Roll No. . Total No.

of Questions 7 Time Allowed - 3 Hours

Total No. of Printed Pages

Maximum Marks 100

Question No. 1 is compulsory. Attempt any Five questions from the remaining Six questions. Whenever appropriate, suitable assumption/s should be made and indicated in answer by candidate. Working notes should form part of the answer. Marks Q .1 5X 4 = 20

(A) ABC Ltd has an average cost of debt at 10% and tax rate is 40%. The debt equity ratio is 0.6. Calculate Return on Equity if Return on investment is 20%. (B) Give the treatment of the following in cost accounts (i) Income tax (ii) Cost of samples (iii) Normal & Uncontrollable Idle time (iv) Abnormal spoilage (v) Bad debts (C) Ms SG is required to pay four equal annual payments of ` 4000 each in her Deposit account that pays 10% interest per year at the end of each year. Find out the maturity value of the annuity plan. (d) What is the difference in cost control and cost Reduction. (e) State whether true or false with reason: (i) Debtors Turnover is a measure of Debt Service Capacity of a firm (ii) Equity capital does not carry any cost. (iii) In a close ended lease, the lessee has the option to transfer the asset in the end of lease period. (iv) Car manufacturing is an example of job costing. (v) Cash discount is not considered in cost accounting. Q.2 16 The Ajanta Manufacturing Companys job-costing system has two direct-cost categories: direct materials and direct manufacturing labour. Manufacturing -over-head (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labour-hour (DLH). At the beginning of 2007, Ajanta adopted the following standards for its manufacturing costs: Particulars Input Cost per output unit Direct materials 3 kgs. At ` 5 per kg. `.15.00 Direct manufacturing labour 5 hrs. at `15 per hrs. 75.00 Manufacturing overhead Variable ` 6 per DLH 30.00 Fixed ` 8 per DLH 40.00 Standard manufacturing cost per output unit ` 140.00

The denominator level for total manufacturing overhead per month in 2005 is 40,000 direct manufacturing labour-hours. Ajantas flexible budget for January 2006 was based on this denominator level. The records for January indicated the following: Direct Materials Purchased 25000 kgs at ` 5.20 per kg Direct materials used 23100 kgs. Direct Manufacturing labour 41,100 hrs. at ` 14.60 per hrs. Total actual manufacturing overhead (variable & Fixed) ` 6,00,000 Actual Production 7800 output units Required: i. Prepare a schedule of total standard manufacturing costs for the 7,800 output units in January 2007. ii. For the month of January, 2007, compute the following variances, indicating whether each is favourable (F) or unfavourable(U): a) Direct materials price variance, based on purchases. b) Direct materials efficiency variance c) Direct manufacturing labour price variance. d) Direct manufacturing labour efficiency variance. e) Total manufacturing overhead spending variance. f) Variable manufacturing overhead efficiency variance. g) Production-volume variance. Q 3. 8

(a) Harison Furnishings is holding a two 9-week carpet sale at Richi Rich, a local warehouse store. Harisons plans to sell carpets for ` 5,000 each. The company will purchase the carpets from a local distributor of ` 3,500 each, with the privilege of returning any unsold units for a full refund. Richi Rich has offered harisons two payment alternatives for the use of space. Option 1 A fixed payment of ` 50,000 for the sale period. Option 2 10 percent of total revenues earned during the sale period. Assume Harrison will incur no other costs. Required: 1. Calculate the breakeven point in units for (a) option 1 and ( b) option 2. 2. At what level of revenues will Harison earn the same operating income under either option? 3. a. For what range of unit sale will Harison prefer option 1. b. For what range of unit sales will Harison prefer option 2. 4. Calculate the degree of operating leverage at sales of 100 units for the two rental options. Briefly explain and interpret your answer .

8 The Sunshine oil company buys crude vegetable oil. Refining this oil results in four products at the split-off point: A,B,C and D product. C is fully processed at the split-off point. Products A,B, and D can individually be further refined into Super A, Super B, and Super D. In the most recent month (December), the output at the split-off point was: Product A, 3,000 litres Product B, 1,000 litres Product C, 500 litres Product D, 500 litres The joint costs of purchasing and processing the crude vegetable oil were ` 1,00,000 sunshine had no beginning or ending inventories. Sales of product C in December were ` 50,000. Products A,B and D were further refined and then sold. Data related to December are: Separable Processing Costs to Make Super Products Revenues Super A ` 2,00,000 ` 3,00,000 Super B ` 80,000 ` 1,00,000 Sunshine had the option of selling products A, B, and D at the split-off point. This alternative would have yielded the following revenues for the December production: Product A, ` 50,000 Product B, ` 30,000 Product D, ` 70,000 Required: 1. Compute the gross-margin percentage for each product sold in December, using following methods for allocating the ` 1,00,000 joint costs: a. Sales value at split-off. b. Physical measure c. NRV 2. Could Sunshine have increased its December operating income in1(a) by making different decisions about the further processing of products A,B, or D? Show the effect on operating income of any changes you recommend. Q. 4 8 (a) Foods Ltd. Is presently operating at 60% level producing 36,000 packets of snack foods and proposes to increase capacity utilization in the coming year by 33 1/3% over the existing level of production. The following data has been supplied: i. Unit cost structure of the product at current level: Raw Material 4 Wages (variable) 2 Overheads (variable) 2 Fixed overheads 1 Profit 3 Selling price 12 ii. Raw materials will remain in stores for 1 month before being issued for production. Material will remain in process for further 1 month. iii. Suppliers grant 3 months credit to the Company. iv. Finished goods remain in godown for 1 month. v. Debtors are allowed credit for 2 months.

(b)

vi. Lag in wages and overhead payments is 1 month and these expenses accrue evenly throughout the production cycle. vii. No increase either in cost of inputs or selling price is envisaged. Prepare a Projected Profitability Statement and the Working Capital requirement at the new level, assuming that a minimum Cash balance of ` 19,500 has to be maintained. (b) Using the following data of SGC Ltd. , complete the Balance Sheet given below: Gross Profit `54,000 Shareholders Fund `6,00,000 Gross Profit margin 20% Credit sales to Total sales 80% Total Assets Turnover 0.3 Inventory turnover 4 Average collection period (a 360 day-year) 20 Current ratio 1.8 Long-term Debt to Equity 40% Q. 5 (a) 8

8 The following is the capital structure of a Company: Source of Capital Book Value Market Value ` ` Equity shares @ ` 100 each 80,00,000 1,60,000 9% Cumulative Preference Shares @ ` 100 each 20,00,000 24,00,000 11% Debentures 60,00,000 66,00,000 Retained Earnings 40,00,000 -2,00,00,000 2,50,00,000 The current market price of th companys equity share is ` 200. For the last year the company had paid equity dividend at 25% and its dividend is likely to grow 5 % every year. The corporate tax rate is 30% and shareholders personal income tax rate is 20 percent. You are required to calculate Weighted average cost of capital on the basis of market value weights. (b) 8 A firm can make investment in either of the following two projects. The firm anticipates its cost of capital to be 10% and the net (after tax) cash flows of the projects for five years are as follows: Figure in ` ,000 Year 0 1 2 3 4 5 Project -A (500) 85 200 240 220 70 Project -B (500) 480 The discount factors are as under Year 0 1 PVF (10%) 1 0.91 PVF (20%) 1 0.83 Required: 100 2 0.83 0.69 70 3 0.75 0.58 30 4 0.68 0.48 20 5 0.62 0.41

i. ii. iii.

Calculate the NPV and IRR of each project. State with reasons which project you would recommend. Explain the inconsistency in ranking of two projects.

Q.6

(a) A textile company purchases cotton from the farmers and produces shirtings as final product. Cotton is processed into two departments namely weaving department and Dying department. The following are the cost details for the two departments for the month of January, 2013. Weaving Deptt. Dying Deptt. 7200 hours 3000 hours ` ` 1,72,800 72,000 Direct Labour 1,80,000 64,000 Material Consumed 30,000 10,000 Depreciation 15,000 3,200 Overhead apportioned 96 32 Power consumption per hour @ ` 3.20 per unit During the month both departments worked at 80% of their capacity and out of these 400 hours were expected to be lost due to unavoidable reasons. The normal processing time to process 100 meter of raw product is 3.5 hours and 2 hours in Weaving department and Dying department respectively. At the end of the month 1,00,000 meter of completed shirting were produced and 50,000 meter of the shirting were in incomplete condition on which processing in Dying department is needed. There was no stock at the beginning of the month. No power is consumed during idle time. Capacity You are required to calculate: i. Machine hour rate for the two departments. ii. Cost of 1,00,000 meter of completed shirting. iii. Cost of abnormal idle time to be changed to costing profit and loss account. (b) 8 The following incomplete accounts are furnished to you for the month ended 31 Mar, 2013. Dr Store Control A/c Cr. 01-03-2013 To Balance b/d 54,000 Dr 01-03-2013 Dr 01-03-2013 Dr Work in progress control A/c To Balance b/d 6,000 Finished Goods Control A/c To Balance b/d 75,000 Factory overhead Control A/c Cr. Particulars

Cr.

Cr.

Total Debits for March, 13 Dr

45,000 Fixed Overhead Applied A/c Cr.

Dr Dr

Cost of Goods Sold Account A/c Creditors A/c 01-03-2013

Cr. Cr. 30,000

By Balance b/d

Additional Information: a. The factory overheads are applied by using a budgeted rate based on direct labour hours. The budget for overheads for 2012-13 is ` 6,75,000 and budget of direct labour hours in 4,50,000. b. The balance in the account of creditors on 31-03-2013 is ` 15,000 and payments made to creditors in March, 2013 amount to ` 1,05,000. c. The finished goods inventory as on 31st March, 2013 is ` 66,000. d. The cost of goods sold during the month was ` 1,95,000. e. on 31st March, 2013, there was only one unfinished job in the factory. The cost records show that ` 3,000 (1,200 direct labour hours) of direct labour cost and ` 6,000 of direct material cost had been charged. f. A total of 28,200 direct labour hours were worked in March, 2013. All factory workers earn same rate of pay. g. All actual factory overheads incurred in March, 2013 have been posted. You are required to find: i. Materials purchased during March, 2013. ii. Cost of goods completed in March, 2013. iii. Overheads applied to production in March, 2013. iv. Balance of work in progress on 31st March, 2013 v. Direct materials consumed during March, 2013. vi. Balance of Stores Control Account on 31st March, 2013. vii. Over and Under absorbed overheads for March 2013. Q.7 Attempt any four (a) Write short notes on Debt Securitisation. (b) What is the difference between job & process costing. (c) What is GDR. (d) What are the disadvantages of high labour turnover. (e) Explain the following briefly: a) Factoring b) Margin of Safety. 4 X 4 = 16