5. | (a) | In each of the following one of them is correct. Indicate the correct answer. | 1x12 | |
| | (i) | Prime cost may be correctly termed as (a) | The sum of direct material and labour cost with all other costs excluded. | (b) | The total of all cost items which can be directly charged to product units | (c) | The total costs incurred in producing a finished unit | (d) | The sum of the large cost terms in a product cost. | | | (1) |
| | (ii) | Which of the following does not usually appear on a GRN? (a) | Date received | (b) | Quantity received | (c) | Price of goods | (d) | Description of goods. | | | (0) |
| | (iii) | From the following data production overhead absorption rate, as a percentage of prime cost: Direct material cost: Rs. 3,000 Direct labour cost: Rs. 5,000 Direct expenses: Rs. 2,000 Production overhead: Rs. 20,000 (a) | 200% | (b) | 50% | (c) | 250% | (d) | 40% | | | (0) |
| | (iv) | Which of the following methods of remuneration is most likely to give stability of earnings to employee and stability of labour cost to employer: (a) | Straight piecework | (b) | Premium bonus schemes | (c) | Measured day work | (d) | Group bonus scheme. | | | (0) |
| | (v) | Vacation pay for factory workers should be charged to (a) | Work–in–process inventory | (b) | Direct labour | (c) | Administrative expense | (d) | Factory overhead | | | (0) |
| | (vi) | Apportionment of overhead cost may be defined as: (a) | Charge to a cost centre of an overhead cost item with no estimation. | (b) | Charge each cost centre with a share of an overhead cost using an appropriate basis to estimate the benefit extracted by each cost centre. | (c) | Charge to cost units for the use of an overhead cost. | (d) | Classification of overhead cost as fixed or variable. | | | (0) |
| | (vii) | Which of the following indicates a breakeven point? (a) | Sales revenue – variable cost. | (b) | Profit = fixed cost + variable cost | (c) | Contribution = fixed cost | (d) | Contribution + fixed cost = profit. | | | (0) |
| | (viii) | A factory operates on 300 days. It runs on 3 shifts of 7 hours each. Normally one hour everyday is spent on normal repair work. The number of hours for computation of machine hour rate will be: (a) | 6000 hours | (b) | 6300 hours | (c) | 2100 hours | (d) | 6600 hours. | | | (0) |
| | (ix) | Existing sales are Rs. 1,00,000 (500 units), variable costs are Rs. 60,000 & fixed costs are Rs. 24,000. If selling price is reduce by 10%, the break–even sales of the company will be (a) | 400 units | (b) | 334 units | (c) | 500 units | (d) | 450 units. | | | (0) |
| | (x) | Margin of Safety is: (a) | Fixed cost—Variable Cost | (b) | Contribution—Fixed Cost | (c) | BEP Sales—Variable Cost | (d) | Sales—BEP Sales. | | | (1) |
| | (xi) | In situation of increasing price, the valuation of closing stock is less under: (a) | FIFO | (b) | LIFO | (c) | Simple average | (d) | Weighted average. | | | (0) |
| | (xii) | An increase in fixed cost will result in (a) | A decrease in P/V Ratio | (b) | Decrease in contribution per unit | (c) | Increase in break even level | (d) | Increase in profit. | | | (0) |
| (b) | State with reasons whether the following statements are true or false: | 2x9 | |
| | (i) | Under LIFO method, price of issues is close to current market price. | | (0) |
| | (ii) | Price rate system is useful when the quality of the product is extremely important. | | (0) |
| | (iii) | Variable cost per unit will not change. | | (0) |
| | (iv) | Cost centre is sometimes known as cost unit. | | (0) |
| | (v) | Abnormal costs are controllable. | | (0) |
| | (vi) | All overheads change with change in volume and in the same proportion. | | (0) |
| | (vii) | All packing materials are indirect, hence treated as factory overheads. | | (0) |
| | (viii) | Target cost is a product cost arrived at after deducting desired profit from the selling price prevailing in the market. | | (0) |
| | (ix) | Just in time means to complete all work just in time, without keeping anything pending for the next day. | | (0) |
6. | (a) | ABC Ltd. furnished information in relation to the production of 2,000 units of product "X" for the year 2007. | Rs. | (i) (ii) (iii) (iv) (v) (vi) | Direct materials Direct labour Indirect wages (50% fixed) Consumable Stores (70% variable) Office rent (100% fixed) Selling expenses (40% variable) | 2,00,000 1,50,000 40,000 30,000 60,000 80,000 |
In the year 2008, it is estimated that the production will increase by 50%. The price of material and labour will up by 10% and 20% respectively. Compute selling price per unit of product "X" for the year 2008, if the company wishes to maintain the profit @ 10% on cost. | 7 | (0) |
| (b) | Write note on "Idle Time". | 3 | (0) |
7. | (a) | A Contractor uses labour groups of two skilled and three unskilled workers to do small contract jobs. The contractor wishes to charge the work done by this group on an hourly basis. The information for the group is as follows: | One Skilled Worker | One Unskilled Worker | Working hours per week Normal idle time | 40 10% of working hours Three weeks on full pay plus bonus of Rs. 2000 per annum | 40 10% of working hours Three weeks on full pay | Wages rate per hour Food Allowance per working week Lodging allowance per working week Non–contributory pension fund—employer’s payment per annum | Rs. 24 Rs. 120 Rs. 180 Rs. 1,060 | Rs. 16 Rs. 80 Rs. 120 — |
You are required to calculate labour hour rate for the group, assuming fifty–two weeks per year. | 6 | (0) |
| (b) | Write note on "Cost–Volume–Profit (CVP) Analysis. | 4 | (0) |
8. | (a) | Calculate Economic order quantity from the following: Annual Requirement Price per kg. Ordering Cost Inventory Holding Cost | 16000 kg. Rs. 200 Rs. 50 per order 5% on average inventory | | 2+2+2+4 | (0) |
| (b) | Re–ordering level Re–ordering quantity Minimum usage Minimum lead time | 200 units 300 units 20 units 5 weeks | What is the Minimum Stock? | | (0) |
| (c) | The number of employees at the beginning and end of 2007 were 2500 & 3500 respectively. During the year 2007, 250 employees left and 350 persons joined the company. Calculate the labour turnover ratio under Flux Method. | | (0) |
| (d) | You are required to find out the break even sales (BES) and profit, it the sales of a company are Rs. 50 lakhs and P/V ratio and margin of safety are 50% and 40% respectively. | | (0) |