Cost Accounting OM
Cost Accounting OM
Cost Accounting OM
INTERMEDIATE EXAMINATION
GROUP - II
(SYLLABUS 2016)
DECEMBER - 2021
Q.1 ROI (Return on Investment) can be decomposed into the following ratios :
Ans 1. Overall Turnover Ratio and Current Ratio
2. Divisional Goals
3. Managers‟ Goals
4. Corporate Goals
Q.3 Which of the following would be consistent with a more aggressive approach to
financing working capital ?
Ans 1. Financing permanent inventory build up with long – term debt.
Q.4 RUB LTD earned a Profit of Rs 240000 during the year 2020-21. If its P/V Ratio is 25%,
what will be the Margin of Safety ?
Ans 1. Rs 880000
2. Rs 900000
3. Rs 960000
4. Rs 980000
Q.5 Which of the following Concepts suggests a basis for Correct staffing in Continuously
expanding production ?
Ans 1. Growth Curve
2. Learning Curve
3. Exponential Curve
4. Production Curve
Q.6 A favourable material price variance coupled with an unfavorable material usage
variance would most likely result from
Ans 1. changes in the product mix
4. None of these
2. Ensures that the present value of Net Cash Inflow is < the Net Cash Outflow
3. None of these
4. Equates the present value of Net Cash Inflow to the Net Cash Outflow
Q.9 Decision making Concerns the-
Ans 1. Future
2. Past
3. None of these
3. None of these
4. Finished Products
Q.11 The degree of operating Leverage and degree of financial Leverage of VIM Ltd are 2
and 1.5 respectively. If the Sale increases by 10% what will be the percentage change
in EPS ?
Ans 1. 15% increase
2. None of these
3. 10% increase
4. 30% increase
Q.12 EBIT-EPS chart is used for which of the following purpose?
Ans 1. Determining the Price-Earning ratio
Q.13 The Chart that shows the relationship between Profit and Sales Volume is
Ans 1. Break-even chart
3. None of these
Q.14 Corporate financing instruments which have an unlimited life, voting right and right to
receive dividends are known as
Ans 1. Non-Redeemable Preference Shares
3. Equity Shares
4. Debentures
Q.15 In a factory of ZINB Ltd operating Standard Costing System, 2000 kgs of a material @
Rs 12 per kg were used for a Product, resulting in Material Cost variance of Rs 3000
(FAV). The standard material cost of actual production is -
Ans 1. Rs 30000
2. Rs 27000
3. Rs 24000
4. Rs 25000
Q.16 UBI Ltd has EBIT of Rs 100000. The Company makes use of Debt and Equity Capital.
The Company has 10% debentures of Rs 400000. If the Company’s equity
capitalization rate is 15% What will be value of UBI Ltd ?
Ans 1. Rs 400000
2. Rs 700000
3. Rs 800000
4. Rs 600000
Q.17 ABY Ltd has paid dividend of Rs 3 per share of Rs 10 each last year and it is expected
to grow @ 10% next year. If the market price of share is Rs 60 what will be the Cost of
equity ?
Ans 1. 12.00%
2. 12.50%
3. 16.50%
4. 15.50%
Q.18 For preparing a production budget which one of the following is not to be considered
?
Ans 1. Research and Development Budget
2. The Production plan of the factory
Q.19 Which of the following Accountings records both qualitative and quantitative aspect ?
Ans 1. Green Accounting
2. Management Accounting
3. Financial Accounting
Cost Accounting
Q.1 relates to a repetitive Job or task and represents the relationship between
experience and productivity.Using the appropriate word(s) fill in the blank.
Answer :
Q.2 The total Asset - turnover ratio and total Asset to net-worth of GIN Ltd are 1.80 and
2.50 respectively. If the net – profit margin of the company is 8%. What will be its
Return on Equity (ROE) ?
Answer :
36%
Q.3 Which of the following item in Column (A) is Correctly matched with the
Corresponding item in Column (B) ?
Answer :
Goal congruence
Q.4 A factory of ZINITH Ltd operates a Standard Costing System, where 1500 kgs of
Raw materials @ Rs 20 per kg were used for a product resulting in Price variance of
Rs 6000 (FAV). What will be the Standard Cost of raw materials per kg ?
Answer :
Rs. 24
Q.5 In cash Flow analysis the term cash includes cash on hand and .Using
the appropriate word(s) fill in the blank.
Answer :
Q.6 The current market price of an equity share of a company is Rs 80. The current
dividend per share is Rs 4. In case the dividend are expected grow at the rate of 7%,
the cost of equity capital will be : .
Answer :
12.35%
Q.8 Roxy Ltd. maintains a margin of Safety of 25% on its current Sales and earns a
profit of Rs 28 lakh per annum. If the company has a P/v Ratio of 25% its current
sales will be .
Answer :
Q.10 is the notional value at which goods and services are transferred
between divisions in a decentralized organization.Using the appropriate word(s) fill
in the blank.
Answer :
A transfer price
Q.11 Who said - “Investors prefer the early resolution of uncertainty and are willing to
pay a higher price of the shares that offer the greater current Dividends” ?
Answer :
Myron J Gordon (1962)
Q.14 The Cost per unit of a product manufactured in a factory of BOT Ltd amounts to Rs
150 (80% variable) when production is 10000 units. If production is increased by
25%. What will be the cost of product per unit ?
Answer :
Rs. 144
Q.15 ratio expresses the relationship between what is actually paid in the
form of dividends out of available earnings and what is available as earnings per
share.Using the appropriate word(s) fill in the blank.
Answer :
Pay-out
Q.16 Which item in Column (B) is an appropriate match for the item in Column (A).
Answer :
Millar-Orr Model
Q.17 is caused due to the poor working conditions.Using the appropriate
word(s) fill in the blank.
Answer :
Labour efficiency variance
5 years
Q.20 is the angle between Sales line and Total Cost line.Using the appropriate
word(s) fill in the blank.
Answer :
Angle of incidence
Section : C
(12X4= 48 Marks)
One LAQ
Q.1 RITU Ltd a manufacturer of Gel Pens selling in the market at Rs 100 per dozen
makes an average net profit of 20% on sales by producing 50000 dozens per annum
(7 Marks)
against a Capacity of 75000 dozens.
In 2021, the Company anticipates its fixed cost to increase by 6%, Cost of Direct
materials by 5% and Labour by 10%. Market enquires revealed that the Selling price
of the product and quantity will remain unchanged in 2021.
Based on above information you are required to answer the following questions: (3
+ 2 + 2 = 7)
(i) How many number of Gel Pens have to be manufactured and sold in 2021 in
order to break-even?
(ii) The Profit of the Company in the year 2021 would be how much?
(iii) An inquiry has been received for the Supply of 10000 dozens of Gel Pen to ZT
Company,
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Answer :
Answer :
The market Price of Equity Share is Rs 30. It is expected that the Company will pay
next year a dividend of Rs 3 per share which will grow at 7% forever. Corporate Tax
is 40%.
Based on above information you are required to answer the following questions : (1
+ 4 = 5)
(i) What is the Cost of Equity ?
(ii) What is the weighted Average Cost of Capital (WACC) of the Company using
book value weights ?
Answer :
(i) Cost of Equity = 17%
(ii) Weighted Average Cost of Capital (WACC)= 12.03%
Two LAQ
Q.1 VINAK LTD uses a Standard Cost System and manufactures Product Z by blending (6 Marks)
two materials A and B.
The Standard and Actual Particulars of September 2021 are as follows:
The Company’s total assets turnover ratio is 3. Its fixed operating costs are Rs
200000 and the variable operating costs ratio 40 percent. The Corporate Tax rate is
35 percent.
Based on above information you are required to answer the following questions : (2
+ 1 + 1 + 2 = 6)
(i) What is the operating Leverage of Riup Ltd ?
(ii) Financial Leverage is
(iii) What is the Combined Leverage of Riup Ltd ?
(iv) What is the likely level of EBIT if EPS is Rs 3 ?
Answer :
720000 1.385
520000 =
(i) Operating Leverage (OL) = -
(ii) What is the amount of Total Present value of Future Cost saving from buying
Computer System ?
(iii) The Net Present value (NPV) (incremental) from the Computer System will be
.
(iv) As a financial adviser, what would be your recommendation for the company in
respect of the Purchase of Computer System ?
Answer :
(i) Incremental Cash Outflows: Rs. 26 lakh
(ii) The total P.V. of future cost Savings: = Rs. 13.361 lakh
(iv) Recommendations:
Since Net present value is negative, the proposal is not financially viable. The
company should not consider to purchase a new computer system.
Q.2 TRIST LTD, a manufacturing Company, operating Standard Costing System (6 Marks)
has a normal Capacity of 720 machine hours per day of 25 days a month. The
fixed overheads are budgeted Rs 108000 per month. The Standard time required
to manufacture one unit of production is 4 hours.
In June 2021, the Company worked 24 days of 630 machine hours per day and
produced 3980 units of output. The actual fixed overheads are Rs 106500.
Based on the above information you are required to answer the following questions
: (2 + 2 + 2 = 6)
(i) What is the amount of Fixed overhead Efficiency Variance ?
Q.1 The following financial parameters and Balance Sheet of BXA Ltd for the
year ended 31.3.2021 are given :
(6 Marks)
Based on the above information you are required to answer the following questions
: (2 + 1 + 2 + 1 = 6)
(i) What is the value of Current Liabilities ?
(ii) What is the value of Properties, Plants and equipments (PPE) ?
(iii) What is the value of Inventory ?
(iv) The value of Debtors will be .
Answer :
(i) Current Liabilities = Rs. 400000.
(ii) Value of Properties, Plants and Equipments (PPE)= Rs. 400000.
(iii) Value of Inventory = Rs. 600000.
(iv) Value of Debtors= Rs. 400000.
Q.2 The variable cost structure of a product manufactured by ABX company
during thecurrent year is as under :
(6 Marks)
The selling price per units is Rs 378 and the fixed cost and sales during the current
year are Rs 19.60 Lakh and Rs 56.70 Lakh respectively.
During the forthcoming year, the direct workers will be entitled to a wage increase
of 10%from the beginning of the year and the material cost, variable overhead and
fixed overhead are expected to increase by 7.5%, 5% and 3% respectively.
Based on the above information you are required to answer the following questions
: (1 + 3 + 2 = 6)
(i) What is the current year’s Profit ?
(ii) The new sale price in the forth coming year if the current P/V Ratio is to be
maintained would be how much ?
(iii) How many numbers of Units would required to be sold during the forth Coming
year so as to yield the same of Profit in the Current year, assuming that selling price
per unit will not be increased ?
Answer :
(ii) New Selling Price for the forthcoming year: Rs. 407.40
Q.1 XBA LTD. has furnished the following information for the year ended 31st
March,2021.
(6 Marks)
Based on the above information you are required to answer the following questions
in accordance with AS-3 (Revised) :
(3 + 2 + 1 = 6)
(i) What is the value of the Net Cash Flow from Operating Activities ?
(ii) Net Cash Flow from Investing Activities is .
(iii) What is the value of Net Cash flow from Financing Activities ?
Answer :
(ii) Net Cash flows from investing Activities: Rs. 188 lakh
(iii) Net Cash Flows from Financing Activities:= (Rs. 240) Lakh
Q.2 ABT Ltd produces and sells a single product PANCO.
Sales Budget for Calendar year 2021 by quarters is as under: (6 Marks)
The year is expected to open with an inventory of 4000 units of finish products and
close with an inventory of 6500 units.
Production is customarily scheduled to provide for two – thirds of the current
quarter’s Sales demand plus one third of the following quarter’s demand.
Thus production anticipates Sales volume by about one month.
The Standard cost details for one unit of the product PANCO is as follows :
Direct Materials 10 kgs @ 50 Paise per kg.
Direct Labour 1 hour 30 Minutes @ Rs 4 per hour
Variable overheads 1 hour 30 minutes @ Re 1 per hour
Fixed overheads @ Rs 2 per hour, based on a budget Production Volume of 90000
Direct Labour hours for the year.
Based on the above information you are required to answer the following questions
: (2 + 1 + 3 = 6)
(i) How many budgeted number of units to be produced for the four quarters of year
2021 ?
(ii) What is the value of Budgeted Production Cost for the quarter III of year 2021 ?
(iii) What is the Total value of Budgeted Production Cost for the year 2021?
Answer :
(4X3= 12 Marks)
Q.1 Write Short Notes on Advantage of Zero Based Budgeting (ZBB) (3 Marks)
Answer :
Angle of Incidence:
Angle of Incidence is the angle between sales and total cost line. This angle is an indicator of profit earning capacity of the firm
over the breakeven point sales. Angle of incidence is an angle formed at the intersection point of total sales line and total cost
line in a formal break even chart. If the angle is larger, the rate of growth of profit is higher and if the angle is lower, the rate of
growth of profit is lower. So, growth of profit or profitability rate is depicted by Angle of Incidence.
It is difficult to understand the analytical of the decision on the basis of profitability index
i) What are the amount (Rs in Lakh) of Cash discount and Cost of Investment in
Debtors for the Credit term First Option (2/20 net 45) ?
Answer : For the credit term first option (2/20 net 45):
Cash Discount = Rs. 7.566 lakh
Cost of Investment in Debtors= Rs. 10.126 lakh
ii) What is the value of Net Profit (Rs in Lakh) for the Credit Term First Option (2/20 net
45) ?
Answer : Net profit for Credit term First Option (2/20 net 45): = Rs. 61.953 lakh.
iii) What is the amount (Rs in Lakh) of Cash discount, as well as Cost of Investment in
Debtors for Credit Term Second option (1.5/30 net 60) ?
Answer :
For credit term- Second Option (1.5/30 net 60): Cash Discount = Rs. 6.153 lakh
Cost of Investment in Debtors= Rs. 13.677 lakh
iv) The Net Profit to be earned from the Credit term Second Option (1.5/30 net 60)
would be how much ?
Answer :
Net Profit for Credited term Second Option (1.5/30 net 60) = Rs. 65.137 lakh