\n
This\u00a0Paper\u00a0has 14 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\u00a0in English\u00a0except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. If a candidate who has not opted for Hindi medium,\u00a0answers\u00a0in Hindi, his\u00a0answers\u00a0in 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 Question numbers 7, 8 and 9.
\nWorking notes should form part of the answer.
\nMarks
\n1. (a) ABC Limited manufactures two radio models, the Nova which has been produced for five years and sells for Rs. 900, and the Royal, a new model introduced in early 2004, which sells for Rs. 1,140. Based on the following Income statement for the year 2004\u201305, a decision has been made to concentrate ABC Limited\u2018s marketing resources on the Royal model and to begin to phase out the Nova mode.
\nABC Limited
\nIncome statement
\nfor the year ending March 31, 2005
\nRoyal Model
\nRs. Nova Model
\nRs. Total
\nRs.
\nSales
\nCost of Goods sold
\nGross margin
\nSelling & Administrative Expenses
\nNet Income
\nUnit Produced and sold
\nNet Income per unit sold 45,60,000
\n31,92,000
\n13,68,000
\n9,78,000
\n3,90,000
\n4,000
\n97.50 1,98,00,000
\n1,25,40,000
\n72,60,000
\n58,30,000
\n14,30,000
\n22,000
\n65 2,43,60,000
\n1,57,32,000
\n86,28,000
\n68,08,000
\n18,20,000<\/p>\n
The standard unit costs for the Royal and Nova models are as follows :<\/p>\n
Royal Model
\nRs. Nova Model
\nRs.
\nDirect materials
\nDirect Labour
\nRoyal (3.5 hrs x Rs. 12)
\nNova (1.5 hrs x Rs. 12)
\nMachine usage
\nRoyal (4 hrs x Rs. 18)
\nNova (8 hrs x Rs. 18)
\nManufacturing overheads
\n(applied on the basis of machine
\nhours at a pre\u2013determined rate of
\nRs. 25 per hour)
\nStandard Cost 584<\/p>\n
42<\/p>\n
72<\/p>\n
100
\n798 208<\/p>\n
18<\/p>\n
144<\/p>\n
200
\n570
\nABC Ltd\u2019s Controller is advocating the use of activity\u2013based costing and activity\u2013based cost management and has gathered the following information about the company\u2018s manufacturing overheads cost for the year ending March 31, 2005.<\/p>\n
Activity center Traceable Number of Events
\n(Cost driver) costs Royal Nova Total
\nRs.
\nSoldering (Number of solder joints)
\nShipments (Number of shipments)
\nQuality control (Number of inspections)
\nPurchase orders (Number of orders)
\nMachine power (Machine hours)
\nMachine setups (Number of setups)
\nTotal Traceable costs 9,42,000
\n8,60,000
\n12,40,000
\n9,50,400
\n57,600<\/p>\n
7,50,000
\n48,00,000 3,85,000
\n3,800
\n21,300
\n1,09,980
\n16,000
\n14,000 11,85,000
\n16,200
\n56,200
\n80,100
\n1,76,000
\n16,000 15,70,000
\n20,000
\n77,500
\n1,90,080
\n1,92,000
\n30,000
\nRequired :<\/p>\n
(i) Prepare a Statement showing allocation of manufacturing overheads using the principles of activity\u2013based costing.
\n(ii) Prepare a Statement showing product cost and profitability using activity\u2013based costing
\n(iii) Should ABC Ltd. continue to emphasize the Royal model and phase out the Nova model? Discuss.
\n4+4+2=10 (0)
\n(b) Discuss the essentials of a good Cost\u00a0Accounting\u00a0system. 4 (0)
\n(c) Discuss ABC analysis as a technique of inventory control. 4 (0)
\n2. From the following Information for the month ending October, 2005, prepare Process Cost accounts for Process III. Use First\u2013in\u2013first\u2013out (FIFO) method to value equivalent production.<\/p>\n
Direct materials added in process III (Opening WIP)
\nTransfer from Process II
\nTransferred to Process IV
\nClosing stock of Process III
\nUnits scrapped
\nDirect material added in Process III
\nDirect wages
\nProduction Overheads 2,000 units at Rs. 25,750
\n53,000 units at Rs. 4,11,500
\n48,000 units
\n5,000 units
\n2,000 units
\nRs. 1,97,600
\nRs. 97,600
\nRs. 48,800<\/p>\n
Opening
\nStock Closing
\nStock Scrap
\nMaterials
\nLabour
\nOverheads 80%
\n60%
\n60% 70%
\n50%
\n50% 100%
\n70%
\n70%
\nThe normal loss in the process was 5% of production and scrap was sold at Rs. 3 per unit. 14 (0)
\n3. (a) Discuss the circumstances under which a Cost Audit is ordered and the purpose of Cost Audit. 4 (0)
\n(b) The following is the Trading and Profit & Loss Account of Omega Limited:
\nDr. Cr.
\nParticulars Rs. Particulars Rs.
\nTo Materials consumed
\nTo Direct wages
\nTo Production Overheads
\nTo Administration Overheads
\nTo Selling and Distribution Overheads
\nTo Preliminary Expenses written off
\nTo Goodwill written off
\nTo Fines
\nTo\u00a0Interest on Mortgage
\nTo Loss on Sale of machine
\nTo Taxation
\nTo Net Profit for the year
\n23,01,000
\n12,05,750
\n6,92,250
\n3,10,375
\n3,68,875
\n22,750
\n45,500
\n3,250
\n13,000
\n16,250
\n1,95,000
\n3,83,500
\nBy Sales (30,000 units)
\nBy Finished goods stock(1,000 units)
\nBy Work\u2013in\u2013progress :
\nMaterials55,250
\nWages26,000
\nProduction Overheads16,250
\nBy Dividends received
\nBy Interest on\u00a0bank\u00a0deposits 48,75,000
\n1,30,000<\/p>\n
97,500
\n3,90,000
\n65,000
\n55,57,500 55,57,500
\nOmega Limited manufactures a standard unit.
\nThe Cost\u00a0Accounting\u00a0records of Omega Ltd. show the following :<\/p>\n
(i) Production overheads have been charged to work\u2013in\u2013progress at 20% on Prime cost.
\n(ii) Administration Overheads have been recovered at Rs. 9.75 per finished Unit
\n(iii) Selling & distribution Overheads have been recovered at Rs. 13 per Unit sold.
\n(iv) The Under-or Over\u2013absorption of Overheads has not been transferred to costing P\/L A\/c.
\nRequired :<\/p>\n
(i) Prepare a proforma Costing Profit & Loss account, indicating net profit.
\n(ii) Prepare Control accounts for production overheads, administration Overheads and selling & distribution Overheads.
\n(iii) Prepare a statement reconciling the profit disclosed by cost records with that shown inFinancial accounts.
\n3+3+4=10 (0)
\n4. (a) A Re\u2013roller produced 400 metric tons of M.S. bars spending Rs. 36,00,000 towards materials and Rs. 6,20,000 towards rolling charges. Ten percent of the output was found to be defective, which had to be sold at 10% less than the price for good production. If the sales realization should give the firm an Overall profit of 12.5% on cost, find the selling price metric ton of both the categories of bars. The scrap arising during the rolling process fetched a realization of Rs. 60,000. 6 (0)
\n(b) The existing Incentive system of Alpha Limited is as under :
\nNormal working week<\/p>\n
Rate of Payment<\/p>\n
Average output per operator for 49-hours week i.e. including 3 late shifts. 5days of 8 hours each plus 3 late shifts of 3 hours each
\nDay work : Rs. 160 per hour
\nLate shift : Rs. 225 per hour<\/p>\n
120 articles
\nIn order to Increase output and eliminate Overtime, it was decided to switch on to a system of payment by results. The following Information is obtained :
\nTime\u2013rate (as usual)
\nBasic time allowed for 15 articles
\nPiece\u2013work rate
\nPremium Bonus :
\n:
\n:
\n: Rs. 160 per hour
\n5 hours
\nAdd 20% to basic piece\u2013rate
\nAdd 50% to time.
\nRequired :
\n(i) Prepare a Statement showing hours worked, weekly earnings, number of articles produced and labour cost per article for one operator under the following systems :
\n(a) Existing time\u2013rate
\n(b) Straight piece\u2013work
\n(c) Rowan system
\n(d) Halsey premium system
\nAssume that 135 articles are produced in a 40\u2013hour week under straight piece work, Rowan Premium system, and Halsey premium system above and worker earns half the time saved under Halsey premium system. 2×4=8 (0)
\n5. From the details furnished below you are required to Compute a comprehensive machine-hour rate :
\nOriginal purchase price of the machine
\n(subject to depreciation at 10% per annum on original cost)
\nNormal working hours for the month
\n(The machine works to only 75% of capacity)
\nWages of Machine man
\nWages for a Helper (Machine attendant)
\nPower cost for the month for the time worked
\nSupervision charges apportioned for the
\nmachine centre for the month
\nElectricity & Lighting for the month
\nRepairs & maintenance (machine) including
\nConsumable stores per month
\nRs. 3,24,000<\/p>\n
200 hours
\nRs. 125 per day (of 8 hours)
\nRS. 75 per day (of 8 hours)
\nRs. 15,000<\/p>\n
Rs. 3,000
\nRs. 7,500<\/p>\n
Rs. 17,500
\nInsurance of Plant & Building (apportioned) for the year
\nOther general expenses per annum Rs. 16,250
\nRs. 27,500
\nThe workers are paid a fixed Dearness allowance of Rs. 1,5755 per month. Production bonus payable to workers in terms of an award is equal to 33.33% of basic wages and dearness allowance. Add 10% of the basic wage and dearness allowance against leave wages and holidays with pay to arrive at a comprehensive labour\u2013wage for debit to production. 14 (0)
\n6. The following are the Balance Sheets of Gama Limited for the year ending March 31, 2004 and March 31, 2005 :
\nBalance Sheet as on March, 31
\n2004
\nRs. 2005
\nRs.
\nCapital and Liabilities
\nShare capital
\nGeneral Reserves
\nCapital Reserve (Profit on Sale of investment)
\nProfit & Loss Account
\n15% Debentures
\nAccrued Expenses
\nCreditors
\nProvision for Dividends
\nProvision for Taxation
\n6,75,000
\n2,25,000
\n\u2014
\n1,12,500
\n3,37,500
\n11,250
\n1,80,000
\n33,750
\n78,750
\n7,87,500
\n2,81,250
\n11,250
\n2,25,000
\n2,25,000
\n13,500
\n2,81,250
\n38,250
\n85,500
\nTotal 16,53,750 19,48,500
\nAssets
\nFixed Assets
\nLess : Accumulated depreciation
\nNet Fixed Assets
\nLong\u2013term Investments (at cost)
\nStock (at cost)
\nDebtors (net of provision for doubtful debts
\nof Rs. 45,000 and Rs. 56,250 respectively for
\n2004 and 2005 respectively)
\nBills receivables
\nPrepaid Expenses
\nMiscellaneous Expenditure
\n11,25,000
\n2,25,000
\n9,00,000
\n2,02,500
\n2,25,000<\/p>\n
2,53,125
\n45,000
\n11,250
\n16,875
\n13,50,000
\n2,81,250
\n10,68,750
\n2,02,500
\n3,03,750<\/p>\n
2,75,625
\n73,125
\n13,500
\n11,250
\nTotal 16,53,750 19,48,500
\nAdditional Information :<\/p>\n
(i) During the year 2004\u201305, fixed assets with a net book value of Rs. 1,250 (accumulated depreciation, Rs. 33,750) was sold for Rs. 9,000.
\n(ii) During the year 2004\u201305, Investments costing Rs. 90,000 were sold, and also Investments costing Rs. 90,000 were purchased.
\n(iii) Debentures were retired at a Premium of 10%
\n(iv) Tax of Rs. 61,875 was paid for 2003\u201304.
\n(v) During the year 2004\u201305, bad debts of Rs. 15,750 were written off against the provision for Doubtful Debt account
\n(vi) The proposed dividend for 2003\u201304 was paid in 2004\u201305.
\nRequired :
\nPrepare a Funds Flow Statement (Statement of changes in Financial Position on working capital basis) for the year ended March 31, 2005.<\/p>\n
16 (0)
\n7. Using the following data, complete the Balance Sheet given below :
\nGross Profits
\nShareholders Funds
\nGross Profit margin
\nCredit sales to Total sales
\nTotal Assets turnover
\nInventory turnover
\nAverage collection period (a 360 days year)
\nCurrent ratio
\nLong-term Debt of Equity Rs. 54,000
\nRs. 6,00,000
\n20%
\n80%
\n0.3 times
\n4 times
\n20 days
\n1.8
\n40%
\nBalance Sheet<\/p>\n
Creditors
\nLong-term debt
\nShareholders funds ……..
\n……..
\n…….. Cash
\nDebtors
\nInventory
\nFixed assets ……..
\n……..
\n……..<\/p>\n
12 (0)
\n8. MNP Limited is thinking of replacing its existing machine by a machine by a new machine which would cost Rs. 60 lakhs. The company\u2018s current production is 80,000 units, and is expected to Increase to 1,00,000 units, if the new machine is bought. The selling price of the product would remain unchanged at Rs. 200 per unit. The following is the cost of producing one unit of product using both the existing and new machine:
\nExisting Machine
\n(80,000 units) New Machine
\n(1,00,000 units) Unit cost (Rs.)
\nDifference
\nMaterials
\nWages & salaries
\nSupervision
\nRepairs and Maintenance
\nPower and Fuel
\nDepreciation
\nAllocated Corporate Overheads 75.0
\n51.25
\n20.0
\n11.25
\n15.50
\n0.25
\n10.0 63.75
\n37.50
\n25.0
\n7.50
\n14.25
\n5.0
\n12.50 (11.25)
\n(13.75)
\n5.0
\n(3.75)
\n(1.25)
\n4.75
\n2.50
\n183.25 165.50 17.75
\nThe existing machine has an accounting book value of Rs. 1,00,000, and it has been fully depreciated for tax purpose. It is estimated that machine will be useful for 5 years. The supplier of the new machine has offered to accept the old machine for Rs. 2,50,000. However, the market price of old machine today is Rs. 1,50,000 and it is expected to be Rs. 35,000 after 5 year. The new machine has a life of 5 years and a salvage value of Rs. 2,50,000 at the end of its economic life. Assume corporate Income\u2013tax rate at 40% and depreciation is charged on straight line basis for Income-tax purposes. Further assume that book profit is treated as ordinary income for tax purpose. The opportunity cost of capital of the company is 15%.
\nRequired :<\/p>\n
(i) Estimate net present value of the replacement decision.
\n(ii) Estimate the internal rate of return of the replacement decision.
\n(iii) Should Company go ahead with the replacement decision? Suggest
\nYear 1 2 3 4 5
\nPVIF0.15.t 0.8696 0.7561 0.6575 0.5718 0.4972
\nPVIF0.20.t 0.8333 0.6944 0.5787 0.4823 0.4019
\nPVIF0.25.t 0.80 0.64 0.512 0.4096 0.3277
\nPVIF0.30.t 0.7692 0.5917 0.4552 0.3501 0.2693
\nPVIF0.35.t 0.7407 0.5487 0.4064 0.3011 0.2230
\n8+3+1=12 (0)
\n9. (a) A company needs Rs. 31,25,000 for the construction of new plant. The following three plans are feasible :
\n(I) The Company may issue 3,12,500 equity shares at Rs. 10 per share.
\n(II) The company may issue 1,56,250 ordinary equity shares at Rs. 10 per share and 15,625 debentures of Rs. 100 denomination bearing a 8% rate of interest.
\n(III) The company may issue 1,56,250 equity shares at Rs. 10 per share and 15,625 preference shares at Rs. 100 per share bearing a 8% rate of dividend.
\n(i) If the Company\u2019s earnings before interest and taxes are Rs. 62,500, Rs. 1,25,000, Rs. 2,50,000, Rs. 3,75,000 and Rs. 6,25,000, what are the earnings per share under each of three financial plans? Assume a Corporate Income\u2013tax rate of 40%.
\n(ii) Which alternative would you recommend and why?
\n(iii) Determine the EBIT-EPS indifference points by formulae between Financing Plan I and Plan II and Plan I and Plan III.
\n6+1+3=10 (0)
\n(b) Discuss Miller\u2013Orr Cash Management model. 2 (0)<\/p>\n","protected":false},"excerpt":{"rendered":"
CA PE II Question Papers Group\u00a0II Cost\u00a0Accounting and Financial Management November 2005 This\u00a0Paper\u00a0has 14 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\u00a0in English\u00a0except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. If a candidate who has … 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\/24592"}],"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=24592"}],"version-history":[{"count":0,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24592\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=24592"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=24592"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=24592"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}