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FOUNDATION EXAMINATION

(SYLLABUS 2008)

SUGGESTED ANSWERS TO QUESTIONS

DECEMBER 2011

Paper-2 : ACCOUNTING

T ime A l lowed : 3 Hours Fu l l M arks : 100

The f igures in the mar gin on t he right side indicate full m arks.

SECTION - I

AnswerQuest ion No. 1,w hich is compulsory andany f ive questions from Section I.

Q. 1.(a) In each of th e fol low ing one of the al ternat ives is correct , indicate the correct one : [110=10]

( i) In te rna t ional Account ing s tandards a re i ssued by the(A) In te rnat iona l Account ing Board

(B) In te rna t iona l Account ing Standards Com mi t tee

(C) Inst i tu te o f Char te red Accountan ts o f Ind ia

(D) Account ing Standards Coun ci l of Amer ica

( i i ) A t ransact ion af fects three accounts, one account is debi ted by ` 7,500, anot her account iscredi ted by ` 9,000. Thi rd account w i l l be

( A) Cr ed it e d b y ` 7,500

( B) D eb it e d b y ` 9,000

(C) Cre d it e d b y ` 1,500

( D) D ed it e d b y ` 1,500

(iii) Shiva wh o w as a credi tor for ` 47,000, h is account w as set t led for ` 45,850. At t he t im e o fset t lement , Shivas account wo uld be d ebi ted by

(A ) ` 45,850

(B) ` 47,000

(C) ` 1,150

( D) N o n e o f t h e ab o ve

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2 Suggested Answers to Question ACT

(iv) W hich of the fo l low ing is a t ransact ion of contra entr y?

(A) Purchased goods f rom X ` 10,000

(B) Cash depos ited in to Bank ` 15,000

( C) Pa id t o Y ` 4,800 in fu l l se t t l ement o f ` 5,000

( D) Sh o p r en t o f ` 6,000, paid by chequ e

(v ) W hich o f t he fo l l ow ing is no t a bus iness t ransact ion?

(A) Re n t p a id t o La n d lo rd ` 5,000

(B) G o od s p u rch a se d f r o m Z ` 20,000

(C) Placed an order t o Chandra & Co. for purchasing the goods for ` 35,000

(D) Received in te rest f rom Bank ` 2,000

(v i) Ex te rna l li ab il i t i es are the

(A) Excess of capi ta l over t he f ixed assets

(B) Excess of capi ta l over the assets

(C) Excess of assets over th e capi ta l

(D) Excess of assets over current l iabi li t ies

(v ii ) Fest i val advance o f ` 25,000 was given to em ployees at th e t im e of Deepawal i . It is a

(A) Revenue Expend i tu re

(B) Cap i tal Expend i tu re

(C) Defer red Revenue Expend i tu re(D) N o t a n Ex p en se

(v ii i) W h ich o f the fo l l ow ing i s an uncer ta in l i ab il i t y?

(A) Lo n g Te rm

( B) Co n t in ge n t

( C) Cu r r en t

( D) Fi xe d

(xi ) Cash co lumn o f cash book can never have

(A) Cre d it b a l an c e

(B) D e bi t b a la n ce

(C) Ze ro b a la n ce


(x) Wages paid for insta l lat ion of M achinery debi ted to w ages account . This is an error of

( A) O m issi on

( B) Pr in ci pl e

(C) Co m m i ssi o n

(D) D u p li ca t io n

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Suggested Answers to Question ACT 3

( b ) Fi l l up t he b lanks : [14=4]

(i) Go o dw ill is a asset .

(i i) Pat en t Righ t is in t h e n at u re o f Acco u nt .

(i i i) Bi ll o f exch an ge is a in st ru m ent .

(iv) Paym ent o f Royalt ies is expen d it u re.

(c) State w ith reasons w heth er the fol low ing statem ents are True or False : [28=16]

( i) Pro f i t and Loss Account show s the f i nanc ia l posi t i on o f the concern .

( i i ) Live Stock Account is a nominal account .

( ii i) Goods lost by f i re a re deb i ted to Goods Account .( iv ) Rect i f icat ion entr ies are passed in ledger.

(v) Capi ta l is t reated as internal l iabi li ty .

(v i ) Clos ing Stock is valued at cost pr ice or m arket pr ice, whichever is h igher.

(v i i) Deprec iat ion increases the value of asset .

(v ii i ) Jo in t Venture i s a permanent par tn ersh ip .

Answer 1. (a)

( i) (B) In te rnat iona l Account ing Standard Com m i t tee .

(i i) (D ) De bit ed b y ` 1,500

(ii i) (B)`

47,000( iv ) (B) Cash deposi ted in to Bank ` 15,000

(v) (C) Placed an order t o Chandra & Co. fo r purchasing the goods fo r ` 35,000

(v i ) (C) Excess of assets over the capi ta l

( vi i) (D) N o t a n Ex p en se

(vi ii ) (B) Co n t i n ge n t

( ix ) (A) Cre d it b a la n ce

( x) ( B) Pr in ci pl e

Answer 1. (b)

( i) In t an gi b le

( ii ) Re al

( ii i) N e go t i ab l e

( iv ) Re ve n ue

Answ er 1. (c)

(i ) False Prof i t and Loss Account shows the f inancia l perform ance of the concern.

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(ii) False It is a Real Account .

(ii i) False It is credi ted t o Goods account .

(iv) False They are p assed in Jou rnal Prop er.

(v ) True Because i t is the cont r ibut ion by th e ow ners of com pany.

(vi) False Closing s tock is valued at cost p r ice or m arket pr ice w hichever is low er as per concept ofconservatism.

(vii) False It reduces the value due to w ear and tear, extru sion or passage of t ime.

(viii) False It i s a tem porary par tnersh ip w h ich ge ts over w i th the com ple t ion o f t he ven ture .

Q. 2. (a) Journ al ise the fol low ing t ransact ion s in the bo oks of a t rader : [15=5]

2011

N o v. 1 M r. Du t t a w as d ecl ar ed i nso lv en t an d a su m o f ` 5,600 would be received insteadof ` 8,000.

N o v. 4 A n o ld m a ch in e r y w a s so ld t o Ra ke sh fo r ` 15,000.

No v. 8 Goo d s co st in g ` 2,500 (sale price ` 3,000) wi thd rawn f rom business for personal use.

N o v. 1 2 Pu rch a se d f u rn i t u re f ro m V i ka s f o r sh o p ` 25,000.

N ov. 15 Dep osit ed ` 80,000 in SBI accoun t.

(b) Calculate the amo unt of subscr ipt io n to be show n in the Incom e and Expenditu re Account forthe year end ing 31st M arch, 2011 f rom t he fo l lowing in format ion : [3]

( i ) Subscr ip t ion rece ived dur ing 2010-11 ` 31,500.

( ii ) Ar rears o f subscr ip t ion on 31 .03 .2010 ` 3,400.

( i ii ) Subscr ipt ion received in advance on 31.03.2010 ` 2,100.

( iv ) Ar rears o f subscr ip t ion on 31 .03 .2011 ` 4,700.

(v) Subscr ipt ion received in advance on 31.03.2011 ` 2,150.

(c) Fol low ing were the pro f i ts for the last 4 years ended 31st December :31.12.07 = ` 27,000; 31.12.08 = ` 25,200; 31.12.09 ` = ` 28,800 and 31.12.10 = ` 30,000.

Calcu lat e go od w ill at 2 years pu rchase o f t he average p ro fi t o f last 3 years. [2]

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Answer 2. (a)

Jour nal Entries

Dr. Cr.

Dat e Par t icu lars Am ount Am ount` `

2011

No v. 1 Cash A/ c Dr. 5,600

Bad deb t s A/ c Dr. 2 ,400

To M r. Du t t as A/ c 8 ,000

No v. 4 Rakesh s A/ c Dr. 15,000

To M ach in ery A/ c 15,000

No v. 8 Draw ings A/ c Dr. 2 ,500

To Pu rchases A/ c 2,500

Nov. 12 Fu rn it u re A/ c Dr. 25,000

To V ikass A/ c 25,000

Nov. 15 Bank Accou nt Dr. 80,000

To Cash A/ c 80,000

Answer 2. (b)

Part iculars ` `Subscr ip t io n received in 2010-11 31,500

Ad d : Sub scr ip t io n received in ad van ce o n 31.3.10 2,100

Ad d : Ar rears o f su bscr ip t io n on 31.3 .11 4,700

38,300

Less: Ar rears o f su bscr ip t io n o n 31.3.10 3,400

Less: Sub scr ip t io n received in advan ce o n 31 .3.11 2,150 5,550

The am ount o f subsc r ip t ion to be show n in the Incom e andExpen d it u re Acco u nt fo r 2010-11 32,750

Answ er 2. (c)

Calcu la t ion o f Goodwi l l :

Average Pro f i t o f l ast t h ree years = (25 ,200 + 28,800 + 30,000) / 3 = 28 ,000

Goodw i l l a t 2 years purchase of average prof i t of last 3 years = 28,000 2.5 = ` 70,000.

Q. 3. (a) M r. Sinha draw s a b i ll on 1st January, 2009 on M r. M ane for ` 36,000/ - fo r 4 m onths per iod . M aneaccepts th e b i l l on 2nd January, 2009 and ret urns i t to Sinha. Sinha discount s the b i l l @ 8% p .a.Before due date M ane requests Sinha to accept ` 24,000/ - in cash and draw s a second bi l l for t hebalance. Sinha draws a new b i l l for the b alance plus interest @ 12% p.a. for t w o m ont hs, on 4t hM ay as per t he request . The bi l l is sent t o th e Bank for col lect ion and hon oured o n du e date. Pass

jo u rn al en t r ie s in t h e b o o ks o f M r. Sin ha. [6]

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(b ) Opening s tock is 80 per cent of the c losing s tock and average stock is ` 36,000, calculate theam o unt o f o p en in g st ock an d clo sin g st o ck. [2]

(c) A and B purchased 20 old com put ers for ` 7,250 each in a jo int venture and spent ` 42,500 onrepai rs. 17 com put ers were sold for ` 1,95,500 and sel l ing expenses amo unted to ` 2,125. Unsoldco m pu t ers w ere t aken b y A at co st p r ice. Calcu lat e p ro f it o n jo int vent ure. [2]

Answer 3. (a)

In the Books of M r. Sinha

Jour nal Entries

Dr. Cr.Dat e Par t icu lars L.F Am ount Am ount

` `

2009 Bills Receivab le A/ c Dr. 36 ,000

Jan . 1 To M an es A/ c 36,000

(Being bi l l draw n on and accepted by M ane)

Jan . 2 Bank A/ c Dr. 35,040

Disco u nt A/ c Dr. 960

To Bi lls Receivab le A/ c 36,000

(Being M anes acceptance discount ed w i th t he bank)

M ay 4 M anes A/ c Dr. 36,000

To Ban k A/ c 36,000(Being the bi l l d ishon ored on due date)

M ay 4 M an es A/ c Dr. 240

To In t e rest A/ c 240

(Being Interest on renew al charged)

M ay 4 Bill Receivab le A/ c Dr. 12 ,240

Cash A/ c Dr. 24,000

To M anes A/ c 36,240

(Being part paym ent and accepted b i l l w i th int erestrece ived f rom M ane)

M ay 4 Bill sen t t o Ban k fo r co llect ion A/ c Dr. 12 ,240

To Bi lls Receivab le A/ c 12,240

(Being M anes new accepted b i l l sent t o bankfor col lect ion )

Ju ly 7 Bank A/ c Dr. 12 ,240

To Bi ll sen t t o b an k fo r co l lect io n A/ c 12,240

(Being M anes new acceptance hono ured on du e date)

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Answer 3. (b)

Let Closing Sto ck be x

Op en ing St o ck =100

80x

Average St o ck =210080

xx+

210080

xx+= ` 36,000

o r xx10080

+ = ` 72,000

o r100

80100 xx+= ` 72,000

o r 180x = ` 7 2,0 00 1 00

o r x =180

100000,72 `

= ` 40,000

Closin g St o ck = ` 40,000

Op en ing St o ck =10080 ` 40,000

= ` 32,000.

Answ er 3. (c)

`

Sale valu e o f 17 co m pu t ers 1,95,500

Less: Co st o f pu rch ases (` 7,250 17) 1,23,250

Cost o f rep airs (` 42,500/20 17) 36,125

Selling exp enses 2,125 1,61,500

Pro f it o n Jo in t Vent u re 34,000

Q. 4. (a) Classi fy th e fol low ing expenses into capital and revenue expendit ure : [ 21 8=4]

( i) W h i t e -w a sh i n g o f t h e f a ct o r y b u i ld i n g ` 10,000.

( i i ) Re-bui ld ing expenses incurred for ` 25,000.

( ii i ) Paym ent o f impor t d u ty on purchase o f raw m ater ia l .

(iv) ` 500 paid for rem oval of stock to a new si te.

(v) Expenses incurred. in connect ion w i th obt ain ing a l icence to s tar t th e factor y.

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SECTION - I I

AnswerQuest ion No. 5,w hich is compulsory andany t w o questions from Section II.

Q. 5. (a) In each of t he fol low ing one of th e al ternat ives is correct , indicate the correct on e : [19=9]

( i) Conversion cos t i s equa l to the to ta l o f the

(A) D i rec t mater ia l cos t and d i rect l abour cost

(B) D i rec t mater ia l cos t and fac to ry overheads

(C) D i rect m ater ial cost , d i rect l abour cost and facto ry overheads

(D) D i rec t l abour cost and fac to ry overheads

( i i) The var iab le cost per un i t i s

(A) Va r ia b le i n n a t u re

(B) F ixe d in n a t u re

(C) Semi -var iab le in na tu re


( ii i) B incard con ta ins

(A) The va lue and quant i t y o f m ater ial l ying in the B in

(B) The va lue o f mater ial l ying in the B in

(C) The quant i t y o f a l l k ind o f m ater ial s o f s to res

(D) The quant i t y o f mater ia l l y ing in the Bin

( iv ) Se l li ng p r i ce ` 48 per uni t ; var iable cost ` 40 per u ni t and f ixed cost ` 6,00,000. The BreakePoint in u ni ts wi l l be

( A) 1 5 ,0 0 0 u n it s

( B) 1 2 ,5 0 0 u n it s

(C) 1 ,2 5 ,0 0 0 u n i t s

( D) 7 5 ,0 0 0 u ni t s

(v) Prof i t -volum e Rat io (P/ V Rat io) for the f i rm is 40 per cent and var iable cost of a produ ct is

` 720 uni t . I ts sell ing pr ice per un i t w i l l be

(A ) ` 1,008

(B) ` 1,200

(C) ` 1,800

(D ) ` 1,080

(vi ) Co n t r i b u t io n i s a su m o f

(A) F ixed cos t and pro f i t

(B) Var iab le cos t and pro f i t

(C) Var iable cost and f ixed cost


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(v ii ) Labour tu rnover i s m easured by

( A) Se p ar at i o n M e t h od

( B) Re p la ce m e n t M e t h od

( C) Fl ux M e t h od

(D) A ll of t h e ab o v e

(v ii i) W h ich o f the fo l l ow ing i tems i s exc luded f rom cost accounts?

(A ) In co m e t ax

(B) I n t ere st o n d e b e nt u re s

(C) Cash d iscount

(D) A ll of t h e ab o v e

( ix ) I d le t im e i s a

(A) T im e sp e n t o n p ro d u ct i o n

( B) U n p ro d u ct i ve t i m e

(C) T im e o f w o rk d o n e b ey o n d n o rm a l w o rk i n g h o u rs

(D) T ime taken by casua l labourers/ workers

( b ) Fi l l i n t he b lanks : [15=5]

(i) At th e level o f Break-even -sales t he p ro f it w il l b e .

( i i ) Al l th e indi rect costs re lated to indi rect m ater ia l , indi rect labour and indi rect expenses aret erm ed as .

(ii i ) Fact or y cost p lus ad min ist rat ive overh ead s is kn ow n as .

( iv ) W hen the am ount o f overhead absorbed i s l ess than the amount o f overhead incur red , i t i scal led o f o verhead .

(v) Fo r t he goo d s t ran spo r t com pany is t he su it ab le cost un it .

(c) Sta te w i th reasons wh ether the fo l lowing s tatements are True or Fa lse : [28= 16 ]

( i ) Chargeable expenses is an example of f ixed cost .

( i i ) Costs w hich are ascerta ined af ter t hey have been incurred, are know n as h is tor ical costs .

( i i i) The tota l order ing cost and t he tot a l carry ing cost wo uld be sam e, if order s ize is kept at

econom ic o rder quant i t y .

( iv ) The item s consis t ing of only a smal l percentage of the tot a l i tem s handled by th e stores, butrequi r ing h eavy investm ent, are kept in C category under ABC Analysis.

(v ) A w e l l sa t i sf i ed team o f w orkers can ra ise p roduc t i v i t y to a la rge exten t .

(v i) Over t im e worked on account o f abnorm al cond i t i ons shou ld be charged to cos t o f p roduc t ion .

(v ii ) The P/ V Rat io = Pro f i t / M argin o f Sa fe ty.

(vi i i ) At BEP, Tot al sales and variab le costs are same.

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Answer 5. (a)

( i) (D ) D i rec t labour cos t and facto ry overheads.

( ii ) (B) F ixe d in n a t u re .

( ii i ) (D) The quant i t y o f mater ia l l y ing in the B in .

( iv ) ( D) 7 5,0 00 u n it s

(v) (B) ` 1,200

(vi ) (A) F ixe d co st a n d p ro f it .

( vi i) (D) A ll o f t h e a b o ve .

( vi ii ) (D) A ll o f t h e ab o v e.( ix) ( B) U n p ro d u ct i ve t i m e .

Answer 5. (b)

(i) N il

( ii ) O ve r he ad s

( ii i) Co st o f p ro d u c t io n

( iv ) U n d er r e co ve r y

( v) To n K il o m e t e rs

Answ er 5. (c)

(i ) False It is direct cost , hence, i t is an examp le of variable cost.

(ii) True Due to past in nature.

(ii i) True These are m inimu m as wel l as same.

(iv) False These are kept in Category A.

(v ) True Satisfact ion mo t ivates to do m ore produ ct ion.

(vi) False Abno rm al overt im e cost is charged to cost ing P & L Account .

(vii) True P/ V Rat io is calculated b y contr ibut ion / sales as wel l as prof i t / M .S.

(viii) False At BEP, Tot al sales and Tot al costs are t he sam e.

Q. 6. (a) Calculate the labour cost chargeable to Job No. 102 in respect of an employee, by us ing thefo l lo w in g d et ai ls, w h o is paid acco rd in g t o [3]

( i) Ha lsey 50% scheme;

( ii ) Ro w a n Sc h em e :

Tim e allow ed : 7 h o urs 30 m in u t es

Tim e t aken : 6 h o u rs 45 m in u t es

W age rat e : ` 45 per hour

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(b ) The cost analysis of m anufactur ing 4,000 u ni ts of a p rodu ct is as fo l lows:

M ater ial ` 80,000; Labour ` 50,000; Overh ead charges (f ixed and variable) ` 30,000.

The comp any prod uces and sel ls 6,000 uni ts @ ` 45 each and is m aking a prof i t of ` 35,000.

You are requ i red to f i nd ou t the

( i ) To ta l amount o f f i xed overheads and

(ii) Var iab le overh ead s p er u n it . [22= 4]

(c) Price per uni t o f m ater ia l X ` 15; annual consum pt ion 60,000 uni ts ; order ing cost ` 400 per o rderand annu al carry ing cost 20 per cent of m ater ia l cost . Calculate th e Econom ic Order Quant i t y .[2 ]

(d ) In a factory, dai ly consum pt ion of a comp onent is 300 to 350 u ni ts and re-order p er iod is 6 to 10d ays. Calcu lat e t h e re-o rd er level fo r t he com p o n en t . [1]

Answer 6. (a)

( i) U n d e r Ha lse y 50 % Pl an :

Norm al Wages = 6.75 hours ` 45 = ` 303.75

Tim e Saved = 7 6 = 3/4 ho urs

Bonus = 3/4 hou rs ` 45 50% = ` 16.88

Tot al Labour Cost = ` 320.63

(ii) `

Under Rowan P lan : Norm al wages =43

6 Hrs. ` 45 = 303.75

Bonus = Time.StdSavedTime

Actu al Hrs. Hrly Rate = 45436

7 21

43

= 30.38

To t al Lab o u r Co st = 334.13

Answer 6. (b)

( i) Ca lcu la t ion o f the am ount o f to t a l overheads f ixed & var iab le at t he leve l o f 6000 un i ts :

`

Sa le s : 6 0 0 0 ` 45 2,70 ,000

Less: M at er ial = ` 80000 6000/4000 = ` 1,20,000

Labour = ` 50000 6000/4000 = ` 75,000 1,95 ,000

Am o un t o f Pro f i t & overh ead s 75,000

Less: Pro f it 35 ,000

Tot al overheads 40,000

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( ii ) Va ri ab le Ov er h ead p er u n it =o u t p u tinChange

overheadsinChange

=un i t s4000un i t s6000

3000040000

``

=un i ts2000

10000`= ` 5 per un i t

Fixed o ve rh ead = ` 30000 (` 5 400 0)

= ` 10,000

Answ er 6. (c)

EOQ = year1fo rinventoryo fun i tonecarry ingo fCosto rde rperCostOrder ingnConsumptionnualA2

= 15o f%20400600002

`

`

= 3400600002

`

= 4000 uni t s .

Answer 6. (d)

Re-order leve l = M ax. Consumpt ion Max . Re-order per iod

= 3 5 0 u n it s 1 0 = 35 0 0 u n it s.

Q. 7. (a) The fo l lowing f igures are avai lable f rom the records of Aasth a Ltd. as at 31st M arch:

Par t icu lars 2010 (` Iakh s) 2011 (` lakhs)

Sales 150 200

Pro f it 30 50

Calcu late :

( i) The P/ V ra t io and to ta l f i xed expenses.

( i i ) The Break-even level of sales.

( ii i ) Sa les requ i red to earn a p ro f i t o f ` 90 lakhs.

( iv ) Pro f i t o r Loss tha t w ou ld a r i se , i f the sales were ` 280 lakh s. [14=4]

(b ) The fo l lowing detai ls are avai lable to you :

Direct mater ia ls ` 4,00,000

Product ive wages ` 3,00,000

Fac tory overheads are recovered @ 40 per cen t on p roduc t i ve wages and admin is t ra t i veoverheads are recovered @ 10 per cent of factor y cost

I f th e actual factory expenses are ` 1,15,000 and adm inist rat ive expenses are ` 85,000, f ind ou tthe un der/ over recovery of overheads.

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(c) Class ify t he fo l low ing costs into f ixed, semi-var iable and var iable costs :

( i) D ep re ci at i o n o f Bu il d in g

(ii) Po w er

( ii i) Wa t e r a n d G as

( i v) Sa lary o f Works M anager

(v) Com m ission to salesman as a percentage of sales

( vi ) Sh o w ro o m e x p en se s

Answer 7. (a)

(i) P.V. Rat io = 100salesinChangepro f i tinChange

= 100)150200(

)3050(

= 40%

VP

Saleso f i tPrFC

=+

Ratio

o r10040

20050FC

=+

o r 1 0 0 FC + 50 0 0 = 8 0 0 0

o r 1 00 FC = 30 0 0

o r FC = ` 30 lacs

( ii ) BEP =%40

30PVRFC

= = ` 75 Lacs.

( ii i ) Sa les to reach Desi red Pro f i t :

= Ratio.V.Pof i tPrDesiredFC+

=%409030 +

= 3 00 la cs

( i v) Pro f i t / Loss, i f sales were ` 280 Lacs.

SalesPFC +

= P/ V Rati o

10040

lacs280Placs30=

+

`

`

` 3000 lacs + 100P = ` 11,200 lacs

or P =100

8200lacs

or P = ` 82 lacs

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Answer 7. (b)

Factory overhead recovered = 40% o f p roduc t i ve wages

= 40% of ` 300000 = ` 120000

Over - recovery o f facto ry overhead = ` 120000 Actual ` 115000

= ` 5000

Adm inist rat ive overhead recovered = 10% of factory cost

= (Di rect M ater ia l ` 400000 + W ages ` 300000 + Factory Overhead ` 120000)

= ` 820000 10%

= 82000

Hence, und er recovery of adm inist rat ive overhead =Actual ` 85000 ` 82000 = ` 3000.

Answ er 7. (c)

Fixed Cost (i), ( iv)

Variable (i i ), ( i i i ), (v)

Sem i-variable (vi)

Q. 8. (a) Z Ltd. prod uced 500 uni ts of a prod uct and th e fo l lowing costs were incurred :

`

M at er ial con su m ed 20,000

W ages p aid 30,000Chargeab le exp en ses 2,000

Fact o r y overh eads 26,000

Of f ice overh ead s 20,000

Selling an d d ist r ib u t io n overh eads 10,000

450 uni t s were sold at cost p lus 25 per cent on sales. Prepare a s tatement showing t he

( i) Pr im e co st ;

( ii ) Fa ct o r y c o st ;

( ii i) Co st o f p ro d u ct i o n ;

( iv ) Cos t o f Goods so ld ;

(v ) Pr o f it ; an d(vi) Sales. [16=6]

(b ) I f the Op ening Stock of f in ished good s is 3,000 un i ts , th e prod uct ion d ur ing th e per iod is 30,000un its, Closing Sto ck of f in ished good s is 5,000 un its and i f ` 5 per un i t is spent on every uni t sold,t hen f in d o u t t h e t o t al sel lin g exp enses. [2]

(c) I f the pr im e cost is ` 4,00,000 and factor y cost is ` 6,40,000 and of f ice overheads are 33 31 p er

cent o f t h e fact o r y overh ead s, w h at w o u ld b e t h e co st o f p ro du ct io n ? [2]

7/29/2019 8607_960523_accounting

16/16


Answer 8. (a)

State m ent of Cost, Profit and Sales

Output : 500 un i t s

`

M at er ial co n su m ed 20,000

W ages paid 30,000

Ch argeab le Exp enses 2,000

Pr im e Co st (i) 52,000

Fact o ry overh ead 26,000

Fact o r y Co st (ii) 78 ,000Off ice o verhead 20,000

Cost o f Pro d u ct io n (ii i) 98 ,000

Less: Cl o si n g st o c k : 5 00 4 50 = 5 0 u n it s

= ` 98,000 50050

9,800

Cost o f go od s so ld (iv) 88,200

Sellin g an d Dist r ib u t io n overh ead 10,000

Cost o f sales 98,200

Ad d : Pr o fi t : 2 5% on sa le s o r 3 3 31 % o n co st (v) 32,733

Sales (vi) 1 ,30,933

Answer 8. (b)

Uni ts so ld = Open ing stock + p roduc t ion c losing stock

= 3000 + 30,000 5000 = 28000 uni ts

Sellin g expen ses @ ` 5 per un i t sold

= 28000 ` 5

= ` 140000

Answ er 8. (c)

Fa ct o r y o ve r he ad = Fa ct o r y co st Pr im e co st

= ` 6,40,000 ` 4,00,000

= ` 2,40,000

Of fice o ve rh ead = Fact or y Over head 3 3 31 %

= ` 2,40,000 33 31 %

= ` 80,000

Co st o f p ro d u c t io n = Fa ct o r y co st + Of f ic e o v erh e ad

= ` 6,40,000 + ` 80,000

= ` 7,20,000.

8607_960523_accounting

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