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Costing & Cost Control (Elective I) (October 2009)

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Total No. of Questions : 12] [Total No. of Pages : 4 [3664] - 131 P1311 B.E. (Mechanical Engg.) COSTING AND COST CONTROL (2003 Course) (402045) (Elective - I) Time : 3 Hours] [Max. Marks : 100 Instructions to the candidates: 1) Answer any one question from each Unit. 2) Answers to the two sections should be written in separate books. 3) Neat diagrams must be drawn wherever necessary. 4) Figures to the right indicate full marks. 5) Use of electronic pocket calculator is allowed. 6) Assume suitable data, if necessary. Q1) a) b) SECTION - I UNIT - I What is cost accounting? What are its objectives? How do cost accounting records help in the planning and control of operations of business enterprise? [12] Indicate whether the following statements are True or False : [4] i) Idle facility and idle time are the same. ii) Overtime premium paid to all factory workers is usually considered direct labor cost. iii) The rental of a car which includes a fixed daily rate plus an extra fee for each kilometer driven is an example of a step cost. iv) Assuming inflation, if a company wants to maximize net income, it would select FIFO as the method of pricing raw materials. OR Q2) a) b) c) Q3) a) b) Distinguish between Financial statement analysis and Funds flow analysis with an example? [5] Explain the various elements of cost with an example? [7] [4] What are the limitations of financial accounting? UNIT - II Distinguish between the following with an example for each : [8] i) Controllable cost and Non-controllable cost. ii) Direct material cost and indirect material cost. A manufacturing company has shown the following expenses as establishment expenses in its account records : P.T.O. 1. Warehouse charges 2. Office salaries 3. Office lighting 4. Directors remuneration 5. Rent and insurance of warehouses 6. Warehouse lighting 7. Trade magazine 8. Bank charges 9. Bad debts 10. Agents commission 11. Warehouse repair 12. Traveling expenses 13. Rent and insurance of office 14. Printing and stationary From the above information, find out the total cost of i) Selling expenses. ii) Distribution expenses. iii) Administration expenses. ( 000) (Rs.) 3,600 2,260 140 2,800 620 540 140 200 340 11,500 1,020 1,520 460 3,000 [10] OR Q4) a) b) Distinguish between the following : i) Cost control and Cost reduction. ii) Direct and Indirect labor cost. The following inventory data relates to XYZ Ltd., [8] Inventories Beginning Ending Rs. 1,10,000 95,000 Rs. 70,000 80,000 Rs. 90,000 95,000 Finished goods Work-in-progress Raw materials Additional information : Cost of goods available for sale Total goods processed during the period Factory overheads Direct materials used Determine the following : i) Raw materials purchases. ii) Direct labor cost incurred. iii) Cost of goods sold. [3664] - 131 -2- Rs. 6,84,000 Rs. 6,54,000 Rs. 1,67,000 Rs. 1,93,000 [10] Q5) a) b) Q6) a) b) Q7) a) b) Q8) a) b) UNIT - III What do you understand by classification, allocation and apportionment in relation to overhead expenses? Explain? [12] Explain the term material cost variance ? [4] OR Define budget and budgetary control . Discuss the objectives and limitations of budgetary control? [8] The standard materials cost to produce a tonne of chemical X is : 300 kg of material A @ Rs. 10 per kg 400 kg of material B @ Rs. 5 per kg 500 kg of material C @ Rs. 6 per kg During a period, 100 tonnes of mixture X was produced from the usage of : 35 tonnes of material A at a cost of Rs. 9,000 per tonne 42 tonnes of material B at a cost of Rs. 6,000 per tonne 53 tonnes of material C at a cost of Rs. 7,000 per tonne Calculate the price, usage and mix variances? [8] SECTION - II UNIT - IV Define and explain the term Joint products and by-products . Enumerate the method which may be employed in costing Joint Product ? [9] A company manufactures product A which yield two by-products B and C. The actual joint expenses of manufacture for a period were Rs. 8,00,000. It was estimated that the profits on each product as a percentage of sales would be 30%, 25% and 15% respectively. Subsequent expenses were : A B C Materials Rs. 10,000 Rs. 7,500 Rs. 2,500 Direct wages 20,000 12,500 5,000 Overheads 15,000 12,500 7,500 45,000 32,500 15,000 Total sales Rs. 6,00,000 Rs. 4,00,000 Rs. 2,50,000 Prepare a statement showing the apportionment of the joint expenses of manufacture over the different products. [9] OR Discuss the distinguishing features of a process cost system? [9] Prepare process cost accounts from the following data : Production overhead incurred is Rs. 1,60,000 and is recovered on 200% of direct wages. Production during the period was 20,000 units. There was no [9] opening and closing work-in-progress. [3664] - 131 -3- Items Direct material Direct wages Direct expenses Q9) a) b) Total I 4,40,000 3,60,000 80,000 20,000 1,00,000 60,000 Process II 60,000 40,000 - III 20,000 20,000 40,000 UNIT - V Discuss the uses and assumptions of CVP analysis. Explain its significance to management? [8] Profit/ Volume ratio of a company is 50%, while its margin of safety is 40%. If sales volume of the company is Rs. 50 lakhs, find out its break even point and net profit. [8] OR Q10)a) b) Q11)a) b) How do the following reflect on a break even point [9] i) increase in total fixed cost. ii) decrease in variable cost per unit. iii) increase in total physical sales. A company has annual fixed costs of Rs. 14,00,000. In 1996 sales amounted to Rs. 60,00,000 as compared with Rs. 45,00,000 in 1995 and profit in 1996 was Rs. 4,20,000 higher than in 1995. i) At what level of sales does the company break-even. ii) Determine profit or loss on a forecast sales volume of Rs. 80,00,000. [7] UNIT - VI What is Activity-Based Costing? Why is it needed? [6] Prepare Income Statement under marginal costing from the following information relating to the year 2006-07. [10] Opening stock = 1000 units valued at Rs. 70,000 including variable cost of Rs. 50 per unit. Fixed cost = Rs. 1,20,000. Variable cost = Rs. 60 per unit. Production = 10,000 units. Sales = 7,000 units @ Rs. 100 per unit. Stock is valued on the basis of FIFO. OR Q12)a) b) Define and explain standard cost and standard costing. What are the advantages and limitations of standard costing? [9] What do you mean by marginal costing? Discuss its usefulness and limitations. [7] [3664] - 131 -4-

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