CWA ICWA Inter - Group II : Cost and Management Accounting - June2012

CWA ICWA Inter - Group II • Cost and Management Accounting • June 2012

This Paper has 32 answerable questions with 1 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.

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.

(a)

Match the statement in Column I with the appropriate statement in Column II:

Column I		Column II
(i) (ii) (iii) (iv) (v)	Bad Debt is Flexible Budget is Transfer Price Uniform Costing is Contract Costing is	(A) (B) (C) (D) (E)	not a distinct method of Cost Accounting a method used in Construction Industry allows goal congruence a selling overhead prepared for different levels of capacity utilization

1x5

(1)

(b)

State whether the following statements are TRUE or FALSE:

1x5

(i)

Standard Costing may not be suitable for small concerns.

(0)

(ii)

Cost Accounting is a branch of Financial Accounting.

(0)

(iii)

Labour Turnover is the movement of people out of the organisation.

(0)

(iv)

Transfer Pricing has significance for the purpose of measurement of divisional performance.

(0)

(v)

Bincard shows the value of a material at any movement of time.

(0)

(c)

Fill–up the blanks suitably:

1x5

(i)

ABC analysis is made on the basis _____________.

(0)

(ii)

The success of the _______________ costing is based on mutual belief and understanding.

(0)

(iii)

A Budget is a statement that is always prepared ___________ to a difined period of time.

(0)

(iv)

_____________ is the difference between the actual sales and the break–even sales.

(0)

(v)

Activity Based Costing is based on the identification of ________________.

(0)

(d)

In the following cases, one out of four answers is correct. You are required to indicate the correct answer (1 mark) and give brief workings (1 mark):

2x5

(i)

After inviting tenders for supply of raw materials, two quotations are received as follows—Supplier A Rs. 2.20 per unit, Supplier B Rs. 2.10 per unit plus Rs. 2,000 fixed charges irrespective of the units ordered. The order quantity for which the purchase price per unit will be the same —

(a)	22,000 units	(c)	20,000 units
(b)	21,000 units	(d)	None of the above

(0)

(ii)

Normal rate per hour for worker A in a factory is Rs. 5.40. Standard time per unit for the worker is one minute. Normal piece rate per unit for the worker is

(a)	Rs. 0.90	(c)	Rs. 0.11
(b)	Rs. 0.09	(d)	None of the above

(0)

(iii)

In case of joint products, the main objective of accounting of the cost is to apportion the joint costs incurred up to the split off point. For cost apportionment one company has chosen Physical Quantity Method. Three joint products ‘A’, ‘B’ and ‘C’ are produced in the same process. Up to the point of split off the total production of A, Band C is 60,000 kg, out of which ‘A’ produces 30,000 kg and joint costs are Rs. 3,60,000. Joint costs allocated to product A is

(a)	Rs. 1,20,000	(c)	Rs. 60,000
(b)	Rs. 1,80,000	(d)	None of the above

(0)

(iv)

A transport company is running five buses between two towns, which are 50 kms apart. Seating capacity of each bus is 50 passengers. Actually passengers carried by each bus were 75% of seating capacity. All buses ran on all days of the month. Each bus made one round trip per day. Passenger kms are

(a)	2,81,250	(c)	1,87,500
(b)	5,62,500	(d)	None of the above

(0)

(v)

The cost per unit of a product manufactured in a factory amounts to Rs. 160 (75% variable) when the production is 10,000 units. When production increases by 25%, the cost of production will be Rs. _____ per unit.

(a)	Rs. 145	(c)	Rs. 150
(b)	Rs. 152	(d)	Rs. 140

(0)

(a)

Gupta Enterprise is operating at 60% capacity level producing and selling 60,000 units @ Rs. 50 per unit. Other relevant particulars are as follows:

	Cost per unit
Material Conversion Cost (variable) Dealer’s margin (10% of sales) Fixed cost for the period is Rs. 6,00,000	Rs. 20 Rs. 10 Rs. 5

As there is a stiff compitition it is not possible to sell all the products at the existing cost price structure. The following alternative proposals are considered:

(i)	Decrease selling price by 20%
(ii)	Increase dealer’s margin from 10% to 20%

Select the better alternative. Also calculate the sales volume required to maintain the same amount of profit under the alternative which is considered better assuming that volume of sales will not be a limiting factor under such alternative. Also assume that fixed cost will remain constant.

3+2+2+3

(0)

(b)

State briefly the methods of segregating semi–valiable cost into fixed and variable.

(0)

(a)

The budgeted overheads and cost driver volumes of Neptune Ltd. are as follows:

Cost Pool	Budgeted Overheads (Rs.)		Cost Driver	Budgeted Volume
Material Procurement Material Handling Set–up Maintenance Quality Control Machinery	2,90,000 1,25,000 2,07,500 4,85,000 88,000 3,60,000		No. of Orders No. of Movements No. of Set–ups Maintenance Hours No. of Inspection No. of M/c hours	550 340 260 4,200 450 12,000

The firm has produced a batch of 2,600 components of AXL–5, its Material cost was Rs.1,30,000, and Labour cost Rs. 2,45,000.
The usage activities of the said batch are as follows:

Material Orders
Material Movements
Set–ups

—
—
—

26
18
25

Maintainance hours
Inspection
M/c hours

—
—
—

600
28
1,800

Required:

(i)	Calculate Cost driver rates that are used for tracing appropriate amount of overheads to the said batch; and

(ii)	Ascertain the cost of batch of components using Activity Based Costing.

5+5

(0)

(b)

What are the advantages of Target Costing?

(0)

(a)

A company produces three joint products in one common process. The three products can either be sold at split off point or can be separately processed futther after split off point and sold separately. The estimated data for a particular month are as under:

	Product
	X	Y	Z
Selling price at split off point (Rs./kg) Selling price after further processing (Rs./kg) Cost incurred on further processing (Rs.) Output in kg	100 200 3,50,000 3,500	90 190 4,00,000 2,500	150 260 2,00,000 2,000

Joint costs incurred up to split off point are Rs. 2,40,000.

Such costs are apportioned to the three products according to quantity of production.

You are required to

(i)	Prepare a statement of estimated profit or loss for each product individually and in total for the company for the month if all three products are (1) sold off at split off point and (2) further processed.
(ii)	Also advice how profit could be maximised by selectively selling the products individually either at split off point or after further processing.

4+4+2

(0)

(b)

What are the problems associated with apportionment of joint cost?

(0)

(a)

Richa Industries engaged in manufacturing Lunch Boxes is working to 50% capacity and produces 15,000 Lunch Boxes per annum. The present cost break up for one Lunch Box is as under:
Material Rs. 25; Labour Rs. 20 and Overhead Rs. 15 (60% variable).
The selling price is Rs. 75 per Lunch Box.
If it is decided to work at 60% capacity, the selling price falls by 2%. At 80% capacity, the selling price falls by 10% accompanied by a similar fall in the price of material but labour rate increases by 10%.
You are required to find out the most profitable capacity level amongst 50%, 60% and 80% capacity levels and also calculate the Break-even Point (in units) at above said levels.

3+2+5

(0)

(b)

Explain briefly to classification of overheads according to behavior.

(0)

(a)

The following information is available from the financial accounts of Madhu Limited for the year ended 31st March, 2012:

		Rs.
Direct Material Consumption Direct Wages Factory Expenses Administration Expenses Selling and Distribution Expenses Bad Debts Preliminary Expenses (Written off) Legal Charges Dividend Received Interest on Deposit Received Sales–1,20,000 Units Valuation of Closing Stock in financial accounts: Finished Stock 40,000 Units Work–in–Progress (Valued at factory cost) both in cost and financial accounts The Cost Accounts reveal: Direct Material Consumption Rs. 5,60,000; Factory overhead recovered at 20% on prime cost; Administrative overhead at Rs. 6 per unit of production; Selling and Distribution overhead at Rs. 8 per unit sold.	.. .. .. .. .. .. .. .. .. .. .. .. ..	5,00,000 2,00,000 7,60,000 5,00,000 9,60,000 40,000 20,000 10,000 1,00,000 20,000 14,00,000 4,40,000 1,60,000

You are required to prepare:

(i)	A statement showing costing profit or loss.

(ii)	Profit & Loss Account showing profit or loss in Financial Books.

(iii)

A statement reconciling the profits disclosed as per cost accounts and as per financial accounts.

3+3+4

(0)

(b)

Explain briefly benefits of Integrated Accounting System.

(0)

(a)

From the following particulars furnished by M/s. Starlight Co. Ltd. find out (i) Material cost variance; (ii) Material usage variance and (iii) Material price variance.

Value of Material purchased
Quantity of Material purchased
Standard quantity of materials required
per tonne of finished product
Standard rate of material
Opening Stock
Closing Stock of material
Finished production during the period

..
..

..
..
..
..
..

Rs. 9,000
3,000

25
Rs. 2
Nil
500
80

units

units
per unit

units
tonnes

4+3+3

(0)

Write short notes on any three of the following:

5x3

(a)

Absorption Costing;

(0)

(b)

Cost Control and Cost Reduction;

(0)

(c)

Zero–Base Budgeting;

(0)

(d)

Uniform Costing;

(0)

(e)

Activity Based Costing.

(0)

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