ABHYAS · CA STUDENTS
CA Intermediate: Costing & FM सीए इंटरमीडिएट: लागत और वित्तीय प्रबंधन
Unlimited CA Intermediate practice for Cost & Management Accounting and Financial Management: EOQ, stock levels, CVP, variances, NPV, payback, cost of capital, leverage and working capital, with hints, worked steps and mistake checks. Original questions generated by code.
Material cost
- Economic order quantity (EOQ)EOQ = √(2AO ÷ C): A = annual demand (units), O = ordering cost per order, C = carrying cost per unit per year.
- Stock levels: re-order, minimum and maximumROL = Max usage × Max lead time. Min level = ROL − (Avg usage × Avg lead time). Max level = ROL + ROQ − (Min usage × Min lead time).
Overheads: absorption costing
Marginal costing
- P/V ratio (contribution ÷ sales)P/V ratio = Contribution ÷ Sales × 100, where Contribution = Sales − Variable cost. With two periods: Change in profit ÷ Change in sales × 100.
- Break-even point (units and sales value)BEP (units) = Fixed cost ÷ Contribution per unit. BEP (₹) = Fixed cost ÷ P/V ratio.
- Margin of safetyMargin of safety = Actual sales − Break-even sales = Profit ÷ P/V ratio. MOS % = MOS ÷ Actual sales × 100.
- Sales needed for a target profitRequired units = (Fixed cost + Target profit) ÷ Contribution per unit. For an after-tax target, first gross it up: pre-tax = after-tax ÷ (1 − tax rate).
Standard costing
- Material variances: price, usage and costSign convention: positive = Favourable (F), negative = Adverse (A). MPV = (SP − AP) × AQ; MUV = (SQ − AQ) × SP; MCV = SC − AC = MPV + MUV.
- Labour variances: rate, efficiency and costPositive = Favourable (F), negative = Adverse (A). LRV = (SR − AR) × AH paid; LEV = (SH − AH) × SR; LCV = SC − AC (no idle time assumed).
Investment decisions
- Net present value (NPV)NPV = Σ (Cash inflow × PV factor) − Initial investment. Accept if NPV > 0.
- Payback periodEven cash flows: Payback = Investment ÷ Annual cash inflow. Uneven: full years until cumulative inflow nearly covers cost + (amount still needed ÷ next year’s inflow).
- Accounting rate of return (ARR)ARR = Average annual profit after depreciation and tax ÷ Investment × 100. Average investment = (Initial cost + Salvage value) ÷ 2.
Cost of capital
- Cost of equity: dividend growth (Gordon) modelKe = D1 ÷ P0 + g, where D1 = D0 × (1 + g) is next year’s expected dividend.
- CAPM: required return on equityKe = Rf + β × (Rm − Rf). (Rm − Rf) is the market risk premium.
- Weighted average cost of capital (WACC)WACC = Σ (weight × cost). Use after-tax cost of debt: Kd = Interest rate × (1 − tax rate).