CWA ICWA Inter Stage I : Cost and Management Accounting - June 2003

CWA ICWA Inter - Stage I • Cost and Management Accounting • June 2003

This Paper has 36 answerable questions with 7 answered.

I–5(CMA) Revised Syllabus
Time Allowed : 3 Hours	Full Marks : 100

Answer Question No. 1 which is compulsory and any five from the rest .
Marks

Answer Question No. 1 which is compulsory and any five from the rest .

Marks

(a)

State whether the following statements are true (T) or false (F):

(i)

ABC analysis is made on the basis of unit prices of materials.

(0)

(ii)

Cost of tube used for packing tooth paste is indirect material cost.

(0)

(iii)

Value analysis helps in cost control.

(0)

(iv)

No distinction is made between direct and indirect materials in Process Costing.

(0)

(v)

Coal industry makes use of output costing.

(0)

(vi)

Standard hour is the standard time required per unit of production.

(0)

(b)

Match the following correctly:

Merit rating
Flexible budget
Debtors Turnover
Differential cost analysis
Debenture interest
Angle of incidence

Average Collection Period
Pure finance not Included in cost
Profitability rate
Evaluation of a job
Liquidity
Considers costs by behaviour
Decision taking
Budgetary control
Basis for remunerating employees

(0)

(c)

Choose the correct answer from the brackets:

(i)

The annual demand of a certain component bought from the market is 1,000 units. The cost of placing an order is Rs. 60 and the carrying cost per unit is Rs. 3 p.a. The Economic Order Quantity for the item is _______ (200, 400, 600).

(0)

(ii)

The monthly cost of maintenance of machinery for 12,000 machine hours run is Rs. 1,70,000 and for 18,500 hours it is Rs. 2,02,500. The cost of maintenance for 14,000 hours is Rs. _______. (1,90,000, 1,80,000, 1,85,000)

(0)

(iii)

A company's fixed cost amounts to Rs. 120 lakhs p.a. and its overall P/V ratio is 0.4. The annual sales of the company should be Rs. _______ lakhs to have a Margin of Safety of 25%. (400, 500, 600)

(0)

(iv)

If the Current Ratio and Liquid Ratio of a firm are 2.2 and 0.8 respectively and its Current Liabilities is Rs. 10 lakhs the value of stock held by the firm is Rs. _______ lakhs. (12, 16, 14).

(1)

(a)

State the method of costing suitable for the following industries. Also mention the cost unit for each:

(i)

Textile mills;

(0)

(ii)

Electricity Undertakings;

(0)

(iii)

Automobile repair workshops;

(0)

(iv)

Brick making;

(0)

(v)

Cement manufacture;

(0)

(vi)

Passenger Bus Service.

(0)

(b)

Mention four important assumptions made for ’Break–even Analysis’.

(0)

(c)

How are the following costs treated in Cost accounts?

(i)

Packing expenses;

(0)

(ii)

Training expenses;

(0)

(iii)

Repairs and maintenance.

(0)

Compute a comprehensive machine hour rate for a machine in Production department ‘A’ of a factory from the following details:

Machine:

Working hours:

Cost including installation charges
Estimated useful life
Estimated salvage value
Number of working days
Number of shifts per day
Effective working hrs. per shift
Stoppages for repairs and maintenance etc.

:
:
:
:
:
:
:

Rs. 20,00,000
10 years
10%
300
2
7
200 hrs.

Operating & other costs:

(i)	Wages of two operators (one for each shift) @ Rs. 5,000 p.m.
(ii)	Salary of supervisor (one for each shift) @ Rs. 7,500. Only one–fifth of the supervisor’s time is devoted to this machine.
(iii)	Electric Power	: 20 units per hour, each unit costing Rs. 3.20
(iv) (v) (vi) (vii) (viii)	Insurance Charges Repairs and Maintenance (estimated) Rent, rates & taxes (allocated) General lighting etc. (allocated) Other factory overheads (allocated)	: Rs. 5,000 per annum : Rs. 12,500 p.m. : Rs. 10,000 p.a. : Rs. 750 p.m. : Rs. 1,40,000 p.a.

(1)

From the following information relating to Process I of a factory for the month of April 2003, prepare the statement of equivalent production, statement of cost, statement of evaluation and Process Account, using average Cost method;

(i)	Opening work in progress : 500 units	Materials Labour Overheads	Rs. Rs. Rs.	27,000 8,000 12,500 47,500
(ii)	Cost incurred during April 2003: Input of materials: 14,000 units Labour Overheads		Rs. Rs. Rs.	5,74,750 1,19,300 1,78,450
(iii)	Process loss: Normal loss: 10% Value of scrapped unit: Rs. 10 each. Actual loss during April 2003: 1,500 units Degree of completion: Materials 100%, Labour and Overheads 60%.
(iv)	Closing work in progress: 1,000 units Degree of completion: Materials 100%, Labour and Overheads 70%.
(v)	Processed units transferred to Process II: 12,000 units during April 2003.

(1)

(a)

What is Profit–Volume Ratio? Mention some possible courses of action to improve this ratio.

(0)

(b)

A company earned a profit of Rs. 2,00,000 on a sale volume of Rs. 14,00,000 during the first half of a year, the fixed cost being Rs. 5,00,000. However during the second half of the year it incurred a loss of Rs. 1,00,000 although unit variable cost, selling price and fixed cost remained the same.
Required:

(i)	Profit–Volume Ratio, Break–even point and Margin of safety for the first half of the year.
(ii)	Sales Volume for the second half.
(iii)	Break–even point and Margin of safety for the whole year.

(1)

(a)

Mention four important uses of ’Ratio Analysis’.

(0)

(b)

The following information are furnished by a company in regard to its working, as on 31.3.2003:

Capital and Reserves Net Working Capital Current Ratio Liquid Ratio	Rs. Rs.	28,00,000 2,80,000 2.4 1.6
Inventory Turnover (based on cost of sales) Gross Profit on Sale Credit allowed		8 20% 1.5 months

Reserves amount to 40% of share capitals. All sales are on Credit.
Current assets consist of stock, debtors and cash only.
Prepare the Balance Sheet of the Company as on 31.3.03.

(1)

(a)

What do you understand by the following in the context of operating a standard cost system?

(i)

Ideal standard;

(0)

(ii)

Average standard;

(0)

(iii)

Attainable standard.

(0)

(b)

Raw material 'A' and 'B' having standard cost of Rs. 20/kg and Rs. 30/kg are mixed in the standard ratio of 60%: 40% to manufacture 'Z'.

During a particular week 1,200 kg of 'A' costing Rs. 25,000 and 1,000 kg of 'B' costing Rs. 28,000 were mixed to produce 2,200 kgs of Z. Calculate all material cost variances.

(1)

Write short notes on any four of the following:

4x4=16

(a)

Material Transfer Note:

(0)

(b)

Direct expense;

(1)

(c)

Profit–Volume Chart;

(0)

(d)

Profit on incomplete contracts;

(0)

(e)

Margin of safety.

(0)

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