<\/p>\n
This Paper has 22 answerable questions with 0 answered.<\/p>\n
Total No. of Questions\u2014 9]
\nTime Allowed : 3 Hours<\/p>\n
Maximum Marks : 100
\nAnswers to questions\u00a0are to be given only in English except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. If a\u00a0candidate\u00a0who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
\nQuestion Nos.1 and 6 are compulsory.
\nAttempt three questions out of the remaining question numbers 2, 3, 4 and 5 and attempt two questions from the remaining Questions Nos. 7, 8 and 9.
\nWorking notes should form part of the answer.
\nMarks
\n1. (a) ABC\u00a0Bank\u00a0is examining the profitability of its Premier Account, a combined Savings & Cheque account. Depositors receive a 7% annual interest on their average deposit. ABCBank\u00a0earns an\u00a0interest rate\u00a0spread of 3% (the difference between the rate at which it\u00a0lends money\u00a0and rate it pays to depositors) by\u00a0lending money\u00a0for home loan purpose at 10%
\nThe Premier Account allows depositors unlimited use of services such as deposits, withdrawals, cheque facility, and foreign currency drafts. Depositors with Premier Account balances of Rs. 50,000 or more receive unlimited free use of services. Depositors with minimum balance of less than Rs. 50,000 pay Rs. 1,000\u2013a\u2013month service fee for their Premier Account.<\/p>\n
ABC\u00a0Bank\u00a0recently conducted an activity\u2013based costing study of its services. The use of these services in 2005\u201306 by three customers is as follows:<\/p>\n
Activity\u2013 Account Usage
\nBased Cost
\nPer “Transaction Customer
\nX Customer
\nY Customer
\nZ
\nDeposits\/withdrawal
\nwith teller
\nDeposits\/withdrawal
\nwith automatic teller
\nmachine (ATM)
\nDeposits\/withdrawal
\non prearranged
\nmonthly basis
\nBank\u00a0cheques
\nwritten
\nForeign Currency
\ndrafts
\nInquiries about
\nAccount balance
\nAverage Premier Account
\nBalance for 2005\u201306
\nRs. 125<\/p>\n
Rs. 40<\/p>\n
Rs. 25<\/p>\n
Rs. 400<\/p>\n
Rs. 600<\/p>\n
Rs. 75
\n40<\/p>\n
10<\/p>\n
0<\/p>\n
9<\/p>\n
4<\/p>\n
10<\/p>\n
Rs. 55,000
\n50<\/p>\n
20<\/p>\n
12<\/p>\n
3<\/p>\n
1<\/p>\n
18<\/p>\n
Rs. 40,000
\n5<\/p>\n
16<\/p>\n
60<\/p>\n
2<\/p>\n
6<\/p>\n
9<\/p>\n
Rs. 12,50,000
\nAssume Customer X and Z always maintain a balance above Rs. 50,000, whereas Customer Y always has a balance below Rs. 50,000.<\/p>\n
Required:<\/p>\n
(i) Compute the 2005\u201306 profitability of the Customers X, Y and Z Premier Account at ABCBank.
\n(ii) What evidence is there of cross\u2013subsidization among the three Premier Accounts? Why might ABC\u00a0bank\u00a0worry about this Cross\u2013subsidization, if the Premier Account product offering is Profitable as a whole?
\n(iii) What changes would you recommend for ABC Bank’s Premier Account?
\n6+3+2=11 (0)
\n(b) Discuss the treatment of Idle time and Overtime premium in Cost\u00a0Accounting. 4 (0)
\n(c) Discuss the essential requisites for the installation of Uniform costing system. 3 (0)
\n2. (a) PQR Limited produces a product which has a monthly demand of 52,000 units. The product requires a component X which is purchased at Rs. 15 per unit. For every finished product, 2 units of Component X are required. The Ordering cost is Rs. 350 per order and the Carrying cost is 12% p.a.
\nRequired:<\/p>\n
(i) Calculate\u00a0for the year 2005\u201306:
\n(a) Inventory turnover ratio
\n(b) Financial Leverage
\n(c) Return on Investment (ROI)
\n(d) Return on Equity (ROE)
\n(e) Average Collection period.
\n(ii) If the minimum lot size to be supplied is 52,000 units, what is the extra cost, the company has to incur?
\n(iii) What is the minimum carrying cost, the Company has to incur?
\n3+3+2=8 (0)
\n(b) Discuss the treatment of Under\u2013absorbed and Over\u2013absorbed overheads in CostAccounting. 6 (0)
\n3. (a) RST Construction Ltd. commenced a contract on April 1, 2005. The total contract was for Rs. 49,21,875. It was decided to estimate the total Profit on the contract and to take to the Credit of P\/L A\/c that proportion of estimated profit on cash basis, which work completed bore to total Contract. Actual expenditure for the period April 1, 2005 to March 31, 2006 and estimated expenditure for April 1, 2006 to September 30, 2006 are given below:
\nApril 1, 2005
\nto March 31, 2006
\n(Actuals)
\nRs. April 1, 2006
\nto September 30, 2006
\n(Estimated)
\nRs.
\nMaterials Issued
\nLabour : Paid
\nPrepaid
\nOutstanding
\nPlant Purchased
\nExpenses : Paid
\nOutstanding
\nPrepaid
\nPlant returns to Store (historical cost) 7,76,250
\n5,17,500
\n37,500
\n12,500
\n4,00,000
\n2,25,000
\n25,000
\n15,000
\n1,00,000 12,99,375
\n6,18,750
\n\u2013
\n5,750
\n\u2013
\n3,75,000
\n10,000
\n\u2013
\n3,00,000
\n(On September 30, 2005) (On September 30 2006)
\nWork certified
\nWork uncertified
\nCash received
\nMaterials at site 22,50,000
\n25,000
\n18,75,000
\n82,500 Full
\n\u2013
\n\u2013
\n42,500
\nThe plant is subject to annual depreciation @ 25% on written down value method. The contract is likely to be completed on September 30, 2006.<\/p>\n
Required:<\/p>\n
(i) Prepare the contract A\/c. Determine the profit on the contract for the year 2005&ndsh;06 on prudent basis, which has to be credited to P\/L A\/c.
\n10 (0)
\n(b) Distinguish between any two of the following: 2+2=4
\n(i) Profit Centres and Investment Centres (0)
\n(ii) Product Cost and Period Cost (0)
\n(iii) Job Costing and Batch Costing. (0)
\n4. (a) Discuss the reconciliation of Profits as per Cost Accounts and Financial Accounts. 6 (0)
\n(b) XYZ Auto Ltd. is in the business of selling cars. It also sells insurance and finance as part of its overall business strategy. The following information is available for the company.
\nPhysical
\nunits Sales
\nvalue
\nSales of Cars
\nSales of Insurance
\nSales of Finance 10,000 Cars
\n6,000 Policies
\n8,000 Loans Rs. 30,000 lacs
\nRs. 1,500 lacs
\nRs. 19,200 lacs
\nThe Revenue earnings from each line of business before expenses are as follows:<\/p>\n
Sales of Cars
\nSales of Insurance
\nSales of Finance 3% of Sales value
\n20% of Sales value
\n2% of Sales value
\nThe expenses of the company are as follows:<\/p>\n
Salesman salaries
\nRent
\nElectricity
\nAdvertising
\nDocumentation cost per insurance policy
\nDocumentation cost for each loan
\nDirect sales expenses per car Rs.
\nRs.
\nRs.
\nRs.
\nRs.
\nRs.
\nRs. 200
\n100
\n100
\n200
\n100
\n200
\n5,000 lacs
\nlacs
\nlacs
\nlacs
\nIndirect costs have to be allocated in the ratio of physical units sold.<\/p>\n
Required:<\/p>\n
(i) Make a cost sheet for each product allocating the direct and indirect costs and also showing the product wise profit and total profit.
\n(ii) Calculate\u00a0the percentage of profit to revenue earned from each line of business.
\n6+2=8 (0)
\n5. (a) A company produces a component, which passes through two processes. During the month of April, 2006, materials for 40,000 components were put into Process I of which 30,000 were completed and transferred to Process II. Those not transferred to Process II were 100% complete as to materials cost and 50% complete as to labour and overheads cost. The Process I costs incurred were as follows:
\nDirect Materials
\nDirect Wages
\nFactory Overheads Rs. 15,000
\nRs. 18,000
\nRs. 12,000
\nOf those transferred to Process II, 28,000 units were completed and transferred to finished goods stores. There was a normal loss with no salvage value of 200 units in process II. There were 1,800 units, remained unfinished in the process with 100% complete as to materials and 25% complete as regard to wages and overheads.<\/p>\n
No further process material costs occur after introduction at the first process untill the end of the second process, when protective packing is applied to the completed components. The process and packing costs incurred at the end of the Process II were:<\/p>\n
Packing Materials
\nDirect Wages
\nFactory Overheads Rs. 4,000
\nRs. 3,500
\nRs. 4,500
\nRequired:<\/p>\n
(i) Prepare Statement of Equivalent Production, Cost per unit and Process I A\/c.
\n(ii) Prepare statement of Equivalent Production, Cost per unit and Process II A\/c.
\n4+6=10 (0)
\n(b) Discuss the\u00a0accounting\u00a0of Selling and Distribution overheads. 4 (0)
\n6. (a) A company is considering a proposal of installing a drying equipment. The equipment would involve a Cash outlay of Rs. 6,00,000 and net Working Capital of Rs. 80,000. The expected life of the project is 5 years without any salvage value. Assume that the company is allowed to charge depreciation on straight\u2013tax\u2013purpose. The estimated before\u2013tax cashinflows are given below:
\nBefore\u2013tax Cashinflows (Rs. ‘000)
\nYear 1
\n240 2
\n275 3
\n210 4
\n180 5
\n160
\nThe applicable Income\u2013tax rate to the Company is 35%. If the Company’s opportunity Cost of Capital is 12%, calculate the equipment’s discounted payback period, net present value and internal rate of return.<\/p>\n
The PV factors at 12%, 14% and 15% are:<\/p>\n
Year
\nPV factor at 12%
\nPV factor at 14%
\nPV factor at 15% 1
\n0.8929
\n0.8772
\n0.8696 2
\n0.7972
\n0.7695
\n0.7561 3
\n0.7118
\n0.6750
\n0.6575 4
\n0.6355
\n0.5921
\n0.5718 5
\n0.5674
\n0.5194
\n0.4972
\n10 (0)
\n(b) Discuss the changing scenario of Financial Management in India. 6 (0)
\n7. JKL Limited has the following Balance Sheets as on March 31, 2006 and March 31, 2005:
\nBalance Sheet
\nRs. in Lakhs
\nMarch 31, 2006 March 31, 2005
\nSources of Funds
\nShareholders Funds
\nLoan Funds 2,377
\n3,570
\n5,947 1,472
\n3,083
\n4,555
\nApplication of Funds
\nFixed Assets
\nCash and bank
\nDebtors
\nStock
\nOther Current Assets
\nLess: Current Liabilities
\n3,466
\n489
\n1,495
\n2,867
\n1,567
\n(3,937)
\n5,947
\n2,900
\n470
\n1,168
\n2,407
\n1,404
\n(3,794)
\n4,555
\nThe Income Statement of the JKL Ltd. for the year ended is as follows:<\/p>\n
Rs. in Lakhs
\nMarch 31, 2006 March 31, 2005
\nSales
\nLess: Cost of Goods sold
\nGross Profit
\nLess: Selling, General and
\nAdministrative expenses
\nEarnings before Interest and Tax (EBIT)
\nInterest Expense
\nProfits before Tax
\nTax
\nProfits after Tax (PAT) 22,165
\n20,860
\n1,305<\/p>\n
1,135
\n170
\n113
\n57
\n23
\n34 13,882
\n12,544
\n1,338<\/p>\n
752
\n586
\n105
\n481
\n192
\n289
\nApplication of Funds
\nFixed Assets
\nCash and bank
\nDebtors
\nStock
\nOther Current Assets
\nLess: Current Liabilities
\n3,466
\n489
\n1,495
\n2,867
\n1,567
\n(3,937)
\n5,947
\n2,900
\n470
\n1,168
\n2,407
\n1,404
\n(3,794)
\n4,555
\nRequired:<\/p>\n
(i) Calculate for the year 2005\u201306:
\n(a) Inventory turnover ratio
\n(b) Financial Leverage
\n(c) Return on Investment (ROI)
\n(d) Return on Equity (ROE)
\n(e) Average Collection period.
\n(ii) Give a brief comment on the Financial Position of JKL Limited.
\n10+2 (0)
\n8. (a) Discuss the major considerations in Capital Structure Planning. 6 (0)
\n(b) A Company issues Rs. 10,00,000 12% debentures of Rs. 100 each. The debentures are redeemable after the expiry of fixed period of 7 years. The Company is in 35% tax bracket.
\nRequired:<\/p>\n
(i) Calculate the cost of debt after tax, if debentures are issued at
\n(a) Par
\n(b) 10% Discount
\n(c) 10% Premium
\n(ii) If brokerage is paid at 2%, what will be the cost of debentures, if issue is at par?
\n5+1=6 (0)
\n9. (a) A Company has sales of Rs. 25,00,000. Average collection period is 50 days, bad debt losses are 5% of sales and collection expenses are Rs. 25,000. The cost of funds is 15%. The Company has two alternative Collection Programmes:
\nProgramme I Programme II
\nAverage Collection Period reduced to
\nBad debt losses reduced to
\nCollection Expenses 40 days
\n4% of sales
\nRs. 50,000 30 days
\n3% of sales
\nRs. 80,000
\nEvaluate which Programme is viable.<\/p>\n
6 (0)
\n(b) Write short notes on any two of the following: 3+3=6
\n(i) Debt Securitisation (0)
\n(ii) American Depository Receipts (0)
\n(iii) Bridge Finance. (0)<\/p>\n","protected":false},"excerpt":{"rendered":"
CA PE II Question Papers Group II Cost\u00a0Accounting\u00a0and Financial Management May 2006 This Paper has 22 answerable questions with 0 answered. Total No. of Questions\u2014 9] Time Allowed : 3 Hours Maximum Marks : 100 Answers to questions\u00a0are to be given only in English except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. … Read more<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[4731,120,4930],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24589"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=24589"}],"version-history":[{"count":0,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24589\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=24589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=24589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=24589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}