| 1. | (a) | Pick up the most appropriate option and fill in the blank: | 1x5 | |
| | | (i) | Change the management is caused by ________ factors. | (A) | internal | (B) | external | (C) | Internal and external |
| | (0) |
| | | (ii) | Simulation is particularly appropriate when it is difficult to build a model for the ________ situation mathematically. | (A) | real life | (B) | illogical | (C) | random |
| | (0) |
| | | (iii) | Transfer Pricing have a significance for the purpose of measurement of ________ performance. | (A) | managerial | (B) | divisional | (C) | competitors |
| | (0) |
| | | (iv) | Formulation of LPP involves a series of mathematical constraints and ________ function. | (A) | mathematical | (B) | research | (C) | objective |
| | (0) |
| | | (v) | MNC consciously manipulate the transfer prices as an instrument of maximizing achievement of ________ | (A) | corporate goals | (B) | market shares | (C) | Production. |
| | (0) |
| | (b) | Match each expression under column I with column II | Column I | Column II | (i)
(ii)
(iii)
(iv)
(v) | Labour efficiency variance
Standard sales
Recovered overhead
Fixed overhead cost variance
Purchase department is responsible for | (a)
(b)
(c)
(d)
(e) | Absorbed overhead
Material price variance
Aggregate of the expenditure variance and volume variance
Difference between standard hours for actual output
and actual hours
Budgeted sales |
| 1x5 | (0) |
| | (c) | Which of the following statements are True or False: | 1x5 | |
| | | (i) | Production budget is prepared before sales budget. | | (0) |
| | | (ii) | Responsibility center emphasizes on the division of organization among different sub–units. | | (0) |
| | | (iii) | A key factor, which at a particular time or over a period will not limit the activities of the organization. | | (0) |
| | | (iv) | In ZBB some important reference is made to previous level of expenditure. | | (0) |
| | | (v) | Profit planning and control is not a part of budgetary control mechanism. | | (0) |
| | (d) | Define the following terms in not more than two sentences: | 1x5 | |
| | | (i) | Absorption costing; | | (0) |
| | | (ii) | Back flush costing; | | (0) |
| | | (iii) | Capacity costs; | | (0) |
| | | (iv) | Hire–Low method of costing; | | (0) |
| | | (v) | Responsibility accounting. | | (0) |
| 2. | LK Machinery Limited manufactures 3 components; X–090, Y–070 and Z–559 which are made from 3 parts:
A–1, B–1 and C–1 in the following proportions: X–090
Y–070
Z–559 | 1 unit of A–1 and 1 unit of B–1
2 units of A–1, 2 units of B–1 and 1 unit of C–1
3 units of A–1, 1 unit of B–1 and 2 units of C–1 |
All the above parts are made in the own plant of the company. Further information are as follows: | A–1 | B–1 | C–1 | Selling price (Rs.)
Direct material (Rs.)
Time cost (Rs.) | 6
2
2 | 14
2
9 | 24
5
12 |
Time cost covers direct labour and overheads which is valued at Rs. 6 per hour. All parts can be sold individually at the above selling prices, but the market demand, which is hoped, will be satisfied from the expansion will be for the components. Further expansion will provide additional 58000 hours and market demand for the components will rise by 5000 units each. Additional fixed expenses relate to the expansion are expected to be Rs. 15,000.
Prepare a statement showing how the additional capacity available should be used to generate maximum additional profit. | 16 | (0) |
| 3. | The operational hours for the direct labour for 3 different products manufactured in a factory, in three different operations, are: | Time taken (minutes) for the products | Operations
1
2
3 | A
18
–
9 | B
42
12
6 | C
30
24
– |
The factory works all days in a week except Sundays and for 8 hours per day. A budget quarter is 13 weeks and hours lost due to leave and holidays are estimated to be 124 hours.
The hourly rate for labour is budgeted to be Rs. 20, Rs. 25 and Rs. 30 respectively for the three operations.
The sales for the period is estimated to be Product A
Product B
Product C | 9000 units
15000 units
12000 units |
Opening stock of Product B was 5000 units and of Product C 4000 units at the beginning of the quarter under analysis. Further it is planned to keep a closing stock at the end of that quarter, for Product A 1000 units and for Product C 2000 units.
You are required to prepare a Labour Budget for the quarter showing: | (i) | Labour hours for operations 1, 2 and 3. |
| (ii) | Labour cost for each operation. |
| (iii) | Labour requirement. |
| 5+6+5 | (0) |
| 4. | (a) | Prepare Budget for 70% capacity from the following cost data at 40% capacity; Direct material cost
Administrative overheads
Direct HR cost
Factory overheads
Selling overheads
Sales | Rs.
Rs.
Rs.
Rs.
Rs.
Rs. | 20 lacs
8 lacs
30 lacs
24 lacs
14 lacs
120 lacs |
Material cost gets reduced by 20% at 70% capacity utilization. Factory overheads are 50% fixed, Administrative overheads 60% are fixed and Selling overheads 40% are fixed. 70% capacity production could be sold only if there is a reduction of 10% in sales price. | 8 | (0) |
| | (b) | X, Y and Z are the locations of plants owned by a single company. Contemplating merging the plants they want you to find out (i) the capacity of the merged plant at break even, (ii) Profits at 80% capacity after merger, and (iii) Sales for a desired profit of Rs. 35 lacs after merger of plants. The details pre–merger are as under: | X | Y | Z | Capacity utilization
Turnover
Variable cost
Fixed cost |
Rs.
Rs.
Rs. | 100%
400 lacs
250 lacs
80 lacs | 80%
290 lacs
200 lacs
50 lacs | 60%
160 lacs
80 lacs
60 lacs |
| 3+2+3 | (0) |
|
| 5. | (a) | What are the practical applications of Linear programming? | 6 | (0) |
| | (b) | A cereal manufacture is investingating the possibility of introducing a new cereal. It would be composed of wheat, rice and corn flakes. Requirements are given below: | Cost per ounce and dietary requirements for diet problems | | Wheat | Rice | Corn | Requirements
(Per 12 ounce box) | Protein (gms per ounce)
Carbohydrates (gms per ounce)
Calories per ounce
Cost (Rs. ’000) | 4
20
90
03 | 2
25
110
.05 | 2
21
100
.02 | at least 27 gms
at least 240 gms
not more than 1260 calories |
Make out a Linear programming model that will determine the optimum quantities of wheat, rice and corn per box that will achieve the requirements at minimum cost. (Work out only the formulation — solution not required.) | 10 | (0) |
| 6. | (a) | A Company has the option to procure a particular material from two sources. Source I assures that defectives will not be more than 2% of supplied quantity. Source II, on the other hand, does not give any assurances regarding the likelihood of the quantum of defectives but on the basis of past experiences of supplies received from it, it is observed that the percentage of defective is likely to be 2.8%. The material is supplied in lots of 1000 units. Source II supplies at a price, which is lower by Rs. 100 per lot as compared to Source I. The defective units of material can be rectified for use at a cost of Rs. 5 per unit.
You are required to suggest to the Purchase Manager which of the two sources is more economical. | 8 | (0) |
| | (b) | Your Company fixes the inter–divisional transfer price for it’s products on the basis of cost plus a return on investment in the Division.
The Investment in Division A for 2008–09 is as under: | Rs. | Fixed Assets
Current Assets
Debtors | 5,00,000
3,00,000
2,00,000 |
The annual fixed costs of the Division A for 2008–09 has been estimated at Rs. 8,00,000 and variable cost per unit of product will be Rs. 10/–. The estimated production for the year will be 4,00,000 units. The desired ROI for the Division is 28%.
Determine the transfer price for Division A. | 8 | (0) |
| 7. | (a) | At a ticket counter on the average a Customer arives every 5 minutes. The service time is 4 minutes per customer. The inter arrival time follows the Poisson Distribution and the service time are exponentially distributed.
Assuming that there is only one server, find out the different characteristics of this queuing system like | 4x2 | |
| | | (i) | Expected numbers of the Customers in the system. | | (0) |
| | | (ii) | Average length of the Queue. | | (0) |
| | | (iii) | Mean time a customer spends in the system and | | (0) |
| | | (iv) | Average time a customer spends in the Queue. | | (0) |
| | (b) | A Company is planning to install a water bottling plant. The estimated annual sales would be 50,000 bottles. Sales price will be Rs. 27/– per bottle.
The cost estimates are as under: | Annual Demand | Total Cost p.a. (Rs.) | Fixed portion (%) | Material Cost
Wages
Factory Overheads
Adm. & selling overheads | 5,00,000
3,00,000
2,00,000
1,60,000 | Nil
50%
40%
60% |
Over and above, 10% of sale price is to be paid to the Sales Agency as commission. | (i) | Calculate the Break Even Point and |
| (ii) | What should be the sale price if the desired profit is 10% of sales? |
| 4+4 | (0) |
| 8. | Write short notes on any four of the following: | 4x4 | |
| | (a) | Flexible Budgeting, | | (0) |
| | (b) | Standard Costing, | | (0) |
| | (c) | Sensitivity Analysis, | | (0) |
| | (d) | Cost Management, | | (0) |
| | (e) | Cost Drivers, | | (0) |
| | (f) | Target costing. | | (0) |
