CWA ICWA Final - Group IV : Management Accounting - Enterprise Performance Management - June2012

CWA ICWA Final - Group IV • Management Accounting - Enterprise Performance Management • June 2012

This Paper has 40 answerable questions with 0 answered.

F—P15(EPM) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.

Answer Question No. 1 (carrying 25 marks) which is compulsory and any five more
questions(each carrying 15 marks) from the rest.

Please:

(i) Answer all bits of a question at one place.
(ii) Open a new page for answer to a new question.

(a)

State whether the following statements given below are ‘True’ or ‘False’ with justifications for your answer. If false, state the correct statement. No credit will be given for merely stating ‘True’/‘false’.

1x5

(i)

ERP bridges the information gap across the organization.

(0)

(ii)

Target Costing reduces the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design.

(0)

(iii)

JIT manufacturing, based as it is on ‘Push through’ philosophy, helps to provide the right parts at the right time in right quantity.

(0)

(iv)

A Balanced Score Card studies the performance of management by comparing a financial achievement with the amount spent thereon.

(0)

(v)

The key factors of ‘Theory of constraints’ is contribution and profit.

(0)

(b)

Out of the different options given against each of the following statements, only one is the most appropriate option. You are required to write in down:

1x5

(i)

ABC Ltd., has correct PBIT of Rs.19.20 Cr. on total assets of Rs. 96 Cr. The company propose to increase assets by Rs. 24 Cr., which is estimated to increase operating profit before Depreciation by Rs. 8.4 Cr. and a net increase in Depreciation by Rs. 4.8 Cr. This will result in ROI:

A.	To decrease by 1 %
B.	To increase by 1 %
C.	To remain the same
D.	None of these.

(0)

(ii)

The Selling price of the single product manufactured by a company is fixed at Rs. 1500 per unit. In the coming year, 500 units of the product are likely to be sold. If the total value of investments of the company is Rs. 15 lakhs and it has a target ROI of 15%, the target cost would be:

A.	Rs.930
B.	Rs.950
C.	Rs.1050
D.	None of these.

(0)

(iii)

A company using a detailed system of standard costing finds that the cost of investigation of variances is Rs.30,000 and if after investigation, it is found that the situation is out of control, the cost of correction is Rs. 50,000. If no investigation is made, the present value extra cost involved is Rs. 2,00,000. The probability of process, being out of control, is 20%. The cost of investigation would be:

A.	Rs.6,000
B.	Rs.10,000
C.	Rs.40,000
D.	None of these

(0)

(iv)

A company makes components and sell internally to its subsidiary and also to external market. The external market price is Rs. 24 per component, which gives a contribution of 40% of sales. For external sales, variable costs include Rs. 1.50 per unit for distribution costs. This is, however, not incurred in internal sales. There are no capacity constraints. To maximize company profit, the transfer price to subsidiary should be:

A.	Rs.9.60
B.	Rs.12.90
C.	Rs.14.40
D.	None of these

(0)

(v)

A particular job requires 800 kgs of material–P.
500 kgs. of the particular material is currently in stock.
The original price of the material–P was Rs. 300 but current resale value of the same has been determined as Rs.200. If the current replacement price of the material–P is Re.0.80 per kg., the relevant cost of the material–P required for the job would be:

A.	Rs.640
B.	Rs.440
C.	Rs.300
D.	None of these

(0)

(c)

Fill in the blanks with appropriate word/(s):

1x5

(i)

_____________refers to a computer Information System that integrates all the business activities and processes throughout the entire organization.

(0)

(ii)

_____________ consists of shared values, beliefs and norms of organization.

(0)

(iii)

The concept of Value Analysis was first conceived by __________ ____________.

(0)

(iv)

Enterprise Risk Management deals with ____________ and __________ affecting value creation.

(0)

(v)

TQM is a ______________oriented decision process aimed at satisfying internal and external customers.

(0)

(d)

Expand the following abbreviation:

1x5

(i)

CPOF

(0)

(ii)

FAST

(0)

(iii)

RIMS

(0)

(iv)

OSHAS

(0)

(v)

FMEA

(0)

(e)

Define the following terms in just one/two sentences:

1x5

(i)

Detector

(0)

(ii)

Query tools

(0)

(iii)

Quality Functions Deployment

(0)

(iv)

Succession planning

(0)

(v)

Control chart.

(0)

XYZ Co. has received an once–off export order for its sole product that would require the use of half of the factory’s total capacity, which is estimated at 4 Lakhs units/annum. The condition of the export order is that it has to be accepted in full; acceptance of part quantity is not allowed.

The factory is currently operating at 60% level to meet the demands of its domestic customers. As against the current price of Rs. 6/– per unit, the export offer is Rs. 4.70/unit, which is less than the total cost of the current production.

The cost breakdown is given below;	Rs./unit
Direct materials Direct labour Variable expenses Fixed overhead	2.50 1.00 0.50 1.00
Total cost	5.00

The company has the following options:

a.	Accept the export order and cut back domestic sales as necessary.

b.	Remove the capacity constraints by installing necessary balancing equipment and also by working overtime to meet both domestic and export demand. This will increase fixed overhead by Rs.15,000 annually and additional cost for overtime work will amount to Rs.40,000 for the year.

Appoint a sub–contractor to manufacture the additional requirement and meet the domestic & export requirements in full by supplying the raw materials, paying a conversion charge@ Rs.2 per unit and appointing a supervisor at a salary of Rs.3,000 per month for checking the quality of the product and controlling operations at the manufacturing unit.

d.	Refuse the export order.

Required :

A statement of costs and profits under each of the above 4 options.

ii)

Accept the export order and cut back domestic sales as necessary.

(3x4)+3

(0)

(a)

What are the objectives of JIT production methods?

(0)

(b)

Define Bench Marking. Outline the different types of Bench Marking?

1+3

(0)

(c)

What are the options for demand stimulation? How you would adjust capacity to match current demand?

3+4

(0)

(a)

Explain how an organization would benefit from a Product Life–Cycle Costing exercise?

(0)

(b)

TECHNOTIK LTD., specializes in the manufacture of Computers. It is planning to introduce a new computer specially designed for children. Development of the New Computer is to begin shortly and TECHN TIK LTD., is in the process of preparing a Product Life–Cycle Budget. It expects the new product to have a life–cycle of 3 years from the time of its introduction in the market before the computer becomes obsolete due to technological advancement of other competitive products

The following information is available:

Particulars	Year–l	Year–2	Year–3
Units manufactured & sold Computers per batch Price per Computer (Rs.) R&D and Design Cost (Rs.) Production Cost: Variable Cost per unit (Rs.) Variable Cost per batch (Rs.) Fixed Cost (Rs.) Marketing Cost: Variable Cost per unit (Rs.) Fixed Cost (Rs.) Distribution Cost: Units produced per batch Variable Cost per unit(Rs.) Variable Cost per batch (Rs.) Fixed Cost (Rs.) Customer Service Cost per unit (Rs.)	25000 40 4500 450 Lakh 1600 7000 300 Lakh 360 200 Lakh 20 100 1200 120 Lakh 200	100000 50 4000 50 Lakh 1500 6000 300 Lakh 320 150 Lakh 16 100 1200 120 Lakh 150	75000 50 3500 – 1500 6000 300 Lakh 280 150 Lakh 12 100 1000 120 Lakh 150

You are required to prepare budgeted life–cycle operating profit for the new computer

2+2
+2+2

(0)

(c)

Your company fixes the inter–divisional transfer prices for its products on the basis of cost plus a return on investment in the division. The Budget for Division A for 2011–12 appears as under:

	Rs.
Fixed assets Current assets Debtors Annual Fixed Cost of the Division Variable Cost per unit of Product Budgeted Volume Desired ROI	5,00,000 3,00,000 2,00,000 8,00,000 10 4,00,000 28%	Units/year

Determine the transfer Price for Division A.

(0)

(a)

Good lite Company has installed 200 electric bulbs of a certain brand. The company follows the policy of replacing the bulbs as and when they fail. Each replacement costs Rs.2. The probability distribution of the life of the bulbs is as given below:

Life of Bulb (weeks	1	2	3	4	5
% of Bulbs	0.10	0.30	0.45	0.10	0.05

Determine the cost/week of the replacement policy in the long run.

(0)

(b)

After observing heavy congestion of customers over a period of time in a petrol station, Mr. X has decided to set up a petrol pump facility on his own in a nearby site. He has compiled statistics relating to the potential customer arrival pattern and service pattern as given below. He has also decided to evaluate the operations by using the simulation technique

Arrivals		Services
Inter–arrival time (minutes) 2 4 6 8 10	Probability 0.22 0.30 0.24 0.14 0.10	Inter–arrival time (minutes) 4 6 8 10	Probability 0.28 0.40 0.22 0.10

Assume

i)	The clock starts at 8.00 hours
ii)	Only one pump is set up
iii)	The following 12 Random Numbers are to be used to depict the customer arrival pattern. 78,26,94,08,46,63,18,35,59,12,97 and 82.
iv)	The following 12 Random Numbers are to be used to depict the customer service pattern. 44,21,73,96,63,35,57,31,84,24,05 and 37.

You are required to find out the

i)	Probability of the pump being idle and
ii)	Average time spent by a customer waiting in queue.

(0)

(a)

S.V. Ltd., manufactures by mixing three raw materials. For every batch of 100 kg. of BXE, 125 kg. of raw materials are used. In April, 2012, 60 batches were prepared to produce an output of 5,600 kg. of BXE. The standard and actual particulars for April, 2012 are as under:

Raw material	Mix (%)	Price/kg.	Mix (%)	Price per kg.	Quantity of raw materials purchased (kg.)
A B C	50 30 20	20 10 5	60 20 20	21 8 6	5,000 2,000 1,200

Calculate all variances.

(0)

(b)

Alfa Limited Company’s Cost Accountant was given the following information regarding the overheads for 31^st March, 2010.

A–Overhead Cost Variance Rs.1400 Adverse.
B–Overhead Volume Variance Rs.1 000 Adverse.
C–Budgeted Hours for 31^st March, 2010 – 1200 hours.
D–Budgeted Overheads for 31^st March, 2010 – Rs.6000.
E–Actual Rate of recovery of overheads Rs.8 per hour.

As a professional accountant, you have to assist him in computing the following for 31^st March, 2010:

(i)	Overhead Expenditure Variance

(ii)	Actual overhead incurred

(iii)

Actual hours for actual production

(iv)	Overheads Capacity Variance

(v)	Overheads Efficiency Variance

(vi)	Standard Hours for Actual Production.

1x6

(0)

(a)

What are the basic elements of Control Systems?

(0)

(b)

The impact of Control System on human behaviour can be better explained by Budgetary Control. Explain

(0)

Write short notes on:

3x5

(a)

5 S’s concept in Quality Management.

(0)

(b)

"Zero Defects" and "Rights First Time".

(0)

(c)

Six Sigma process in Quality Management

(0)

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