<\/p>\n
<\/p>\n
<\/p>\n
This Paper has 26 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 are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who 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) Discuss the essential requisites for the installation of uniform costing system. 3 (0)
\n(b) Discuss the treatment of spoilage and defectives in cost accounting. 3 (0)
\n(c) A B C D Co. Ltd. produces and sells four products A, B, C and D. These products are similar and usually produced in production runs of 10 units and sold in a batch of 5 units. The production details of these products are as follows :
\nProducts
\nProduction (units)
\nCost per unit:
\nDirect material (Rs.)
\nDirect labour (Rs.)
\nMachine hour rate (per unit) A
\n100<\/p>\n
30
\n25
\n5 B
\n110<\/p>\n
40
\n30
\n4 C
\n120<\/p>\n
35
\n30
\n3 D
\n150<\/p>\n
45
\n40
\n4
\nThe production overheads during the period are as follows :<\/p>\n
Factory works expenses
\nStores receiving costs
\nMachine set up costs
\nCost relating to quality control
\nMaterial handling and dispatch Rs.
\n22,500
\n8,100
\n12,200
\n4,600
\n9,600
\n57,000
\nThe cost drivers for these overheads are detailed below :<\/p>\n
Cost
\nFactory works expenses
\nStores receiving costs
\nMachine set up costs
\nCost relating to quality control
\nMaterial handling and dispatch Cost drivers
\nMachine hours
\nRequisitions raised
\nNo. of production runs
\nNo. of production runs
\nNo. of orders executed
\nThe number of requisitions raised on the stores was 25 for each product and number of orders executed was 96, each order was in a batch of 05 units.
\nRequired:<\/p>\n
(i) Total cost of each product assuming the absorption of overhead on machine hour basis;
\n(ii) Total cost of each product assuming the absorption of overhead by using activity base costing; and
\n(iii) Show the differences between (i) and (ii) and comments.
\n4+4+4=12 (0)
\n2. (a) Distinguish between : 3+2=5
\n(i) Explicit and Implicit cost (0)
\n(ii) Job costing and Contract costing (0)
\n(b) An engine manufacturing company has two production departments : (i) Snow mobile engine and (ii) Boat engine and two service departments: (i) Maintenance and (ii) Factory office. Budgeted cost data and relevant cost drivers are as follows:
\nDepartments costs
\nSnow mobile engine
\nBoat engine
\nFactory office
\nMaintenance
\nCost drivers : Rs.
\n6,00,000
\n17,00,000
\n3,00,000
\n2,40,000
\nFactory office department :
\nSnow mobile engine department
\nBoat engine department
\nMaintenance department No. of employees
\n1,080
\n270
\n150
\n1,500<\/p>\n
Maintenance department :
\nSnow mobile engine department
\nBoat engine department
\nMaintenance department
\nNo. of work orders
\n570
\n190
\n40
\n800
\nRequired<\/p>\n
(i) Compute the cost driver allocation percentage and then use these percentage to allocate the service department costs by using direct method.
\n(ii) Compute the cost driver allocation percentage and then use these percentage to allocate the service department costs by using non\u2013reciprocal method\/step method.
\n2+3=5 (0)
\n(c) SK Enterprise manufactures a special product “ZE”. The following particulars were collected for the year 2004 :
\nAnnual consumption
\nCost per unit
\nOrdering cost
\nInventory carrying cost
\nNormal lead time
\nSafety stock 12,000 units (360 days)
\nRe. 1
\nRs. 12 per order
\n24%
\n15 days
\n30 days consumption
\nRequired:<\/p>\n
(i) Re \u2013 order quantity.
\n(ii) Re \u2013 order level.
\n(iii) What should be the inventory level (ideally) immediately before the material order is received?
\n2+1+1=4 (0)
\n3. (a) Discuss the area of activity in respect of which cost accounting records are to be maintained. 4 (0)
\n(b) In order to develop tourism. ABCL airline has been given permit to operate three flights in a week between X and Y cities (both side). The airline operates a single aircraft of 160 seats capacity. The normal occupancy is estimated at 60% through out the year of 52 weeks. The one way fare is Rs. 7, 200.
\nThe cost of operation of flights are :
\nFuel cost (variable)
\nFood served on board on non-chargeable basis
\nCommission<\/p>\n
Fixed cost :
\nAircraft lease
\nLanding charges Rs. 96,000 per flight
\nRs. 125 per passenger
\n5% of fare applicable for all booking<\/p>\n
Rs. 3,50,000 per flight
\nRs. 72,000 per flight
\nRequired:<\/p>\n
(i) Calculate the net operating income per flight.
\n(ii) The airline expects that its occupancy will increase to 108 passengers per flight if the fare is reduced to Rs. 6,720. Advise whether this proposal should be implemented or not.
\n3+2=5 (0)
\n(c) A manufacturing unit has purchased and installed a new machine of Rs. 12,70,000 to its fleet of 7 existing machines. The new machine has an estimated life of 12 years and is expected to realise Rs. 70,000 as scrap at the end of its working life. Other relevant data are as follows :
\n(i) Budgeted working hours are 2,592 based on 8 hours per day for 324 days. This includes 300 hours for plant maintenance and 92 hours for setting up of plant.
\n(ii) Estimated cost of maintenance of the machine is Rs. 25,000 (p.a.)
\n(iii) The machine require a special chemical solution, which is replaced at the end of each week (6 days in a week) at a cost of Rs. 400 each time.
\n(iv) Four operators control operation of 8 machines and the average wages per person amounts to Rs. 420 per week plus 15% fringe benefits.
\n(v) Electricity used by the machine during the production is 16 units per hour at a cost of Rs. 3 per unit. No current is taken during maintenance and setting up.
\n(vi) Departmental and general works overhead allocated to the operation during last year was Rs. 50,000. During the current year it is estimated to increase 10% of this amount.
\nCalculate machine hour rate, if (a) setting up time is unproductive; (b) setting up time is productive. 2+3=5 (0)
\n4. (a) Discuss the treatment of research and development expenditures in cost accounting. 3 (0)
\n(b) Explain the area of cost reduction at product design stage. 3 (0)
\n(c) The following figures have been extracted from the cost records of a manufacturing unit :<\/p>\n
Stores : Opening balance
\nPurchases of material
\nTransfer from work\u2013in\u2013progress
\nIssues to work\u2013in\u2013progress
\nIssues to repair and maintenance
\nDeficiencies found in stock taking
\nWork\u2013in\u2013progress : Opening balance
\nDirect wages applied
\nOverheads applied
\nClosing balance of W.I.P. Rs.
\n32,000
\n1,58,000
\n80,000
\n1,60,000
\n20,000
\n6,000
\n60,000
\n65,000
\n2,40,000
\n45,000
\nFinish Products : Entire output is sold at a profit of 10% on actual cost from work \u2013 in \u2013 progress. Wages incurred Rs. 70,000, overhead incurred Rs. 2,50,000.
\nItems not included in cost records : Income from investment Rs. 10,000, Loss on sale of capital assets Rs. 20,000.
\nDraw up<\/p>\n
Store Control account, Work\u2013in\u2013progress Control account, Costing Profit and Loss account, Profit and Loss account and Reconciliation statement. 2+2+1+1+2=8 (0)
\n5. (a) Explain :- 2+3=5
\n(i) Single and multiple overhead rate (0)
\n(ii) Sunk cost. (0)
\n(b) A company produces two joint product X and Y, from the same basic materials. The processing is completed in three departments.
\nMaterials are mixed in department I. At the end of this process X and Y get separated. After separation X is completed in the department II and Y is finished in department III. During a period 2,00,000 kgs of raw material were processed in department I, at a total cost of Rs. 8,75,000, and the resultant 60% becomes X and 30% becomes Y and 10% normally lost in processing.
\nIn department II 1\/6 of the quantity received from department I is lost in processing. X is further processed in department II at a cost of Rs. 1,80,000.
\nIn department III further new material added to the material received from department I and weight mixture is doubled, there is no quantity loss in the department and further processing cost (with material cost) is Rs. 1,50,000.
\nThe details of sales during the year :<\/p>\n
Quantity sold (kgs)
\nSales price per kg (Rs.) Product X
\n90,000
\n10 Product Y
\n1,15,000
\n4
\nThere were no opening stocks. If these products sold at split\u2013off\u2013point, the selling price of X and Y would be Rs. 8 and Rs. 4 per kg respectively.
\nRequired :<\/p>\n
(i) Prepare a statement showing the apportionment of joint cost to X and Y in proportion of sales value at split off point.
\n(ii) Prepare a statement showing the cost per kg of each product indicating joint cost, processing cost and total cost separately.
\n(iii) Prepare a statement showing the product wise profit for the year.
\n(iv) On the basis of profits before and after further processing of product X and Y, give your comment that products should be further processed or not.
\n2+3+2+2=9 (0)
\n6. (a) XYZ Co. Ltd. is a pipe manufacturing company. Its production cycle indicates that materials, are introduced in the beginning of the production cycle; wages and overhead accrue evenly through out the period of the cycle. Wages are paid in the next month following the month of accrual. Work in process includes full units of raw materials used in the beginning of the production process and 50% of wages and overheads are supposed to be conversion costs. Details of production process and the components of working capital are as follows :
\nProduction of pipes
\nDuration of the production cycle
\nRaw material inventory held
\nFinished goods inventory held for
\nCredit allowed by creditors
\nCredit given to debtors
\nCost price of raw materials
\nDirect wages
\nOverheads
\nSelling price of finished pipes 12,00,000 units
\nOne month
\nOne month consumption
\nTwo months
\nOne month
\nTwo months
\nRs. 60 per unit
\nRs. 10 per unit
\nRs. 20 per unit
\nRs. 100 per unit
\nRequired to calculate :<\/p>\n
(i) The amount of working capital required for the company.
\n(ii) Its maximum permissible bank finance under all the three methods of lending norms as suggested by the Tondon Committee, assuming the value of crore current assets : Rs. 1,00,00,000.
\n5+5=10 (0)
\n(b) D Ltd. is foreseeing a growth rate of 12% per annum in the next two years. The growth rate is likely to be 10% for the third and fourth year. After that the growth rate is expected to stabilise at 8% per annum. If the last dividend was Rs. 1.50 per share and the investor\u2019s required rate of return is 16%, determine the current value of equity share of the company.
\nThe P.V. factors at 16%
\nYear
\nP.V. factor 1
\n.862 2
\n.743 3
\n.641 4
\n.552
\n6 (0)
\n7. (a) “Decision tree analysis is helpful in managerial decisions.”Explain with an example. 5 (0)
\n(b) The R & G Company has following capital structure at 31st March, 2004, which is considered to be optimum :<\/p>\n
13% debenture
\n11% preference share capital
\nEquity share capital (2,00,000 shares) Rs.
\n3,60,000
\n1,20,000
\n19,20,000
\nThe company\u2018s share has a current market price of Rs. 27.75 per share. The expected dividend per share in next year isa 50 percent of the 2004 EPS. The EPS of last 10 years is as follows. The past trends are expected to continue :
\nYear
\nEPS (Rs.) 1995
\n1.00 1996
\n1.120 1997
\n1.254 1998
\n1.404 1999
\n1.574 2000
\n1.762 2001
\n1.974 2002
\n2.211 2003
\n2.476 2004
\n2.773
\nThe company can issue 14 percent new debenture. The company\u2018s debenture is currently selling at Rs. 98. The new preference issue can be sold at a net price of Rs. 9.80, paying a dividend of Rs. 1.20 per share. The company\u2019s marginal tax rate is 50%.
\n(i) Calculate the after tax cost (a) of a new debts and new preference share capital, (b) of ordinary equity, assuming new equity comes from retained earnings.
\n(ii) Calculate the marginal cost of capital.
\n(iii) How much can be spent for capital investment before new ordinary share must be sold? Assuming that retained earning available for next year’s investment are 50% of 2004 earnings.
\n(iv) What will be marginal cost of capital (cost of fund raised in excess of the amount calculated in part (iii) if the company can sell new ordinary shares to net Rs. 20 per share? The cost of debt and of preference capital is constant.
\n2+1+2+2=7 (0)
\n8. (a) Explain the relevance of time value of money in financial decisions. 2 (0)
\n(b) Discuss the eligibility criteria for issue of commercial paper. 3 (0)
\n(c) The following is the income statement of XYZ Company for the year 2004 :<\/p>\n
Sales
\nAdd. : Equity in ABC Company’s earning<\/p>\n
(Rs.)
\n1,62,700
\n6,000
\n1,68,700
\nExpenses :
\nCost of goods sold
\nSalaries
\nDepreciation
\nInsurance
\nResearch and development
\nPatent amortisation
\nInterest
\nBad debts Rs.
\n89,300
\n34,400
\n7,450
\n500
\n1,250
\n900
\n10,650
\n2,050
\nIncome tax :
\nCurrent
\nDeferred
\nTotal expenses
\nNet income
\n6,600
\n1,550<\/p>\n
8,150<\/p>\n
1,54,650
\n14,050
\nAdditional informations are :
\n(i) 70% of gross revenue from sales were on credit.
\n(ii) Merchandise purchases amounting to Rs. 92,000 were on credit.
\n(iii) Salaries payable totalled Rs. 1,600 at the end of year.
\n(iv) Amortisation of premium on bonds payable was Rs. 1,350.
\n(v) No dividends were received from the other company.
\n(vi) XYZ Company declared cash dividend of Rs. 4,000.
\n(vii) Changes in Current Assets and Current Liabilities were as follows :<\/p>\n
Cash
\nMarketable securities
\nAccounts receivable
\nAllowance for bad debt
\nInventory
\nPrepared insurance
\nAccounts payable (for merchandise)
\nSalaries payable
\nDividends payable Increase
\n(Decrease)
\nRs.
\n500
\n1,600
\n(7,150)
\n(1,900)
\n2,700
\n700
\n5,650
\n(2,050)
\n(3,000)
\n7 (0)
\n9. (a) Write notes on : 2+3=5
\n(i) Venture capital financing (0)
\n(ii) Seed capital assistance (0)
\n(b) With the help of the following information complete the Balance Sheet of MNOP Ltd. :
\nEquity share capital
\nThe relevant ratios of the company are as follows :
\nCurrent debt to total debt
\nTotal debt to owner\u2019s equity
\nFixed assets to owner\u2019s equity
\nTotal assets turnover
\nInventory turnover Rs. 1,00,000<\/p>\n
.40
\n.60
\n.60
\n2 Times
\n8 Times
\n7 (0)<\/p>\n","protected":false},"excerpt":{"rendered":"
CA PE II Question Papers Group II Cost Accounting and Financial Management May 2005 This Paper has 26 answerable questions with 0 answered. Total No. of Questions\u2014 9] Time Allowed : 3 Hours Maximum Marks : 100 Answers to questions are to be given only in English except in the cases of … 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\/24595"}],"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=24595"}],"version-history":[{"count":0,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24595\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=24595"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=24595"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=24595"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}