1. | (a) | State whether the following statements are ‘True’ or ‘False’, justify with reasons. No credit will be given, if justification for your answer is not given: | 1x5 | |
| | (i) | The detailed provisions relating to the regulation of Cost Audit in India are contained in Section 233B read with Section 277(1) of the Companies Act. | | (0) |
| | (ii) | A Cost Accountant cannot act as an Internal Auditor of the same company. | | (0) |
| | (iii) | UK is the first country in the world in introducing the provisions of compulsory maintenance of Cost Accounting Records. | | (0) |
| | (iv) | A cost accountant in practice has to keep the monies of his client in a separate bank account. | | (0) |
| | (v) | An aggrieved Cost Accountant in practice has the right to appeal to the High Court on the nature of punishment awarded to him by the Council of ICWAI. | | (0) |
| (b) | Which of the following are professional misconduct for a practising Cost Accountant and which are not? | 1x5 | |
| | (i) | A Practising member/firm maintains branch office in India–each under the separate charge of a member of ICWA/Institute of Charted Accountants. | | (0) |
| | (ii) | Personal discussions/correspondences with prospective clients relating to achievement and capabilities by PCA (Practising Cost Accountant). | | (0) |
| | (iii) | Press Publicity (not an advertisement) regarding appointment as an Auditor. | | (0) |
| | (iv) | An advertisement, notifying changes in address/partnership, dissolution etc., by the PCA (Practising Cost Accountant). | | (0) |
| | (v) | Accepts position as Cost Accountant previously held by some other Cost Accountant in practice on such conditions as to constitute undercutting. | | (0) |
| (c) | Which of the following is correct? | 1x5 | |
| | (i) | The company has to give documents to the cost auditor within (1) | 180 days | (2) | 135 days | (3) | 120 days | | | (0) |
| | (ii) | How many days a Cost Auditor get after getting the information from the company of the close of financial year? (1) | 60 days | (2) | 45 days | (3) | 30 days | | | (0) |
| | (iii) | Capital employed under Para 24 means average of (1) | Fixed Assets and Net Current Assets | (2) | Share Capital plus Reserves | (3) | Total Assets less Current Liabilities. | | | (0) |
| | (iv) | For physical verification of inventory under Para 19B, figures are provided for (1) | Current year and Previous year | (2) | Current year and Previous two years | (3) | Current year. | | | (0) |
| | (v) | For written off stock, under Para 18B figures are provided for (1) | Current year and Previous two years | (2) | Current year | (3) | Current year and Previous year. | | | (0) |
| (d) | Fill up the blanks with appropriate word/words: | 1x5 | |
| | (i) | The Company should keep ___________ asset register to identify factor–wise fixed assets, as well as fixed assets for activity under audit and other activity. | | (0) |
| | (ii) | The maximum amount of penalty payable by a Cost Auditor for non–compliance with the provisions of the Cost Audit (Report) Rules, is Rs. ___________ | | (0) |
| | (iii) | Non–moving stocks of stores and spares are those stock which have not moved for more than ___________ months. | | (0) |
| | (iv) | The debit balance in the Profit & Loss Account is to be ___________ in computing the net worth of the company. | | (0) |
| | (v) | In Debt–Equity Ratio, Long Term Liabilities are the Liabilities due for settlement more than ___________ months after the date of the Balance Sheet. | | (0) |
2. | A sugar mill has a boiler which uses its own by product, bagasse as fuel. The steam generated is first used for generation of power and the exhaust steam is used in the process of sugar manufacture. The following details are extracted from the financial accounts and cost accounting records of the sugar mill: Sugar produced Steam generated and consumed Fuel (Bagasse) consumed for production of steam Cost of generation of steam including cost of water (other than fuel cost) Steam used for generation of power Power purchased from Electricity Board @ Rs. 5.75 per KWH Power generated from steam turbine Variable conversion cost for generation of power (excluding cost of steam) | 24,50,000 quintals 12,45,000 tonnes 6,23,450 tonnes
Rs. 5,75,40,000 5,75,000 tonnes 48,50,000 KWH 4,82,15,000 KWH
Rs. 3,87,14,000 |
Notes: | (1) | The sale value of bagasse, if sold in the open market is Rs. 1,750 per tonne. | | (2) | The exhaust steam (after generation of power) transferred to sugar manufacturing process is valued at 85% of the cost of production of steam. |
Prepare two separate cost sheet for steam and power as per Cost Accounting Record Rules and compute the average cost of power as per Para 7(A) of the Annexure to the Cost Audit Report. | 15 | (0) |
3. | (a) | As a Cost Auditor, suggest different measures to rectify imbalance in production facilities. | 5 | (0) |
| (b) | The following figures are extracted from the statement prepared by the Cost Accountant and the Trial Balance of XYZ Ltd., which is a single product company. | Year ending | | 31.03.08 | 31.03.07 (Rs. in lakhs) | 31.03.06 | Gross sales inclusive of Excise Duty Excise Duty Raw Materials consumed Direct Wages Power and Fuel Stores and Spares Depreciation charged to production cost centres Factory overheads: Salaries and Wages Depreciation Rates and Taxes Other overheads Administrative overheads: Salaries and Wages Rates and Taxes Other overheads Selling and distribution overheads: Salaries and Wages Packing and Forwarding Depreciation Other overheads Interest Bonus and Gratuity Gross Current Assets Current Liabilities and Provisions | 2,040 295 1,140 35 30 6 16
5 2 1 6
10 2 162
7 6 1 124 85 12 840 324 | 1,985 280 1,060 32 27 5 15
4 2 1 5
9 2 154
6 6 1 118 74 10 724 305 | 1,875 265 975 27 24 4 13
3 2 1 4
8 2 148
5 5 1 108 68 9 640 246 |
You are required to compute the following ratios as per requirement of Para 24 of the Cost Audit Report Rules, 2001: (i) | Operating Profit as percentage of Value Addition. | (ii) | Value Addition as percentage of Net Sales. | Note: The computation should be based on EBDIT as Operating Profit. | 5+5 | (0) |
4. | (a) | There was a strike from 13.9.2007 to 16.11.2007 in a Textile Company of which you were the Cost Auditor for the year ending 31.3.2008. Although the company began working from 17.11.2007, production could effectively begin only from 5.12.2007. The expenses incurred during the year ended 31.3.2008 were: | Rs. in lakhs | Salaries and Wages (direct) Salaries and Wages (indirect) Power (variable) Depreciation Other Fixed Expenses | 3,500 2,500 1,200 1,800 2,400 | Detailed examination of the records reveal that of the above the following relate to the period 13.9.2007 to 16.11.2007: | | Rs. in lakhs | Salaries and wages (Indirect) Depreciation Other Fixed Expenses | 710 690 800 |
Calculate the amount which, in your opinion, should be treated as abnormal for exclusion from the product costs. | 10 | (0) |
| (b) | A company manufacture various types of the product under review as a Cost Auditor would you accept the absorption of "Selling and Distribution" expenses as a percentage on Sales Value. | 5 | (0) |