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 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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