Q.1 a State whether True or False: [Any 8] 1 Functional Budget is a Budget which is established for use over a short period of time. FALSE 2 Total Fixed cost remains constant irrespective of change in production activity. TRUE 3 Semi-variable cost varies in direct proportion to the output. FALSE 4 In absorption costing, the prices are fixed in such a manner that will cover total cost TRUE i.e. Fixed Costs as well as Variable Costs. 5 Fixed overhead calendar variance arises due to the change in the number of working days. TRUE 6 A Sales budget is prepared by the salesmen. FALSE 7 Fixed budget is prepared for different levels activities. FALSE 8 In the break-even chart, Variable Costs Line will make a 45 0 angle to the X- axis. TRUE 9 In Absorption Costing the Fixed Costs are charged to products and hence included in TRUE valuation of the closing stock. 10 Idle time variance is always favorable FALSE b Multiple Choice Questions: 1 The scarce factor of production is known as: d a) Key factor b) Limiting factor c) Critical factor d) All of the above 2 Fixed cost per unit decreases when a a) ion volume increases. b) ion volume decreases. c) Variable cost per unit decreases. d) Prime cost per unit decreases. 3 Capital expenditure budget is a a) A budget for long term investment b) A budget for short term investment c) A budget for future expenditure d) A budget for personal expenditure 4 Zero-based budgeting implies that b a. Past actual are absolutely irrelevant b. Each process or expenditure has to be examined afresh c. Zero adjustment in past actual is the right way of budgeting
d. While carrying out the budget exercise, the data on past actual or past budgets should not be given 5 A company has sales of ` 2,00,000; P/V Ratio is 20% and fixed cost is ` 15,000; the profit will be a a) ` 25,000 b) ` 20,000 c) ` 35,000 d) ` 40,000 6 Fixed overhead efficiency variance is equal to a. Actual fixed overhead rate per hour *(Actual hours-budgeted hours) d b. Actual fixed overhead rate per hour *(Actual hours-standard hours for actual production) c. Standard fixed overhead rate per hour *(Actual hours-standard hours for standard production) d. Standard fixed overhead rate per hour * (Actual hours-standard hours for actual production ) 7 Which of the following is a purpose of standard costing? c a. To determine profit at different levels b. To determine break even production level c. To control costs d. To allocate cost with more accuracy 8 In a decision situation which of the following cost is not likely to contain a variable cost component. c a. Material b. Labour c. Overheads d. Direct Expenses 9 A cost incurred in the past and hence irrelevant for current decisions making is c a. Fixed cost b. Direct cost c. Indirect cost d. Mixed cost 10 If inventory levels have increased during the period, the profit calculated using marginal costing when compared with that calculated using absorption costing will be a. Higher b. Lower c. Equal d. Impossible to answer without further information b
Q.2 Statement Showing Contribution per Direct labour Hour particulars A B c D ` ` ` ` a. Selling Price per unit 90 71 100 86 b. Variable Cost per unit: In absorption costing, the prices are fixed in su 30 20 40 40 i.e. Fixed Costs as well as Variable Costs. Direct Labour Cost 24 18 30 12 Variable Overheads 12 9 15 6 Total (b) 66 47 85 58 c. Contribution per unit (a-b) 24 24 15 28 d. In Absorption Costing the Fixed Costs are charg 4 3 5 2 e. valuation of the closing stock. 6 8 3 14 f Ranking III II IV I a. The maximum direct labour hours are 50,000(250*25 days*8 hours per day) and would be utilised in the following order to yield maximum profit: -mix Direct Labour Total Labour Hours per unit Hours D (Maximum Demand) 8,250 2 16,500 B (Maximum Demnad) 5,000 3 15,000 A (working note) 4,625 4 18,500 Total Hours 50,000 Calculation of Profit No. of units Contribution per units Total A 4,625 24 111,000 B 5,000 24 120,000 D 8,250 28 231,000 Total Contribution 462,000 Less: Fixed Overheads (200,000) Profit 262,000 Working Note: ion units of A Balance Hours for ion of A = 50,000-16,500 (D) - 15,000 (B) = 18,500 Therefor Prodcution of A = Balance Hours Hours required per unit = 18,500/4 = 4,625 units
Q.2 Statement Showing Contribution A B particulars ` ` a. Selling Price per unit 100 120 b. Variable Cost per unit: In absorption costing, the prices are fixed in su 10 15 i.e. Fixed Costs as well as Variable Costs. Direct Labour Cost 15 10 Direct Expenses 5 6 Variable Overheads 15 20 Total (b) 45 51 c. Contribution Per unit 55 69 A B Total Sales potential in Units is Limited Decision Crieteria: Contribution per unit Contribution per unit (a-b) 55 69 Rank II I Total Sales potential in Value is Limited Decision Crieteria: P/V Ratio Contribution per unit (a-b) 55 69 Selling Price 100 120 P/V Ratio 55% 57.50% Rank II I C Labour Hours is in Short Supply Decision Crieteria: Contribution per hour Contribution per unit (a-b) 55 69 Hours per unit 3 2 Contribution per Hour 18.33 34.50 Rank II I D Raw Material is in Short Supply Decision Crieteria: Contribution per kg Contribution per unit (a-b) 55 69 Kgs per unit 2 3 Contribution per Hour 27.50 23.00 Rank I II
a. The maximum Raw Material is 10,000 kg and would be utilised in the following order to yield maximum profit: -mix Total Labour Kgs per unit Hours A (Maximum Demand) 3,500 2 7,000 B (Balance 3000 kg / 3 kg per unit) 1,000 3 3,000 Total Kgs 10,000 Calculation of Profit No. of units Contribution per units Total A 3,500 55 192,500 B 1,000 69 69,000 Total Contribution 261,500
Q.3. Sales Budget Quantity and Value A B C Quantity 1,000 2,000 1,500 Selling Price 100 120 140 Sales Value 240,000 210,000 (in units) A B C Sales 1,000 2,000 1,500 Add: Closing Stock 1,100 1,650 550 Less: Opening Stock (1,000) (1,500) (500) ion 1,100 2,150 1,550 Raw Material M1 M2 M3 Requirement For A For 1100 uts 4,400 2,200 - For B For 2150 uts 6,450 6,450 4,300 For C For 1550 uts 3,100 1,550 1,550 Total Requirement 13,950 10,200 5,850 Add: Closing Stock 31,200 24,000 14,400 Less: Opening Stock (26,000) (20,000) (12,000) Purchases (units) 19,150 14,200 8,250 Cost per unit 6 6 9 Purchase Cost (`.) 114,900 85,200 74,250 Total Purchase (`.) 274,350
Q.3 Sales Budget (amount in `) Particulars Kent Essex Sussex Total Sales Quantities 1,000 2,000 500 Unit Selling Price 50 75 100 Sales Value 50,000 150,000 50,000 250,000 Pruduction Budget ( in Units) Particulars Kent Essex Sussex Sales Qunatities 1,000 2,000 500 (+) Closing Stock 100 200 50 (-) Opening stock (200) (200) (100) ion Quantities 900 2,000 450 Materials Usage Budget Leather Wire ion per unit of Per unit of Quatities Total Total Required (mt.) (mt.) (k.g.) (k.g.) Kent 900 5 4,500 1.2 1,080 Essex 2,000 6 12,000 1.3 2,600 Sussex 450 7 3,150 1.4 630 Total Leather 19,650 Total wire 4,310 Materials Purchases Budget particulars Leathrer Wire (mt.) (kg.) Usage Quantities 19,650 4,310 (+)Closing Stock 4,100 900 (-)Opening Stock (1,000) (500) Purchase Quantities 22,750 4,710 Price per unit ` 0.10 ` 2 Value of Purchases 2,275 9,420 Total 11,695
Q.4 A Calculation of Labour Variance SH SR Amt RH SR Amt AH AR Amt 10 SK 10,000 3 30,000 11,000 3 33,000 9,000 4 36,000 8 SS 8,000 1.5 12,000 8,800 1.5 13,200 8,400 1.5 12,600 16 US 16,000 1 16,000 17,600 1 17,600 20,000 0.9 18,000 34,000 58,000 37,400 63,800 37,400 66,600 LCV LRV LEV LYV LMV SK (6,000) (9,000) 3,000 (3,000) 6,000 SS (600) - (600) (1,200) 600 US In Absor 2,000 (4,000) (1,600) (2,400) Total valuation (7,000) (1,600) (5,800) 4,200 Q. 4 B Calculation of Sales Variance Units SR Amt AH SR Amt Sales 10,000 3 30,000 5,000 3 15,000 8000 2.5 20,000 35,000 Sales Value Variance 5,000 F Sales Rate Variance 4,000 A Sales Qty Variance 9,000 F
Q.4 A Std. Particulars Std-4,500 units Actual-4,500 Units 5,000 units SH SP Amt AH AR Amt 10,000 Hrs. Variable Overhead 9,000 1 9,000 9,900 0.90 8,910 Variable Overhead Cost Variance 90 Variable Overhead Expenditure Variance 990 Variable Overhead Efficiency variance (900) Particulars Std-4,500 units Budget -5,000 Units Actual-4,500 Units SH SP Amt BH AR Amt AH AR Amt Fixed Overhead 9,000 3 27,000 10,000 3.00 30,000 9,900 3.10 30,690 Fixed Overhead Cost Variance (3,690) Fixed Overhead Expenditure Variance (690) Fixed Overhead Volume variance (3,000) Fixed Overhead Efficiency variance (2,700) Fixed Overhead Capacity variance (300)
Q.5 60% 100% 100% 100% 80% Particulars A A B Merge Merge Sales 12.00 20.00 30.00 50.00 40.00 Less Variable Cost 9.00 15.00 22.00 37.00 29.60 Contribution 3.00 5.00 8.00 13.00 10.40 Less Fixed Cost 2.50 2.50 4.00 6.50 6.50 Profit 0.50 2.50 4.00 6.50 3.90 P/v Ratio 26% 1 BEP of Merge Plant 25 1 Capacity of Merge Plant 25/50*100 50% 1 at break even Required Sales = FC + Req Profit 6.5 + 6 48.08 Lacs P/v Ratio 26%
Q.5 OR Statement of Existing Profitability 60,000 uts Particulars Rs. Per Unit Sales 858,000 14.30 (-) Variable Cost Direct Material (210,000) (3.50) Direct Wages (75,000) (1.25) Factory Overhead (187,500) (3.125) Sales Overhead (12,000) (0.200) 373,500 6.225 (-) Fixed Cost Factory Overhead (187,500) (3.125) Sales OH (36,000) (0.600) Profit 150,000 2.50 Revised Cost a FOH FC 1,87,500 + 10% 206,250 b Sales FC 36,000 + 10% 39,600 c Direct Wages 1.25 + 8% 1.35 per unit d Direct Material 3.5+ 10% 3.71 per unit Statement of Revised Profitability of 60000 uts 60,000 uts Particulars Rs. Per Unit Sales 858,000 14.30 (-) Variable Cost Direct Material (222,600) (3.71) Direct Wages (81,000) (1.35) Factory Overhead (187,500) (3.125) Sales Overhead (12,000) (0.200) 354,900 5.915 (-) Fixed Cost Factory Overhead (206,250) Sales OH (39,600) Profit 109,050 Total Profit requeired 167,300 Profit from 60,000 units 109,050 Profit required from 20000 units 58,250 Profit per unit 58250/20000 2.9125 Revised Variable Cost per unit 5.9150 Miminum Offer Price for 20,000 units 8.8275