|Time Allowed : 3 Hours||Full Marks : 100|
|The figures in the margin on the right side indicate full marks|
|Attempt Question NO. 1 (carrying 20 marks) which is compulsory and |
any five (each carrying 16 marks) from the rest.
|1.||(a)||State if each of the following statements is T (= true) or F (= false).||1x14=14|
|(i)||It is appropriate to view the value chain from the customer’s perspective, with each link being seen as the customer of the previous link.||(0)|
|(ii)||One of the goals JIT seeks to achieve is batch sizes of one.||(0)|
|(iii)||Examples of value added and non–value added activities are ‘move time’ and ‘storage time’ respectively.||(0)|
|(iv)||JIT manufacturing, based as it is on ‘push through philosophy’ helps to provide the right parts at the right time and in right quantity.||(0)|
|(v)||A ‘cost of quality report’ indicates the total cost to the organization of producing products or services conforming with quality of requirements.||(0)|
|(vi)||A balanced score card studies the performance of management by comparing a financial achievement with the amount spent thereon.||(0)|
|(vii)||While using a matrix method, in the event of close–down of a service centre (say, own generated electricity) the number of units of service (kwh) that should be acquired externally can be calculated by dividing the number of units produced internally by the diagonal element of the concerned service in the inverse of the matrix.||(0)|
|(viii)||Safety stock is that level of stock that is stored in fire–proof insurable storage.||(0)|
|(ix)||Differential cost decision excludes fixed cost and qualitative factors.||(0)|
|(x)||Back Flus Accounting compares profit with the cost of producing a product.||(0)|
|(xi)||EVA encourages short–term performance.||(0)|
|(xii)||The useful purposes that budgets seek to serve include coordinating the activities of the various parts of the organisation and ensuring that the parts are in harmony with each other.||(0)|
|(xiii)||To convert the assignment problem into a maximization problem, all elements of the matrix are deducted from the highest element in the matrix.||(0)|
|(xiv)||In a transportation problem VAM stands for Vogel’s approximation method.||(0)|
|(b)|| The following question is provided with an answer. State if the answer is correct or not. Give reasons or show your workings in support of your answer: |
A pay–off matrix has been correctly prepared by the junior accountant of a firm, as below:
The firm can introduce only one of the above three products. The figures under a product show net incomes from three possible levels of demand.
On being asked to suggest which of the products, A, B or C should be chosen my minimax regret criterion for introduction, the accountant says, “My answer is B, Sir”.
|2.|| Mounir Halabi wishes to decide whether to lease a new machine to assist in the manufacture of his single product for the coming quarter, and also to decide what price to charge for his product in order to maximize his profit (or minimize his loss). |
In the quarter just ended his results were as follows:
Mounir expects that, during the coming quarter,
Quality control is very difficult and a high proportion of material is spoiled. A new machine has become available that can be delivered immediately. Tests have shown that it will eliminate the quality control problems; resulting in a halving of the usage of materials. It cannot bought but can be leased for Rs. 1,15,000 per quarter.
The product has a very short self life, and is produced only to order. Mounir estimates that if he were to change the unit selling price, demand for the product would increase by 1,000 units per quarter for each one paisa (Re. 0.01) decrease in the selling price (so that he would receive orders for 5,00,000 units if he were to offer them free of charge), and would decrease by 1,000 units per quarter for each one paisa (Re. 0.01) increase in the unit selling price (so that at a price of Rs. 5 his sales would be zero).
You are required to advise Mounir Halabi whether, in the coming quarter.
|3.|| Jai Hind Ltd. (JH) has two divisions — Sunny Engineering Division (SE) and Kiron Motor Division (KM) SE sells is products both inside and outside the company. It sells one of its products, a motor unit, solely to external customers, but buys the motor itself internally from KM division. The KM division makes the motor to SE specifications and it does not expect to be able to sell it to any other customers. In preparing the 2008 budgets SE estimated the number of motor units it expects to be able to sell at various prices as follows: |
It then sought a quotation from KM, who offered to supply the motors at Rs. 24 each based on the following estimate.
Factory overhead costs are fixed. All other costs are variable.
Although it considered the price quoted to be on the high side, SE nevertheless believed that it could still sell the completed unit at a profit because it incurred costs of only Rs. 8 (material Rs. 2 and direct labour Rs. 6) on each unit made. It therefore placed an order for the coming year.
On reviewing the budget for 2008 the finance director of JH noted that the projected sales of the motor unit were considerably less than those for the previous year, which was disappointing as both divisions concerned were working well below their capacities. On making enquiries he was told by SE that the price reduction required to sell more units would reduce rather than increase profit and that the main problem was the high price charged by KM. KM stated that they required the high price in order to meet their target profit margin for the year, and that any reduction would erode their pricing policy.
|4.|| A company produces machine lubricants. The production manager wants to finalise the production plan for the following year on the basis of demand and capacity figures as shown below: |
At the commencement of the year 25,000 litres of the lubricant will be in stock and the plan envisages an year end stock of 30,000 litres.
Use the transportation method to develop the aggregate plan.
|5.||(a)|| AB Foods have observed from a market survey that they can sell a special type of packed snack at a price of Rs. 50 per pack during festive season only. |
However, for this purpose they will have to make a fresh investment of Rs. 1,50,000 in equipment. The variable cost of production would be Rs. 25 per unit. The variable cost of production would come down to Rs. 20 if the investment is made for Rs. 3,00,000. The likely sales to be achieved are as under:
There will be no residual value of the investments at the end of the festive season. Should the company go ahead and invest?
|(b)||A company is contemplating purchase of an equipment at a cost of Rs. 10,00,000. This investment will generage additional sale of 10,000 units per annum for next 4 years. The contribution per unit is Rs. 300. The fixed costs are expected to be Rs. 20,00,000 per annum. The cost of capital is 5%. |
You are required to work out how much each factor contributing to profit can change before the company becomes indifferent to the Project. [The Discount factor @ 5% for year 1 to 4 is 3.546].
|6.||(a)||Explain the concept of Learning Curve and state how relevant is the same in managing costs.||4||(0)|
|(b)|| A manufacturing company manufactures two chemical products xx and yy in its single processing department. For every unit of production of xx, two units of yy are produced. The company has the choice of either marketing xx and yy as such or sell those after further refining as super quality in department A and department B respectively. The following data are available. |
Product xx – Rs. 6, Product yy – Rs. 5, Product Super xx – Rs. 8, Product Super yy – Rs. 6.50.
The company apportions joint costs on the basis of potential sales values.
If the production is sold without refining; the processing departments A and B can be completely closed down.
|7.|| The probability of the consumption pattern of a material is as under: |
The cost of placing an order is Rs. 2000 and it takes two months to replenish stock (i.e an order is delivered after two intervening months). The average carrying cost of stock, calculated on the stocks held at the end of each month, is Rs. 100 per month per stock.
At the beginning of the period under review, there is an opening stock of 8 tons and there is 6 tons of material to be received next month against an order placed 2 months ago.
Using the random numbers given below, you are required to simulate the consumption for 12 months and find out which alternative will have minimum inventory costs.
|8.||Write short notes on (any four):||4x4|
|(c)||Life Cycle Costing||(0)|
|(d)||Objectives of PERT and CPM.||(0)|
|(f)||Parametric Cost Control.||(0)|