Free of Cost ISBN : 978-93-5034-896-3 Solved Scanner Appendix CMA (CWA) Inter Gr. II (Solution of December - 2013) Paper - 10 : Cost & Management Accountancy Section - A : Cost & Management Accounting Methods & Techniques Chapter - 2 : Integrated & Non-Integrated Accounting System 2013 - Dec [6] (b) (i) Impact on Costing Profit & Loss Account Particulars Financial Books Cost books Impact on cost books Closing Stock Sundry Incomes Direct Wages Factory Overhead Admin. Expenses Selling Expenses 1,50,242 632 46,266 41,652 19,690 44,352 Amount in ` 1,56,394-49,734 39,428 20,790 34,650 6,152 Results in more profit 632 Less profit in cost accounts 3,468 Over-absorbed 2,224 Under absorbed 1,100 Over-absorbed 9,702 Under-absorbed (ii) Reconciliation Statement for the year ended 31 st March 2013 Particulars ` ` Profit as per Financial P&L Account Add: Difference in closing stock Factory overheads under - absorbed Selling expenses under - absorbed Less: Over - absorbed direct wages Over - absorbed admin. Expenses Sundry income not taken in cost account Profit as per cost accounts 6,152 2,224 9,702 3,468 1,100 632 33,248 18,078 (5,200) 46,126 1
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 2 Chapter - 4 : Contract Costing 2013 - Dec [4] (b) Computation of Estimated Profit Amount ` Contract Price Less : Cost of work to date Estimated Further expenditure to complete contract Estimated total cost Hence, Estimated Profit 4,50,000 25,000 Amount ` 6,12,000 4,75,000 1,37,000 Computation of profit to be transferred to Profit & Loss Account under different Methods: (i) Estimated Profit Work certified /contract price = (ii) = ` 1,23,300 Estd. Profit [Work certified / contract price] [cash received / work certified] = 1,37,000 [5,50,800 / 6,12,000] [4,40,640 /5,50, 800] = ` 98,640 (iii) Estd. Profit Cost of work to date /Estd. Total cost = = ` 1,29,789.47 (iv) Estd. Profit [cost of work to date/estd. Total cost] [cash received/ work certified] = 1,37,000 [4,50,000/4,75,000] [4,40,640 5,50,800] = ` 1,03,831.58 Chapter - 8 : Marginal Costing 2013 - Dec [1] (b), (d) (b) PV Ratio = = Fixed cost = = 20% = Sales PV Ratio - profit = 2,00,000 0.2-20,000 = ` 20,000 Sales required to earn a profit of ` 50,000 = = = ` 3,50,000 (d) Variable Cost per unit = ` 160 75%= ` 120 Fixed Cost per unit = (160-120) = ` 40 Total fixed Cost = 10,000 40 = ` 4,00,000 Production increases by 25% of 10,000 = 12,500 Variable cost 12,500 120 = 15,00,000 Total Cost = VC + FC =15,00,000 +4,00,000 = ` 19,00,000 Cost of production per unit = = ` 152
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 3 2013 - Dec [2] (a) Results of the first quarter: Sales 10,000 units Particulars Per units (`) Amount (`) Variable Cost (VC) Fixed Cost (FC) Total Cost Loss Sales (S) Contribution (S - VC) 8 3 11 1 10 2 80,000 30,000 1,10,000 10,000 1,00,000 20,000 Comparative Statement of 3 Proposals Particulars Proposal of Finance Manager Amount (`) Sales Manager Amount (`) Prod. Manager Amount (`) Selling Price per Unit 10.00 10.00 9.70 Variable Cost per Unit 8.50 8.00 8.00 Contribution Per Unit 1.50 2.00 1.70 Fixed Cost 30,000 35,000 30,000 Profit required Nil 5,000 4,000 Particulars Proposal of Finance Manager Amount (`) BEP (Units) = Fixed 30,000/1.50=20, Cost/Contribution per unit (A) 000 Sales (Units) = Fixed Cost +Profit/Contribution per unit (A) - Sales Manager Amount (`) Prod. Manager Amount (`) - - 35,000 + 5,000/ 2.00 = 20,000 30,000 + 4,000/1.70= 20,000 Sales in First Quarter (B) 10,000 10,000 10,000 Fixed Cost 10,000 10,000 10,000 Additional Sales Volume required Nil 5,000 4,000 in SECOND Quarter as Compared to first Quarter (A-B) Chapter - 9 : Throughput Accounting 2013 - Dec [1] (a) Return per hour = = Hence, return per hours for product B - 1 is ` 180. = = ` 180
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 4 Chapter - 10: Activity Based Costing 2013 - Dec [4] (a) AKASH INDUSTRIES LTD (i) Computation of Product Costs Using Traditional Costing System (based on assumption that all overheads are recovered on the basis of Direct Labour hours) (A) Products X Y Z ` ` ` Direct Labour 8 12 6 Direct Material 25 20 11 Overhead 4/3 21= 28 2 21= 42 1 21= 21 Total 61 74 38 Direct Labour Hour rate = Overhead cost/direct labour hours = 18,48,000/88,000 = ` 21 per hour (B) The overheads of the receiving department are recovered by a material handling overhead rate the remaining overheads are recovered by using a machine hour rate: Products X Y Z ` ` ` Direct Labour 8 12 6 Direct Material 25 20 11 Material handling 25 35.14%= 8.78 20 35.14%= 7.03 11 35.14%= 3.87 overhead Other overhead 4/3 18.59= 24.79 1 18.59= 18.59 1 18.59 = 18.59 Total 66.57 57.62 58.05 Material Handing Rate = 4,35,000/12,38,000 = 35.14%, and Machine hour rate = 14,13,000/76,000 = ` 18.59 (ii) Computation of Product Costs Using Activity Based Costing (ABC) System: Products X Y Z ` ` ` Direct Labour 8 12 6 Direct Material 25 20 11 Machine overheads 10 4/3= 13.33 10 1=10 10 2= 20 Set-up Costs 100 3/30,000= 0.10 1,000 7/20,000= 0.35 1,000 20/8,000= 2.50 Receiving 1,611 15/30,000= 0.81 1,611 35/20,000= 2.82 1,611 220/8,000= 44.30 Packing 7,812 9/30,000= 2.34 7,812 3/20,000=1.17 7,812 20/8,000= 19.53 Engineering 7,460 15/30,000= 3.73 7,460 10/20,000= 3.73 7,460 25/8,000= 23.31 Total Product Cost 53.31 50.07 126.64
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 5 Machine overhead rate per hour = 7,60,000 / 76,000 = ` 10 Cost per set-up = 30,000 / 30 = ` 1,000 Cost per receiving order = 4,35,000 / 270 = `1,611 Cost per packing order = 2,50,000 / 32 = ` 7,812 Engineering. : Cost per production order = 3,73,000 / 50 = ` 7,460 Chapter - 11 : Transfer Pricing 2013 - Dec [3] (a) Green Environ Ltd. (i) Comparative Profitability Statement of Division M (Figures in `) Alternative Situations Particulars Sales at ` 25 Transfer at ` 22 Do not transfer Sales Revenue :Market Sales 12,50,000 12,50,000 12,50,000 (50,000 units ` 25) Transfer to Division-N(10,000 2,50,000 2,20,000... units ` 25) Total (A) 15,00,000 14,70,000 12,50,000 Variable Cost (at ` 15/unit) 9,00,000 9,00,000 7,50,000 Fixed cost 3,00,000 3,00,000 2,60,000 Total (B) 12,00,000 12,00,000 10,10,000 Total Profit (A - B) ` 3,00,000 27,00,000 2,40,000 Total assets 12,00,000 12,00,000 10,00,000 ROI (Percentage) 25% 22.50% 24% Manager of Division should not transfer the product at ` 22/unit to Division N because it is less than its selling price i.e.` 25/unit and will get low rate of return at ` 22/unit by 2.5%(25% - 22.5%). (ii) The lowest transfer price acceptable to Division M is one, which maintains its rate of return of 24% (ROI without selling to Division N): = (Total Sales Revenue - Total Cost) / Total Assets = 0.24 or, [( ` 12,50,000 + 10,000 Transfer Price (TP)) 12,00,000] ` 12,00,000 =0.24 or, 10,000 TP = 2,88,000 50,000 = 2,38,000 or, (Transfer Price) TP = 2,38,000 10,000 = 23.80 i.e. ` 23.80 The lowest transfer price acceptable to Division - M is ` 23.80 per unit. Chapter - 12 : Budgeting & Budgetary Control 2013 - Dec [3] (c) (i) Saheen Ltd. Fixed Items - Depreciation and Insurance Variable- Wages and consumable stores Semi- variable - Maintenance, and power & fuel
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 6 (ii) Particulars Budget for 80% Capital Level Budgeted Production 80% of 1000 i.e. 800 Units Variable Cost Wages @`2.00 per unit Consumable stores @ ` 1.50 per unit Maintenance : ` 1.00 per unit Power & Fuel : ` 1.00 per unit Fixed cost Maintenance Power & Fuel Depreciation Insurance Amount in ` 1,600 1,200 800 800 500 1,000 4,000 1,000 Total Cost (Variable Cost + Fixed Cost) 10,900 Working Notes: Segregation of semi-variable costs: Maintenance = [1,500-1,100] / 400 = ` 1 per unit variable and Fixed cost = 1,100-600 = ` 500. Power & Fuel = [2,000-1,600] / 400 = ` 1 per unit variable and Fixed cost = 1,600-600 = ` 1,000 (iii) Variable Cost per unit works out to ` 5.50 It consists of wages: ` 2 Consumables Stores : ` 1.50 Maintenance: ` 1.00 Power & Fuel: ` 1.00 Total Fixed Cost = Maintenance + Power & Fuel + Depreciation + Insurance = 500 + 1,000 + 4,000 + 1,000 = ` 6,500 Computation of Total Costs per unit Capacity Particulars 60% 80% 100% Production (Units) 600 800 1,000 Variable cost per units(`) 5.5 5.5 5.5 Fixed cost per unit (` 6,500 + Production Units) 10.83 8.13 6.5 Total Cost per units (`) 16.33 13.33 12
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 7 Chapter - 13 : Standard Costing 2013 - Dec [1] (c) Given, Actual quantity = 2,000Kg Actual rate = ` 12/kg Actual Material cost = 2,000 12 = ` 24,000 Total material cost variance = Material price variance + Material usage variance = 6,000 (FAV) + 3,000(ADV) = 3,000 (FAV) Hence, the standard material cost of Actual production: = 24,000+3,000 (F) = ` 27,000 2013 - Dec [2] (b) ESKAY LTD. Working: Standard Cost of finished Alloy Material Ratio Quantity (Kg) Cost/kg (`) Total (`) P 2 2 40 80 Q 2 2 60 120 R 1 1 85 85 Total Input 5 285 (Less) 5% Loss in process (0.25) --- Net Output 4.75 Kg (`) 285 Standard Cost per Kg of output = ` 60 COMPUTATION OF VARIANCES: Total material Cost variance: Std Cost of Actual Production (Output) - Actual material Cost for production 5,80,000 ` 60-2,40,000 ` 38 = ` 3,48,00,000 - ` 3,35,50,000 2,50,000 ` 59 1,10,000 ` 88 = ` 12,50,000 (F) Material Price Variance : (Std Price - Actual Price) Actual qty consumed X: (40-38) 2,40,000 = ` 4,80,000 (F) Y: (60-59) 2,50,000 = ` 2,50,000 (F) Z: (85-88) 1,10,000 = ` 3,30,000 (A) = ` 4,00,000 (F) Material Mix Variance : (Input in Std proportion- Actual input) Std Cost of input/kg X (2,40,000-2,40,000) ` 40 = Nil Y Z (2,40,000-2,50,000) ` 60 = ` 6,00,000 (A) (1,20,000-1,10,000) ` 85 = ` 8,50,000 (F) 6,00,000 6,00,000 ` 2,50,000 (F)
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 8 Yield variance = (Std yield from actual input - Actual input) Std Cost of finished product = (6,00,000-5,80,000) ` 60 =10,000 ` 60 = ` 6,00,000 (F) Usage Variance = Standard cost (Output) of Actual production/(output) - Standard Cost of Actual quantity Consumed. 5,80,000 60 - X: 2,40,000 40 Y: 2,50,000 60 Z: 1,10,000 85 = ` 3,48,00,000 - ` 3,39,50,000 = ` 8,50,000 (F) Mix Variance + Yield variance ` 2,50,000 (F) + ` 6,00,000 (F) = ` 8,50,000(F) Chapter - 14 : Uniform Costing 2013 - Dec [1] (e) Limitations of Inter firm comparison: (a) Top management shows resistance in sharing of information. (b) Middle management is not convinced with sure comparison. (c) When suitable basis of comparison are not available inter firm comparison becomes meaningless. (d) When suitable cost accounting system is not present the figures supplied are of non relevance as they cannot be relied upon for comparison. 2013 - Dec [3] (b) Prerequisite for installation of uniform costing C C C C C Firms in industry should share information. There should be a spirit of working with mutual trust and cooperation between firms. Sharing of information and ideas should be done freely and frequently. Bigger firms to share their experience to help the small firm, in improving their performance. Uniformity between firms should be established.
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 9 Section - B : Cost Records and Cost Audit Chapter - 15 : Cost Accounting Records and Cost Audit 2013 - Dec [1] (f), (g) (f) The exemption from mandatory cost audit is applicable to those 100% EOU, C who are registered under the policy document as per the Foreign Trade Policy and C the 100% EOU is functioning within the permissible approved limits as per the Foreign Trade Policy. (g) Every company covered under Companies (Cost Accounting Record) Rules, 2011 is required to file a compliance report, irrespective of whether all or any of its products are covered under Cost Audit. Thus the compliance report shall include product groups covered under Cost Audit as well as product groups not covered under Cost Audit. 2013 - Dec [5] (a), (b) (a) The appointment of cost auditor under a firm s name will be subject to the following conditions: 1. All the partners of the firm are full time cost accounting practitioners within the meaning of Sections 6 and 7 of the Cost and Works Accountants Act, 1959. 2. The firm must have been constituted with the previous approval of CG or of the Central Council of ICWAI as per amended regulation 113 of the Cost and Works Accountants Act, 1959. The Cost Audit Report shall be signed by 1. Any one of the partners of the firm responsible for the conduct of the cost audit in his own hand for and on behalf of the firm; 2. A proprietary firm can also be appointed as Cost Auditor and in such cases the report shall be signed by the proprietor himself. (b) NAVINA LTD (i) STATEMENT SHOWING COMPUTATION OF CAPITAL EMPLOYED Particulars For the year ended 31.03.2013 31.03.2012 31.03.2011 (Amount in ` lakh) Gross Fixed Assets : 4,615 4,212 3,845 Less; Depreciation 1,312 1,263 1,224 Net Fixed Assets (A) 3,303 2,949 2,621 Gross Current Assets: Inventory 625 580 511
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 10 Sundry Debtors 334 317 292 Other Loans and Advances 65 58 53 Other Current Assets 32 29 26 Total Current Assets 1,056 984 882 Particulars For the year ended 31.3.2013 31.03.2012 31.3.2011 (Amount in ` Lakh) Gross Current Liabilities Sundry Creditors 214 187 174 Provisions for expenses 29 34 28 Total Current Liabilities 243 221 202 Net Current Assets (B) 813 763 680 Total Capital Employed (A+B) 4,116 3,712 3,301 Particulars Average Capital employed 2012-13 ; For the year ended 31.3.2013 31.03.2012 31.3.2011 (Amount in ` Lakh) 3,914 2011-12 ; 3,506.5 Profit before taxes 232 145 Net sales 3,924 3,212 (ii) PB to Capital Employed For the year Ended 31.03.2013: =[(232 3,914) x 100] = 5.93% PBT to Capital Employed For the year Ended 31.03.2012: = [(145 3,506.5) x 100] = 4.14% (iii) PBT to Net Sales For the year Ended 31.03.2013 =[(232 3,924) x 100] =5.91% PBT to Net Sales For the year Ended 31.03.12 = [ (145 3,212) x 100] = 4.51% 2013 - Dec [6] (a) (a) The duties of cost auditor are similar to those of statutory auditor of the company. In addition to those duties certain additional duties are also cast on cost auditors which are as follows:
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 11 1. Cost auditor shall verify and ensure that proper books of accounts as required by Cost Accounting Records Rules have been kept by the company. He is also duty bound to verify the returns of those branches which are not visited by him. 2. Cost auditor shall ensure that the Cost Audit Report and the detailed cost statements are in the form prescribed by the Cost Audit Report Rules. 3. Cost auditor s report shall be based on data which is verified by him. 4. Cost auditor is duty bound to include observations in his report only after company has been given a chance of commenting on the same. 5. Auditor is duty bound to ensure that the indirect expenses are properly allocated and are absorbed on a reasonable basis. 6. To qualify report if there is any need and to give reasons for any qualification in his report. 7. To forward the cost audit report within the prescribed time period. 2013 - Dec [6] (c) Yes, as per the Companies (Cost Accounting Records) Rules 2011, it is mandatory to prepare unit-wise and product/activity-wise cost statements For Compliance Certificate purposes, no cost statement is required to be submitted. However, if any or all the products/activities of the company is also covered under Cost Audit, then for the purposes of submission of Cost Audit Report under the Companies (Cost Audit Report) Rules 2011, a consolidated cost statement for the product group(s) under cost audit is required to be prepared. Chapter - 16 : Economics for Managerial Decision Making 2013 - Dec [1] (h), (i) (h) Determinants of demand are enumerated below: (1) Price of Commodity (a) Price of the related goods Complementary Goods (b) Substitute Goods or (2) Competing Goods (3) Income of the household (4) Taste and Preference of Consumers (5) Demonstration effect (6) Other Factors: (a) Size of Population (b) Composition of Population (c) Distribution of Income (d) Weather Condition (i) Demand function, x = 80 + 2P + 5P 2 Marginal Quantity demanded = 2 + 10 P
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 12 Elasticity of demand = or Marginal Quantity demanded x = (2 + 10P) x Elasticity of demand At P = = = 2013 - Dec [7] (a), (b), (c) (a) Demand Forecasting: Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Factors involved in Demand Forecasting: (i) Time factor: Demand forecasting may be short-term or long-term. A short-term demand may cover a period of three months, six months or one year but not exceeding one year and long forecasting covers a period exceeding 5 years. (ii) Level factor: Demand forecasting may be undertaken at three different levels: (a) Macro level: It is concerned with business conditions over the whole economy. (b) Industry level: This includes the preparations of sales forecasting by different trade associations. (c) Firm level: It is an important matter from the managerial view point. Individual firms forecast their sales. (iii) General or specific purpose factor: General forecast may be useful for the firm but it also needs commodity forecasts and sales area forecasts (specific forecasts). (iv) Product: Forecasting varies type of product i.e., new product or existing product or well established product. (v) Nature of the product: Goods can be classified into capital goods and consumer durable or non-durable goods and services. Demand for a product will be mainly dependent on nature of the product. Forecasting methods for producer goods and consume/ goods will be different accordingly. (vi) Competition: While making forecasting, market situation and the product (vii) position in particular market should be analyzed. Consumer Behavior: What people think about the future, their own personal prospects and about products and brands are vital factors for firm and industry. (b) Under Prefect Competition Market Demand = Supply 16-x 2 = 2 x 2 + 4 Or 16-x 2-2x 2-4 = 0 Or -3 x 2 = -12
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 13 Or x 2 = 12/3 = 4 x 2 = ±2 i.e. 2 or -2 (Since Quantity cannot be negative, ignoring the negative value (-2) (i) Market Price Y = 16-x 2 = 16-4 = 12 (Where x = +2) (ii) Consumer Surplus = -24 = 32 - -24 = (c) (i) Cost function of Nandini Electricals C(x) = x and Revenue Function R (x) = x (1,100-1.5x) Then, Profit = R(x) -C(x) = x (1,100-1.5x) - x = 1,100x - 1.5x 2 - - 200x = 900x - 1.5x 2 - (Say P) Marginal profit = = 900-3x- Output required per month to make the MP = 0 Hence, Or, - - 3x - 900 = 0 (ii) - 3x 2-30x + 9,000 = 0 x 2 +10x - 3,000 = 0 X 2 + 60x - 50x - 3,000 = 0 or, x(x+60) - 50(x+60) = 0 or, (x-50) (x+60) = 0 Either x = 50 or x = -60 [Since quantity/units cannot be negative value] Hence, The required output level = 50 (thousand) units. Total Profit at output x= 50 (thousand) units. - - 3x - 900 = 1,25,000 /10-3,750 + 45,000 = ` 28,750 thousands.
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 14 2013 - Dec [8] (a), (b), (c) (a) Main features of perfect competition market: (1) Large number of buyers and sellers: Under perfectly competitive market there is large number of buyers and sellers. Each buyer and seller has no ability to influence the ruling price by their independent action. (2) Homogeneous Products: The products sold by the suppliers are fully homogeneous. The commodities available everywhere are the same. (3) Uniform price: Price is uniform as the products in the market are identical. Price is fixed by all the buyers and sellers in the market. (4) Free entry and free exit: Under perfect competition buyers and sellers are absolutely free to enter and leave the market. No restriction is imposed on their entry and exit. (5) Perfect knowledge about the market: Both buyers and-sellers must have perfect knowledge about the conditions of the market. Sellers must know the ruling market price charged by other sellers from the buyers. Similarly buyers know the prices charged by different sellers. (6) Perfect mobility: Various factors of production are perfectly mobile within the industry. Factors of production can freely move from one occupation to another and from one place to another. (7) Absence of transport cost: Price being charged by the firms is free of transportation cost. Price is not affected by the cost of transportation of goods. (b) (i) Cost (c) = x 2 + 780 x + 25,000 Demand (D), x = = Or, 4x = 60,000 - P P = 60,000-4X So total Revenue per x sets, R = 60,000 x - 4x 2 Maximum Revenue is obtained at Marginal Cost = Marginal Revenue MR = dr/dx = 60,000-8x MC (Marginal Cost) = dc / dx = 2x + 780 When, MC= MR 2x + 780= 60,000-8x or, 10x = 59,220 or, x= 5,922 Sets Hence, 5,922 sets to be produced per week at which the firm will get maximum net revenue. (ii) Monopoly Price = 60,000-4x = 60,000-4 5,922 = ` 36,312
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 15 (c) Efficiency of a small manufacturing concern, E = + 3W - 39.2 For the Maximum Efficiency = 0, and should be negative. = - x 3W 2 + 3 =0 3W 2 = 1,200, => W 2 = 400, => W= 20 = -, ˆ at w= 20 = = <0 Maximum Efficiency at w = 20 Hence strength of workers = 20 2013 - Dec [9] (a), (b), (c) (a) (i) When the product is new but with a high degree of consumer acceptability, the firm should decide its pricing strategy in favour of Skimming Pricing Strategy, i.e., an approach under which a producer sets a high price for a new high-end product or a uniquely differentiated technical product. Its objective is to obtain maximum revenue from the market before substitutes products appear. As the demand for the new product is relatively inelastic the high prices will not stop the new consumers from demanding the product. If the life of the product promises to be a short one, the management should fix high price so that it can earn, as, much profit as possible and in as short a period as possible. (ii) The product is already served in the market by well-known brands. Ajanta Foot wear has to choose Penetration Pricing Strategy. Penetration pricing is the practice of offering a low price for a new product or service during its initial offering in order to attract customers away from competitors. The reasoning behind this marketing strategy is that customers will buy and become aware of the new product due to its lower price in the marketplace relative to rivals. (b) Given to assume closed economy, E = C+I+G Given that, C=15 +0.9Y, I = 20+0.05Y and G = 25 ˆ E = 15 + 0.9Y +20 + 0.05Y + 25 E = 60 + 0.95Y For equilibrium values of Y, E = Y (Given) 60 + 0.95Y =Y Or Y = 1,200 For equilibrium values of C, C = 15 + 0.9 Y, C = 15 + 0.9 x 1,200 C = 1,095 For equilibrium values of I, I = 20 + 0.05 Y
Solved Scanner Appendix CMA (CWA) Inter Gr. II Paper 10 16 I = 20 + 0.05 x 1,200 I = 80 When there is no government spending Y = 35 + 0.95Y, Y = 700 C = 15 + 0.9 Y = 15 + 630 = 645 I = 20 + 0.05Y = 20 + 0.05 700 = 55 (c) Revenue function, R=10Q Cost function, C=20,000 +50 Profit (P)= R-C = 10Q -20,000 + 50 = 10Q -20,000 + 50 (profit function) To find number of Units to get the Maximum Profit = 0, and should be negative. = = 10 - = 0 10 - = 0 Q = 64,000 = = - = - which is negative. Profit (P) is maximum at Q = 64,000 Units Hence, 64,000 to be sold to get maximum profit. Maximum profit = 10 x 64,000 20,000 50 = 6,40,000-20,000-3,20,000= ` 3,00,000 Shuchita Prakashan (P) Ltd. 25/19, L.I.C. Colony, Tagore Town, Allahabad - 211002 Visit us : www.shuchita.com