GLS University

Faculty of Commerce

January -2017

Assignment -1

Cost Account 2 Semester IV

UNIT -1 Marginal Costing

Q-1 FOC ltd. Produces three products arts ,science and commerce by using raw material for the
same quantity and labour force with the equal skills . For the year 2016-2017. Following data
given below . ( 20 Marks)

Particular Arts Science Commerce

Selling price per unit 100 200 150
Demand (noof units) 1000 3000 4000
Raw material 03 04 05
Labour hour 02 05 03

Per unit of raw material cost rs10 and the wage per hour is rs 20 the variable overheads expense
are 25% 20%and 10% respy. Of the direct labour

The fixed cost is rs 120000 for the period 30000 units of raw material and 35000 labour hours
are available for the next year.

Calculate the sale mix to earn the maximum profit for the next year.

Q-2 (A) Pratikena ltd provides the following information relating to its production ( 10 Marks )

Year Total sales Rs Total cost Rs

2016 1500000 1725000
2017 3000000 2775000

From the above information calculate

Profit volume ratio

Fixed expenses
Breakeven point
Profit when sales are RS 4200000.
Sales to earn profit of RS 375000.
Q-2(B) The following information is obtained from the record of a company Niyati ltd. ( 10
Marks )

Selling price per unit Rs.60

Variable expense per unit Rs.36
Fix expense Rs.1,80,000
From the above data find out
1) The sale to earn profit of 1,08,000
2) The sale to make loss Rs. 1,08,000
3) The sale to earn a profit of Rs.8 per unit
4) The sale to make a loss of Rs. 8 per unit
5) Calculate BEP

Q-3 MCQ ( 20 Marks )

1)Contribution =_______________
a)Selling price + Variable cost
b)Selling price variable cost
c)Fixed cost + variable cost
d)Selling price fixed cost variable cost

2) The costing method which shows relationship between cost sales volume and profit is called
a) breakeven point
b) cost - volume - profit analysis
c) margin of safety
d) contribution

3)For the production of a product if fixed cost is Rs.4000 variable cost is Rs.5 per unit in selling
price is Rs.10 per unit find out the sale is required and breakeven point
a) 400 units
b) 200 units
c) 600 units
d) 800 units

4)Which of the following costing method is useful to every units of industries as well as it is
useful with other costing method in the same unit
a) process costing
b) operating costing
c) unit costing
d) marginal costing

5) In marginal costing which two lines Will be intersect each other to find the breakeven point
a) total cost line and sale line
b) total cost line and fix cost line
c) total cost line and variable cost line
d) total cost a line profit line
6) variable cost is Rs.20 per unit and fixed cost is Rs.40,000 if breakeven point is reduced to
2000 unit find out the new selling price per unit
a)Rs.10
b)Rs.30
c) Rs 20
d)Rs.40

7) variable cost is Rs.42 selling prices Rs.50 for manufacture of one unit 2KG's of raw material
is used find a conception per KG of material
a) Rs2
b)Rs6
c)Rs4
d)Rs8

8)which of the following furmula is false to find out the profit

a)profit = contribution - fixed cost
b) profit= sales- variable cost
c) profit = margin of safety X PV ratio
d) profit = sales-(fixedcost + variable cost )

9) ___________ Is used when the total figures only are available

a)contribution per unit
b)profit volume ratio
c)per unit variable cost
d). Can't say

10) sale units 30,000 fixed expense Rs.5, 40,000 breakeven sale units 18,000 if sale price per
unit is Rs.70 calculate variable expense per unit
a)Rs.50
b)Rs.35
c)Rs. 40
d) Rs.45

UNIT-2 Standard Costing

Q.1. The following is the standard mix of production of product A. (20)

MATERIALS KGS. PRICE PER KG. (RS.)

P 10 16
Q 6 18
R 4 13
The standard loss is 20% of units introduced. Actual production is 960 kgs. The actual
consumption and cost of material used is as under:

MATERIALS KGS. TOTAL PRICE (RS.)

P 640 12,800
Q 240 3,600
R 400 3,600

Calculate the following Variances:

(1) Material Cost Variance

(2) Material Price Variance
(3) Material Usage Variance
(4) Material Mix Variance
(5) Material Yield Variance

Q.2.

(A) Calculate Material Variances from the following information of a factory: (10)

MATERIALS STANDARD ACTUAL

X 480 units at Rs. 16 600 units at Rs. 15
Y 360 units at Rs. 12 380 units at Rs. 13
840 980

(B) From the following information, calculate Direct Labour Cost Variance: (10)

STANDARD ACTUAL
HOUR RATE LABOUR HOURS RATE LABOUR
S (Rs.) (Rs.) (Rs.) (Rs.)
SKILLED 1000 3.00 3,000 1,400 3.20 4,480
UNSKILLED 600 1.20 720 600 1.00 600
1,600 3,720 2,000 5,080
Q.3. OBJECTIVES:

(A) TRUE/FALSE: (10)

1. Material Price Variance + Material Mix Variance = Material Cost Variance.

2. When actual cost exceeds the standard cost it is an Adverse Variance.
3. Labour Efficiency Variance is the total of Mix and Sub-efficiency Variance.
4. Mix Variance occurs only in case of Labour.
5. Labour Cost Variance is the difference between Labour Price Variance and Labour
Efficiency Variance.

(B) MULTIPLE CHOICE QUESTIONS: (10)

1. Standard Cost per unit for a product is as under:
21 Litres at the rate of Rs. 2.50 per litre. 12,000 litres material is used for actual
production, of which price paid is 4% more than the standard price and the direct material
usage variance is Rs. 3,600 (F). Find the standard units of the product.
(A) 640 (B) 560 (C) 480 (D) 540

2. A companys June 2016 labour cost is as under:

Direct labour paid Rs. 16,400
Standard hours 4,320
Standard rate of labour per hour Rs.3
Actual work hours 4,100
Hence the Labour Rate Variance and Labour Cost Variance will be respectively
__________.
(A) 4100(A) and 3440 (F) (B) 4100(A) and 3440(A)
(C) 3440(F) and 4100 (A) (D) 3440 (F) and 4100(F)

3. A factory uses standard costing system. Production information of Jan. 2017 is as

follows:
Standard: 10 kg material is required for 8 kg production
Standard price of material is Rs.2 per kg
Actual production 2400 kgs
Material utilized 2900 kgs
Cost of material utilized Rs. 8700
Hence the Material Usage Variance and Material Price Variance will be
respectively____________.
(A) 200(F) and 2900(A) (B) 200(F) and 2900(F)
(C) 2900(A) and 200(F) (D) 2900(F) and 200(A)
 4. A Ltd. has a budgeted material cost of Rs.1,25,000 for the production of 25000 units
per month. Each unit is budgeted to use 2 kg of materials. The standard price of material
is Rs. 2.50 per kg. Actual materials in the month cost Rs. 136000 for 27,000 units and
53,000 kgs were purchased and used.
What will be the Adverse Material Price Variance?
(A) Rs. 1000 (B) Rs. 3500 (C) Rs. 7500 (D) Rs. 11000

5. From the above figures, determine the favourable Material Usage Variance:
(A) Rs. 2500 (B) Rs. 4000 (C) Rs.7500 (D) Rs.10000

UNIT-3 Operating Costing

Q.1 (A) Mr. Raj owns a travel bus, which runs 25 days in a month according to the (20)
following schedule :
(i) Ahmedabad to Surat and back the same way :
One side distance 200 km.
Days run 10
Occupied seating capacity 90%
(ii) Ahmedabad to Rajkot and back the same way :
One side distance 100 km.
Days run 10
Occupied seating capacity 80%
(iii) Ahmedabad Local :
Distance covered per day 100 km.
Days run 5
Occupied seating capacity 100%
(iv) Other informations :
Cost of bus Rs. 20,00,000
Depreciation annual 12%
Salary of driver p.m. Rs. 15,00
Salary of conductor p.m. Rs. 10,000
Other adminatrative expenses p.m. Rs. 38, 500
Insurance annual 3%
Road tax-annual Rs. 6,000
Repair and Maintenance p.m. Rs. 1,000
Disel consumption 4 km. per letre.
Disel price Rs. 35 per letre
Lubricant oil Rs. 50 per 100 km.
(v) The bus has a capacity of 50 persons.
From the above informations calculate fare per passenger km. if he wants to earn 50% profit
on his taking.
Calculate the passenger fare for Ahmedabad to Surat and Ahmedabad to Rajkot.
Q.2 (A) City Bus Service Ltd. Runs the following fleet of buses within the limits (10)
of Rajkot city :
Carrying Capacity :
10 Buses 60 passengers
15 Busses 50 Passengers
On an average each bus makes 10 trips a day covering a distance of 8 km. in each trip and
75% of the seats are occupied. The annual records show that 5 buses are generally required
to be kept away from roads each day for repairs. The following expenses were incurred by
the company during March, 2016.

Carriage, Rent, Rates and Insurance 5000

Road and Vehicle tax 1000
Salary : Chief operating manage 3000
3 assistant manage 800 each
4 supervisors 400 each
25 drivers 240 each
30 cleaners 100 each
Office staff 4,000
Consumable stores 4,500
Petrol 24,000
Lubricants 5,500
Replacement of tyres and tubes 1,750
Gas and Electricity 350
Miscellaneous expenses 1,800
Repairs 3,500
The cost clerk of the company prepared a cost sheet using the actual figures for various
expenses and writing off Rs. 6,000 for depreciation. Show the cost sheet in proper form as
might have been prepared by the cost clerk. Find out cost per passenger km.

Q.2(B) A Transport company supplies the following details in respect of 5 tone capacity. (10)

Cost of Truck 1600000

Estimated life 20 years
Scrap value 20%
Repairs 4000 per month
Diesel 40 per trip each way
Divers Salary 13000 per month
Cleaners salary 8000 per month
Tax 10000per month
This truck carries goods to and from the city covering a distance of 100 km each way. On the
outward trip freight is available to extent of full capacity and on return trip 20% of capacity.
Daily Two round trips are possible. The trucks runs on average 25 days in a month. Calculate
the cost per tone kilometer.
Q-3 Give Necessary Answers : (20)
(1) Operating costing is not applicable to

(a) Gujarat State Transport Co. (b) Hotel Marriot

Vadilal Sarabhai Hospital (d) Natural Gas Co.

(2) In pharmaceutical business which costing method is used ?

(a) Contract cost (b) Job cost

Unit cost (d) Branch cost

3) Which of following is not included in operating industry?

a) Theatre b) Railways
c) Publication d) Hotel

4) Which of folloeing items is considered as a fixed cost from the view point of a transport
undertaking?

a) Depreciation b) Repairs and Maintenance

c) Petrol d) Insurance premium

5) Which of folloeing items is considered not as a fixed cost from the view point of a transport
undertaking?

a) Road Tax b) Salary of Drivers

c) Repairs and Maintenance d) Administrative expenses

6) Show The cost unit for Tram Transport

a) Passenger km b) Ton km

c) Per passenger d) Per Km

7) ) Show The cost unit for Goods Transport.

a) Per Trip b) per Ton km

c) Per Ton d) Per Km

8) Which of the Following is not included in operating industry.

a) Hospital b) Hotel

c) Bus d) Oil Company

9) ) Which of the Following is included in operating industry.
 a) Renu Chinni Ltd. B) Raj Transport Ltd

c) D.L.F Ltd d) Non of the above

10) Which of the Following is included in operating industry.

a) Restaurant b) Construction Industry

c) Service Industry d) Oil Company