3,900 5, 5,900 Average Cost per student Computation of break-even point of Contribution per student = Collection per student ( 45) Variable cost per student ( 20) = 25 7

8 Since, the breakup of semi-variable costs is not provided, semi variable costs in entirety are considered in calculating the break-even point. The blocks can be considered as follows: Particulars Upto Fixed cost + semivariable 1, 2,100 2,900 cost (A) Contribution per unit (B) BEP (A) / (B) A Factory is currently running at 50% capacity and produces 5,000 units at a cost of Rs. 900 per unit as per the details given below: Particulars Amount (Rs) Material 500 Labour 150 Factory Overheads Administrative Overheads 150 (Rs. 60 fixed) 100 (Rs. 50 fixed) The current selling price is Rs per unit. At 70% working, material cost per unit increases by 2% and selling price per unit falls by 2%. Estimate Profits of the Factory at 70% working by preparing a flexible budget. WN-1: Calculation of number of units to be produces at 70% working capacity Units produced at 50% working capacity 5000 units (GIVEN) At 70% capacity = (5000*70%)/ 50% = 7000 units FLEXIBLE BUDGET FOR 70% WORKING CAPACITY PARTICULARS 50% Capacity (5000 units) Amount in Rs. 70% capacity (7000 units) Amount in Rs. Material 25,00,000 35,70,000 (5000*500) (7000*500*1.02) Labour 7,50,000 10,50,000 (5000*150) (7000*150) Factory Overheads Variable 4,50,000 6,30,000 (5000*90) (7000*90) Fixed 3,00,000 3,00,000 (5000*60) (5000*60) Administrative Overheads Variable 2,50,000 3,50,000 (5000*50) (7000*50) 8

9 Fixed 2,50,000 2,50,000 (5000*50) (5000*50) Total Cost (A) 45,00,000 61,50,000 Total Sales Revenue (B) 50,00,000 68,60,000 (5000*1000) (7000*1000*0.98) Total Profit (B) (A) 5,00,000 7,10,000 9

SAMVIT ACADEMY IPCC MOCK EXAM

SAMVIT ACADEMY IPCC MOCK EXAM SUGGESTED ANSWERS - Group 1 Costing (Code FUN) Disclaimer (Read carefully) The answers given below are prepared by the faculty of Samvit Academy as per their views and experience. The working notes, notes