CWA/ICWA Inter :: Cost and Management Accounting: December 2005

*I-5(CMA)* *Revised Syllabus*
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 .
Marks

(a)

Match the following correctly:

Scatter Diagram
Escalator Clause
Perpetual Inventory
Material Requisation
By-product Cost accounting

Production Order
Reserve Cost Method
Splitting of semi-variable Costs
Contract Costing
method of maintaining Store records
Purchase Order
Continuous Verification of stores

(b)

State the whether the folloeing are True (T) or False (F):

(i)	Variable Cost varies with time.
(ii)	ABC analysis is based on the unit peice of materials.
(iii)	CEnvat credit is allowed on the basis of Central Excise Gate Pass.
(iv)	Differential Costing and Marginal Costing mean the same thing.
(v)	Internal accounts merge financial and cost accounts in one set of accounts.

(c)

Choose the correct answer from the answers given for each of the following questions. Indicate workings briefly:

(i) A worker has a time rate of Rs.15/hr. He makes 720 units of a component (standard time: 5 minutes/unit) in a week of 48 hours. His total wages including Rowan bonus for the week is _________.

(A) Rs. 792 (B) Rs. 820 (C) Rs. 840 (D) Rs. 864

(ii) A television company manufactures several components in batches. The following data relates to one component:
Annual demand : 32,000 units; Set-up cost per batch : Rs. 120.
Annual rate of interest : 12%; Cost of production per unit : Rs. 16.
The Economic Batch Quantity is _________ Units

(A) Rs. 2500 (B) Rs. 4000 (C) Rs. 3000 (D) Rs. 2000

(iii) A company has annual turnover of Rs.200 lakhs and an average c/s ratio of 40%. It makes 10% profit on sales before charging depreciation with interest which amount to Rs. 10 lakhs and Rs. 15 lakhs respectively. The annual fixed cost of the company is ____________.

(A) Rs. 85 lakhs (B) Rs. 75 lakhs (C) Rs. 60 lakhs (D) Rs. 55 lakhs

(iv) Sales for two consecutive months, of a Company are Rs. 3,80,000 and Rs. 4,20,000. The company's net profit for these months amounted to Rs. 24,000 and Rs. 40,000 respectively. There is no change in c/s ratio or fixed costs. The c/s ratio of the company is __________.

(A)

1
3

(B)

2
5

(C)

1
4

(D) None of the these.

(v) The average peiod of credit allowed by a Company which has a annual credit sales of Rs. 120 lakhs is one month. By reducing the period of credit to half-a-month, sales fall to Rs. 108 lakhs. The fall in the amount of average Debtors is ___________.

(A) Rs. 5 lakhs (B) Rs. 4 lakhs (C) Rs. 5.5 lakhs (D) Rs. 6 lakhs

2x5

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( 2 )

I-5(CMA)
Revised syllabus

Marks

M M Ltd. has three productions departments X, Y, Z and two service departments S and C. The following detailes are extracted from the books of accounts in respect of indirect expences incurred during April 2005:

Indirect Cost Indirect wages Lighting and heating Rent and rates Electric power Depreciation Sundry expences	Amount (Rs.) 9,000 1,200 12,000 6,000 24,000 7,800
		60,000

Following further detailes are collected for distribution of the above costs:

Particulars	Departments
Value of machinery (in Rs.'000) Horse power of machines Light points(Nos.) Floor space (sq. metres) Direct wages(in Rs.'000) Machine hours worked	X 60 40 20 150 30 4250	Y 50 45 30 200 20 3380	Z 80 60 40 250 40 7120	S 10 5 20 100 4	C - - 10 50 60

The costs of the service departments are apportioned percentagewise as follows:

	Departments S C	X 20 40	Y 30 20	Z 40 30	S - 10	C 10 -
Calculate

(a)

Overhead Recovery Rates showing the basis of apportionment.

(b)

Total cost of job 321 (with elementwise and deptwise cost break down), the job card of which contain the following detailes:

Paticulars
Direct materials used
Direct wages
Machine hours worked

Dept X
Rs. 268
Rs. 300
10

Dept Y
Rs. 131
Rs. 250
12

Dept Z
Rs. 102
Rs. 300
12

A product passes through two distinct processes X and Y before completion. During a certain period,10,000 units of crude material were introduced in process X at a cost of Rs. 40,000. After processing in dept X, 9,000 units of processed material were transfered to process Y for finishing. From process Y Interly 8,600 units of the finished product were obtained and transfered to Finished Goods store.

( 3 )

I-5(CMA)
Revised syllabus

Marks

Further data regarding normal waste, costs etc. are given below:

Costs incurred:

Normal Waste (% of input)
Realisable value of waste per unit

Material
Labour
Overheads

Process X
Rs. 10,000
20,000
10,000
8%
Rs. 5

Process Y
Rs. 5,000
15,000
8,000
5%
Rs. 8

There was no opening or closing stocks in any process.

Required:

(a)	Process Accounts
(b)	Normal Loss Account
(c)	Abnormal Loss/Gain Account
(d)	Selling price per unit of the finished product, if management wants 25% profit on sales

(a)

Define 'Cost Reduction'. How is it different from 'Cost control'?

(b)

List out main areas to be examined in a manufacturing organisation, for a cost reduction study and very briefly mention the relevent points in each area.

A company has plans to manufacture five types of products using a common raw material which is locally available according to requirements at Rs. 16 per Kg. However skilled labour required for manufacture is in short supply and current avialabikityis only 30,000 hours per month @ RS. 20 per hour.
Variable production overheads amounts to Rs. 10 per labour hour and variable selling and distribution cost is 10% of sales value.
Total fixed costs of selling, distribution and administration is estimated to be Rs. 3,00,000 per month.
Further details relating to the products are gien below:

Product	Current demand (units)	Selling price per unit (Rs.)	Raw material required (kg/unit)	Direct labour required (hrs/unit)
A B C D E	8,000 6,000 5,000 3,000 2,000	100 120 160 220 300	2 2.5 3 4 5	1 1.2 2 3 4

Required:

(a)

Contribution Analysis statement showing the relative profitability of the products under:

(i)	Normal conditions without any constraints on resources.
(ii)	When skilled labour hours are in short supply.

(b)

Production plan for optimum profit when avialable labour hours is only 30,000. What is expected profit?

(c)

If the company decides to produce and sell even relatively less profitable products to meet at least 10% of the current demand, what revised plan will you suggest? What is the anticipated profit?

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( 4 )

I-5(CMA)
Revised syllabus

Marks

The summarised balance sheets of ABC Ltd. for the years ended 31-3-2004 and 31-3-2005 are given below:

Liabilities	Year ending		Assets	Year ending
	31.3.'04	31.3.'05		31.3.'04	31.3.'05
	(In lakhs of rupees)			(In lakhs of rupees)
Equity capital	100	150	Fixed Assets:
General Reserve	40	65	Land	15	15
Profit & Loss Account	7	11	Buildings (Net of depreciation)	16	14
15% Debentures	70	50	Plant & Machinery (Net of depreciation)	180	240
Dividend	40	50	Furniture & Fittings (Net of depreciation)	5	4
Provision for Taxation	10	5	Current Assets:
Bank Overdraft	25	10	Stock	37	27
Sundry Creditors	18	19	Bills Receivable	20	14
			Debtors	32	38
			Cash & Bank	5	8
	310	360		310	360

(a)

Briefly distinguish between the two cost control techniques 'Budgetary Control' and 'Standard Costing'.

(b)

A factory manufactures a chemical product with three ingradient chemicals A, B and C as per standard data given follow:

Chemical	Percentage of total input	Standard Cost per kg. (Rs.)
A B C	50% 30% 20%	40 60 95
Note: There is a procrss loss of 5% during the course of manufacture.

The Management gives the following detailes for a certain weel:

Chemical	Quantitly purchased and issued	Actual Cost (Rs.)
A B C	5,200 kg. 3,600 kg. 1,700 kg.	2,34,000 2,19,600 1,58,100
Output of finished product : 10,200 kg. Calculate all the relevent variances.

Write short notes on any four of the following:-

(a)	ABC analysis
(b)	Equivalent production
(c)	Cost-plus Contract
(d)	Flexible budgeting
(e)	Advantage of Inter-firm comparision.

4x4

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