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CA IPCC : Sample / Mock Test Paper - COST ACCOUNTING & FINANCIAL MANAGEMENT 2011

6 pages, 25 questions, 3 questions with responses, 3 total responses,

CA IPCC
Tilak Vidyalaya Higher Secondary School (TVHSS), Kallidaikurichi

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Paper 3: COST ACCOUNTING & Financial Management All questions are compulsory. Working note should form part of the answer wherever appropriate, suitable assumptions should be made Question 1 (5 x 2 = 10 Marks) Answer any five of the following: (i) A ltd. Maintains margin of safety of 37.5% with an overall contribution to sales ratio of 40%. Its fixed costs amount to Rs. 5 lakhs. Calculate the following: (a) Break-even sales (b) Total variable cost (c) New margin of safety if the sales volume is increased by 7 %. (ii) Compute notional profit and profit to be taken to contracts P & L A/C on a contract (which has been 80% completed) from the following particulars: Rs. Total expenditure to date 1,70,000 Estimated further expenditure to complete the contract (including contingencies) 34,000 Contract price 3,06,000 Work certified 2,00,000 Work not certified 17,000 Cash Received 1,63,200 (iii) When material prices fluctuate widely, what is the most suitable method (from amongst the Weighted Average, LIFO or FIFO) for pricing material? (iv) Department L production overheads are abs orbed using a direct labour hour rate. Budgeted production overheads for the department were Rs. 480,000 and the actual labour hours were 100,000. Actual production overheads amounted to Rs. 516,000. Based on the above data, and assuming that the productio n overheads were over absorbed by Rs. 24,000, what was the overhead absorption rate per labour hour? (v) In Akanksha ltd raw material passes through four processes A, B,C and D and the output of each process is the input of the subsequent process. The loss in the four processes A,B,Cand D are respectively 25%, 20%, 20% and 16 % of the Input. If the end product at the end of process D is 40,000 kgs, what is the quantity of raw materials required along with its cost to be fed at the beginning of Process A when the cost of the same is Rs.5 per kg. (vi) Distinguish between 'Commi tted Fixed Costs' and 'Discretionary Fixed Costs'. 9 Question 2 15 Marks) (a) ( 9 + 6= Vivek Elementary School has a total of 150 stude nts consisting of 5 sections with 30 students per section. The school plans for a picnic around the city during the week -end to places such as the zoo, the Niko Park, the planetarium etc. A private transport operator has come forward to lease out the buses for taking the students. Each bus will have a maximum capacity of 50 (excluding 2 seats reserved for the teachers accompanying the students). The school will employ two teachers for each bus, paying them an allowance of Rs. 50 per teacher. It will also lease out the required number of buses. The following are the other cost estimates: Cost per student Breakfast Rs. 5 Lunch 10 Tea 3 Entrance fee at zoo 2 Rent Rs. 650 per bus. Special permit fee Rs. 50 per bus. Block entrance fee at the planeta rium Rs. 250. Prizes to students for games Rs. 250. No cost are incurred in respect of the accompanying teachers (except the allowance of Rs. 50 per teacher). You are required to prepare: (i) A flexible budget estimating the total cost for the levels of 30 , 60, 90,120 and 150 students. Each item of cost is to be indicated separately. (ii) Compare the average cost per student at these levels. (iii) What will be your conclusions regarding the break -been level of student if the school proposes to collect Rs. 45 per student? (b) The standard and actual figures of a firm are as under: Standard time for the job 1,000 hours Standard rate per hour Re. 0.50 Actual time taken 900 hours Actual wages paid Rs. 360 Compute (i) Rate variance (ii) Efficiency variance (iii) Total labour cost variance Question 3 16 Marks) (2 x 8 = 3 (a) In a factory, the basic wage rate is Rs. 10 per hour an d overtime rates are as follows: 10 Before and after normal working hours basic wage rate : 175% of Sundays and holidays basic wage rate : 225% of During the previous year, the following hours were worked : Normal time hours : 1,00,000 Overtime before and after working hours hours : 20,000 Overtime on Sundays and holidays hours : 5,000 Total hours : 1,25,000 The following hours have been worked on job Z : Normal : 1000 hours Overtime before and after working hrs. 100 hours Sundays and holidays 25 hours : : Total : 1125 hours You are required to calculate the labour cost chargeable to jobs Z and overhead in each of the following instances: (i) Where overtime is worked regularly througho ut the year as a policy due to the labour shortage. (ii) Where overtime is worked irregularly to meet the re quirements of production. (iii) Where overtime is worked at the request of the customer to expedite the job. (b) A transport company has 20 vehicl es, which capacities are as follows: No. of Vehicles Capacity per vehicle 5 9 tonne 6 12 tonne 7 15 tonne 2 20 tonne The company provides the goods transport service between stations A to station B . Distance between these stations is 200 kilo metres. Each vehicle makes one round trip per day an average. Vehicles are loaded with an average of 90 per cent of capacity at the time of departure from station A to station B and at the time of return back loaded with 70 per cent of capacity. 10 per cent of vehicles are laid up for repairs every day. The following informations are related to the month of October, 2008: Salary of Transport Manager Rs. 30,000 11 Salary of 30 drivers Rs. 4,000 each driver Wages of 25 Helpers Rs. 2,000 each helper Wages of 20 Labourers Rs. 1,500 each labourer Consumable stores Rs. 45,000 Insurance (Annual) Rs. 24,000 Road Licence (Annual) Rs. 60,000 Cost of Diesel per litre Rs. 35 Kilometres run per litre each vehicle 5 Km. Lubricant, Oil etc. Rs. 23,500 Cost of replacement of Tyres, Tubes, other parts etc. Rs. 1,25,000 Garage rent (Annual) Rs. 90,000 Transport Technical Service Charges Rs. 10,000 Electricity and Gas charges Rs. 5,000 Depreciation of vehicles Rs. 2,00,000 There is a workshop attached to tr ansport department which repairs these vehicles and other vehicles also. 40 per cent of transport manager s salary is debited to the workshop. The transport department is charged Rs. 28,000 for the service rendered by the workshop during October, 2008. Du ring the month of October, 2008 operation was 25 days. You are required: (i) Calculate per ton-km operating cost. (ii) Find out the freight to be charged per ton-km, if the company earned a profit of 25 per cent on freight. Question 4 (3 x 3 = 9 Marks) Answer any three of the following: (i) What is cost plus contract? State its advantages. (ii) Discuss the reasons for disagreement of profits as per Cost Accounting and Financial Accounting (iii) A Company manufactures a special product whi ch requires a component Alpha . The following particulars are collected for the year 2008: (i) Annual demand of Alpha : 8,000 units (ii) Cost of placing an order : Rs. 200 per order (iii) Cost per unit of Alpha : Rs. 400 (iv) Carrying cost % p.a. : 20% The company has been offered a quantity discount of 4% on the purchase of Alpha , provided the order size is 4,000 components at a time. Required: (a) Compute the economic order quantity. (b) Advise whether the quantity discount offer can be accepted . (iv) What is 'Defective Work'? How it is accounted for in cost accounts? 12 Part B: FINANCIAL MANAGEMENT Question 1 All questions are compulsory. Working notes should form part of the answer. Answer the following: (i) Explain the concept of Wealth Maximisation. (ii) Discuss the concept of Venture Capital Financing. (iii) How is Interest Coverage Ratio calculated? What is its significance? (iv) Discuss the term Global Depository Receipts (GDRs). (v) Explain the advantages of Multiple Internal Rate of Return. (5 2 = 10 Marks) Question 2 Sansakar Limited has furnished the following cost data relating to the year ending of 31st March, 2009. Rs. (in Lakhs) 450 150 30 60 60 50 Sales Material consumed Direct wages Factory overheads (100% variable) Office and Administrative overheads (100% variable) Selling overheads The company wants to make a forecast of working capital needed for the next year and anticipates that: Sales will go up by 100%; Selling expenses will be Rs. 150 lakhs; Stock holdings for the next year will be - Raw material for two and half months, Work -inprogress for one month, Finished goods for half month and Book debts for one and half months; and Lags in payment will be of 3 months for creditors, 1 month for wages and half month f or Factory, Office and Administrative and Selling overheads. You are required to: (i) Prepare statement showing working capital requirements for next year, and (ii) Calculate maximum permissible bank finance as per Tandon Committee guidelines assuming that core current assets of the firm are estimated to be Rs. 30 lakhs . (8 + 8 = 16 Marks) Question 3 (a) The following details of Maharishi Limited for the year ended 31st March, 2009 are given below: Operating leverage 1.4 Combined leverage 2.8 Fixed Cost (excluding interest) Rs. 2.04 lakhs 13 Sales Rs. 30.00 lakhs 12% Debentures of Rs. 100 each Rs. 21.25 lakhs Equity Share Capital of Rs. 10 each Rs. 17.00 lakhs Income tax rate 30 per cent You are required to: (i) Calculate financial leverage (ii) Calculate P/V ratio and Earnings per Share (EPS) (iii) If the company belongs to an industry, whose assets turnover is 1.5, does it have a high or low assets leverage? (iv) At what level of sales the Earning before Tax (EBT) of the company will be equal to zero? (b) Cesa Limited is planning its capital investment programme for next year. It has five projects all of which give a positive NPV at the company cut -off rate of 15 percent, the investment outflows and present values being as follows: Project A B C D E Investment Rs. 000 (50) (40) (25) (30) (35) NPV @ 15% Rs. 000 15.4 18.7 10.1 11.2 19.3 The company is limited to a capital spending of Rs. 1,20,000. You are required to optimise the returns from a package of projects within the capital spending limit. The projects are independent of each other and are divisible (i.e., part -project is possible). (8 + 7 = 15 Marks) Question 4 Answer the following: (a) Distinguish between Cash Flow and Funds Flow statement. (b) Sasha Limited sells 40,000 optical mouses evenly throughout the year. The cost of carrying one unit in inventory for one year is Rs. 16, and the purchase order cost per order is Rs. 64. What is the economic order quantity? (c) Camera Limited maintains a separate account for cash disbursement. Total disbursements are Rs. 10,50,000 per month. Administrative and transaction cost of transferring cash to disbursement account is Rs. 50 per transfer. Marketable securities yield is 15% per annum. Determine the optimum cash balance according to William J Baumol model. (3 3 = 9 Marks) 14

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Chartered Accountancy (ICAI India) : Integrated Professional Competence Course (IPCC) - Model / Mock Test Paper for Cost Accounting & Financial Management Group I Paper 3

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