| 1. | (a) | Bloom Ltd. makes 3 products, A, B and C. The following information is available: | (Figures in Rupees per unit) | | A | B | C | Selling price (peak–season)
Selling price (off–season)
Material cost
Labour (peak–season)
Labour (off–season)
Variable production overhead
Variable selling overhead
(only for peak–season)
Labour hours required for one unit of production | 550
550
230
110
100
100
10
8 | 630
604
260
120
99
120
20
11 | 690
690
290
150
149
130
15
7 (hours) |
Material cost and variable production overheads are the same for the peak–season and off–season. Variable selling overheads are not incurred in the off–season. Fixed costs amount to Rs. 26,780 for each season, of which Rs. 2,000 is towards salary for special technician, incurred only for product B, and Rs. 4,780 is the amount that will be incurred on after–sales warranty and free maintenance of only product C, to match competition. Labour force can be interchangeably used for all the products. During peak–season, there is labour shortage and the maximum labour hours available are 1,617 hours. During off–season, labour is freely available, but demand is limited to 100 units of A, 115 units of B and 135 units of C, with production facility being limited to 215 units for A, B and C put together.
You are required to: | (i) | Advise the company about the best product mix during peak–season for maximum profit. | | (ii) | What will be the maximum profit for the off–season? |
| 12 | (0) |
| | (b) | The cost matrix giving selling costs per unit of a product by salesman A, B, C and D in regions R1, R2, R3 and R4 is given below: | A | B | C | D | | R1 | 4 | 12 | 16 | 8 | | R2 | 20 | 28 | 32 | 24 | | R3 | 36 | 44 | 48 | 40 | | R4 | 52 | 60 | 64 | 56 |
| (i) | Assign one salesman to one region to minimise the selling cost. | | (ii) | If the selling price of the product is Rs. 200 per unit and variable cost excluding the selling cost given in the table is Rs. 100 per unit, find the assignment that would maximise the contribution. | | (iii) | What other conclusion can you make from the above? |
| 8 | (0) |
| 2. | (a) | Tripod Ltd. has three divisions ? X, Y and Z, which make products X, Y and Z respectively. For division Y, the only direct material is product X and for Z, the only direct material is product Y. Division X purchases all its raw material from outside. Direct selling overhead, representing commission to external sales agents are avoided on all internal transfers. Division Y additionally incurs Rs. 10 per unit and Rs. 8 per unit on units delivered to external customers and Z respectively. Y also incurs Rs. 6 per unit picked up from X, whereas external suppliers supply at Y’s factory at the stated price of Rs. 85 per unit.
Additional information is given below: | Figures Rs./unit | | X | Y | Z | Direct materials (external supplier rate)
Direct labour
Sales Agent’s commission
Selling price in external market
Production capacity
External demand | 40
30
15
110
20,000
14,000 | 85
50
15
170
30,000
26,000 | 135
45
10
240
40,000 units
42,000 units |
You are required to discuss the range of negotiation for Managers X, Y and Z, for the number of units and the transfer price for internal transfers. | 11 | (0) |
| | (b) | Differentiate between ‘Traditional Management Accounting’ and ‘Value Chain Analysis in the strategic framework’. | 5 | (0) |
| 3. | (a) | The following profit reconciliation statement has been prepared by the Cost Accountant of RSQ Ltd. for March, 2008: | Rs. | | Budget profit
Sales price variance
Sales volume profit variance | 2,40,000
51,000
42,000
2,49,000 |
(F)
(A) | Material price variance
Material usage variance
Labour rate variance
Labour efficiency variance
Variable overhead expenditure variance
Variable overhead efficiency variance
Fixed overhead volume variance
Fixed overhead expenditure variance
Actual profit | 15,880
3,200
78,400
32,000
8,000
12,000
1,96,000
4,000
86,720 | (A)
(F)
(F)
(A)
(F)
(A)
(A)
(F) |
Budgeted production and sales volumes for Mach, 2008 were equal and the level of finished goods stock was unchanged, but the stock of raw materials decreased by 6,400 kg (valued at standard price) during the month.
The standard cost card is as under. Material 4 kg @ Rs. 2.00
Labour 4 hours @ Rs. 32.00
Variable overhead
4 hours @ Rs. 12.00
Fixed overheads
4 hours @ Rs. 28.00
Standard profit
Standard selling price | 8.00
128.00
48.00
112.00
296.00
24.00
320.00 |
The actual labour rate was Rs. 2.24 lower than the standard hourly rate.
You are required to calculate: (i)
(ii)
(iii)
(iv) | Actual quantity of material purchased
Actual production and sales volume
Actual number of hours worked
Actual variable and fixed overhead cost incurred. |
| 11 | (0) |
| | (b) | A company produces three products A, B and C. The following information is available for a period: | | A | B | C | | Contribution | 30 | 25 | 15 | | (Rupees per unit) | | | | | (Sales – Direct materials) | | | |
Machine hours required per unit of production: | Hours | | | A | B | C | Through out accounting ratio | Machine 1
Machine 2
Machine 3 | 10
15
5 | 2
3
1 | 4
6
2 | 133.33%
200%
66.67% |
Estimated sales demand for A, B and C are 500 units each and machine capacity is limited to 6,000 hours for each machine.
You are required to analyse the above information and apply theory of constraints process to remove the constraints.
How many units of each product will be made? | 5 | (0) |
| 4. | (a) | The normal time, crash time and crashing cost per day are given for the following network:  | Activity | Normal time (days) | Crash time (days) | Crashing cost
(Rs./day) | 1 — 2
1 — 3
2 — 3
2 — 4
3 — 4
4 — 5 | 18
23
8
10
3
8 | 14
22
5
6
2
6 | 40
20
60
40
80
50 |
| (i) | Crash the project duration in steps and arrive at the minimum duration. What will be the critical path and the cost of crashing? | | (ii) | If there is an indirect cost of Rs. 70 per day, what will be the optimal project duration and the cost of crashing? |
| 10 | (0) |
| | (b) | The budgeted and actual cost data of M Ltd. for 6 months from April to September, 2008 are as under: | Budget | Actual | Production units
Material cost
Labour cost
Variable overhead
Fixed overhead | 16,000
Rs. 25,60,000
(1,600 MT @ Rs. 1,600)
Rs. 16,00,000
(at Rs. 40 per hour)
Rs. 3,00,000
Rs. 4,60,000 | 14,000
Rs. 41,60,000
(at Rs. 1,650)
Rs. 15,99,840
(@ Rs. 44 per hour)
Rs. 2,76,000
Rs. 5,80,000 |
In the first half of financial year 2009–10, production is budgeted for 30,000 units, material cost per tonne will increase from last year’s actual by Rs. 150, but it is proposed to maintain the consumption efficiency of 2008 as budgeted. Labour efficiency will be lower by 1% and labour rate will be Rs. 44 per hour. Variable and fixed overheads will go up by 20% over 2008 actuals.
Prepare the Production Cost budget for the period April–September, 2009 giving all the workings. | 6 | (0) |
|
| 5. | (a) | What are the requisites for the installation of a uniform costing system ? | 4 | (0) |
| | (b) | Write a short note on the procedure in hypothesis testing. | 5 | (0) |
| | (c) | A company has prepared the following budget for the forthcoming year: | | Rs. lakhs | | Sales | 20.00 | | Direct materials | 3.60 | | Direct labour | 6.40 | | Factory overheads: | | | Variable | 2.20 | | Fixed | 2.60 | | Administration overheads | 1.80 | | Sales commission | 1.00 | | Fixed selling overheads | 0.40 | | Total costs | 18.00 | | Profit | 2.00 |
The policy of the company in fixing selling prices is to charge all overheads other than the prime costs on the basis of percentage of direct wages and to add a mark up of oneninth of total costs for profit. While the company is confident of achieving the budget drawn up as above, a new customer approached the company directly for execution of a special order. The direct materials and direct labour costs of the special order are estimated respectively at Rs. 36,000 and Rs. 64,000. This special order is in excess of the budgeted sales as envisaged above. The company submitted a quotation of Rs. 2,00,000 for the special order based on its policy. The new customer is willing to pay a price of Rs. 1,50,000 for the special order. The company is hesitant to accept the order below total cost as, according to the company management, it will lead to a loss.
You are required to state your arguments and advise the management on the acceptance of the special order. | 7 | (0) |
| 6. | (a) | TQ Ltd. implemented a quality improvement programme and had the following results: | 2007 | 2008 | | (Figures in Rs. ‘000) | Sales
Scrap
Rework
Production inspection
Product warranty
Quality training
Materials inspection | 6,000
600
500
200
300
75
80 | 6,000
300
400
240
150
150
60 |
You are required to: | (i) | Classify the quality costs as prevention, appraisal, internal failure and external failure and express each class as a percentage of sales. | | (ii) | Compute the amount of increase in profits due to quality improvement. |
| 4 | (0) |
| | (b) | The following matrix gives the unit cost of transporting a product from production plants P1, P2 and P3 to destinations. D1, D2 and D3. Plants P1, P2 and P3 have a maximum production of 65, 24 and 111 units respectively and destinations D1, D2 and D3 must receive at least 60, 65 and 75 units respectively: | To | D1 | D2 | D3 | Supply | | From | | | | | | P1 | 400 | 600 | 800 | 65 | | P2 | 1,000 | 1,200 | 1,400 | 24 | | P3 | 500 | 900 | 700 | 111 | | Demand | 60 | 65 | 75 | 200 |
You are required to formulate the above as a linear programming problem. (Only formulation is needed. Please do not solve). | 9 | (0) |
| | (c) | What is trend? What are the various methods of fitting a straight line to a time series? | 3 | (0) |
| 7. | (a) | Paints Ltd. manufactures 2,00,000 tins of paint at normal capacity. It incurs the following manufacturing costs per unit: | | Rs. | | Direct material | 7.80 | | Direct labour | 2.10 | | Variable overhead | 2.50 | | Fixed overhead | 4.00 | | Production cost / unit | 16.40 |
Each unit is sold for Rs. 21, with an additional variable selling overhead incurred at Rs. 0.60 per unit. During the next quarter, only 10,000 units can be produced and sold. Management plans to shut down the plant estimating that the fixed manufacturing cost can be reduced to Rs. 74,000 for the quarter. When the plant is operating, the fixed overheads are incurred at a uniform rate throughout the year. Additional costs of plant shut down for the quarter are estimated at Rs. 14,000.
You are required: | (i) | To advise whether it is more economical to shut down the plant during the quarter rather than operate the plant. | | (ii) | Calculate the shut down point for the quarter in terms of numbering units. |
| 6 | (0) |
| | (b) | Describe the Just&ndahs;in–time systems. | 6 | (0) |
| | (c) | Briefly explain skimming pricing and penetration pricing policies. | 4 | (0) |
