Calicut University 2006 Certification CWA/ICWA Institute Of Cost and Works Accountants Of India, - Question Paper

(ii) Mention rating is identical as Job valuation.
(iii) A firm which has a very high current ratio and very low liquid ratio, has a low level of inventory.
(iv) Units that do not meet production standards and must be processed further in order to be stable as good units or
irregulars are called Spoiled units.
(v) Labour cost may be viewed as a Committed cost rather than discretionary cost.
2. (a) What is labour turnover? elaborate the costs associated with it? How would you treat it in costing?
(2+3 +2)

(b) The profitability position of TARGET LTD. for the year ending 31.3.2006 is as under: +9=16
(Rs. in lakhs) (Rs. in lakhs)
Annual Turnover 200
Variable Costs:
Direct Material 60
Direct Labour 40
Variable Overheads 50 150
Marginal Contribution 50
Fixed Overheads 10
Profit 40

The profit for the year did not match with Company's expectation and works management attributed it to Labour turnover.
Analysis of the data revealed the following:

Permanent workmen worked during the year 960,000 Direct labour hours
Apprentice workmen worked 80,000 Direct labour hours
__________
1,040,000 Direct labour hours
The effectiveness of Direct labour hours put in by apprentice workmen was 50% and delay in replacing against separations
during the year resulted in loss of 20,000 Direct labour hours.
You are needed to compute the loss of Profit on account of loss of production from Labour turnover.

3. (a) describe "flexible budget" and discuss its importance as a budgeting technique and tool of control. six
(b) BMS LTD. has prepared annual budget for the year ending 31.3.07 on the basis of 60% capacity utilisation.

Earning:   Approval pending.