CWA ICWA Exam Papers Inter Group II Cost and Management Accounting June 2009

CWA ICWA Exam Papers Inter Group II

Cost and Management Accounting June 2009

 

This Paper has 39 answerable questions with 0 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.
Marks
1. (a) Match the following correctly with what is relates:
Merit rating Supervisors’ salaries
Variance analysis Decision making
Point rating Design of the product
Value engineering Basis for remunerating employees
Angle of incidence Job evaluation
engineered cost
Profitability rate
Management by Exception
1×5=5 (0)
(b) State whether the following statements are True (T) or False (F). 1×5=5
(i) If an expense can be identified with a specific cost unit, it is treated as direct expense; (0)
(ii) Time and motion study which is a function of the engineering department is useless for the determination of wages; (0)
(iii) ABC analysis is made on the basis of unit prices of materials; (0)
(iv) The relationship of value, function and cost can be expressed as Cost = Value/Function; (0)
(v) Standard hour is the standard time required per unit of production. (0)
(c) Choose the correct answer from the brackets: 1×5=5
(i) The annual demand of a certain component bought from the market is 1,000 units. The cost of placing an order is Rs. 60 and the carrying cost per unit is Rs. 3 p.a. The Economic Order Quantity for the item is ________ (200, 400, 600). (0)
(ii) The monthly cost of maintenance of machinery for 12,000 machine hours run is Rs. 1,70,000 and for 18,500 hours it is Rs. 2,02,500. The cost of maintenance for 14,000 hours is Rs. (1,90,000, 1,80,000, 1,85,000) (0)
(iii) A company’s fixed cost amounts to Rs. 120 lakhs p.a. and its overall P/V ratio is 0.4. The annual sales of the company should be Rs. ________ lakhs to have a Margin of Safety of 25% (400, 500, 600) (0)
(iv) In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover according to flux method is ________ (5.04, 4.03, 9.08) (0)
(v) The output of three different products P, Q and R in a factory are 20000 Kg. 15000 Kg. and 15000 Kg. respectively. If the costs are in proportion 4 : 6 : 7, then the cost per equivalent product unit is Rs.________(10, 7, 5) (0)
(d) Fill in the black; with suitably: 1×5=5
(i) Margin of safety is ________ or ________. (0)
(ii) Material usage variance is the sum of ________ and ________. (0)
(iii) A flexible budget recognizes the behaviour of ________ and ________. (0)
(iv) Profit volume graph shows the relationship between ________ and ________. (0)
(v) Efficiency is basically a ratio of ________ and ________. (0)
(e) In the following cases, choose the correct answer: 1×5=5
(i) In activity based costing, costs are accumulated by
A. Cost objects;
B. Cost benefit analysis;
C. Cost pool;
D. None of the above.
(0)
(ii) A company maintains a margin of safety of 25% on its current sales and earns a profit of Rs. 30 lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales amount to
A. Rs. 200 lakhs;
B. Rs. 300 lakhs;
C. Rs. 325 lakhs;
D. None of the above.
(0)
(iii) In a factory of PEE Ltd. where standard costing is followed, the budgeted fixed overhead for a budgeted production of 4800 units is Rs. 24,000. For a certain period actual expenditure incurred was Rs. 22,000 resulting in a fixed overhead volume variance of Rs. 3,000 (Adv.). Then actual production for the period was
A. 5400 units;
B. 4200 units;
C. 3000 units;
D. None of the above.
(0)
(iv) Zee Ltd. uses material—A for the production of Product M. The safety stock of material A is 300 units; the supplier quotes a delivery delay of two or three weeks. If the company uses 500 to 800 units a week according to the activity levels, the re–order level of material–A will be
A. 2300 units;
B. 2400 units;
C. 2700 units;
D. 28 units.
(0)
(v) A worker has 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.
(0)
2. (a) Discuss the essentials of a good incentive scheme. 5 (0)
(b) The standard hours for job X is 100 hours. The job has been completed by Amar in 60 hours. Akbar in 70 hours and Anthony in 95 hours. The bonus system applicable to the job is as follows:
Percentage of time saved to time allowed Bonus
Saving up to 10% 10% of time saved
From 11% to 20% 15% of time saved
From 21% to 40% 20% of time saved
From 41% to 100% 25% of time saved
The rate of pay is Rs. 10 per hour. Calculate the total earnings of each worker and also the rate of earnings per hour.

5 (0)
(c) A company has three production departments, A, B and C and two service departments, P and Q. The following figures are available from the primary distribution summary.
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
From primary distribution (Rs.) 3,150 3,700 1,400 2,250 1,000
The expenses of the services departments are to be apportioned on a percentage basis as follows:

Department Dept. A Dept. B Dept. C Dept. P Dept. Q
P (%) 40 30 20 — 10
Q (%) 30 30 20 20 —
Prepare secondary distribution summary as per the simultaneous equations method.

5 (0)
3. (a) State the fundamental principles of Process Costing. 5 (0)
(b) Prabhu Builders Ltd. commenced work on 1st April, 2007 on a contract of which the agreed price was Rs. 5 lakhs. The following expenditure was incurred during the year up to 31st March, 2008.
Particulars Amount Rs.
Wages 1,40,000
Plant 35,000
Materials 1,05,000
Head office expenses 12,500
Materials costing Rs. 10,000 proved unsuitable and were sold for Rs. 11,500 and a part of plant was scrapped and sold for Rs. 1,700. Of the contract price Rs. 2,40,000 representing 80% of work certified had been received by 31st March, 2008 and on that date the value of the plant on the job was Rs. 8,000 and the value of materials was Rs. 3,000. The cost of work done but not certified was Rs. 25,000.

It was decided to (a) Estimate what further expenditure would be incurred in completing the contract. Ub) Compute from the estimate and the expenditure already incurred, the total profit that would be made on the contract and (c) Ascertain the amount of profit to be taken to the credit of Profit and Loss Account for the year ending on 31st March, 2008. While taking profit to the credit of Profit and Loss A/c. that portion of the total profit should be taken which the value of work certified bears to the contract price. Details of the estimates to complete the contract are given below:

(a) That the contract would be completed by 30th September, 2008.
(b) The wages to complete would amount Rs. 84,750.
(c) That materials in addition to those in stock on 31st March, 2008 would cost Rs. 50,000.
(d) That further Rs. 15,000 would have to be spent on plant and the residual value of the plant on 30th September, 2008 would be Rs. 6,000.
(e) The head office expenses to the contract would be at the same annual rate as in 2007–08.
(f) That claims, temporary maintenance and contingencies would require Rs. 9,000.
Prepare contract account for the year ended 31st March, 2008 and show your calculations of the sum to be credited to Profit and Loss A/c. for the year.

10 (0)
4. (a) New India Engineering Co. Ltd. produces three components A, B and C. The following particulars are provided:
PRODUCT
A
Rs. B
Rs. C
Rs.
Per Unit
Sale Price
Direct Material
Direct Labour
Variable overhead expenditure
Fixed Cost is Rs. 1,00,000 per year
Estimated Sales (in No. of Units)
60
20
15
13

2,000
55
18
14
13

2,000
50
15
12
17

2,000
Due to break–down of one of the machines, the capacity is limited to 12,000 machine hours only and this is not sufficient to meet the total sales demand.
You are required to work out

(a) what will be most profitable product mix that should be produced, and
(b) the total contribution from the revised product mix.
5+5=10 (0)
(b) What are the factors those are taken into account by the Management while considering a Make or Buy decision? 5 (0)
5. (a) The standard process cost card for a processed item is as under:
Rs. Per kg of
Finished Product
Direct Material – 2 kgs @ Rs. 10 per kg
Direct Labour–3 hours @ Rs. 20 per hour
Fixed Overhead
Total 20
60
90
170
Budgeted output for the period is 1000 kgs.
Actual production and cost data for a month are as under:
Actual production (on equivalent production basis)

Material =
Labour =
Overheads = 1400 kgs
1140 kgs
1140 kgs
Direct Material
Direct Labour
Fixed Overhead 2900 kgs
3300 hours = cost
= cost Rs.
Rs.
Rs. 32,000
68,000
88,000
You are required to work out the following variances

(iii) Material Price and Usage Variances;
Labour rate and Efficiency Variances; and
Fixed Overhead Budget Variance.
10 (0)
(b) Distinguish between Standard Costing and Budgetary Control. 5 (0)
6. (a) The following information relates to the production activities of Good Wish Ltd. for 3 months ending on 31st December, 2006:
Particulars Amount in Rupees
Fixed Expenses:
Management Salaries 2,10,000
Rent and Taxes 1,40,000
Depreciation of Machinery 1,75,000
Sundry Office Expenses 2,22,000
Total Fixed Expenses 7,47,000
Semi–Variable Expenses at 50% capacity
Plant Maintenance 62,500
Labour 2,47,000
Salesmen’s salaries 72,500
Sundry Expenses 65,000
Total Semi–Variable Expenses 4,47,000
Variable Expenses at 50% capacity
Materials 6,00,000
Labour 6,40,000
Salesmen’s commission 95,000
Total Variable Expenses 13,35,000
It is further noted that semi–variable expenses remain constant between 40% and 70% capacity, increase by 10% of the above figures between 70% and 85% capacity and increase by 15% of the above fig. between 85% and 100% capacity. Fixed expenses remain constant whatever the level of activity. Sales at 60% capacity are Rs. 25,50,000, at 80% capacity Rs. 34,00,000 and at 100% capacity Rs. 42,50,000. All items produced are sold. Prepare a flexible budget at 60%, 80% and 100% productive capacity.

10 (0)
(b) Define ‘Operating Costing’ and mention at least five activities where it is applicable. 5 (0)
7. (a) As of 31st March, 2008, the following balances existed in a firm’s cost ledger, which is maintained separately on a double entry basis:
Debit
Rs. Credit
Rs.
Stores Ledger Control A/c
Work–in–progress Control A/c
Finished Goods Control A/c
Manufacturing Overhead Control A/c
Cost Ledger Control A/c
Total 3,00,000
1,50,000
2,50,000


7,00,000 —


15,000
6,85,000
7,00,000
During the next quarter, the following items arose:

Finished Product (at cost)
Manufacturing overhead incurred
Raw material purchased
Factory wages
Indirect labour
Cost of sales
Materials issued to production
Sales returned (at cost)
Materials returned to suppliers
Manufacturing overhed charged to production 2,25,000
85,000
1,25,000
40,000
20,000
1,75,000
1,35,000
9,000
13,000
85,000
You are required to prepare the Cost Ledger Control A/c., Stores Ledger Control A/c., Work–in progress control A/c. Finished Stock Ledger Control A/c., Manufacturing Overhead Control A/c., Wages Control A/c., Cost of Sales A/c and the Trial Balance at the end of the quarter.

10 (0)
(b) Explain the need for reconciliation of cost and financial accounts. Also state the reasons for difference in profit between the two accounts. 5 (0)
8. Write short notes on any three; 3×5=15
(a) Cost Volume Profit Analysis; (0)
(b) Limitations of Market Based Transfer pricing; (0)
(c) Profit Centre; (0)
(d) Essentials of Inter firm comparison; (0)
(e) Concept of split–off point and joint cost. (0)

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