CMA JANUARY 2022 EXAMINATION

ADVANCED LEVEL II
COST & MANAGEMENT AUDIT

Course Code : AA252 Total Marks : 100

Reading Time : 15 minutes Writing Time : 180 minutes

Instructions to Candidates
 You MUST NOT write anything during the reading time.
 There are 5 (five) questions.
 You should attempt ALL questions.
 Answers should be properly structured and relevant.
 Carefully read ALL the requirements and sub-questions before attempting a specific
question.
 ALL answers must be written in the answer book.
 AVOID WRITING/MARKING on the question paper at any time which may cause disciplinary
action.
 Start answering each question from a fresh sheet.
 Answers should be clearly numbered with the sub-question number.

Allowable Materials
 Writing Stationaries
 Non-programmable Calculator

Assessment Structure

Expected
Sub-
Marks Time
question
Required
Question 1 Essay/Computational/Case 3 20 35 minutes
Question 2 Essay/Computational/Case 2 20 35 minutes
Question 3 Essay/Computational/Case 3 20 35 minutes
Question 4 Essay/Computational/Case - 20 35 minutes
Question 5 Essay/Computational/Case 4 20 35 minutes
Revision 5 minutes
Total 100 180 minutes

RESTRICTED USE

This paper MUST NOT BE REMOVED from the examination venue

Do not turn the page until instructed

Page 1 of 3
QUESTION 1 [(4+6+10) = 20] MARKS]
(a) State the role of Cost Auditor to add value of an organisation.
(b) “Practice of Cost Accounting, Cost Audit and implementation of Cost Audit Standard
published by ICMAB is effective tools for pricing, cost controlling and profit maximizing”.
Briefly discuss.
(c) Mr. Rahman was appointed as Cost Auditor of MNC Ltd. for the Financial Year 2019-20.
State the following:
(i) How long the Cost Auditor can continue to hold office for the financial year?
(ii) In what format the Cost Auditor shall submit his/her report?
(iii) What was the formality to be observed by the Board of Directors if the cost Auditor did
resign on 31.01.2020?

QUESTION 2 [(10+10) = 20 MARKS]

(a) Rahim Manufacturer Ltd. received an enquiry for 250,000 numbers of special type of
machine parts. Capacity of the company exists for manufacturing the parts, but a fixed
investment of Tk. 95,000 and working capital of to the extent of 35% of Sales value will be
required to undertake the job.
The cost estimates are as follows:
Raw materials 40,000 kg at Tk. 3.00 per kg.
Labor hours 12,000 of which 800 would be overtime payable at double the normal rate.
Labor rate Tk. 3.00 per hour
Factory overhead Tk. 2.50 per direct labor hour.
Selling and distribution overhead expenses Tk. 45,400
Material recovered at the end of operation will be Tk. 12,000 (estimated)
The company expects a net return of 15% on capital employed.
As a Management accountant of the Company, you are requested to prepare Cost
statement, indicating the price to be quoted by the Company to the Customer.
(b) The management of XYZ Ltd. is worried about increasing labor turnover in the factory and,
before analyzing the causes and taking the remedial steps, the management wants to have
an idea of the profit foregone because of the labor turnover in the last year.
Last year, sales amount to Tk. 9,823,600 and the P/V Ratio was 20%. The total number of
actual hours worked by the direct labor force was 5 lac. Because of the delays by the
Personnel Department in filling vacancies due to labor turnover, 100,000 productive hours
were lost. The actual labor hours included 30,000 hours attributable to training new recruits,
out of which half of the hours was unproductive. An analysis of cost incurred consequent on
labor turnover revealed the following:
Settlement Costs due to leaving Tk. 45,680
Recruitment Costs Tk. 30,620
Selection Costs Tk. 15,750
Training Costs Tk. 37,250
Assuming that the potential loss because of labor turnover could have been sold at the
prevailing prices, find out the profit foregone in the last year on account of labor.

QUESTION 3 [(4+6+10) = 20 MARKS]

(a) In planning to conduct a Management Audit of an organization what documents and
information should a Management Auditor need to collect?
(b) As a management consultant, you have an assignment to conduct a Management Audit of
the production function of a medium-scale engineering unit. Prepare a checklist of the points
on which you should undertake the study.
(c) You as a management auditor have been asked to conduct a review of the function of the
personnel department of XYZ Ltd. State the various points, which will be covered in the review.
TURN OVER

Page 2 of 3
QUESTION 4 [20 MARKS]
Zaman & Co Limited. in the business of Real Estate and Consumer Goods shows the following
financial position for the year ending June 30, 2020:
(Amount in BDT crore)
Year ended 30 J u n e
2020 2019
Liabilities:
Share Capital 33 33
Securities Premium Account 931 928
General Reserve 57 44
Capital Redemption Reserve 42 40
Profit & Loss Account 595 390
Long Term Borrowings 10133 670
Deferred Tax Liability 25 39
Short Term Borrowing 782 676
Trade Payable 715 747
Miscellaneous Provisions 77 73
- Total: 4270 3640
Assets:
Fixed Assets (Tangible) 647 614
Capital WIP 667 383
Non-Current Investments 2378 2048
Long Term Loans 53 66
Inventories 167 232
Trade Receivables 104 94
Cash and Bank Balance 107 69
Other Current Assets 25 30
Advance for Equipment 122 104
Total: 4270 3640
Profit before tax for the year 2019-20 was BDT 326 crores (Previous year BDT 397 crores).
You are required to compute the following figures/ratios as stipulated in the Annexure of cost Audit
Report under the Companies (Cost Records and Audit) Rules, for the year ended 30 June 2020:
(i) Capital Employed
(ii) Debt Equity Ratio
(iii) EBT to Capital Employed
(iv) EBT to Net Worth
(v) Current Assets to Current Liabilities

QUESTION 5 [(4x5) = 20 MARKS]

(a) Why is it essential to implement proper Internal Control system in any organization?
(b) As a part of management strategy Emicon Limited, manufacturing soaps or purchased a
popular soap brand ‘SOFNEEL’ from a smaller company.
What will be treatment of such costs and the disclosure to be made in the Cost Statements
as per relevant Cost Accounting Standard?
(c) What is 'Due Diligence' Audit? Why is it undertaken?
(d) The managing director of Tushar Ltd discovered that staffs in the company’s Supply Chain
Management (SCM) department do not follow the company’s policy of checking for the
cheapest supplier when ordering for transport facility. For several years, they have been
using one of the most expensive suppliers who periodically treat SCM department staff to
meals in expensive restaurants. The managing director has expressed surprise that the cost
auditors did not uncover this irregularity during the cost audit and has requested a meeting to
discuss this matter. List the matters the external auditor should discuss with the managing
director at the meeting.
END OF QUESTION
Page 3 of 3