(a) ABC company produces tables. An analysis of their accounting reveals—
Fixed cost ₹1,00,000 for the year
Variable cost ₹40 per table
Selling price ₹140 per table
Capacity 2000 tables per year

(i) Find the break-even point (BEP).
(ii) Find the num

Question

(a) ABC company produces tables. An analysis of their accounting reveals—
Fixed cost ₹1,00,000 for the year
Variable cost ₹40 per table
Selling price ₹140 per table
Capacity 2000 tables per year

(i) Find the break-even point (BEP).
(ii) Find the number of tables to be sold to get a profit of ₹60,000.
(iii) What will be the answer for (i) and (ii), if selling price changes to ₹120 per table?
(iv) If the company can manufacture 600 tables more per year with an additional fixed cost of ₹4,000, what should be the selling price to maintain the profit per table as (ii) above? (20 marks)

(b) "Accounting is an information system for decision making." Explain. State its characteristics. (15 marks)

(c) What is tax audit? Explain its objectives. Who can be a tax auditor? (15 marks)

UPSC Answer Check · Accepted Answer

This question demands a hybrid approach: solve the CVP numerical in part (a) with clear workings, explain the conceptual framework in part (b) on accounting as an information system, and describe the regulatory provisions for tax audit in part (c). Allocate approximately 40% time to part (a) given its 20 marks and computational complexity, 30% each to parts (b) and (c). Structure with clear sub-headings for each part, show all formulas and step-by-step calculations for (a), and conclude with integrated insights linking cost accounting information to decision-making and compliance.
- Part (a)(i)-(iv): Correct calculation of BEP in units (1,000 tables), target profit units (1,600 tables), revised BEP at ₹120 SP (2,000 tables), and required selling price for expanded capacity (₹140) with proper formulas and margin of safety analysis
- Part (b): Explanation of accounting as an information system with identification of inputs (transactions), processes (recording/classification), outputs (financial statements/reports), and users (internal/external); characteristics including relevance, reliability, timeliness, understandability, and comparability
- Part (c): Definition of tax audit under Section 44AB of Income Tax Act, 1961; objectives including verification of turnover/gross receipts, compliance with tax laws, detection of concealment, and facilitation of assessment
- Part (c): Eligibility criteria for tax auditors—Chartered Accountants holding full-time certificate of practice, provisions regarding disqualification, and ceiling on number of tax audits (60 per auditor)
- Integration: Link between cost accounting data from (a), managerial decision-making in (b), and statutory compliance through tax audit in (c) demonstrating how accounting information serves multiple stakeholder needs

Dimension	Weight	Max marks	Excellent	Average	Poor
Demand-directive understanding	15%	7.5	Correctly interprets 'solve' for part (a) with proper mathematical approach, 'explain' for part (b) with conceptual depth, and 'what is'/'who can be' for part (c) with definitional precision; recognizes the 20:15:15 mark distribution and adjusts depth accordingly	Identifies basic directives but treats all parts with similar depth; some confusion between calculation and explanation requirements; misses mark-weighted prioritization	Misinterprets directives—writes descriptive narrative for (a) instead of calculations, or merely lists points for (b) without explanation; fails to distinguish part requirements
Content depth & accuracy	30%	15	Part (a): All four sub-parts solved with correct formulas (BEP=FC/Contribution, Target=(FC+Profit)/Contribution), accurate figures, and sensitivity analysis showing BEP rises to 2,000 units when SP drops to ₹120; Part (b): Comprehensive coverage of AIS components, feedback loops, and qualitative characteristics per AS 1/Conceptual Framework; Part (c): Precise Section 44AB provisions, Form 3CA/3CB/3CD references, and CA eligibility rules	Part (a): Correct BEP calculation but errors in target profit or revised SP scenario; Part (b): Generic information system description without accounting-specific context; Part (c): Basic definition but misses specific section numbers or audit forms	Part (a): Fundamental calculation errors, wrong formulas, or missing units; Part (b): Confuses financial accounting with cost accounting information systems; Part (c): Incorrect eligibility (mentions Company Secretary or Cost Accountant) or outdated provisions
Structure & flow	20%	10	Clear tripartite structure with visible headings (a), (b), (c); within (a), sequential labeling of (i)-(iv) with tabular presentation of workings; logical progression from computation → conceptual framework → regulatory compliance; effective use of white space and numbering for examiner navigation	Basic structure present but inconsistent formatting; calculations run together without clear labeling; some mixing of (b) and (c) content; readable but requires effort to follow	Unstructured wall-of-text approach; no headings or sub-headings; calculations buried in paragraphs; parts (a), (b), (c) not clearly demarcated; examiner must search for answers
Examples / case-law / data	20%	10	Part (a): Uses Indian context (₹ notation, realistic furniture manufacturing scenario); Part (b): Cites SEBI disclosure requirements, Companies Act 2013 provisions on financial reporting, or ICAI's Accounting Standards; Part (c): References specific tax audit cases (e.g., CIT vs. Ashok Bhai K. Patel on audit scope), recent CBDT notifications on turnover thresholds (₹1 crore/₹5 crore/₹10 crore), or GST audit interplay	Part (a): Correct data usage but no contextual enhancement; Part (b): Generic corporate examples without regulatory specificity; Part (c): Mentions Section 44AB but no case law or recent amendments	No examples or case references; part (a) lacks data interpretation; part (c) shows no awareness of current threshold limits or that tax audit is distinct from statutory audit under Companies Act
Conclusion & analytical edge	15%	7.5	Synthesizes across parts: notes how CVP analysis (a) generates internal management information feeding the AIS (b), which ultimately supports tax audit verification (c); discusses limitations of CVP (assumptions of linearity, constant mix) and challenges in digital-era tax audits (e-governance, faceless assessment); forward-looking statement on integrated reporting	Brief concluding paragraph restating main points without synthesis; acknowledges CVP usefulness but no critical evaluation; standard closing on tax audit importance	No conclusion; or abrupt ending with 'hence proved'; missing entirely for parts (b) and (c); no analytical reflection on interconnections between cost accounting, information systems, and audit function

(a) ABC company produces tables. An analysis of their accounting reveals— Fixed cost ₹1,00,000 for the year Variable cost ₹40 per…

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