| 1. | (a) | Enumerate the main objectives of introduction of a Cost Accounting System in a manufacturing organisation | 3 | (0) |
| | (b) | Define Cost Audit and state its purposes | 3 | (0) |
| | (c) | A company manufactures 5000 units of a product per month. The cost of placing an order is Rs. 100. The purchase price of the raw material is Rs. 10 per kg. The re–order period is 4 to 8 weeks. The consumption of raw materials varies from 100 kg to 450 kg per week, the average consumption being 275 kg. The carrying cost of inventory is 20% per annum. You are required to calculate: (i)
(ii)
(iii)
(iv)
(v) | Re–order quantity
Re–order level
Maximum level
Minimum level
Average stock level |
| 6 | (0) |
| | (d) | A construction company undertook a contract at an estimated price of Rs. 108 lacs, which includes a budgeted profit of Rs. 18 lacs. The relevant data for the year ended 31.3.2002 are as under: | (Rs.000’s) | Materials issued to site
Direct wages paid
plant hired
Site office costs
Materials returned from site
Direct expenses
Work certified
Progress payments received | 5,000
3,800
700
270
100
500
10,000
7,200 |
A special plant was purchased specifically for this contract at Rs. 8,00,000 and after use on this contract till the end of 31.2.2002, it was valued at Rs. 5,00,000. The cost of materials at site at the end of the year was estimated at Rs. 18,00,000. Direct wages accrued as on 31.3.2002 was Rs. 1,10,000
Required:
Prepare the Contract Account for the year ended 31st March, 2002 and compute the profit to be taken to the Profit and Loss Account. | 6 | (0) |
| 2. | (a) | Distinguish between Cost reduction and Cost Control. | 3 | (0) |
| | (b) | Explain briefly the procedure for valuation of Work–in–process | 2 | (0) |
| | (c) | A product passes through two processes. The output of Process I becomes the input of Process II and the output of Process II is transferred to warehouse. The quantity of raw materials introduced into Process I is 20,000 kg at Rs. 10 per kg. The cost and output data for the month under review are as under: | Process I | | Process II | Direct materials
Direct labour
Production overheads
Normal loss
Output
Loss realisation Rs./unit | Rs. 60,000
Rs. 40,000
Rs. 39,000
8%
18,000
2.00 | Rs. 40,000
Rs. 30,000
Rs. 40,250
5%
17,400
3.00 |
The company’s policy is to fix the Selling price of the end product in such a way as to yield a profit of 20% on Selling price | Required: | | (i) Prepare the Process Accounts | | | (ii) Determine the selling price per unit of the end product. | |
| 9 | (0) |
| 3. | (a) | State the essential pre–requisites for installation of uniform costing system in an industry. | 5 | (0) |
| | (b) | A company is undecided as to what kind of wage scheme should be introduced. The following particulars have been compiled in respect of three system, which are under consideration of the management: | Workers | | A | B | C | | Actual hours worked in a week | 38 | 40 | 34 | | Hourly rate of wages | Rs. 6 | Rs. 5 | Rs. 7.20 | | Production in Units: | | Product P | 21 | -- | 60 | | Product Q | 36 | -- | 135 | | Product R | 46 | 25 | –– |
Standard time allowed per unit of each product is : | | P | Q | R | | Minutes | 12 | 18 | 30 |
For the purpose of piece rate, each minute is valued at Rs. 0.10
You are required to calculate the wages of each worker under : | (i) | Guaranteed hourly rates basis | | (ii) | Piece work earnings basis, but guaranteed at 75% of basic pay (guaranteed hourly rate) if his earnings are less than 50% of basic pay. | | (iii) | Premium bonus basis where the worker receives bonus based on Rowan Scheme. |
| 9 | (0) |
| 4. | (a) | Explain, what do you mean by Chargeable Expenses and state its treatment in Cost Accounts | 3 | (0) |
| | (b) | What do you understand by the term Cost Centre? A company manufacturing two products furnishes the following data for a year: | Product | Annual Output (Units) | Total Machine hours | Total number of purchase orders | Total number of set-ups | | A | 5,000 | 20,000 | 160 | 20 | | B | 60,000 | 1,20,000 | 384 | 44 |
The annual overheads are as under: | Volume related activity Costs | Rs.5,50,000 | | Set up related Costs | Rs.8,20,000 | | Purchase related Costs | Rs.6,18,000 |
You are required to calculate the cost per unit of each Product A and B based on: | (a) | Traditional method of charging overheads | | (b) | Activity based costing method. |
| 11 | (0) |
|
| 5. | (a) | Why it is necessary to reconcile the Profits between Cost Accounts and Financial Accounts? | 5 | (0) |
| | (b) | In the current quarter, a company has undertaken two jobs. The data relating to these jobs are as under: | Job 1102 | Job 1108 | Selling Price
Profit as percentage on cost
Direct Materials
Direct Wages
| Rs. 1,07,325
8%
Rs. 37,500
Rs.30,000 | Rs. 1,57,920
12%
Rs. 54,000
Rs.42,000 |
It is the policy of the company charge Factory overheads as percentage on direct wages and Selling and Administration overheads as percentage on Factory Cost.
The company has received a new order for manufacturing of a similar job. The estimate of direct materials and direct wages relating to the new order are Rs.64,000 and Rs. 50,000 respectively. A profit of 20% on sales is required. You are required to compute: | (i) | The rates of Factory overheads and Selling and Administration overheads to be charged; | | (ii) | The Selling price of the new order. |
| 9 | (0) |
| 6. | (a) | Explain two basic functions of Financial Management | 4 | (0) |
| | (b) | The data relating to two Companies are given below: | Company A | Company B | Equity Capital
12% Debentures
Output (units) per annum
Selling price/unit
Fixed Costs per annum
Variable Cost per unit | Rs. 6,00,000
Rs. 4,00,000
60,000
Rs.30
Rs. 7,00,000
Rs. 10 | Rs. 3,50,000
Rs. 6,50,000
15,000
Rs.250
Rs. 14,00,000
Rs. 75 |
You are required to calculate the Operating leverage, Financial leverage and Combined leverage of two Companies. | 4 | (0) |
| | (c) | A Company has prepared the following projections for a year. | Sales | 21,000 units | | Selling Price per unit | Rs.40 | | Variable Costs per unit | Rs.25 | | Total Costs per unit | Rs.35 | | Credit period allowed | One month |
The Company proposes to increase the credit period allowed to its customers from one month to two months. It is envisaged that the change in the policy as above will increase the sales by 8%. The company desires a return of 25% on its investment.
You are required to examine and advise whether the proposed Credit Policy should be implemented or not. | 4 | (0) |
| | (d) | A company proposes to install a machine involving a Capital Cost of Rs. 3,60,000. The life of the machine is 5 years and its salvage value at the end of the life is nil. The machine will produce the net operating income after depreciation of Rs. 68,000 per annum. The Company’s tax rate is 45% The Net Present Value factors for 5 years as under: | Discounting Rate | : | 14 | 15 | 16 | 17 | 18 | | Cumulative factor | : | 3.43 | 3.35 | 3.27 | 3.20 | 3.13 |
You are required to calculate the internal rate of return of the proposal. | 4 | (0) |
| 7. | (a) | Enumerate the activities which are covered by Treasury Management. | 3 | (0) |
| | (b) | Write a note on Venture Capital Financing. | 3 | (0) |
| | (c) | From the following information, prepare a summarised Balance Sheet as at 31st March, 2002: | Working Capital | Rs. 2,40,000 | | Bank overdraft | Rs.40,000 | | Fixed Assets to Proprietory ratio | 0.75 | | Reserves and Surplus | Rs. 1,60,000 | | Current ratio | 2.5 | | Liquid ratio | 1.5 |
| 6 | (0) |
| 8. | (a) | State three assumptions of Modigliani and Miller approach to Cost of Capital. | 3 | (0) |
| | (b) | Distinguish between Cash Flow and Fund Flow statement. | 3 | (0) |
| | (c) | A company has to make a choice between two projects namely A and B. The initial capital outlay of two Projects are Rs. 1,35,000 and Rs. 2,40,000 respectively for A and B. There will be no scrap value at the end of the life of both the projects. The opportunity Cost of Capital of the company is 16%. The annual incomes are as under: | Year | Project A
Rs. | Project B
Rs. | Discounting
factor @16% | 1
2
3
4
5 | ––
30,000
1,32,000
84,000
84,000 | 60,000
84,000
96,000
1,02,000
90,000 | 0.862
0.743
0.641
0.552
0.476 |
You are required to calculate for each project: (i)
(ii)
(iii) | Discounted payback period
Profitability index
Net present value |
| 6 | (0) |
| 9. | (a) | A company earns a profit of Rs. 3,00,000 per annum after meeting its Interest liability of Rs. 1,20,000 on 12% debentures. The tax rate is 50%. The number of Equity Shares of Rs. 10 each are 80,000 and the retained earnings amount to Rs. 12,00,000. The company proposes to take up an expansion scheme for which a sum of Rs. 4,00,000 is required. It is anticipated that after expansion, the company will be able to achieve the same return on investment as at present. The funds required for expansion can be raised either through debt at the rate of 12% or by issuing Equity Shares at par. Required: (i)
(ii) | Compute the Earnings Per Share (EPS), if:
—the additional funds were raised as debt
— the additional funds were raised by issue of equity shares
Advise the company as to which source of finance is preferable. |
| 6 | (0) |
| | (b) | The following information has been extracted from the records of a Company: | Product cost sheet | Rs./unit | | Raw materials | 45 | | Direct labour | 20 | | Overheads | 40 | | Total | 105 | | Profit | 15 | | Selling price | 120 |
| — | Raw materials are in stock on an average of two months. | | — | The materials are in process on an average for 4 weeks. The degree of completion is 50% | | — | Finished goods stock on an average is for one month. | | — | Time log in payment of wages and overheads is 1 ½ weeks |
| 6 | (0) |
