CWA/ICWA Inter :: Cost and Management Accounting: December 2004

*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

(a)

Match the following correctly:

Pareto distribution
Angle of incidence
Standard costing
Electricity undertaking
Direct materials
Telephone charges

Cost reduction
Semi variable cost
Engineered cost
Profit earning capacity
Cost control
Operating costing
Marging of safety
ABC analysis
Relevant cost

(b)

Fill in the blanks suitably:

(i)	Two broad methods of costing are __________ and __________.
(ii)	A cost which does not involve any cash out flow is called __________ or __________.
(iii)	Recorder level is __________ multiplied by __________.
(iv)	The normal value of current ratio is __________ and that of quick ratio is __________.
(v)	Margin of safety is __________ or __________.
(vi)	Material usage variance is the sum of __________ and __________.

(c)

Choose the correct answer from the brackets, giving brief workings:

(i)	The budgeted annual sales of a firm is Rs. 80 lakhs and 25% of the same is cash sales. If the average amount of debtors of the firm is Rs. 5 lakhs, the average collection period of credit sales __________ months. (½ 1; 1½)
(ii)	A firm requires 16,000 nos of a certain component which it buys at Rs. 60 each. The cost of placing an order and following it up is Rs. 120 and the annual storage charges works out to 10% of the cost of the item. To get maximum benefit the firm should place order for _______ units at a time. (1000; 900; 800).
(iii)	The repairs and maintenance of machinery in a factory is found to be semi-variable cost having some relationship with the no. of machine hours run. It was Rs. 17,500 during October 2004 for 7500 machine hours worked and Rs. 15,400 for November 2004 when only 5,400 machine hours were worked. The budgeted cost of repairs and maintenance for December 2004 when 6,200 machine hours are expected to be worked will be Rs. _______ (17,200; 16,800; 16,200).
(iv)	The standard variable overhead cost of a product is Rs. 10 (5 hours @ Rs. 2/hr.) In a certain months it took 1,800 hours at a cost of Rs. 4,200 to manufacture to manufacture 400 units. The variable overhead expenditure and efficiency variances are __________ and __________ respectively. (Rs. 600 (F) and Rs. 400 (F); Rs. 600 (A) and Rs. 400 (F); Rs. 600(F) and Rs. 400 (A)]

1½+1½
+ 2 + 3

(a)

The budgeted annual production of a company is 1,20,000 units, each unit requiring 2½ hours at an hourly wage rate of Rs. 15. Currently the average efficiency of the production workers is only 60%. The management has a scheme to raise this to 75%. The scheme involves realigning the machinery and intensive training of the production workers, at an one time cost of Rs. 10 lakhs. The scheme also proposes to raise the wage rate to Rs. 16 to enlist the full co-operation of the workers.
Examine the scheme and state whether it can be accepted.

(b)

A factory has three production departments A, B and C and also two service departments 'X' and 'Y'. The primary distribution of the estimated overheads in the factory has just been completed. These details and the quantum of service rendered by the service departments, to the other departments are given below:

	DEPARTMENTS
Primary distribution (Rs.) Service rendered by Dept. 'X' Dept. 'Y'	A 2,40,000 30% 25%	B 2,10,000 20% 40%	C 2,50,000 35% 25%	X 1,40,000 — 10%	Y 96,000 15% —

Prepare a statement showing the distribution of service dept. overheads to the production departments, by the simultaneous equation method.

Please turn over

( 2 )

I-5(CMA)
Revised syllabus

Marks

A company manufactures its sole product by passing the raw material through three distinct process in its factory. During the months of April, 2004 the company purchased 96,000 kg of raw material at Rs. 5 per kg and introduced the same in process I. Further particulars of manufacture for the month are given below.

	Process I	Process II	Process III
Materials consumed Direct labour Overheads Normal waste in process as % of input Sale value of waste (Rs./kg) Actual output during the month (kg)	Rs.33,472 80,000 1,20,000 3% 2 93,000	Rs.27,483 72,000 1,08,000 1% 3 92,200	Rs.47,166 56,000 84,000 1% 5 91,500

Prepare the three process accounts and accounts relating to abnormal loss/gain, if any.

(a)

when a contract is large enough to extend over a number of years, what proportion of profit should be taken to the profit and Loss Account at the end of the year under each of the following cases?

(i)	When the work has just started and the cost of the work done is only about 10% of the contract price.
(ii)	When the work has reasonably advanced and about 60% of the work has been completed.
(iii)	When the work is nearing completion and about 95% has been completed.

(b)

An amount of Rs. 19,80,000 was incurred on a contract work up to 31.3.2004. Certificates have been received to date to the value of Rs. 24,00,000 against which Rs. 21,60,000 has been received in cash. The cost of work done but not certified amounted to Rs. 45,000. It is estimated that by spending an additional amount of Rs. 1,20,000 (including provision for contingencies) the work can be completed in all respects in another two months. The agreed contract price of the work is Rs. 25 lakhs. Compute a conservative estimate of the profit to be taken to the profit and Loss Account.

(a)

Product pricing is an important are for management decision making. State very briefly the broad objectives of the pricing policy. Mention specifically situations where prices are fixed below the variable cost.

(b)

Two plants manufacturing the same product decide to merge. Particulars of operation of the two plants before the merger were as follows:

Capacity utilised
Sales
Variable cost
Fixed cost

Plant A
80%
Rs. 4.80 crores
3.52 crores
0.80 crores

Plant B
60%
Rs. 2.40 crores
1.80 crores
0.40 crores

Your are required to work out:

(i)	Break even capacity of the merged plant,
(ii)	Profit earned at 75% capacity of the merged plant,
(iii)	Sales required to earn a profit or Rs. one crore.

Please turn over

( 3 )

I-5(CMA)
Revised syllabus

Marks

(a)

A product is manufactured by mixixng and processing three raw materials X, Y and Z as per standard data given below:

Raw material
X
Y
Z

Percentage of input
40%
40%
20%

Cost per kg.
Rs. 40
Rs. 60
Rs. 85

Note: Loss during processing is 5% of input and this has no realisable value.
During a certain period 5,80,000 kg of finished product was obtained from inputs as per details given below:

Raw material
X
Y
Z

Quantity consumed
2,40,000 kg
2,50,000 kg
1,10,000 kg

Cost/kg.
Rs. 38
Rs. 59
Rs. 88

Calculate the total material cost variance with details of sub-variances relating to Price, Mix, Yield and Usage.

The Summarised Balance Sheets of X Ltd. as on 31.2.2003 and 31.3.2004 are given below.

Liabilities (in '000s of rupees)	31.03.03	31.03.04	Assets (in '000s of rupees)	31.03.03	31.03.04
Share capital General Reserve Profit & Loss account Bank Loan Creditors Provision for taxation	500 200 40 — 158 45	500 220 32 100 172 30	Land and buildings Plant & Machinery Other fixed assetsInvestments Stock Debtors Cash & bank balances	180 210 30 50 200 170 103	200 276 45 50 190 195 98
	943	1,054		943	1,054

Prepare a 'Source and Application of funds' statement of the firm, given the following additional information for the year ended 31.03.2004.

(a)	Provision for taxation Rs. 12,000
(b)	Machinery worth Rs. 15,000 (book value) was sold for Rs. 12,000.
(c)	Depreciation provided on assets:
Land & buildings Rs. 5,000 Plant & Machinery Rs. 20,000

Write short notes on any four of the following:

(a)	Differential cost analysis in decision making;
(b)	Pre - requisites for computerisation of accounts;
(c)	Uses of Ratio Analysis;
(d)	Batch costing;
(e)	Cost-plus-contract.

4x4=16

__________