CWA/ICWA Final :: Management Accounting—Performance Management : December 2006

*I—9(MPM)* *Revised Syllabus*
Time Allowed : 3 Hours		Full Marks : 100
The figures in the margin on the right side indicate full marks
Answer Question No. 1 which is compulsory and any five from the rest
Marks

(a)

Fill in the blanks:

(i)	MRP is a production planning system that starts with______
(ii)	The adoption of JIT normally requires to improve ________
(iii)	When MRP is extended most important resources are known as _____
(iv)	Appraisal costs are connected with ______ requirements.
(v)	External failure costs are discovered ______ to customers.

1x5

(b)

Match each expression under column I with column II:

Column I		Column II
(i)	Regression Analysis	(a)	Objectives and procedures involved in budgeting process
(ii)	Sensitivity	(b)	A part of business accountable for cost and revenue
(iii)	Budget Manual	(c)	Comprehensive plan prepared from functional budgets
(iv)	Master Budget	(d)	Estimation of future estimation
(v)	Profit Centre	(e)	Degree of uncertainty

1x5

(c)

Which of the following statements are TRUE or FALSE:

(i)	Balanced Scorecard does not link financial and non-financial measures of performance.
(ii)	Marginal cost is the cost, which would not be avoided if the unit was not produced.
(iii)	BE chart is the graphical relationship between C-V-P.
(iv)	Linear programming describes the relationship between two or more variables in order to achieve optimal result with restricted resources.
(v)	Simulation does not give optimum solution.

1x5

(d)

Define the following terms in not more than two sentences:

(i)	Goal Congruence
(ii)	Break Even Point
(iii)	Incremental Effect
(iv)	Activity Based Accounting
(v)	Target Costing.

1x5

Please turn over

( 2 )

I—9(MPM)
Revised syllabus

Marks

(a)

Discuss briefly the process of managing change effectively.

(b)

Explain Balanced Scorecard and its perspectives.

A Company presently sells an equipment for Rs. 35,000. Increase in price of labour and material cost are anticipated to the extent of 15% and 10% respectively in the coming year. At present material cost represents 40% of cost and sales and labour cost 30% of cost sales. The remaining relate to overheads. If the existing selling price is retained, despite the increase in labour and material prices, the company would face a 20% decrease in the existing amount of profit on the equipment.
You are required to arrive at a selling price so as to give the same percentage of profit on increased cost of sales, as before. Prepare a statement of proft/loss per unit, showing the new selling price and cost per unit in support of your answer.

(a)

What is Transfer Price? Briefly state the importance of Transfer Pricing System.

2+4

(b)

A company has two divisions. Division 'A' and Division 'B'. Division 'A' has a Budget of selling 2,00,000 nos. of a particular component 'X' to fetch a return of 20% on the average assets employed.
The following particulars of Division 'A' are also known.

Fixed Overhead
Variable Cost
Average Assets
Sundry Debtors
Inventories
Plant & Equipments :
:

:
:
: Rs. 5 lakhs
Rs. 1 per unit

Rs. 2 lakhs
Rs. 5 lakhs
Rs. 5 lakhs

However, there are certain constraints in marketing and only 1,50,000 units of the component 'X' can be directly sold to the market at the proposed price. It has been gathered that the balance 50,000 units of component 'X' can be taken up by Division 'B'. Division 'A' wants a price of Rs. 4 per unit of 'X' but Division 'B' is prepared to pay Rs. 2 per unit of 'X'.

Division 'A' has another option on hand, which is to produce only 1,50,000 units of component 'X'. This will reduce the holding of assets by Rs. 2 lakhs and fixed overhead by Rs. 25,000.
You are required to advise the most profitable course of action for Division 'A'.

(a)

An animal feed company must produce 200 kg. of a mixture consisting of ingredients X and Y daily. X costs Rs. 3 per kg. and Y Rs. 8 per kg. No more than 80 kgs. of X can be used and at least 60 kgs. of Y must be used. Formulate the problem as a Linear Programming Model.

(b)

Customers arrives at a one-window drive-in bank according to a poisson distribution with mean 10 per hour. Service time per customer is exponential with mean 5 minutes. The space in front of the window, including that for the serviced car can accommodate a maximum of 3 cars. Other cars can wail outside this space.

(a)
What is the probability that an arriving customer can drive directly to the space in front of the window?

(b) What is the probability that an arriving customer will have to wait outside the indicated space?

(c) How long is an arriving customer expected to wait before starting service?

4+4+2

Please turn over

( 3 )

I—9(MPM)
Revised syllabus

Marks

(a)

Distinguish between Standard Costing and Budgetary Control.

(b)

A company manufactures two products X and Y. A forecast of unit to be sold in the first four months of the year is given below:

Months	Product X	Product Y
January February March April May	1000 1200 1600 2000 2400	2800 2800 2400 2000 1600

Other information are as follows:

Cost per unit (Rs.)	Product X	Product Y
Direct material Direct labour Factory overhead per unit	12.50 4.50 3.00	19.00 7.00 4.00

There will be no opening and closing work-in-progress (WIP) at the end of any month and 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:
(a) Production budget for January to April and
(b) Summarized production cost budget.

5+5

(a)

Based on the data given below show the calculation of:

(i)	Efficiency ratio;
(ii)	Production volume ratio;
(iii)	Idle capacity ratio.

Data	Standard Hour of Output	Hours of Actual Operations
Theoretical capacity Theoretical capacity less Unavoidable loss time Planned activity for period Actual activity for period	100 95 81 68	100 95 90 85

(b)

The following cost data are available for the year 2005:

	Budgeted	Actual
Fixed overhead (Rs.) Working days Production (units) Working hours in a day Idle time (hrs.) Find out idle time variance.	96,000 (yearly) 300 (yearly) 24,000 (yearly) 8 —	8,500 (monthly) — 2,100 (monthly) — 4

Write short notes on any four of the following:

(i)	Value analysis;
(ii)	Master Budget;
(iii)	Variance analysis;
(iv)	Selling at or below marginal cost;
(v)	Enterprise resource planning.

4x4

__________

CWA/ICWA Inter :: Management Accounting—Performance Management : December 2006