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Question Paper
Cost Management Accounting Duration:75
Details: Test-2 (Ch-2) Marks: 40
Instructions:
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Q-1 A factory requires 1,500 units of an item per month. The cost of each unit is Rs27. The cost
per order is Rs150 and material carrying charge works out to 20% of the average material. Find
out the economic order quantity (EOQ) and ascertain the number of orders to be placed per
year. Would you accept a 2% price discount on a minimum supply of 1,200 units?
(7 Marks)
Q-2 XYZ Ltd. are the manufactures of tyre tubes for cars. The following are the details of their
operations during the current financial year:
Ordering cost (per order) Rs 100
Inventory carrying cost (per annum) 20%
Cost of tubes (per tube) Rs 500
Normal usage (tubes per week) 150
Minimum usage (tubes per week) 50
Maximum usage (tubes per week) 200
Lead time to supply (weeks) 6-8
You are required to calculate:
(i) Economic order quantity. If the supplier is willing to supply quarterly 1,500 units at a
discount of 5 per cent, is it worth accepting?
(ii) Re-order level
(iii) Maximum level of stock
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(iv) Minimum level of stock
(8 Marks)
Q-3 Stocks are issued at standard price and the following transactions occurred in a specific
material:
Stocks are issued at standard price and the following transactions occurred in a specific material:
Date April 2013
1 Stock 10 tons at Rs240 per ton
4 Purchased 5 tons at Rs260 per ton
5 Issued 3 tons
12 Issued 4 tons
13 Purchased 3 tons at Rs250 per ton
19 Issued 4 tons
26 Issued 3 tons
30 Purchased 4 tons at Rs280 per ton
30 Issued 3 tons
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The debit balance of price variation on 1st April 2013 was Rs20. Show the stock account for the
material for the month of April indicating how would you deal with the difference in material
price variance, while preparing the Profit and Loss Account for the month.
(10 Marks)
Q-4 SKD Company Ltd., not registered under GST, purchased material P from a company which
is registered under GST. The following information is available for the one lot of 1,000 units of
material purchased:
Listed price of one lot Rs.50, 000
Trade discount @ 10% on listed price
CGST and SGST (Credit Not available) 12% (6% CGST + 6% SGST)
Cash discount @10%
(Will be given only if payment is made within 30 days.)
Freight and Insurance Rs.3, 400
Toll Tax paid Rs.1, 000
Demurrage Rs. 1,000
Commission and brokerage on purchases Rs.2, 000
Amount deposited for returnable containers Rs. 6,000
Amount of refund on returning the container Rs. 4,000
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Other Expenses @ 2% of total cost
20% of material shortage is due to normal reasons.
The payment to the supplier was made within 20 days of the purchases.
You are required to calculate cost per unit of material purchased to SKD Company Ltd.
(7 Marks)
5. MCQs
Case study 1
Cipla Ltd. has a monthly requirement for an item of raw material is 1,000 units. The purchase
price per unit of material is 60. The cost of processing an order is Rs. 540 and the carrying cost
is 20%.
There is a single supplier for the material which offers quantity discounts as under:
Order Quantity (in units) Price per unit (Rs.)
Less than 2,000 units 60
2,000 units and less than 4,000 units 59.8
4,000 units and less than 6,000 units 59.5
6,000 units and less than 8,000 units 58.9
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8,000 units and above 58.4
The company uses the cash credit facility provided by the company’s banker to finance its raw
material purchase. The bank due to its own infrastructural constraint, can accommodate a
maximum of five fund transfer (NEFT/RTGS) requests for any single beneficiary per annum. The
company in short term is unable to arrange any other source of finance.
Here are two MCQ questions based on the given scenario.
1. What is the Economic Order Quantity (EOQ) for Cipla Ltd. based on the given data?
a) 1,000 units
b) 1,039 units
c) 1,500 units
d) 2,000 units
(1 Marks)
2. What is the additional cost incurred by the company due to the bank's inability to process
more than five fund transfer requests per annum?
a) Rs. 2,700
b) Rs. 2,181
c) Rs. 7, 34,652
d) Rs. 7, 32,471
(2 Marks)
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Case Study 2
M/s. SJ private Limited manufactures 20,000 units of a product per month. The cost of placing
an order is Rs. 1,500. The purchase price of the raw material is Rs.100 per kg. The re-order
period is 5 to 7 weeks. The consumption of raw materials varies from 200 kg to 300 kg per
week. The average consumption being 250 kg. The carrying cost of inventory is 9.75% per
annum.
3. What is the Maximum Level of raw materials for M/s. SJ Private Limited?
a) 2,100 kgs
b) 3,100 kgs
c) 1,850 kgs
d) 600 kgs
(2 Marks)
Case Study 3
Oil India is a bulk distributor of high octane petrol. A periodic inventory of petrol on hand is
taken when the books are closed at the end of each month. The following summary of
information is available for the month of June 2021.
Particulars Rs
Sales 9,45,000
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General Administrative Cost 25,000
Opening stock: 1,00,000 Liters @ Rs 3 per liter 3,00,000
Purchase ( including freight in)
June 1 2,00,000 liters @ Rs 2.85 per liter
June 30 1,00,000 liters @ Rs 3.03 per liter
Closing stock June 30 1,30,000 liters
Here are two MCQ questions based on the provided scenario
4. Under the FIFO method, what is the value of the closing stock on June 30, 2021?
a) Rs. 3, 88,500
b) Rs. 3, 90,000
c) Rs. 3, 93,000
d) Rs. 3, 80,000
(1 Marks)
5. What is the profit for June 2021 under the LIFO method?
a) Rs. 1, 35,500
b) Rs. 1, 37,000
c) Rs. 1, 40,000
d) Rs. 1, 32,000
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(2 Marks)
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