Costing

1.Materials
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A company manufactures 5,000 units of a product per month. The cost of
placing an order is Rs. 100. The purchase price of the raw material is Rs. 10 per
2.25 5 kg. ………………………………………………….(v) Average stock level.

A company manufactures a product from a raw material, which is purchased at

Rs. 60 per kg. The company incurs a handling cost of Rs. 360 plus freight of
2.27 6 Rs. 390 per order. ……………………….. price of raw materials should be
negotiated?
The quarterly production of a company's product which has a steady market is
2.28 7 20,000 units. Each unit of a product requires 0.5 kg. of raw material
…………….........taking EOQ also into consideration.
The following are the details of receipts and issues of a material of stores in a
manufacturing company for the period of three months ending 30th June, 2014
2.44 20 …………………………………..You are required to prepare a Stores Ledger
Account.

2.Labour
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X Y Z Ltd. wants to ascertain the profit lost during the year 2013-14 due to
3.23 5 increased labour turnover ……………………… increased labour turnover
during the year 2013-14.
The management of a company wants to formulate an incentive plan for the
3.38 18 workers with a view to increase productivity. ………………………. and
Emerson’s efficiency plan.
A, B and C are three industrial workers working in Sports industry and are
3.43 21 experts in making cricket pads. ………………………… weekly earnings of all
the three workers.
Calculate the earnings of A and B from the following particulars for a month
3.47 24 and allocate the labour cost to each job X, Y and Z:
…………………….Overtime was done on job Y.

3.Overheads
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In a factory, a machine is considered to work for 208 hours in a month. It
4.12 1 includes maintenance time of 8 hours and set up time of 20 hours.
………………………. (a) set up time, and (b) running time.
 A manufacturing unit has purchased and installed a new machine of Rs.
4.14 2 12,70,000 to its fleet of 7 existing machines ………………………(b) setting
up time is productive.
PQR manufacturers – a small scale enterprise produces a single product and
4.28 10 has adopted a policy to recover the production ……………………the
unabsorbed overheads over the items.
E-books is an online book retailer. The Company has four departments. The
two sales departments are Corporate Sales and Consumer Sales.
4.31 12 ……………………………the reciprocal allocation method.

ABC Ltd. has three production departments P1, P2 and P3 and two service
4.34 13 departments S1 and S2. ………………………… and direct labour cost is Rs.
375.

4.Non-integrated Accounts
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As of 31st March, 2014, the following balances existed in a firm’s cost ledger,
5.17 4 which is maintained separately on a double entry basis: ………………….. Trial
Balance at the end of the quarter.
BPR Limited keeps books on integrated accounting system. The following
5.25 8 balances appear in the books as on April 1, 2013. ……………………… BPR
Limited and prepare a Trial balance.
ABC Ltd. has furnished the following information from the financial books for
5.39 13 the year ended 31st March, 2014: …………………… profit shown in
Financial accounts.
A manufacturing company has disclosed net loss of Rs. 48,700 as per their cost
5.49 18 accounting records for the year ended 31st March, 2014.
………………………… Account by taking costing loss as base.

5.Job Costing & Batch Costing

Nil
6.Contract Costing
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Arnav Construction Ltd. commenced a contract on November 1, 2012. The
7.7 1 total contract was for Rs. 39,37,500. ……………………
……………………………………. Costing Profit & Loss A/c.
Paramount Engineers are engaged in construction and erection of a bridge
7.9 2 under a long-term contract ……………………. …………
…………………………….completed contract as at 31.03.2014.
Modern Construction Ltd. obtained a contract No. B-37 for Rs. 40 lakhs. The
following balances and information relate to the contract ……………………
7.12 4 …………………………….. (iii) Balance Sheet.
 SB Constructions Limited has entered into a big contract at an agreed price of
Rs. 1,50,00,000 subject to an escalation clause ……………………………
7.17 8 …………... ……………………………and labour related to the contract are
Rs.13,45,000.

From the following particulars compute a conservative estimate of profit by 4

7.23 11 methods on a contract which has 80 percent complete:
…………………………………………… Cash received 8,16,000.

7.Operating Costing
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A Mineral is transported from two mines – 'A' and 'B' and unloaded at plots in
8.4 3 a Railway Station. Mine A is at a distance of 10 km. ……………….
………………………….mineral from each mine.
A transport company has a fleet of three trucks of 10 tonnes capacity each
8.8 5 plying in different directions for transport of customer's goods
…………………………………. yield a profit of 10% on freight.
In order to develop tourism, ABCL airline has been given permit to operate
8.24 12 three flights in a week between X and Y cities (both side).
…………………………….. proposal should be implemented or not.
A company runs a holiday home. For this purpose, it has hired a building at a
8.27 14 rent of Rs. 10,000 per month alongwith 5% of total taking
…………………………. be charged for each type of suite.

8.Process & Operation Costing

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Following information is available regarding process A for the month of
February, 2014: ………………………………………………………. (iv)
9.4 1 Process Cost Account for Process A.

Following details are related to the work done in Process ‘A’ of XYZ Company
9.13 5 during the month of March, 2014: ……………………………….. and
Abnormal Loss Accounts.
JK Ltd. produces a product “AZE”, which passes through two processes, viz.,
9.22 8 process I and process II. …………………..
…………………………………….the case may be for each process.
Following information is available regarding Process A for the month of
9.29 12 October 2013: ………………..…………. (iv) Process- A Account.

9.Joint Products & By-Products

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The Sunshine Oil Company purchases crude vegetables oil. It does refining of
10.8 2 the same. The refining process results in four products ………………….. you
recommend on operating profits.
 A company’s plant processes 1,50,000 kg. of raw material in a month to
10.19 5 produce two products, viz, ‘P’ and ‘Q’. ………………….Will you recommend
further processing?
A company produces two joint product X and Y, from the same basic
10.24 7 materials. The processing is completed in three departments.
…………………. products should be further processed or not.

10.Standard Costing
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KPR Limited operates a system of standard costing in respect of one of its
11.12 2 products which is manufactured within a single cost centre.
……………………. Calculate the Bonus amount.
Compute the sales variances (total, price and volume) from the following
11.18 6 figures: ……………………………. S 1000 100 800 105.

The standard labour employment and the actual labour engaged in a 40 hours
11.22 9 week for a job are as under: …………………….. (iii) Labour Idle Time
Variance.
Following are the details of the product Phomex for the month of April 2013:
11.24 10
……………………………. (iii) Material Cost Variance.
SP Limited produces a product 'Tempex' which is sold in a 10 Kg. packet. The
standard cost card per packet of 'Tempex' are as follows:
11.25 11 …………………………………. (viii) Fixed Overhead Cost Variance

11.Marginal Costing
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A Company sells two products, J and K. The sales mix is 4 units of J and 3
12.8 5
units of K. ……………….. Compute the break-even point.
MNP Ltd sold 2,75,000 units of its product at Rs. 37.50 per unit. Variable costs
12.9 7 are Rs. 17.50 per unit ……………………… Assume 40% corporate Income
Tax rate.
The following figures are related to LM Limited for the year ending 31st March,
12.11 9 2014 : …………………………. Break-even Point is to be brought down by
4,000 units.
SHA Limited provides the following trading results: ……………………… (v)
12.19 14 Margin of Safety at a profit of Rs. 2,70,000.

ABC Ltd. can produce 4,00,000 units of a product per annum at 100% capacity.
12.31 21 The variable production costs are ……………………… (ii) On the basis of
absorption costing.
 12.Budgets and Budgetary Control
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Calculate efficiency and activity ratio from the following data: ……………….
13.12 3
Standard Time per unit = 4 hours.
Jigyasa Ltd. is drawing a production plan for its two products Minimax (MM)
13.15 6 and Heavyhigh (HH) for the year 2013-14 …………………. Prepare
production budget for the first quarter in monthwise.
Concorde Ltd. manufactures two products using two types of materials and one
13.17 8 grade of labour. …………………….. showing the quantities and values, for
the next month.
RST, Limited is presently operating at 50% capacity and producing 30000 units.
The entire output is sold at a price of ……………………………. activity and
13.2 9 find out the profits at respective levels.
 Financial Management
1.Time Value of Money
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Calculate if Rs. 10,000 is invested at interest rate of 12% per annum, what is
the amount after 3 years if the compounding of interest is done?
2.3 1 ………………………………………………….. (iii) Quarterly.

A company offers a fixed deposit scheme whereby Rs. 10,000 matures to Rs.
2.5 3 12,625 after 2 years, on a half-yearly compounding basis. ………………
………………...the revised maturity value?
A doctor is planning to buy an X-Ray machine for his hospital. He has two
2.5 4 options. He can either purchase it by making a cash payment …………….
……………….discount for six years is 4.111.
2.Cost of Capital
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A Company issues Rs. 10,00,000 , 12% debentures of Rs. 100 each. The
4.8 1 debentures are redeemable after the expiry of fixed period of 7 years.
………….. the cost of debentures, if issue is at par?
A company issued 40,000, 12% Redeemable Preference Share of Rs. 100 each
4.11 4 at a premium of Rs. 5 each, redeemable after ……………. share capital
ignoring dividend tax.
The following is the capital structure of a Company: Source …………………
4.27 11
capital on the basis of market value weights.
The capital structure of a company as on 31st March, 20X5 is as follows:
4.28 12 ………………………… weighted average cost of capital of the company?

The capital structure of a company consists of equity shares of Rs. 50 lakhs;

4.3 14 ………………………. Weighted Average Cost of Capital (WACC).

3.Capital Structure
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Calculate the level of earnings before interest and tax (EBIT) at which the EPS
indifference point between the following financing alternatives will occur.
4.4 1 ………….. par value of equity share is Rs. 10 in each case.

There are two firms P and Q which are identical except P does not use any
4.42 3 debt in its capital structure while Q has ……………….. firms according to
MM Hypothesis.
 D Ltd. is foreseeing a growth rate of 12% per annum in the next two years.
4.45 7 The growth rate is likely to be 10% ……………….. P.V. Factor 0.862
0.743 0.641 0.552 .
A Company earns a profit of Rs. 3,00,000 per annum after meeting its Interest
4.46 8 liability of Rs. 1,20,000 on 12% debentures ……………. (ii) Advise the
company as to which source of finance is preferable.
The management of Z Company Ltd. wants to raise its funds from market to
4.49 10 meet out the financial demands of its long-term projects. ………….. Also
indicate if any of the plans dominate.
4.Leverages
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Consider the following information for Omega Ltd.: …………………. in
4.55 1
earnings per share, if sales increase by 5%.
A Company had the following Balance Sheet as on March 31, 2006:
4.63 11
……………… (iv) Combined Leverage.
Z Limited is considering the installation of a new project costing Rs. 80,00,000.
4.67 14 ……………………… (ii) Determine the likely level of EBIT, if EPS is Rs. 4,
or Rs. 2, or Zero.
The following details of RST Limited for the year ended 31st March, 2015 are
4.69 15 given below: ……………. Earning before Tax (EBT) of the company will be
equal to zero?
From the following financial data of Company A and Company B: Prepare
4.7 16 their Income Statements. ……………………. Sales - 1,05,000.

The Capital structure of RST Ltd. is as follows: ……………….. (iv) The Net
4.76 20
Fund Flow.
5.Capital Budgeting
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A company is required to choose between two machines A and B. The two
6.13 5 machines are designed differently …………………..PVIF 0.10, 1 = 0.9091,
PVIF0. 10, 2 = 0.8264, PVIF0. 10, 3 = 0.7513.
Given below are the data on a capital project 'M'. ……………………. 4 year
6.19 10 0.572 0.592 0.613 0.636 .

A firm can make investment in either of the following two projects. The firm
anticipates its cost of capital to be 10% ……………………. (iii) Explain the
6.35 17 inconsistency in ranking of two projects.

WX Ltd. has a machine which has been in operation for 3 years. Its remaining
6.37 18 estimated useful life is 8 years …………………. provided here is on the basis
of correct word i.e. ‘Labour cost per hour’.
XYZ Ltd. is planning to introduce a new product with a project life of 8 years.
6.46 22 The project is to be set up in Special Economic Zone (SEZ), ………………
The PV factors at 12%.
 C Ltd. is considering investing in a project. The expected original investment in
6.48 23 the project will be Rs. 2,00,000, ………………….. (iii) Calculate internal rate
of return.
6.Working Capital Management
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The following annual figures relate to MNP Limited: ……………………
7.17 9
Ignore work-in-progress.
A proforma cost sheet of a Company provides the following data:
7.2 11
…………….. wages and overheads accrue similarly.
Following information is forecasted by the CS Limited for the year ending 31st
7.24 13 March, 2010: ……………….. (iii) Amount of working capital requirement.

A company is presently having credit sales of Rs. 12 lakh. The existing credit
terms are 1/10, net 45 days and average collection period is 30 days
7.76 13 …………….. Should the company change its credit terms? (Assume 360 days
in a year).
A company currently has an annual turnover of Rs. 50 lakhs and an average
7.81 17 collection period of 30 days. ……………………. A year may be taken to
comprise of 360 days.
RST Limited is considering relaxing its present credit policy and is in the
process of evaluating two proposed polices. ………………………..Bad debt
7.84 20 losses (Rs.) 7.5 22.5 47.5 .

7.Ratio Analysis
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JKL Limited has the following Balance Sheets as on March 31, 2015 and
3.16 3 March 31, 2016: ……………………… (ii) Give a brief comment on the
Financial Position of JKL Limited.
MN Limited gives you the following information related for the year ending
3.2 5 31st March, 2016: …………………… (v) Price-Earning Ratio.

The following accounting information and financial ratios of M Limited relate

3.25 8 to the year ended 31st March, 2016 : ………………. (viii) Current Liabilities.

The following accounting information and financial ratios of PQR Ltd. relate
3.28 9 to the year ended 31st December, 2015: …………………. the Balance Sheet
as on 31st December, 2015.
The assets of SONA Ltd. consist of fixed assets and current assets, while its
3.32 10 current liabilities comprise bank credit in the ratio of 2 : 1 ……………….
Assume 360 days in a year.
 8.Fund Flow & Cash Flow Statements
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Balance Sheet of OP Ltd. as on 31st March, 20X7 and 20X8 are as follows
3.44 3
…………….. (ii) Funds flow statement.
The financial statement and operating results of PQR revealed the following
position as on 31st March, 20X6: …………………… (ii) Prepare the fund
3.5 5 flow statement for the year ended 31st March, 20X7.

Balance Sheets of RST Limited as on March 31, 20X8 and March 31, 20X9 are
3.54 6 as under: ……………. (b) Fund Flow Statement for the year ended March 31,
20X9.
The Balance Sheet (extract) of X Ltd. as on 31st March, 20X7 is as follows:
3.72 12 ……………………. (ii) Prepare projected Cash Flow Statement in
accordance with AS-3.
Balance Sheets of a company as on 31st March, 20X7 and 20X8 were as
3.76 13 follows: …………………… (ii) Schedule of Changes in Working Capital.

All the very best………...

No one can separate the best pair in this world –

“SUCCESS and HARD WORK”

- CA Krishna Korada