CWA ICWA Inter Stage II : Management Accounting Performance Management - June 2003

CWA ICWA Inter - Stage II • Management Accounting Performance Management • June 2003

This Paper has 36 answerable questions with 20 answered.

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

Answer Question No. 1 of which is compulsory and any five questions from the rest.
Marks

Answer Question No. 1 of which is compulsory and any five questions from the rest.

Marks

(a)

Fill in the blanks:

5x1

(i)

Activity–based Costing Identifies the activities which cause cost to be incurred and trace _______ of these activities.

(1)

(ii)

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.

(1)

(iii)

Budget is a forecast of _______ events.

(1)

(iv)

An Increase in sales price _______ the BEP.

(1)

(v)

MRP is a production planning system that starts with _______

(1)

(b)

From the following, choose the most appropriate answer:

5x1

(i)

Contribution is known as:

(a)	Marginal income;
(b)	Gross profit;
(c)	Net income.

(1)

(ii)

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 increases and sales grow;
(d)	Variable cost per unit increases;
(e)	None of the above.

(1)

(iii)

If sales are Rs. 2 lakhs, fixed cost is Rs. 30,000 and P/V Ratio is 40%, the amount of profit will be

(a)	Rs. 50,000;
(b)	Rs. 80,000;
(c)	Rs. 12,000.

(1)

(iv)

Linear Programming techniques can be applied for

(a)	Minimization of cost;
(b)	Optimization of system;
(c)	Improving human relations.

(1)

(v)

The Simulation technique will be useful when

(a)	A precise solutions is required;
(b)	Problems are complex;
(c)	Problems cannot be solved mathematically.

(1)

(c)

State whether the following statements are 'True' or 'False':

5x1

(i)

Budget is prepared by managers to fix their targets.

(1)

(ii)

In Zero–based Budgeting, there is some reference made to the previous level of expenditure.

(1)

(iii)

Transfer Pricing has significance for the purpose of measurement of divisional performance.

(1)

(iv)

TQM stresses on zero defects and doing it right first time.

(1)

(v)

Production cost efficiency alone is no guarantee of profit.

(1)

(d)

Define the following terms in not more than two sentences:

5x1

(i)

Responsibility Accounting,

(1)

(ii)

Budget,

(1)

(iii)

Standard Cost,

(1)

(iv)

Enterprise Resource Planning,

(1)

(v)

Cost Reduction.

(1)

(a)

The owner of Metro Sports wishes to determine how many advertisements to place in the selected three monthly magazines - A, B and C. His objective is to advertise in such a way that total exposure to principal buyers of expensive sports goods is maximized. Percentages of readers for each magazine are know. Exposure in any particular magazine is the number of advertisements placed multiplied by the number of principal buyers. The following data my be used:

	Magazines
Readers (in lakhs) Principal buyers (in percentage) Cost per advertisements (Rs.)	A 1 10 5,000	B 0.6 15 4,500	C 0.4 7 4,250

The budgeted amount is at most Rs. 1 lakh for the advertisements. The owner has already decided that magazine A should have no more than 6 advertisements and that B and C each have at least two advertisements. Only formulate a LP model for the problem. You are not required to solve the LP model.

(0)

(b)

Discuss the process if managing Organisational Change effectively.

(0)

(a)

M/s XYZ Ltd. produces and sells three types of products. P, Q and R. The management has decided to discontinue the production of Q since there is not much profit in it.

The following set of information is available:

	Selling	Direct	Direct Wages/unit
Products	Price/unit	Materials/unit	— Dept. A	— Dept. B	— Dept. C
	Rs.	Rs.	Rs.	Rs.	Rs.
P Q R	300 275 305	60 30 70	20 20 12	15 20 10	10 10 20

The absorption rates of overhead on the Direct wages are given below:-

Variable Overhead
Fixed Overhead

Dept. A
150%
200%

Dept. B
120%
240%

Dept. C
200%
150%

You are required to find out –

(i)	Profitability of the three products, and

(ii)	P/V Ratio of P, Q and R

Also give your short comments on the decision of the management.

2+2+4

(0)

(b)

Explain Balance Score Card and its various perspectives.

2+6

(0)

(a)

The Bombay Transport Company has trucks available at four different sites in the following numbers:

Site	A – 4	Trucks
Site	B – 10	Trucks
Site	C – 7	Trucks
Site	D – 3	Trucks

Customers – W, X and Y require trucks as shown below:

Customer	W – 5	Trucks
Customer	X – 8	Trucks
Customer	Y – 10	Trucks

Variable Costs of getting trucks to the Customers are given below:

From A to W – Rs. 7, to X – Rs. 3, to Y – Rs. 6

From B to W – Rs. 4, to X – Rs. 6, to Y – Rs. 3

From C to W – Rs. 5, to X – Rs. 8, to Y – Rs. 4

From D to W – Rs. 8, to X – Rs. 4, to Y – Rs. 3

Solve the above Transportation problem.

(0)

(b)

Explain how the performance of the Public Undertakings will be judged.

(0)

(a)

A company manufactures two products – X and Y.

A forecast of units to be sold in the first five months of the year is given below.

Months
January
February
March
April
May

Products X
1,000
1,200
1,600
2,000
2,400

Products Y
2,800
2,800
2,400
2,000
1,600

Other information is as follows.

Cost per unit (Rs.)
Direct Materials
Direct Labour
Factory Overhead

Products X
12.50
4.50
3.00

Products Y
19.00
7.00
4.00

There will be no opening and closing work–in–progress at the end of any month. Finished product (in units), equal to half of the budgeted sale of the next month, should be in stock at the end of each month (including previous year December).

You are required to prepare

(i)	Production Budget for January to April, and

(ii)	Summarised Production Cost Budget.

5+5

(0)

(b)

What are the basic differences between 'Forecast' and 'Budget'?

(0)

(a)

Vikas Limited has adopted a Standard Costing System. The Standard Output for a period is 10,000 units. The Standard Cost per unit is given below:

Direct Materials (6 units at Rs. 3) Direct Labour (6 hours at Rs. 2) Direct Expenses Factory Overheads Variable Fixed Administrative Overheads	Rs. 18.00 12.00 2.00 1.00 1.20 1.20
Profit per unit	35.40 4,60
Selling price per unit	40.00

Production and Sales during the period was 72.00 units.
The following are the variances worked out at the end of the period

Direct materials
Price Variance
usage Variance
Direct Labour
Rate Variance
Efficiency Variance
Factory Overheads
Variable Expenditure Variance
Fixed Expenditure Variance
Fixed Volume Variance
Administrative Overheads
Expenditure variance
Volume Variance

Favourable
Rs.

–
2,100

–
6,400

800
800
–

–
–

Adverse
Rs.

8,500
–

8,000
–

–
–
3,360

800
3,360

You are required to ascertain the details of costs and prepare the Profit and Loss Account in statement form for the period, showing actual profit Reconcile the actual profit with the standard profit.

(0)

(b)

Discuss the importance of Variance Analysis in controlling costs.

(0)

(a)

The cost of an article at the capacity level of 10,000 units is given under 'A' below. For a variation in capacity above or below this level, the individual expenses vary as indicated in 'B' below.

Material cost Labour cost Power Repairs or maintenance Stores Inspection Depreciation Administrative overheads Selling overhead	A (Rs.) 50,000 30,000 3,000 3,500 2,000 800 10,000 3,600 4,500	B 100% 100% 80% 80% 100% 25% 100% 25% 50%	Variable Variable Variable Variable Variable Variable Variable Variable Variable
Total	1,07,400
Cost/Unit (Rs.)	10.74

Find out the unit cost of product, showing each individual category of expenses, at the production levels of 8,000 units and 12,000 units respectively.

(0)

(b)

A company AB Ltd. has two Divisions, viz. X and Y, Division X manufactures a special type of electrical component and Division Y sells a finished product for which it requires one component per unit from X Division. Division X sells the component in the external market @ Rs. 180 per unit and Division X is also working at almost Its 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. Division Y is keen to get this order. Division Y will meet the special order at a price of Rs. 1,200 per unit and it offers a price of Rs. 120 per component to Division X.
The possible cost per unit of Division Y’s finished product is given below.

Other purchased component Component to be supplied by Division X Other variable overheads Fixed overheads	Rs. 500 120 320 180
Total cost per unit	1,120

(i)	As a manager of Division X, what decision would you like to take regarding the offer by Division Y for the supplies @ Rs. 120?

(ii)	Would it be an economic advantage for Division Y to buy @ Rs. 180?

4+4

(0)

Write short notes on the following:-

4x4=16

(a)

Behavioural aspects of Budgeting;

(0)

(b)

Simulation;

(0)

(c)

Principles of Management;

(0)

(d)

Regression Analysis.

(0)

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