The Institute of Chartered Financial Analysts of India University 2007 PCC Group II 4 - Costing and Financial Management -2 - Question Paper
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
PROFESSIONAL COMPETENCE COURSE GROUP-II
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
Model Test Paper - BOS/PCC/ Cost Accounting and Financial Management-2/2007
Time : 3 hours Maximum Marks: 100
PAPER - 4 : COST ACCOUNTING AND FINANCIAL MANAGEMENT PART -1: COST ACCOUNTING (50 marks)
1. Give brief answers to any five of the following :
(a) If Rs 10 is spend on producing 10 units and Rs 15 for producing 15, what is the fixed cost per unit ?
(b) In a perpetual inventory system which classifies inventory into the A,B and C categories, which category of items should be checked most frequently and why?
(c) Why is a blanket overhead rate not suitable for product costing in a company which is semi automated?
(d) A company presently does not utilise its available capacity. In case of full capacity utilisation, the cost per unit shall,
1. Increase
2. Decrease
3. Remain constant
4. None of the above
(e) An increase in contribution can be because of
1. An increase in fixed costs
2. A increase in the selling price of the product
3. A decrease in the variable cost per unit of the product
4. Both 2 and 3.
(f) What do you understand by under absorbed overheads. (5x2=10 Marks)
ABC Ltd manufactures Picture Tubes and has a capacity of 1,000 Units per month. The following cost sheet has been prepared on ideal standards by the management accountant;
|
Description Fixed Cost per unit(Rs) Direct material Fixed overheads Variable Overheads Total cost 1,000 Standard selling price Details of direct material to be used is as under; Bill of Material |
Variable cost per unit(Rs) Total cost per unit(Rs) 2,000 1,000 1,000 4.000 5.000 |
|
Description Glass shell Phosphor Laquor Electron guns Total cost per picture tube |
Standard quantity per unit of Picture Tube (Rs) 01 Total cost (Rs) 1,000 500 250 250 2,000 100 grams 50 grams 02 |
Standard price per uni (Rs) 1,000 5 per gram 5 per gram 125 |
During a particular month, the actual usage of Glass Shells and Electron guns was upto the standards. However there was a 20% extra usage accounted for both Phosphor and Laquor. The actual purchase price of these two raw material did not vary from the standards established. However, the price paid for procuring Glass Shell and Electron guns was Rs 1,200 and Rs 150 respectively. The actual production in the concerned month was 800 units of Picture Tubes.There was no deviation in the fixed and variable overheads from the standards established. You are required to compute the following;
(a) Production volume variance.
(b) Usage and purchase price variance of all of the concerned direct material.
(c) Profit made by the company in the relevant month with an actual selling price of Rs
6.000 per Picture Tube. (15 Marks)
3. (a) From the following particulars with respect to a particular item of material of a
manufacturing company, calculate the best quantity to order:
Ordering Quantities (tons) Price per Ton
Less than 250 Rs.6.00
250 but less than 800 5.90
800 but less than 2,000 5.80
2.000 but less than 4,000 5.70
4.000 and above 5.60 The annual demand for the material is 4,000 tonnes.
Stock holding costs are 20% of material cost p.a.
The delivery cost per order is Rs.6. (8 Marks)
(b) The following particulars for the first week of September 2003 relate to X and Y, two workers employed in a factory:
X Y
(a) Job completed (units) 3,600 4,200
(b) Out of above, output rejected
and unsaleable 540 420
(c) Time allowed 12 minutes per dozen 3 hours for 200 units
(d) Basic wage rate per hour Rs.5 Rs.6
(e) Hours worked 45 50
The normal working hours per week are fixed at 42 hours. Bonus is paid @ 2/3of the basic wage rate for gross time worked and gross output produced without deduction of rejected output. The rate of overtime for first 4 hours is paid at time plus 1/3 and next 4 hours is paid at time plus
From the above data, calculate for each employee:
(a) Number of bonus hours earned and amount of bonus earned,
(b) Total wages earned. (8 Marks)
4. Answer any three of the following;
(a) Distinguish between budget and budgetary control
(b) Distinguish between functional and master budgets.
(c) Differentiate between Marginal and Direct costing.
(d) Differentiate between Profit centre and Investment centre. (3x3=9Marks)
(Answer all questions)
5. Answer any five of the following, supporting the same with reasoning/working notes:
(a) The trade terms "2/15, net 30" indicate that a 2% discount is offered if payment is made within 30 days. Is the statement true or false?
(b) The estimated benefits from a project are expressed as cash flows instead of income flows because it is simpler to calculate cash flows than income flows. Is the statement true or false?
(c) Beta Companys shares have a beta of 0.90, while Alpha Companys shares have a beta of 1.80. The expected return on the market is 10 percent, and the risk-free rate is 6 percent. According to the capital-asset pricing model (CAPM) and making use of the information given, calculate the required return on Beta and Alpha Companies shares.
(d) PL Forgings Limited has an 8 percent return on total assets of Rs.3,00,000 and a net profit margin of 5 percent. What are its sales?
(e) Best of Luck Companys debt-to-total assets (D/TA) ratio is 0.4. What is its debt-to-equity (D/E) ratio?
(f) An EBIT-EPS indifference analysis chart is used for determining the impact of a change in sales on EBIT. Is the statement true or false? (5x2=10 Marks)
6. A firm has sales of Rs. 75,00,000; variable cost of Rs. 42,00,000 and fixed cost of Rs.
6,00,000. It has a debt of Rs. 45,00,000 at 9% and equity of Rs. 55,00,000.
(i) What is the firms ROI?
(ii) Does it have favourable financial leverage?
(iii) If the firm belongs to an industry whose asset turnover is 3, does it have a high or low asset leverage?
(iv) What are the operating, financial and combined leverages of the firm?
(v) If the sales drop to Rs. 50,00,000, what will be the new EBIT?
(vi) At what level the EBT of the firm will be equal to zero? (15 Marks)
7. (a) Xansa Ltd. has the following book-value capital structure as on March 31, 2006.
Rs.
Equity share capital (2,00,000 shares)
40.00.000
10.00.000
30.00.000
80.00.000
11.5% preference shares 10% debentures
The equity share of the company sells for Rs.20. It is expected that the company will pay next year a dividend of Rs.2 per equity share, which is expected to grow at 5% p.a. forever. Assume a 35% corporate tax rate.
(i) Compute weighted average cost of capital (WACC) of the company based on the existing capital structure.
(ii) Compute the new WACC, if the company raises an additional Rs.20 lakhs debt by issuing 12% debentures. This would result in increasing the expected equity dividend to Rs.2.40 and leave the growth rate unchanged, but the price of equity share will fall to Rs. 16 per share.
(iii) Comment on the use of weights in the computation of weighted average cost of capital.
(b) The cash flows of two mutually exclusive Projects are as under:
|
to |
ti |
t3 |
t4 |
t5 |
te | ||
|
Project A (Rs.) Project B (Rs.) |
(40.000) (20.000) |
13.000 7.000 |
8,000 13,000 |
14.000 12.000 |
12,000 |
11,000 |
15,000 |
Required:
(i) Estimate the net present value (NPV) of the Project A and B using 15% as the hurdle rate.
(ii) Estimate the internal rate of return (IRR) of the Project A and 'B\
(iii) Why there is a conflict in the project choice by using NPV and IRR criterion?
(iv) Which criteria you will use in such a situation? Estimate the value at that criterion. Make a project choice.
|
The present value interest factor values at different rates of discount are as under: | ||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
(fr- 7=16 Marks) |
8. Write short notes on any three of the following:
(a) Functions of a Chief Financial Officer
(b) William J. Baumal versus Miller-Orr Cash Management Model
(c) Bridge Finance
(d) Funds Flow Statement versus Cash Flow Statement. (3*3=9 Marks)
36
|
Attachment: |
| Earning: Approval pending. |
