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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