Cost & Management Accounting April 2026 Solved Assignments
Description
Cost & Management Accounting | Applicable for April 2026 Examination
Q1. CustomTek Solutions is monitoring the progress of a Rs.100 crore hospital construction project under a cost-plus contract with the government. The project has experienced unexpected labor shortages and fluctuations in steel prices, leading to a significant increase in direct costs. The contract includes an escalation clause and requires transparent, periodic reporting to the client. The project manager needs to ensure the company earns a fair profit while justifying all costs and managing stakeholder expectations during these volatile times.Applying the cost-plus contract framework and escalation clause, how should CustomTek Solutions approach cost allocation, documentation, and client communication to justify increased expenditures and secure the agreed profit margin under changing market conditions? (10 Marks)
Ans 1.
Introduction
Large infrastructure endeavours undertaken via cost-plus contracts necessitate stringent cost management, transparency, and proactive communication with stakeholders, particularly amidst unstable market dynamics. Within CustomTek Solutions’ ₹100 crore hospital construction undertaking, unanticipated labour deficits and volatile steel prices have substantially inflated direct expenses, thereby challenging both the stipulations of the contract and the client’s confidence. Given the agreement’s cost-plus framework, which incorporates an escalation clause, the project manager is tasked with reconciling precise cost recovery with accountability and credibility. Consequently, effective cost allocation, scrupulous documentation,
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Q2. A manufacturing concern issues materials to production using FIFO and Weighted Average methods.
From the following information relating to Material M for April 2025, you are required to:
(a) Prepare the Stores Ledger Account under the FIFO method
(b) Prepare the Stores Ledger Account under the Weighted Average method
(c) Compare the total value of material issued and closing stock under both methods
| Date | Particulars | Quantity (Units) | Rate (Rs.) |
| Apr 1 | Opening Stock | 1,200 | 20 |
| Apr 4 | Purchase | 800 | 22 |
| Apr 7 | Issue | 1,000 | — |
| Apr 10 | Purchase | 1,500 | 24 |
| Apr 14 | Issue | 900 | — |
| Apr 18 | Purchase | 700 | 26 |
| Apr 21 | Issue | 1,100 | — |
| Apr 25 | Purchase | 900 | 28 |
| Apr 28 | Issue | 800 | — |
Assumptions:
– No losses or shortages
– Weighted Average rate is recalculated after each receipt (10 Marks)
Ans 2.
Introduction
Inventory valuation is a critical component of cost accounting, significantly impacting material costs, profit assessment, and financial strategy. Manufacturing entities frequently employ structured pricing methodologies, including FIFO (First-In, First-Out) and Weighted Average, to document material withdrawals and ascertain the value of closing stock. Each of these methods embodies distinct assumptions regarding cost flow and exhibits varied responses to price changes. By utilising the provided data for Material M throughout April 2025, the creation of Stores Ledger Accounts under both FIFO and Weighted Average methods
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Q3(A). Alice’s Bakery, previously a single-location business, is about to expand into a second storefront in a totally new market area. Alice knows that direct and indirect costs, sunk and differential costs, as well as joint and common costs, will all impact her future profitability. She also wants to implement a cost allocation and tracking system that is fair, scalable, and supports her future expansion strategy—including franchising. She seeks your guidance as an MBA consultant specializing in cost and management accounting systems.Develop a customized cost allocation and tracking system for Alice’s Bakery expansion, synthesizing advanced concepts of cost classification, joint/common cost allocation, and expansion scalability. How will your framework guide strategic decisions now and in the event of further scaling through franchising? (5 Marks)
Ans 3a.
Introduction
As Alice’s Bakery embarks on its expansion into a new market, the effective classification and allocation of costs are paramount for maintaining profitability and fostering sustained growth. The complexities of expansion introduce intricate cost behaviours, including the distinctions between direct and indirect costs, sunk and differential costs, and joint and common costs; these must be meticulously identified and managed to facilitate informed decision-making. The absence of a structured cost tracking system can swiftly lead to pricing inaccuracies and inefficient resource utilisation, thereby diminishing profit margins. Consequently, the development of a fair, transparent, and scalable cost allocation framework is essential;
Q3(B). A manufacturing company produces three joint products—A, B, and C—by processing 20,000 kg of raw material at a cost of Rs.12 per kg. Total direct labour and overhead amount to Rs.1,10,000. At the split-off point, the production and selling prices are:
| Product | Output (kg) | Selling Price per kg (Rs.) |
| A | 9,000 | 32 |
| B | 6,000 | 20 |
| C | 3,500 | 16 |
However, 1,500 kg of process loss is considered normal and can be sold as scrap for Rs.2 per kg. Joint costs are to be apportioned among A, B, and C using the sales value at split-off method. Compute the cost per kg of each product after allocating joint costs and adjusting for the revenue from the normal loss, clearly showing all steps and logical assumptions. (5 Marks)
Ans 3b.
Introduction
In process industries, the simultaneous emergence of joint products from a shared input necessitates careful cost allocation, a crucial aspect of managerial accounting. This process becomes more complex when normal process losses, which possess salvage value, are present; these losses require adjustment prior to the equitable distribution of joint costs. Consider a manufacturing firm that generates three joint products—A, B, and C—from a single raw material input, incurring common material, labour, and overhead expenses up to the split-off point. To ascertain the true cost efficiency and profitability of each product,
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