Cec Case Study of 20 Marks

7/29/2019 Cec Case Study of 20 Marks

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Front page will be declared later:

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.


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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 tooperations for the month of June 2004:

Particulars Units

Opening work-in-process (June 01, 2004) 650

Introduced in production during June2004 7,800

Closing work-in-process (June 30, 2004) 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 Rs. 19,850

Conversion Rs. 21,250

During the month:

Materials Rs.4,98,240

Conversion Rs.5,49,990

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 500 hours

Absenteeism (without pay) 50 hours

Leave (with pay) 70 hours

Normal idle time (unavoidable) 10 hours

Average rate of wages per hour Rs.20

Estimated production bonus 8% on wages


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Value of power consumed Rs.28,500

Supervision and indirect labor Rs.42,400

Electricity and lighting Rs.19,600

Repairs and maintenance per quarter 1% on value of machines

Depreciation per annum 10% on original cost

Miscellaneous expenses per annum Rs.48,000

General management expenses per annum 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 Rs.140

Labor Rs. 60

Overheads Rs. 80 (50% fixed)

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 Model M1 Model M2

Installed capacity in units 25,000 25,000

Fixed overhead expenses per annum Rs.6,00,000 Rs.2,50,000

Estimated profit at the above capacity Rs.4,00,000 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:


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Particulars Rs.

Total contract price 1,25,00,000

Work certified 79,00,000

Progress payment received 62,50,000

Material issued to site 40,80,000

Direct wages paid 16,50,000

Materials returned from site 51,500

Plant hire charges 1,25,000

Wage related costs 99,500

Direct expenses incurred 63,500

Work not certified 11,11,500

Materials at site 40,500

Accrued wages 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 relatingto 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 Process 1 Process 2

Normal loss as a percentage of input 10% 5%

Output in units 4,200 3,970

Scrap value per unit (Rs.) 3.80 2.90

Additional components introduced (Rs.) 1,800 1,150


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Direct wages incurred (Rs.) 6,500 7,250

Direct expenses incurred (Rs.) 3,235 3,799

Production overhead as a % of direct

wages

60 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 Cost per ton (Rs.) of input

Direct material cost 1,550

Direct labor cost 1,200

Overhead costs 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

Output

(Kg.)

Additional processing

cost

after split-off point (Rs.)

Sales value after

further process

(Rs.)

A 12,000 22,000 2,40,000

B 6,000 20,000 1,44,000

C 8,000 4,000 1,44,000

D 4,000 18,000 80,000

If the products are sold at split-off point without further processing, the sales value would

have been:

A Rs.2,16,000

B Rs.1,26,000

C Rs.1,40,000


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D 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 Units

Opening work-in-process inventory, June 1, 2004 5,500

Unit introduced during June 2004 29,000

Unit completed during June 2004 32,500

Closing work-in-process inventory, June 30, 2004 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.)

Closing inventory

(Rs.)

Raw materials 16,330 18,540

Work-in-process 9,320 6,520

Finished goods 4,300 4,440

Other information:


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i. Raw materials used Rs.78,390

ii. 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. 2,85,960

iii. Cost of goods available for sale Rs.3,25,600

iv. Selling and general expenses Rs.6,300

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 42 hours

No. of machines 8

Normal weekly loss of hours on

maintenance etc 4 hours per machine

No. of weeks worked per year 50

Estimated annual overheads Rs.3,04,000

Estimated wage rate Rs12 per hour

Actual results in respect of a 4 week period are:

Wages incurred Rs.17,000

Overheads incurred Rs.23,300

Machines used 1,200 hours

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 June 1, 2004 (Rs.) June 30, 2004 (Rs.)

Finished goods 85,000 81,000

Work-in-process 72,000 63,500

Direct materials 90,000 82,500

The following additional manufacturing data were available for the month of June 2004:

Particulars (Rs.)

Direct materials purchased 2,93,400

Purchase returns and allowances 2,600


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Transportation 2,900

Direct labor 2,68,000

Actual factory overhead 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 Rs.200

Direct labor Rs.150

Factory overhead Rs. 100 (40% fixed)

Selling overhead 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 followingbudgeted information:

Particulars25,000 units

(Rs.)

20,000 units

(Rs.)

Fixed overheads 2,00,000 2,00,000

Variable overheads 4,00,000 3,20,000

Semi-variable overheads 2,50,000 2,20,000

Sales realization 15,00,000 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


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variable costs of the companys products are as follows:

ProductVariable costs of manufacture

(per unit) (Rs.)

A

B

C

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 Rs.8,50,000

Gross profit on sales 30%

Increase in inventory during the month Rs.25,800

Increase in sundry debtors Rs.19,500

Total selling and administrative expensesRs.50,000 + 2.5% on

sales

Depreciation expenses which is included in

fixed selling and administrative expenses 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


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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.

September

2004

Rs.

Sales 20,000 30,000 40,000

Purchases 20,000 30,000 30,000

Salaries 10,000 10,000 10,000

Manufacturing and otheradministrative expenses

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 Percentage to total sales(Rs.)

Direct materials 40

Direct labor 20

Factory overheads Variable

10

Fixed 8

Selling and administrative overheads Variable

12

Fixed 06

Profit 04

Total 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


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20. Sreyi Ltd. has furnished the following data relating to a product for the year 2003

04:

Units produced 4,000

Direct materials

(Rs.)5,20,000

Direct labor (Rs.) 3,40,000

Manufacturing overheads

(Rs.)2,00,000 (25% fixed)

Selling and administrative overheads

(Rs.)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 Projected sales in units

July 2004 3,500

August 2004 3,900

September 2004 4,200

October 2004 4,500

November 2004 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)


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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 Product X Product Y

Direct labor hours per unit 4 2.5

Machine hours per unit 5 4

Number of set ups during the period 22 18

Number of orders handled during the period 16 19

Production units 6,000 4,340

Total production overhead costs for the period are as follows:

Particulars Rs.

Machine activity costs 2,40,000

Set-ups costs 56,000

Order handling costs 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 Rs.80

Labor Rs.20

Factory overheads Rs.30 (40% fixed)

Administrative overheads Rs.20 (50% fixed)

Other information:

i. The current selling price of the product is Rs.200 per unit.

ii. At 70% capacity level Material cost per unit will increase by 2% and

current selling price per unit will reduce

by 2%.

iii. At 90% capacity level Material cost per unit will increase by 5% and


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current selling price per unit will reduce

by 5%.

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 monthof June 2004.

Material usage per unit 5 kg at the rate of Rs.15 per kg

Budgeted production 1000 units

The company has furnished the following data relating to direct material for the month of

June 2004:

Materials purchased 5,400 kg at a price of Rs.86,400

Materials issued to production 4,670 kgs

Actual production 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 Standard mix Standard price per kg.

A 60% Rs. 8

B 40% Rs.10

The standard process loss is 10%. During the month of June 2004, the company produced5,000 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.

Stock as on June

30, 2004 Kg.

Purchases during June

2004

Kg. Rs.

A 120 50 3,000 24,900

B 80 30 2,500 24,000

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 Rs.1,20,000

Production 12,000 units


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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 Budget Actual

Production units 10,000 10,400

Labor hours 5,000 4,800

Fixed overheads (Rs.) 85,000 87,200

Number of working days 25 24

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) Rs.800

Fixed overheads (40 hours at the rate of Rs.15 per hour) Rs.600

The additional information is available for the month of June 2004:

i. 4,000 pumps were produced although 4,200 had been scheduled for production

ii. The normal capacity level was 1,68,000 direct labor hours per month

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. Overhead cost variance Rs.5,200 (A)

ii. Overhead volume variance Rs.3,800 (A)

iii. Budgeted hours for the month 2,500

iv. Budgeted overheads for the month Rs.20,000


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v. Rate of recovery of overheads Rs.20 per hour

The actual overhead incurred by the company is


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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 Rs.6,50,000

Fixed 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:

ParticularsSkilled

workers

Semi-skilled

workers

Unskilled

workers

i. Standard number of workers in the

gang40 30 20

ii. Standard wage rate per hour (Rs.) 20 16 10

iii. Actual number of workers employedin the gang during the week

36 20 34

iv. Actual wage rate per hour (Rs.) 32 23 8

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

The labor efficiency variance is


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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

5,000

Rs. 87,300

Rs. 40,000

Variances:

Variances Rs.

Labor rate

Labor efficiency

Labor idle time

Material price

Material usage

2,130 (A)

2,250 (F)

300 (A)

2,560 (F)

2,940 (F)

The standard prime cost per unit is

35. Consider the following details pertaining to Srikanth Ltd. for the month of June

2004:

Particulars Rs.

Sales 60,000

Direct materials 18,500

Direct labor 14,000

Variable overheads 8,000

Capital employed 1,20,000

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 5,000 units

Raw materials per unit of finished goods 4 kg

Opening stock of finished goods 675units


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Closing stock of finished goods 850units

Opening stock of raw materials 4,500 kg

Closing stock of raw materials 6,200 kg

The total quantity of materials purchased during the quarter is

37. Siva Ltd. manufacturers cabinets and outsources handles of the cabinet. Eachcabinet 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 300 cabinets

August 2004 310 cabinets

September 2004 320 cabinets

October 2004 350 cabinets

The closing inventory of the company for the month of June 2004 are as follows:

Cabinets 150

Handles 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:

ParticularsContract A

(Rs.)

Contract B

(Rs.)

Contract price 54,00,000

1,20,00,000

Materials 11,60,00

0

21,60,000

Wages paid 22,48,00

0

33,00,000

Other expenses 56,000 1,20,000

Plant at site 3,20,000 6,00,000

Unused materials at site 80,000 1,20,000

Wages accrued 72,000 1,08,000

Other expenses due 8,000 18,000

Work certified 32,00,00

0

60,00,000

Cash received 24,00,00 45,00,000


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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) Raw material issued to process 1 was 3,000 units at a cost of Rs.5 per unit.

ii) 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 Process 1 Process 2

Normal loss as a percentage of input 10% 5%

Output in units 2,800 2,600

Scrap value per unit (Rs.) 2 5

Additional components introduced (Rs.) 1,000 780

Direct wages incurred (Rs.) 4,000 6,000

Direct expenses incurred (Rs.) 10,000 14,000

Production overhead as a % of direct

wages

75 125

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 directwages 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


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Group number 5

41. The cost data pertaining to Product X of XL Ltd. are as follows:

Maximum capacity 30,000 units

Normal capacity 15,000 units

Increase in inventory 1,880 units

Variable cost per unit Rs.12

Selling price per unit Rs.50

Fixed manufacturing overhead

costs

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:

Product

Production

SalesSales value per

unit

A 600 units

B 400 units

C 500 units400

units

Rs. 70

D 600 units450

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.

Product Production Sales Cost of furtherprocessing Sales value perunit

X 600 units600

units

Rs.10,000 Rs.100

Y 400 units 300unit

Rs.25,000 Rs.200


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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 Rs.

Raw materials (September

1,2004)

6,000

Direct labor cost 25,000 (125% of factory

overhead )

Work-in-progress (September

1,2004)

7,000

Finished goods (September

1,2004)

12,000

Cost of goods sold 88,000

Selling expenses 8,500

Raw materials (September

30,2004)

6,800

Work-in-progress (September

30,2004)

6,500

Finished goods (September

30,2004)

12,800

Sales for the month 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 AB Ltd XY Ltd

Capacity utilization (%) 90 60

Sales (Rs. in lacs) 540 300

Variable costs (Rs. in

lacs)

396 225

Fixed costs (Rs. in lacs) 80 50


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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

60% of sales

value

Budgeted Fixed costs

20% of salesvalue

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 perunit

Rs.80

Variable cost perunit

Rs.35

Fixed cost Rs.5,96,000

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.

ii. Acquiring a packing machine of Rs.80,000.

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 .

ParticularsProduct

M

Product

N

Sales (Units) 80,000 1,20,000

Sale price per unit

(Rs.)20 16

Variable cost per unit 12 10


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(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 Rs. in lakh Rs. in lakh

Sales 640

Cost of sales:

Direct materials

200

Direct expenses 80

Variable

overheads

40

Fixed overheads 260

Total cost 580

Net income 60

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 threeproducts:

Particulars P (Rs.) Q (Rs.) R (Rs.)

Fixed cost 7.00 5.00 4.50

Variable cost 8.00 6.00 6.00

Total cost 15.00 11.00 10.50


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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 2002-03 (Rs.) 2003-04 (Rs.)

Sales 8,00,000 ?

P/V Ratio 50 % 37.5%

Margin of safety as % of Sales 40 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 2003-

04 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


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53. The comparative profit statement of two quarters is as below:

Particulars 1st quarter 2nd quarter

Units sold 2,500 3,750

Direct Material (Rs.) 87,500 ?

Direct wages (Rs.) 62,500 ?

Fixed and variable factory overheads

(Rs.)

75,000 95,000

Sales (Rs.) 2,75,000 ?

Profit (Rs.) 50,000 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 profitof 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

Output

(Kg.)

Additional processing

cost

after split-off point

(Rs.)

Sales value after further

process

(Rs.)

P 10,000 20,000 2,20,000

Q 3,000 20,000 1,15,000

R 6,000 17,000 1,05,000

S 4,000 50,000 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


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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 March 1, 2005 (Rs.) March 31, 2005 (Rs.)

Finished goods 1,25,000 1,17,000

Work-in-process 2,35,000 2,51,000

Direct materials 1,34,000 1,24,000

The following additional manufacturing data were available for the month of March

2005:

Particulars (Rs.)

Direct materials

purchased1,89,000

Purchase returns 1,000

Transportation 3,000

Direct labor 3,00,000

Actual factory overhead 1,75,000

The company applies factory overhead at a rate of 60% of direct labor cost and anyoverapplied 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)

Budgeted overhead

allowance (Rs.)

3,000 10,000

7,000 18,000

11,000 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%


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capacity level, which represents 4,800 chairs per month. The cost break-up

per chair is as under:

Materials Rs.62

Labor Rs.32

Overheads Rs.40 (60% fixed)

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 peroperator

200 hours

Absenteeism (without pay) 12 hours

Leave (with pay) 20 hours

Normal idle time (unavoidable) 8 hours

Average rate of wages per hour Rs.8

Estimated production bonus 10% on wages

Value of power consumed Rs.7,265

Supervision and indirect labor Rs.4,100

Electricity and lighting Rs.3,800

Repairs and maintenance per quarter 1% on value of machines

Depreciation per annum 10% on original cost

Miscellaneous expenses per annum Rs.7,200

General management expenses per annum 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


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pertaining to the costs for 3 months:

MonthBatch

Production(Units)

Material

cost

(Rs.)

Labor

cost

(Rs.)

Overhead

cost

(Rs.)

Total

labor

hours

April 2005 2,500 12,5005,00

024,000 8,000

May 2005 3,000 18,0006,00

018,000 9,000

June 2005 2,000 10,0004,00

030,000 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:

Department Allocation BaseProduct

A

Product

B

Product

C

Overhead

costs

Production Machine Hours 1,000 2,000 500 Rs.14,00,000

Purchasing Purchase Orders 100 300 150 Rs. 5,00,500

Inspection Labor Hours 200 200 200 Rs. 3,00,000

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 - Rs.10 per unit

Direct labor - Rs. 6 per unit

Variable overhead - Rs. 3 per unit


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Fixed overhead - Rs. 4 per unit

Budgeted production - 12,000 units

Actual production - 10,000 units

There is no overhead spending variance

Sales - 9,000 units

Selling price - 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

Overhead costs (Rs.)

P1 13,600

P2 14,700

P3 12,800

S1 9,000

S2 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:

Department

P1 P2 P3 S1 S2

S1 40% 30% 20% - 10%

S2 30% 30% 20% 20% -

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 Rs.

Manufacturing overheads 13,84,000

Manufactured overheads

applied

14,00,000

Work-in-progress 3,00,000

Finished goods 8,00,000

Cost of goods sold 9,00,000


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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:

DepartmentEmployee

s Sq.ft

Costs

Rs.

Direct

Hours

Allocation

Base

Personnel 3 1,00

0

1,80,000 Employees

Cleaning 5 2,22,750 Square

feet

Operating Dept.

A

30 3,75

0

25,00,00

0

45,00

0

Hours

Operating Dept.

B

10 3,00

0

30,00,00

0

27,00

0

Hours

Using the Step Method to allocate Personnel Department and Cleaning Departmentcosts, 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 Units

Opening work-in-process (March 01, 2005)1,28

0

Introduced in production during March 20057,20

0

Closing work-in-process (March 31, 2005) 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 Rs.

Opening work in process:

Materials 20,500

Conversion 16,350

During the month:

Materials1,12,83

0


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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 themanufacturing process, when some units are separated out as inferior quality.

The following data are available for the month of March 2005:

Material costs Rs.36,000

Conversion costs Rs.19,500

Units introduced 8,000

Units completed 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 byquality 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 500 units

Work-in-process Rs.7,450

Raw materials Rs.16,120

The following data are available as on March 31, 2005

Indirect labor Rs.16,100

Freight in Rs.7,500

Direct labor Rs.43,240

Raw material Rs.6,490

Factory overhead expenses Rs.31,300


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Work-in-process Rs.6,800

Sales (15,000 units) Rs.3,60,000

Indirect material Rs.25,500

Total manufacturing costs incurred 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 10,000 units (Rs.) 8,000 units (Rs.)

Fixed overheads 1,50,000 1,50,000

Variable overheads 50,000 40,000

Semi-variable overheads 1,00,000 88,000

Sales realization 8,00,000 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 non-

recoverable.

The total amount of sales commission for the month of June 2005 is

Cec Case Study of 20 Marks

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