University Of Pune Question Paper
M.Com. (Semester – IV) Examination, 2013
(Group – B) : ADVANCED COST ACCOUNTING AND COST SYSTEMS
(Special Paper – VIII)
Case Studies in Advanced Cost Accounting And Cost System
(2008 Pattern)
Time : 3 Hours Max. Marks : 100
Instructions : a) Attempt any four questions.
b) Each question carries 25 marks.
c) Use of non-programmable calculator is allowed.
d) Marks are awarded not to the length, but to the content of your
answer.
1. A pharmaceutical company has developed a new drug by total investment of
Rs. 2.5 crs. during last 3 accounting years. The commercial production is going
to commence from June 2013. Write an exhaustive note giving details of cost
accounting treatment of R & D expenses. Make logical assumptions in support
of your note.
2. Company produces 30000 units of products A and 20000 units of product B per
annum. The sales value and costs of the two products are as follows :
Sales value Rs. 7,60,000
Direct material Rs. 1,40,000
Direct labour Rs. 1,90,000
Factory overheads Rs. 1,90,000
Administrative and selling overheads Rs. 1,20,000
50% of factory overheads are variable and 50% of administrative and selling
overheads are fixed. The selling price of A is R. 12 per unit and selling price of B
is Rs. 20 per unit.
The direct material and labour cost ratio for product A is 2 : 3 and the same for
product B is 4 : 5. For both the products the selling price is 40% of direct labour.
The factory overheads are charged in the ratio of direct labour and administrative
and selling overheads are recovered at a flat rate of Rs. 2 per unit of A and Rs. 3
per unit of B.
Due to fall in demand of the above products the company has a plan to diverse
and make product C using 40% capacity. It is estimated that for product C, direct
material and direct labour will be Rs. 2.5 and Rs. 3 per unit respectively. Other
variable costs will be the same as applicable to product A. The selling price of
product C is Rs. 14 per unit and production will be 30000 units.
Assuming that 60% capacity is used for manufacturing A and B calculate :
a) Present cost and profit
b) Costs and profit after diversification, and
c) Give your recommendation as to whether to diversify or not.
3. Explain with examples the following concepts :
a) Target costing
b) Modern techniques of inventory control
c) Transfer pricing
d) Value analysis
e) Evaluation of capital expenditure proposals.
4. A hotel has three types of rooms viz. A, B and C. You are to suggest what rent
should be charged for each type of room on the basis of the following information :
i) The rent of B type room is to be fixed at 1.5 times of the C type of room and
that of A as twice of the C type of room.
ii) There are 20 A type rooms, 30 B type rooms and 100 C type rooms in the
hotel.
iii) Normally 60% of A type rooms, 80% of B type rooms and 90% of C type
rooms are occupied in summer, and in winter 20% of A type rooms, 20% of B
type rooms and 50% of C type of rooms are occupied.
iv) Actual expenses are as follows :
a) Staff salary Rs. 22,00,000 per annum.
b) Room Attendants’ salary (when occupied) :
Room Type Summer (Rs. per day) Winter (Rs. per day)
A 40 60
B 30 45
C 20 30
-3- [4370] – 407
c) Lighting per month if occupied for full month for both summer and winter
are :
A type room Rs. 800
B type room Rs. 600
C type room Rs. 400
d) Repairs and maintenance Rs. 4,20,000 per annum.
e) Advertisement and other expenses Rs. 50,000 per annum.
f) Sundry expenses Rs. 80,000 per annum.
g) Depreciate Building at 10% (Value of the building is 1.4 crore)
Depreciate Furniture at 20% (Value of the furniture is Rs. 30 lakhs).
h) Assume Summer of 7 months and Winter of 5 months. Each month is
average to have 30 days.
i) Profit is fixed at 25% on the total cost.
5. ‘Activity Based Costing technique tries to minimize the distortion in cost
ascertainment’. Do you agree ? Explain with numerical examples how this distortion
is avoided by the use of ABC vis-à-vis the traditional methods of overhead
accounting.
6. Explain various forms necessary for accounting of and control of material cost in
any manufacturing company. Answer the question with reference to Cost
Accounting Standard No. 6 issued by The Institute of Cost Accountants of India.
————————
M.Com. (Semester – IV) Examination, 2013
(Group – B) : ADVANCED COST ACCOUNTING AND COST SYSTEMS
(Special Paper – VIII)
Case Studies in Advanced Cost Accounting And Cost System
(2008 Pattern)
Time : 3 Hours Max. Marks : 100
Instructions : a) Attempt any four questions.
b) Each question carries 25 marks.
c) Use of non-programmable calculator is allowed.
d) Marks are awarded not to the length, but to the content of your
answer.
1. A pharmaceutical company has developed a new drug by total investment of
Rs. 2.5 crs. during last 3 accounting years. The commercial production is going
to commence from June 2013. Write an exhaustive note giving details of cost
accounting treatment of R & D expenses. Make logical assumptions in support
of your note.
2. Company produces 30000 units of products A and 20000 units of product B per
annum. The sales value and costs of the two products are as follows :
Sales value Rs. 7,60,000
Direct material Rs. 1,40,000
Direct labour Rs. 1,90,000
Factory overheads Rs. 1,90,000
Administrative and selling overheads Rs. 1,20,000
50% of factory overheads are variable and 50% of administrative and selling
overheads are fixed. The selling price of A is R. 12 per unit and selling price of B
is Rs. 20 per unit.
The direct material and labour cost ratio for product A is 2 : 3 and the same for
product B is 4 : 5. For both the products the selling price is 40% of direct labour.
The factory overheads are charged in the ratio of direct labour and administrative
and selling overheads are recovered at a flat rate of Rs. 2 per unit of A and Rs. 3
per unit of B.
Due to fall in demand of the above products the company has a plan to diverse
and make product C using 40% capacity. It is estimated that for product C, direct
material and direct labour will be Rs. 2.5 and Rs. 3 per unit respectively. Other
variable costs will be the same as applicable to product A. The selling price of
product C is Rs. 14 per unit and production will be 30000 units.
Assuming that 60% capacity is used for manufacturing A and B calculate :
a) Present cost and profit
b) Costs and profit after diversification, and
c) Give your recommendation as to whether to diversify or not.
3. Explain with examples the following concepts :
a) Target costing
b) Modern techniques of inventory control
c) Transfer pricing
d) Value analysis
e) Evaluation of capital expenditure proposals.
4. A hotel has three types of rooms viz. A, B and C. You are to suggest what rent
should be charged for each type of room on the basis of the following information :
i) The rent of B type room is to be fixed at 1.5 times of the C type of room and
that of A as twice of the C type of room.
ii) There are 20 A type rooms, 30 B type rooms and 100 C type rooms in the
hotel.
iii) Normally 60% of A type rooms, 80% of B type rooms and 90% of C type
rooms are occupied in summer, and in winter 20% of A type rooms, 20% of B
type rooms and 50% of C type of rooms are occupied.
iv) Actual expenses are as follows :
a) Staff salary Rs. 22,00,000 per annum.
b) Room Attendants’ salary (when occupied) :
Room Type Summer (Rs. per day) Winter (Rs. per day)
A 40 60
B 30 45
C 20 30
-3- [4370] – 407
c) Lighting per month if occupied for full month for both summer and winter
are :
A type room Rs. 800
B type room Rs. 600
C type room Rs. 400
d) Repairs and maintenance Rs. 4,20,000 per annum.
e) Advertisement and other expenses Rs. 50,000 per annum.
f) Sundry expenses Rs. 80,000 per annum.
g) Depreciate Building at 10% (Value of the building is 1.4 crore)
Depreciate Furniture at 20% (Value of the furniture is Rs. 30 lakhs).
h) Assume Summer of 7 months and Winter of 5 months. Each month is
average to have 30 days.
i) Profit is fixed at 25% on the total cost.
5. ‘Activity Based Costing technique tries to minimize the distortion in cost
ascertainment’. Do you agree ? Explain with numerical examples how this distortion
is avoided by the use of ABC vis-à-vis the traditional methods of overhead
accounting.
6. Explain various forms necessary for accounting of and control of material cost in
any manufacturing company. Answer the question with reference to Cost
Accounting Standard No. 6 issued by The Institute of Cost Accountants of India.
————————
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