|Total No. of Questions— 6]||[Total No. of Printed Pages—4|
|Time Allowed : 3 Hours||Maximum Marks : 100|
|Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.|
|Question No. 1 is compulsory. |
Answer any four Questions from the rest. Working notes should form part of the answer.
Make assumptions wherever necessary.
|1.||(a)||What are the elements of a Balanced Score card? Also explain how it can be used as a Financial Planning model.||4||(0)|
|(b)||What is the concept of ‘Value–chain’ and why is it important for Cost Management?||4||(0)|
|(c)|| Compute Ltd. manufactures two parts ‘P’ and ‘Q’ for Computer Industry. |
Direct machining costs represent the cost of machine capacity dedicated to the production of each product. These costs are fixed and are not expected to vary over the long-run horizon.
A foreign competitor has introduced product very similar to ‘P’. To maintain the company’s share and profit, Computer Ltd. has to reduce the price to Rs. 86.25. The company calls for a meeting and comes up with a proposal to change design of product ‘P’. The expected effect of new design is as follows:
|2.||(a)|| Zilmil Ltd. makes two products ‘Brightly’ and ‘Lightly’. Both the products use the same labour force, the size of which is restricted to 78,000 hours per month. Brightly needs 2 hours per unit to make whereas lightly needs one hour. The estimated production and sales, manufacturing and selling expenses per month are as follows: |
The Company is considering pricing option in a highly competitive market. It has estimated sales demand at various selling prices:
You are required to compute profit maximizing price and quantity for each product.
|(b)||What are some goals of a ‘transfer–pricing’ system in an organization?||4||(0)|
|(c)||“Overhead variances should be viewed as interdependent rather than independent”. Explain.||4||(0)|
|3.||(a)|| Jay Kay Limited is a single product manufacturing company. The following information relates to the months of May and June, 2003: |
You are required to calculate the relative effects on the monthly operating profits of applying: (a) Absorption costing and (b) Marginal costing.
|(b)||What is total–life–cycle costing approach? What is it important?||4||(0)|
|(c)||Why are conventional product costing systems more likely to distort product costs in highly automated plants? How do activity–based costing systems deal with such a situation?||4||(0)|
|4.||(a)|| An organisation manufactures a product, particulars of which are detailed below: |
Determine the unit selling price under two strategies mentioned below. Assume that the organisation’s Tax rate is 40%—
(a) 20% return on investment.
(b) 6% profit on list sales, when trade discount is 40%.
|(b)||“Sunk cost is irrelevant in decision-making, but irrelevant costs are not sunk costs”. Explain with example.||4||(0)|
|(c)||How will you apply customer costing in service sector? Explain with the help of a suitable example.||4||(0)|
|5.||(a)|| A Company is engaged in manufacturing two products ‘X’ and ‘Y’. Product X uses one unit of component ‘P’ and two units of component ‘Q’. Product ‘Y’; uses two units of component ‘P’, one unit of component ‘Q’ and two units of component ‘R’. Component ‘R’ which is assembled in the factory uses one unit of component ‘Q’. |
Component ‘P’ and ‘Q’ are purchased from the market. The company has prepared the following forecast of sales and inventory for the next year:
The production of both the products and the assembling of the component ‘R’ will be spread out uniformly throughout the year. The company at present orders its inventory of ‘P’ and ‘Q’ in quantities equivalent to 3 months production. The company has compiled the following data related to two components:
(a) Prepare a Budget of production and requirements of components during next year.
(b) Suggest the optimal order quantity of components ‘P’ and ‘Q’.
|(b)||Differentiate between ‘Value–added’ and ‘Non–value–added’ activities in the context of Activity–based costing. |
Give examples of Value–added and Non–value–added activities.
|(c)||“The use of Absorption costing method in decision-making process leads to anomalies.” Discuss.||4||(0)|
|6.||(a)|| A Company manufactures two products ‘X’ and ‘Y’. Company’s fixed cost per annum is Rs. 5 lacs. These products are sold for Rs. 288 per unit of ‘X’ and Rs. 432 per unit of ‘Y’. Standard cost data are: |
The Company operates 8 hours shift for 300 days in a year. Number of workers engaged by each department is given below:
|(b)||How has the composition of manufacturing costs changed during recent years? How has this change affected the design of cost accounting systems?||4||(0)|
|(c)||Explain the concept ‘Learning curve’. How can it be applied for Cost management?||4||(0)|