2016
(September)
COMMERCE
Paper: 103
(Cost and Management Accounting)
Full Marks – 80
Time – Three Hours
The figures in the
margin indicate full marks for the questions.
1.
(a) Discuss the meaning of Activity Based Costing. What are the benefits of
Activity Based Costing? State its differences with Conventional Costing. 4+6+6=16
Or
(b) Narrate the objectives and features of cost reduction.
State the major areas in which cost reduction is usually possible. 3+3+10=16
2.
(a) Explain the possible reasons for differences between profits shown by cost
accounts and financial accounts.
16
Or
(b) The product of a manufacturing concern passes through
two processes A and B and then to finished stock. It is ascertained that in
each process normally 5% of the total weight is lost and 10% is scrap which
from processes A and B, realizes Rs. 80 per ton and Rs. 200 per ton
respectively.
The
following are the figures relating to both the processes –
Process A
|
Process B
|
|
Materials (in tons)
Cost of materials
per ton (in Rs.)
Wages (in Rs.)
Manufacturing
expenses (in Rs.)
Output (in tons)
|
1,000
125
28,000
8,000
830
|
70
200
10,000
5,250
780
|
Prepare
Process Cost Accounts showing cost per ton of each process. There was no stock
or work-in-progress in any process. 8+8=16
3.
(a) What is Comparative Income Statement? Discuss the utility of such a
statement. 4+12=16
Or
(b) From the Income Statement given below, prepare a
Common-size Income Statement. Give your brief interpretation of the common-size
Income Statement. 12+4=16
INCOME STATEMENTS
For the year ending
31st
December, 2014 and 2015
Particulars
|
2014
(Rs.)
|
2015
(Rs.)
|
Sales
Less: Cost of goods
sold
|
1,40,000
85,000
|
1,65,000
1,05,000
|
Gross Profit
|
55,000
|
60,000
|
Operating Expenses:
Selling and
distribution expenses
Administrative
expenses
|
12,000
10,000
|
16,000
11,000
|
Total operating
expenses
|
22,000
|
27,000
|
Net income before
tax
Income Tax (40%)
|
33,000
13,200
|
33,000
13,200
|
Net Income
|
19,800
|
19,800
|
4.
(a) “Ratios are mechanical and incomplete.” Give comment on this statement with
justifications in support of your contention. 16
Or
(b) (i) State the significance of the following ratios and
how these are calculated:
1) Inventory
Turnover Ratio.
2) Receivable
Turnover Ratio. 5x2=10
(ii) The current ratio of Popular Co. Ltd. is 2 : 1. Which
of the following suggestion would improve, reduce or leave unchanged the
current ratio? 1x6=6
1) To
sell stock for cash.
2) To
purchase stock on credit.
3) To
pay-off a current liability.
4) To
discount account receivables.
5) To
borrow money from bank for long period.
6) To
sell old furniture for cash.
5.
(a) “The fate of large scale investment in fixed capital is often determined by
a relatively small amount of current assets.” Give your comment on this
statement. 16
Or
(b) The capacity of an organisation is to produce 40,000
units of valve per annum. Due to protracted power cuts, the organisation can
operate at 60% of the capacity level.
Ascertain
the working capital requirement at the current level of operations. The
following data on the cost-price structure of valves, at the current level of
production, are available:
Elements of Cost
|
Per unit (Rs.)
|
Raw materials
Direct labour
Overheads
|
6
3
4
|
Total cost
Profit
|
13
3
|
Selling price
|
16
|
Raw materials
are in stock, on an average for 2 months. The duration of the production
process is half a month. Finished products are in stock, on an average for 1
month.
Credit
allowed to customers is 3 months and that obtained from suppliers of raw
materials is 1½ months. Lag in payment of wages is half a month. There is, usually, no lag in payment of
overheads. 16
***
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