Success-Gurus

[GROUP - II]
254 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
COST AND MANAGEMENT ACCOUNTING
BASIC ASPECTS OF COST ACCOUNTING
Objectives -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
The relationship of value, function and cost can be expressed as Cost = Value/Function.
[Ref : Q1. (b)(iv), June ’07 / Paper-8] 1
Descriptive & Practical Questions :
Q1. State the distinguishing features of standard cost. [Ref : Q5. (a), Dec ’07 / Paper-8] 5
MATERIALS
Objectives -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
ABC analysis is made on the basis of unit prices of materials.
[Ref : Q1. (b)(iii), June ’09 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
The annual demand of a certain component bought from the market is 1,000 units. The cost of
placing an order is Rs. 60 and the carrying cost per unit is Rs. 3 p.a. The Economic Order
Quantity for the item is ___________ . (200, 400, 600)
[Ref : Q1. (c)(i), June ’09 / Paper-8] 1
Q3. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover
according to flux method is ___________ . (5.04, 4.03, 9.08)
[Ref : Q1. (c)(iv), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. Write short note on JIT. [Ref : Q8. (a), Dec ’08 / Paper-8] 3
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LABOUR
Objective -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
Time and motion study which is a function of the engineering department is useless for
determination of wages. [Ref : Q1. (c)(ii), Dec. ’08 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end. During the year 120 persons left service and 96 replacements were made. The labour
turnover according to flux method is ___________ %. (5.04, 4.03, 9.08)
[Ref : Q1. (e)(i), Dec. ’08 / Paper-8] 1
Q3. State whether the following statements are True (T) or False (F) :
Time and motion study which is a function of the engineering department is useles for
determination of wages. [Ref : Q1. (b)(ii), June ’09 / Paper-8] 1
Q4. Choose the correct answer from the brackets :
In a company there were 1200 employees on the rolls at the beginning of a year and 1180 at the
end, during the year 120 persons left and 96 replacements were made, the rate of labour turnover
according to flux method is ___________ . (5.04, 4.03, 9.08)
[Ref : Q1. (c)(iv), June ’09 / Paper-8] 1
Q5. In the following cases, choose the correct answer :
A worker has time rate of Rs. 15/hr. He makes 720 units of a component (standard time :
5 minutes/ unit in a week of 48 hours). His total wages including Rowan bonus for the week is
_________ .
A : Rs. 792;
B : Rs. 820;
C : Rs. 840;
D : Rs. 864. [Ref : Q1. (e)(v), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. What is idle time? Explain the causes for idle time. [Ref : Q2. (a), Dec ’08 / Paper-8] 5
Q2. A worker is allowed 60 hours to complete a job on a guaranteed wage of Rs. 10 per hour. He
completes the job in 48 hours. For the saving in time, how much he will get under Halsey
Premium Plan (@ 50% Bonus)? [Ref : Q2. (b), Dec ’08 / Paper-8] 5
256 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
Q3. Discuss the essentials of a good incentive scheme. [Ref : Q2. (a), June ’09 / Paper-8] 5
Q4. The standard hours for job X is 100 hours. The job has been completed by Amar in 60 hours,
Akbar in 70 hours and Anthony in 95 hours. The bonus system applicable to the job is as
follows :
Percentage of time saved to time allowed Bonus
Saving up to 10% 10% of time saved
From 11% to 20% 15% of time saved
From 21% to 40% 20% of time saved
From 41% to 100% 25% of time saved
The rate of pay is Rs. 10 per hour. Calculate the total earnings of each worker and also the rate
of earnings per hour. [Ref : Q2. (b), June ’09 / Paper-8] 5
DIRECT EXPENSES
Objective -Type Questions :
Q1. If an expenses can be identified with a specific cost unit, it is treated as direct expenses.
[Ref : Q1. (c)(i), Dec. ’08 / Paper-8] 1
Q2. If an expenses can be identified with a specific cost unit, it is treated as direct expenses.
[Ref : Q1. (b)(i), June ’09 / Paper-8] 1
Q3. The monthly cost of maintenance of machinery for 12,000 machine hours run is Rs. 1,70,000
and for 18,500 hours it is Rs. 2,02,500. The cost of maintenance for 14,000 hours is Rs. ________
(1,90,000, 1,80,000, 1,85,000) [Ref : Q1. (c)(ii), June ’09 / Paper-8] 1
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 257
INDIRECT EXPENSES
Objective -Type Questions :
Q1. Fill in the blanks :
The term used to charge overheads to cost units is called __________ .
[Ref : Q1. (b)(i), Dec. ’08 / Paper-8] 1
Descriptive & Practical Questions :
Q1. A company makes components for television sets using two service departments and two
production departments. The inter-departmental relationship and overhead costs are given
below :
Percentage of service provided to
Maintenance Scheduling Moulding Assembly
From :
Maintenance — 10% 40% 50%
Scheduling 20% — 50% 30%
Total overhead cost (Rs.) 7,50,000 4,00,000 3,78,000 2,76,00
You are required to show the amount of Scheduling Department costs and Maintenance
Department costs to be allocated to the Production Department, using Simultaneous Equation
Method. [Ref : Q2. (c), Dec ’08 / Paper-8] 5
Q2. A company has three production departments, A, B and C and two service departments, P and
Q. The following figures are available from the primary distribution summary.
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
From primary distribution (Rs.) 3,150 3,700 1,400 2,250 1,000
The expenses of the services departments are to be apportioned on a percentage basis as follows :
Department Dept. A Dept. B Dept. C Dept. P Dept. Q
P (%) 40 30 20 — 10
Q (%) 30 30 20 20 —
Prepare secondary summary as per the simultaneous equations method.
[Ref : Q2. (c), June ’09 / Paper-8] 5
258 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
JOB, BATCH, CONTRACT AND PROCESS COSTING
Objective -Type Questions :
Q1. Choose the correct answer from the brackets :
The output of three different products P, Q and R in a factory are 20000 Kg, 15000 Kg. and 15000
Kg. respectively. If the costs are in proportion 4 : 6 : 7, then the cost per equivalent product unit
is Rs. __________ . (10, 7, 5) [Ref : Q1. (c)(v), June ’09 / Paper-8] 1
Q2. Identify the correct answer from the given alternatives of the following questions :
(i) “Conversion cost” refers to
A. Manufacturing costs incurred to produce units of output
B. All costs associated with manufacturing other than direct labour costs
C. The sum of direct material costs and all factory overhead costs
D. The sum of raw material costs and overheads costs
[Ref : Q1. (d)(ii), Dec ’08 / Paper-8] 1
Q3. Choose the correct answer from the brackets :
The output of three different products P, Q and R in a factory are 20000 kg, 15000 kg and 15000
kg respectively. If costs are in proportion 4 : 6 : 7, then the cost per equivalent unit is
Rs. __________ . (10, 7, 5) [Ref : Q1. (e)(v), Dec ’08 / Paper-8] 1
Descriptive & Practical Questions :
Q1. The following was the expenditure on a contract for Rs. 12,00,000 commenced in January
2008 :
Rs.
Materials 2,40,000
Wages 3,28,000
Plant 40,000
Overheads 17,200
Cash received on account of the contract up to 31st December was Rs. 4,80,000 being 80% of the
work certified. The value of materials in hand was Rs. 20,000. The plant had undergone 20%
depreciation.
Prepare contract account. [Ref : Q3. (a), Dec ’08 / Paper-8] 5
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 259
Q2. A factory has two production processes. Normal loss in each process is 10% and scrapped
units sell for Re. 0.50 each from process 1 and Rs. 3 each from process 2. Relevant information
for costing purposes relating to period 5 are as follows :
Direct materials added : Process 1 Process 2
Units 2,000 1,250
Cost Rs. 8,100 Rs. 1,900
Direct labour Rs. 4,000 Rs. 10,000
Production overhead 150% of direct 120% of direct
labour cost labour cost
Output to Process 2/finished goods 1,750 units 2,800 units
Actual production overhead Rs. 17,800
Workout cost per unit of output and losses.
[Ref : Q3. (b), Dec ’08 / Paper-8] 10
Q3. State the fundamental principles of Process Costing. [Ref : Q3. (a), June ’09 / Paper-8] 5
Q4. Prabhu Builders Ltd. commenced work on 1st April, 2007 on a contract of which the agreed
price was Rs. 5 lakhs. The following expenditure was incurred during the year up to 31st
March, 2008.
Particulars Amount Rs.
Wages 1,40,000
Plant 35,000
Materials 1,05,000
Head office expenses 12,500
Materials costing Rs. 10,000 proved unsuitable and were sold for Rs. 11,500 and a part of plant
was scrapped and sold for Rs. 1,700. Of the contract price Rs. 2,40,000 representing 80% of
work certified had been received by 31st March, 2008 and on that date the value of the plant on
the job was Rs. 8,000 and the value of materials was Rs. 3,000. The cost of work done but not
certified was Rs. 25,000.
It was decided to (a) Estimate what further expenditure would be incurred in completing the
contract, (b) Compute from the estimate and the expenditure already incurred, the total profit
that would be made on the contract and (c) Ascertain the amount of profit to be taken to the
credit of Profit and Loss Account for the year ending on 31st March, 2008. While taking profit
to the credit of Profit and Loss A/c. that portion of the total profit should be taken which the
260 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
JOINT PRODUCT & BY PRODUCT
Descriptive & Practical Questions :
Q1. Concept of split-off point and joint cost. [Ref : Q8. (e)(i), June ’09 / Paper-8] 3
value of work certified bears to the contract price. Details of the estimates to complete the
contact are given below :
(a) That the contract would be completed by 30th September, 2008.
(b) The wages to complete would amount Rs. 84,750.
(c) That materials in addition to those in stock on 31st March, 2008 would cost Rs. 50,000.
(d) The further Rs. 15,000 would have to be spent on plant and the residual value of the plant
on 30th September, 2008 would be Rs. 6,000.
(e) The head office expenses to the contract would be at the same annual rate as in 2007-08.
(f) That claims, temporary maintenance and contigencies would require Rs. 9,000.
Prepare contract account for the year ended 31st March, 2008 and show your calculations of
the sum to be credited to Profit and Loss A/c. for the year.
[Ref : Q3. (b), June ’09 / Paper-8] 10
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 261
RECONCILIATION BETWEEN COST AND FINANCIAL
PROFIT AND LOSS ACCOUNT
Descriptive & Practical Questions :
Q1. As of 31st March, 2008, the following balances existed in a firm’s cost ledger, which is maintaind
separately on a double entry basis :
Debit Credit
Rs. Rs.
Stores Ledger Control A/c 3,00,000 —
Work-in-progress Control A/c 1,50,000 —
Finished Goods Control A/c 2,50,000 —
Manufacturing Overhead Control A/c — 15,000
Cost Ledger Control A/c — 6,85,000
Total 7,00,000 7,00,000
During the next quarter, the following items arose :
Finished Product (at cost) 2,25,000
Manufacturing overhead incurred 85,000
Raw material purchased 1,25,000
Factory wages 40,000
Indirect labour 20,000
Cost of sales 1,75,000
Materials issued to production 1,35,000
Sales returned (at cost) 9,000
Materials returned to suppliers 13,000
Manufacturing overhead charged to production 85,000
You are required to prepare the Cost Ledger Control A/c., Stores Ledger Control A/c., Work-in
progress Control A/c., Finished Stock Ledger Control A/c., Manufacturing Overhead Control
A/c., Wages Control A/c., Cost of Sales A/c and the Trial Balance at the end of the quarter.
[Ref : Q7. (a), June ’09 / Paper-8] 10
Q2. Explain the need for reconciliation of cost and financial accounts. Also state the reasons for
difference in profit between the two accounts. [Ref : Q7. (b), June ’09 / Paper-8] 5
Q3. Write short note on Profit Centre. [Ref : Q8. (c), June ’09 / Paper-8] 3
262 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
DECISION MAKING TOOLS
Objective -Type Questions :
Q1. Fill in the blanks :
(i) Sales minus Break-even sales is called __________ .
(ii) In absorption costing ___________ cost is added to inventory.
(iii) In Television industry the most appropriate method of costing is ________ costing.
[Ref : Q1. (b), Dec. ’08 / Paper-8] 1×3
Q2. State whether the following statements are True (T) or False (F) :
(i) Fixed costs vary with volume rather than time.
(ii) In break-even analysis it is assumed that variable fosts fluctuate inversely with time.
[Ref : Q1. (b), Dec ’08 / Paper-8] 1×2
Q3. Identify the correct answer from the given alternatives of the following questions :
(i) Which of the following concept is known as cost behaviour-oriented approach to product
costing?
A. Standard costing
B. Marginal costing
C. Process costing
D. Absorption costing
(ii) Which of the following is true at break-even point?
A. Total Sales revenue = Variable cost
B. Profi = Fixed cost
C. Sales revenue = Total cost — Variable cost
D. Contribution = Fixed cost
(iii) Which of the following is the correct valuation base for finished goods stock for balance
sheet purposes?
A. Variable cost per unit
B. Marginal cost per unit
C. Production cost per unit
D. Total cost per unit
(iv) If the raw material prices are affected by inflation, which of the following methods of
valuing stocks will give the lowest gross profit?
A. LIFO
B. Replacement cost
C. FIFO
D. Simple average [Ref : Q1. (d), Dec ’08 / Paper-8] 1×4
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 263
Q4. Choose the correct answer from the brackets :
The variable cost of a product increases by 10% and the management raise the unit selling price
by equal amount. The fixed costs remain unchanged. Then BEP of the firm ___________ .
[increase, decrease, unchanged] [Ref : Q1. (e), Dec ’08 / Paper-8] 1
Q5. Choose the correct answer from the brackets :
A company’s fixed cost amounts Rs. 120 lakhs p.a. and its overall P/V ratio is 0.4. The annual
sales of the company should be Rs. ____________ lakhs to have a Margin of Safety of 25%.
(400, 500, 600) [Ref : Q1. (c)(iii), June ’09 / Paper-8] 1
Q6. Fill in the blanks suitably :
(i) Margin of safety is _____________ or _____________ .
(ii) Profit volume graph shows the relationship between ____________ and ___________.
[Ref : Q1. (d), June ’09 / Paper-8] 1×2
Q7. In the following cases, choose the correct answer :
A Company maintains a margin of safety of 25% on its current sales and earns a profit of Rs. 30
lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales
amount to
A : Rs. 200 lakhs;
B : Rs. 300 lakhs;
C : Rs. 325 lakhs;
D : None of the above. [Ref : Q1. (e)(ii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. Distinguish between Marginal Costing and Absorption Costing.
[Ref : Q7. (a), Dec ’08 / Paper-8] 5
Q2. A company produces 30,000 units of product A and 20,000 units of product B per annum. The
sales value and costs of the two products are as follows :
Sales Value : Rs. 7,60,000 Factory Overheads : Rs. 1,90,000
Direct Material : Rs. 1,40,000 Administrative and Selling Overheads : Rs. 1,20,000
Direct Labour : Rs. 1,90,000
50% of the factory overheads are variable and 50% of the administrative and selling overheads
are fixed. The selling price of A is Rs. 12 per unit and Rs. 20 per unit for B.
The direct material and labour ratio for product A is 2 : 3 and for B is 4 : 5. For both the products,
the selling price is 400% of direct labour. The factory overheads are charged in the ratio of direct
labour and administrative and selling overheads are recovered at a flat rate of Rs. 2 per unit for
A and Rs. 3 per unit for B.
264 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
Due to fall in demand of the above products, the company has a plan to diversify and make
product C using 40% capacity. It has been estimated that for C direct material and direct labour
will be Rs. 2.50 and Rs. 3 per unit respectively. Other variable costs will be the same as applicable
to the product A. The selling price of product C is Rs. 14 per unit and production will be 30,000
units.
Assuming 60% capacity is used for manufacture of A and B, calculate—
(i) Present cost and profit;
(ii) Cost and profit after diversification;
(iii) Give your recommendations as to whether to diversify or not.
[Ref : Q7. (b), Dec ’08 / Paper-8] 10
Q3. Write short note on Benchmarking. [Ref : Q8. (c), Dec ’08 / Paper-8] 3
Q4. New India Engineering Co. Ltd., produces three components A, B and C. The following
particulars are provided :
PRODUCT
A B C
Rs. Rs. Rs.
Per Unit
Sale Price 60 55 50
Direct Material 20 18 15
Direct Labour 15 14 12
Variable overhead expenditure 13 13 17
Fixed Cost is Rs. 1,00,000 per year.
Estimated Sales (in No. of Units) 2000 2000 2000
Due to break-down of one of the machines, the capacity is limited to 12,000 machine hours only
and this is not sufficient to meet the total sales demand.
You are required to work out
(a) what will be most profitable product mix that should be produced, and
(b) the total contribution from the revised product mix.
[Ref : Q4. (a), June ’09 / Paper-8] 5+5
Q5. What are the factors those are taken into account by the Management while considering a Make
or Buy decision? [Ref : Q4. (b), June ’09 / Paper-8] 5
Q6. Write short note on Cost Volume Profit Analysis. [Ref : Q8. (a), June ’09 / Paper-8] 3
Q7. Write short note on Essentials of Inter firm comparison. [Ref : Q8. (d), June ’09 / Paper-8] 3
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 265
OPERATING COSTING
Descriptive & Practical Questions :
Q1. A hotel has a capacity of 100 single rooms and 20 double rooms. The average occupancy of both
single and double rooms is expected to be 80% throughout the year of 365 days. The rent for the
double rooms has been fixed at 125% of the rent of the single room. The costs are as under :
Variable costs : Single room Rs. 220 each per day; Double room Rs. 350 each per day.
Fixed costs : Rs. 49,64,000
Calculate the rent chargeable for single and double rooms per day in such a way that the hotel
earns a margin of safety of 20% on hire of room. [Ref : Q4. (b), Dec ’08 / Paper-8] 10
Q2. Define ‘Operating Costing’ and mention at least five activities where it is applicable.
[Ref : Q6. (b), June ’09 / Paper-8] 5
RELEVANT COSTING
Objective -Type Questions :
Q1. State whether the following statements are True (T) or False (F) :
Future costs are not relevant while making managerial decisions.
[Ref : Q1. (c)(iv), Dec ’08 / Paper-8] 1
266 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
BUDGETING
Objective -Type Questions :
Q1. Fill in the blanks suitably :
A flexible budget recognizes the behaviour of _____________ and _____________ .
[Ref : Q1. (d)(iii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. The following are the estimated sales of a company for eight months ending 30. 11.2007
Month Estimated Sales (Units)
April 2007 12,000
May 2007 13,000
June 2007 9,000
July 2007 8,000
August 2007 10,000
September 2007 12,000
October 2007 14,000
November 2007 12,000
As a matter of policy, the company maintains the closing balance of finished goods and raw
materials as follows :
Stock item Closing balance of a month
Finished goods 50% of the estimated sales for the next month
Raw materials Estimated consumption for the next month
Every unit of production requires 2 kg of raw material costing Rs. 5 per kg.
Prepare Prodcution Budget (in units) and Raw Material Purchase Budget (in units and cost) of
the company for the half year ending 30 September 2007. [Ref : Q6. (a), Dec ’08 / Paper-8] 10
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 267
Q2. Write short note on Flexible Budgeting. [Ref : Q8. (e), Dec ’08 / Paper-8] 3
Q3. The following information relates to the production activities of Good Wish Ltd. for 3 months
ending on 31st December, 2006 :
Particulars Amount in Rupees
Fixed Expenses :
Management Salaries 2,10,000
Rent and Taxes 1,40,000
Depreciation of Machinery 1,75,000
Sundry Office Expenses 2,22,000
Total Fixed Expenses 7,47,000
Semi-Variable Expenses at 50% capacity
Plant Maintenance 62,500
Labour 2,47,000
Salesmen’s salaries 72,500
Sundry Expenses 65,000
Total Semi-Variable Expenses 4,47,000
Variable Expenses at 50% capacity
Materials 6,00,000
Labour 6,40,000
Salesmen’s commission 95,000
Total Variable Expenses 13,35,000
It is further noted that semi-variable expenses remain constant between 40% and 70% capacity,
increase by 10% of the above figures between 70% and 85% capacity and increase by 15% of the
above fig. between 85% and 100% capacity. Fixed expenses remain constant whatever the level
of activity. Sales at 60% capacity are Rs. 25,50,000, at 80% capacity Rs. 34,00,000 and at 100%
capacity Rs. 42,50,000. All items produced are sold. Prepare a flexible budget at 60%, 80% and
100% productive capacity. [Ref : Q6. (a), June ’09 / Paper-8] 10
268 SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING
STANDARD COSTING
Objective -Type Questions :
Q1. Fill in the blanks :
Material usage variance is the sum of _____________ .
[Ref : Q1. (b)(iii), Dec ’08 / Paper-8] 1
Q2. Choose the correct answer from the brackets :
The factory where standard costing is followed, 4600 kg of materials at Rs. 10.50/kg were
actually consumed resulting in a price variance of Rs. 4800 (A) and usage variance of Rs. 4000
(F). The standard cost of actual production is Rs. ___________ . [100000, 96000, 120000]
[Ref : Q1. (e)(iii), Dec ’08 / Paper-8] 1
Q3. If the capacity usage ratio of a prodcution department is 90% and acitivity ratio is 99%, then the
efficiency ratio of the department is __________ %. [120, 110, 90]
[Ref : Q1. (e), Dec ’08 / Paper-8] 1
Q4. Standard hour is the standard time required per unit of production.
[Ref : Q1. (b)(v), June ’09 / Paper-8] 1
Q5. Fill in the blanks suitably :
(i) Material usage variance is the sum of ____________ and ________________ .
(ii) Efficiency is basically a ratio of ____________ and _____________ .
[Ref : Q1. (d)(ii)(v), June ’09 / Paper-8] 1+1
Q6. In the following cases, choose the correct answer :
In a factory of PEE Ltd. where standard costing is followed, the budgeted fixed overhead for a
budgeted production of 4800 units is Rs. 24,000. For a certain period actual expenditure incurred
was Rs. 22,000 resulting in a fixed overhead volume variance of Rs. 3,000 (Adv.). Then actual
production for the period was
A : 5400 units;
B : 4200 units;
C : 3000 units;
D : None of the above. [Ref : Q1. (e)(iii), June ’09 / Paper-8] 1
Descriptive & Practical Questions :
Q1. State the distinguishing features of standard cost. [Ref : Q5. (a), Dec ’08 / Paper-8] 5
SCANNER [SEC-II] n COST AND MANAGEMENT ACCOUNTING 269
Q2. The following information was obtained from the records of a manufacturing unit using
standard costing system :
Particulars Standards Actual
Production 4000 units 3800 units
Working days 20 21
Fixed overheads Rs. 40,000 Rs. 39,000
Variable overheads Rs. 12,000 Rs. 12,000
Calculate :
(a) Variable overhead variance;
(b) Fixed overhead expenditure variance;
(c) Fixed overhead volume variance;
(d) Fixed overhead efficiency variance;
(e) Fixed overhead calandar variance. [Ref : Q5. (b), Dec ’08 / Paper-8] 10
Q3. The standard process cost card for a processed item is as under :
Rs. Per kg of
Finished Product
Direct Material — 2 kgs @ Rs. 10 per kg 20
Direct Labour — 3 hours @ Rs. 20 per hour 60
Fixed Overhead 90
Total 170
Budgeted output for the period is 1000 kgs.
Actual production and cost data for a month are as under :
Actual production (on equivalent production basis)
Material = 1400 kgs
Labour = 1140 kgs
Overheads = 1140 kgs
Direct Material 2900 kgs = cost Rs. 32,000
Direct Labour 3300 kgs = cost Rs. 68,000
Fixed Overhead 3300 kgs Rs. 88,000
You are required to work out the following variances :
[Ref : Q5. (a), June ’09 / Paper-8] 10
Q4. Distinguish between Standard Costing and Budgetary Control.
[Ref : Q5. (b), June ’09 / Paper-8] 5

SCANNER [SEC-II] n FINANCIAL ACCOUNTING 209
SCANNER
SECTION-II
Compiles Question asked in the Intermediate
Examination of ICWAI under Syllabus 2008 in
December ’08 and June ’09.
210 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
[GROUP - I]
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 211
FINANCIAL ACCOUNTING
ACCOUNTING CONVENTIONS AND PRACTICES
Objective -Type Questions :
Q1. Distinguish between liability and provisions. [Ref : Q1. (a), June ’09 / Paper-5] 3
Q2. State whether following statements are true or false :
(i) Goodwill is a fictitious assets.
(ii) Land is a depreciable asset. [Ref : Q1. (d), June ’09 / Paper-5] 4
Descriptive & Practical Questions :
Q1. Materiality concept. [Ref : Q8. (e), Dec ’08 / Paper-5] 3
Q2. What are the objects of charging depreciation and problems of measurement of depreciation?
Explain. [Ref : Q2. (b), June ’09 / Paper-5] 5
Q3. State the advantages and disadvantages of Weighted Average method of valuation of inventory.
[Ref : Q5. (b), June ’09 / Paper-5] 5
212 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
ROYALTY
Descriptive & Practical Questions :
Q1. Define the Concept of Minimum/Dead Rent. [Ref : Q3. (b), June ’09 / Paper-5] 5
HIRE PURCHASE
Objective -Type Questions :
Q1. Choose the correct answer :
Under the hire-purchase system the buyer becomes the owner of goods :
(i) Immediately after the delivery of goods.
(ii) Immediately after the down payments.
(iii) Immediately after the first instalment is paid.
(iv) Immediately after the payment of last instalment. [Ref : Q1. (h), Dec. ’08 / Paper-5] 3
Descriptive & Practical Questions :
Q1. Sunshine Company sells goods for cash and on hire purchase and latter being the cash retail
price plus 12.5% thereon. Following are the particulars for the year ended 31st December,
2007 :
Rs.
Stock with hire purchase (at hire purchase price) with customers on 1.1.2007 29,700
Purchase during the year 1,58,400
Stcok at shop : On 1.1.2007 22,000
On 31.12.2007 26,400 48,400
Cash Sales during the year 79,200
Cash received during the year (Hire purchase instalments) 1,01,750
Instalments due but not received :
On 1.1.2007 4,400
On 31.12.2007 6,600
Hire purchase sales during the year 1,18,800
Prepare the following :
(a) General Trading Account.
(b) Hire Purchase Trading Account.
(c) Hire Purchase Sales Account, for the year ended 31st December, 2007.
[Ref : Q4. (a), June ’09 / Paper-5] 10
Q2. Distinguish between Hire Purchase System and Instalment System.
[Ref : Q4. (b), June ’09 / Paper-5] 5
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 213
RECEIPTS & PAYMENTS/INCOME & EXPENDITURE ACCOUNTS
Objective -Type Questions :
Q1. A non-profit organisation has furnished the following data in connection with finalisation of
accounts for the year ended 31st March 2008 :
Rs.
Membership subscriptions received as per books 57,000
Subscription in arrear for 2007-08 1,400
Contribution to indoor games section included in item no. one above 2,000
Advance receipt of subscriptions (for 2008-09) 480
Subscription outstanding for 2006-07 now received 3,000
The amount of subscription to be taken as income for 2007-08 is
A : Rs. 57,000, B : Rs. 51,520, C : Rs. 55,000, D : Rs. 52,920, Select the correct one.
[Ref : Q1. (f), Dec. ’08 / Paper-5] 3
Descriptive & Practical Questions :
Q1. The income and expenditure account of an association for the year ended 31st March 2008 is as
under :
Rs. Rs.
To Salaries 1,20,000 By Subscription 1,70,000
Printing and Stationery 6,000 Entrance fee 4,000
Telephone 1,500 Contribution for dinner 36,000
Postage 500
General expenses 12,000
Interest and bank charges 5,500
Audit fees 2,500
Annual dinner expenses 25,000
Depreciation 7,000
Surplus 30,000
Total 2,10,000 2,10,000
The aforesaid income and expenditure account has been prepared after the following
adjustments :
Subscription outstanding as on 31st March 2007 16,000
Subscription outstanding on 31st March 2008 18,000
Subscription received in advance as on 31st March 2007 13,000
Subscription received in advance as on 31st March 2008 8,400
214 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
Salaries outstanding as on 31st March 2007 6,000
Salaries outstanding as on 31st March 2008 8,000
Audit fees for 2006-2007 paid during 2007-2008 2,000
Audit fee for 2007-2008 not paid 2,500
The building owned by the association since 1990 costs 1,90,000
Equipment as on 31st March 2007 valued at 52,000
At the end of the year after depreciation of Rs. 7,000, equipment amounted to 63,000
In 2006-2007, the association raised a bank loan of which is still not paid 30,000
Cash in hand as on 31st March 2008 28,500
You are required to prepare Receipts and Payments Account of the association for the year
ended 31st March 2008 and the Balance Sheet as at that date.
[Ref : Q6. (a), Dec. ’08 / Paper-5] 10
Q2. Distinguish between ‘Receipts and Payments Account’ and ‘Income and Expenditure Account’.
[Ref : Q6. (b), Dec. ’08 / Paper-5] 5
Q3. The following is the Receipts and Payment Account of Sodepore Recreation Club for the year
ended 31.12.2008 :
Rs. Rs.
To Cash in hand 1,000 By Rent of Club House 2,600
” Cash at Bank 12,000 ” Painting of Club House 1,400
” Members’ Subscription ” Wages of Ground Maintenance 3,000
2007 200 ” General Expenses 2,600
2008 3,600 ” Electricity Charges 3,600
2009 400 4,200 ” Investment 20,000
” Life Membership Subscription 4,000 ” Secretary’s Honorarium 1,200
” Sale of Ticket of annual exhibition 20,000 ” Annual Meeting Expenses 800
” Sale of refreshment 24,000 ” Sports Equipment 3,600
” Interest on investment 2,600 ” Purchase of refreshment 11,000
” Sale of furniture 200 ” Printing & Stationery 1,000
(Original Cost on 1.1.02 ” Insurance 600
Rs. 1,000) ” Cash in hand 4,000
” Cash at Bank 12,600
68,000 68,000
The following information are available to you :
(a) On 31.12.2007 outstanding subscription for 2007 was Rs. 300.
(b) On 31.12.2007 advance subscription for 2008 received was Rs. 100.
(c) On 31.12.2008 outstanding subscription for 2008 was Rs. 600.
[Ref : Q6. (b), Dec. ’08 / Paper-5] 5
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 215
PARTNERSHIP ACCOUNTING
Objective -Type Questions :
Q1. A & B are two partners of a firm sharing the profits & losses in the ratio of 7/12 and 5/12
respectively. On 1st April 2008 they take C as a partner giving him 1/6 share. A & B agreed
further to share the future profits in the ratio of 13/24 and 7/24 respectively. C, in addition to
his capital, brings in Rs. 96,000 as his goodwill for 1/6 share. This goodwill amount is to be
shared between A & B.
The share of goodwill amount of A & B respectively will be :
A : Rs. 24,000 and Rs. 72,000
B : Rs. 72,000 and Rs. 24,000
C : Rs. 56,000 and Rs. 40,000
D : Rs. 52,000 and Rs. 44,000
Choose the correct answer :. [Ref : Q1. (g), Dec. ’08 / Paper-5] 3
Q2. State briefly the Rule of Gerner vs. Murray. [Ref : Q1. (f), June ’09 / Paper-5] 4
Descriptive & Practical Questions :
Q1. A and B carry on independent business in provisions and their position as at 31.03.09 are
reflected in the Balance Sheets given below :
A B
Rs. Rs.
Stock in Trade 1,70,000 98,000
Sundry Debtors 89,000 37,000
Cash at Bank 13,000 7,500
Cash in hand 987 234
Furniture and fixture 2,750 1,766
Investments 513 —
2,76,250 1,44,500
Represented by Sundry Creditors for
Purchases 1,10,000 47,000
Expenses 13,250 2,000
Caipital Account 1,53,000 95,500
2,76,250 1,44,500
Both of them want to form a partnership firm from 1st April, 2009 on the following
understanding :
(a) The capital of the partnership would be Rs. 3 lakhs which would be contributed by them in
the ratio of 2 : 1.
216 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
(b) The assets of the individual business would be evaluated by C at which values, the firm
will take them over and the value would be adjusted against the contribution due by A and
B.
(c) C gave his valuation report as follows :
Business of A : Stock in Trade to be written down by 15% and a portion of Sundry Debtors
amounting to Rs. 9,000 estimated unrealisable not to be assumed by the firm; furniture and
fixtures to be valued at Rs. 2,000 and investments to be taken of market value of Rs. 1,000.
Assets of B : Stocks to be increased by 10%, and Sundry Debtors to be admitted at 85% of
their value; rest of the assets to be assumed at their book value.
(d) The firm is not to assume any Creditors other than dues on acount of purchase made.
Prepare the opening Balance Sheet of the firm. [Ref : Q5. (a), June ’09 / Paper-5] 10
Q2. Suchandra, Ashmita and Kasturi were running partnership business sharing Profit and Losses
in 2 : 2 : 1 ratio. Their Balance Sheet as on 31.03.2008 stood as following :
(Rs. in 000’s)
Liabilities Rs. Rs. Assets Rs. Rs.
Fixed Capital : Fixed Assets 920.00
Suchandra 690.00 Investment 115.00
Ashmita 460.00 Current Assets :
Kasturi 230.00 1,380.00 Stock 230.00
Current Account : Debtors 632.50
Suchandra 138.00 Cash at Bank 287.50 1,150.00
Kasturi 92.00 230.00
Unsecured Loan 230.00
Current Liabilities 345.00
2,185.00 2,185.00
On 1.4.2008, they agreed to form new company Tata (P) Ltd. withAshmita and Kasturi each
taking up 460 eq. share of Rs. 10 each, which shall take over the firm as going concern including
Goodwill, but excluding cash and bank balance.
The following are also agreed upon :
(a) Goodwill will be valued at 3 years purchase of super profit.
(b) The actual profit for the purpose of Goodwill valuation will be Rs. 4,60,000.
(c) The normal rate of return will be 18% p.a. on Fixed Capital.
(d) All other assets and liabilities will taken at Book value.
(e) Ashmita and Kasturi are to acquire interest in the new company at the ratio 3 : 2.
(f) The purchase consideration will be payable partly in shares of Rs. 10 each and partly in
cash. Payment in cash being to meet the requirement to discharge Suchandra, who has
agreed to retire.
(g) Realisation expenses amounted to Rs. 1,17,300.
You are required to close the books of the firm by passing necessary journal entries.
[Ref : Q4. (a), Dec. ’08 / Paper-5] 10
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 217
BRANCH AND DEPARTMENTAL ACCOUNTS
Descriptive & Practical Questions :
Q1. Write short notes on treatment of abnormal losses in Branch Account.
[Ref : Q4. (b), Dec. ’08 / Paper-5] 5
ACCOUNTING STANDARDS
Objective -Type Questions :
Q1. Match the following :
I AS—1 I Contingencies and events occuring after the Balance Sheet date.
II AS—3 II Accounting for Fixed Assets.
III AS—4 III Disclosure of Accounting policies.
IV AS—10 IV Cash flow statement. [Ref : Q1. (d), Dec. ’08 / Paper-5] 4
Q2. Match the following :
1. AS-7 (i) Earning per Share
2. AS-9 (ii) Construction Contracts (Revised)
3. AS-19 (iii) Revenue Recognition
4. AS-20 (iv) Leases [Ref : Q1. (c), June ’09 / Paper-5] 3
Q3. State whether the following statements are true or false :
(i) AS-26 applies when computer software is acquired for sale in the ordinary course of business.
(ii) Cost incurred in salaries/wages in internally generated software are included in the cost
computation. [Ref : Q1. (g), June ’09 / Paper-5] 3
Descriptive & Practical Questions :
Q1. Mention any five areas in which different accounting policies may be adopted by different
enterprises. [Ref : Q3. (b), Dec. ’08 / Paper-5] 5
Q2. Segment reporting. [Ref : Q8. (d), Dec. ’08 / Paper-5] 5
Q3. State clearly the provisions contained in the Accounting Standard in respect of Revaluation of
fixed Assets. [Ref : Q6. (b), June ’09 / Paper-5] 5
Q4. Disclosure requirement in a case where the companies do not comply with Accounting standard.
[Ref : Q8. (d), June ’09 / Paper-5] 3
218 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
JOINT STOCK COMPANIES
Objective -Type Questions :
Q1. Distinguish between shares and stock. [Ref : Q1. (a), Dec. ’08 / Paper-5] 3
Q2. What is meant by Revesionary Bonus? [Ref : Q1. (e), Dec. ’08 / Paper-5] 3
Q3. Choose the correct answer :
The excess amount received over the face value of shares, should be credited to
(i) Current Liabilities;
(ii) Currents Assets;
(iii) Reserves & Surplus;
(iv) Securities Premium Account. [Ref : Q1. (b), June ’09 / Paper-5] 3
Q4. Can dividend be declared out of Security Premium Account?
[Ref : Q1. (e), June ’09 / Paper-5] 3
Q5. State whether the following statements are true or false :
(i) Capital Redemption Reserve Account is created to meet legal requirements.
(ii) Partly paid-up preference shares can be redeemed.
(iii) Capital Redemption Reserve Account cannot be utilised for issuing fully paid bonus shares.
[Ref : Q1. (h), June ’09 / Paper-5] 3
Descriptive & Practical Questions :
Q1. Mention any five purposes for which share premium account can be utilised.
[Ref : Q3. (a), Dec. ’08 / Paper-5] 5
Q2. The summarized balance sheet of A Co. Ltd. as on 30th June 2008 is as under :
Share Capital :
10% redeemable preference shares of Rs. 100 each 10,00,000
Equity shares of Rs. 10 each 15,00,000
12% Debentures 7,00,000
Revenue reserves 40,00,000
Total 72,00,000
Represented by Net assets 72,00,000
The redeemable preference shares were due for redemption on 31st August 2008 and were
redeemed and duly paid off. The company is permitted to redeem the debentures at any time at
a premium of 10% and did so on 30th September 2008.
The company was in a reasonably liquid position but to assist in providing funds for redemption
of the redeemable preference shares, a rights issue of equity shares was made. 20000 equity
shares were issued for cash at a premium of Rs. 20 per share, Rs. 12.50 payable on application
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 219
on 15th July 2008 and the balance on allotment on 31st July 2008. All cash due was received on
the due dates.
During the three months ended 30th September 2008, the company traded at a profit of Rs.
2,50,000.
Required :
(i) Pass journal entries (including cash transactions) showing the relevant entries in respect
of the above.
(ii) Prepare summarized balance sheet of the company as on 30th September 2008.
[Ref : Q7. (a), Dec. ’08 / Paper-5] 10
Q3. Reserve Capital. [Ref : Q8. (e), June ’09 / Paper-5] 3
Q1. Bonus shares. [Ref : Q8. (c), Dec. ’08 / Paper-5] 3
Q2. Discuss the conditions of Companies Act with regard to buy-back of shares.
[Ref : Q7. (b), June ’09 / Paper-5] 5
220 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
PREPARATION OF COMPANY ACCOUNTS
Descriptive & Practical Questions :
Q1. Preparation the Balance Sheet as at 31st March, 2008 from the particulars furnished by Vision
Ltd., as per Schedule VI of Companies Act.
Rs.
Equity Share Capital (Rs. 10 each fully paid) 8,00,000
Calls in arrear 800
Land 1,60,000
Building 2,80,000
Plant & Machinery 4,20,000
Furniture 40,000
General Reserve 1,68,000
Loan from IDBI 1,20,000
Loans (Unsecured) 96,800
Provision for Taxation 54,400
Sundry Debtors 1,60,000
Advances (Dr.) 34,160
Proposed dividend 48,000
Profit & Loss A/c. 80,000
Cash balance 24,000
Cast at Bank 1,97,000
Preliminary Expenses 10,640
Sundry Creditors (For goods & expenses) 1,60,000
Stock :
Finished goods 1,60,000
Raw material 40,000 2,00,000
Adjustment :
(i) 1500 equity shares were issued for consideration other than cash.
(ii) Loan of Rs. 1,20,000 fro IDBI is inclusive of Rs. 6,000 for interest accrued but not due. The
loan is hypothecated by plant & machinery.
(iii) Debtors of Rs. 50,000 are due for more than six months.
(iv) The cost of assets :
Rs.
Building 3,20,000
Plant & Machinery 5,60,000
Furniture 50,000
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 221
(v) Bank balance includes Rs. 2,000 with Trust Bank Ltd., which is not a schedule Bank.
(vi) Bills receivable for Rs. 2,20,000 maturing on 30th June, 2008 have been discounted.
(viii) The company had contract for the erection of machinery at Rs. 1,50,000 which is still
incomplete. [Ref : Q2. (a), June ’09 / Paper-5] 10
222 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
ACCOUNTING SERVICES IN ORGANIZATIONS
Objective -Type Questions :
Q1. Match the following items shown below :
I Cash Reserve I Electric Supply Co.
II Clear Profit II Construction Company
III Escalation clause III Banking Company
[Ref : Q1. (b), Dec. ’08 / Paper-5] 3
Q2. Choose the correct answer :
The amortization of amount of software commences from the date when it is
(i) available for use
(ii) put to use
(iii) developed upto 75%. [Ref : Q1. (c), Dec. ’08 / Paper-5] 3
Descriptive & Practical Questions :
Q1. Distinguish between Statutory Reserve and Cash Reserve in respect of Banking Companies.
[Ref : Q5. (b), Dec. ’08 / Paper-5] 5
Q2. Escrow Account. [Ref : Q8. (a), June ’08 / Paper-5] 3
Q3. Statutory Reserve in case of Bank. [Ref : Q8. (c), June ’08 / Paper-5] 3
Q4. Kanpur Electric Supply Company rebuild and reequipped one of their plant at a cost of Rs.
80,00,000. The old plant thus, superceded, cost of Rs. 30,00,000. The capacity of new plant is
thrice of the old plant. Rs. 1,00,000 realised from sale of old materials. Four old motors valued
at Rs. 2,00,000 salvaged from old plant, were used in the construction. The cost of labour and
material was respectively 20% and 25% lower than now.
The proportion of labour to material in the plant then and now in 2 : 1. Show the journal entries
for recording the above transactions if accounts are maintained under double entry system.
[Ref : Q3. (a), Dec. ’08 / Paper-5] 10
Q5. Double Accounting system. [Ref : Q8. (b), Dec. ’08 / Paper-5] 3
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 223
Q6. Following balance have been extracted from the books of an electricity company at the end of
2007 :
(Figures in ’000)
Share Capital 1,00,000
Reserve fund (investment in 4.5% Govt. securities at par) 50,00
Contingencies reserve investment in 5% State Loan 10,00
8% debenture 20,00
Loan from State Electricity Board 40,00
Development Reserve 10,00
Fixed Assets 2,00,00
Depreciation reserve on fixed assets 50,00
Consumer deposit 55,00
Amount contributed by consumer for fixed assets 1,00
Intangible assets 5,00
Tariffs and dividend control reserve 5,00
Current Assets (monthly average) 20,00
The compnay earns a profit of Rs. 8,50,000 (after tax) in 2007. Show how the profit is to be dealt
with by the company, assuming bank rate is 5%. [Ref : Q5. (a), Dec. ’08 / Paper-5] 10
Q7. Re-insurance. [Ref : Q8. (a), Dec. ’08 / Paper-5] 3
Q8. The following balances have been extracted from the books of Star Insurance Co. Ltd. for the
year ending 31st December, 2006 :
Rs.
Amount of Life Assurance at the beginning of the year 12,56,450
Claims by death 93,584
Claims by maturity 77,136
Premia 1,68,457
Expenses of management 23,912
Commission 29,233
Consideration for annuities 8,496
Interest, dividends and rents 41,969
Income-tax paid on profit 2,448
Surrenders 17,414
Annuities 23,536
Bonus paid in cash 7,560
Bonus paid in reduction of premium 2,800
Preliminary expenses 480
Claims admitted but not paid at the end of the year 64,027
Annuities due but not paid 17,904
Capital paid up 4,80,000
224 SCANNER [SEC-II] n FINANCIAL ACCOUNTING
Government Securities 13,52,712
Sundry Assets 4,54,488
Investment Reserve 48,000
Prepare the Revenue Account and the Balance Sheet after taking into account the following :
Rs.
(i) Claims covered under re-insurance 8,000
(ii) Further claims intimated 6,400
(iii) Further bonus utilised in reduction of premium 1,200
(iv) Interest accrued 12,320
(v) Premium outstanding 5,920
(vi) Bonus surrendered 4,000
[Ref : Q3. (a), June ’08 / Paper-5] 10
ACCOUNTING INTERPRETATION OF FINANCIAL STATEMENTS
Q1. Solvency Ratio. [Ref : Q8. (b), June ’08 / Paper-5] 3
Q2. From the following information relating to ND Ltd, prepare a Balance Sheet as on 31.12.2007.
Current Ratio — 2
Fixed Assets/Shareholders’ net worth — .60
Reserve & Surplus/share capital — .25
Average Debt collection period — 2 months
G. P. Ratio — 25%
Cost of sales/closing stock — 9 times
Net working Capital — Rs. 4,00,000
Liquid Ratio — 1.5 [Ref : Q2. (a), Dec. ’09 / Paper-5] 10
Q10. The following extracts of financial information relate to Complex Ltd. :
(Rs. in lakhs)
Balance Sheet as at 31st March 2008-09 2007-08
Rs. Rs.
Share Capital 10 10
Reserves and Surplus 30 10
Loan Funds 60 70
100 90
Fixed Assets (Net) 30 30
SCANNER [SEC-II] n FINANCIAL ACCOUNTING 225
(Rs. in lakhs)
Balance Sheet as at 31st March 2008-09 2007-08
Rs. Rs.
Current Assets :
Stock 30 20
Debtors 30 30
Cash at Bank 10 20
Others Current Asset 30 10
100 80
Less : Current Liabilities 30 20
Net 70 60
Total Assets 100 90
Sales (Rs. lakhs) 270 300
(i) Calculate for the two yers Debt Equity Ratio, Quick Ratio and Working Capital Turnover
Ratio.
(ii) Find the Sales volume that should have been generated in 2008-09 if the company were to
have maintained its Working Capital Turnover Ratio.
Note : All Current Liabilities are quick liabilities. [Ref : Q6. (a), June ’08 / Paper-5] 10

226 SCANNER [SEC-II] n COMMERCIAL AND INDUSTRIAL LAW
COMMERCIAL AND INDUSTRIAL LAW AND AUDITING
COMMERCIAL AND INDUSTRIAL LAW
LAWS OF CONTRACT
Q1. An agreement with insufficiency of consideration is void abinitio.
[Ref : Q1. (a), Dec ’08 / Paper-6] 2
Q2. Mr. Ramesh promised to pay Rs. 10,000/- on 30.10.08 jointly to Mr. Bhabesh and Mr. Naresh
for some consideration. Mr. Bhabesh died on 1.9.08. On 30.10.08 Mr. Naresh demanded payment
of whole amount of Rs. 10,000/-. Whether Mr. Naresh is justified?
[Ref : Q2. (a), Dec ’08 / Paper-6] 2
Q3. BEE owes Rs. 10,000/- to CEE. Amount was guaranteed by GEE. Said debt becomes payable on
25.10.07. CEE does not sue BEE. Hence due to delay GEE is automatically discharged from his
surityship. — Comment. [Ref : Q2. (b), Dec ’08 / Paper-6] 2
Q4. An agent retained all the stock and other papers of a principal until his pending dues are
cleared by the principal. State legal position. [Ref : Q2. (e), Dec ’08 / Paper-6] 2
Q5. Mr. Ramesh direct his agent to sell his Maruti car. Agent buys the car for himself but in the
name of his friend at Rs. 50,000/- against market price of Rs. 70,000/- without the consent of
Mr. Ramesh. What action Mr. Ramesh can take? [Ref : Q2. (g), Dec ’08 / Paper-6] 2
Q6. Time is the essence of contract. [Ref : Q4. (a) (i), Dec ’08 / Paper-6] 4
Q7. Misrepresentation. [Ref : Q4. (a) (iv), Dec ’08 / Paper-6] 4
Q8. Every person is competent to contract. [Ref : Q1. (d), June ’09 / Paper-6] 2
Q9. ‘A’ saved life of ‘B’, who was drawing. Later ‘A’ demanded remuneration from ‘B’ for saving
him since saving of life was valid consideration, ‘A’ would succeed.
[Ref : Q1. (g), June ’09 / Paper-6] 2
Q10. ‘A’ executed a guarantee in favour of State Bank of India as Security for a loan to ‘B’. Later ‘A’
contended that the guarantee was not enforceable as it was not supported by consideration as
he was not paid guarantee commission. Is ‘A’s stand correct in law?
[Ref : Q2. (c), June ’09 / Paper-6] 2
Q11. ‘A’ is owner of the factory building and also of product. ‘A’ authorises ‘B’ to take an insurance
policy on factory building for Rs. 2 lacs. ‘B’ procures a policy for Rs. 2 lacs on factory and
another policy for Rs. 2,000 on products. ‘A’ refused to reimburse to ‘B’.
[Ref : Q2. (g) (i), June ’09 / Paper-6] 2
Q12. What is fraud under Indian Contract Act, 1872? [Ref : Q3. (i), June ’09 / Paper-6] 2
SCANNER [SEC-II] n COMMERCIAL AND INDUSTRIAL LAW 227
Q13. Write explanatory notes on Effects of ‘coercion’ on a contract.
[Ref : Q4. (a) (i), June ’09 / Paper-6] 4
Q14. Write explanatory notes on Bailee’s particular lien. [Ref : Q4. (a) (iii), June ’09 / Paper-6] 4
Q15. Mr. B (a broker) by the orders of Mr. A purchases 10 Drums of oil for A from Mr. C. Afterwards
Mr. A refuses to receive oil. Mr. C sues Mr. B who informs Mr. A but Mr. A repudiates the
contract. Although Mr. B defends but failed. Mr. B has to pay cost, damages and incurs expense.
Can B recover any amount from A? [Ref : Q4. (b), June ’09 / Paper-6] 2
LAWS RELATING TO SALE OF GOODS
Q1. Mr. X offers to sell his Maruti car to Mr. Y for and intended sum of Rs. 90,000/- but by mistake
he makes an offer in writing for Rs. 70,000/- instead of Rs. 90,000. Mr. X can plead mistake as
defence. [Ref : Q1. (c), Dec ’08 / Paper-6] 2
Q2. Mr. X delivered 1000 mt. steel pipes to Mr. Y. 100 mt. were not as per specification, hence Mr. Y
refused to accept and informed Mr. X to take back at his cost and risk. Mr. X rejected Mr. Y’s
request and demanded to return to Mr. X freight paid. State the correct position.
[Ref : Q1. (d), Dec ’08 / Paper-6] 2
Q3. What will be the consequences when goods are sold by a person not the Owner and without
Owner’s consent. [Ref : Q3. (a), Dec ’08 / Paper-6] 4
Q4. Rights of the unpaid seller. [Ref : Q4. (a) (iii), Dec ’08 / Paper-6] 4
Q5. Sale and agreement to sell. [Ref : Q4. (a) (v), Dec ’08 / Paper-6] 4
Q6. Comment on the following statements based on legal provisions :
An hirer, who obtains possesssion of a car from its owner under a hire purchase agreement,
sells the car to a buyer who buys in good faith and without notice of the right of the owner. The
buyer gets good title to the car. [Ref : Q1. (a), June ’09 / Paper-6] 2
Q7. Mr. A agreed to purchase 100 bales of cotton from ‘B’ from his large stock. ‘A’ sent his men to
take delivery of cotton. On completion of packing of only 70 bales, there was accidental fire and
entire stock including packed 70 bales were destroyed. There was no Insurance cover. Who
will bear the loss? [Ref : Q2. (b), June ’09 / Paper-6] 2
Q8. State the rights and liabilities of ‘A’ in the following cases :
‘A’ authorises ‘B’ to buy 500 pieces of Sunlight soap for him but ‘B’ buys 500 pieces Sunlight
and 200 pieces Henko at a total price of Rs. 5000. ‘A’ refused to pay to ‘B’.
[Ref : Q2. (g) (ii), June ’09 / Paper-6] 2
228 SCANNER [SEC-II] n COMMERCIAL AND INDUSTRIAL LAW
Q9. An Auctioneer advertised in a newspaper that a sale of office furniture will be held at Kolkata
on 29.11.2009. ‘A’ came from New Delhi to buy the furniture but the auction was cancelled.
Whether ‘A’ can a file a suit against the auctioneer for his loss of time and cost.
[Ref : Q2. (g) (iii), June ’09 / Paper-6] 2
Q10. A minor can be appointed as agent. — Comment. [Ref : Q3. (b), June ’09 / Paper-6] 2
Q11. In an Auction sale, a bid once made can be withdrawn by the Bidder. Comment citing rules.
[Ref : Q3. (d), June ’09 / Paper-6] 2
Q12. Stipulation as to time of payment is deemed to be essence of a contract of sale. — Comment.
[Ref : Q3. (e), June ’09 / Paper-6] 2
Q13. As per sales order A is to supply 20 MT of sugar to B. A however supplied 22 MT and billed for
accordingly. B paid cost of 20 MT which was ordered by B. Can A take any action against B?
[Ref : Q3. (f), June ’09 / Paper-6] 2
Q14. When property passes to the buyer under ‘goods on approval’ or ‘on sale or return’?
[Ref : Q3. (g), June ’09 / Paper-6] 2
Q15. A Railway company refuses to deliver certain goods to the consignee except upon payment of
Rs. 2000 being excess/illegal charge. The consignee paid the said amount in order to obtain the
goods. Is there any remedy? [Ref : Q3. (h), June ’09 / Paper-6] 2
Q16. Write explanatory notes on Seller’s lien. [Ref : Q4. (a) (v), June ’09 / Paper-6] 4
SCANNER [SEC-II] n COMMERCIAL AND INDUSTRIAL LAW 229
INDUSTRIAL LAWS
Factories Act :
Q1. Personnel Manager told to Director that at least one canteen shall be provided in every factory.
Do you agree? [Ref : Q2. (d), Dec ’08 / Paper-6] 2
Q2. Occupier of a factory in relation to the company means factory Manager of the factory. Answer
based on legal provision. [Ref : Q2. (e), June ’09 / Paper-6] 2
Q3. As per provision of Factories Act, every factory is to appoint at least one Welfare Officer—Do
you agree? Answer citing rules. [Ref : Q3. (a), June ’09 / Paper-6] 2
Industrial Dispute Act :
Q1. Dr. B has been dismissed by the Manager of an Industrial Establishment. Workmen demanded
his reinstatement. Comment legal position. [Ref : Q2. (i), Dec. ’08 / Paper-6] 2
Q2. ‘A’ (workman), is laid-off by his employer ‘B’ because of strike in another part of B’s
establishment. ‘A’ is entitled to get compensation for lay off under the Industrial Disputes Act,
1947. [Ref : Q1. (e), June ’09 / Paper-6] 2
Workman Compensation Act :
Q1. Workmen working in a public utility services have right to go on strike even without giving
notice. [Ref : Q1. (g), Dec. ’08 / Paper-6] 2
Q2. In case of personal injury, the employer is liable to pay compensation within 3 months from the
date when it fall due. State legal provisions. [Ref : Q2. (c), Dec. ’08 / Paper-6] 2
Q3. A workman while returning home after duty was murdered within the premises of the comployer.
A’s widow is not entitled to compensation under the Workmen’s Compensation Act 1923.
[Ref : Q1. (f), June ’09 / Paper-6] 2
Payment of Wages Act, Minimum Wages Act :
Q1. Permissible deduction under Payment of Wage Act. [Ref : Q4. (a) (ii), Dec. ’08 / Paper-6] 2
Q2. Powers of Inspectors (Minimum Wage Act). [Ref : Q4. (a) (ii), June ’09 / Paper-6] 2
Provident Funds Act :
Q1. When and under what circumstances a person can received pension under Employees Provident
Fund Scheme? [Ref : Q2. (h), Dec. ’08 / Paper-6] 2
230 SCANNER [SEC-II] n COMMERCIAL AND INDUSTRIAL LAW
Payment of Bonus Act :
Q1. Every employee in an establishment is entitled to bonus under the Payment of Bonus Act.
[Ref : Q1. (b), Dec. ’08 / Paper-6] 2
Q2. A dismissed employee is not entitled to bonus under Bonus Act. — Comment, based on legal
provision. [Ref : Q4. (b), Dec ’08 / Paper-6] 2
Q3. Is there any time limit for payment of Bonus under Bonus Act?
[Ref : Q2. (d), June ’09 / Paper-6] 2
Payment of Gratuity Act :
Q1. Calculate the amount of gratuity of Mr. X who joined the company on 1.5.78 and retired on
30.11.08 when his salary was Rs. 26,000/- per month. During November, 2008 he received
overtime and incentive Rs. 5,000/-. [Ref : Q2. (f), Dec ’08 / Paper-6] 2
Q2. A complaint can be filed under Consumer Protection Act within 36 months from the date on
which cause of action arose. [Ref : Q1. (c), June ’09 / Paper-6] 2
Q3. Every employee, whose salary is not more than Rs. 3500 per month is entitled to Gratuity as per
Payment of Gratuity Act. State the legal provision if not correct.
[Ref : Q2. (f), June ’09 / Paper-6] 2
Q4. Write explanatory notes on Recovery of Gratuity. [Ref : Q4. (a) (iv), June ’09 / Paper-6] 4
Consumer Protection Act :
Q1. Consumer under Consumer Protection Act, 1986 means persons who obtains goods for resale
or for any commercial purpose. [Ref : Q1. (e), Dec. ’08 / Paper-6] 2
SCANNER [SEC-II] n COMMERCIAL AND INDUSTRIAL LAW 231
OTHER LAWS
Q1. A limited liability Partnership is a body corporate. [Ref : Q1. (b), June ’09 / Paper-6] 2
Q2. Public Information Officer shall as expeditiously as possible and in any case within 30 days of
receipt of request provide the required information. [Ref : Q1. (f), Dec ’08 / Paper-6] 2
Q3. One mistake was detected after passing of orders by the Commission under Competition Act,
2002. Whether such mistake can be rectified? If so, by whom and how?
[Ref : Q3. (c), Dec ’08 / Paper-6] 2
Q4. What is dominant position (Competition Act, 2002)? [Ref : Q3. (c), June ’09 / Paper-6] 2
Q5. Make of a cheque is not liable under N.I. Act for dishonour of cheque under certain conditions.
State such conditions. [Ref : Q3. (b), Dec ’08 / Paper-6] 3
Q6. Mr. Paul gave a cheque dated 7.2.2009 for Rs. 10,000 to Mr. Roy for payment of Mr. Roy’s Tution
fees. Cheque was dishonoured for insufficiency of funds. Mr. Paul is liable for prosecution.
[Ref : Q2. (a), June ’08 / Paper-6] 2

SCANNER [SEC-II] n APPLIED INDIRECT TAXATION 283
APPLIED INDIRECT TAXATION
CANONS OF TAXATION - INDIRECT TAXES
Descriptive & Practical Questions :
Q1. Ability to pay is one of the most important cannons of Taxation.
[Ref : Q8. (c), Dec ’08 / Paper-10] 4
CENTRAL EXCISE
Objective -Type Questions :
Q1. Fill in the blanks :
(i) Goods covered by Central Excise Tariff but fully exempt from duty are ________ . (excisable/
not excisable)
(ii) SSI units whose turnover exceeds Rs. _________ per annum have to furnish declaration in
prescribed form for Central excise purposes.
(iii) Compressing and bottling gas _________ (is/isnot) manufacture.
(iv) Affixing brand name, labelling or re-labelling and repacking from bulk pack to small pack
of readymade garment ________ (is/is not) manufacture.
(v) Cenvat credit _________ (can/can not) be utilised for payment of service tax on output
service.
(vi) In case of Central Excise and Customs, appeals must be filed within ________ days from
the date of communication of order.
(vii) Job work done under Cenvat provisions __________ (is/is not) exempt from service tax.
[Ref : Q1. (a), Dec ’08 / Paper-10] 1×7
Q2. State with reasons, whether True or False :
(i) Cenvat credit on capital goods can be availed in full in the year of purchase.
(ii) Wastes and scrap are always treated as excisable goods.
(iii) Excise duty is payable on all sample, even if given free.
[Ref : Q1. (b), Dec ’08 / Paper-10] 3×5
Q3. Fill in the blanks :
(i) Goods under Central Excise must be _________ (movable/immovable) and _________
(marketable/packaged).
(ii) CETA specifies some _________ (process/operations) as amounting to manufacturer. This
will be said to be manufactured _________ (even if/unless) as per court decisions they do
not amount to manufacture.
284 SCANNER [SEC-II] n APPLIED INDIRECT TAXATION
(iii) Processing can amount to manufacture if a ___________ (new/existing) and ____________
(identifiable/similar) product known in the market emerges.
[Ref : Q1. (a)(i)(ii)(iii), June ’09 / Paper-10] 2×5
Q4. State with reasons, whether true or false :
Brand owner is considered as manufacturer under Central Excise.
[Ref : Q1. (b)(i), June ’09 / Paper-10] 5
Descriptive & Practical Questions :
Q1. Writes notes on Doctrine of unjust enrichment in case of refunds under Central Excise and
Customs. [Ref : Q3. (b)(i), Dec ’08 / Paper-10] 5
Q2. (a) What is special Audit under section 14AA of CEA? (cenvat credit Audit)
[Ref : Q6. (a), Dec ’08 / Paper-10] 4
(b) Who can conduct such audit? [Ref : Q6. (b), Dec ’08 / Paper-10] 3
(c) Who can order such audit? [Ref : Q6. (c), Dec ’08 / Paper-10] 4
(d) What is the time limit for submission of report? [Ref : Q6. (d), Dec ’08 / Paper-10] 4
Q3. (a) Determine the value of a product and excise duty payable on the basis of following data
(i) Goods sold at Depot Price 20,000
Freight from factory to Depot 500
Insurance 500
Octroi 1200
Star VAT 800
CE 16%, Education Cess 2%, SAH Cess 1% [Ref : Q7. (a)(i), Dec ’08 / Paper-10] 6
(b) Complete AV2CE if the goods are used for captive consumption. Assume cost of production is
80% of the invoice price in above question. [Ref : Q7. (a)(ii), Dec ’08 / Paper-10] 4
Q4. Write short note on Exemption to Small Scale Industry units.
[Ref : Q7. (b), Dec ’08 / Paper-10] 5
Q5. Meaning of “accessory” for excise duty purpose. [Ref : Q3. (b), June ’09 / Paper-10] 5
Q6. Duty Entitlement Pass Book (DEPB) scheme. [Ref : Q3. (c), June ’09 / Paper-10] 5
Q7. Special Audit as per S. 14A of Central Excise Act, 1944. [Ref : Q3. (d), June ’09 / Paper-10] 5
Q8. Who is a job worker? State how is value determined when the goods are manufacturered on job
work basis. [Ref : Q4. (a), June ’09 / Paper-10] 3+6
SCANNER [SEC-II] n APPLIED INDIRECT TAXATION 285
Q9. A Ltd. supplies raw material to a job worker J Ltd. After completing the job-work, the finished
product of 5,000 packets are returned to A Ltd. putting the retail sale price as Rs. 20 on each
packet. The product in the packet is covered under MRP provisions and 40% abatement is
available on it. Determine the assessable value under Central Excise Law from the following
details :
Cost of raw material supplies Rs. 28,000
Job worker’s charges including profit Rs. 9,000
Transportation charges for sending raw material to the job worker Rs. 4,000
Transportation charges for returning the finished packets to A Ltd. Rs. 4,000
[Ref : Q4. (b), June ’09 / Paper-10] 6
Q10. Explain the provisions relating to cenvat credit on goods, services and capital goods under
Central Excise. [Ref : Q7. (a), June ’09 / Paper-10] 8
Q11. An assessee cleared various manufactured final products during June, 2008. The duty payable
for June, 2008 on his final products was as follows : Basic Rs. 2,00,000, Education Cesses—as
applicable. During the month, he received various inputs on which total duty paid by suppliers
of inputs was as follows : Basic duty Rs. 50,000, Education Cess Rs. 1,000, SAH education CEss
Rs. 500. Excise duty paid on capital goods received during the month was as follows : Basic
duty Rs. 12,000, Education Cess Rs. 240, SAH Education Cesss Rs. 120. Service Tax paid on
input services was as follows : Service Tax Rs. 10,000, Education Cess Rs. 200, SAH Education
Cess Rs. 100.
How much duty the assessee will be required to pay by GAR-7 challan for the month of June
2008, if assessee had no opening balance in PLA account? What is last date for payment?
[Ref : Q7. (b), June ’09 / Paper-10] 7
286 SCANNER [SEC-II] n APPLIED INDIRECT TAXATION
CUSTOMS LAWS
Objective -Type Questions :
Q1. Fill in the blanks :
Basic Customs duty is levied under section __________ of the Customs Act.
[Ref : Q1. (a)(iii), Dec ’08 / Paper-10] 1
Q2. Fill in the blanks :
Exclusive economic zone extends to __________ (200/300) nautical miles from the base line of
the coast. Beyond __________ (100/200) nautical miles is High Seas.
[Ref : Q1. (a)(iv), June ’09 / Paper-10] 2
Q3. Fill in the blanks :
General Free Allowance (GFA) under Customs Act is __________ (allowed/not allowed) on
unaccompanied baggage; GFA is __________ (allowed/not allowed) on alcoholic liquor or
wines up to two litres. [Ref : Q1. (a)(v), June ’09 / Paper-10] 2
Q4. The concession under Customs Act for person who is transferring his residence to India whereby
he is eligible to bring used personal and household articles to India without duty is applicable
to Indian residents returning from overseas after 2 years but not available to foreigners.
[Ref : Q1. (b)(iii), June ’09 / Paper-10] 5
Descriptive & Practical Questions :
Q1. Briefly explain the procedure for assessment and clearance of imported goods through a customs
sea port under the Customs Act, 1962. [Ref : Q2. (a), Dec ’08 / Paper-10] 8
Q2. Customs value (Assessable value of imported goods) is Rs. 4,00,000. Basic customs duty payable
is 10%. If the goods were produced in India, excise duty would have been 16%. Education cess
is as applicable. Special CVD is at appropriate rates. Find the customs duty payable. How
much Cenvat can be availed of by importer if he is manufacturer?
[Ref : Q2. (b), Dec ’08 / Paper-10] 7
Q3. What do you understand by transit and transhipment of goods? Under what conditions do
they enjoy exemptions from duty under the Customs Act, 1962?
[Ref : Q2. (a), June ’09 / Paper-10] 10
Q4. The assessable value of an imported items is Rs. 1,00,000. Basic customs duty is 20%, additional
duty of customs is 2% and secondary and higher education cess is 1% on duty. No additional
duty of customs is chargeable on such goods u/s 3(5) of the Act.
Compute the amount of customs duty payable. Also state the amount of credit available to the
importer. [Ref : Q2. (b), June ’09 / Paper-10] 5
Q5. Mention briefly any five illustrative cases under the Customs, Central Excise Duties and Service
Tax Drawback Rules, 1995, where all the industry Drawback rates will not apply.
[Ref : Q8. (a), June ’09 / Paper-10] 6
Q6. Write notes on Special Brand Rate. [Ref : Q8. (b), June ’09 / Paper-10] 4
SCANNER [SEC-II] n APPLIED INDIRECT TAXATION 287
SERVICE TAX
Objective -Type Questions :
Q1. Fill in the blanks :
A secondary and higher education cess of __________ (1%/2%) has been imposed on services
liable to service tax under the Finance Act, 2007.
[Ref : Q1. (a)(v), Dec ’08 / Paper-10] 1
Q2. Fill in the blanks :
Finance Act, 1994 which contains provisions relating to service tax __________ (does/does
not) provide for criminal liability in service tax matters.
[Ref : Q1. (a)(x), Dec ’08 / Paper-10] 1
Q3. State with reasons, whether True or False :
In case of delayed payment of service tax the assessee has to pay simple interest @13% for the
period for which the payment is delayed. [Ref : Q1. (b)(iv), Dec ’08 / Paper-10] 3
Descriptive & Practical Questions :
Q1. Write notes on Appeals under service tax. [Ref : Q3. (b)(ii), Dec ’08 / Paper-10] 5
Q2. State the provisions relating to general exemption available to small service providers.
[Ref : Q4. (a), Dec ’08 / Paper-10] 7
Q3. State briefly the provisions for valuation of taxable services for charging Service Tax.
[Ref : Q4. (b), Dec ’08 / Paper-10] 8
Q4. Outline the provisions relating to registration under service tax.
[Ref : Q5. (a), June ’09 / Paper-10] 7
Q5. Explain ‘Export of Services’ under service tax. What is the exemption available to exporter of
service from service tax? [Ref : Q5. (b), June ’09 / Paper-10] 8
Q6. ABC Co. Ltd. provided services valuing Rs. 8 lakhs during the financial year 2007-08. During
2008-09, it has provided taxable services valuing Rs. 10 lakhs and has received payments
towards payable services Rs. 8.5 lakhs. It has also received services in the nature of transport of
goods by road valuing Rs. 50,000, in respect of which it is the person liable to pay service tax.
Compute the service tax, if any, payable by ABC Co. Ltd. for the financial year 2008-09. It is
given that goods transport service is exempt to the extent of 75% of value thereof.
[Ref : Q8. (c), June ’09 / Paper-10] 5
288 SCANNER [SEC-II] n APPLIED INDIRECT TAXATION
CENTRAL SALES TAX ACT & VAT ACT.
Objective -Type Questions :
Q1. State with reasons, whether True or False :
Security demanded from dealer under the Central Sales Tax Act, 1956 can be satisfied in the
form of Security Bond. [Ref : Q1. (b)(ii), Dec ’08 / Paper-10] 3
Q2. State with reasons, whether True or False :
Under Central Sales Tax Act, for an activity to be classified as business profit motive is immaterial.
[Ref : Q1. (b)(ii), June ’09 / Paper-10] 5
Descriptive & Practical Questions :
Q1. State with reasons whether sales tax will be levied on the following (any two) :
(i) Sales of newspapers
(ii) Development of software for marketing
(iii) Shares and debentures [Ref : Q5. (a), Dec ’08 / Paper-10] 5
Q2. Write short note on taxable turnover. [Ref : Q5. (b), Dec ’08 / Paper-10] 5
Q3. A Dealer effected following inter state sales.
during 2nd quarter of 2008
Invoice No. 1 dt. 1st August, 08 Rs. 20,000 + C.S.T. 3%
Invoice No. 2 dt. 15th August, 08 Rs. 70,000 + T 3%
Invoice No. 3 dt. 31st August, 08 Rs. 51,500 tax not shown
Invoice No. 4 dt. 15th October, 08 Rs. 15,000 + 3% S.T.
Invoice No. 5 dt. 31st October, 08 Rs. 20,000 + 3% S.T.
Goods worth 5,000 exclusive of Tax were returned from Invoice No. 4 within 6 months compute
Turn over and C.S.T. more necessary assumption. [Ref : Q8. (a), Dec ’08 / Paper-10] 8
Q4. Offences under C.S.T. are cognizable mention a few. [Ref : Q8. (b), Dec. ’08 / Paper-10] 3
Q5. Write short notes on Appeals to appellate authority under CST Act.
[Ref : Q3. (a), June ’09 / Paper-10] 5
Q6. A dealer effected following inter-state sales during the quarter July, 2008-September, 2008.
(a) Invoice No. 25 dated 5th July, 2008 : Rs. 1,12,400 (tax not shown separately), (b) Invoice
No. 26, dated 13th August, 2008 : Rs. 50,000 plus tax @ 4% i.e. Rs. 2,000, Total Rs. 52,000,
(c) Invoice No. 27 dated 18th September, 2008 : Rs. 20,000 plus tax @ 4% Rs. 800 i.e. Total Rs.
20,800, (d) Invoice No. 2B dated 27th September, 2008 : Rs. 31,200. Tax not shown separately.
Goods returned within 6 months were Rs. 8,400 (inclusive of taxes). Sales Tax rate is 4% if
goods are sold within the State.
What is the turnover and what is tax payable, if the buyers did not issue C Form?
[Ref : Q6. (a), June ’09 / Paper-10] 8
Q7. What is the impact of VAT on CST? [Ref : Q6. (b), June ’09 / Paper-10] 7
Q8. Distinguish ‘zero rated sale’ and ‘exempt sale’ with reference to VAT.
[Ref : Q3. (a), Dec ’08 / Paper-10] 5

270 SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM
OPERATION MANAGEMENT AND INFORMATION SYSTEM
OPERATION MANAGEMENT
OVERVIEW OF PRODUCTION PROCESS
Objective & Descriptive Type Questions :
Q1. One of the important charts used in programme control is :
(a) Material chart, (b) Gantt chart, (c) Route chart, (d) Inspection chart.
[Ref : Q1. (a)(iv), June ’09 / Paper-9] 1
Q2. Mention the name of the metal working process involved in carrying out the following operations
and also state the machine/equipment of which this is carried out :
(i) Reducing the diameter of a cylindrical object.
(ii) Making a cylindrical hole on an object.
(iii) Very fine finishing of the inside diameter of a cylindrical linear.
(iv) Reducing the thickness of one side of a metal cube.
[Ref : Q1. (c), June ’09 / Paper-9] 1×4
Q3. Expand the following systems of production technology. Narrate the main features related to
enhancement of production and the advantages derived from the system.
(i) FMS, (ii) CIM [Ref : Q2. (a), June ’09 / Paper-9] 4
Q4. Advantages of NC Machines. [Ref : Q3. (c)(ii), June ’09 / Paper-9] 1
Q5. A shaft of 3000 mm in length requires machining on a lathe. If the spindle executes 1500 r.p.m.
and the feed is 0.20 mm per revolution, how long does it take the cutter to pass down the entire
length of the shaft? [Ref : Q4. (a), June ’09 / Paper-9] 2
Q6. A shaft 1,200 mm in length is being machined on a lathe. If the spindle rotates 600 r.p.m. and
the feed is 0.25 mm per revolution, how long will it take the cutter to pass down the entire length
of the shaft? [Ref : Q4. (c), Dec ’08 / Paper-9] 3
SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM 271
Q7. Mr. X is considering an interchange of departments B and C in the present layout. The present
layout and the handling frequencies between the departments are given. What would be the
effect of interchange asuming that the departments are of the same size? Also assume that the
material handling cost per unit length travel between departments is same.
A C E
B D F
From / To A B C D E F
A — 20 70 0 40 0
B — — 50 200 0 10
C — — — 30 120 40
D — — — — 50 220
E — — — — — 30
F — — — — — —
[Ref : Q2. (d), Dec ’08 / Paper-9] 6
272 SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM
PRODUCTION PLANNING & PRODUCTIVITY MANAGEMENT
Objective & Descriptive Type Questions :
Q1. A and M are two fierce competitors. N, a leading manufacturer of mobile phones approaches
them separately to share what they can offer for outsourcing the manufacture of mobile phone
components on a standardised machine whose operating cost is Rs. 40/- per hour. N requests
you to evaluate and advice based on following offers made by A and M as to which of the two
should be chosen?
Company A CompanyM
Production Rate / hour 20 pieces 30 pieces
Mobile components / set up 8000 pieces 6000 pieces
Set up Costs Rs. 600 Rs. 3000
[Ref : Q2. (a), Dec ’08 / Paper-9] 4
Q2. You as a work study engineer carry out the work sampling study. The following observations
were made for a machine shop :
Total number of observations — 2000, No working activities — 500,
Ratio between manual to machine element — 3 : 1, Average rating factor — 110%,
Total number of jobs produced during study — 500 units,
Rest allowance — 10%.
Calculate the standard time for the job. [Ref : Q2. (c), Dec ’08 / Paper-9] 4
Q3. Company A wants to make large giant trucks called LARJO. Company A now requests you to
list out the plant layout principles it should consider before taking any decision?
[Ref : Q3. (c), Dec ’08 / Paper-9] 4
Q4. The fixed cost for the production of particular item is Rs. 200 per month. Its variable cost being
Rs. 3 per unit and its sale price being Rs. 7 per unit, determine its break-even volume. What
would be the profit if 2,000 such units were wold in a month? How many such units should be
sold to earn a profit of Rs. 3,000 per month? [Ref : Q4. (b), Dec ’08 / Paper-9] 5
Q5. For each part below, choose the most appropriate answer out of the four options indicated
below each part :
(i) The acitivity of specifying when to start the job and when to end the job is known as :
(a) Planning, (b) Scheduling, (c) Timing, (d) Follow-up.
(ii) Most suitable layout for job production is :
(a) Line layout, (b) Matrix layout, (c) Process layout, (d) Product layout.
(iii) The act of assessing the future and making provisions for it is known as :
(a) Planning, (b) Forecasting, (c) Assessment, (d) Scheduling.
[Ref : Q1. (a),(i)(ii)(iii) June ’09 / Paper-9] 1×3
SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM 273
Q5. As on August 1, the following jobs are to be procesed. Their processing times and due dates are
given :
Job A B C D
Processing time (days) 2 6 7 12
Due date August 12 August 7 August 4 August 8
Sequence the jobs based on minimum critical ratio.
[Ref : Q3. (a), June ’09 / Paper-9] 4
Q6. What are the factors that force an organisation to redesign plant layout?
[Ref : Q3. (b), June ’09 / Paper-9] 4
Q7. Briefly explain :
(i) MDD as a sequencing rule for single facility. [Ref : Q3. (c)(i), June ’09 / Paper-9] 2
Q8. A company is planning to undertake the production of medical testing equipment and has to
decide on the location of the plant. Two locations are being considered, namely, A and B. The
fixed costs of two locations are estimated to be Rs. 25 lakhs and Rs. 30 lakhs respectively. The
variable costs are Rs. 300 and Rs. 250 per unit respectively. The average sale price of the
equipment is Rs. 550 per unit.
Find the range of annual production/sales volume for which each location is most suitable.
[Ref : Q3. (d), June ’09 / Paper-9] 4
Q9. Requirement of raw materials for a company is 250 units per month. The carrying cost for the
same is 10% of its purchase price which is Rs. 10 per unit. The ordering cost is Rs. 15 per order.
Compute EOQ and related total cost. [Ref : Q4. (b), June ’09 / Paper-9] 4
274 SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM
MAINTENANCE MANAGEMENT
Objective & Descriptive Type Questions :
Q1. What requirements need to be fulfilled in the order to ensure that the full benefits of effective
maintenance are achieved? [Ref : Q2. (b), Dec ’08 / Paper-9] 4
Q2. A key electric component lasts for a maximum of 3 weeks. The chances of its failing at the end
of first week is 0.1 and the chance of its failing at the end of second week is 0.3. The cost per
component for individual replacement is Rs. 5 and cost per component for bulk replacement is
Rs. 3. What is the optimal replancement period assuming there are 100 components initially?
[Ref : Q3. (a), Dec ’08 / Paper-9] 4
Q3. Briefly enlist and explain the rules to be enforced for proper control of maintenance work.
[Ref : Q3. (d)(i), Dec ’08 / Paper-9] 3
Q4. Load Schedding Power Utility Company has been given the task of power supply by the State.
The Company has noticed that the system has been experiencing the following number of
failures for months over the past one year.
Number of failures 0 1 2 3
Number of months this occurred 2 3 3 4
Each breakdown costs an average of Rs. 10,000/- Preventive maintenance can be carried out
for a cost of Rs. 3,000/- to limit the failures to an average of one month. The Company seeks
your advice on which policy is most suitable for adoption.
[Ref : Q4. (a), Dec ’08 / Paper-9] 4
Q5. What types of work are carried out during routine maintenance?
[Ref : Q3. (e), June ’09 / Paper-9] 2
Q6. Calculate the number of units expected to fail in a year and the mean time between failures from
the following :
Testing time = 100 hours
Samples tested = 50 units
Failures = 2 units
Average usage = 2 hours/day
Total sales in the year = 500 units [Ref : Q4. (c), June ’09 / Paper-9] 4
Q7. What are the requirements to be fulfilled in order to get the full benefits of effective maintenance?
[Ref : Q4. (d), June ’09 / Paper-9] 3
SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM 275
Q8. A Public Transport Corporation has gathered the data about the number of breakdowns for
months over the past two years in their new fleet of vehicles :
Number of breakdowns 0 1 2 3 4
Number of months this occurred 3 7 11 2 1
Each breakdown costs the firm an average of Rs. 3000. For a cost of Rs. 1375 per month,
preventive maintenance can be carried out to limit the breakdowns to an average of one per
month. Which policy will be suitable for the firm?
[Ref : Q4. (e), June ’09 / Paper-9] 5
RECOURCE MANAGEMENT
Objective & Descriptive Type Questions :
Q1. The following is the demand for Product A in 5 towns :
Population (in lacs) : X 9 5 8 5 3
Demand : Y 12 20 15 10 5
Estimate the demand for Product A for a town with a population of 10 lacs.
[Ref : Q3. (b), Dec ’08 / Paper-9] 4
Q2. List out the internal factors, which influence the choice of technology in an organisation?
[Ref : Q3. (d)(ii), Dec ’08 / Paper-9] 3
Q3. A workshop has 30 nos. of identical machines. From the failure pattern of the machines it is
calculated that the expected time before failure is 3 months. It costs Rs. 200 to attend a failed
machine and rectify the same. Compute the yearly cost of servicing the broken down machines.
[Ref : Q4. (d), Dec ’08 / Paper-9] 2
Q4. Expand and briefly explain the following in the context of technology used to enhance
production :
(i) AGV, (ii) AIS. [Ref : Q4. (e), Dec ’08 / Paper-9] 2×2
Q5. A company manufactures items X1 and X2 which are sold at a profit of Rs. 35 per unit of X1 and
Rs. 25 per unit of X2.
X1 requires 3 kgs. of materials, 4 man-hours and 2 machine-hours per unit.
X2 requires 2 kgs. of materials, 3 man-hours and 2 machine-hours per unit.
276 SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM
During each production run, there are 350 kgs. of materials available, 600 man-hours and 550
machine-hours for use.
Formulate under Simplex method of linear programming :
(i) the objective function and the linear constraints, and
(ii) the equations after introducing slack variables.
(iii) What are the various methods of solving a linear programming problem?
[Ref : Q2. (b), June ’09 / Paper-9] 2+2+2
Q6. The annual sales of TV sets by a dealer in Delhi are as under :
Year 2004 2005 2006 2007 2008
Sales (thousand units) 3 14 36 4 33
Fit a linear trend equation to the sales figure and estimate the sales for the year 2009.
[Ref : Q2. (c), June ’09 / Paper-9] 4
MISCELLANEOUS
Objective & Descriptive Type Questions :
Q1. For each part below, choose the most appropriate one and write its number only in the answer
sheet :
Match column (1) with column (2)
Column (1) Column (2)
(i) Castings A. Gravity Chute
(ii) Pig Iron B. Rotary kiln
(iii) Steel C. Foundry
(iv) Rails D. Blast furnace
(v) Cement E. Open Hearth Furnace
(vi) Material Handling F. Rolling Mills
[Ref : Q1. (a), Dec ’08 / Paper-9] 1×6
Q2. Expand the following abbrevitations :
(i) ASRS
(ii) GERT
(iii) AQL [Ref : Q1. (b), Dec ’08 / Paper-9] 1×3
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Q3. Put an appropriate word or two in blank position :
(i) _______ uses algebraic procedure to solve any problem, which satisfies the test of linearity
and certainty.
(ii) Under preventive maintenance “(hours worked for maintenance)/(Scheduled
hours) × 100 = _______ ”
(iii) Trend values of all years of the series may be obtained advantageously using the ______ .
(iv) _______ is a process that bakes on a white, brittle protection finish.
(v) _______ is the degree to which a firm’s own production system handles the entire supply
chain starting from procurement of raw materials to distribution of finished goods.
[Ref : Q1. (c), Dec ’08 / Paper-9] 1×5
Q4. Given below are two lists —list ‘A’ containing six observations and list ‘B’ containing various
functional areas associated with production management. Expand the abbreviations and match
them with the corresponding functional areas.
List ‘A’ List ‘B’
LP Quality control
PERT Project planning
CRAFT Inventory management
MRP Product design
CAD Product mix determination
AOQ Plan layout
[Ref : Q1. (b), June ’09 / Paper-9] 1×6
278 SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM
INFORMATION SYSTEM
INFORMATION SYSTEM ANALYSIS AND DESIGN
Objective & Descriptive Type Questions :
Q1. ______ System is a software that controls the hardware devices, software, Communication
media and channels. [Ref : Q5. (a)(v), Dec ’08 / Paper-9] 1
Q2. Expand the following abbreviations :
EEPROM. [Ref : Q5. (c)(iii), Dec ’08 / Paper-9] 1
Q3. Each statement below is either True or False, Indicate the same in your answers :
Virtual memory is a provision of primary storage which acts as secondary memory.
[Ref : Q5. (b)(i), Dec ’08 / Paper-9] 1
Q4. Explain peer-to-peer architecture and list out its benefits? [Ref : Q6. (b), Dec ’08 / Paper-9] 5
Q5. Expand the following abbreviations :
TCP/IP. [Ref : Q5. (c)(iv), Dec ’08 / Paper-9] 1
Q6. What is Access Control? What are the checks one needs to ensure before executing a system of
access control? [Ref : Q7. (b), Dec ’08 / Paper-9] 4
Q7. Expand the following abbreviations :
EEPROM. [Ref : Q5. (c)(iii), Dec ’08 / Paper-9] 1
Q8. Q. File and Smile Online asks you to draw a flow chart for calculation of income tax as per slabs
prescribed which are as below :
Salary in currency limit Rate %
Up to 1,50,000 Nil
1,50,001 to 3,00,000 10
3,00,001 to 5,00,000 20
5,00,001 and above 30
[Ref : Q7. (d), Dec ’08 / Paper-9] 4
Q9. ______ System is a software that controls the hardware devices, software, Communication
media and channels. [Ref : Q5. (a)(v), Dec ’08 / Paper-9] 1
Q10. List the salient features of a WAN? [Ref : Q8. (c), Dec ’08 / Paper-9] 4
SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM 279
Q11. Fill up the following missing blocks which form part of the system development team in a
System Development Life cycle. Write missing answer against Serial Number only in the answer
sheet :
Sl Step Person Responsibility
No. Responsible
1. System proposal ? Study requirement and prepare
proposal for clearance by
management
2. Systems Implementation Programmer and ?
Systems Analyst
3. ? Programmers To develop programs according
to system specifications and testing
the programs
[Ref : Q8. (d), Dec ’08 / Paper-9] 3
Q12. ______ basically sends a mail to the e-mail address of the receiver.
[Ref : Q5. (a)(iv), Dec ’08 / Paper-9] 1
Q13. Expand the following abbreviations :
(i) MICR.
(ii) ASCII
(iii) GUI [Ref : Q5. (a), June ’09 / Paper-9] 1×3
Q14. Put an appropriate word or two in blank position :
(i) _______ means loading Operating System in computer after power is switched on.
(ii) Programs written in High Level Language are called _______ .
(iii) _______ is a process of continuous checking of possible encroachmnt of virus in a machine.
[Ref : Q5. (b), June ’09 / Paper-9] 1×4
Q15. Each statement below is either True or False. Indicate the same in your answers :
(i) ROM is used for temporary data storage.
(ii) File Volatility is the rate of change in the records in the file.
[Ref : Q5. (a), June ’09 / Paper-9] 2
Q16. Name the four divisions in COBOL. What are its advantages?
[Ref : Q7. (b), June ’09 / Paper-9] 2+2
Q17. Explain FTP mentioning the steps involved in it. [Ref : Q7. (d), June ’09 / Paper-9] 3
Q18. (i) What are the objectives of Infoamtion System Auditing?
(ii) Explain the major areas for imposition of system of Internal Control.
[Ref : Q8. (a), June ’09 / Paper-9] 3+4
Q19. What are the facilities that are required in the computer for an access to the Internet? What are
the problems associated with use of Internet? [Ref : Q8. (b), June ’09 / Paper-9] 2+4
280 SCANNER [SEC-II] n OPERATION MANAGEMENT AND INFORMATION SYSTEM
DATABASE MANAGEMENT SYSTEMS
Objective & Descriptive Type Questions :
Q1. (i) Name any two models of DBMS.
(ii) What does one mean by “Going Live”. [Ref : Q6. (d), Dec ’08 / Paper-9] 2+2
Q2. What are the characteristics of a database? [Ref : Q8. (b), Dec ’08 / Paper-9] 4
Q3. Put an appropriate word or two in blank position :
(i) Oracle is based on a concept of ______ Technology. [Ref : Q5. (a)(i), Dec ’08 / Paper-9] 1
Q4. Each statement below is either True or False, Indicate the same in your answers :
In Multiprogramming, one CPU processes a number of programs by time-sharing technique.
[Ref : Q5. (b)(iii), Dec ’08 / Paper-9] 1
Q5. Expand the following abbreviations:
ORDBMS. [Ref : Q5. (c)(i), Dec ’08 / Paper-9] 1
Q6. Expand the following abbreviations :
DML. [Ref : Q5. (a)(i), June ’09 / Paper-9] 1
Q7. Put an appropriate word or two in blank position :
________ is extracting of data from multiple data sources by way of interactive and analytical
software tools. [Ref : Q5. (b)(iv), June ’09 / Paper-9] 1
Q8. Each statement below is either True or False. Indicate the same in your answers :
(i) File Volatility is the rate of change in the records in the file.
(ii) Data Mart has no relevance to Data Warehousing.
[Ref : Q5. (c)(iii)(iv), June ’09 / Paper-9] 1+1
Q9. What is Data Warehousing? Give examples of strategic use of data warehousing in different
business environment. [Ref : Q6. (d), June ’09 / Paper-9] 2+2
Q10. What are the advantages of Database Management System?
[Ref : Q6. (e), June ’09 / Paper-9] 2
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MANAGEMENT INFORMATION SYSTEMS (MIS)
Objective & Descriptive Type Questions :
Q1. List the nature of preparatory work to be undertaken before a decision on outsourcing of
information system services can be taken? [Ref : Q7. (a), Dec ’08 / Paper-9] 4
Q2. Depending on the level of management, different functional areas will require various types of
MIS reports. Keeping this in view, you are required to list out kind of reports under the following
categories :
(i) Top level (Strategic) Reports required for Personnel Management;
(ii) Middle Level (Tactical) Reports for Production Management;
(iii) Operational Level (Operational) Reports for Sales Mnagement.
[Ref : Q7. (c), Dec ’08 / Paper-9] 6
Q3. Put an appropriate word or two in blank position :
______ basically sends a mail to the e-mail address of the receiver.
[Ref : Q5. (a)(iv), Dec ’08 / Paper-9] 1
Q4. One of the important factors for the success for MIS is the quality of software. List out the
criteria, which the software must fulfil for the basis for selection apart from meeting the user
specific functional specifications? [Ref : Q8. (a), Dec ’08 / Paper-9] 4
Q5. Fill up the following missing blocks which form part of the decision making pattern. Write
missing answer against Serial Number only in the answer sheet :
Sl Level of Decision Information support from
No. Management making on
1. Lower Level ? Transaction Processing
2. Middle Level Planning & Control ?
3. Top Level ? Executive System/Expert System
[Ref : Q6. (b), June ’09 / Paper-9] 3
Q6. What is ‘Risk Management’ in an Infomation System and what are the steps involved in it?
[Ref : Q7. (a), June ’09 / Paper-9] 1+3
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ENTERPRISE RESOURCE PLANNING (ERP)
Objective & Descriptive Type Questions :
Q1. PTC a large manufacturer of agro-based products is in the process of evaluation to go in for an
ERP package for managing its entire Financial, Supply Chain Management, Manufacturing,
Procurement, Inventory, and Sales etc. and requests you to list out the common criteria it
should consider before selection of a package. [Ref : Q6. (a), Dec ’08 / Paper-9] 4
Q2. Name common modules of an ERP Package and a few important sub-systems under each
module. [Ref : Q6. (c), Dec ’08 / Paper-9] 5
Q3. Name three popular ERP packages. [Ref : Q8. (e), Dec ’08 / Paper-9] 3
Q4. Each statement below is either True or False, Indicate the same in your answers :
Readymade sofware is one, which meets the full-customised requirements of a specific
organisation. [Ref : Q5. (b)(ii), Dec ’08 / Paper-9] 1
Q5. Expand the following abbreviations :
ISAM [Ref : Q5. (c)(v), June ’09 / Paper-9] 1
Q6. Each statement below is either True or False, Indicate the same in your answers :
ERP package convers the function of production management only and excludes Finance and
Human Resources. [Ref : Q5. (c)(v), June ’09 / Paper-9] 1
Q7. Explain briefly the different phases in implementation methodologies of an ERP system.
[Ref : Q6. (a), June ’09 / Paper-9] 5
Q8. What are the sub-systems under the Sales and Distribution Module of an ERP system?
[Ref : Q6. (c), June ’09 / Paper-9] 4
Q9. (i) What will be the nature of costs to be included in the budget for implementation of an ERP
package?
(ii) What is ‘Gap Analysis’ in ERP Life Cycle? [Ref : Q7. (c), June ’09 / Paper-9] 3+1
Q10. What is E-Commerce? What are the components involved in it? What are the steps by which a
transaction take place in E-Commerce? [Ref : Q8. (c), June ’09 / Paper-9] 1+1+3