SRM UNIVERSITY

(Under section 3 of UGC Act 1956)

S.R.M. Nagar, Kattankulathur - 603 203.

Degree I Branch Sub Code

Title of the Paper Semester
Duration Max. Marks
(Instructions to the Candidates)

Question Marks.
No.
PART – A
Answer All The Questions.
(Each Question Carries 2 Marks) ..

1 What is date and what is information? 2 marks

Explain the classification of cost based on function?

2 2 marks

Explain what is a variable cost. Give two example .

3
2 marks

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Question
Marks
No.

4 What is the purpose of scatter graph? Give any two 2 marks

advantages of using the scatter graph.

5 2 marks
What is a marginal cost? .

6 Explain what is Profit Mark up and what is Profit 2 marks

Margin.
7
What is an incremental budget? Give one 2 marks
example.

8 2 marks
What is a rolling budget? Give on example.

2 marks
9 What is a variance?

What is an ideal standard? 2 marks

10

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Questio
Marks
n
No.

PART – B
Answer All The Questions.
(Each Question carries 16 marks)

11 a A company currently produces two products , A and B . Details

of the two products for the last year are given below :
16 marks
A B
Selling price : $40 $25
Variable cost per unit : $31 $17
Sales units : 4000 2000

Fixed cost for the year were $36,000.

The company is considering expansion of Product A.

If the expansion goes ahead, the fixed cost will increase by

21,000 per annum. The selling prices of the two products will
remain the same , But it is anticipated that the variable cost of
product A will fall to $28 per unit. The sales of A are budgeted
to increase to 5,500 , but the additional sales of A will result in a
fall in sales of R by 300 units.

The factory space which will be used to house the expansion is

currently rented out to a local business at a rent of $500 per
month.

Advise the company if the expansion is worthwhile.

Calculate the resulting increase of decrease in profit.
Which of the above costs , is an opportunity cost for the
company?

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Question
Marks
No.

or
.

XYZ produces two types of tables, the Deluxe and the Premium. Data for
11 b each of the tables is as follows : 16 marks
Deluxe Premium
Direct Material : $6/unit $4/unit
Direct labour : $4/unit $3/unit
Variable Overhead: $9/unit $5/unit
Fixed Overhead: $3/unit $2/unit

XYZ has estimated to sell 900 units of the Deluxe and 2600 units of the
premium tables.

The selling price per unit of the Deluxe table is $49. The selling price of
the Premium table has not been fixed and they plan to have a $10 profit
per unit on the Premium table.

1. What will be the total variable cost for each unit of the Deluxe
and the Premium table?

2. What will be the selling price of one unit of the Premium table?

3. Which of the two types of tables is more profitable per unit and
by how much?

4. Calculate the total profit the company will earn if it sells 4500
units of the Deluxe and 3200 units of the Premium table.

5. What is the Prime cost of one unit of the Deluxe table and one
unit of the Premuium table

6. If the company makes 2000 units of Deluxe and 500 units of

Premium, what will be the total production cost for the company.?

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Question
Marks
No.

Consider the following costs for Tim’s company at two different

12 A activity levels
16 marks
100 units 200 units
Material $700 $1400
Labour $2000 $4000
Rent $4000 $4000
Electricity $700 $900

How much is the total cost for making 700 units.

There are four costs, W,X,Y,Z

The total costs at different activity levels are the following :

Total cost Total cost

100 units 140 units
Cost $ $
W 8000 10560
X 7000 7000
Y 6500 9100
Z 6700 8580

Which of these costs is fixed, variable and semi variable?

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Question
Marks
No.

OR

12 B A company has recorded the following data for a

semi variable cost . 16 marks

Activity level cost incurred

Month units $
Jan 1800 36,600
Feb 2450 41,150
March 2100 38,700
April 2000 38,000
May 1750 36,250
June 1950 37650

Using the High low method, calculate how much

will be the total cost incurred if the company
produces 3500 units.

Mention two other methods for analysing Semi

variable costs.

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Question
Marks
No.

13 A John co manufactures two products, the EP01 and the GJ01 . Both the products
pass through two processes during the production, Assembly and finishing. 16 marks
The following data are available for one unit of each of the products

EP01 GJ01
Selling price $80 $100
Direct Materials $10 $12
Direct expenses $5 $3

Direct labour hours:

Assembly 1 0.5
Finishing 2 3

Machine hours
Assembly 3 4
Finishing 1 2

Direct labour is paid at $10 per hour.

Total production overheads are $10,500 for assembly and $15,000 for finishing.
Further details of the two production departments are given

Assembly Finishing
Machine hours 5000 5000
Direct labour hours 2000 6000

Each unit of EP01 AND GJ01 also absorbs a selling and distribution overhead of
10% of selling price.

Calculate the following for EP01 AND GJ01

A) The prime cost per unit .
B) The total production overhead cost per unit
C) The total production cost per unit
D) The full cost per unit
E) The profit per unit.

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Question
Marks
No.

OR
A company manufacturers two products, X and Y, in a factory
divided into two production cost centres, 6 marks
Primary and Finishing. The following budgeted data are available:
Cost centre Primary Finishing
13 B
Allocated and apportioned fixed overhead costs are $96,000 to
primary and $82,500 to finishing

Direct labour minutes per unit:

Product X 36 25
Product Y 48 35

Budgeted production is 6,000 units of product X and 7,500 units of

product Y. Fixed overhead costs are
to be absorbed on a direct labour hour basis.

What is the budgeted fixed overhead cost per unit for product Y?

2
A company uses an overhead absorption rate of $3.50 per machine
our, based on 32,000 budgeted machine hours for the period. During
the same period the actual total overhead expenditure amounted to 5 marks
$108,875 and 30,000 machine hours were recorded on actual
production. By how much was the total overhead under or over
absorbed for the period?

3. A company absorbs overheads on machine hours. In a period, 5 marks

actual machine hours were 22,435,
actual overheads were $496,500 and there was over absorption of
$64,375.
What was the budgeted overhead absorption rate per machine hour
(to the nearest $)?

.
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Question
Marks
No.

1 Each unit of product Alpha requires 3 kg of raw material. Next month's

14 A production budget for product
Alpha is as follows. : 5 marks
Opening inventories:
Raw materials : 15,000 kg
Finished units of Alpha : 2,000 units
Budgeted sales of Alpha :60,000 units

Planned closing inventories:

Raw materials :7,000 kg

Finished units of Alpha : 3,000 units

How many kilograms of raw materials should be purchased next month?

2 A company manufactures a single product, M. Budgeted production output of

product M during August
is 200 units. Each unit of product M requires 6 labour hours for completion and
PR Co anticipates 20
per cent idle time. Labour is paid at a rate of $7 per hour. What is the direct 5 marks
labour cost budget for
August?

3 Budgeted sales of X for December are 18,000 units. At the end of the 6 marks
production process for X, 10% of
production units are scrapped as defective. Opening inventories of X for
December are budgeted to be
15,000 units and closing inventories will be 11,400 units. All inventories of
finished goods must have
successfully passed the quality control check.

What is the production budget for X for December?

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Question
Marks
No.

OR
14 B
You are presented with the following flow forecasted
data for a company for the period November 20X1 to
March 20X2.

It has been extracted from functional flow forecasts

that have already been prepared.

NovX1 DecX1 JanX2 FebX2 MarX2

Sales 86, 90 120, 135, 150,
Purchases 30 59, 78, 90, 120,
Wages 9, 11, 16, 22, 22,
Overheads 9, 19, 15, 18, 17,

(Note: All the above figures are in the nearest 000’s .

Exmple : the sales of number is $80,000) 16 marks

You are also told the following.

(a) Sales are 40% cash 60% credit. Credit sales are
paid two months after the month of sale.
(b) Purchases are paid the month following purchase.
(c) 75% of wages are paid in the current month and
25% the following month.
(d) Overheads are paid the month after they are
incurred.

(e) The opening cash balance is $18,000. Prepare a

cash flow forecast for the three-month period January
to March 20X2.

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Question
Marks
No.

A company has prepared the following standard cost card:

15 A $ per unit
Materials (4 kg at $4.50 per kg) $18
Labour (5 hrs at $5 per hr) $25
Variable overheads (5 hrs at $2 per hr) $10
Fixed overheads (5 hrs at $3 per hr) $15
TOTAL $68

Budgeted selling price $75 per unit.

Budgeted production 8,700 units
Budgeted sales 8,000 units 16 marks
There is no opening inventory

The actual results are as follows:

Sales: 8,400 units for $613,200
Production: 8,900 units with the following costs:
Materials (35,464 kg) $163,455
Labour (Paid 45,400hrs; worked 44,100 hrs) $224,515
Variable overheads $87,348
Fixed overheads $134,074

Prepare a flexed budget and calculate the total variances

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Question
Marks
No.

OR

15 B A company manufactures a single product. The standard

cost card for one unit of the product is given : 16 marks

Direct material : 87 kg @7 per kg $567/unit

Direct labour : 97 hours @$8 per hour $776/unit
Variable overhead : 97 hours @3 per hour $291/unit
TOTAL : $1634

For January , the company had budgeted to produce 550

units, but 530 units were actually produced and the costs
incurred were as follows:

Direct material : 42,845 kg purchased and used at a cost of

$308,484
Direct Labour : 51,380 hours worked at a cost of $400,764
Variable overhead : $156,709

Calculate the variable cost variances for january

.

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