INTERMEDIATE COURSE

MOCK TEST PAPER -1

Time allowed : 3 hours

Total marks : 100

Question No.1 is compulsory

Candidates are also required to answer any four questions from the
remaining five questions .

Question.1. [4 x 5=20 marks ]

(a). RST Limited has received an offer of quan ty discount on its order of materials as
under:
Price per ton Order Size (in ton)
9,600 Less than 50
9,360 50 and less than 100
9,120 100 and lass than 200
8,880 200 and less than 300
8,640 300 and above
The annual requirement for the material is 500 tons. The ordering cost per order is 12,500
and the stock holding cost is es mated at 25% of the material cost per annum.
Required
(i) Compute the most economical purchase level.
(ii) Compute EOQ if there are no quan ty discounts and the price per ton is 10,500 [5]
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(b). A Company is undecided as to what kind of wage scheme should be introduced. The
following par culars have been compiled in respect of three systems. Which are under
considera on of the management.
Workers
A B C
Actual hours worked in a week 38 40 34
Hourly rate of wages 6 5 7.20
Produc on in units
Product – P 21 - 60
Product – Q 36 - 135
Product – R 46 25 -
Standard me allowed per unit of each product is:
P Q R
Minutes 12 18 30
For the purpose of piece rate, each minute is valued at 0.10
You are required to calculate the wages of each worker under:
(i) Guaranteed hourly rates basis
(ii) Piece work earnings basis but guaranteed at 75% of basic pay (guaranteed hourly rate) if
his earnings are less than 50% of basic pay.
(iii) Premium bonus basis where the worker receives bonus based on Rowan scheme. [5]

(c). ABC Ltd. has three produc on departments P1,P2 and P3 and two service departments
S1 and S2 The following data are extracted from the records of the Company for the month
of October, 2013:
Rent and rates 62,500
General ligh ng 7,500
Indirect Wages 18,750

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 Power 25,000
Deprecia on on machinery 50,000
Insurance of machinery 20,000

Other Informa on:

P1 P2 P3 S1 S2
Direct wages 37,500 25,000 37,500 18,750 6,250
Horse Power of Machines 60 30 50 10 --
used
Cost of machinery 3,00,000 4,00,000 5,00,000 25,000 25,000
Floor space (Sq. ) 2,000 2,500 3,000 2,000 500
Number of light points 10 15 20 10 5
Produc on hours worked 6,225 4,050 4,100 -- --
Expenses of the service departments S1 and S2 are reappor oned as below:

P1 P2 P3 S1 S2
S1 20% 30% 40% -- 10%
S2 40% 20% 30% 10% --

Required:
(i) Compute overhead absorp on rate per produc on hour of each produc on department
(ii) Determine the total cost of product X which is processed for manufacture in department
P1 P2 and P3 for 5 hours, 3 hours and 4 hours respec vely. Given that its direct material cost
is 625 and direct labour cost is 375. [5]
(d). Arnav Motors Ltd. manufactures pistons used in car engines. As per the study
conducted by the Auto Parts Manufacturers Associa on, there will be a demand of 80
million pistons in the coming year. Arnav Motors Ltd. is expected to have a market share of
1.15% of the total market demand of the pistons in the coming year. It is es mated that it
costs 1.50 as inventory holding cost per piston per month and that the set-up cost per run of
piston manufacture is 3,500.
(i) What would be the op mum run size for piston manufacturing? [5]

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Question.2. [2 x 8 = 16 marks]
(a). M/s ABID Construc ons undertook a contract at a price of 171.00 lacs. The relevant data
for the year ended 31st March, 2014 are as under:

( 000)
Material issued at site 7700
Direct wages paid 3300
Site office cost 550
Material return to store 175
Work cer fied 12650
Work uncer fied 225
Progress Payment Received 10120
Prepaid site office cost as on 31-03-2014 50
Direct wages outstanding as on 31-03-2014 100
Material at site as on 31-03-2014 110
Addi onal Informa on:
(a) A plant was purchased for the contract at 8,00,000 on 01-12-2023
(b) Deprecia on @ 15% per annum is to be charged.
(c) Material which cost 1,30,000 was destroyed by fire.
Prepare:
(i) Contract Account for the year ended 31st March, 2014 and compute the profit to
be taken to the profit & Loss Account.
(ii) Account of Contractee.
(iii) Profit & Loss Account showing the relevant items.
(iv) Balance Sheet showing the relevant items. [8]

(b). A transport company has 20 vehicles, which capaci es are as follows:

No. of Vehicles Capacity per vehicle

5 9 tonne
6 12 tonne
7 15 tonne
2 20 tonne

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The company provides the goods transport service between sta ons ‘A’ to sta on ‘B’
Distance between these sta ons is 200 kilometres. Each vehicle makes one round trip per
day an average. Vehicles are loaded with an average of 90 per cent of capacity at the me of
departure from sta on ‘A’ to sta on ‘B’ and at the me of return bank loaded with 70 per
cent of capacity 10 per cent of vehicles are laid up for repairs every day The following
informa on are related to the month of October, 2013:

Salary of Transport Manager 30,000

Salary of 30 drivers 4,000 each driver
Wages of 25 Helpers 2,000 each helper
Wages of 20 Labourers 1,500 each labourer
Consumable stores 45,000
Insurance (Annual) 24,000
Road Licence (Annual) 60,000
Cost of Diesel per litre 35
Kilometres run per litre each vehicle 5 Km.
Lubricant Oil etc 23,500
Cost of replacement of Tyres. Tubes, other parts etc. 1,25,000
Garage rent (Annual) 90,000
Transport Technical Service Charges 10,000
Electricity and Gas charges 5,000
Deprecia on of vehicles 2,00,000

There is a workshop a ached to transport department which repairs these vehicles and
other vehicles also. 40 per cent of transport manager’s salary is debited to the workshop.
The transport department is charged 28,000 for the service rendered by the workshop
during October, 2013. During the month of October, 2013 opera on was 25 days.
You are required:
(i) Calculate per ton-km opera ng cost.
(ii) Find out the freight to be charged per ton-km if the company earned a profit of 25 per
cent on freight. [8]

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Question.3. [2 x 8 = 16 marks ]
(a). ABC Ltd. had prepared the following es ma on for the month of April:

Quan ty Rate Amount

Material-A 800 kg. 45.00 36,000
Material-B 600 kg. 30.00 18,000
Skilled labour 1,000 hours 37.50 37,500
Unskilled labour 800 hours 22.00 17,600

Normal loss was expected to be 10% of total input materials and an idle labour me of 5%
of expected labour hours was also es mated.
At the end of the month the following informa on has been collected from the cost
accoun ng department:
The company has produced 1,480 kg. finished product by using the followings:

Quan ty Rate Amount

Material-A 900 kg. 43.00 38,700
Material-B 650 kg. 32.50 21,125
Skilled labour 1,200 hours 35.50 42,600
Unskilled labour 860 hours 23.00 19,780

You are required to calculate:

(a) Material Cost Variance;
(b) Material Price Variance;
(c) Material Mix Variance;
(d) Material Yield Variance;
(e) Labour Cost Variance;
(f) Labour Efficiency Variance and
(g) Labour Yield Variance. [8]

(b). XY Co. Ltd manufactures two products viz. X and Y and sells them through two divisions,
East and West. For the purpose of Sales Budget to the Budget Commi ee, following
informa on has been made available for the year 2014-15:
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 Product Budgeted Sales Actual Sales
East Division West Division East Division West Division
X 400 units at 9 600 units at 9 500 units at 9 700 units at 9
Y 300 units at 21 500 units at 21 200 units at 400 units at
21 21

Adequate market studies that product X is popular but under priced. It is expected that if the
price of X is increased by 1, it will, find a ready market. On the other hand, Y is overpriced
and if the price of Y is reduced by 1 it will have more demand in the market. The company
management has agreed for the aforesaid price changes. On the basis of these price changes
and the reports of salesmen, following es mates have been prepared by the Divisional
Managers:
Percentage increase in sales over budgeted sales

Product East Division West Division

X + 10% +5%
Y + 20% + 10%

With the help of intensive adver sement campaign, following addi onal sales (over and
above the above men oned es mated sales by Divisional Mangers) are possible:

Product East Division West Division

X 60 units 70 units
Y 40 units 50 units

You are required to prepare Sales Budget for 2015-16 a er incorpora ng above es mates
and also show the Budgeted Sales and Actual Sales of 2014-15. [8]

Question.4. [2 x 8 = 16 marks ]
(a). A company offers a fixed deposit scheme whereby ₹ 10,000 matures to ₹ 12,625 a er 2
years, on a half-yearly compound ding basis. If the company wishes to amend the scheme by
compounding interest every quarter, what will be the revised maturity value? [8]
(b). MN Limited gives you the following informa on related for the year ending 31st March
2016:
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 (1) Current Ra o 2.5 : 1
(2) Debt-Equity Ra o 1 : 1.5
(3) Return on Total Assets (A er Tax) 15%
(4) Total Assets Turnover Ra o 2
(5) Gross Profit Ra o 20%
(6) Stock Turnover Ra o 7
(7) Current Market Price per Equity Share 16
(8) Net Working Capital 4,50,000
(9) Fixed Assets 10,00,000
(10) 60,000 Equity Shares of 10 each
(11) 20,000 9% Preference Shares of 10 each
(12) Opening Stock 3,80,000
You are required to calculate:
(i) Quick Ra o
(ii) Fixed Assets Turnover Ra o
(iii) Proprietary Ra o
(iv) Earnings per Share
(v) Price-Earning Ra o [8]

Question.5. [2 x 8 = 16 marks ]
(a). Using the following data. complete the Balance Sheet given below: [8]
Gross Profit 54,000
Shareholders Funds 6,00,000
Gross Profit margin 20%
Credit sales to Total sales 80%
Total Assets turnover 0.3 mes
Inventory turnover 4 mes
Average collec on period (a 360 days year ) 20 days

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Current ra o 1.8
Long-term Debt to Equity 40%
Balance Sheet
Creditors ……………………. Cash ………………
Long-term debt ……………………. Debtors …………………
Shareholders’ funds ……………………. Inventory …………………
Fixed assets …………………

(b). A company wants to invest in a machinery that would cost 50,000 at the beginning of
year 1. It is es mated that the net cash inflows from opera ons will be 18,000 per annum
for 3 years. if the company opts to service a part of the machine at the end of year 1 at
10,000. In such a case, the scrap value at the end of year 3 will be 12,500. However, if the
company decides not to service the part, then it will have to be replaced at the end of year 2
at 15,400. But in this case, the machine will work for the 4th year also and get opera onal
cash inflow of 18,000 for the 4th year. It will have to be scrapped at the end of year 4 at
79,000. Assuming cost of capital at 10% and ignoring taxes, will you recommend the
purchase of this machine based on the net present value of its cash flows?
If the supplier gives a discount of 5,000 for purchase, what would be your decision? (The
present value factors at the end of years 0, 1, 2, 3, 4, 5 and 6 are respec vely 1, 0.9091,
0.8264, 0.7513, 0.6830, 0.6209 and 0.5644). [8]

Question.6. [ 16 marks ]
Following informa on is forecasted by the CS Limited for the year ending 31st March 20X6:

Balance as at Balance as at
1st April, 20X5 31st March,
20X6
Raw Material 45,000 65,356
Work-in-progress 35,000 51,300
Finished goods 60,181 70,175
Receivables 1,12,123 1,35,000
Payables 50,079 70,469

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 Annual purchases of raw material (all 4,00,000
credit)
Annual cost of produc on 7,50,000
Annual cost of goods sold 9,15,000
Annual opera ng cost 9,50,000
Annual sales (all credit) 11,00,000
You may take one year as equal to 365 days.
You are required to calculate:
(i) Net opera ng cycle period.
(ii) Number of opera ng cycles in the year.
(iii) Amount of working capital requirement

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