CA PCC Question Papers Group II Cost Accounting and Financial Management November 2011

CA PCC Question Papers Group II

 Cost Accounting and Financial Management

November 2011

Time Allowed : 3 Hours  

Maximum Marks : 100

Answers to questions are to be given only in English except in the case of candidates who
have opted for Hindi Medium. If a candidate has not opted for Hindi medium, his/heranswers
in Hindi will not be valued.
Question No. 1 is compulsory.
Attempt any five questions from the remaining six questions.
Working notes should form part of the answer.
Marks
1. Answer the following: 4×5=20
(a) The P/V Ratio of Delta Ltd. is 50% and margin of safety is 40%. The company sold 500units for Rs. 5,00,000. You are required to calculate:
(i) Break even point, and
(ii) Sales in units to earn a profit of 10% on sales
(0)
(b) X executes a piece of work in 120 hours as against 150 hours allowed to him. His hourly rate is Rs. 10 and he gets a dearness allowance @ Rs. 30 per day of 8 hours worked in addition to his wages. You are required to. .calculate tota1 wages received by X under the following incentive schemes:
(i) Rowan Premium Plan, and
(ii) Emerson’s Efficiency Plan
(0)
(c) A new customer with 10% risk of non-payment desires to establish business connections with you. He would require 1.5 month of credit and is likely to increase your sales by Rs. 1,20,000 p.a. Cost of sales amounted to 85% of sales. The tax rate is 30%.
Should you accept the offer if the required rate of return is 40% (after tax) ? (0)
(d) Beeta Ltd. has furnished the following information :




— Earning per share (EPS)
Dividend payout ratio
Market price per share
Rate of Tax
Growth rate of dividend Rs. 4
25%
Rs. 40
30%
8%
The company wants to raise additional capital of Rs. 10 lakhs including debt of Rs. 4 lakhs. The cost of debt (before tax) is 10% upto Rs. 2 lakhs and 15% beyond that.
Compute the after tax cost of equity and debt and the weighted average cost of capital. (0)
2. (a) X Ltd. recovers overheads at a pre–determined rate of Rs. 50 per man–day. The total factory overheads incurred and the man–days actually worked were Rs. 79 lakhs and 1.5 lakhs days respectively. During the period 30,000 units were sold. At the end of the period 5,000 completed units were held in stock but there was no opening stock of finished goods. Similarly, there was no stock of uncompleted units at the beginning of the period but at the end of the period there were 10,000 uncompleted units which may be treated as 50% complete.
On analyzing the reasons, it was found that 60% of the unabsorbed overheads were due to defective planning and the balance were attributable to increase in overhead cost.
How would unabsorbed overheads be treated in cost accounts?

8 (0)
(b) The financial statements of a company contain the following information for the year ending 31st March,2011 :
Particulars Rs.
Cash
Sundry Debtors
Short–term Investment
Stock
Prepaid Expenses
Total Current Assets
Current Liabilities
10% Debentures
Equity Share Capital
Retained Earnings 1,60,000
4,00,000
3,20,000
21,60,000
10,000
30,50,000
10,00,000
16,00,000
20,00,000
8,00,000
Statement of Profit for the year ended 31st March, 2011
Sales (20% cash sales)
Less: Cost of goods sold
Profit before Interest & Tax
Less: Interest
Profit Before Tax
Less: Tax @ 30%
Profit After Tax 40,00,000
28,00,000
12,00,000
1,60,000
10,40,000
3,12,000
7,28,000
You are required to calculate:
(i) Quick Ratio
(ii) Debt–equity Ratio
(iii) Return on Capital Employed, and
(iv) Average collection period (Assuming 360 days in a year).
8 (0)
3. (a) The following details are available of Process X for August 2011 :
(1) Opening work-in-process 8,000 units
Degree of completion and cost:
Material (100%)
Labour (60%)
Overheads (60%) Rs.
Rs.
Rs. 63,900
10,800
5,400
(2) Input 1,82,000 units at Rs. 7,56, 900
(3) Labour paid Rs. 3,28,000
(4) Overheads incurred Rs. 1,64,000
(5) Units scrapped
Degree of completion:
Material
Labour and overhead 14,000

100%
80%
(6) Closing work-in-process
Degree of completion:
Material
Labour and overhead 18000 units

100%
70%
(7) 1,58,000 units were completed and transferred to next process.
(8) Normal loss is 8% of total input including opening work–in–process.
(9) Scrap value is Rs. 8 per unit to be adjusted in direct material cost.
You are required to compute, assuming that average method of inventory is used:
(i) Equivalent production, and
(ii) Cost per unit
8 (0)
(b) Alpha Ltd. has furnished the following Balance Sheet as on March 31, 2011 :
Liabilities Rs. Assets Rs.
Equity Share Capital (1,00,006
Equity shares off Rs. 10 each)
General Reserve
15% Debentures
Current Liabilities 10,00,000

2,00,000
28,00,000
8,00,000
48,00,000 Fixed Assets
Current Assets 30,00,000
18,00,000

48,00,000
Additional informations:
(1)
(2)
(3)
(4) Annual Fixed Cost other than Interest
Variable Cost Ratio
Total Assets Turnover Ratio
Tax Rate 28,00,000
60%
2.5
30%
You are required to calculate:
(i) Earning Per Share (EPS), and
(ii) Combined Leverage.
8 (0)
4. (a) The Trading and Profit and Loss Account of Beta Ltd. for the year ended 31stMarch, 2011 is given below:
Particulars Amount
Rs. Particulars
Rs. Amount
Rs.
To Opening Stock:
Raw materials
Work–in–progress
Finished Goods 1,80,000
60,000
2,60,000

5,00,000 By Sales (Credit)
By Closing Stock:
Raw materials
Work–in–progress
Finished Goods 2,00,000
1,00,000
3,00,000
20,00,000

6,00,000
To purchases (credit)
To Wages
To Production Expenses
To Gross Profit C/d 11,00,000
3,00,000
2,00,000
5,00,000
26,00,000 26,00,000
To Administration Expenses
To Selling Expenses
To Net Profit 1,75,000
75,000
2,50,000 By Gross Profit b/d 5,00,000
5,00,000 5,00,000
The opening and closing balances of debtors were Rs. 1,50,000 and Rs. 2,00,000 respectively whereas opening and closing creditors were Rs. 2,00,000 and Rs. 2,40,000 respectively.
You are required to ascertain the working capital requirement by operating cycle method. 8 (0)
(b) The following information have been extracted from the cost records of a manufacturing company:
Stores Rs.
∗ Opening balance 9,000
∗ Purchases 48,000
∗ Transfer from WIP 24,000
∗ Issue to work–in–process 48,000
∗ Issue for repairs 6,000
∗ Deficiency found in stock 1,800
Work–in–Progress:
∗ Opening balance 18,000
∗ Direct wages applied 18,000
∗ Overhead charged 72,000
∗ Closing balance 12,000
Finished Production:
∗ Entire production is sold at a profit of 10% on cost from work–in–process.
∗ Wages paid. 21,000
∗ Overheads incurred. 75,000
Draw the Stores Ledger Control A/c, Work–in–Progress Control A/c, Overheads Control A/c and Costing Profit and Loss A/c. 8 (0)
5. Distinguish between: 4×4=16
(i) Cost control and cost reduction. (0)
(ii) Fixed and flexible budget (0)
(iii) Operating lease and financial lease, and (0)
(iv) Net present value method and internal rate of return method. (0)
6. (a) A Ltd. is considering the purchase of a machine which will perform some operations which are at present performed by workers. Machines X and Y are alternative models. The following details are available:
Machine X
Rs. Machine Y
Rs.
Cost of machine
Estimated life of machine
Estimated cost of maintenance p.a.
Estimated cost of indirect material p.a
Estimated savings in scrap p.a.
Estimated cost of supervision p.a
Estimated savings in wages p.a. 1,50,000
5 years
7,000
6,000
10,000
12,000
90,000 2,40,000
6 years
11,000
8,000
15,000
16,000
1,20,000
Depreciation will be charged on straight line basis. The tax rate is 30%. Evaluate the alternatives according to :
(i) Average rate of return method, and
(ii) Present value index method assuming cost of capital being 10%.
(The present value off 1.00 @ 10% p.a. for 5 years is 3.79 and for 6 years is 4.354)

8 (0)
(b) Gama Ltd. has furnished the following standard cost data per unit of production:
∗ Material 10 kg @ Rs. 10 per kg
∗ Labour 6 hours @ Rs. 5.50 per hour.
∗ Variable overhead 6 hours @ Rs. 10 per hour.
∗ Fixed overhead Rs. 4,50,000 per month (Based on a normal volume of 30,000 labour hours).
The actual cost data for the month of August 2011 are as follows:
∗ Material used 50,000 kg at a cost of Rs. 5,25,000.
∗ Labour paid Rs. 1,55,000 for 31,000 hours worked.
∗ Variable overheads Rs. 2,93,000.
∗ Fixed overheads Rs. 4,70,000.
∗ Actual production 4,800 units.
Calculate:
(i) Material cost variance
(ii) Labour cost variance.
(iii) Fixed overhead cost variance.
(iv) Variable overhead cost variance.
8 (0)
7. Answer any four of the following: 4×4=16
(a) Elucidate the responsibilities of Chief Financial Officer. (0)
(b) Explain the relevance of time value of money. (0)
(c) Discuss ABC analysis as a system of inventory control. (0)
(d) Explain the terms notional profit and retention money in contract costing. (0)
(e) Explain the following:
(i) Bridge finance (0)
(ii) Essentials of budget- (0)

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