CA Inter P5 · Chapter 4 · Question 12 of 14
Swara Software Ltd. had 250 employees throughout the year, each paid Rs. 30,000 per month. A uniform 8% increment was given with effect from 1 October; the financial year ends on 31 March. Using a substantive analytical procedure, what is the auditor's expected annual salary cost? (Ignore other components.)
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Rs. 9.36 crore
Explanation
Monthly cost before increment = 250 x Rs. 30,000 = Rs. 75 lakh; for April to September: 75 x 6 = Rs. 450 lakh. Monthly cost after increment = 75 x 1.08 = Rs. 81 lakh; for October to March: 81 x 6 = Rs. 486 lakh. Expected cost = 450 + 486 = Rs. 936 lakh, i.e. Rs. 9.36 crore. Rs. 9.72 crore applies the increment for the full year, Rs. 9.00 crore ignores it, and Rs. 9.18 crore applies it for only three months.
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