| 1. | (a) | State if each of the following statements is T (= true) or F (= false): | 1x5 | |
| | | (i) | A blanket overhead rate is a single overhead rate computed for the entire factory. | | (0) |
| | | (ii) | A production order is in order received from the customer. | | (0) |
| | | (iii) | Process accounts should always be presented in conventional ‘T’ forms. | | (0) |
| | | (iv) | Opportunity costs are out–of–packet costs. | | (0) |
| | | (v) | Marginal costing is basically relevant for short‐term decision making. | | (0) |
| | (b) | Each of the following sums gives four possible answers. Find the correct answer. Show working in support of your chosen answer: | 2x5=10 | |
| | | (i) | Fixed cost of operating Plant A is Rs.30,000, while the variable cost is Rs.4 per unit. For Plant B of the same firm the variable cost per unit of identical product is Rs.3 but its fixed cost amounts to Rs.40,000 for the same period. At what production level will the total cost of production be same for both the plants? | (A) | 8,000 units | | (B) | 10,000 units | | (C) | 11,000 units | | (D) | 12,000 units |
| | (0) |
| | | (ii) | A hospital’s records show that the costs of carrying out health checks in the last five accounting periods have been as follows: | Period | No. of patients seen | Total cost
(Rs.) | 1
2
3
4
5 | 650
940
1,260
990
1,150 | 17,125
17,800
18,650
17,980
18,360 |
Using the high–low method and ignoring inflation, the estimated cost of carrying out health checks on 850 patients in period 6 is | (A) | Rs.17,515 | | (B) | Rs.17,570 | | (C) | Rs.17,625 | | (D) | Rs.17,680 |
| | (0) |
| | | (iii) | Budgeted variable overheads of a factory was Rs.12,000 per month and budgeted production was 3,000 units. During a month, actual production was 3,200 units and variable overhead expenses amounted to Rs.12,500. Variable production overhead variance for the month was | (A) | Rs.800 favorable | | (B) | Rs.500 favorable | | (C) | Rs.300 adverse | | (D) | Rs.300 favorable. |
| | (0) |
| | | (iv) | A K Chemicals produces high quality plastic sheeting in a continuous manufacturing operation. All materials are input at the beginning of the process. Conversion costs are incurred evenly throughout the process. A quality control inspection occurs 75% through the manufacturing process, when some units are separated out as inferior quality. The following data are available for May: Materials costs
Conversion costs
Units started
Units completed | Rs. 90,000
Rs. 70,200
40,000
36,000 |
There is no opening or closing work – in – progress. Past experience indicates that approximately 7.5% of the units started are found to be defective on inspection by quality control.
The cost of abnormal loss for May is then | (A) | Rs.3,600 | | (B) | Rs.4,050 | | (C) | Rs. 4,680 | | (D) | Rs. 10,800 |
| | (0) |
| | | (v) | A limited has fixed costs of Rs.6,00,000 per annum. It manufactures a single product which it sells for Rs.200 per unit. Its contribution to sale ratio is 40%.
A Limited’s break–even point in units is | (A) | 7,500 | | (B) | 8,000 | | (C) | 3,000 | | (D) | 1,500 |
| | (0) |
| | (c) | From the following two groups of words match one capital letter with one small letter by their underlying relevance (any five): | Group I | | Group II | A.
B.
C.
D.
E.
F.
G. | Perpetual inventory
Point rating
Normal capacity
Composite unit
Key factor
Value analysis
Debt equity ratio | a.
b.
c.
d.
e.
f.
g.
h.
i. | Operating cost
Technique of cost reduction
Profitability
Source and application of funds
Stock control by maintaining records
Method of job evaluation
Marginal costing
Relates to overhead rates
Tool for financial analysis |
| 1x5 | (0) |
| 2. | (a) | The following particulars are extracted from the records of ABC Ltd: | Per unit | | Product A | Product B | Sales
Consumption of material
Material cost
Direct wages cost
Direct expenses
Machine hours used
Fixed overhead
Variable overhead | Rs.
Rs.
Rs.
Rs.
Rs.
Rs. | 100
2 kg
10
15
5
3
5
15 | Rs.
Rs.
Rs.
Rs.
Rs.
Rs. | 120
3 kg
15
10
6
2
10
20 |
Direct wages per hour is Rs.5 Comment on the profitability of each product (both use the same raw material)when– (1)
(2)
(3)
(4) | Total sales potential in units is limited.
Total sales potential in value is limited.
Raw material is in short supply.
Production capacity (in terms of machine hours) is the limiting factor. |
Assume that only one constraint is effective at a time when other factors do not pose a problem. | 10 | (0) |
| | (b) | Assuming raw material as the key factor, availability of which is 10,000 kg, and maximum sales potential of each product being 3,500 units, find the product mix which will yield maximum profit for ABC Ltd. | 6 | (0) |
| 3. | The Trading and Profit & Loss Account of a company for the year ended 31st December, 2008 is as follows: | Particulars | Rs. | Particulars | Rs. | To Materials consumed
To Wages
To Factory Expenses
To Administration Expenses
To Selling & Distribution Expenses
To Preliminary Expenses
To Interest on Loan
To Net Profit | 1,09,600
60,400
33,200
15,296
18,000
1,400
1,000
13,824 | By Sales (2,400 units)
By Stock of finished goods
By Work–in–progress (80 units) Materials
Wages
Factory Expenses | 3,360
1,440
800 |
By Dividend received | 2,40,000
6,400
5,600
720 | | 2,52,720 | | 2,52,720 |
The company manufactures a standard unit. In the cost accounts, factory expenses have been charged to the production at 20% on prime cost; administration expenses at Rs.6 per unit on total units produced and selling and distribution expenses at Rs.8 per unit sold. You are required to prepare (a) the costing Profit and Loss Account of the company and (b) the reconciliation statement for reconciling the difference in the net profits as shown by the financial Profit and Loss Account and the costing Profit and Loss Account. | 8+8 | (0) |
| 4. | (a) | Distinguish between ‘operating costing’ and ‘operation costing’. | 4 | (0) |
| | (b) | A transport company maintains a fleet of buses as follows: No. of buses
10
5 | Carrying capacity
60 passengers each
40 passengers each |
Each bus makes 4 trips (i.e. both upward and downward journeys in one trip) in a day, covering a distance of 5 kilometres in each one way journey in each trip. On an average, 75% of the seats are occupied in each trip.
Assuming that the company operates its fleet 25 days in a month, ascertain operating cost passenger–kilometre, taking into account the following further information: | Rs. Per month | Wages of 15 drivers
Petrol, Oil etc.
Repairs
Tyre, tube etc .
Depreciation
Garage rent
Interest on capital
General supervising charges | 250 each
3,000
1,500
375
90,000
9,000
12,000
3,000 |
| 12 | (0) |
|
| 5. | (a) | Discuss the essential feature of a successful wage payment plan. | 8 | (0) |
| | (b) | The employees in a plastic toy making unit are paid wages at the rate of Rs.7 per hour for an eight hour shift. Each employee produces 5 units per hour. The overhead in this department is Rs.10 per direct labour hour. Employees and management are considering the following piece rate wage proposal: Upto 45 units per day of 8 hours,
From 46 units to 50 units
From 51 units to 55 units
From 56 units to 60 units
Above 60 units | Rs.1.30 per unit
Rs.1.60 per unit
Rs.1.65 per unit
Rs.1.70 per unit
Rs.1.75 per unit |
The working hours are restricted to 8 hours per day. Overhead rate does not change with increased production.
Prepare a statement indicating advantages to the employees as well as the management at production levels of 40, 45, 55 and 60 units. | 8 | (0) |
| 6. | The capital of Akshoy Ltd. is as follows: | Rs. | 9% Preference shares, Rs.10 each
Equity shares of Rs.10 each | 4,00,000
10,00,000
14,00,000 |
Additional information: Profit (after tax at 33%)
Depreciation
Equity dividend paid
Market price of equity shares | Rs.3,60,000
Rs.80,000
40 per cent
Rs.80 |
You are required to compute the following, showing the necessary workings: | (a) | Dividend yield on the equity shares, |
| (b) | Cover for the preference and equity shares, |
| (d) | Price – earnings ratio. |
| 4+4+4+4 | (0) |
| 7. | The summarized profit and loss statement of Shivaji Ltd. for the last year is as follows: | (In Rs. ’000) | Sales (50,000 units)
Direct materials
Direct wages
Fixed production overhead
Variable production overhead
Administration overhead
Selling and distribution overhead
Profit/(loss) |
350
200
200
50
180
120 | 1,000
1,100
Rs.(100) |
You are required as management assistant, to evaluate the following alternative proposals to improve the situation, and to comment briefly on each: | (a) | Pay salesmen a commission of 10% of sales and thus increase sales to achieve break – even point. |
| (b) | Reduce selling price by 10%, which it is estimated would increase sales volume by 30%. |
| (c) | Increase sales by additional advertising of Rs.3,00,000, with an increased selling price of 20% , setting a profit margin of 10%. |
| 5+3+8 | (0) |
| 8. | Write short notes on any four of the following: | 4x4 | |
| | (a) | Basic budget; | | (0) |
| | (b) | Limitations of Inter–firm comparison; | | (0) |
| | (c) | Administrative overhead; | | (0) |
| | (d) | Machine–hour rate; | | (0) |
| | (e) | Cost reduction; | | (0) |
| | (f) | Zero – base budgeting. | | (0) |
