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CEC case study of 20 marks. There will be 10 questions per group and each question will carry 2 marks. That means 10 * 2 = 20marks CEC case study declaration date 13th of March 12, 2013 CEC case study submission date 30th of March 12, 2013, After last date no case study will be accepted. They will be given zero marks in their assignment submission of 10 marks. Viva of the above question will be declared later on.

Questions for group number 1

1. Samsnit Ltd. uses process cost system to manufacture a special type of kit for the textile industry. The company has furnished the following information pertaining to operations for the month of June 2004: Particulars Opening work-in-process (June 01, 2004) Introduced in production during June2004 Closing work-in-process (June 30, 2004) Units 650 7,800 580

There is no loss in the manufacturing process. The opening inventory was 80% complete for materials and 60% complete for conversion costs. The closing inventory was 75% complete for material and 65% complete for conversion costs. Costs pertaining to the month of June 2004 are as follows: Opening work in process: Materials Conversion During the month: Materials Conversion Rs.4,98,240 Rs.5,49,990 Rs. 19,850 Rs. 21,250

The total cost of closing work-in-process on June30, 2004, using FIFO method, 2. Mani Ltd. has 3 identical machines manned by 4 operators. The operators are fully engaged on machines. The total original cost of these 3 machines is Rs.12,00,000. The company has furnished the following information pertaining to operations for 1st quarter ending June 30, 2004: Normal available hours per month per operator Absenteeism (without pay) Leave (with pay) Normal idle time (unavoidable) Average rate of wages per hour Estimated production bonus 500 hours 50 hours 70 hours 10 hours Rs.20 8% on wages

Value of power consumed Supervision and indirect labor Electricity and lighting Repairs and maintenance per quarter Depreciation per annum Miscellaneous expenses per annum General management expenses per annum

Rs.28,500 Rs.42,400 Rs.19,600 1% on value of machines 10% on original cost Rs.48,000 Rs.80,000

The comprehensive machine hour rate for the machine shop for the quarter ending June 30, 2003 is 3. Plastic Furniture Ltd. manufactures plastic TV stands. The company is working at 80% capacity level, which represents 24,000 units per month. The cost break-up per TV stands is as under: Materials Labor Rs. 60 Rs. 80 (50% fixed) Rs.140

Overheads

The selling price is Rs.360 per unit. The company is planning to produce at 90% capacity level. At 90% capacity level the selling price falls by Rs.20 accompanied by 5% fall in the price of materials. The break-even point in units and profit at 90% level of capacity of the company are

4. XY Ltd. wants to buy a new machine to replace the old one, which is having frequent
breakdowns. The company received offers for two models M1 and M2. The details of the two models are as under: Particulars Installed capacity in units Fixed overhead expenses per annum Estimated profit at the above capacity Model M1 25,000 Rs.6,00,000 Rs.4,00,000 Model M2 25,000 Rs.2,50,000 Rs.2,50,000

The sale price per unit of product manufactured by these types of machines is Rs.80. The level of sales at which both the models will earn the same profit 5. Mohan Constructions undertook a contract for construction of a large complex in Secunderabad. The construction work commenced on April 01, 2003 and the following data are available for the year ended March 31, 2004:

Particulars Total contract price Work certified Progress payment received Material issued to site Direct wages paid Materials returned from site Plant hire charges Wage related costs Direct expenses incurred Work not certified Materials at site Accrued wages

Rs. 1,25,00,000 79,00,000 62,50,000 40,80,000 16,50,000 51,500 1,25,000 99,500 63,500 11,11,500 40,500 34,000

The contractors own a plant which originally cost Rs.12,00,000 and has been continuously in use in this contract throughout the year. The salvage value of the plant after 10 years is nil. The company uses the straight-line method of depreciation. The total of work-in-process and plant at site to be shown in the balance sheet as on March 31, 2004 is 6. Thaparia Ltd., using process costing, manufactures a single product, which passes through two processes process 1 and process 2, the output of process 1 becoming the input to process 2. The company has furnished the following information relating to the product for the month of June 2004: I. Raw material issued to process 1 was 4,500 units at a cost of Rs.11.80 per unit. II. There was no opening or closing work-in-progress but opening and closing stocks of finished goods were Rs.15,130 and Rs.14,500 respectively.

III. Normal losses and abnormal losses are defective units having a scrap value and cash is received at the end of the period for all such units. Other information: Particulars Normal loss as a percentage of input Output in units Scrap value per unit Additional components introduced (Rs.) (Rs.) Process 1 10% 4,200 3.80 1,800 Process 2 5% 3,970 2.90 1,150

Direct wages incurred Direct expenses incurred Production overhead as a % of direct wages

(Rs.) (Rs.)

6,500 3,235 60

7,250 3,799 40

The cost of goods sold of the product for the month of June 2004 is 7. A product, which uses 100 tons as input per month, passes through two processes Process 1 and Process 2. The details of cost of process 1 for the month of June 2004 are as follows: Process 1 Direct material cost Direct labor cost Overhead costs Cost per ton (Rs.) of input 1,550 1,200 1,349

The total loss in process 1 is 2% of input and the scrap is 6% of the input with a value of Rs.850 per ton. The material is transferred to process 2 at cost. The direct labor cost of Process 2 is Rs.1,250 per ton of input. The overhead is 60% of direct labor cost. The scrap at process 2 is 10% of input with a value of Rs.850 per ton. The cost per unit of finished goods in process 2 is 8. Shiv Sankar Ltd. manufactures four products A, B, C & D, which emerge from a particular process of operation. The total cost of input for the period ended March 31, 2004 is Rs.4,80,000. The details of output, additional cost after split-off point and sales value of the products are as follows: Product s A B C D Output (Kg.) 12,000 6,000 8,000 4,000 Additional processing cost after split-off point (Rs.) 22,000 20,000 4,000 18,000 Sales value after further process (Rs.) 2,40,000 1,44,000 1,44,000 80,000

If the products are sold at split-off point without further processing, the sales value would have been: A B C Rs.2,16,000 Rs.1,26,000 Rs.1,40,000

Rs. 56,000

The maximum amount of profit of the company from the four products is

9. Kappa Ltd. uses a process cost system to manufacture product - K. The company has furnished the following information pertaining to operation for the month of June 2004: Particulars Opening work-in-process inventory, June 1, 2004 Unit introduced during June 2004 Unit completed during June 2004 Closing work-in-process inventory, June 30, 2004 Units 5,500 29,000 32,500 2,000

The opening inventory was 60% complete for materials and 50% complete for conversion costs. The closing inventory was 80% complete for materials and 60% complete for conversion costs. Costs pertaining to the process for the month of June 2004 were as follows: I) Opening inventory costs are: Materials Rs.22,500, Labor cost Rs.16,200 Factory Overhead Rs.7,500 II) Costs incurred during the month: Materials used Rs.1,65,000, Labor cost Rs.1,10,000 Factory overhead Rs.62,500 Using the weighted average method, the equivalent unit cost of material for the month of June2004 is 10. Consider the following data pertaining to inventories of CBX Ltd. for the month of June 2004: Particulars Opening inventory (Rs.) Raw materials Work-in-process Finished goods Other information: 16,330 9,320 4,300 Closing inventory (Rs.) 18,540 6,520 4,440

i. ii.

Raw materials used Total manufacturing costs charged to product (it includes raw materials, direct labor and factory overheads applied at the rate of 50% of direct labor cost)

Rs.78,390

Rs. 2,85,960 Rs.3,25,600 Rs.6,300

iii. Cost of goods available for sale iv. Selling and general expenses The costs of raw materials purchased and the direct labor are

Group number 2
11. The budgeted working conditions of a cost center of Super T Ltd. are as follows: Normal working per week No. of machines Normal weekly loss of hours on maintenance etc No. of weeks worked per year Estimated annual overheads Estimated wage rate Actual results in respect of a 4 week period are: Wages incurred Overheads incurred Machines used Rs.23,300 1,200 hours Rs.17,000 8 42 hours

4 hours per machine 50 Rs.3,04,000 Rs12 per hour

The amount of under or over absorption of wages and overheads respectively are 12. Moonstar Ltd. had the following inventories at the beginning and end of the month of June 2004: Particulars Finished goods Work-in-process Direct materials June 1, 2004 (Rs.) 85,000 72,000 90,000 June 30, 2004 (Rs.) 81,000 63,500 82,500

The following additional manufacturing data were available for the month of June 2004: Particulars Direct materials purchased Purchase returns and allowances (Rs.) 2,93,400 2,600

Transportation Direct labor Actual factory overhead

2,900 2,68,000 1,65,000

The company applies factory overhead at a rate of 40% of direct labor cost, and any over applied or under applied factory overhead is deferred until the end of the year 2004-05. The manufacturing cost of the company for the month of June 2004 was

13. Bismat Ltd. manufactures and sells a special type of product K. Presently, the company manufactures 8,000 units, which is 80% of the potential capacity. The present cost structure per unit of the product K is given below: Direct materials Direct labor Factory overhead Selling overhead Rs.200 Rs.150 Rs. 100 (40% fixed) Rs. 80 (50% fixed)

The company estimates to produce the same number of units of the product during the following year and anticipates that fixed cost will go up by 10% while the rates of direct materials and direct labor will increase by 8% and 6% respectively. The company has no intention to increase its present sale price of Rs.580 per unit. Under these circumstances, the company obtained an offer to supply 1,000 units of the product to a special customer. The minimum sale price per unit of additional order of 1,000 units to be quoted to the customer if the company desires to earn an overall profit of Rs.2,50,000 is 14. Santaram Ltd. manufactures a single product at the operated capacity of 20,000 units while the normal capacity of the plant is 25,000 units per annum. The company has estimated 20% profit on sales realization and furnished the following budgeted information: Particulars Fixed overheads Variable overheads Semi-variable overheads Sales realization 25,000 units (Rs.) 2,00,000 4,00,000 2,50,000 15,00,000 20,000 units (Rs.) 2,00,000 3,20,000 2,20,000 12,00,000

The company has received an order from a customer for a quantity equivalent to 10% of the normal capacity. It is noticed that prime cost per unit of product is constant. If the company desires to maintain the same percentage of profit on selling price, the minimum price per unit to be quoted for new order is 15. Jyothi Ltd. is attempting to compute costs for its three products for pricing purposes. The company has annual fixed manufacturing costs of Rs.5,32,000. The

variable costs of the companys products are as follows: Product A B C Variable costs of manufacture (per unit) (Rs.) 20 30 40

The company expects to produce and sell 5,000 units of A, 6,000 units of B, and 8,000 units of C annually. The policy of the company is to add a markup of 25% to each products total manufacturing costs to compute the tentative selling price. The selling prices of product A, B and C, if fixed costs are allocated on the basis of number of units produced, are 16. Motilal Ltd. manufactures and sells a single product. The estimated activity of the company for the month of June 2004 is as follows: Sales Gross profit on sales Increase in inventory during the month Increase in sundry debtors Total selling and administrative expenses Depreciation expenses which is included in fixed selling and administrative expenses Rs.8,50,000 30% Rs.25,800 Rs.19,500 Rs.50,000 + 2.5% on sales Rs.20,000

The net cash surplus or deficit for the month of June 2004 is 17. Shira Ltd. pays commission to its salesmen in the month the company receives cash for sales, which is equal to 4% of the cash inflows. The company has budgeted sales of Rs.6,50,000 for July 2004, Rs.7,00,000 for August 2004 and Rs.7,50,000 for September 2004. 50% of the sales are on credit. Experience indicates that 70% of the budgeted credit sales will be collected in the month following the sales. 25% are expected to be realized in the second month following the month of sales and remaining 5% will be non-recoverable. The total amount of sales commission for the month of September 2004 is 18. Tripty Ltd. has a policy of maintaining a minimum cash balance of Rs.50,000 at the end of each month. Any deficit below Rs.50,000 will be financed through bank borrowings and any surplus will be utlised to repay the outstanding bank borrowing and the balance will be invested in short-term securities. For this purpose, the company has an agreement with the bank to borrow in multiples of Rs.5,000 whenever a need arises subject to a maximum of Rs.60,000. The rate of interest is

12% per annum payable monthly on the amount borrowed. 50% of the sales are on credit and is expected to be collected in the month following the month of sales. 25% of the purchases are on credit and will be paid in the month following the month of purchases. The salaries and other expenses are to be paid in the month for which they relate. The following is the budgeted information for the quarter ending September 2004: Particulars July 2004 Rs. August 2004 Rs. 30,000 30,000 10,000 September 2004 Rs. 40,000 30,000 10,000

Sales Purchases Salaries Manufacturing and other administrative expenses

20,000 20,000 10,000

10,000

10,000

10,000

If the closing cash balance as on July 31, 2004 is Rs.50,000, the cash balance as on October 01, 2004 before borrowing will be 19. XY Ltd. has prepared the following budget for the year 2004-05: Particulars Direct materials Direct labor Factory overheads Variable Fixed Selling and administrative overheads Variable Fixed Profit Total Percentage to total sales(Rs.) 40 20 10 8 12 06 04 100

After evaluating the first quarter performance, it was observed that the company would be able to achieve only 80% of the original budgeted sales. The revised budgeted sales as envisaged above was estimated at Rs.2,400 lakh after taking into account a reduction in selling price by 20%.The original budgeted sales at original price is

20. Sreyi Ltd. has furnished the following data relating to a product for the year 2003 04: Units produced Direct materials (Rs.) Direct labor Manufacturing overheads (Rs.) Selling and administrative overheads (Rs.) (Rs.) 4,000 5,20,000 3,40,000 2,00,000 (25% fixed) 1,50,000 (40% fixed)

If the company manufactures 4,400 units in the next year, the total cost per unit would be

Group number 3
21. Leo Ltd. manufactures toy cats with moving parts and a built-in voice box. Projected sales for 5 months are as follows: Month July 2004 August 2004 September 2004 October 2004 November 2004 Projected sales in units 3,500 3,900 4,200 4,500 4,800

Each toy requires direct materials from a supplier at Rs.80 for moving parts. Voice boxes are purchased from another supplier at Rs.20 per toy. Labor cost is Rs.30 per toy and variable overhead cost is Rs.5 per toy. Fixed manufacturing overhead applicable to production is Rs.51,000 per month. It is the practice of the company to manufacture an output in a month which is equivalent to 1.2 times of the following months sales. The production budget for the month of August 2004 and the production cost budget for the month of September 2004 are 22. The flexible budget for the month of July 2004 was for 12,000 units with direct material cost at Rs.25 per unit. Direct labor was budgeted at 45 minutes per unit for a total cost of Rs.1,44,000. Actual output for the month was 10,800 units with Rs.2,70,000 in direct material and Rs.1,30,000 in direct labor expenses. The direct labor standard of 45 minutes was maintained throughout the month. The variance analysis of the performance for the month of July 2004 would show a(n)

23. Avoy Ltd. manufactures two products X and Y, using same facilities and similar process. The company has furnished the following information pertaining to two products for the year ending March 31, 2004. Particulars Direct labor hours per unit Machine hours per unit Number of set ups during the period Number of orders handled during the period Production units Product X 4 5 22 16 6,000 Product Y 2.5 4 18 19 4,340

Total production overhead costs for the period are as follows: Particulars Machine activity costs Set-ups costs Order handling costs Rs. 2,40,000 56,000 52,500 3,48,500 The absorption of total production overheads of both the products on the basis of a suitable cost driver, using Activity Based Costing method, is Product X (Rs.) Product Y (Rs.)

24. Acer Ltd. manufactures 6,000 units of Product PT at a cost of Rs.150 per unit. Presently, the company is utilizing 60% of the total capacity. The information pertaining to cost per unit of the product is as follows: Material Labor Factory overheads Administrative overheads Other information: i. ii. The current selling price of the product is Rs.200 per unit. At 70% capacity level by 2%. iii. At 90% capacity level Material cost per unit will increase by 5% and Material cost per unit will increase by 2% and current selling price per unit will reduce Rs.80 Rs.20 Rs.30 (40% fixed)

Rs.20 (50% fixed)

current by 5%.

selling price per unit will reduce

The profit per unit of the product of the company at 70% and 90% capacity levels will be 25. Sri Ram Ltd. uses a Standard costing system. The following details have been extracted from the standard cost card in respect of direct materials for the month of June 2004. Material usage per unit Budgeted production 5 kg at the rate of Rs.15 per kg 1000 units

The company has furnished the following data relating to direct material for the month of June 2004: Materials purchased Materials issued to production Actual production 5,400 kg at a price of Rs.86,400 4,670 kgs 900 units

The material price and material usage variances are 26. Mina Processors Ltd. produces a commodity by blending two raw materials A and B. The following are the details regarding the raw materials: Material A B Standard mix 60% 40% Standard price per kg. Rs. 8 Rs.10

The standard process loss is 10%. During the month of June 2004, the company produced 5,000 kg. of finished product. The position of stock and purchases for the month of June 2004 is as under: Material Stock as on June 01, 2004 Kg. 120 80 Stock as on June 30, 2004 Kg. Purchases during June 2004 Kg. 50 30 3,000 2,500 Rs. 24,900 24,000

A B

The material yield variance of the company is 27. SD Ltd. uses a standard absorption costing system. The following data have been extracted from its budget for the month of June 2004: Fixed production overhead cost Production Rs.1,20,000 12,000 units

In June 2004, the fixed production overhead cost was under absorbed by Rs.10,500 and the fixed production overhead expenditure variance was Rs.2,800 (Adverse).The actual number of units produced was 28. VK Ltd. has furnished the following data pertaining to a product for the month of June 2004: Particulars Production Labor hours Fixed overheads (Rs.) Number of working days The fixed overhead volume variance is 29. Sri Durga Pump Ltd. manufactures water pumps and uses a standard cost system. The following standard factory overhead costs per water pump are based on direct labor hours: Variable overheads (40 hours at the rate of Rs.20 per hour) Fixed overheads (40 hours at the rate of Rs.15 per hour) The additional information is available for the month of June 2004: i. ii. 4,000 pumps were produced although 4,200 had been scheduled for production The normal capacity level was 1,68,000 direct labor hours per month Rs.800 Rs.600 units Budget 10,000 5,000 85,000 25 Actual 10,400 4,800 87,200 24

iii. 1,59,000 direct labor hours were worked at a total cost of Rs.38,16,000 iv. The standard direct labor rate is Rs.25 per hour v. The standard direct labor time per unit is 40 hours

vi. Variable overhead costs were Rs.33,20,000 vii. Fixed overhead costs were Rs.25,50,000 The fixed overhead expenditure variance and direct labor efficiency variance are 30. Consider the following data pertaining to overhead cost for the month of June 2004: i. ii. Overhead cost variance Overhead volume variance Rs.5,200 (A)

Rs.3,800 (A) 2,500 Rs.20,000

iii. Budgeted hours for the month iv. Budgeted overheads for the month

v.

Rate of recovery of overheads

Rs.20 per hour

The actual overhead incurred by the company is

Group number 4
31. X Ltd. operates under a standard cost system. Factory overhead cost is applied to products on a direct labor hour basis. At normal operating level, the company utilizes 2,00,000 direct-labor hours per year. The budgeted overhead cost at normal capacity level is as follows: Variable Fixed Rs.6,50,000 Rs.4,20,000

During the year 2003-04, the actual labor hours were 2,20,000 to get production that should have required only 1,80,000 hours. The overhead efficiency variance is 32. MN Ltd. uses standard process costing method. The standard process cost card per month shows that 4 hours of direct labor is required to produce one kg. of finished product and the fixed overheads, which are recovered on direct labor hours, amount to Rs.180 per kg. of output. The budgeted output is 4,000 kgs. per month. Actual production during the month of June 2004 is 3,800 kgs. and the direct labor hours utilized during the month were 14,800. The details of opening and closing work-in progress (WIP) are as under: Opening work-in-progress 300 kgs.(Degree of completion of labor and overheads 60%) Closing work-in-progress 480 kgs.(Degree of completion of labor and overheads 20%) The company uses FIFO method for evaluation of stocks. The fixed overhead efficiency variance is 33. The standard labor component and the actual labor component for a job in a week are given below: Particulars i. ii. Standard number of workers in the gang Standard wage rate per hour (Rs.) Skilled workers 40 20 36 32 Semi-skilled workers 30 16 20 23 Unskilled workers 20 10 34 8

iii. Actual number of workers employed in the gang during the week iv. Actual wage rate per hour (Rs.)

During the 40 hours working week, the gang produced 3,400 standard labor hours of work. The labor efficiency variance is

34. The data relating to Sinha Ltd. for the month of June 2004 are as follows: Output (units) Wages paid for 4,850 hours Material purchased 2,500 kg Variances: Variances Labor rate Labor efficiency Labor idle time Material price Material usage The standard prime cost per unit is 35. Consider the following details pertaining to Srikanth Ltd. for the month of June 2004: Particulars Sales Direct materials Direct labor Variable overheads Capital employed Rs. 60,000 18,500 14,000 8,000 1,20,000 Rs. 2,130 (A) 2,250 (F) 300 (A) 2,560 (F) 2,940 (F) 5,000 Rs. 87,300 Rs. 40,000

The return on investment in June 2004 is 12.5%. In the month of July 2004, it is expected that the volume of sales will be increased by 15%, the selling price will be increased by 2% and there will be a reduction of all other costs by 2%. The change in the return on investment for the month of July 2004 will be 36. Consider the following data of AB Ltd. for the quarter ending June 30, 2004: Projected sales Raw materials per unit of finished goods Opening stock of finished goods 5,000 units 4 kg 675units

Closing stock of finished goods Opening stock of raw materials Closing stock of raw materials The total quantity of materials purchased during the quarter is

850units 4,500 kg 6,200 kg

37. Siva Ltd. manufacturers cabinets and outsources handles of the cabinet. Each cabinet requires four handles. The direct labor time for assembly work is 30 minutes per cabinet. The closing stock of finished cabinets in a month is estimated to be 50% of projected unit sales for the next month. The closing stock of handles in a month is planned to be 60% of the requirement for the second following month. The company has furnished the following projected unit sales: July 2004 August 2004 September 2004 October 2004 300 cabinets 310 cabinets 320 cabinets 350 cabinets

The closing inventory of the company for the month of June 2004 are as follows: Cabinets Handles 150 800

The number of handles to be purchased in the month of July 2004 is 38. ABC Constructions Ltd. has taken two contracts on April 01, 2003. The position of the contracts as on March 31, 2004 is as follows: Particulars Contract price Materials Wages paid Other expenses Plant at site Unused materials at site Wages accrued Other expenses due Work certified Cash received Contract A (Rs.) 54,00,00 0 11,60,00 0 22,48,00 0 56,000 3,20,000 80,000 72,000 8,000 32,00,00 0 24,00,00 Contract B (Rs.) 1,20,00,000 21,60,000 33,00,000 1,20,000 6,00,000 1,20,000 1,08,000 18,000 60,00,000 45,00,000

0 Work completed but not yet certified 1,60,000 1,80,000

The plant at site is to be depreciated at 12% per annum. The values of work in progress of each contract respectively are

39. Aditya Ltd., using process costing, manufactures a single product, which passes through two processes process 1 and process 2, the output of process 1 becoming the input to process 2. The company has furnished the following information relating to the product for the month of September 2004: i) ii) Raw material issued to process 1 was 3,000 units at a cost of Rs.5 per unit. There was no opening or closing work-in-progress but opening and closing stocks of finished goods were Rs.20,000 and Rs.23,000 respectively.

iii) Normal losses and abnormal losses are defective units having a scrap value and cash is received at the end of the period for all such units. Other information: Particulars Normal loss as a percentage of input Output in units Scrap value per unit Additional components introduced Direct wages incurred Direct expenses incurred Production overhead as a % of direct wages (Rs.) (Rs.) (Rs.) (Rs.) Process 1 10% 2,800 2 1,000 4,000 10,000 75 Process 2 5% 2,600 5 780 6,000 14,000 125

The cost of goods sold of the product for the month of September 2004 is 40. Marphy Company manufactures radios, which are sold at Rs.1,600 per unit. The total cost consists of 30% for direct materials, 40% for direct wages and 30% for overheads. An increase in material price by 30% and in wage rates by 10% is expected in the forthcoming year, as a result of which, the profit at current selling price may decrease by 40% of the present profit per unit. The future selling price to maintain same profit percentage is

Group number 5
41. The cost data pertaining to Product X of XL Ltd. are as follows: Maximum capacity Normal capacity Increase in inventory Variable cost per unit Selling price per unit Fixed manufacturing overhead costs 30,000 units 15,000 units 1,880 units Rs.12 Rs.50 Rs.3,60,000

If the profit under Absorption costing method is Rs.1,01,000, the profit under Marginal costing method would be 42. JIT Ltd. has a factory where four products are manufactured in a common process. During September 2004, the costs of the common process were Rs.1,60,000. The data pertaining to four products is as follows: Produc t A B C Productio n 600 units 400 units 500 units Sales 400 unit s 450 unit s Sales value per unit Rs. 70

600 units

Rs.100

Products A and B are further processed to make finished products X and Y respectively. The data relating to Products X and Y is given below. Produc t X Y Productio n 600 units 400 units Sales 600 unit s 300 unit Cost of further processing Rs.10,000 Rs.25,000 Sales value per unit Rs.100 Rs.200

s There was no opening stock. Company uses sales value at split off point as basis for apportionment of common costs. The profits of product Y and product C are 43. Bharti Ltd. has furnished the following data pertaining to manufacturing operations for the month of September 2004: Particulars Raw materials 1,2004) Direct labor cost Work-in-progress 1,2004) Finished goods 1,2004) Cost of goods sold Selling expenses Raw materials 30,2004) Work-in-progress 30,2004) Finished goods 30,2004) Sales for the month (September (September (September (September (September (September Rs. 6,000 25,000 (125% of factory overhead ) 7,000 12,000 88,000 8,500 6,800 6,500 12,800 1,12,500

The materials purchased and profit earned by the company for the month of September 2004 are 44. Two manufacturing companies AB Ltd and XY Ltd. have decided to merge their business operations. They have furnished the following operation details: Particulars Capacity utilization (%) Sales (Rs. in lacs) Variable costs (Rs. in lacs) Fixed costs (Rs. in lacs) AB Ltd 90 540 396 80 XY Ltd 60 300 225 50

The profitability of the merged plant at 80% capacity level is 45. XLNT Ltd. has furnished the following information pertaining to the forthcoming year: Budgeted Variable costs Budgeted Fixed costs 60% of sales value 20% of sales value

If the company increases the selling price by 10% but the fixed costs, variable cost per unit and sales volume remain unchanged, the effect on contribution would be 46. Quadila Ltd. has furnished the following information pertaining to its product for the period ended September 30,2004:

Selling price per unit Variable cost per unit Fixed cost

Rs.80 Rs.35 Rs.5,96,00 0

The company plans to improve the quality of its sole product by i. Replacing a component that costs Rs.6.25 with a higher-grade unit that costs Rs.8.00. Acquiring a packing machine of Rs.80,000.

ii.

The company will depreciate the machine over a period of 10 years with no estimated salvage value by the Straight Line Method of depreciation. The income tax rate is 40%. If the company desires to earn a post-tax profit of 10% on sales in the next period, the units to be sold by the company in the next period are 47. Sams Ltd. manufactures and sells two products M and N. The following data are estimated for the quarter ending September 30, 2004 . Particulars Sales Sale price per unit (Rs.) Variable cost per unit (Units) Product M 80,000 20 12 Product N 1,20,000 16 10

(Rs.) The annual fixed costs are estimated at Rs.8,16,000. The break-even point in sales value with the current sales mix is 48. ACD Ltd. has been approached by a foreign customer who wants to place an order for 1,500 units of Product C at Rs.22.50 a unit although the company currently sells this item for Rs.39 a unit, and the item has a cost of Rs.29 per unit. Further analysis reveals that the company will not pay sales commission of Rs.2.50 a unit on these sales and its packaging requirement will save an additional amount of Rs.1.50 per unit. However, the additional graphics required on this job will cost Rs.3,000. The fixed costs amounting to Rs.4,00,000 for the production of 50,000 units of such products by the company will not change. Accepting this job by the company will 49. Ponchu Das Pvt.Ltd. of Kolkata is currently operating at 80% capacity. The following is the income statement furnished by the company: Particulars Sales Cost of sales: Direct materials Direct expenses Variable overheads Fixed overheads Total cost Net income 200 80 40 260 580 60 Rs. in lakh Rs. in lakh 640

The Managing Director has been discussing an offer from Middle East of a quantity, which will require 50% capacity of the factory. The price is 10% less than the current price in the local market. Order cannot be split. The capacity of factory can be augmented by 10% by adding facilities at an increase of Rs.40 lakh in fixed cost. If the proposal is accepted with the increased facilities, the profit will be increased by 50. PQR Ltd. manufactures three components P, Q, and R. The company has furnished the following information pertaining to the cost per unit of three products: Particulars Fixed cost Variable cost Total cost P (Rs.) 7.00 8.00 15.00 Q (Rs.) 5.00 6.00 11.00 R (Rs.) 4.50 6.00 10.50

Alwin Company has offered to supply the components to PQR Ltd at the following prices: P Rs. 10.00 per unit Q Rs. 5.00 per unit R Rs. 7.50 per unit Which of the following decisions should be considered by PQR Ltd.?

Group number 6

51. MNR Ltd. has furnished the following information for two years: Particulars Sales P/V Ratio Margin of safety as % of Sales 2002-03 (Rs.) 8,00,000 50 % 40 2003-04 (Rs.) ? 37.5% 21.87

There has been substantial saving in the fixed cost for the year 2003-04 due to restructuring of process. The companys sales quantities of both the years are same. Selling price for the year 2003-04 is reduced. The fixed cost for the year 200304 is 52. Bhavani Ltd.is operating at 80% capacity has a sales value of Rs.8,00,000 at Rs.25 per unit. The cost data are as under: Material cost Rs.7.50 per unit. Labour Rs.6.25 per unit. Semi variable cost (including variable cost of Rs.3.75 per unit) Rs.1,80,000. Fixed cost Rs1,90,000 up to 80% level of output, beyond this an additional cost of Rs.20,000 will be incurred. The activity level at break even point is

53. The comparative profit statement of two quarters is as below: Particulars Units sold Direct Material (Rs.) Direct wages (Rs.) Fixed and variable factory overheads (Rs.) Sales (Rs.) Profit (Rs.) 1st quarter 2,500 87,500 62,500 75,000 2,75,000 50,000 2nd quarter 3,750 ? ? 95,000 ? 40,000

In 2nd quarter, direct material price has increased by 20%. There was a saving of Rs.5,000 in fixed overhead in the second quarter. The other costs remained same. The quantity that should have been sold in the second quarter to maintain the profit of 1st quarter is. 54.. Delta Ltd. manufactures four products P,Q,R & S, which emerge from a particular process of operation. The total cost of input for the year ended March 31, 2004 is Rs.2,80,000. The details of output, additional cost after split-off point and sales value of the products are as follows: Product s P Q R S Output (Kg.) 10,000 3,000 6,000 4,000 Additional processing cost after split-off point (Rs.) 20,000 20,000 17,000 50,000 Sales value after further process (Rs.) 2,20,000 1,15,000 1,05,000 1,70,000

If the products are sold at split-off point without further processing, the sales value would have been: Rs.1,90,00 0 Rs.1,00,00 0 Rs. 85,00 0 Rs.1,05,00

0 The maximum amount of profit of the company from the four products is

55. Ajex Ltd. had the following inventories at the beginning and end of the month of March 2005: Particulars Finished goods Work-in-process Direct materials March 1, 2005 (Rs.) 1,25,000 2,35,000 1,34,000 March 31, 2005 (Rs.) 1,17,000 2,51,000 1,24,000

The following additional manufacturing data were available for the month of March 2005: Particulars Direct materials purchased Purchase returns Transportation Direct labor Actual factory overhead (Rs.) 1,89,000 1,000 3,000 3,00,000 1,75,000

The company applies factory overhead at a rate of 60% of direct labor cost and any overapplied or underapplied factory overhead is deferred until the end of the year 2004-05. The manufacturing cost of the company for the month of March 2005 was 56. For a department, the standard overhead rate is Rs.2.50 per hour and overhead allowances are as follows: Activity level (hours) 3,000 7,000 11,000 Budgeted overhead allowance (Rs.) 10,000 18,000 26,000

The normal capacity level, on the basis of which the standard overhead rate has been worked out, is 57. Sai Plastics Ltd. manufactures plastic chairs. The company is working at 60%

capacity level, which represents 4,800 chairs per month. The cost break-up per chair is as under: Materials Labor Rs.62

Rs.32 Rs.40 (60% fixed)

Overheads

The selling price is Rs.180 per chair. The company is planning to produce at 80% capacity level. At 80% capacity level the selling price falls by 5% accompanied by a similar fall in the price of materials. The break-even point in units and profit at 80% level of capacity of the company are 58. A machine shop has 5 identical machines manned by 3 operators. The operators are fully engaged on machines. The total original cost of these 5 machines is Rs.8,00,000. The company has furnished the following information pertaining to operations for the last quarter ending March 31, 2005: Normal available hours per month per operator Absenteeism (without pay) Leave (with pay) Normal idle time (unavoidable) Average rate of wages per hour Estimated production bonus Value of power consumed Supervision and indirect labor Electricity and lighting Repairs and maintenance per quarter Depreciation per annum Miscellaneous expenses per annum General management expenses per annum 200 hours 12 hours 20 hours 8 hours Rs.8 10% on wages Rs.7,265 Rs.4,100 Rs.3,800 1% on value of machines 10% on original cost Rs.7,200 Rs.45,800

The comprehensive machine hour rate for the machine shop for the quarter ending March 31, 2005 is 59. Monark Ltd. has undertaken to supply 2,000 units of product MONO per month for the months of April, May and June 2005. Every month a batch order is opened against which materials and labor cost are booked at actual. Overheads are absorbed at a rate per labor hour. The selling price is contracted at Rs.15 per unit. The company has furnished the following data

pertaining to the costs for 3 months: Material Month Batch Production (Units) cost (Rs.) April 2005 May 2005 June 2005 2,500 3,000 2,000 12,500 18,000 10,000 Labor Overhead cost (Rs.) 5,00 0 6,00 0 4,00 0 cost (Rs.) 24,000 18,000 30,000 Total labor hours 8,000 9,000 10,000

The rate per labor hour is Rs.2. The overall profit of the order of 4,400 units is 60. HP Ltd. has furnished the following information pertaining to its 3 products: Product Department Production Purchasing Inspection Allocation Base A Machine Hours Purchase Orders Labor Hours 1,000 100 200 B 2,000 300 200 C 500 150 200 costs Rs.14,00,000 Rs. 5,00,500 Rs. 3,00,000 Product Product Overhead

Assuming overhead is allocated based on activities, using ABC basis, how much would be allocated to Product B?

Group number seven

61. AB Ltd. has furnished the following information for its product: Direct material Direct labor Variable overhead Rs.10 per unit Rs. 6 per unit Rs. 3 per unit

Fixed overhead Budgeted production Actual production

Rs. 4 per unit

- 12,000 units - 10,000 units

There is no overhead spending variance Sales Selling price 9,000 units

Rs.28 per unit

Using Absorption costing, what is the cost per unit based upon actual costs?

62. Baisakhi Ltd. has 3 production departments P1, P2 and P3 and 2 service departments S1 and S2. The company has furnished the following overhead costs of production as well as service departments: Departmen t P1 P2 P3 S1 S2 Overhead costs (Rs.) 13,600 14,700 12,800 9,000 3,000

The company has provided the expenses of service departments which are charged to production as well as service departments on the following percentage basis: Departmen t S1 S2 P1 40% 30% P2 30% 30% P3 20% 20% S1 20% S2 10% -

The total overhead expenses of P1 and P3 are 63. Mahan Ltd. uses a historical cost system and applies overheads on the basis of predetermined rates. The following data are furnished by the company for the year ended March 31,2005: Particulars Manufacturing overheads Manufactured applied Work-in-progress Finished goods Cost of goods sold overheads Rs. 13,84,000 14,00,000 3,00,000 8,00,000 9,00,000

The amount of under absorbed overheads to be adjusted to work-in-progress, using supplementary rate, is 64. ADC Ltd. has furnished the following data pertaining to its business: Department Personnel Cleaning Operating A Operating B Dept. Dept. Employee s 3 5 30 10 Sq.ft 1,00 0 3,75 0 3,00 0 Costs Rs. 1,80,000 2,22,750 25,00,00 0 30,00,00 0 Direct Hours 45,00 0 27,00 0 Allocation Base Employees Square feet Hours Hours

Using the Step Method to allocate Personnel Department and Cleaning Department costs, what is the appropriate overhead allocation rate to Department B? 65. APW Ltd. uses process cost system to manufacture Dust Density Sensors for the mining industry. The following pertains to operations for the month of March 2005: Particulars Opening work-in-process (March 01, 2005) Introduced in production during March 2005 Closing work-in-process (March 31, 2005) Units 1,28 0 7,20 0 950

There is no loss in the manufacturing process. The opening inventory was 60% complete for materials and 50% complete for conversion costs. The closing inventory was 80% complete for material and 60% complete for conversion costs. Costs pertaining to the month of March 2005 are as follows: Particulars Opening work in process: Materials Conversion During the month: Materials 1,12,83 0 20,500 16,350 Rs.

Conversion

89,520

The total cost of closing work-in-process on March 31, 2005, using FIFO method, i 66. During the month of March 2005, Murphi Ltd. manufactured 5,000 units of product P at a cost of Rs.60,000, exclusive of spoilage allocation. The company sold 2,500 units of product P during the month. An additional 1,000 units, costing Rs.8,000, were completed to the extent of 50% by March 31, 2005. All units were inspected between the completion of manufacturing and transfer to finished goods inventory. Normal spoilage for the month was Rs.2,000 and abnormal spoilage of Rs.5,000 was also incurred during the month. The portion of total spoilage that should be charged against revenue in the month of March 2005 is 67. Sigma Chemicals Ltd. produces high-quality plastic sheets in a continuous manufacturing operation. All materials are introduced at the beginning of the process. Conversion costs are incurred evenly throughout the process. A quality control inspection occurs when units are 80% through with the manufacturing process, when some units are separated out as inferior quality. The following data are available for the month of March 2005: Material costs Conversion costs Units introduced Units completed Rs.36,000 Rs.19,500 8,000 7,000

There is no opening or closing work-in-progress. Past experience indicates that approximately 8% of the units introduced are found to be defective on inspection by quality control. The cost of abnormal loss for the month of March 2005 is 68. Anjani Ltd. makes one model of a product known as Brand D. The company has provided the following balances as on October 01, 2004: Finished goods Work-in-process Raw materials The following data are available as on March 31, 2005 Indirect labor Freight in Direct labor Raw material Factory overhead expenses Rs.16,100 Rs.7,500 500 units

Rs.7,450 Rs.16,120

Rs.43,240 Rs.6,490

Rs.31,300

Work-in-process Sales (15,000 units) Indirect material Total manufacturing costs incurred

Rs.6,800 Rs.3,60,000

Rs.25,500 Rs.2,15,500

There were 1,500 units of finished goods of Brand D as on March 31, 2005. The amount of raw materials purchased during the half-year ended March 31, 2005 was

69. Srirupa Ltd. manufactures a single product at the operated capacity of 8,000 units while the normal capacity of the plant is 10,000 units per annum. The company has estimated 25% profit on sales realization and furnished the following budgeted information: Particulars Fixed overheads Variable overheads Semi-variable overheads Sales realization 10,000 units (Rs.) 1,50,000 50,000 1,00,000 8,00,000 8,000 units (Rs.) 1,50,000 40,000 88,000 6,40,000

The company has received an order from a customer for a quantity equivalent to 10% of the normal capacity. It is noticed that prime cost per unit of product is constant. If the company desires to maintain the same percentage of profit on selling price, the minimum price per unit to be quoted for the new order is 70. Dcent Ltd. pays commission to its salesmen in the month the company receives cash for sales, which is equal to 5% of the cash inflows. The company has budgeted sales of Rs.4,25,000 for April 2005, Rs.5,25,000 for May 2005 and Rs.5,85,000 for June 2005. 60% of the sales are on credit. Experience indicates that 60% of the budgeted credit sales will be collected in the month following the sales. 35% are expected to be realized in the second month following the month of sales and remaining 5% will be nonrecoverable. The total amount of sales commission for the month of June 2005 is