CWA ICWA Question Papers Inter Group II
Cost and Management Accounting June 2010
This Paper has 38 answerable questions with 0 answered.
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 following correctly :
(i) Scatter Diagram (A) Production Order
(ii) Escalation Clause (B) Reverse Cost Method
(iii) Perpetual Inventory (C) Splitting of Semi–variable Costs
(iv) Material Requisition (D) Contract Costing
(v) By Product Cost Accounting (E) Method of Maintaining Store Records
(b) Which of the following statements are ‘True ’ or ‘False’? 1×5
(i) In ZBB important reference is made to the previous level of expenditure. (0)
(ii) Just‘in–time deals with controlling defects in time. (0)
(iii) Production Budget is prepared before Sales Budget. (0)
(iv) A key factor, which at a particular time or over a period, will not limit the activities of the organization. (0)
(v) Profit planning and control is not a part of budgetary control mechanism. (0)
(c) State whether the following statements are ‘True’ or ‘False’: 1×5
(i) Standard hour is the standard time required per unit of production. (0)
(ii) Cost of tube used for packing tooth paste is indirect material cost. (0)
(iii) Fixed Cost vary with volume rather than time. (0)
(iv) Future costs are not relevant while making managerial decisions. (0)
(v) In break–even analysis it is assumed that variable costs fluctuate inversely with time. (0)
(d) Fill in the blanks suitably: 1×5
(i) A cost which does not involve any cash outflow is called ________ or ________ . (0)
(ii) Contribution earned after reaching Break Even Point is _________ of the firm. (0)
(iii) Two broad methods of costing are ___________ and __________ . (0)
(iv) Idle time variance is always __________ . (0)
(v) Profit–volume graph shows the relationship between __________ and __________ . (0)
(e) Choose the correct answer from the following: 1×5
(i) A firm requires annually 16,000nos. of a certain components which it buys at Rs.60 each. The cost of placing an order is Rs.120 and the annual storing charges work out 10% of the cost of component. To get maximum benefit the firm should place order for how many units at a time?
(1) 1,000 units;
(2) 900 units;
(3) 800 units;
(ii) The scarce factor of production is known as
(1) Linking factor;
(2) Key factor;
(3) Production factor;
(iii) The allotment of whole item of cost to a cost centre or cost unit is called as
(1) Cost allocation;
(2) Cost apportionment;
(3) Overhead absorption;
(4) Cost classification.
(iv) If actual hours worked exceed the standard hours allowed, the variance which will occur is called as
(1) Favourable labour efficiency variance;
(2) Adverse labour rate variance;
(3) Adverse labour efficiency variance;
(4) Favourable labour rate variance.
(v) The valuation of Closing Stock according to Last in First Out method of Pricing is done at
(1) The latest prices;
(2) The earliest prices;
(3) At average prices;
(4) None of the above.
2. (a) Write a note on ABC system of Stores Control. 5 (0)
(b) The employees in a factory are paid wages at the rate of Rs.7 per hour for an eight–hour shift. Each employee produces 5 units per hour. The overhead is Rs.10 per direct labour hour. Employees and the management are considering the following piece rate wage proposal:
Upto 45 units per day of 8 hours – Rs.1.30 per unit
From 46 units to 50 units – Rs.1.60 per unit
From 51 units to 55 units – Rs.1.65 per unit
From 56 units to 60 units – Rs.1.70 per unit
Above 60 units – Rs.1.75 per unit
The working hours are restricted to 8 hours per day. Overhead rate does not change with increased production.
Prepare a statement indicating advantages to employees as well as to management of production levels of 40, 45, 55 and 60 unit.
3. (a) What is meant by ‘Relevant Cost’? Explain with the help of illustration. 5 (0)
(b) A factory is currently working at 50% capacity and produces 5,000 units at a cost of Rs.90 per unit as per details given below:
Factory Overhead Rs.15(Rs.6 fixed)
Administration Overhead Rs.10(Rs.5 fixed)
The current selling price is Rs.100 per unit.
At 60% working, material cost per unit increases by 2% and selling price per unit falls by 2%.
At 80% working, material cost per unit increases by 5% and selling price per unit falls by 5%.
Calculate the current profit at 50% working. Estimate profits of the factory at 60% and 80% working. Which capacity of production you recommend? 2+3+
4. (a) What is Inter Firm Comparison? Enumerate some of its advantages. 2+3 (0)
(b) ABC Ltd. is manufacturing three products X, Y and Z. All the products use the same raw material which is scarce and available to the extent of 61,000 kg. only. The following information is available from records of the Company:
Particulars Product X Product Y Product Z
Selling Price per unit(Rs.)
Variable Cost per Unit(Rs.)
Raw Material Requirement per unit(Kg.)
Market Demand(Units) 100
Fixed Costs are Rs.1,50,000
Advise the Company about the most profitable product mix. Compute the amount of profit resulting from such product mix. 4+6 (0)
5. B.Ltd. started trading on 1st November 2008, manufacturing and selling one product. The standard cost per unit was:
Direct material : Standard price Rs.10 per kilogram
Standard quantity : 20 kilogram per unit
Direct labour : Standard rate of pay Rs.5.50 per hour
Standard time allowance : 12 hours per unit
Production overhead costs, all classified as fixed, were budgeted at Rs.9,00,000 per annum. The standard time for producing one unit is 12 machine hours and normal capacity is 60,000 machine hours per annum. Production overhead is absorbed on machine hours.
For the year ended 31st October 2009, the costs incurred and other relevant information is given below:
Direct material used –
Direct wages paid –
Production overhead –
Machine capacity used –
Actual output – 1,00,000 kilograms at a cost of Rs.10,50,000.
Rs.3,10,000 for 62,000 hours
Assuming no stocks of work–in–progress or finished goods at year end.
You are required to:
(a) Show the standard product cost for one unit.
(b) Calculate variances for material(usage and price), labour (rate and efficiency) and overhead.
6. (a) Zenith Transport Company has given a route 40 kilometers long to run bus. The bus costs the Company a sum of Rs.1,00,000. It has been insured at 3% p.a. and the annual tax will amount to Rs.2,000. Garage rent is Rs.200 per month. Annual repairs will be Rs.2,000 and the bus is likely to last for 5 years. The diver’s salary will be RS.300 per month and the conductor’s salary will be Rs.200 per month in addition to 10% of taking as commission (to be shared by the driver and the conductor equally).
Cost of stationery will be Rs.100 per month. Manager–cum–accountant’s salary is RS.700 per month. Petrol and oil will be Rs.50 per 100 kilometers. The bus will make 3 up and down trips carrying on an average 40 passengers on each trip.
Assuming 15% profit on taking, calculate the bus fare to be charged from each passenger. The bus will run on an average 25 days in a month.
(b) The Profit & Loss A/c. of XYZ Ltd., for the year ended 31st March 2010 was as follows:
Profit & Loss A/c for the year ended 31st March 2010
(Rs.) Particulars Amount
To Direct Expenses
To Gross Profit 4,80,000
1,20,000 By Sales
By Closing Stock 9,60,000
Total 12,00,000 Total 12,00,000
To Administration Expenses
To Net Profit 60,000
66,000 By Gross Profit
By Dividends Received 1,20,000
Total 1,26,000 Total 1,26,000
As per the cost records, the direct expenses have been estimated at a cost of RS.30 per kg. and administration expenses at Rs.15 per kg. During the year Production was 6,000 kgs. and Sales were Rs.9,60,000.
Prepare a statement of costing Profit & Loss A/c. and reconcile the profit with financial profit.
7. (a) Starlight Co. Ltd. and Jupiter Co. Ltd. sell the same type of product. Budgeted Profit & Loss A/c. of these companies for the year ended 31st March 2009 given below:
(Rs.’000) Jupitor Co.
Less: Variable Cost:
You are required to find out the break–even point of each Company. Also state clearly which Company is likely to earn greater profit if there is (i) heavy demand; and (ii) poor demand for its product.
(b) State clearly limitations of Activity Based Costing. 5 (0)
8. Write short notes on any three;of the following: 5×3
(a) Managerial Decision Making; (0)
(b) Inter–Firm Comparison; (0)
(c) Zero–Base Budgeting; (0)
(d) Uniform Costing; (0)
(e) Budget Manual; (0)
(f) JIT. (0)