LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

# OA 07

FIFTH SEMESTER – November 2008

# BU 5501 – COST & MANAGEMENT ACCOUNTING

Date : 15-11-08                       Dept. No.                                          Max. : 100 Marks

Time : 9:00 – 12:00

PART A

Answer ALL questions                                                                                                             (2 x 10 = 20)

1. What is ABC Analysis?
2. Explain the treatment of idle time in Cost Accounting.
3. Distinguish between BIN card and Stores Ledger.
4. Explain Debt Equity Ratio.
5. Distinguish between Bread even Point and Margin of Safety.
6. What is Working Capital?
7. Annual usage 6000 units. Cost per unit Rs.20. Cost of placing and receiving one order is Rs.60. annual carrying cost Rs.2 per unit. Calculate Economic Order quantity.
8. Normal piece rate is Rs.2 per unit. Standard time allowed for 25 units is 1 hour. A produced 150 and B produced 250 units in 8 hours. Calculate their wages under Taylors Differential Piece rate.
9. Sales 1000 units at Rs.10 each. Variable cost Rs.6 per unit. Fixed cost Rs.8000. Calculate Break even point and sales to earn a profit of Rs.10000.
10. Credit sales Rs.80000. Debtors on 31.12.1993 Rs.10000. Calculate debtors collection period.

PART  B

Answer FIVE questions selecting at least TWO questions from each section.                   ( 5 x 8 = 40)

SECTION 1

1. What is labor turnover? What are its causes? Explain any 2 methods for computing labor cost.

1. The accounts of XY Ltd for the year ending 31.12.2007 showed the following:

Material used Rs.1,00,000; Direct wages Rs.80,000; Works overheads Rs.16,000; Office overheads Rs.9,800. Prepare a Cost Sheet from the above.

In 2008 the company is asked to quote for a job for which material required is Rs.500 and direct wages Rs.300. profit required is 20% on cost. Works overheads are recovered as a percentage of wages and Office overheads as a percentage of Works cost.

Compute the price to be quoted for the job.

1. From the following particulars calculate the earning of a worker under (1) straight piece rate (2) Taylors differential piece rate (3) Halsey plan (4) Rowan plan.

No. of working hours per week = 48; wages per hour Rs.3.75; Normal time per piece 20 minutes; rate per piece Rs.1.50; normal output for the week 120 pieces; actual output for the week 150 pieces. Differential piece rate 80% of piece rate when output is below standard and 120% when above standard.

1. Compute machine rate from the following data:

Cost of machine                      Rs.13,500

Life of machine                                   10 years

Scrap value at end of 10 years Rs.1,980

Working hours per annum       1800

Insurance per annum               Rs.45

Consumable stores p.a.                        Rs.75

Rent for the dept per annum    Rs.975

Foreman’s salary p.a.               Rs.7,500

Lighting for dept. p.a.              Rs.360

Repairs for entire life               Rs.1440

The machine uses 10 units of power per hour at 10 paise per unit. The machine occupies 1/5th of the area of the department and the foreman devotes 1/5th of his time for this machine. The machine uses two light points out of a total of 12 for lighting the department.

SECTION 2

1. State the merits and limitations of Ratio Analysis.

1. Prepare an Income statement from the following and calculate
• Gross profit ratio (b) net profit ratio (c) interest coverage ratio (d) operating profit ratio.

Sales   Rs.8,00,000

Selling expenses Rs.80,000

Interest paid Rs.30,000

Cost of goods sold Rs.4,00,000

Income tax provision Rs.30,000

1. From the following data calculate:
2. Break even sales in rupees and units
3. Selling price if break even sales is to be reduced to 6,600 units
4. Profit if sales are Rs.8 lakhs.
5. Margin of safety if profit is Rs.60,000.

Selling price Rs.20 per unit; variable cost Rs.14 per unit; Fixed cost Rs.79,200.

1. The Balance Sheet of ABC Ltd on 31/12/2004 and 31/12/2005 are as follows:

2004                2005                                        2004                 2005

Equity Capital (Rs.10)100,000           200,000           Machinery       120,000           260,000

P/L A/c                           30,000            50,000           Furniture          30,000              40,000

12% Debenture              50,000          150,000           Stock                50,000              40,000

10% ICICI bank loan    50,000                                  Debtors              30,000              60,000

Creditors                        20,000             25,000          Cash                  10,000                 5,000

Tax provision                40,000            60,000          Bank                  50,000               80,000

290,000          485,000                                  290,000             485,000

(a) Machinery worth Rs.50,000 were purchased and paid for by the issue of equity shares.

(b) Depreciation provided on machinery Rs.30000 and on furniture Rs.5000.

(c) During the year 2005, Income tax Rs.50,000 and interim dividend Rs.8,000 were paid.

Prepare Fund Flow statement.

PART C

Answer Two questions (choosing 1 from each section)                                         Marks : 2 x 20 : 40

SECTION 1

19.M.Ltd, has 3 production depts.. A, B and C and 2 service dept., X and Y.  following particulars are available for the month of March 2005.

Rent   Rs. 30000,  Building Tax  Rs. 15000,  Electricity   Rs.2400,  Indirect wages  Rs.12000,  Power Rs. 6000,  Depreciation on machinery Rs. 40000,  Canteen expenses Rs. 30000,  Welfare expenses Rs. 20000.  The following further details are available:

Total      A         B         C         X         Y

Floor space(Sq mts.)                           5000    1000    1250    1500    1000    250

Light points (nos)                                  240       40        60         80        40       20

Direct wages (Rs.)                               40000 12000  8000    12000  6000    2000

HP of machines (nos.)                           150       60        30         50        10       –

Cost of machines (Rs.)                                   200000 48000  65000  80000  4000    4000

Working hours                                                –             2335  1510     1525  –             –

The expenses of the service dept. are to be allocated to the production depts.. as follows:

A         B         C         X         Y

X                                             40%     30%     20%     –           10%

Y                                             30%     20%     40%     10%     –

Calculate the overhead absorption rate per hour for each of the three production depts.

What should be the price to be quoted for a job which would require Rs. 2000 material, Rs.1500 in wages and the job is handled by the three production depts. as follows:

Dept A. 6 hrs., Dept.B  10 hrs and Dept C. 4 hrs.  A profit of 25% on total cost is expected.

20.The following transactions took place in the month of December 2007 in respect of material X:

Dec.1   purchased 200 units at Rs.2 per unit.

10th      purchased 300 units at Rs.2.4 per units

15th      issued 250 units

18th      purchased 250 units at Rs.2.6 per unit

20th      purchased 150 units at Rs.2.5 per unit

24th      issued 200 units

28th      purchased 100 units at Rs.2.70 per unit

30th      issued 250 units

Prepare the Stores Ledger, pricing the issues under (a) Weighted Average Method (b) FIFO method

SECTION 2

1. From the following data prepare the Balance Sheet

Current ratio                                                  1.75

Liquid ratio                                                    1.25

Stock turnover ratio                                       9

Gross profit ratio                                           25%

Debt collection period                                   1.5 months

Reserves and surplus to share capital            20%

Fixed assets turnover (cost of sales)              1.2

Long term debt to share capital                     60%

Fixed assets to net worth                              1.25

Sales for the year                                           Rs.12 lakhs

1. The Balance Sheet of XYZ Co. as on 31/12/2005 and 31/12/2006 are given below:

2005                2006                                        2005                2006

(Rs.)                (Rs.)                                        (Rs.)                (Rs.)

Equity capital (Rs.10) 1,00,000         1,50,000          Fixed assets     2,00,000          3,50,000

P/L a/c                          40,000              80,000         Investments         40,000             60,000

General Reserve           30,000              50,000         Stock                   60,000             50,000

12% Debentures        1,00,000              2,00,000      Debtors               50,000             70,000

Creditors                        80,000             50,000         Cash                     20,000            30,000

Tax provision                   80,000       1,00,000         Bank                     60,000            70,000

———- ———-                                       ———             ———-

4,30,000          6,30,000                                    4,30,000            6,30,000

Income statement for the year ended 31/12/2006

Rs.

Sales                                                                                                     20,00,000

Less: Cost of goods sold                                                                      15,00,000

Gross Profit                                                                                             5,00,000

Less: Adm. & selling expenses                                 2,50,000

Depreciation                                                   46,000

Loss on sale of fixed assets                                       10,000

Interest                                                           24,000                3,30,000

Profit before tax                                                                                       1,70,000

Less: Provision for tax                                                                                70,000

Profit after tax                                                                                          1,00,000

Less: Interim Dividend                                    40,000

Transfer to Reserve                            20,000                                60,000

Retained earnings                                                                                        40,000

During the year 2006, a machine whose book value is Rs.40,000 was sold for Rs.30,000/-

Prepare Cash Flow statement as per AS3.

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