CWA ICWA Inter Stage II : Management Accounting Performance Management - June 2008

CWA ICWA Inter - Stage II • Management Accounting Performance Management • June 2008

This Paper has 34 answerable questions with 0 answered.

*I—9(MPM)* *Revised Syllabus*
Time Allowed : 3 Hours		Full Marks : 100

The figures in the margin on the right side indicate full marks
Answer Question No. 1 which is compulsory and any five from the rest.
Marks

(a)

Match each expression under Column I below with the statement in Column II:

Column I		Column II
(i)	Performance of Public enterprise	(A)	Technique for continuous improvement of performance
(ii)	JIT	(B)	Number of Purchase orders processed
(iii)	Profit Centre	(C)	Shows capacity utilization and profitability
(iv)	Cost Driver	(D)	Availability of material at the correct time
(v)	Bench Marking	(E)	A part of business accountable for cost and revenue.

1x5

(0)

(b)

From the following choose the most appropriate answer:

1x5

(i)

Period cost means
(A) Variable cost
(B) Fixed cost
(C) Prime cost.

(0)

(ii)

If the fixed cost is Rs. 10,000 and profit–volume (PV) ratio is 50% the break–even will be
(A) Rs. 20,000
(B) Rs. 50,000
(C) Rs. 10,000

(0)

(iii)

Increase in capacity reduces the margin of safety if
(A) Total cost remains unchanged
(B) Fixed costs at new capacity are increased
(C) Fixed cost increased and sales grow.

(0)

(iv)

An increase in sales price
(A) Lower the BEP
(B) Increases the BEP
(C) Lowers the new profit.

(0)

(v)

An increase in variable cost
(A) Reduces contribution
(B) Increases PV ratio
(C) Increases margin of safety.

(0)

(c)

Which of the following statements are TRUE or FALSE:

1x5

(i)

Performance measurement system has the goal of strategy implementation.

(0)

(ii)

JIT philosophy is not dedicated to the elimination of waste.

(0)

(iii)

Labour efficiency variance is the difference between standard hours for actual output and actual hours.

(0)

(iv)

Recovered overheads and absorbed overheads do not mean one and the same thing.

(0)

(v)

ERP bridges the information gap across the organization.

(0)

(d)

Define the following terms in not more than two sentences

1x5

(i)

Perfection Standards;

(0)

(ii)

Capacity Cost;

(0)

(iii)

Cross Sectional Comparison;

(0)

(iv)

Financial Planning Model;

(0)

(v)

Economic Value Added (EVA).

(0)

(a)

If you were a Management Accountant of a company, how do you facilitate Change Management in your organization?

(0)

(b)

Critically evaluate Balance Score Card as a Strategic Management System.

(0)

(a)

Explain the relation between ‘contribution’ and the profits.

(0)

(b)

Division—I of Hindustan Machines Limited manufactures three standard parts other than the custom made products. Historical data on sales and cost of the division relating to the standard parts No. MUVS — 1Pi, UVS—X10, MSL—130, for the month of March 2008 are as follows:

	MUVS — 1Pi (Rs.)	UVS — X10 (Rs.)	MSL—130 (Rs.)	Total (Rs.)
Sales	1,00,000	60,000	40,000	2,00,000
Variable Costs	80,000	42,000	4,000	1,46,000

Apportioned fixed cost per month for the Division is Rs. 27,000.

You are required to calculate PV Ratio, BEP and Variable Cost to Sales. Also calculate the impact on Profit and BEP if the sale of MUVS—1Pi is dropped by Rs. 40,000 and that for products UVS—X10 and MSL—130 increased by Rs. 20,000 each.

(0)

(a)

A company manufactures three products A, B, C with a target to produce 1 lakh units, 1.5 lakh units and .5 lakh units, during the year 2009. The expenses overheads, at 100% (10 lakh hours) capacity production are budgeted as follows:

Fuel and power
Salaries
Stores
Electricity

Rs. 1,50,000
Rs. 4,00,000
Rs. 40,000
Rs. 50,000

Indirect Wages
Repairs
Defectives

Rs. 80,000
Rs. 5,000
Rs. 20,000

The budgeted hours for the three products A, B and C are 5, 3 and 8 hours respectively. The overheads increase by 10% for every increase up to 20% in capacity over 100% capacity.
Prepare a production overhead budget for the year 2009, with above data.

(0)

(b)

How budgetary control is possible when overheads are indirect costs?

(0)

(a)

The following table shows all necessary information on the supply to three warehouses D, E and F of three factories X, Y and Z of Avon Ltd. The weekly supplies of the factories and warehouses demands are as under:
Factory supplies
X — 50 units
Y — 40 units
Z — 60 units
Warehouse demand
D — 20 units
E — 95 units
F — 35 units

Using the cost information given in the table below compute the optimal transportation cost using the MODI method.

Factory/Warehouse	D	E	F
X	6	4	1
Y	3	8	7
Z	4	4	2

(0)

(b)

NBA Promotion Bank is trying to select investment portfolio for a cotton farmer. The Bank has chosen a set of four investment alternatives with subjective estimates of rates of returns and risk as given below:

Investment	Annual rate of return (ARR)	Risk
Tax–free Municipal Bonds Corporate Bonds Mutual Funds Real Estates	6.0 8.0 7.0 15.0	1.3 1.5 1.7 2.7

The bank officer in charge of the portfolio would like to maximize the average ARR on the portfolio. However, the investor has specified that the average risk of the portfolio should not exceed 2.0 and does not want more than 20% of the investment to be put into Real Estates.
Formulate this as a Linear Programming problem. You are not required to solve the LPP problem.

(0)

(a)

Novelty Ltd. produces a variety of products each having a number of component parts. Product–P takes 5 hours to produce on Machine No. 20, working to full capacity. The selling price and marginal cost of Product–P are Rs. 100 and Rs. 60 respectively. A component part B–15 could be made in the same machine in 2 hours for a marginal cost of Rs. 10 per unit. The supplier's price is Rs. 25 per unit.
You are required to advise whether the company should make or buy the component B–15. [Assume that machine hours is the limiting factor]

(0)

(b)

Shree BalajiTextiles Limited follows standard costing system. The standard output for a month is 20000 units and standard cost and profit per unit as follows:

	Rs.
Direct Material 3 units @ Rs. 1.50 Direct Labour 3 hours @ Rs. 1.50 Direct Expense Variable Overheads (Factory) Fixed Overheads (Factory) Administrative Overheads Total Cost Profit Selling Price	4.50 3.00 0.50 0.25 0.30 0.30 8.85 1.15 10.00

The actual production and sales for the period was 14400 units. There has been no price revision by the government during the period.
The following variances are worked out at the end of the period:

(Figures in Rs.)
	Favourable	Adverse
Direct Material Price Usage Direct Labour Rate Efficiency Factory Overheads Variable Expenditure Fixed Expenditure Fixed volume Administration Overhead Expenditure Volume	1050 3200 400 400	4250 4000 1680 400 1680

You are required to reconcile the actual profit with the standard profit.

(0)

(a)

A company manufactures two product A and B using common facilities. The following cost data for a month is presented to you:

Units produced
Direct Labour hours per unit
Machine hours per unit
Set up of machines
Orders
Machine activity expenses Rs. 3 lacs
Set–up relating expenses Rs. 30,000
Expenses relating to orders Rs. 35,000

A
1000
2
6
15
18

B
2000
3
1.5
50
70

Calculate the overheads per unit absorbed using activity — based costing approach.

(0)

(b)

A hospital record shows the cost of carrying out health checks in the last five accounting periods as follows:

Period
1
2
3
4
5

No. of patients seen
650
940
1260
990
1150

Total cost (Rs.)
17,125
17,800
18,650
17,980
18,360

Using the high–low method estimate the cost of carrying out health checks on 850 patients in period 6.

(0)

Write short notes on (any four) of the following:

4x4

(i)

Differential Costing;

(0)

(ii)

Relevant Cost in capital budgeting;

(0)

(iii)

Value Analysis;

(0)

(iv)

Purposes of material Requirement planning;

(0)

(v)

Operational and Planning variances;

(0)

(vi)

Bench marking.

(0)

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