CWA/ICWA Inter :: Management Accounting—Performance Management : June 2003

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

1. (a) Fill in the blanks:
(i)

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

(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.

(iii)Budget is a forecast of _______ events.
(iv)An Increase in sales price _______ the BEP.
(v)MRP is a production planning system that starts with _______
 5x1
(b) From the following, choose the most appropriate answer: 5x1
(i)Contribution is known as:
(a)Marginal income;
(b)Gross profit;
(c)Net income.
(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.
(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.

(iv)Linear Programming techniques can be applied for
(a)Minimization of cost;
(b)Optimization of system;
(c)Improving human relations.
(v)The Simulation technique will be useful when
(a)A precise solutions is required;
(b)Problems are complex;
(c)Problems cannot be solved mathematically.
(c) State whether the following statements are 'True' or 'False':
(i)Budget is prepared by managers to fix their targets.
(ii)In Zero-based Budgeting, there is some reference made to the previous level of expenditure.
(iii)Transfer Pricing has significance for the purpose of measurement of divisional performance.
(iv)TQM stresses on zero defects and doing it right first time.
(v)Production cost efficiency alone is no guarantee of profit.
 5x1
(d) Define the following terms in not more than two sentences:
(i)Responsibility Accounting,
(ii)Budget,
(iii)Standard Cost,
(iv)Enterprise Resource Planning,
(v)Cost Reduction.
 5x1

 
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( 2 )

I-9(MPM)
Revised syllabus		 Marks
2. (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

8

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.
(b) Discuss the process if managing Organisational Change effectively. 8
3. (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:
 SellingDirectDirect Wages/unit
ProductsPrice/unitMaterials/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

2+2+4
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.
(b) Explain Balance Score Card and its various perspectives. 2+6
4. (a) The Bombay Transport Company has trucks available at four different sites in the following numbers:
SiteA - 4 Trucks
SiteB - 10 Trucks
SiteC - 7 Trucks
SiteD - 3 Trucks
 8
Customers - W, X and Y require trucks as shown below:
CustomerW - 5 Trucks
CustomerX - 8 Trucks
CustomerY - 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.
(b) Explain how the performance of the Public Undertakings will be judged. 8
5. (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
5+5
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.
(b) What are the basic differences between 'Forecast' and 'Budget'? 6
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( 3 )

I-9(MPM)
Revised Syllabus

Marks
6. (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 unit40.00

 12
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.
(b) Discuss the importance of Variance Analysis in controlling costs. 4
7. (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.

 8

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
Total1,07,400
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.
(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 unit1,120
(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?

4
(ii)

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

4
8. Write short notes on the following:-
(a)Behavioural aspects of Budgeting;
(b)Simulation;
(c)Principles of Management;
(d)Regression Analysis.
 4x4=16

__________

 

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