DCM 6104 COST ANALYSIS AND CONTROL JULY-AUG 2025

Description

SESSION	JULY-AUGUST 2025
PROGRAM	MASTER OF COMMERCE (M.COM)
SEMESTER	I
COURSE CODE & NAME	DCM6104 COST ANALYSIS AND CONTROL

 

 

Set – 1

 

Q1. Briefly explain the following:

1. Contract Costing.
2. Operating Costing.

iii. Unit or Single Output Costing.

1. Process Costing.
2. Operation Costing.

Ans 1.

1. Contract Costing

Contract costing is a method of costing used where work is undertaken according to specific contracts, usually of long duration. It is commonly applied in industries such as construction, shipbuilding, civil engineering, and large-scale infrastructure projects. Under this method, each contract is treated as a separate cost unit, and all costs related to that particular contract are recorded separately. Direct costs such as materials, labor, and direct expenses are charged directly to the contract, while indirect costs are apportioned appropriately. Since contracts often extend over more than one accounting period, the concept of work-in-progress and

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Q2. Information on the overhead of different production and service departments is available as follows for July 2025:

Particulars	Production Department			Service Department
	X	Y	Z	Maintenance	Store
Indirect material	19,000	24,000	4,000	30,000	8,000
Indirect wages	18,000	22,000	6,000	20,000	13,000
Area (Sq. ft.)	2,000	2,000	1,500	1,000	500
Capital value of assets	1,00,000	1,20,000	80,000	60,000	40,000
Kilowatt hours	1,000	1,100	400	375	125
Number of employees	18	24	6	8	4

 

In addition to the above, the following information is available:

Lighting Expenses                                                                               Rs.70,000

Power expenses                                                                                Rs.1,20,000

Rent and rates                                                                                    Rs.56,000

Insurance of assets                                                                            Rs.20,000

Canteen expenses                                                                             Rs.18,000

Depreciation rate on capital value of assets per annum                       12%

Find the overhead of each department.

Ans 2.

Departmental Overheads (Primary Distribution) for July 2025

Statement Showing Department-wise Data (July 2025)

Particulars	X	Y	Z	Maintenance	Store	Total
Indirect Material (₹)	19,000	24,000	4,000	30,000	8,000	85,000
Indirect Wages (₹)	18,000	22,000	6,000	20,000	13,000	79,000
Area (Sq. ft.)	2,000	2,000	1,500	1,000	500	7,000
Capital Value of Assets (₹)	1,00,000	1,20,000	80,000	60,000	40,000	4,00,000
Kilowatt Hours (KWH)	1,000	1,100	400	375	125	3,000
Number of Employees	18	24	6	8	4	60

 

 

 

Q3. Mention any five differences between Marginal and Absorption Costing.

Ans 3.

Differences between Marginal Costing and Absorption Costing

Marginal costing and absorption costing are two important techniques of cost accounting used for cost analysis, pricing, and managerial decision-making. Although both methods aim to ascertain product cost and profit, they differ significantly in treatment of costs, valuation of inventory, and usefulness for management decisions. The following discussion explains five major differences between marginal costing and absorption costing in a clear and exam-oriented manner.

1. Treatment of Fixed Manufacturing Overheads

The most fundamental difference lies in the treatment of fixed manufacturing overheads.

 

 

Set – 2

 

Q4. If the semi-variable cost for 2,000 units of output is Rs. 15,000 and for 3,000 units it is Rs. 20,000, find the variable cost per unit and total fixed cost for the period.

2. Selling Price is Rs. 200; Variable cost per unit is Rs. 120; Fixed Cost is Rs. 10,000.

The number of Units produced is 200.

 Calculate the following:

1. Contribution
2. P/V ratio

iii. BEP in Rs.

1. BEP in units.

Ans 4.

(A).

Semi-variable Cost (High–Low Method)

Given:

At 2,000 units → Cost = ₹15,000

At 3,000 units → Cost = ₹20,000

Variable Cost per Unit

 

Q5. The following data relates to two machines of KPS Ltd.

Particulars	Existing machine Rs.	New machine Rs.
Capital cost Rs. Marginal cost per unit Rs. Selling price per unit Rs. Fixed expenses Rs. Annual Output (units) Life of machinery (years)	1,00,000 60 120 48,000 2,000 10	4,00,000 52 120 1,48,000 4,000 10

 

The existing machine has been working for 5 years. Its present resale value is Rs. 40,000. The scrap value of the machine may be taken as nil. Advise whether the old machine should be replaced by a new machine if the rate of interest is 10% per annum.

Ans 5.

Replace Old Machine? (NPV Decision @ 10%)

Step 1: Annual Cash Profit (Contribution – Fixed)

Existing machine:

Contribution/unit = 120 − 60 = ₹60

Annual contribution = 60 × 2,000 = ₹1,20,000

Annual profit = 1,20,000 − 48,000 = ₹72,000

New machine:

 

 

Q6. Define the concepts of Pricing Decisions. And explain its external and internal factors.

Ans 6.

Pricing Decisions: Meaning and Internal & External Factors

Pricing decisions refer to the process of determining the appropriate price at which a product or service should be offered to customers. Price is the only element of the marketing mix that generates revenue, while all other elements involve costs. Therefore, pricing decisions directly influence profitability, market position, and long-term sustainability of a business. An effective pricing decision aims to recover costs, earn a reasonable profit, and provide