CWA ICWA Inter Group II : Cost and Management Accounting - December 2008

CWA ICWA Inter - Group II • Cost and Management Accounting • December 2008

This Paper has 39 answerable questions with 21 answered.

I—P8(CMA) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
Answer Question No. 1 which is compulsory and any five from the rest.
Marks

The figures in the margin on the right side indicate full marks.

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

Marks

(a)

Match the following expressions in column I with the most relevant topic in column II.

Column I	Column II
Balanced Score Card Under Absorbed Overhead Contribution Piece Rate Perpetual Inventory System	Inventory Control Marginal Costing Method of Wage Payment Supplementary Rates Performance Analysis

1x5=5

(1)

(b)

Fill in the blanks:

1x5=5

(i)

The term used to charge overheads to cost units is called ________

(1)

(ii)

Sales minus Break–even sales is called ________

(1)

(iii)

Material usage variance is the sum of ________

(1)

(iv)

In absorption costing ________ cost is added to inventory.

(1)

(v)

In Television industry the most appropriate method of costing is ________ costing.

(1)

(c)

State whether the following statements are True (T) or False (F).

1x5=5

(i)

If an expense can be identified with a specific cost unit, it is treated as direct expense.

(1)

(ii)

Time and motion study which is a function of the engineering department is useless for determination of wages.

(1)

(iii)

Fixed costs vary with volume rather than time.

(1)

(iv)

Future costs are not relevant while making managerial decision.

(1)

(v)

In break–even analysis it is assumed that variable costs fluctuate inversely with time.

(1)

(d)

Identify correct answer from the given alternatives of the following questions:

1x5=5

(i)

Which of the following concept is known as cost behavior–oriented approach to product costing?

A.
B.
C.
D.

Standard costing
Marginal costing
Process costing
Absorption costing

(1)

(ii)

"Conversion cost" refers to

A.
B.
C.
D.

Manufacturing costs incurred to produce units of output
All costs associated with manufacturing other than direct labour costs
The sum of direct material costs and all factory overhead costs
The sum of raw material costs and overheads costs

(1)

(iii)

Which of the following is the correct valuation base for finished goods stock for balance sheet purposes?

A.
B.
C.
D.

Variable cost per unit
Marginal cost per unit
Production cost per unit
Total cost per unit

(1)

(iv)

Which of the following is true at break–even point?

A.
B.
C.
D.

Total Sales revenue = Variable cost
Profit = Fixed cost
Sales revenue = Total cost – Variable cost
Contribution = Fixed cost

(1)

(v)

If the raw material prices are affected by inflation, which of the following methods of valuing stocks will give the lowest gross profit?

A.
B.
C.
D.

LIFO
Replacement cost
FIFO
Simple average.

(1)

(e)

Choose the correct answer from the brackets.

1x5=5

(i)

In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the end. During the year 120 persons left service and 96 replacements were made. The labour turnover according to flux method is ________ %. [5.04, 4.03, 9.08]

(1)

(ii)

The variable cost of product increases by 10% and the management raise the unit selling price by equal amount. The fixed cost remain unchanged. Then BEP of the firm ________ [Increase, decrease, unchanged].

(1)

(iii)

The factory where standard costing is followed, 4600 kg of materials at Rs. 10.50/kg where actually consumed resulting in a price variance of Rs. 4800 (A) and usage variance of Rs. 4000 (F). The standard cost of actual production is Rs. ________ [100000, 96000, 120000].

(1)

(iv)

If the capacity usage ratio of a production department is 90% and activity ratio is 99%, the efficiency ratio of the department is ________ %. [120, 110, 90].

(1)

(v)

The output of three different products P, Q and R in a factory are 20000 kg,15000 kg and 15000 kg respectively. If costs are in proportion 4 : 6 : 7, then the cost per equivalent unit is Rs. ________ [10, 7, 5].

(1)

(a)

What is idle time? Explain the causes for idle time.

(0)

(b)

A worker is allowed 60 hours to complete a job on a guaranteed wage of Rs. 10 per hour. He completes the job in 48 hours. For the saving in time, how much he will get under Halsey Premium Plan (@50% Bonus)?

(0)

(c)

A company makes components for television sets using two service departments and two production departments. The inter–departmental relationship andoverhead costs are given below:

	Percentage of service provided to
	Maintenance	Scheduling	Moulding	Assembly
From:
Maintenance Scheduling Total overhead cost (Rs.)	— 20% 7,50,000	10% — 4,00,000	40% 50% 3,78,000	50% 30% 2,76,000

You are required to show the amount of Scheduling Department costs and Maintenance Department costs to be allocated to the Production Department, using Simultaneous Equation Method.

(0)

(a)

The following was the expenditure on a contract for Rs. 12,00,000 commenced in January 2008:

	Rs.
Materials Wages Plant Overheads	2,40,000 3,28,000 40,000 17,200

Cash received on account of the contract up to 31st December was Rs. 4,80,000 being 80% of the work certified. The value of materials in hand was Rs. 20,000. The plant had undergone 20% depreciation.
Prepare contract account.

(0)

(b)

A factory has two production processes. Normal loss in each process is 10% and scrapped units sell for Re. 0.50 each from process 1 and 3 each from process 2. Relevant information for costing purposes relating to period 5 are as follows:

Direct materials added:	Process I		Process II
Units Cost Direct labour Production overhead Output to Process 2/finished goods Actual production overhead	2,000 Rs. 8,100 Rs. 4,000 150% of direct labour cost 1,750 units	Rs. 17,800	1,250 Rs. 1,900 Rs. 10,000 120% of direct labour cost 2,800 units

Workout cost per unit of output and losses.

(0)

(a)

"Costs may be classified in a variety of ways according to their nature and the information needs of the management." —Explain.

(0)

(b)

A hotel has a capacity of 100 single rooms and 20 double rooms. The average occupancy of both single and double rooms is expected to be 80% throughout the year of 365 days. The rent for the double rooms has been fixed at 125% of the rent of the single room. The costs are as under:

Variable costs:
Fixed costs:

Single room Rs. 220 each per day; Double room Rs. 350 each per day
Rs. 49,64,000

Calculate the rent chargeable for single and double rooms per day in such a way that the hotel earns a margin of safety of 20% on hire of room.

(0)

(a)

State the distinguishing features of standard cost.

(0)

(b)

The following information was obtained from the records of a manufacturing unit using standard costing system:

Particulars	Standard	Actual
Production Working days Fixed overheads Variable overheads	4000 units 20 Rs. 40,000 Rs. 12,000	3800 units 21 Rs. 39,000 Rs. 12,000

Calculate:

(a)
(b)
(c)
(d)
(e)

Variable overhead variance;
Fixed overhead expenditure variance;
Fixed overhead volume variance;
Fixed overhead efficiency variance;
Fixed overhead calendar variance.

(0)

(a)

The following are the estimated sales of a company for eight months ending 30:11:2007.

Month	Estimated Sales (Units)
April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007	12,000 13,000 9,000 8,000 10,000 12,000 14.000 12,000

As a matter of policy, the company maintains the closing balance of finished goods and raw materials as follows:

Stock item	Closing balance of a month
Finished goods Raw materials	50% of the estimated sales for the next month Estimated consumption for the next month

Every unit of production requires 2 kg of raw material costing Rs. 5 per kg.

Prepare Production Budget (in units) and Raw Material Purchase Budget (in units and cost) of the company for the half year ending 30 September 2007.

(0)

(b)

Explain the methods of Transfer Pricing.

(0)

(a)

Distinguish between Marginal Costing and Absorption Costing.

(0)

(b)

A company produces 30,000 units of product A and 20,000 units of product B per annum. The sales value and costs of the two products are as follows:

Sales Value:
Direct Material
Direct Labour:

Rs.
Rs.
Rs.

7,60,000
1,40,000
1,90,000

Factory Overheads:
Administrative and Selling Overheads:

Rs.
Rs.

1,90,000
1,20,000

50% of the factory overheads are variable and 50% of the administrative and selling overheads are fixed. The selling price of A is Rs. 12 per unit and Rs. 20 per unit for B.

The direct material and labour ratio for product A is 2 : 3 and for B is 4 : 5. For both the products, the selling price is 400% of direct labour. The factory overheads are charged in the ratio of direct labour and administrative and selling overheads are recovered at a flat rate of Rs. 2 per unit for A and Rs. 3 per unit for B.

Due to fall in demand of the above products, the company has a plan to diversify and make product C using 40% capacity. It has been estimated that for C direct material and direct labour will be Rs. 2.50 and Rs. 3 per unit respectively. Other variable costs will be the same as applicable to the product A. The selling price of product C is Rs. 14 per unit and production will be 30,000 units.
Assuming 60% capacity is used for manufacture of A and B, calculate—

(i)
(ii)
(iii)

Present cost and profit;
Cost and profit after diversification;
Give your recommendations as to whether to diversify or not.

(0)

Write short notes on any three of the following:

3x5=15

(a)

JIT;

(0)

(b)

Activity Based Costing;

(0)

(c)

Benchmarking;

(0)

(d)

Uniform Costing;

(0)

(e)

Flexible Budgeting.

(0)

Disclaimer ♣ Privacy Policy ♣ Who We Are ♣ Terms of Service