Budgeting and Cost Control

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MBA

June 2013- Examination

Finance Specialisation (Major and Minor)

Sub: Budgeting and Cost Control

1. Define Cost. Explain the elements of cost with an example each.

2. What is Costing? Explain any four methods of costing?

3. What is Cost? Explain in brief any eight types of cost

4. Write short notes on:

a. Cost center

b. Cost unit

c. Cost Estimation

d. Cost ascertainment

5. What is Costing? Explain any four techniques of costing?

6. What is Budgetary control? Explain the objectives of Budgetory control?

7. What is Costing? Explain the objectives of costing.

8. What is Cost reduction? How is it different from cost control?

9. What is budgets? Explain the different types of budgets prepared by the business

enterprises.

10. What is Marginal costing? Write any 4 merits and 4 demerits of marginal costing.

11. The following data relate to manufacturing of a standard product during the four

weeks ending on 31st March 2013:

Raw materials consumed 40,000

Direct wages 12,000

Machine-hours worked 1,000 hours

Machine –hour rate Rs 2 per hour

Office overhead 20% on works cost

Selling Overhead Re 0.40 per unit

Units produced 20,000 units

Units sold at Rs 12 each 18,000 units

Prepare a cost sheet and show the profit



12. A factory produces a standard product. The following information is given to you

from which you are required to prepare a „cost sheet‟ for the period ended 31 st July

2012

Raw Materials

Opening stockPurchasesClosing Stock

Rs

10,00085,0004,000

Direct Wages 20,000

Other Direct Expenses 10,000

Factory Overhead 100% of direct labour

Office overhead 10% of works cost

Selling and Distribution expenses Rs 2 per unit sold

Units of Finished product

In hand at the beginning of the period Units 1,000(Value Rs 16,000)

Produced during period 10,000 unitsIn hand at the end of the period 2,000 units

Also find out the selling price per unit on the basis that profit mark-up is uniformly made

to yield a profit of 20% of the selling price. There was no work-in-progress either at the

beginning or at the end of the period.

13. Raj Enterprises is a manufacturer of Cycles. It finds that in 2012, it costs Rs7,20,060

to manufacture 175 Cycles which is sold for Rs5,400 each. The cost was made up of:

Materials 2,82,000

Direct Wages 3,24,000

Factory Overheads 48,600

Office Overhead 65,460

Total 7,20,060

For the year 2013, it is estimated that:

a)Each scooter will require materials of Rs1,900 and labour of Rs1,600

b) Factory Overheads will bear the same relation to wages as the previous year.

c) Office overheads percentage on factory cost will be the same as in the past.

You are required to caclucuate the price to be quoted per Cycle if the company expects

the same percentage of profits as earned in the year 2012.



14. What is Break Even Analysis? What are its assumptions?

15. What is Break Even Chart? Draw the break even chart showing different variables of

the break even analysis.

16. What is Cost sheet? Draft a format of a cost sheet.

17. The trading results of Pradhan Limited for the two years are given below.

Year Sales Profit

2008 5,40,000 12,000

2009 6,00,000 30,000

Compute the following:

I. PV Ratio

II. Fixed Costs

III. Break-even analysis

IV. Margin of safety at a profit of 48,000V. Variable costs during the two years

18. The following information is supplied to:

Fixed cost (Total) - 4,500

Variable Cost (Total) - 7,500

Sales (Total) - 15,000

Units Sold - 5,000 units

Calculate:a) Contribution

b) B.E Points in unitsc) Margin of Safetyd) Profite) Volume of sales to earn a profit of Rs 6,000

19. What is Zero Based Budgeting? Write any 8 features of ZBB.

20. Bangalore Engineering co ltd manufactures product X . An estimate of number of

units expected to be sold in the first seven months of 2013 is given below.

Months Product X

January 500February 600

March 800

April 1000

May 1200

June 1200

July 1000

It is anticipated that:



a) There will be no work-in-progress at the end of any month:

b)Finished units equal to half the anticipated sales for the next month will be in stock at

the end of each month(including December 2012)The budgeted production and

production costs for the year ending 31 December 2012 are as follows:

Product X

Production(units) 11000

Direct materials per unit 12

Direct Wages per unit 5

Other manufacturingcharges apportion able toeach type of product

44000

You are required to prepare:

a) A production budget showing the number of units to be manufactured each month.

b) A summarized production cost budget for the 6 month period-Jan to June 2013

21. A company expects to have Rs 60,000 cash in hand on 1 April, and requires you to

prepare an estimate of cash position during the three months-April, May and June.The

following information is supplied to you.

Month Sales Purchase Wages FactoryExpenses

OfficeExpenses

SellingExpenses

February 75000 45000 9000 7500 6000 4500

March 84000 48000 9750 8250 6000 4500

April 90000 52500 10500 9000 6000 5250

May 120000 60000 13500 11250 6000 6570

June 135000 60000 14250 14000 7000 7000Other information:

1. Period of credit allowed by suppliers 2 months.

2.20% of sales are for cash and period of credit allowed to customer is 1 month.

3. Delay in payment of all expenses-1 month

4. Income tax of Rs 57,500 is due to be paid on 15 June.

5. The company is to pay dividends to shareholders and bonus to workers of Rs15,000

and Rs 22,500 respectively in the month of April.

6. Plant has been ordered to be received and paid in May. It will cost Rs1,200,000.

22. The Sales and Profits for 2 years are as below:

Sales ProfitYear 2011 Rs. 20 lakhs Rs. 2 lakhsYear 2012 Rs.30 lakhs Rs. 4 lakhsCalculate,a) PV Ratio



b) Sales required to earn a profit of 10 lakhs.

c) Margin of Safety of the year 2011 and 2012

d) Profit when sales are 50 lakhs

23. A company is expecting to have Rs.35,000 Cash in hand on 1st April 2013,and it

requires you to prepare a Cash Budget for 3 months from April to June 2013.

The following information is supplied to you (Amount in Rs.),

Month Sales Purchases Wages Expenses

Feb 1,70,000 40,000 8,000 6,000

Mar 1,80,000 50,000 8,000 7,000

Apr 1,92,000 52,000 9,000 7,000

May 2,00,000 60,000 10,000 8,000

Jun 2,20,000 55,000 12,000 9,000

Other information:

A. Period of credit allowed by suppliers: two months

B. 25% of the sales are of cash and period of credit allowed to customers for

credit sales one month.

C. Delay in payment of wages and expenses: one month

D. Income tax of Rs.40,000 is to be paid in June 2013.

24. From the following details available in the records of a company for the yearending 31st March 2013

Particulars Opening balance (1/4/2012) Closing balance (31/3/1013)Raw material 86000 10400Work in progress 16000 18000

Finished goods 300 units (Rs 30000) 600 unitsTransaction for the period

a. Purchase of raw material 320000b. Direct labor 178000c. Direct Expenses 66000d. No of units produced 1000e. Factory over head 98000f. Office and administration over head 32000



g. Selling & distribution Rs 6 per unit soldh. Profit earned by the company 15% on selling price.

You are required to prepare a cost sheet & ascertain cost of selling per unit

25. Company x a manufacturer of furniture producers of chair the costing data for theyear 2012 is as follows

a. Direct material 220000b. Direct labor 160000c. Direct Expenses 120000d. Factory over head 90000e. Office and administration over head 40000f. Selling & distribution overhead 11000g. No of units produced & sold 1000h. Profit 66000

In the year 2013 company got an order for 500 chairs, the following changes areexpected

a. Materiel prices are expected to increase by 15%b. Labor charges will increase by 10% per unitc. Direct Expenses will reduce by 5% per unitd. Selling & distribution will reduce to 3000e. Factory over head to be recovered as a % of direct wages f. Office and administration over head to be recovered as a % of works costg. The company wants to earn 10% of profit on cost

You are required to prepare a cost sheet for the year 2012 and calculate the price to bequoted per chair

26. The following data are available relating to a product x which manufactured inbatches MBQ is 2000 units

a. Raw Material per unit 220b. Direct labor per unit 160c. Direct Expenses per unit 30d. Factory over head 30000 per monthe. Office & administration overhead 60000 per monthf. Insurance 24000 per annumg. Depreciation on furniture 36000 pa

h. Duration of the batch 15 daysPrepare a batch cost sheet & calculate cost per unit

27.a. What is Marginal Costing? Write any four areas of its managerial application.

b. Following details are available in the records of a company relating to product X thisproduct requires a product Y for its assembling, it is available in the market @ Rs. 32per unit with an assured supply



The cost of making the product is as followsa. Material 19 per unitb. Labor 7 per unitc. Other variable expenses 5 per unitd. Fixed expenses 2 per unit

Suggest whether the product to be manufactured or purchased

28. A company produces & sells 3 different products AB&C the details are given belowParticulars A B CSelling price per unit (Rs) 500 400 300Direct material per unit(Rs) 190 260 240Direct labor per unit(Rs.) 60 30 20Direct expenses per unit(Rs.) 30 40 10Variable over head per unit(Rs.) 20 10 -

Total fixed cost of the firm is Rs. 80000. You are required to suggest the most profitablesales mix from the following combinations of products.800 units of only “A” 500 units of „A‟ „B‟& „C‟ 700 units of „A‟ „B‟ each & 900 units of „c‟

29. The following particulars are available in a company relating to co xParticulars A B CSelling price (Rs) 280 260 180Variable cost (Rs) 120 140 110Direct material required per unit 5 kg 4 kg 3kgTotal demand (in Units) 100 200 300

Total raw material available 1800 kgsTotal fixed cost 20000You are required to suggest a profitable sales mix

30. The following details of a manufacturing company A B & C are the products anddetails given below

Particulars A B CSelling price (Rs) 280 190 380Variable cost (Rs) 140 100 180Direct labor required per unit( in hrs) 20 10 6Demand in units 400 500 300Total labor hours available 12000 hrs

Total fixed cost is 45000You are required to suggest the most profitable sales mix

Documents

Budgeting and Cost Control