|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.||In each of the cases given below one out of four answers is correct. Indicate the correct answer (= 1 marks) and give your working/reasons in support of your answer (= 3 marks):|
|(a)|| If the time taken to produce the first unit of a product is 4000 hrs, what will be the total time taken to produce the 5th to 8th unit of the product, when a 90% learning curve applies? |
|(b)|| In a process, three raw materials are mixed together to produce a product. The standard mix of inputs required to produce 160 kgs of finished product is as under; |
During May 2007, the company produced 920 kgs of output and the actual consumption of raw materials is as under:
The material yield and mix variances respectively for May, 2007 are
(A) or (F) under brackets after the figures denotes ‘Adverse’ or ‘Favourable’.
|(c)|| A company proposes to undertake a capital project. The life of the project is 4 years and the annual cash inflows are estimated at Rs. 40,000. The internal rate of return of the project is 15% and the cumulative present value factor for 15% for 4 years is 2.855. The profitability index is 1.064. |
The net present value of the project is
|(d)|| Back flush costing is most likely to be used when |
|(e)|| A particular job requires 800 kgs of a material 500 kgs of the particular material is currently in stock. The original price of the material was Rs. 300 but current resale value of the same has been determined as Rs. 200. The current replacement price of the material is Re. 0.80 per kg. |
The relevant cost of the material required for the job is
|2.||(a)||Explain clearly the distinction between Joint Products and By Products.||4||(0)|
|(b)|| The Petal Perfume Company processes a secret blend of flower petals into three products. The process works in such a way that the petals are broken down into a high–grade perfume, ’Charm‘ and a low–grade flower oil. The flower oil is then processed into a low–grade perfume. ‘Wild Scent’ and a Cologne, ’Personality‘. |
The company used 10,000 kgs of petals last month.
The costs involved in reducing the petals the petals into ’Charm‘ and ’Flower oil‘ were as follows.
The costs of producing ‘Wild Scent’ and Personally from the flower oil were
Total production for the month, with no closing work–in–progress was
The sale price of Charm is Rs. 40 for 25 ml; of Wild Scent Rs. 10 for 25 ml and of Personally per 25 ml.
Additional costs, entirely separate for each product, of processing and selling are
You are required:
|3.||(a)||Write a short note on ‘Relevant costs in decision making’.||3||(0)|
|(b)||Pooja Company manufactures cookware. Expected annual volume of 1,00,000 sets per year is well below its full capacity of 1,50,000. Normal selling price is Rs. 40/– per set, Manufacturing cost is Rs. 30/– per set (Rs. 20 variable and Rs. 10 fixed). Total fixed manufacturing cost is Rs. 10,00,000. Selling and administrative expenses are expected to be Rs. 5,00,000 (Rs. 3,00,000 fixed and Rs. 2,00,000 variable). |
A departmental store offers to buy 25,000 sets of Rs. 27/– per set, No extra selling and administrative costs would be caused by the order. Further, the acceptance of this order will not affect regular sales. Should the offer be accepted?
You are to adopt Incremental Approach only for your decision making.
|(c)|| Accurancy Calculators Ltd. manufactures engineering calculators and selling price was fixed at Rs. 400. The following are the cost particulars. |
The company was producing only 10,000 units, since the demand was only 10,000 units. However, the company has the capacity to produce another 1,000 units without any additional fixed overheads. One of the distributors offered that they will take, 1,000 units in addition to their normal quota, but at a selling price of Rs. 320 per unit. He was also prepared to accept only half of his regular commission for this transaction.
The Managing Director wants you as the Cost and Management Accountant to prepare a statement to the Board of Directors with your specific recommendations, based on the calculations in the statement.
|4.||(a)|| A company uses complex electronic control systems in its production processes. There are 20 of these systems and each system contains 25 components, which are subject to failure. The company has been recording the pattern of failure over four periods of time with the results as shown below: |
If the components are replaced as they fail, it will cost Re. 1 per component to effect the replacement. However, if all the components are replaced at once, the cost is Re. 0.50 per component.
Management is considering the following alternative replacement polices.
You are required to advise the management on which is the more economic replacement policy.
|(b)|| An engineering workshop wishes to appoint a mechanic to repair motors that breakdown at an average rage of 4 per hour, the number of breakdowns being Poison distributed. Two candidates have been short–listed of which one has to be appointed. |
‘A’ is experienced and can repair on an average 8 motors per hour and asks for it daily wage of Rs. 160.
‘B’ is not so experienced and can repair on an average 8 motors per hour and asks for a daily wage of Rs. 96.
The number of repairs in either case follows a Poisson distribution, Whenever a motor is down, an idle time cost at the rate of Rs. 60 per hour is incurred. The workshop works an 8–hour day. Give your recommendation as to who should be appointed.
|5.||Mr. X is trying to decide whether to travel to Sri Lanka from new Delhi to negotiate the sale of a shipment of China novelties. He holds the novelties in stock and is fairly confident but by no means sure that if he makes the trip, he will sell the novelties at a price that will give him a profit of Rs. 30,000. He puts the probability of obtaining the order at 0.6. If he does not make the trip, he will certainly not get the order. |
If the novelties are not sold in Sri Lanka, there is an Indian customer, who will certainly buy them at a price that leaves him a profit of Rs. 15,000 and his offer is open at least till Mr. X returns from Sri Lanka, Mr. X estimates the expenses of trip to Sri Lanka at Rs. 2,500. He is however, concerned that his absence, even for only three days, may lead to production inefficiencies in the factory. These could cause him to miss the deadline on another contract, with the consequence that a late penalty of Rs. 10,000 will be invoked. Mr. X assesses the probability of missing the deadline under these circumstances at 0.4.
Further, he believes that in his absence, there will be a lower standard of housekeeping in the factory and the raw material and labour cost on the other contract will rise by about Rs. 2,000 above the budgeted figure.
Draw an appropriate decision tree for Mr. ‘X’s problem and using the Expected Monetary Value (EMV) as the appropriate criterion for decision, find the appropriate initial decision.
|6.||(a)||Many traditional management accounting practices the criticized because they fail to include assumption about human behaviour. |
For the following areas viz.,
discuss, with reference to practical situation, how the effects of human behaviour should be recognized in the introduction and operation of the system.
|(b)||A company makes two kinds of leather belts. Belt A is a high quality belt and Belt B is lower quality. The respective profits are Rs. 40 and Rs. 30 per belt. Each belt of type A requires twice as much time as belt of type B and if all belts were of type B, the company could make 1000 per day. The supply of leather is sufficient for only 800 belts (both A and B combined). Belt A requires a fancy buckle and only 400 per day are available. There are only 700 buckets a day available for Belt B. |
You are required to only formulate the linear programming problem. Do not solve the LPP.
|7.||(a)||State the advantages of ‘Just–in–time’ production system.||4||(0)|
|(b)|| A company has two manufacturing divisions, A and C. Each division operates as an independent profit center. A, which produces two components ‘Bright’ and ‘Light’ — has a capacity of 100000 hours per annum. The annual fixed costs of A amount to Rs. 20 lacs. |
The product cost data is as under:
A has a permanent customer for the purchase of 15000 units of ‘Bright’ per annum at a selling price of Rs. 300 per unit. The balance capacity is devoted to the production of ’Light‘, for which there is an unlimited sales potential at a price of Rs. 60 per unit.
C assembles ’Tight‘ by using imported component. The annual fixed costs of division C amount to Rs. 4,00,000.
The product cost data is an under:
With a view to minimizing dependence on imported components, the possibility of using ‘Bright’ was explored. It was found that the import substitution was possible with slight modification, which will take two extra hours per unit of ’Tight‘ in Division C. The production of ’Tight‘ is estimated at 5000 units per annum.
You are requested to present the division–wise profit statement and the company‘s profit as a whole on the basis of the following conditions.
|8.||Write short notes on any four out of the following:||4x4=16||(0)|
|(b)||Objectives to be kept in mind while setting transfer pricing by multinationals;||(0)|
|(c)||Differences between Traditional Products Cost System and Throughput Accounting;||(0)|
|(d)||Reasons for emergence of Activity Based Costing;||(0)|
|(e)||Life Cycle Costing.||(0)|