CWA ICWA Question Paper Inter Cost and Management Accounting Dec 09

CWA ICWA Question Paper Inter Cost and Management Accounting Dec 09


This Paper has 34 answerable questions with 1 answered.

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.
1. (a) Match the statement in Column 1 with the most appropriate statement in Column 2:
Column 1 Column 2
1. Uniform Costing
2. Value Analysis
3. Residual Income
4. Stepped Cost
5. Point Rating A. Job evaluation
B. Technique to assist inter–firm comparison
C. Promotes innovation and creativity
D. Supervisor‘s salaries
E. Measures divisional performance
1×5 (1)
(b) State whether the following statements are True (T) or False (F) : 1×5
(i) ABC analysis is made on the basis of unit prices of material. (0)
(ii) Cost of tube used for packing tooth paste is indirect material cost. (0)
(iii) Value analysis helps in cost control. (0)
(iv) In process costing on distinction is made between direct and indirect material. (0)
(v) Coal industry makes use of process costing. (0)
(c) In the following cases one out of four answers is correct. You are required to indicate the correct answer (1 mark) and give your reason for answer (1 mark) : 2×5
(i) A television company manufactures several components in batches. The following data relates to one component:
Annual demand – 32,000 units; Set–up cost/batch – Rs.120; Annual rate of interest – 12%; Cost of production per unit – Rs.16.
The Economic Batch Quantity (EBQ) is
(A) 2500 (B) 4000 (C) 3000 (D) 2000
(ii) Sales of two consecutive months of a company are Rs.3,80,000 and Rs.4,20,000. The company’s net profits for these months amounted to Rs.24,000 and Rs.40,000 respectively. There is no change in P/V ratio or fixed costs. The P/V ratio of the company is
(A) 33.33% (B) 40% (C) 25% (D) None of these.
(iii) The repairs and maintenance of machinery in factory is a semi–variable cost having some relationship with the no.of machine hours run. It was Rs.17,500 during October 2009 for 7,500 machine hours worked and Rs.15,400 for November 2009 when only 5,400 machine hours were worked. The budgeted cost of repairs and maintenance for December 2009 when 6,200 machine hours are expected to be worked will be
(A) 17,200 (B) 16,800 (C) 16,200 (D) None of these
(iv) The budgeted annual sales of firm is Rs.80 lakhs and 25% of the same is cash sales. If the average amount debtors of the firm is Rs.5 lakhs, the average collection period of credit sales will be months
(A) ½ (B) 1 (C) 1½ (D) None of these
(v) The budgeted fixed overhead for a budgeted production of 10,000 units is Rs.20,000. For a certain period, the actual production was 11,000 units and the actual expenditure came to Rs.24,000. The volume variance would be
(A) Rs.4,000 (Adv.) (B) Rs.2,000 (Fav.) (C) Rs.2,000 (Adv.) (D) None of these
(d) Fill in the blanks suitably: 1×5
(i) Work study consists of _________ and _________ . (0)
(ii) Two methods used for calculation of equivalent production are __________ and ________ . (0)
(iii) Economic Batch Quantity depends on __________ and _________ costs. (0)
(iv) Normal idle time costs should be charged to __________ while that due to abnormal reasons should be charged to __________ . (0)
(v) A flexible budget recognizes the behaviour of __________ and __________ costs. (0)
2. (a) Distinguish between Scrap, Spoilage and Defectives in an engineering industry. 5 (0)
(b) In a factory bonus system, bonus hours are credited to the employees in the proportion of time taken, which time saved bears to time allowed. Jobs are carried forward from one week to another. No overtime is worked and payment is made in full for all units worked on, including those subsequently rejected. From the following information you are required tocalculate for each employee:
(i) The bonus hours and amount of bonus earned;
(ii) The total wage costs; and
(iii) The wages cost of each good unit produced.
Particulars Worker A Worker B Worker C
Basic rate per hour
Units produced
Time allowed for 100 units
Time taken
Rejects Rs.10
2 hours 30 minutes
52 hours
100 units Rs.16
3 hours
75 hours
40 units Rs.12
1 hour 30 minutes
48 hours
400 units
5 (0)
(c) The production department of a factory furnishes the following information for the month of March 2007:
Materials used — Rs.54,000
Direct wages — Rs.45,000
Overheads — Rs.36,000
Labour hours worked — 36,000
Hours of machine operation — 30,000
For an order executed by the department during a particular period, the relevant information was as under:

Materials used — Rs.6,00,000
Direct wages — Rs.3,20,000
Labour hours worked — 3,200
Machine hours worked — 2,400
Calculate the overhead charges chargeable to the job by the following methods:

(i) Direct materials cost percentage rate;
(ii) Labour hour rate; and
(iii) Machine hour rate.
5 (0)
3. (a) Briefly state the various causes of Labour Turnover. 5 (0)
(b) From the following particulars, prepare the following in the books of X Ltd.:
(i) Statement of equivalent production.
(ii) Statement of apportionment of cost.
• Opening stock as on 1st August: 200 units @ Rs.4 per unit.
• Degree of completion: Materials 100%, Labour and Overheads 40%
• Units introduced during August: 1,050 units
• Output transferred to the next process: 1,100 units
• Closing stock: 150units
• Degree of completion: Materials 100%, Labour and Overheads 70%
• Other relevant information regarding the process:
Materials: Rs.3,150, Labour: Rs.4,500 and Overheads: Rs.2,250.
10 (0)
4. (a) Briefly describe what is meant by Activity Based Management. 5 (0)
(b) ABC Ltd. produces three joint products – X, Y and Z. The products are processed further. Pre–separation costs are apportioned on the basis of weight of output of each joint–product. The following data are provided for month just concluded:
Cost incurred upto separation point Rs.10,000
Product X Product Y Product Z
Output (in Litre)

Costs incurred after separation point
Selling Price per Litre
After further processing
At pre–separation point (estimated) 100

25 70

70 80

You are required to:

(i) Prepare a statement showing profit or loss made by each product using the present method of apportionment of pre–separation cost; and
(ii) Advise the management whether, on purely financial consideration, the three products are to be processed further.
5+5 (0)
5. (a) Distinguish between Cost control and Cost reduction. 5 (0)
(b) A hotel has a capacity of 100 Single rooms and 20 Double rooms. The average occupancy of both single and double rooms is expected to be 80% throughout the year of 365 days. The rent for double room has been fixed at 125% of the rent of single room. The costs are as under:
Variable Costs: Single room Rs.220 each per day, Double room Rs.350 each per day.
Fixed Costs: Single room Rs.120 each per day, Double room Rs.250 each per day.
(calculated on the basis of current occupancy level)
Calculate the rent chargeable for single and double rooms per day in such a manner that the hotel earns a profit of 25% on cost at current occupancy level. 5 (0)
(c) A company produces a single product. The selling price of the product is Rs.69.50 per ton. The variable cost is Rs.35.50 per ton, fixed cost for the period is Rs.18.02 lakh.
(i) Calculate the Break Even Volume; and
(ii) If the Break Even Volume represents 40% of the capacity of the plant, what will be the profit at 80% capacity if there is a reduction in sale price by 10% for additional 20% production and reduction by 15% for the next additional 20% production?
2+3 (0)
6. (a) State the principle reasons which give rise to variances between actual and standard in standard costing. 5 (0)
(b) The following information are provided to you for a month in respect of a workshop:
(i) Overhead cost variance – Rs1,400 adverse
(ii) Overhead volume variance – Rs.1,000 adverse
(iii) Budgeted hours – 1,200hrs.
(iv) Budgeted overhead – Rs.6,000
(v) Actual rate of recovery of overheads – Rs.8 per hour
You are required to compute:

1. Overhead expenditure variance
2. Actual overheads incurred
3. Actual hours for actual production
4. Overheads capacity variance
5. Overheads efficiency variance
6. Standard hours for actual production
10 (0)
7. ABC Ltd. has prepared a flexible budget for the coming quarter. The following information is provided from the same:
Production Capacity
Direct Labour
Direct Material
Production Overheads
Administrative Overheads
Selling and Distribution Overheads 40%
6,200 60%
6,800 80%
7,400 100%
51,400 67,600 83,800 1,00,000
However, due to recession the company will have to operate at 50% capacity in the coming quarter. Selling prices has to be lowered to an uneconomic level and expected sales revenue for the coming quarter will be Rs.49,500/-. But it is projected that in the next quarter following the coming quarter, the concern will operate at 75% capacity and generate a sales revenue of Rs.90,000.

The Management is considering a suggestion to keep the operation suspended in the coming quarter and restart operation from the quarter when it is expecting to operate at 75% capacity. If the operation is suspended in the next quarter it is estimated that:

(a) The present fixed cost for the quarter would be reduced to Rs.11,000.
(b) There will be cost of Rs.7,500 for closing down operations.
(c) There would be additional maintenance cost of Rs.1,000 for quarter.
(d) There would be an one time cost of Rs.4,000 in re–opening the plant.
You are required to advise whether the factory should be kept operational during the coming quarter and also what will be the profit at 75% capacity utilization level.

15 (0)
8. Write short notes on any three from the following: 3×5
(a) Supply Chain Analysis; (0)
(b) Performance Budgeting; (0)
(c) Cost Driver; (0)
(d) Job Evaluation; (0)
(e) Perpetual Inventory System. (0)

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