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May 2010 - IPCE - GROUP I - PAPER – 3 - COST ACCOUNTING AND FINANCIAL MANAGEMENT

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- , PCE 1 ;>~ Gro~.II Paper-4 IPCC Cost Accounting And GROUP.P! APER-, Pinancial Management MAY20\0 Co.STACCOUNTING Roll No ,........................ ANDFINANCIALMANAGEMENT Total No. bf Questions-8] [Total No. of Printed Pages--:-15 Time Allowed-3 Hours Maximum Marks-100 4 ., FUN Answers to questions are to be given only in English except in the case of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, his answers in Hindi will not be valued. Answer all questions. Working notes' should form part of the answer. Marks 5x2=10 1. Answer the following: CD What is Cost accounting? Enumerate its important objectives. (ii) Distinguish between Fixed overheads' and Variable overhe~ds. (iii) Re-order quantity ofmaterial 'X' is 5,000 kg.; Maximum level 8,000 kg.; 'Minimum usage 50 kg. per hour; minimum re-order period 4 days; daily working hours in the factory is 8 hours, You are required to calculate the re~order level of material 'X'. (iv) What do you understand by Key factor? Give two examples of it. (v) What are the main advantages of Integrated accounts? 2. SB Constructions Limited has entered into a big contract at an agreed price of Rs. 1,50,00,000 subject to an escalation clause for material and labour- as spent out on the contract and corresponding actuals are as follows:. Standard Actual Material Quantity Rate per tonne Quantity Rate per tonne (tonnes) Rs. (tonnes) Rs. A 3,000 1,000 3,400 1,100 B 2,400 800 2,300 700 C 500 4,000 600 3,900 D 100 30,000 90 31,500 (E&H) FUN p.T.a. '.. . . ~ (2 ) . ". "'....... J... .. "'. ,FUN h. .:. , 'Marks ... w.\fl3UAI~. ... '< Hours Hourly Rate Hours Hourly Rate Rs. Rs. Ll 60,000 15 56,000 18 ~ L2 40,000 30 38,000 35 .. You are required to : (i) Give your analysis of admissible escalation claim and determine the final 4 contract price payable. (ii) Prepare the contract account, if the all expenses other than material and 3 labour related to the contract are Rs. 13,45,000. (iii) Calculate the following variances and verify them: 8 (a) Material cost variance (b) Material price variance (c) Material usage variance Cd) Labour cost variance (e) Labour rate variance (f) Labour efficiency variance. 3. (a) Pharma Limited produces product 'Glucodin' which passes through two processes 8 before it is completed and transferred to finished stock. The, following data relates to March, 2010 : Process- I Process- II Finished Stock Rs. Rs. ' Rs. Opening Stock 1,50,000 1,80,000 4,50,000 Direct materials 3,00,000 3,15,000. Direct Wages 2,24,000 2,25,000 '. Factory overheads 2,10,000 90,000 Closing Stock 74,000 90,000 2,25,000 Inter process profit included in Opening stock NIL 30,000 1,65,000 (E&H) .FUN - . , i- .£., (3 ) FUN Marks Output of process I is transferred to process II at 25 percent profit on the tn;lllsferred price, whereas output of process II is transferred to finished stock at 20 percent on transfer price. Stock in processes are valued at prime cost. Finished stock is valued at the price at which it is received from process II. Sales for the month is Rs. 28,00,000. 4 ., You are required to prepare Process-I alc, Process-II alc, and Finished Stock alc showing the profit element at each stage. (b) A.transport company has been given a 40 kilometre long route to run 5 buses. 8 The cost of each bus is Rs. 6,501000. The buses will make 3.round trips per day carrying on an average 80 percent passengers of their seating capacity. The seating capacity of each bus is 40 passengers. The buses will run on an average 25 days in a month. The other information for the year 2010-11 are given below: Garage rent Rs. 4,000 per month Annual repairs and maintenance Rs. 22,500 each bus Salaries of 5 drivers Rs. 3,000 each per month Wages of 5 conductors Rs. 1,200 each per month Manager's salary Rs. 7,500 per month Road tax, permit fee, etc. Rs. 5,000 for a quarter Office expenses Rs. 2,000 per month Cost of diesel per litre Rs. 33 Kilometre run per litre for each bus 6 kilometres Annual depreciation. 15% of cost Annual Insurance 3% of cost You are required to calculate the bus fare to be charged frome~ch passenger ':. per kilometre, if the company wants to earn a profits of 331f3 percent on taking (total receipts from passengers). . 4. Answer of the following: (i) Following informations are available for the year 2008 and 2009 of PIX 3 Limited: Year 2008 2009 Sales Rs. 32,00,000 Rs. 57,00,000 Profit/(Loss) (Rs. 3,00,000) Rs. 7,00,000 (E&H) FUN P.T.O. . . ".... ~ ( 4 ) FUN Marks Calculate-(a) PN ratio, (b) Total fixed cost, and (c) Sales required to earn a Profit of Rs. 12,00,000. (ii) Explain the treatment of over and under absorption of Overheads in Cost & accounting. (iii) Which is better plan out of Halsey 50 percent bonus scheme and Rowan bonus 3 scheme for an efficient worker? In which situation the worker get same bonus in both schemes? 5. Answer of the following: 5x2=10 (i) What do y~u understand by Capital structure? How does it differ from Financial structure? . (ii) Explain briefly the accounts receivable systems. (iii) Briefly discuss the concept of seed capital assistance. (iv) Enumerate the various forms of bank credit in financing working capital of a business organisation. (v) Ascertain the compound value and compound interest of an amount of Rs. 75,000 at 8 percent compounded semiannually for 5 years. 6. The following figures and ratios are related to a company: (i) Sales for the year (all credit) Rs. 30,00,000 (ii) Gross Profit ratio 25 percent 1.5 (iii) Fixed assets turnover (basis on cost of goods sold) (iv) Stock turnover (basis on cost of goods sold) 6 (v) Liquid ratio 1 : 1 (vi) Current ratio 1.5 : 1 (vii) Debtors collection period 2 months (viii) Reserve and surplus to Share capital 0.6 : 1 0.5 (ix) Capital gearing ratio (x) Fixed assets to net worth 1.20 : 1 (E&H) FUN ; >! ~ (5 ) FUN Marks You are required to prepare: (a) Balance Sheet of the company on the basis of above details. 11 (b) The statement showing Working capital requirement, if the company wants 44 to make a provision for contingencies @ 10 percent of net working ca-pital ., including such provision. 7. (a) The management of P Limited is considering to select a machine out of the 9 two mutually exclusive machines. The company's cost of capital is 12 percent and corporate tax rate for the company is 30 percent. Details of the machines are as follows: Machine-l Machine- II Cost of machine Rs. 10,00,000 Rs. 15,00,000 Expected life 5 years 6 years Annual income before tax and depreciation Rs. 3,45,000 . Rs. 4,55,000 Depreciation is to be charged on straight line basis. You are required to : (i) Calculate the discounted pay-back period, net present value and internal. rate of return for each machine. (ii) Advise the management of P Limited as to which machine they should take up. The present value factors of Re. 1 are as follows: Year 1 2 3 4 5 6 At 12% .893 .7fi)7 .712 .636 .567 .507 At 13% .885 .783 .693 .613 .543 .480 At 14% .877 .769 .675 .592 .519 .456 At 15% .870 .756 .658 .572 .497 .432 At 16% .862 .743 .641 .552 .476 .410 (E&H) FUN P.T.O. ~ I'"-" '.... ~ (6 ) FUN Marks (b) The following details are. forecasted by a company for the purpose of effective 7 utilisation and management of cash: . ~ (i) Estimated sales and manufacturing costs: Year and month Sales Materials Wages Overheads 2010 Rs. Rs. Rs. Rs. April 4,20,000 2,00,000 1,60,000 45,000 May 4,50,000 2,10,000 1,60,000 40,000 June 5,00,000 2,60,000 1,65,000 38,000 July 4,90,000 2,82,000 1,65,000 37,500 August 5,40,000 2,80,000 1,65,000 60,800 September 6,10,000 3,10,000 1,70,000 52,000 (ii) Credit terms: - Sales-20 percent sales are on cash, 50 percent of the credit sales are collected next month and the balance in the following month. - Credit allowed by suppliers is 2 months. - Delay in payment of wages is 1/2 (one-half) month and of overheads is 1 (one) month. (iii) Interest on 12 percent debentures of Rs. 5,00,000 is to be paid half-yearly in June and December. . . (iv) Dividends on investments amounting to Rs. 25,000 are expected to be rece~ved in June, 2010. (v) A new machinery will be installed in June, 2010 at a cost of Rs. 4,00,000 whi~h is payable in 20 monthly instalments from JulYI 2010 onwards. (vi) Advance income-tax to be paid in August, 2010 is Rs. 15,000. (vii) Cash balance on 1st June, 2010 is expected to be Rs. 45,000 and the company wants to keep it at the end of every month around this figure, the excess cash (in multiple of thousand rupees) being put in fixed deposit. (E&H) FUN 1 , .. ~ 7) ( FUN Marks You are required to prepare monthly Cash budget on the basis of above information for four months,beginning from June, 2010. 8. Answer of the following: ~ (i) SK Limited has obtained funds from the following sources, the specific-cost 3' are also given against them: Source of funds Amount Cost of ,Ca"pital Rs. Equity shares 30,00,000 15 percent Preference shares 8,00,000 8 percent Retained earnings 12,00,000 11 percent Debentures 10,00,000 9 percent (before tax) You are required to calculate weighted average cost of capital. Assume that Corporate tax rate is 30 percent. (ii) State the role of a Chief Financial Officer. 3 (iii) Distinguish between Fund Flow Statement and Cash Flow Statement. 3 (E&H) FUN P.T.O. .. .. "--" (8 ) FUN Marks (Hindi Version) t m ~ 11ft&:rTf$jfCfiT~I~ct;~ r'"1'i?I'~fRT 11T'I:Zf~li iI1 ~ ~ ~~ if it ~ %I m Cffi11ft&TT~m fRT 11T'I:Zfli ~ %, ~ fRT if ~ ~ %, ~ m m-rnI err~ fRT if fGit-rp)~ CfiT~iS-i<c.tj;-1 .. ~~mil1~~1 m ~ cwf rc.U.jrul~i(Working Notes) ~ iI1 'qpT I 1. r-1~r<:1r~diI1 ~ ~ : 5x2=10 . . (i) 'ffiTRf ~ ~ i ct;-1 cp:fT %? ~ +jQ\'=I'tur ~ iI1 ";f]11 ~ I ~ ~ ~ ~~ (ii) dY~~~I' YKCld-1~n<:1dYK~~I' if I ~ ~ (iii) ml1ift 'X' qft "Tf: l1f5IT5,000 ~.m. %; 31f~ ~ 8,000 ~.m.; ~ ."3l1~ 50 ~.m. ~ ~; ~ "Tf: W:Tf~4 ~i ct;1~~I~if ~rdrG-18 ~ ~ CfiT<mf ar %I ~ writ 'X' CfiT"Tf: ~ ~ ~ % I (iv) ~ CfJRCI1(Key factor) it 3m cp:fT ~ ~? ~ eft dC\IQ~UI.~ I ~ (v) ~ct;I~d ~ iI1 ~ ~'q cp:fT ? ~ ~ ~ 2. ~.m. ~CFffi:r r<:1r+j~~~ -ail11:RClp:f ml1ift Wi iI1 ~~ if ~1~i~l. CfiT m ~ ~ ~ "[Q:1,50,00,000~. iI1w:f~ 1:R~ -ail1if ~. 3ffi~ d~ClIC\1 ~ ClI«1rClct;Clp:f r1~rC1r~d : 1Jl1r1 cj1«1 rClct; ml1ift : lfBTT .lfBTT (if) . (if) . 31 3,000 1,000 3,400 1,100 q 2,400 800 2,300 700 "B 500 4,000 600 3,900 G: 100 30,000 90 31,500 (E&I (E&H) FUN , ';:' ~ (9) FUN Marks .w:r : -qul m -qul m~~ . ~. Ll 60,000 15 56,000 18 ~ L2 40,000 30 38,000 35 ~ 3Nf8;N % : ~ ~ ~ ~ ~ ~ ~ (i) ~lcnl~ COT rcj~~~ul 3fu: COTRmrur ~I 4 ~ ~ ~ (ii) <ifu: .w:r iI13irdRm :jp:JWffif ~ ~ ~ ~ ~~ 13,45,000~. if, 3 , m~~~1 ~ ~ (Hi) r1I-1r~r~d rcj..:j",ul~' G~ ~ ~~1'-I1 : 8 (31) ~ "ffiTRfrcj..:j",ul CiS{)~ ~ rcj..:jU'"I (~) ~ l1BIT(~) ~ (G) .w:r"ffiTR~f «:f) Wi ~ rcj..:jU'"I CO Wi cnl~~~I~dl rcj..:j",UII '3. (31) ~ r~rli~~ '~~cnlr-51' ~ COTdr'-ll<:\1 ~ t ~ ~ m ~ Rfl:fu 11WfiI1~ 8 ~ if Q~I~Rd ~ ~ GJ~*.~ ~ ~ %I~, 2010'~ ~~ ~ ~ r1I-1r~r~d : -I -II 'Rfltr ~ '. . . ~. >TR1l:'qC~f) 1,50,000 1,80,000 4,50,000 ~~~ 3,00,000 3,15,000 , ' ~~~ 2,24,000 2,25,000 I, cnl"'~111 d'-lRcx.j~ 2,10,000 90,000 ~~ 74,000 90,000 2,25,000 >TR1l:'qC~f) if 7fflf1:IB ~: ~ 'ffi'q 30,000 1,65,000 . (E&H) FUN P.T.O. '. ~ ( 10 ) FUN Marks ~.I Cf)Td~IC\1 ~-H CfiT~~I~(UI ~ "tR 25 ~ "ffi~ ~ ~ ~ . Q~I~n.d ~ \iffifT ~ I ~ ~-II Cf)T d~I~1 Rf1::rnl1TB~ ~ CfiT ~~I~(UI ., ~ "tR 20 ~ "ffi~ '31'I~~{ Q~I~n.d ~ \iffifT ~ I~31T if ~ Cf)T .~~ict>1 ~ "ffilrn "tR ~ \iffifT t I Rf1fu~ ~ ~ Cf)T ~ ~ Ict>1 ~ ~ "tR ~ \iffifT t ~ ~ ern- ~-II ~ '5mJ g3TI ~ I lW Cfft ~ 28,00,000 ~. ~ I ~ ~ "tR "ffi~ mq CfiT ~ ~ ~ ~-I ~, ~-II ~, ~ Rf1fu . ~~~~~fl (Gf-)~ ~ldl~ld ~ CfiT4.0 r<fJ~~lG{ w<sfi ~ ~ l1f1f"tR5 ~ ~ Cfft ~ eft 8 ~ ~ ~ ~ ~ ~ ~ I ~ Cfft"ffilrn6,50,000 ~. I 31tRt ~ 80 <:nfWffCfiT ~ ~ ~ ~ ~rdr~1~ ~ 3lR ~ (fA~ Cfitrftl~' ~i( 40 GfT3~ft Cfft 8;1tffiT ~ I ~ ~ lW if ~ 25 R;:r ~ Icr:f 2010-11 ~ ~ 3Flr ~~11.:t M~~~d~: . ift\3f Cf)T ~ 4,000~. m ~ ~~~~UUT 22,500~. m ~ '5 ~1~ct>I.Cf)T~ 3,000~. m ~ m ~ ~ 1,200~.m ct>u.s~~m lW 5 ct>u.s~{"r Cfft ~ ~~ Cf)T 7,500 ~'. m lW ir6 ~cm,~ ~, ~ 5,000~. ~.~ iFi ~ ct>1~r~~ 'CXJCJ 2,000 ~. vfu ~ ~ ~ 33 ~. Cfft "ffilrn '!lfu ~~if~~JI'U~Cfft~~ rct>ctI~lG(if 6 rct1~.il~lG( I ~~ "ffilrn Cf)T15 vfumf I ~~ "ffilrnCf)T3 ~ 'I . I , (E&H) FUN I ~, 4J' ( 11 ) - FUN Marks ~ m <IDIT-rct1~I~~Ic.~~ ~ cm1T~. ~ ~ ~ ~ ~ %, m ~ CfR'ft¥'f mftr:IT 1R 33'/3 "ffi'q ~ ~ ~ m I 4. r1~r~r,(gd m: ~ ~ ~ : . 4 , (i) 1ft.~.~. r~r~~-S qff cpf 2008 q 2009 ~ ~ r~~r~r~t1 ~-q11~ ~ ~ : 3 cpf 2008 2009 32,00,000 . 57,00,000 . "ffi'q/(mf.;r) (3,00,000 .) 7,00,000 . ~ ~-( 31) "ffi'q-"t1BI~T (~) ¥'f ~ "ffiTT1ij;Ci(~) 12,00,000 ~. Cf1"Tffi'q ~ m ~ 3ilcj~~ct1 ~ I (ii) <:S'"I~oq~~I'~ ~ 31f~~cj~il~ul~ "ffiTT~ij~ict11 if ~ q1) ~~~I~"!,I 3 (iii) ~ ~-~ ~ ~ ~ ~ 50 ~ ~ M~ 1;C0i0 ~ M~ if "itCht1- 3 t m ~ 31f~ "ffi~ % 7 ~ Cht1-m W-Tfu ~ Gf;IT~m if ~ q1) ~ ~ -mJm-r %7 5. r1~r~r~d m: ~ ~ ~ : 5x2=10 (i)~~"it3m~~~?~~"it~~WfiRf~t7 . (ii) ~ ~ ~ q1)-Ba.{qif ~~~I~"!,I ~ (iii) ~ ~ ~ 31Cf~ ~ -Ba.{qif rcj~-q11 ~ I , (iv) ct1I4~n~ ~ ~ fcffi~~ if ~ cx-Hcj~lr~Wct1r&r~ ~ ~ ~ ~ ~ M~ ~q1)~1 (v) ~-cnf1:fq;- -qstl~ro&31T'tW:1R 75,000 ~. Cf1T8 ~ ~ ~ 1R 5 cpf Cf1T-qstl~ro&~ 1;Ci -qstl~ro&~ Cf1TR~ ~I (E&JI) FUN P.T.D. '( -,"- ~. ( 12 ) FUN Marks ~ ~ ~ 6. r14-1r~r~q ~ ~ cnPFitit ~~ : (i) crtf CfiT~ (~ ~~) 30,00,000 ~. ~ ~ 25~ (ii) ~ 'ffi"'T (iii) ~ w:qfu 31fCR(f~ lW:~ CIft~ in 3iT~ 1R) 1.5 (iv) ~..'I::f 31fCRf(~ lW:~ CIft~ 1R 3iTmfur) 6 (v).(ffi'f ~ . 1-: 1 (vi) ~ ~ 1.5 : 1 ~ ~ (vii) '31Cff~ 2~ (viii) ~ ~ 31Tf~ CfiT~ i~ it ~ 0.6 : 1 (ix) ~ ~-q1~1 (Gearing) ~ 0.5 (x) ~~.CfiT~~ (~) it ~ 1.20 : 1 ~ ~ crm Cf1Br : (31) ~ ~ in 3iT~ 1R cnPFit Cf)[ ~ I 11 (~) ~ cnPFit 3i1~r~~ql3:ff in ~ .~ en)~ ~ ~ ~ ~I~~n~ ~ 1R 10 4 ~ ~1~r~~dl3:ff ~ ~ ~ ~ ~m, q) ~14~n~ i~ cn1~lcI~~~ql ~ ~ ~ ~ ~I 7. (31) ft. r~p'lt-s CfiT~..'I::feft 1ffi=IR~I.JCj~~ l1W1Tif it ~ ~. in ~ 1R ~ CR: 9 wr ~ I cnPFit cn1 ~ cWt~. 12 ~ ~ 'ij~ cnPFit in ~ ~ CR:c6t ~ (E&H) FUN . ~ =.;£:"' - ,- <2J ( 13 ) FUN Marks 30 -srft:pmr ~ I ~ ~ ~~ if fcrcn:"ufr;P-11j,~I( ~ : ~-I ~-II . ~ Cfft ""ffi1Rf 10,00,000 ~. 15,00,000 ~. ., ~8;m '311C41cf11<:1 5c;p:f 6c;p:f ~q~~~Cfft~3Wf 3,45,000 ~. 4,55,000 ~. ~ ~ mm {~lrC4r~ ~ ~ fcn<:rT~ I ~ ~8;m~: (i) 3.jI-tr~r~d ~ 31Cff~~, ~ ~, ~ 3i1~Rcf1 ~ ~ Cfft lTURf ~ ~~~~I ~ (ii) tft. r~r~~-5~ ~~ CfiT~ fCfi'W ctR-m ~ ~ I 1 . r1r<:1rd : c;p:ffG{ 1 2 3 4 5 6 12% .893 .797 .712 .636 .567 ' .507 13% .885 .783 .693 .613 .543 .480 14% .877 .769 .675 .592 .519 .456 15% .870 .756 .658 .572 .497 .432 16% .862 .743 .641 .552 .476 .410 " (~) ~ ~ '!J~ ~ ~ ~~ ~ ~ ~ ~ ~ ~ r1~r~r~d fcrcn:"CurO3TfTTR 7 ~ WTJ7n : 0'. (E&H) FUN p.T.a. ~ .". 0, ( 14) FUN Marks ~ (i) 3ij,~-lIr1d~ r1~lun "RfTRf: m1Hft crCfl'f LJn. cx.j <!oj 2010 . . . . 4 " 4,20,000 2,00,000 1,60,000 45,000 4,50,000 2,10,000 1,60,000 40,000 \1ff 5,00,000 2,60,000 1,65,000 38000 4,90,000 2,82,000 1,65,000 37,500 3llffi'f , 5,40,000 2,80,000 1,65,000 60,800 rdk4( 6,10,000 3,10,QOO 1,70,000 52,000 (ii) ~'i:TR~ ~ : ~-20% ~ ~ t ~'i:TR ~ ~ 50% ~ ~ ~ ~ wffi ~ 1fif ~ ~ am:~ ~ ~ wffi ~ #1 , 'i(fct>dl3i&f m~ ~ ~ ~'i:TR ~I~d ~ I ~ ~ # 'TfCfR 3TIit~ cnr~ o~ ~LJRcx.j<~!oj'IT'fCfR,# ~ ~ cnr ~mm~1 (iii) 5,00,000~. ~ 12%~UILJ?l'RI' 3i4ctlftfct>3TI'i:T'RR ~ \1ffam: r~~k4( # ~ ~~I ~ (iv) \1ff, 2010 # rctr1<!oj1~'R~' 25,000 ~. "ffi~ ~ -srrfu ~~ I . , (v) \1ff, 2010 # 4,00,000 ~. "RfTR~f ~ ~ ~ ~ ~, r"l~ct>1'TfCfR ~, 2010"fr~ ~ 20 l1Tfucn~ # ~ ~I ~ 3fu (vi) 15,000 ~. ~ cnr 'TfdR 3lTffif, 2010 #,~ ~~ I ~ ~ ~ ~ ~ ~ ~ ~ (vii) 1 \1ff, 2010'C!1T 3ij,~1f1d 45,000 ~. ~ 3Rf # W1~ ~ m ~ 00 ~ ~ ~, 3irdn.\b~ C'""RRm' ~ lJUTCfI ~ #) ~ ~ ~ ~ # ~ c!t~ I ~ ~ ~ 3TI'i:TR'R \1ff, 2010 "fr~'q ~ ~ 4 ~ cnr l1Tfucn ~ ~ ~I (E&H) FUN ,..: @ ( 15 ) FUN Marks m ~ ~ 8. f.p'-1r~r(!;Ad : "3"W (i) ~.~. r~r~2.-~5 r-1~r~r(!;Amdm- ~ CfiTt]5"fffi~ W ~ I ~ "ffiTRf ~ ~ ~ 3 4 fucitg{ ~ : ~q)T~ ~Tfu ~CfiT"ffiTRf ~. ~~ 30,00,000 15~ 31f~ ~ 8,00,000 8~ mmfur 3T\5R 12,00,000 11~ , ~ 'fVJT--q?f 10,00,000 9 ~ (~ "<tt) ~ FrP=r~ CfiT~ 30 ~ ~ ~ ~ CfiT'mfuf 3fhrn "ffiTRf~ ~ CfiT ~~~I (ii) ~~~ 31f~CfiT ~~I 3 ~ ~ (Hi) CfiTt5~f fcmuT ~ fcmuT if ~ 3RR ~ I ,3 .' FUN (E&H)