| 1. | (a) | State whether the following statements, based on the quoted terms, are TRUE or FALSE. If any statement is False, you are required to give the correct one, duly quoted. | 1x5 | |
| | | (i) | Balanced Score–card does not link financial and non–financial measures of performance. | | (0) |
| | | (ii) | Marginal Cost is the cost, which would not be avoided, if the additional unit were not produced. | | (0) |
| | | (iii) | The higher the Break–Even–Point, the lower the Fixed Cost. | | (0) |
| | | (iv) | A Budget Manual is the summary of all functional budgets. | | (0) |
| | | (v) | Simulation technique gives optimum solution. | | (0) |
| | (b) | Give your answers in brief (in not more than two sentences): | 1x5 | |
| | | (i) | As a Cost Accountant, you are conducting a close door meeting with all levels of Managers of various departments for launching a product in the market and you are to select a Manager to first draw estimation and a budget. Whom you fell would be the right person? | | (0) |
| | | (ii) | As a Cost Accountant, you have to give a direction to your assistants to solve the problem of a very crowded and a popular shop–owner, whose shop is dealing with all kinds of children’ requirements and has one cashier who hands all the customer’s payments. | | (0) |
| | | (iii) | As a Cost Accountant, which model you would like to suggest for solving a Linear Programming problem, as the technique of last resort? | | (0) |
| | | (iv) | As a Cost Accountant, what overhead cost variance you would like to calculate for determining the total overhead–cost variance? | | (0) |
| | | (v) | As a Cost Accountant, under which method, the sales division transfers at marginal cost, including any opportunity cost? | | (0) |
| | (c) | Match each expression under column I with column II for the following: | Column I | Column II | (i)
(ii)
(iii)
(iv)
(v) | Regression Analysis
Sensitivity
Budget Manual
Master Budget
Profit centre | (A)
(B)
(C)
(D)
(E) | Objectives & procedures involved in Budgeting process
A part of business accountable for cost & revenue
Comprehensive plan prepared from functional budgets
Estimation for the future
Degree of uncertainty |
| 1x5 | (0) |
| | (d) | Fill up the blank with appropriate words: | 1x5 | |
| | | (i) | Board of Directors serves as _______________ of the Company’s assets and property. | | (0) |
| | | (ii) | Efficiency of public undertaking can be measured on the basis of their achievements in _______________ and _________________ fields. | | (0) |
| | | (iii) | A budget continuously updated by adding/deleting accounting period is known as _____________ . | | (0) |
| | | (iv) | Any transfer pricing system has to ensure that the allocation of resources is done in such a manner so as to promote ____________ of the organization. | | (0) |
| | | (v) | The principle followed for BRP is known as ______________ principle. | | (0) |
| 2. | (a) | State clearly how the Break Even Analysis is useful to the management. | 4 | (0) |
| | (b) | Product A takes five hours to produce on a particular machine and it has a selling price of Rs.50 and a marginal cost of Rs.35. On the same machine, another product B can be made at two hours at a marginal cost of Rs.5 per unit. Supplier’s price of product B is Rs.10 per unit.
Assuming that machine hour is the key factor, advise whether Product B could be bought or manufactured. | 6 | (0) |
| | (c) | Fixed expense at 50% activity
Fixed expenses when the factory is shut down
Additional expenses in closing down
Production at 50% activity
Contribution per unit | Rs.1,500
Rs.1,000
Rs.100
500 units
Re. 1/- |
As a Cost Accountant, what are you comments on the above data? | 6 | (0) |
| 3. | Explain what is Enterprise Resource Planning (ERP). State clearly its components. How ERP implementation takes place? | 4+4+8 | (0) |
| 4. | From the information given below, calculate the activity–based Production cost of products P, R and S and comment on the differences between the original standard costs and the activity–based Costs you have calculated. | Standard Cost of the products | | Rs. per unit | | Particulars | P | R | S | Direct materials
Direct labour @ Rs.10 per hour
* *Production overheads | 50.00
30.00
30.00 | 40.00
40.00
40.00 | 30.00
50.00
50.00 | | 110.00 | 120.00 | 130.00 | | Quantity produced (units) | 10,000 | 20,000 | 30,000 |
* * absorbed on the basis of direct labour hours. The company wishes to introduce ABC system and has identified two major cost pools for production overhead and their associated cost drivers. Information on these activity cost pools and their drivers are given below: | Activity cost pool | Cost driver | Cost associated with activity
cost pool | Receiving/inspecting/quality assurance
Production scheduling/machine set–ups | Purchase requisitions
No. of batches | Rs.14,00,000
Rs.12,00,000 |
Further relevant information on the three products is also given below: | Particulars | P | R | S | No. of purchase requisitions
No. of set–ups | 1200
240 | 1800
260 | 2000
300 |
| 16 | (0) |
|
| 5. | ABC Ltd. follows a standard costing system. The standard output for a period is 20,000 units and standard cost and profit per unit are as follows: Direct material 3 units @ Rs.1.50
Direct labour 3 hours @ Re.1.00
Direct expenses
Variable overheads(factory)
Fixed overheads (factory)
Administrative overheads
Total cost
Profit
Selling price (fixed by the Government) | 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 14,400 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 are in Rs. | | Favourable | Adverse | Direct Material
Price
Usage
Direct Labour
Rate
Efficiency
Factory overheads
Variable expenditure
Fixed expenditure
Fixed volume
Administrative overheads
Expenditure
Volume |
1050
3200
400
400 |
4250
4000
1600
400
1680 |
Assume that there is no variance in Direct Expenses. You are required to: | (i) | Ascertain the details of actual cost. |
| (ii) | Prepare a profit and loss statement for the period. |
| (iii) | Reconcile the actual profits with the standard profit. |
| 4+4+8 | (0) |
| 6. | (a) | A company AB Ltd., has two divisions X and Y. Division X manufactures a special type of electrical component and the division Y sells a finished product for which it requires one component per unit from division X. Division X sells the component in the external market @ Rs.180 per unit and division X is also working at almost full capacity. The variable cost of manufacturing per component is Rs.102. Division Y is now operating at 50% capacity. It has received a special order for its product. Y is keen to get this order. Division Y will meet the special order at a price of Rs.1200 per unit and it offers a price of Rs.120 per component to X. The cost/unit for division Y’s finished product is as: | Rs. | Other purchased component
Component supplied by division X
Other variable overheads
Fixed Overheads
Total cost per unit | 500
120
320
180
1120 |
| (i) | As a manager of division X, what decision would you like to take on Y’s request for the supplies @ Rs.120/-? |
| (ii) | Would it be any short–term economic advantage for AB Ltd. to make division X to transfer to division Y at the price of Rs.120/-? |
| (iii) | What would be the behavioural difficulties of the managers? |
| 3+4+3 | (0) |
| | (b) | M. Ltd., which makes & sells only one product, sold 10000 units incurring at loss of Rs.10,000. The variable cost per unit of the product is Rs.8 and the fixed costs are Rs.30,000.
The company has estimated its sales demand as under: Sales (units)
10000
12000
14000
16000
18000 | Probability
0.10
0.15
0.20
0.30
0.25 |
| (i) | What is the probability that the company will continue to make losses? |
| (ii) | What is the probability that the company will make a profit of at least Rs.6,000? |
| 3+3 | (0) |
| 7. | (a) | In a bank, every 15 minutes one customer arrives for cashing the cheque. The staff in the only payment counter takes 10 minutes for serving a customer on an average. You are required to calculate: | (i) | The average queue length; |
| (ii) | Increase in arrival rate in order to justify a second counter (when the waiting time of a customer is at least 15 minutes, the management will increase one more counter. |
Assume that the arrival pattern follows Poisson distribution and the service time follows exponential distribution. | 5+5 | (0) |
| | (b) | A company is making two products, A and B. The cost of producing one unit of product A and B is Rs.60 and Rs.80 respectively. As per the agreement, the company has to supply at least 200 units of product B to its regular customers. One unit of product A requires one–machine hour whereas product B has machine hours available abundantly within the company. Total machine hours available for product A are 400 hours. One unit of each product A and B requires one labour hour each and total 500 labour hours are available. The company wants to minimize the cost of production by satisfying the given requirements. Formulate the problem as a linear programming problem. | 6 | (0) |
| 8. | Write short notes on the following: | 4x4 | |
| | (a) | Administrative functions of the Board of Directors; | | (0) |
| | (b) | Resistance to change; | | (0) |
| | (c) | Performance Budgeting; | | (0) |
| | (d) | Benchmarking. | | (0) |
