Page 1
ANSWER OF MODEL TEST PAPER 7
INTERMEDIATE: GROUP – II
PAPER – 4: COST AND MANAGEMENT ACCOUNTING
Suggested Answers/ Solution
PART I – Case Scenario based MCQs
1. C Profit if no minimum charges are there, on absolute tonne basis, but
he will charge for diesel petrol when running empty
Absolute tonne-kms: (250 kms x 4 tonnes + 150 kms x 3 tonnes) x 90
days
= 1,30,500 tonne-kms
Vacant moving (Chandigarh to Ludhiana) = 100kms x 90 days = 9,000
kms
Charges for vacant running:
(`)
June (80.30 x 16 x 100)/8 16,060
July (80.50 x 31 x 100) /8 31,194
August (81.25 x 29 x 100) /8 29,453
September (80.90 x 14 x 100) /8 14,158
Total Charges 90,864
(`)
Total revenue (1,30,500 x 10) 13,05,000
Add: diesel recovery for vacant running 90,864
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 5,96,977
379
Page 2
ANSWER OF MODEL TEST PAPER 7
INTERMEDIATE: GROUP – II
PAPER – 4: COST AND MANAGEMENT ACCOUNTING
Suggested Answers/ Solution
PART I – Case Scenario based MCQs
1. C Profit if no minimum charges are there, on absolute tonne basis, but
he will charge for diesel petrol when running empty
Absolute tonne-kms: (250 kms x 4 tonnes + 150 kms x 3 tonnes) x 90
days
= 1,30,500 tonne-kms
Vacant moving (Chandigarh to Ludhiana) = 100kms x 90 days = 9,000
kms
Charges for vacant running:
(`)
June (80.30 x 16 x 100)/8 16,060
July (80.50 x 31 x 100) /8 31,194
August (81.25 x 29 x 100) /8 29,453
September (80.90 x 14 x 100) /8 14,158
Total Charges 90,864
(`)
Total revenue (1,30,500 x 10) 13,05,000
Add: diesel recovery for vacant running 90,864
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 5,96,977
379
Bifurcation of principal and interest
Years Calculation of interest
(`)
Interest
(`)
Principal
repayment
(`)
Loan
balance
(`)
0 - - - 20,00,000
1 20,00,000 x 10% 2,00,000 3,27,595 16,72,405
2 16,72,405 x 10% 1,67,241 3,60,354 13,12,051
3 13,12,051 x 10% 1,31,205 3,96,390 9,15,661
4 9,15,661 x 10% 91,566 4,36,029 4,79,632
5 4,79,632 x 10% 47,963 4,79,632 -
Interest allocated to this job = 91,566 x 90 / 365 = 22,578
Depreciation =
20,00,000 5,00,000 90
x
10 365
-
= 36,986
Diesel expenses:
(`)
June (80.30 x 16 x 500)/8 80,300
July (80.50 x 31 x 500)/8 1,55,969
August (81.25 x 29 x 500)/8 1,47,266
September (80.90 x 14 x 500)/8 70,788
Total diesel expenses 4,54,322
2. A
With minimum
limit
(`)
Without minimum limit
(`)
Commercial tonne kms 3.75 x 500 x 90
= 1,68,750
((4+0+3)/3) x 500 x 90
= 1,05,000
revenue 1,68,750 x 10
= 16,87,500
1,05,000 x 10
= 10,50,000
Less: costs (7,98,887) (7,98,887)
Profit/(loss) 8,88,613 2,51,113
Loss arising due to no minimum limit = 8,88,613-2,51,113 = 6,37,500
3. B Total Revenue = Cost + Profit = 7,98,887+ 2,70,000 = ` 10,68,887
Absolute Tonne-Kms = 1,74,375
Rate = 10,68,887/1,74,375 = ` 6.13
380
Page 3
ANSWER OF MODEL TEST PAPER 7
INTERMEDIATE: GROUP – II
PAPER – 4: COST AND MANAGEMENT ACCOUNTING
Suggested Answers/ Solution
PART I – Case Scenario based MCQs
1. C Profit if no minimum charges are there, on absolute tonne basis, but
he will charge for diesel petrol when running empty
Absolute tonne-kms: (250 kms x 4 tonnes + 150 kms x 3 tonnes) x 90
days
= 1,30,500 tonne-kms
Vacant moving (Chandigarh to Ludhiana) = 100kms x 90 days = 9,000
kms
Charges for vacant running:
(`)
June (80.30 x 16 x 100)/8 16,060
July (80.50 x 31 x 100) /8 31,194
August (81.25 x 29 x 100) /8 29,453
September (80.90 x 14 x 100) /8 14,158
Total Charges 90,864
(`)
Total revenue (1,30,500 x 10) 13,05,000
Add: diesel recovery for vacant running 90,864
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 5,96,977
379
Bifurcation of principal and interest
Years Calculation of interest
(`)
Interest
(`)
Principal
repayment
(`)
Loan
balance
(`)
0 - - - 20,00,000
1 20,00,000 x 10% 2,00,000 3,27,595 16,72,405
2 16,72,405 x 10% 1,67,241 3,60,354 13,12,051
3 13,12,051 x 10% 1,31,205 3,96,390 9,15,661
4 9,15,661 x 10% 91,566 4,36,029 4,79,632
5 4,79,632 x 10% 47,963 4,79,632 -
Interest allocated to this job = 91,566 x 90 / 365 = 22,578
Depreciation =
20,00,000 5,00,000 90
x
10 365
-
= 36,986
Diesel expenses:
(`)
June (80.30 x 16 x 500)/8 80,300
July (80.50 x 31 x 500)/8 1,55,969
August (81.25 x 29 x 500)/8 1,47,266
September (80.90 x 14 x 500)/8 70,788
Total diesel expenses 4,54,322
2. A
With minimum
limit
(`)
Without minimum limit
(`)
Commercial tonne kms 3.75 x 500 x 90
= 1,68,750
((4+0+3)/3) x 500 x 90
= 1,05,000
revenue 1,68,750 x 10
= 16,87,500
1,05,000 x 10
= 10,50,000
Less: costs (7,98,887) (7,98,887)
Profit/(loss) 8,88,613 2,51,113
Loss arising due to no minimum limit = 8,88,613-2,51,113 = 6,37,500
3. B Total Revenue = Cost + Profit = 7,98,887+ 2,70,000 = ` 10,68,887
Absolute Tonne-Kms = 1,74,375
Rate = 10,68,887/1,74,375 = ` 6.13
380
4. B
5. B Profit at current rate (based on minimum charges of 75%)
Absolute tonne-kms: (250 kms x 4 tonnes + 100 kms x 3.75 tonnes +
150 kms x 3.75 tonnes) x 90 days = 1,74,375 tonne-kms
(`)
Total revenue (1,74,375 x 10) 17,43,750
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 9,44,863
6. C
Particulars Base Material Conversion cost
Previous year cost (`) 5,34,000 8,01,000
Increased by 2 times -
Increased to 3 times
Current year cost (`) 5,34,000 + (5,34,000 x 2)
= 16,02,000
8,01,000 x 3
= 24,03,000
7. D
Products Production/
Sales(in tonne)
Joint Cost
Apportioned (`)
Sodium hydroxide 24,030 24,03,000
Halogen 16,020 16,02,000
Total 40,050 40,05,000
Joint cost = base material + conversion cost
= 16,02,000 + 24,03,000
= 40,05,000
Apportioned joint cost =
Total joint cost
Total physical value
x Physical units of each
product
381
Page 4
ANSWER OF MODEL TEST PAPER 7
INTERMEDIATE: GROUP – II
PAPER – 4: COST AND MANAGEMENT ACCOUNTING
Suggested Answers/ Solution
PART I – Case Scenario based MCQs
1. C Profit if no minimum charges are there, on absolute tonne basis, but
he will charge for diesel petrol when running empty
Absolute tonne-kms: (250 kms x 4 tonnes + 150 kms x 3 tonnes) x 90
days
= 1,30,500 tonne-kms
Vacant moving (Chandigarh to Ludhiana) = 100kms x 90 days = 9,000
kms
Charges for vacant running:
(`)
June (80.30 x 16 x 100)/8 16,060
July (80.50 x 31 x 100) /8 31,194
August (81.25 x 29 x 100) /8 29,453
September (80.90 x 14 x 100) /8 14,158
Total Charges 90,864
(`)
Total revenue (1,30,500 x 10) 13,05,000
Add: diesel recovery for vacant running 90,864
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 5,96,977
379
Bifurcation of principal and interest
Years Calculation of interest
(`)
Interest
(`)
Principal
repayment
(`)
Loan
balance
(`)
0 - - - 20,00,000
1 20,00,000 x 10% 2,00,000 3,27,595 16,72,405
2 16,72,405 x 10% 1,67,241 3,60,354 13,12,051
3 13,12,051 x 10% 1,31,205 3,96,390 9,15,661
4 9,15,661 x 10% 91,566 4,36,029 4,79,632
5 4,79,632 x 10% 47,963 4,79,632 -
Interest allocated to this job = 91,566 x 90 / 365 = 22,578
Depreciation =
20,00,000 5,00,000 90
x
10 365
-
= 36,986
Diesel expenses:
(`)
June (80.30 x 16 x 500)/8 80,300
July (80.50 x 31 x 500)/8 1,55,969
August (81.25 x 29 x 500)/8 1,47,266
September (80.90 x 14 x 500)/8 70,788
Total diesel expenses 4,54,322
2. A
With minimum
limit
(`)
Without minimum limit
(`)
Commercial tonne kms 3.75 x 500 x 90
= 1,68,750
((4+0+3)/3) x 500 x 90
= 1,05,000
revenue 1,68,750 x 10
= 16,87,500
1,05,000 x 10
= 10,50,000
Less: costs (7,98,887) (7,98,887)
Profit/(loss) 8,88,613 2,51,113
Loss arising due to no minimum limit = 8,88,613-2,51,113 = 6,37,500
3. B Total Revenue = Cost + Profit = 7,98,887+ 2,70,000 = ` 10,68,887
Absolute Tonne-Kms = 1,74,375
Rate = 10,68,887/1,74,375 = ` 6.13
380
4. B
5. B Profit at current rate (based on minimum charges of 75%)
Absolute tonne-kms: (250 kms x 4 tonnes + 100 kms x 3.75 tonnes +
150 kms x 3.75 tonnes) x 90 days = 1,74,375 tonne-kms
(`)
Total revenue (1,74,375 x 10) 17,43,750
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 9,44,863
6. C
Particulars Base Material Conversion cost
Previous year cost (`) 5,34,000 8,01,000
Increased by 2 times -
Increased to 3 times
Current year cost (`) 5,34,000 + (5,34,000 x 2)
= 16,02,000
8,01,000 x 3
= 24,03,000
7. D
Products Production/
Sales(in tonne)
Joint Cost
Apportioned (`)
Sodium hydroxide 24,030 24,03,000
Halogen 16,020 16,02,000
Total 40,050 40,05,000
Joint cost = base material + conversion cost
= 16,02,000 + 24,03,000
= 40,05,000
Apportioned joint cost =
Total joint cost
Total physical value
x Physical units of each
product
381
For Sodium hydroxide =
` 40,05,000
40,050 tonnes
x 24,030 tonnes
= ` 24,03,000
For Halogen =
` 40,05,000
40,050 tonnes
x 16,020 tonnes
= ` 16,02,000
8. A
Products Sales
(in Tonne)
Selling
Price per
Tonne (`)
Sales
Revenue
(`)
Joint Cost
Apportioned
(`)
Sodium
hydroxide
24,030 100 24,03,000 20,02,500
Halogen 16,020 150 24,03,000 20,02,500
Total 40,050 48,06,000 40,05,000
Apportioned joint cost =
Total joint cost
Total sale revenue
x Sale revenue of each
product
For Sodium hydroxide =
` 40,05,000
` 48,06,000
x 24,03,000 = ` 20,02,500
For Halogen =
` 4 0, 0 5,00 0
` 4 8, 0 6, 0 0 0
x 24,03,000 = ` 20,02,500
9. B
Products Sales
(in
Tonne)
Selling
Price
per Tonne
(`)
Sales
Value (`)
Post split-
off cost
(`)
Net
Realisable
Value (`)
Joint Cost
Apportioned
(`)
Sodium
hydroxide
24,030 100 24,03,000 - 24,03,000 17,16,429
Halogen (Vinyl
after further
processing)
10,012.50 150 + 250
= 400
40,05,000 8,01,000 32,04,000 22,88,571
Total 56,07,000 ????????, ???? ????, ????????????
Apportioned joint cost =
Total joint cost
Total Net Realisable Value
x Net Realisable Value
of each product
For Sodium hydroxide =
` 40,05,000
` 56,07,000
x 24,03,000
= ` 17,16,429
For Halogen =
` 40,05,000
` 56,07,000
x 32,04,000
= ` 22,88,571
382
Page 5
ANSWER OF MODEL TEST PAPER 7
INTERMEDIATE: GROUP – II
PAPER – 4: COST AND MANAGEMENT ACCOUNTING
Suggested Answers/ Solution
PART I – Case Scenario based MCQs
1. C Profit if no minimum charges are there, on absolute tonne basis, but
he will charge for diesel petrol when running empty
Absolute tonne-kms: (250 kms x 4 tonnes + 150 kms x 3 tonnes) x 90
days
= 1,30,500 tonne-kms
Vacant moving (Chandigarh to Ludhiana) = 100kms x 90 days = 9,000
kms
Charges for vacant running:
(`)
June (80.30 x 16 x 100)/8 16,060
July (80.50 x 31 x 100) /8 31,194
August (81.25 x 29 x 100) /8 29,453
September (80.90 x 14 x 100) /8 14,158
Total Charges 90,864
(`)
Total revenue (1,30,500 x 10) 13,05,000
Add: diesel recovery for vacant running 90,864
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 5,96,977
379
Bifurcation of principal and interest
Years Calculation of interest
(`)
Interest
(`)
Principal
repayment
(`)
Loan
balance
(`)
0 - - - 20,00,000
1 20,00,000 x 10% 2,00,000 3,27,595 16,72,405
2 16,72,405 x 10% 1,67,241 3,60,354 13,12,051
3 13,12,051 x 10% 1,31,205 3,96,390 9,15,661
4 9,15,661 x 10% 91,566 4,36,029 4,79,632
5 4,79,632 x 10% 47,963 4,79,632 -
Interest allocated to this job = 91,566 x 90 / 365 = 22,578
Depreciation =
20,00,000 5,00,000 90
x
10 365
-
= 36,986
Diesel expenses:
(`)
June (80.30 x 16 x 500)/8 80,300
July (80.50 x 31 x 500)/8 1,55,969
August (81.25 x 29 x 500)/8 1,47,266
September (80.90 x 14 x 500)/8 70,788
Total diesel expenses 4,54,322
2. A
With minimum
limit
(`)
Without minimum limit
(`)
Commercial tonne kms 3.75 x 500 x 90
= 1,68,750
((4+0+3)/3) x 500 x 90
= 1,05,000
revenue 1,68,750 x 10
= 16,87,500
1,05,000 x 10
= 10,50,000
Less: costs (7,98,887) (7,98,887)
Profit/(loss) 8,88,613 2,51,113
Loss arising due to no minimum limit = 8,88,613-2,51,113 = 6,37,500
3. B Total Revenue = Cost + Profit = 7,98,887+ 2,70,000 = ` 10,68,887
Absolute Tonne-Kms = 1,74,375
Rate = 10,68,887/1,74,375 = ` 6.13
380
4. B
5. B Profit at current rate (based on minimum charges of 75%)
Absolute tonne-kms: (250 kms x 4 tonnes + 100 kms x 3.75 tonnes +
150 kms x 3.75 tonnes) x 90 days = 1,74,375 tonne-kms
(`)
Total revenue (1,74,375 x 10) 17,43,750
Less: service & maintenance (80,000 x 3) (2,40,000)
Less: salary (15,000 x 3) (45,000)
Less: diesel cost (4,54,323)
Less: interest (22,578)
Less: depreciation (36,986)
Profit 9,44,863
6. C
Particulars Base Material Conversion cost
Previous year cost (`) 5,34,000 8,01,000
Increased by 2 times -
Increased to 3 times
Current year cost (`) 5,34,000 + (5,34,000 x 2)
= 16,02,000
8,01,000 x 3
= 24,03,000
7. D
Products Production/
Sales(in tonne)
Joint Cost
Apportioned (`)
Sodium hydroxide 24,030 24,03,000
Halogen 16,020 16,02,000
Total 40,050 40,05,000
Joint cost = base material + conversion cost
= 16,02,000 + 24,03,000
= 40,05,000
Apportioned joint cost =
Total joint cost
Total physical value
x Physical units of each
product
381
For Sodium hydroxide =
` 40,05,000
40,050 tonnes
x 24,030 tonnes
= ` 24,03,000
For Halogen =
` 40,05,000
40,050 tonnes
x 16,020 tonnes
= ` 16,02,000
8. A
Products Sales
(in Tonne)
Selling
Price per
Tonne (`)
Sales
Revenue
(`)
Joint Cost
Apportioned
(`)
Sodium
hydroxide
24,030 100 24,03,000 20,02,500
Halogen 16,020 150 24,03,000 20,02,500
Total 40,050 48,06,000 40,05,000
Apportioned joint cost =
Total joint cost
Total sale revenue
x Sale revenue of each
product
For Sodium hydroxide =
` 40,05,000
` 48,06,000
x 24,03,000 = ` 20,02,500
For Halogen =
` 4 0, 0 5,00 0
` 4 8, 0 6, 0 0 0
x 24,03,000 = ` 20,02,500
9. B
Products Sales
(in
Tonne)
Selling
Price
per Tonne
(`)
Sales
Value (`)
Post split-
off cost
(`)
Net
Realisable
Value (`)
Joint Cost
Apportioned
(`)
Sodium
hydroxide
24,030 100 24,03,000 - 24,03,000 17,16,429
Halogen (Vinyl
after further
processing)
10,012.50 150 + 250
= 400
40,05,000 8,01,000 32,04,000 22,88,571
Total 56,07,000 ????????, ???? ????, ????????????
Apportioned joint cost =
Total joint cost
Total Net Realisable Value
x Net Realisable Value
of each product
For Sodium hydroxide =
` 40,05,000
` 56,07,000
x 24,03,000
= ` 17,16,429
For Halogen =
` 40,05,000
` 56,07,000
x 32,04,000
= ` 22,88,571
382
10. C
Particulars Amount
(in `)
Revenue from sales of Vinyl if Halogen further
processed (10,012.50 tonnes × ` 400) (A)
40,05,000
Revenue from sales of Halogen if no further processing
done (16,020 tonnes × ` 150)(B)
24,03,000
Incremental revenue from further processing of
Halogen into Vinyl (A-B)
16,02,000
Incremental cost of further processing Halogen into
Vinyl
8,01,000
Incremental operating income from further
processing
8,01,000
Incremental revenue would be ` 8,01,000, thus the decision relating
to further processing Halogen needs to be approved.
11. C Let X be the cost of material and Y be the normal rate of wages per
hour.
Factory Cost of Mr. Akon (Rowan System) = X + 45Y +
4 5
7 5
x (75 - 45) Y +
(45 x ` 120)
` 1,25,640 = X + 63Y + ` 5,400
X + 63Y = ` 1,20,240 … (i)
Factory Cost of Mr. Ben (Halsey System) = X + 60Y + 50% (75 - 60) Y +
(60 x ` 120)
` 1,29,600 = X + 67.5Y + ` 7,200
X + 67.5Y = ` 1,22,400 … (ii)
From subtracting (i) from (ii), we get,
4.5Y = ` 2,160
Y = ` 480 per hour
Or, normal wage rate = ` 480 per hour
Therefore, X = ` 1,20,240 - 63Y
X = ` 1,20,240 - (63 x ` 480)
X = ` 90,000
Or, cost of material = ` 90,000
12. C
383
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