A manufacturing company has a Profit-Volume (P/V) Ratio of 40% and fixed costs of ₹12,00,000 per annum. If the selling price per unit is ₹100, what is the Break-Even Point (BEP) in sales value and units, and what sales value is required to earn a target profit of ₹6,00,000?
Standard cost data of a product manufactured by Beta Ltd. is as follows:
- Standard Material per unit of output: 5 kg @ ₹20 per kg
- Standard Labour per unit of output: 3 hours @ ₹30 per hour
Actual results for the month of October 2024 for an actual output of 2,000 units:
- Material consumed: 10,800 kg at a total cost of ₹2,05,200
- Labour hours paid and worked: 5,800 hours at a total cost of ₹1,85,600
Compute the following variances:
1. Material Cost Variance (MCV), Material Price Variance (MPV), Material Usage Variance (MUV)
2. Labour Cost Variance (LCV), Labour Rate Variance (LRV), Labour Efficiency Variance (LEV)
Question 4
(a) NT Ltd. showed a net loss of ₹ 9,000 as per their cost accounts for the year
ended 31-03-2025. However, the financial books disclosed a net profit of
₹ 7,000 for the same period. The following information was revealed as a
result of scrutiny of the figures of both the sets of books:
(`)
Factory overheads absorbed
52,000
Selling & distribution overheads over absorbed
6,000
Administrative overheads under absorbed
7,500
Interest on Loan
8,800
Dividend received
9,000
Factory overheads charged
45,000
Depreciation charged in financial accounts
42,000
Depreciation recovered in cost accounts
45,000
There is the difference in the value of closing stock of finished goods due to
varying basis of valuation. 500 units of closing stock is valued at ₹ 41,000 in
cost accounts whereas market price per unit of closing stock is ₹ 80 per unit.
It is found that there is still a difference in the reconciliation statement after
considering all of the above which is due to the excess of raw material
consumption in cost accounts.
Prepare:
(i) A reconciliation statement taking net loss as per cost accounts as base,
and
(ii) Find out the excess of material consumption during the period in cost
accounts effectuated the difference in reconciliation.
(8 Marks)
(b) A manufacturing unit using Standard costing system and the following
information was obtained from its records:
Standard
Actual
Production
4,800 units
4,560 units
Working days
25
27
COST AND MANAGEMENT ACCOUNTING
Fixed overhead
₹ 48,000
₹ 46,800
Variable overhead
₹ 14,400
₹ 14,400
Required:
Calculate the following overhead variances:
(i) Variable overhead variance
(ii) Fixed overhead variance
(iii) Fixed overhead Expenditure variance
(iv) Fixed overhead Volume variance
(v) Fixed overhead Calendar variance
(6 Marks)
Question 1
(a) Language Achievers, a renowned institute specializing in TOEFL
preparation, has secured a spacious hall for 20,000 on weekly basis with a
seating capacity of 250 students. The instructor, highly qualified and
experienced, is compensated generously with an honorarium of 1,500 per
lecture. Additionally, he receives reimbursement for travel expenses of ₹ 200
per day along with refreshments costing 1,500 per week to ensure his comfort
and focus during teaching sessions. Administrative and miscellaneous
expenses, covering essential utilities and materials are, 500 per week.
Language Achievers has meticulously planned its curriculum, scheduling
batches of 2 lectures per day, 5 days a week for 30 weeks, ensuring
comprehensive coverage of the TOEFL syllabus.
Required:
(i) Calculate the total cost per batch.
(ii) Determine the minimum fee per student in a batch to cover costs, if the
batch is fully occupied.
(iii) Calculate the fee to be charged from. each student if batch is 80% filled
and institute aims to achieve a profit margin of 25% on the fee.
(5 Marks)
COST AND MANAGEMENT ACCOUNTING
(b) XYZ Ltd. declared a net profit of ₹ 2,25,000 based on their financial accounts
for the year ending 31st March, 2024. The profit disclosed in cost books are
not matched with financial accounts. The following information were
revealed during the scrutiny of the figures of both the sets of books:
Sr.
No.
Particulars
₹ 1.
Preliminary expenses written off in financial accounts
35,000
2.
Factory Overheads Over charged in cost accounts
20,000
3.
Expenses on issue of shares in financial accounts
30,000
4.
Undervaluation of closing stock in cost accounts
65,000
5.
Interest on Bank Deposits in financial accounts
60,000
6.
Under recovery of administration overheads in cost
accounts
25,000
7.
Notional Rent of own premises charged in cost
accounts
30,000
8.
Under recovery of selling overheads in cost accounts
35,000
9.
Bad debts recovered in financial accounts
50,000
Required:
Prepare Reconciliation Statement to arrive at net profit/loss as per Cost
Accounts.
(5 Marks)
(c) JC Ltd. has a production capacity of 80,000 units per year. Presently a
company produces 60,000 units. Its cost structure is as under:
Material Cost
₹ 6 per unit
Labour Cost
₹ 4 per unit
Variable overheads
₹ 2 per unit
Total fixed cost ₹ 3,00,000 per annum. Present selling price ₹ 20 per unit in
the month of January, 2024 company received an offer from a Japanese client
to supply 20,000 units at a price of ₹ 14 per unit with the additional shipping
cost of ₹ 8,000.
Required:
(i) On the basis of changes in the profit, advice to the company, whether
the offer should be accepted or not?
(ii) Will your advice be different, if the customer is local one?
(iii) If Japanese client offer for supply of 30,000 units to a price of ₹ 14 (part
supply of order not accepted) and shipping cost treated as variable cost,
analyze the impact on the profit of JC Ltd., if order accepted.
(4 Marks)