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Cost & Management Accounting
Dec 2025 Examination
Q1. A factory produces a single
product. The following information relates to the month of March:
- Standard labour time per unit =
2.0 hours.
- Standard labour rate = Rs.100 per
hour.
- Actual production = 1,000 units.
- Actual hours worked (including
idle time) = 2,200 hours.
- Idle time during the period = 100
hours (paid but unproductive).
- Actual average labour rate paid =
Rs.95 per hour.
Overheads:
- Budgeted fixed factory overheads =
Rs.1,00,000 per month.
- Budgeted variable factory
overheads = Rs.20 per productive hour.
- The overhead absorption basis is
labour hours; standard hours for absorption = hours required for actual output
(i.e., 2.0 hr × 1,000 units).
- Actual fixed overheads incurred =
Rs.1,10,000.
- Actual variable overheads incurred
= Rs.46,000.
Required:
(a) Calculate the standard labour
cost for the output, actual labour cost, labour rate variance, labour
efficiency variance.
(b) Compute the overhead absorption
rate per hour, overheads absorbed, and state whether overheads are over- or
under-absorbed and by how much.
(c) Suggest two control measures
(brief) — one for labour cost control and one for overhead control. (1 mark) (10
Marks)
Q2(A).
A manufacturing company is reviewing its inventory valuation methods. The
finance team notes that FIFO and LIFO, each impact reported profits, tax
liabilities, and inventory values differently, especially during periods of
volatile material prices. The operations team is concerned about the complexity
of calculations and the alignment with actual material flows. The management
team must decide which method best supports both financial reporting and
operational needs. Evaluate the implications of choosing between FIFO, LIFO for
inventory valuation in a manufacturing company experiencing frequent price
fluctuations. How should management decide which method to adopt, and what
improvements would you suggest to ensure both financial accuracy and
operational efficiency? (5 Marks)
Q2(B).
A textile mill’s spinning department reported an abnormal gain this quarter,
with actual production surpassing the normal output due to enhanced worker
efficiency and minor process improvements. While this has led to lower per-unit
costs and higher reported profits, the finance director is concerned about
whether this gain is sustainable and how it should influence future budgeting,
cost estimation, and operational planning. Assess the managerial response to an
abnormal gain in a textile mill’s spinning process, where actual output
exceeded expected levels due to improved worker efficiency. How should
management adjust future cost estimates and operational strategies in light of
this abnormal gain, and what are the potential risks of misinterpreting such
gains in process costing? (5 Marks)
Dear students, get fully
solved assignments by professionals
Do send your query at :
or call us at :
08263069601
(Plagiarism proofed
assignments available with 100% surety and refund)
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