CWA/ICWA Final :: Cost and Management Accounting : June 2007

*1-5(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.

(i)
(ii)
(iii)
(iv)
(v)

Prepetual Inventory System
Standard Costing
Value Engineering
Blanket Rate
Margin of Safety

:
:
:
:
:
:
:
:
:

Continuous physical verification
Cost ascertainment
Recording stock balance after every transaction
Analysing the contribution of each part
Management by exception
Profit made above break even level
Analysing the role of every part at design stage
Overhead recovery rate:
Sales minus break even sales

1x5

(b)

State whether the following are True (T) or False (F).

(i)	Time recording is not necessary for piece rate workers.
(ii)	Centralised purchasing is always advisable in a multi-unit company.
(iii)	Cost reduction is a never ending process while cost control has a definite goal.
(iv)	In decision making management should consider only future costs.
(v)	For 'make or by' decision unviable cost should be compared with market price.

1x5

(c)

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

2x5

(i)

The set up cost of a machine is Rs. 120. A certain order requires 9,000 components to be made in the machine for execution of the order. Cost of production of the component is Rs. 40 each and it requires 15% of the cost for storing it for a year. Then the Economic Batch quantity is _______ units.

(A) 300 (B) 250 (C) 400 (D) 600

(ii)

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

(A) 145 (B) 152 (C) 150 (D) 140

(iii)

The budgeted standard hours of a factory is 12,000. The capacity utilisation ratio for April 2007 stood of 90% while the efficiency ratio for the month came to 120%. The actual production in standard hours for April, 2007 was _______

(A) 10,800 (B) 12,960 (C) 14,400 (D) 12,800

(iv)

In a mill number of employees at the beginning and end of a period were 2,486 and 2,334 respectively. During the period, 320 workers left the mill while 168 persons joined in service. Labour turn over rate as per Flux method will be _______

(A) 8.22% (B) 9.46% (C) 10.12% (D) none of the above

(v)

In two consecutive periods, sales and profit were Rs. 1,60,000 and Rs. 8,000 respectively in the first period and Rs. 1,80,000 and Rs. 14,000 respectively during the second period. If there is no change in fixed costs between the two periods then P/V ratio must be _______

(A) 20% (B) 25% (C) 30% (D) 40%

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( 2 )

1-5(CMA)
Revised syllabus

Marks

A firm manufactures three standard products using the same raw material. The cost of raw material constitutes about 65% of the total cost of production and shows upward trends. Besides it is using several indirect materials the cost of which varies considerably from period to period. You are required to prepare your report on a material control system to exercise effective control over material costs.

(a)

A factory has a piece-work scheme for mass production of a certain component for a T.V manufacturer. The standard production fixed for a day of eight hours is 40 units. The piece work rate is Rs. 4 per piece. The details of remuneration payable to the workers are as follows:

Production Wages Dearness allowance Incentive bonus

Upto 80% efficiency P.W. wages @ Rs. 4 per piece
subject to guaranted
minimum wages of Rs. 100/day Rs. 60/day Nil

above 80% -do- -do- Rs. 40/- for every
1% increase in efficiency
above 80%

Three workers Ram, Salim, Tom gave the following performance for May 2007:

Name of worker	No. of days worked	Output (units)
Ram Salim Tom	20 24 25	480 864 1,100

Calculate their total earnings.

(b)

Calculate the comprehensive Machine Hour Rate of a machine from the following:

(i)	Cost of the machine Rs. 25 lakhs, having a scrap value of Rs. 1 lakh after 10 years.
(ii)	The machine will be operated for three shifts of 7 hrs. each for 300 working days in a year of which 300 hrs. will be utilised for minor repairs and maintenance.

(iii)	Wages payable:	Rs. 8,000 p.m. for an operator and Rs. 3,000 p.m. for a helper for every shift Rs. 16,000 p.m. to one supervisor per shift for the department accommodating four machines including the above machine.
(iv)	Other details:

Power consumption	:	25 units (KWH) @ Rs. 4.80 per unit
Repairs & Maintenance	:	Rs. 30,000 per annum
General lighting and heating	:	Rs. 4,000 p.m. for the whole department having the four machines
Insurance	:	Rs. 18,000 per machine per annum
Rent, Rates and Taxes	:	Rs. 3,000 p.m. for the department
Factory overheads	:	Rs. 36,000 per annum for the department

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( 3 )

1-5(CMA)
Revised syllabus

Marks

A company manufacturers a chemical product by a series of operations in three processes. Raw material is fed into Process I and the finished chemical that comes out of Process III is transferred to finished goods store. The following particulars relating to operations for April 2007 are given bfelow:

Process I Process II Process III

Raw materials issued 80,000 kg
Direct wages
Overhead costs
Normal processing loss (% of input)
Output transferred to next process
Work-in-process (cb)
(Processed material awaiting
transfer to next process Rs. 9,60,000
Rs. 1,25,600
Rs. 1,68,000
3%
74,000 kg
3,000 —
Rs. 1,72,000
Rs. 1,77,280
2%
69,400 kg
2,400 —
Rs. 1,42,500
Rs. 1,24,690
1%
69,000 kg
—

Prepare the accounts of Process I, II and III and also abnormal loss and abnormal gain accounts, if any. 16.

(a)

What is profit volume graph? Explain how it is drawn. What are its important limitations?

(b)

A company has a contribution/sales ratio of 40%, It maintains a margin of safety of 20%. If its annual fixed costs amount to Rs. 24 lakhs, calculate its

(i)
(ii)
(iii)
(iv)
(v) Break even sales,
Margin of safety,
Total sales,
Total variable costs and
Profit.

A company is manufacturing a chemical product making use of four different types of raw materials as follows:

Raw material Share of total
input (%) Cost of raw material
(Rs./kg)

A
B
C
D 40
30
20
10 50
80
90
100

There is an inevitable normal loss of 10% during the processing.
For April 2007, the management furnished the following information:

Raw material consumed	Quantity consumed (kg)	Cost of material (Rs./kg)
A B C D	42,000 31,000 18,000 9,000	48 80 92 110

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( 4 )

1-5(CMA)
Revised syllabus

Marks

Output obtained for the month was 92,000 kg.

(a)	Material cost variance,
(b)	Material price variance,
(c)	Material mix variance,
(d)	Material yield variance,
(e)	Material usage variance.

The following information relating to a company for the year ended 31.3.2007 are given:

Credit sales for the year
Net working capital
Fixed assets turnover
Average collection period
for credit sales :
:
:
: Rs. 96 lakhs
Rs. 12 lakhs
2
One month Current ratio
Quick ratio
Reserves to capital :
:
: 1.8
0.8
1:5

Prepare the Balance Sheet of the company from the above data.

Write short notes on any four of the following:

(a)	Direct Expense;
(b)	Equivalent Production;
(c)	Flexible Budget;
(d)	Principal Budget Factor;
(e)	Uniform Costing.

4x4

__________

CWA/ICWA Inter :: Cost and Management Accounting: June 2007