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Bachelor of Management Studies
Previous-year questions solved from four distinct papers: 2022–23, May–June 2024, May–July 2025 (also labelled 2023–25) and May–June 2026 (paper code 2922061201). Concepts and method follow Cost & Management Accounting — Revision Book (CA Vikas Gowda) where it covers the topic; target, life-cycle and quality costing are written from the syllabus. Each question is written out in full, exactly as printed, before its solution. Where the printed data looks inconsistent the solution says so (⚠ Printed-data caution) and states its assumption.
| Unit | Topics | Questions | Repeated | Share of questions |
|---|---|---|---|---|
| Unit 1 — Nature, scope of management accounting; cost concepts, cost sheet and overheads | 6 | 12 | 4 | 22.2% |
| Unit 2 — Cost-volume-profit analysis and decision making | 8 | 13 | 3 | 24.1% |
| Unit 3 — Budgets and budgetary control | 6 | 10 | 4 | 18.5% |
| Unit 4 — Standard costing and variance analysis | 6 | 9 | 3 | 16.7% |
| Unit 5 — Contemporary issues in cost and management accounting | 4 | 10 | 4 | 18.5% |
Cost accounting, financial accounting and management accounting: differences and advantages — asked 4× (2022–23, May–June 2024, May–July 2025)
Break-even analysis, P/V ratio, target profit and margin of safety (numerical) — asked 3× (2022–23, May–June 2024, May–June 2026)
Relevant and irrelevant costs in decision making — asked 3× (2022–23, May–June 2024, May–July 2025)
Target costing — asked 3× (2022–23, May–July 2025, May–June 2026)
Life cycle costing — asked 3× (May–June 2024, May–July 2025, May–June 2026)
Cost sheet: material consumed, prime cost, works cost, cost of sales and profit — asked 2× (May–June 2024, May–July 2025)
Classification of costs: functional, production versus period, fixed and variable — asked 2× (May–June 2024, May–June 2026)
Cost control, cost reduction and cost management — asked 2× (2022–23, May–June 2024)
Most profitable product mix with a limiting factor — asked 2× (2022–23, May–June 2024)
Cash budget (numerical) — asked 2× (2022–23, May–July 2025)
Flexible budget at different activity levels (numerical) — asked 2× (May–June 2024, May–June 2026)
Flexible budget versus fixed budget — asked 2× (2022–23, May–July 2025)
Meaning and steps of budgetary control — asked 2× (2022–23, May–June 2026)
Material cost variances: price, usage, mix and yield (numerical) — asked 2× (2022–23, May–July 2025)
Labour cost variances: rate, efficiency, idle time, mix and yield (numerical) — asked 2× (May–June 2024, May–June 2026)
Limitations of standard costing — asked 2× (2022–23, May–June 2026)
Quality costing — asked 2× (May–June 2024, May–July 2025)
Activity-based costing (ABC) — asked 2× (2022–23, May–June 2024)
| Paper | Pattern | Marks |
|---|---|---|
| 2022–23 | Attempt any five; each Q = (a) numerical 15 + (b) theory 3; Q6 short notes (any three × 6) | 90 |
| May–June 2024 | Same pattern as 2022–23 | 90 |
| May–July 2025 | (a) numerical 13 + (b) theory 5; Q5 notes (any two × 6) | 90 |
| May–June 2026 | (a) theory 6 + (b) numerical 12 per question; Q6 any three × 6 | 90 |
Syllabus (12 hours): Cost vs management accounting, cost control / reduction / management, cost classification, cost sheet, cost unit and centre, overheads (allocation, apportionment, absorption).
Book reference: CA Vikas Gowda, Cost & Management Accounting Revision Book, Ch. 1 (basic meaning, cost classification), Ch. 4 (overheads), Ch. 6 (cost sheet).
Cost: Money spent to make a product or provide a service.
Costing: Finding how much that product or service costs.
Cost accounting: Recording, measuring, classifying and controlling costs.
Management accounting: Providing useful information (costs, budgets, forecasts and performance reports) to managers for planning, control and decisions.
Cost management: Systematically planning, monitoring and improving costs without damaging the product's value.
A factory uses ₹40 of raw material, ₹10 of labour and ₹5 of other variable costs per unit. Its variable cost is ₹55. If it sells at ₹80, the contribution is ₹25 per unit. The factory must first recover monthly fixed costs from this contribution; the balance is profit.
| Basis | Types | Easy meaning | Example |
|---|---|---|---|
| Nature | Material, labour, expenses | What resource was consumed? | Steel, wages, machine hire |
| Traceability | Direct and indirect | Can it be traced to one product? | Cloth = direct; factory supervisor = indirect |
| Function | Production, administration, selling, distribution | Why/where was it incurred? | Factory power; office rent; advertisement; delivery |
| Behaviour | Fixed, variable, semi-variable | What happens when output changes? | Rent; raw material; electricity with base charge |
| Decision | Relevant, irrelevant, opportunity, sunk | Does this cost affect a choice? | Special-order materials = relevant; past research cost = sunk |
| Normality | Normal, abnormal | Is it expected in efficient operation? | Routine wastage; exceptional fire loss |
Fixed cost stays constant in total within a relevant range, so fixed cost per unit falls as more units are made. Variable cost stays approximately constant per unit and changes in total with volume. A semi-variable cost contains both.
Product/manufacturing cost: Direct material + direct labour + direct expenses + production overhead. Under absorption costing, it enters inventory and becomes an expense when inventory is sold.
Period cost: Selling, distribution and general administrative expenditure. Usually expensed in the period incurred, not added to the value of unsold finished goods.
Marginal/variable costing: Only variable manufacturing costs go into the inventory valuation; fixed manufacturing overhead is charged to the period.
| Step | Formula |
|---|---|
| Materials consumed | Opening raw material + purchases + carriage inward − closing raw material |
| Prime cost | Materials consumed + direct wages + direct expenses |
| Works/factory cost | Prime cost + factory overhead + opening WIP − closing WIP |
| Cost of production | Works cost + production-related administration − scrap recovery (where appropriate) |
| Cost of goods sold | Cost of production + opening finished goods − closing finished goods |
| Cost of sales | Cost of goods sold + general administration + selling/distribution overhead |
| Costing profit | Net sales − cost of sales |
Important classifications: Freight inward increases material acquisition cost; freight outward is distribution. Machine depreciation is factory overhead; furniture depreciation normally office overhead. Cash discount and bad debts are financial items, usually kept outside a manufacturing cost sheet; show them separately if reconciling accounting profit. Scrap value is normally credited against factory/production cost if related to the process.
Primary distribution: Share factory overheads among all production and service departments using a fair basis — rent by floor area, machine depreciation by machinery value, motive power by horsepower, canteen by employees, lighting by light points.
Secondary distribution: Pass the service-department costs to the production departments.
Reciprocal/simultaneous equations: If X helps Y and Y helps X, their total costs include the services received from each other. Form two equations, solve them, then assign the resulting service cost to A, B and C.
| No. | Previous-year question topic | Year |
|---|---|---|
| 1 | Cost sheet: material consumed, prime cost, works cost, cost of sales and profit | May–June 2024, May–July 2025 |
| 2 | Cost accounting, financial accounting and management accounting: differences and advantages | 2022–23, May–June 2024, May–July 2025 |
| 3 | Classification of costs: functional, production versus period, fixed and variable | May–June 2024, May–June 2026 |
| 4 | Cost control, cost reduction and cost management | 2022–23, May–June 2024 |
| 5 | Overheads: primary distribution and reciprocal service-department allocation | May–June 2026 |
| 6 | Treatment of scrap in a cost sheet | May–June 2026 |
Prepare a cost sheet to show the total cost and cost per unit of goods manufactured by m/s. Corona Enterprises for the month of January 2022. Also, find out the cost of sales.
| Particulars | Amount (₹) |
|---|---|
| Stock of raw material (1.1.2022) | 4,000 |
| Stock of raw material (31.1.2022) | 5,500 |
| Raw material purchased | 29,000 |
| Manufacturing wages | 8,000 |
| Depreciation on plant | 1,500 |
| Factory rent and rates | 4,000 |
| Office rent | 1,000 |
| General expenses | 1,200 |
| Sales discount | 1,000 |
| Advertising expenses | 5,000 |
The number of units produced during the month was 4,000. The stock of finished goods was 300 and 400- units on 1.1.2022 and 31.1.2023 respectively. The total cost of units in hand on 1.1.2022 was Rs. 3,900. All these had been sold during the month. (15)
Raw material is not the same as raw material consumed. Adjust stock first; then progress from prime cost to production cost, cost of goods sold and cost of sales.
Step 1 — Calculate raw material consumed = Opening ₹4,000 + purchases ₹29,000 − closing ₹5,500 = ₹27,500.
| Cost sheet for January 2022 | ₹ |
|---|---|
| Opening raw material | 4,000 |
| Add: raw material purchased | 29,000 |
| Less: closing raw material | (5,500) |
| Raw material consumed | 27,500 |
| Manufacturing wages | 8,000 |
| Prime cost | 35,500 |
| Depreciation on plant | 1,500 |
| Factory rent and rates | 4,000 |
| Cost of manufacture/works cost | 41,000 |
| Office rent | 1,000 |
| General expenses | 1,200 |
| Cost of production (4,000 units) | 43,200 |
| Opening finished goods | 3,900 |
| Less: closing finished goods (400×₹10.80) | (4,320) |
| Cost of goods sold | 42,780 |
| Advertising | 5,000 |
| Cost of sales (excluding discount) | 47,780 |
| If the ₹1,000 sales discount is classified as selling expense instead | +1,000 |
| Alternative total including sales discount | 48,780 |
Step 2 — Cost per produced unit = 43,200/4,000 = ₹10.80.
The 400 unsold current-production units cost 400×₹10.80. The opening 300 finished units already have a stated historical total cost of ₹3,900, so use that actual opening value instead of repricing them at ₹10.80.
⚠ Printed-data cautions: The source states closing finished stock on 31.1.2023 even though the exercise is for January 2022. The date is kept as printed; the computation treats it as the ending inventory for the stated monthly problem. The source says “Sales discount” without specifying cash or trade discount. Normally financial discounts are excluded from the cost sheet and adjusted against revenue or profit. The alternative total is shown because some exam solutions treat this item as selling overhead.
From the books of account of M/s ABC Enterprises, the following details have been extracted for the year ending 31st March 2025. From the details below you are required to prepare a cost sheet showing the breakup of cost and profit : 13
| Particulars | Amount (₹) |
|---|---|
| Stock of materials - Opening | 1,88,000 |
| Stock of materials - Closing | 2,00,000 |
| Materials purchased during the year | 8,32,000 |
| Direct wages paid | 2,38,400 |
| Indirect wages | 16,000 |
| Salaries to administrative staff | 40,000 |
| Freight - Inward | 32,000 |
| Freight - Outward | 20,000 |
| Sales | 15,79,800 |
| Cash discount allowed | 14,000 |
| Bad debts written off | 18,800 |
| Repairs of plant and machinery | 42,400 |
| Rent, rates and taxes—Factory | 12,000 |
| Rent, rates and taxes—Office | 6,400 |
| Travelling expenses | 12,400 |
| Salesmen's salaries and commissions | 33,600 |
| Depreciation written off—Plant and Machinery | 28,900 |
| Depreciation written off—Furniture | 2,400 |
| Director's fees | 24,000 |
| Electricity charges (factory) | 48,000 |
| Fuel (for boiler) | 64,000 |
| Sale of scrap | 500 |
| General charges | 24,800 |
| Manager's salary (1/5th for factory and 4/5th for office) | 48,000 |
Start with raw materials consumed, classify every item into manufacturing, office or selling cost, and exclude purely financial items from cost of sales.
Step 1 — Material consumed = Opening stock ₹1,88,000 + purchases ₹8,32,000 + inward freight ₹32,000 − closing stock ₹2,00,000 = ₹8,52,000.
Indirect wages ₹16,000
Repairs ₹42,400
Factory rent/rates/taxes ₹12,000
Plant depreciation ₹28,900
Factory electricity ₹48,000
Boiler fuel ₹64,000
Manager's factory portion: 1/5×₹48,000 = ₹9,600
Total factory overhead = ₹2,20,900.
Staff salary ₹40,000 + office rent ₹6,400 + furniture depreciation ₹2,400 + director's fees ₹24,000 + general charges ₹24,800 + manager's office share ₹38,400 = ₹1,36,000.
Freight outward ₹20,000 + travelling ₹12,400 + salesmen's salaries/commissions ₹33,600 = ₹66,000.
| Cost sheet | ₹ |
|---|---|
| Opening materials | 1,88,000 |
| Materials purchased | 8,32,000 |
| Freight inward | 32,000 |
| Less: closing materials | (2,00,000) |
| Material consumed | 8,52,000 |
| Direct wages | 2,38,400 |
| Prime cost | 10,90,400 |
| Factory overheads (detailed above) | 2,20,900 |
| Less: scrap sold | (500) |
| Cost of production / goods sold | 13,10,800 |
| General administrative overhead | 1,36,000 |
| Selling and distribution overhead | 66,000 |
| Cost of sales | 15,12,800 |
| Sales revenue | 15,79,800 |
| Costing profit | ₹67,000 |
Cash discount allowed ₹14,000 and bad debts ₹18,800 are financial/accounting losses rather than product-manufacturing costs. They are excluded from the cost sheet above. If both are later charged against costing profit in a reconciliation, accounting profit would be 67,000−14,000−18,800 = ₹34,200, assuming no other reconciliation items.
The manager's salary is not fully factory cost. Split exactly 1/5 to factory and 4/5 to office as stated.
Write short notes on any Three : (3×6=18)
(i) Comparison between Cost Accounting and Management Accounting
| Basis | Cost accounting | Management accounting |
|---|---|---|
| Objective | Ascertain and control cost | Help managers plan, decide and control |
| Main focus | Cost per product, process, job or service | Overall managerial performance and future choices |
| Data | Mostly detailed cost and operating data | Cost, financial, market, forecast and qualitative information |
| Time focus | Actual and standard costs of current/past operations | Past, present and future |
| Reports | Cost sheet, variance report, product cost | Budgets, forecasts, dashboards, decision analyses |
| Users | Cost managers, production and finance | All levels of internal management |
Both are internal information systems. Management accounting often uses cost-accounting data but has a wider scope. Example: Cost accounting identifies a ₹10 increase in unit cost; management accounting evaluates price, design, supplier and product-mix choices in response.
Briefly explain the limitations of financial accounting. (3)
Historical focus: Mostly reports what happened, not what may happen tomorrow.
Aggregated figures: Overall profit does not disclose cost or profitability of each product, department or job.
Weak operating control: Does not automatically provide material, labour or overhead variance reports.
Non-financial factors omitted: Quality, waiting time, customer satisfaction and employee performance may not appear.
Accounting estimates: Depreciation methods, inventory policies and provisions affect the reported result.
Management and cost accounting supplement financial accounts with detailed, timely information for internal decisions.
Write Short Notes on Any Three (3×6=18)
(i) Advantages of Management Accounting
Better planning: Budgets and forecasts give departments clear targets.
Better decisions: Relevant costs help make-or-buy, shutdown, pricing and product-mix choices.
Cost control: Standard costs and variances show where performance differs from plan.
Resource utilisation: Scarce labour, machines and raw materials can be assigned to high-contribution uses.
Performance review: Departmental reports support responsibility and accountability.
Risk anticipation: Cash-flow projections warn managers of shortages before they happen.
A manager compares three products' contribution per machine-hour and decides how to allocate limited machine capacity. That is an application of management accounting. Caution: Its usefulness depends on timely, accurate data and sound judgement; a forecast is not a guarantee.
State and explain the main differences between cost accounting and financial accounting. 5
| Basis | Cost accounting | Financial accounting |
|---|---|---|
| Purpose | Find/control product and process costs | Record transactions and report overall performance/position |
| Main users | Internal managers and operating departments | Owners, investors, lenders, regulators and management |
| Detail | Product, service, job, process, department | Business as a whole |
| Timing | Frequent/continuous operational reports | Periodic financial statements |
| Rules | Flexible internal classifications and costing methods | Applicable accounting standards and legal reporting rules |
| Time orientation | Past, present standards and future cost forecasts | Mainly completed transactions and reporting period |
| Output | Cost sheet, job cost, variances | Profit and loss, balance sheet, cash flow statement |
| Mandatory? | Depends on entity/reporting requirements | Generally required by company/reporting law |