GLS UNIVERSITY S FACULTY OF COMMERCE B.COM. SECOND YEAR SEMESTER IV COST ACCOUNTING 2 Objective Questions

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1 GLS UNIVERSITY S FACULTY OF COMMERCE B.COM. SECOND YEAR SEMESTER IV COST ACCOUNTING 2 Objective Questions UNIT I MARGINAL COSTING AND CVP Q.1. Multiple Choice Questions: 1. A company manufactures and sells a single product, which has a variable cost of 40 per unit and a contribution to sales ratio of 40%. Monthly fixed costs are 14,40,000. What is the monthly BEP (in units)? (A) 36,000 (B) 40,000 (C) 60,000 (D) 90, Contribution = (A) Selling Price + Variable Cost (B) Selling Price Variable Cost (C) Fixed Cost + Variable Cost (D) Selling Price Fixed Cost Variable Cost 3. A company has calculated its margin of safety as 20% on budgeted sales and budgeted sales are 5,000 units per month. What would be the budgeted fixed costs if the budgeted contribution was 25 per unit? (A) 1,00,000 (B) 1,25,000 (C) 1,50,000 (D) 1,60, A company wishes to make a profit of 7,50,000. It has fixed costs of 3,75,000 with a C/S ratio of 75% and a selling price of 150 per unit. How many units would the company need to sell in order to achieve the required level of profit? (A) 10,000 (B) 15,000 (C) 22,500 (D) 30, If P/V ratio is 50%, margin of safety is 40% and sales is 5,00,000, fixed costs will be of how much rupees? (A) 3,50,000 (B) 2,50,000 (C) zero (D) 1,50,000 1 P age

2 6. The costing method which shows relationship between Cost, Sales volume and Profit is called (A) Break even point (C) Margin of Safety (B) Cost-Volume-Profit Analysis (D) Contribution 7. If fixed expenses are 1,20,000, Variable expenses per unit are 12 and break even point is 10,000 units, then what will be the selling price per unit? (A) 12 (B) 24 (C) 36 (D) All the above 8. Sales units 30,000; Fixed Expenses 5,40,000; Break even sales units 18,000 If sales price per unit is 70, calculate variable expenses per unit. (A) 50 (B) 40 (C) 35 (D) Variable expenses 6 per unit, Selling price 10 per unit and fixed cost 60,000 of a company. If the company wants to earn 15% profit on sales, then what should be the sales? (A) 2,40,000 (B) 6,00,000 (C) 2,00,000 (D) None of the above 10. Variable cost is 20 per unit and fixed cost is 40,000. If break even point is reduced to 2000 units, find out the new selling price per unit. (A) 10 (B) 20 (C) 30 (D) 40 Q.2. Do as directed: 1. If P/V Ratio is 40%; Profit 28,000 (20% of Sales), then BEP =. ( 70,000) 2. Margin of Safety = Actual Sales -. (BEP Sales) 3.Contribution = Fixed Cost +. (Profit) 4.The technique of costing which finds out the effects of changes in volume of output on profitability is called costing. (Marginal) 5. Contribution received at BEP =. (Total Fixed Cost) 6.Profit = Sales Variable Cost (False) 7. Profit/Volume Ratio is also known as Contribution to Sales Ratio. (True) 2 P age

3 8.Absorption Costing is the system in which all variable and fixed costs are included to ascertain the total cost of production. (True) 9. shows what each unit contributes towards fixed costs and profit. (Contribution) 10. is that volume of output at which neither a profit is made nor a loss is incurred. (BEP) Q.3. Answer the following: 1. Variable cost is 42, selling price is 50. For manufacture of one unit 2kgs of raw material is used. Find the contribution per kg. of material. ( 4) 2. Selling Price is 8 per unit, variable cost is 6 per unit, fixed cost is 12,000. Calculate the sales required to earn a profit of 4,000. ( 64,000) 3. The cost of production of an item is as follows: Materials 100, Wages 150, Variable cost per unit 150% of wages, Fixed cost 50,000. If sales price of a unit is 500, then find the BEP. (2,000 units) 4. The following information is supplied in respect of a factory: Total Variable costs 50,000 Total Fixed Expenses 90,000 Sales 2,00,000 Calculate BEP. ( 1,20,000) 5. The following information is obtained from the records of XYZ Ltd: Month Sales (in units) Profit or Loss February 600-1,200 March ,400 The selling price per unit is 120. Calculate Fixed Overheads. ( 30,000) 3 P age

4 UNIT II STANDARD COSTING AND VARIANCE ANALYSIS Q.1. Multiple Choice Questions: 1. The efficiency variance is also known as (a) Spending variance (b) Quantity variance (c) Rate variance (d) Budget variance 2. The standard which can be attained under the most favorable conditions possible is known as (a) Basic standard (b) Ideal standard (c) Current standard (d) Future standard 3. The purchase department manager is usually held accountable for (a) Material price variance (c) Labour Efficiency Variance (b) Material Usage variance (d) Fixed overhead Budget Variance 4. Which variance is always an adverse variance? (a) Labour Idle Time Variance (c) Material Mix Variance (b) Material Price Variance (d) Labour Efficiency Variance 6. Which of the following statement is correct? (a) Material usage variance is always adverse. (b)for material usage variance only purchase dept. is responsible (c) When 50 male are engaged in Production of article - A, Labour mix variance is calculated (d) LCV= LRV+ LEV 7. Fixed overheads budget variance is (a) Difference between total budgeted fixed overheads and actual fixed overheads (b) Difference between total budgeted production and actual production (c) Difference between total budgeted production capacity and total actual production capacity (d) Difference between budgeted efficiency s and actual efficiency of workers 8. Total Sales Margin Variance is a difference between (a) Actual profit and budgeted profit (b)actual labour cost and standard labour cost (c)actual overheads and budgeted overheads (d)actual sales value and standard sales value 9. Budgeted Fixed overhead is.6, 000 for the month of March. Actual days worked are 26 and budgeted days are 25. The Calendar Variance is 4 P age

5 (a) 240 (F) (b) 240 (U) (c) 6240 (F) (d) 25 (U) 10. Which of the following statement is correct? (a) For Material usage variance is always adverse. (b) For material usage variance only purchase dept. is responsible (c) When 50 male are engaged in Production of article - A, Labour mix variance is calculated (d) LCV= LRV+ LEV Q.2. Do as directed: 1. Difference between standard and actual cost is known as Variance. 2. A standard, which set for a long period, is called Basic Standard. 3. A standard based on most desirable condition of performance is known as an Ideal Standard. 4. A standard based on normal conditions of performance is called Normal Standard. 5. A technique which takes in to account total cost of running the enterprise and used with standard costing is known as Standard Absorption Costing. 6. A technique which takes in to account only variable cost of a business and used with standard costing is known as Standard Marginal Costing. 7. The cost account consolidates the information about standards cost of each element and presents them in the card is known as Standard Cost Card. 8. State True or False: Theft an pilferage of materials is one of the causes of Materal Usage Variance. TRUE. 9. State True or False: Loss of discount due to purchase of material in smaller quantity is one of the reasons for Material Price Variance. TRUE 10. State True or False: When two or more skilled workers are involved in production Labour Mix Variance is calculated. False. Q.3. Answer the following: 1. The standard material cost per unit for a product is : 20 liters at Rs. 2.5 per litre. Last month the actual price paid for 24,000 litres for material used was 4 % above. No stock of material was held. Calculate adverse direct Material Price Variance for last month. Ans: -2400(U) 2. Material Usage variance is -30 (U), Material Cost variance is -66(U). Standard quantity is 30 kgs and actual material quantity is 36 kgs. What will be price per actual material quantity per Kg.? Ans: Rs kg of material required for 8 kg of production. Standard price of material is 2.00 per kg.actual production 2,400 kgs. Material used 2,900 kgs, Cost of material used -Rs. 8,700. Find Material price and Material Usage Variance. 5 P age

6 Ans: -2900(U), +200(F) 4. From the following information calculate Variable Overhead Efficiency Variance. Budgeted Actual Variable Overheads Rs. 80,000 Rs.76,000 Labour Hours 8,000 8,200 Production(Units) 4,000 4,200 Ans : +2000(F) 5. The fixed overheads is Rs. 62,400 as per annual budget of a factory and the number of working days are 312. The production of 62,400 units has been fixed for the year. The number of working days in May are 24. Calculate Calendar Variance for the month of May. Ans: -400(U) 6 P age

7 UNIT III OPERATING COSTING AND CONTEMPORARY CONCEPTS IN COSTING Q.1. Multiple Choice Questions: 1. Which of the following cost unit is adopted by Goods Transport Co.? (a) per ton (b) per trip (c) per ton km (d) per km 2. Operating costing is not applicable to- (a) Gujarat State Transport Co. (b) Hotel Marriot (c) Vadilal Sarabhai Hospital (d) Oil and Natural Gas Co. 3. Cost per passenger km is Re Distance between two cities is 100 km. Profit expected is 50% of fare income. What will be the bus fare? (a) 50 (b) (c) 25 (d) Driver s Tiffin allowance is which type of expenses for Operating Costing? (a) Variable expense (b) Material expense (c) Salary expense (d) Fixed expense 5. The following details are obtained from Kamal Transport Company. Find out total tonnekilometers: Total actual kms during the month 1,000 No. of trips 20 Total load carried 180 tonnes (a) 3,600 (b) 20,000 (c) 1,80,000 (d) 9, Target cost = (a) Target Selling Price Target Profits (b) Target Profits Target Selling Price (c) Target fixed cost Target variable cost (d) Target expense + Target income 7. involves designing a product from different angles at a lower cost by reviewing the functions needed by customers from the product. (a) Value engineering (b) Product engineering (c) Sales engineering (d) Quantity engineering 8. Under Activity Based Costing, the valuation is more accurate than with conventional method. (a) Stock (b) Cost (c) Price (d) Market 9. A relevant cost is 7 P age

8 (a) an opportunity cost (b) a sunk cost (c) a notional cost (d) none of the above 10. There are certain costs which are not necessary to be taken into consideration while selecting an alternative by management are called- (a) Relevant costs (b) Unavoidable costs (c) Irrelevant costs (d) Avoidable costs Q.2. Do as directed: 1.Consumption of material is mainly not considered in determining the cost under operating costing. (True) 2. Operating Costing is applicable to service industry only. (True) 3. In a Sugar Industry, operating costing is used. (False) 4. Oil Company is not included in operating industry. (True) 5. Diesel/petrol charges are included as variable expenses in Operating Costing. (True) 6. Under Costing, the stock valuation is more accurate than with conventional method. (Activity Based) 7. ABC is a system of attribution to cost units on the basis of benefit received from the indirect activities. (cost) 8. The cost driver for Perpetual inventory is value of checked. (Inventory) 9. A relevant cost is an cost. (opportunity) 10. The cost which is already incurred or committed and which does not change with different alternatives is called cost. (Sunk) 8 P age Q.3. Answer the following: 1. Show unit of cost in the following service company: (a)gas company (b) Canteen (c) Electricity Company (d) Water Company ((a)gas company- per cylinder (b) Canteen per cup of tea (c) Electricity Company per unit/kilowatt (d) Water Company-per 1,000 litres)

9 2. No. of buses 5 Days operated in the month 25 Daily round trips of each bus 4 Distance between two places 20kms Capacity of the bus 50 passenger Normal passengers travelling 90% of the capacity Find out Passenger kms and Total kms (Passenger kms 9,00,000 and Total kms 20,000) 3. Find out passenger km fare for a city bus of one transport company from the following information: Km Passengers 1 10, , ,000 Total expenditure 50,000 Profit per passenger kilometer 20 paisa is expected Show fare rate of each passenger per kilometer. (Passenger km fare 0.70) 4. Mention the various stages of life cycle of a product. (Introduction, Growth, Maturity and Decline Stage) 5. Mention the 3 methods of Establishment of Target Costs (Subtraction, Addition and Joint/Integrated Method) 9 P age

10 UNIT IV PROCESS COSTING AND RELEVANT COSTING: Q.1. Multiple Choice Questions: 1.Process Costing Is Not Implemented in...industry. (a) Soap (b) Dairy (c) Rubber (d) Construction is not related to process costing. (a) Escalation (b) By Product (c) Inter Process Profits (d) Abnormal Gain. 3.In a process 2000 units are introduced, normal loss is 5% of input then units of abnormal loss will be... (a) 100 (b) 250 (c) 300 (d) Degree of completion of Normal wastage is always...% (a) 0 (b)100 (c) 50 (d) If degree of completion of abnormal loss is not given we have to take it as... % (a) 0 (b) 100 (c) 50 (d) 75 6.Degree of competion of abnormal Gain is always taken as...% (a) 0 (b) 100 (c) 50 (d) Units introduced is 1000, actual Production is 850 units, Normal wastage is 10% of input. abnormal wastage is... units. (a) 150 (b) 100 (c) 50 (d) Production Cost of Process is Rs The profit added is if 20% on transfer price or 25% on production cost.... and... will be the profit. (a) 6250, 6250 (b) 5000, 5000 (c) 6250,5000 (d) 5000, One may Use "... Columnar Method" to calculate the unrealized profit in stocks. (a) One (b) Two (c) Three (d) Four. 10. Actual Profit is Inter process profit in opening and closing stock is 2000 and 3000 respectively. Apparent profit is... (a) (b) (c) (d) Q.2. Do as directed: 1. Carriage outward is shown in process accounts as... (selling and distribution expense) 10 P age

11 2.Per Unit cost of normal output is always equal to per unit cost of... (abnormal Loss or Gain) 3... is unavoidable kind of loss in Process. (Normal Loss) 4 In process account Normal loss is debited to...(process account) 5. In process account abnormal loss is debited to...(profit and loss account) 6.Combined Product means...(production of two equally important Items) 7.By Product means...(product is less important than main Product) 8. If some additional material is introduced in process we have to prepare... materials columns in statement of equivalent production. (Two) 9.There cannot be abnormal loss and... in same process. (abnormal gain) 10.For calculating cost per unit of material cost of... is subtracted from material cost. (cost of normal loss) Q.3. Answer the following: 1.Production of process is 2125 units. Normal Wastage is 10% Abnormal Wastage is half of Normal wastage. Calculate units introduced. (Ans Units) units are input at a cost of Rs Normal loss is 10%. Each unit carries a scrap value of Rs.10. actual output is 3640 units. Calculate Cost of abnormal gain. (Ans. 40 units x18 =Rs.720) 3.Units Input in Process 1 is Units. Normal loss is 8% of Input. Actual production is 5400 Units. Calculate abnormal wastage. (Ans.: 120 Units) 4.Find Apparent profit for the Process from the following data Inter process profit in Opening Stock Rs Inter process profit in Closing Stock Rs P age

12 Actual Profit Rs (Ans: 20800) 5.Department 1 began the month with 1000 units in process, completed 2400 and closed with 1600 units in process. Calculate the units introduced during the month. (Ans.:3000 Units) 12 P age