Cost & Management Accounting DEC 2026
Dec 2026 Examination
Q1 A manufacturing company provides the following information for the production of 10,000 units during the year:
| Particulars | Amount (Rs.) |
| Opening Stock of Raw Materials | 30,000 |
| Purchases of Raw Materials | 2,40,000 |
| Carriage Inwards | 10,000 |
| Closing Stock of Raw Materials | 40,000 |
| Direct Wages | 1,20,000 |
| Direct Expenses | 20,000 |
| Factory Overheads | 1,00,000 |
| Opening Work-in-Progress | 30,000 |
| Closing Work-in-Progress | 20,000 |
| Office & Administrative Overheads | 60,000 |
| Opening Finished Goods | 50,000 |
| Closing Finished Goods | 30,000 |
| Selling & Distribution Overheads | 60,000 |
The company follows a cost-sheet approach for determining product cost and pricing. Prepare a Cost Sheet showing Prime Cost, Factory/Works Cost, Cost of Production, Cost of Goods Sold and Cost of Sales. Calculate the cost per unit and determine the selling price per unit if the company wants to earn a profit of 20% on cost. (10 Marks)
Ans 1.
Introduction
Any manufacturing firm needs an effective method to figure out what a particular product will cost to create and to sell so that they can price it correctly and earn a fair profits. Cost sheets are comprehensive document that categorizes and summarizes the overall costs of a product in distinct categories for the specified period. They are prepared frequently and usually with each order or batch, as well as for the accounting period which serves as an account of costs in the
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Q2 (A) A manufacturing company is facing rising costs, inefficient resource utilisation and increasing competition. The Managing Director believes that financial accounting information alone is sufficient to address these issues. The newly appointed Management Accountant disagrees and recommends using management accounting information for managerial decisions. Evaluate the Management Accountant’s recommendation by explaining how management accounting information can support planning, resource allocation, monitoring and control, and operational decision-making in this situation. (5 Marks)
Ans 2(A).
Introduction
The managing director believes that financial accounting alone can solve the problems of rising costs, poor resource use as well as competition. Nevertheless, the financial accounting system only records what previously occurred. It is the Management Accountant is right to advise management accounting as it focuses on the future and helps the actual process of making
Q2 (B) A diversified manufacturing and engineering company receives the following three assignments:
– Assignment A: Manufacture a customised machine according to the specifications of one customer.
– Assignment B: Manufacture 1,000 identical electronic components together as one production lot.
– Assignment C: Execute a two-year construction project at the customer’s site.
Analyse the nature of each assignment and recommend whether Job Costing, Batch Costing or Contract Costing should be applied in each case. Justify each recommendation based on the nature of the cost unit, production/order characteristics and duration of the work. (5 Marks)
Ans 2(B).
Introduction
The three assignments differ in the way work is ordered, how close the outputs are as well as the length of time that the work takes. This is what determines the costing technique that is most suitable because batch, job and contract pricing are made to work with a specific type of production.
Concept and Application
Assignment A and Job Costing
Assignment A involves manufacturing one customised machine to a single specs of a customer. Thus, each job becomes the cost unit. Job costing has been designed specifically for this