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Management Accounting
Chapter 1:- Nature and Scope of Management Accounting
2010
1) What is management accounting? How does management accounting differ from cost accounting and
financial accounting? (9)
2) Define the terms cost control, cost reduction and cost management. How they are different from
each other? Explain. (9)
2009
1) State the objectives and limitations of Management Accounting. (6)

2008
1) Explain the distinction between cost control and cost reduction. Enumerate some of the
important tools/ techniques of cost reduction and cost control. (6)
2) Explain the distinction between cost accounting and management accounting. ( 7)
2007
1) What is meant by Management Accounting? Discuss its objectives. (7)
2) Explain the following:
Cost management. (4)

Chapter 2:- Budget and budgetary control
2010
1) ABC Ltd. manufactures a single product for which market demand exists for additional quantity.
Present sales of Rs.60,000 per month utilizes only 60% capacity of the plant. Marketing Manager
assures that with the reduction of 10% in the price he would be in a position to increase the sale
by about 25% to 30%. The following data are available:
(i) Selling price Rs.10 per unit
(ii) Variable cost Rs.3 per unit
(iii) Semi-variable cost Rs.6,000 fixed + 50 paise per unit
(iv) Fixed cost Rs.20,000 at present level estimated to be Rs.24,000 at 80%
output.


You are required to prepare the following statements:
(a) The operating profits at 60%, 70% and 80% levels at current selling price,
(b) The operating profits at proposed selling price at the above levels.

2) What is budgeting? Explain its advantages and limitations. (3)

3) Distinguish between fixed and, flexible budgets.(3)

4) Short Note Zero Based Budgeting. (3)

2009
1) Following are the figures of sales, costs and profit relating to a manufacturing unit working at
50% of its capacity:
Rs.
Sales 20,00,000
Direct cost 8,00,000
Factory overheads 4,00,000
Office overheads 2,00,000
Selling overheads 3,00,000
Profit 3,00,000
Every 10% increase in sales beyond 50% of capacity is possible only after reducing the price by 1%
on the base level of 50% capacity sales. Material cost included in Direct cost at this level is 25%.
With every 10% increase in capacity above this level the price of direct material comes down by 2%.
Factory overheads at this level are fixed to the extent of 50% and rest are variable. Every 10%
increase in output over the present level results in 2% increase in the office overheads. Selling
overheads as a percent of sales remain constant.
Prepare a budget at 80% capacity level considering the above information. (15)

2) Write short notes on:
(i) Zero base budgeting (ii) Master budget (iii) Flexible budget. (6)

2008


1) ___________budget is a summary budget incorporating its component functional budgets and
which is finally approved, adopted and employed. (2)
2) The following are the estimated sales of Philips Company for eight months ending 30-10-2008:
April 2008 12,000 units
May 2008 13,000 units
June 2008 9,000 units
July 2008 8,000 units
August 2008 10,000 units
September 2008 12,000 units
October 2008 14,000 units
November 2008 12,000 units
As a matter of policy, the company maintains the closing balance of finished goods and raw
materials as follows:
(i) Finished goods-closing stock of a month will be 50% of the estimated sales for the next
months.
(ii) Raw material-closing stock of a month will be equal to estimated consumption for the next
month. .
Each unit of production consumes 2 kg of raw material costing Rs. 6 per kg.

Prepare the following budgets for the half year ending 30-9-2008:
(i) Production budget (month wise in units)
(ii) Raw material purchase budget (month wise in units and cost) (10)

3) Appex Co. can produce 4,000 units of a product at 100% capacity. The following information is
available from its records:
April May
Units produced 2,800 3,600


Rs. Rs.
Power 1,800 2,000
Repairs and Maintenance 500 560
Indirect Labour 700 900
Consumable stores 1,400 1,800
Inspection 200 240
Depreciation 1,400 1,400
Salaries 1,000 1,000
Direct material cost per unit is Re. 1 and direct wages per hour is Rs. 4. Rate of production per
hour is 10 units.
You are required to:
(i) Compute the cost of production at 100%, 80% and 60% capacity levels showing variable, fixed
and semi-variable items under the flexible budget.
(ii) Compute overhead absorption rate at 80% capacity. (10)

4) Short note Zero base budgeting (4)

2007
1) (a) Briefly explain the essentials of an effective budgetary control system.(7)
(b) The following are the budget estimates of plant servicing department in
a manufacturing company :
Items of Planned at Planned at
cost 6,000 service hours (Rs.) 9,000 service hours (Rs.)

Salaries 28,000 28,000
Indirect materials 42,000 63,000
Miscellaneous costs 16,000 20,500

Required:
Prepare a flexible budget for the department for 7,000, 8,000 and 9,500 service
hours. (8)


2) (a) "Flexible budgets are more realistic and useful than fixed budgets." Do you agree? Explain.(8)
(b) GMR Ltd. has supplied the following summary of its operating results for the year ending
31st March 2007:
Rs. Lakhs
Sales (40,000 units) 48.00
Less: Trade discount 2.40_____
Net Sales 45.60____
Cost of sales :
Direct materials 14.40
Direct wages 12.60
Factory overheads 6.30
Administration overheads 3.60
Selling and distribution overheads 4.50
The following changes are to be incorporated in the budget for the year
ending 31st March 2008 :
(i) Sales quantity to be increased by 25%.
(ii) Material prices to increase by 15%.
(iii) Direct wage rates to go up by 12%.
(iv) Factory overheads will increase by 15%. In addition, a new facility will
be added to the factory laboratory at a recurring cost of Rs. 12,500 per annum.
(v) Administration and selling and distribution overheads are estimated to
go up by 10% and 14% respectively. .
(vi) There will be no change in the rate of trade discount.
(vii) There will be no change in inventory.


You are required to present the budget for the year ending 31st March 2008 showing the details
of total cost, sales and profit. (7)

Zero base budget.

2006
Sales budget. (3)
2005
1) A single product company estimated its sales for the next year as quarter wise as under:

Quarter Sales units
I 30,000 units
II 37,500 units
III 41,250 units
IV 45,000 units
The value of opening stock of finished goods is 10,000 units and the company expects to maintain
the Closing Stock of finished goods at 16,250 units at the end of the year. The production pattern
in each quarter is based on 80% of the sales of the current quarter and 20% of the sales of the next
quarter.
The Opening Stock of raw materials in the beginning of the year is 10,000 kg and the Closing Stock
at the end of the year is required to be maintained at 5,000 kg. Each unit of finished output requires
2 kg of raw materials.

The company proposes to purchase the entire annual requirement of raw materials in the first three
quarters in the proportion and that the prices given below:

Quarter Purchase of raw materials % to Price per kg.
total annual requirement in quantity Rs.

I 30% 2
II 50% 3
III 20% 4

The value of the opening stock of raw materials in the beginning of the year is Rs. 20,000.

Required: Present the following for the next year, quarterwise:
(i) Production budget in units;
(ii) Raw 'material consumption budget in quantity;


(iii) Raw material purchase budget in quantity and value; and
(iv) Priced Stores Ledger Card of the raw material using First In
First Out Method.
2) Write short notes on the following:
(a) Performance Budgeting; (5)

3) Write a note on objectives of budgetary control. (5)

Chapter3:-Standard Costing and Variance Analysis
2010
1) The following standards have been set to manufacture a product by a company:
Direct Material:
2 units of 'A' @ 4 per unit 8
3 units of 'B' @ 3 per unit 9
15 units of 'C' @ 1 per unit 15
Direct Labour:
3 lab. hrs. @ 8 per lab. hr. 24

Total St. Prime Cost 56
The company had manufactured and sold 6,000 units of the product during the year.
Direct material costs incurred were as follows:
12,500 units of 'A' @ 4.40 per unit
18,000 units of 'B' @ 2.80 per unit
88,500 units of 'C' @ 1.20 per unit
The company worked for 17,500 direct labour hours during the year. For 2,500 of these labour hours,
the company paid @ Rs.12 per labour hr., while for the remaining labour hrs. it paid at the standard
rate. You are required to calculate:
(i) Material price, Usage, Mixture and Yield variances


(ii) Labour rate and Efficiency variances.
2) A company has a normal capacity of 120 machines working 8 hours per day for 25 days in a
month. The fixed overheads are budgeted at 1,44,000 per month. The standard time required
to manufacture one unit of product is 4 hours.
In November 2009, the company worked for 24 days utilizing 840 machine hours per day and produced
5,305 units of output. The actual fixed overheads were 1,42,000. You are required to calculate:
(i) Total Fixed Overhead Cost Variance;
(ii) Fixed Overheads Budget/Expenditure Variance
(iii)Fixed Overheads Volume Variance
(iv)Fixed Overheads Capacity Variance
(v) Fixed Overheads Efficiency Variance and
(vi) Fixed Overheads Calendar Variance.
3) Short note on Control ratios as used in budgetary control system

4) Reasons for adverse material cost variance.

2009
1) Distinguish between Budgetary control and Standard costing as measures of cost control. (6)

2) Modern Tiles Ltd. makes plastic tiles of standard size of 6" x 6" X1/8". From the information
given ahead you are required to calculate:
(i) Total material cost variance
(ii) Material price variance
(iii) Material usage variance
(iv) Material mix variance and
(v) Material yield variance.

A standard mix of the compound required to produce an output of 20,000 sq. ft. of tiles of V8"
thickness is as follows:
Direct Material Quantity Price per kg.
Kg Rs.
A 600 9.00
B 400 6.50
C 500 4.00
For the month of March 2008, actual production of plastic tiles was 6, 20,000


units. The actual data for direct material consumed was as under:
Direct Quantity consumed Price per kg.
Material kg Rs.
A 5,000 8.50
B 2,900 6.00
C 4,400 4.50 (15)
3) H Ltd. furnishes the following information relating to budgeted sales and actual sales for the
month of March, 2008:
Product Sales Quantity Units Sale Price Per Unit
Budget Sales:
A 1,200 15
B 800 20
C 2,000 40
Actual Sales:
A 880 18
B 880 20
C 2,640 38

You are required to calculate:
(i) Sales price variance
(ii) Sales volume variance
(iii) Sales mix variance, and
(iv) Total sales value variance. (15)

4) Calculate
(i) Efficiency Ratio; (ii) Activity Ratio; (iii) Capacity Ratio.
From the following information:
Budgeted Production 880 units


Budgeted Hours per unit 10
Actual production 750 units
Actual Hours taken 6,000 (9)

2008
1) When material actually consumed is 1,100 kg at Rs, 8 per kg, the material price variance is Rs,
2,200 (F) and material usage variance is Rs, 1,000 (A), then the standard quantity is kg and
standard price is Rs per kg. (3)

2) Standard material cost for manufacturing 1,000 units of output is 400 kg of material at Rs. 2.50
per kg. When 2,000 units are produced it is found that actual cost is 825 kg of material at Rs.
2.70 per kg. Calculate material cost variance, material price variance and material usage
variance. (6)

3) From the following information about sales, calculate:
(i) Total sales variance
(ii) Sales price variance
(iii) Sales volume variance
(iv) Sales mix variance
(v) Sales quantity variance (9)

Product Standard Rate Actual Rate
Units Rs. Units Rs.

A 5,000 5 6,000 6
B 4,000 6 5,000 5
C 3,000 7 4,000 8

4) From the following data calculate overhead variances:
Fixed overhead Rs. 10,200
Variable overhead Rs. 14,250
Normal capacity 10,000 standard hours
Budgeted rate -Fixed overhead Re. 1 per hour
-Variable overhead Rs. 1.70 per hour


Actual level -8,000 standard hours.
Required: Variable overhead cost variance and fixed overhead cost, budget and volume variances. (6)

5) Standard hours for producing two products A and Bare 15 hours and 20 hours per unit
respectively. Both products require identical type of labour and the standard wage rate is Rs. 5
per hour. In a year 10,000 units of A and 15,000 units of B were produced. The total labour
hours actually worked were 4,50,500 and actual wage bill came to Rs. 23,00,000. This included
12,000 hours paid for at Rs. 7 per hour and 9,400 hours paid for @ Rs. 7.50 per hour, the
balance having been paid at Rs. 5 per hour. You are required to compute labour cost variance,
labour rate variance and labour efficiency variance. (9)
2007
1) (a) Calculate labour variances from the following information :
Actual hours 5,800
Actual direct wages Rs. 1,800
Standard rate per hour Re. 0.35
Standard hours 6,000 (4)
(b)Finolex Co. uses a standard cost system and manufactures product Z.
Standard cost per 1,000 kg of output is as under:
Material Quantity (in kg) Price (Rs.)
A 800 2.50
B 200 4.00
C 200 1.00
In March 2007, the company produced 2,00,000 kg of output. Actual consumption was:
Material :
A: 1,57,000 kg @ Rs. 2.40; B: 38,000 kg @ Rs. 4:20; C: 36,000 kg @ Rs. 1.10
Calculate material variances. (11)


2) (a) Greenfield Co. provides the following data for the month of March 2007 :
Budget:
Product Budgeted sales Budgeted selling
(in units) price per unit (Rs.)
A 2,160 12
B 1,440 5
Actual:
Product Budgeted sales Budgeted selling
(in units) price per unit (Rs.)
A 2240 11
B 960 6
You are required to compute:
(i) Sales value variance; (ii) Sales volume variance;
(iii) Sales price variance; (iv) Mix variance. (11)

(b) Briefly describe the following control ratios:
(i) Activity ratio; (ii) Capacity ratio; (iii) Efficiency ratio.(4)

3) Distinguish between:
Budgetary control and Standard costing. (4)

Fixed overheads cost variances. (4)

2006


1) Explain the points of difference between Standard Costing and
Budgetary Control. (5)

2) A group of 10 skilled and 20 unskilled workers was expected to produce 400 kg
of Chemical BXT in an 8 hour day. The standard hourly wage rate was fixed at
Rs.25 and Rs.15 respectively.
Actually, a group of 15 skilled and 10 unskilled workers was deployed and paid
for 8 hour day at an hourly wage rate of Rs. 22 and Rs.18 respectively. Two hours
were wasted for the entire group due to power failure and only 300 kg of BXT was produced.
You are required to compute :
(i) Labour Cost Variance;
(ii) Labour Rate Variance;
(iii) Idle Time Variance;
(iv) Labour Usage Variance;
(v) Labour Mix Variance;
(vi) Labour Yield Variance.

3) Prepare flexible budget for the overheads of Damyanti Ltd.from the following data
and ascertain the overhead rates-based on direct labour hrs. at 50%, 60% and 70% capacity: .
At 60% Capacity (Rs.)
Variable overheads :
Indirect material 6,000
Indirect labour 18,000
Semi-variable overheads :
Electricity (40% fixed, 60% variable) 30,000
Repairs (80% fixed, 20% variable) 3,000
Fixed overheads:
Depreciation 16,500
Insurance 4,500


Salaries 15,000
Estimated direct labour hours 1,86,000 hrs.

4) The budgeted and actual sales of XYZ Ltd. are as follows:
Budgeted Sales = 10,000 units @ Rs. 4 per unit
Actual Sales = 5,000 units @Rs. 3.50 per unit
=8,000 units @Rs.4 per unit
Calculate: (i) Sales Value Variance
(ii) Sales Price Variance
(iii) Sale Volume Variance

Efficiency ratio and capacity ratio. (3)
2005
1) Distinguish between standard costing and budgetary control. (5)

2) (a) From the following data, calculate the following variances:
(i) Material Cost Variance; (ii) Material Price Variance;
(iii) Material Quantity Variance; (iv) Material Mix Variance;
(v) Material Yield Variance.

Material Standard Actual
Qty. Unit Qty. Unit
Price Price

A 60% Rs. 20 88 Rs.30
B 40% Rs. 10 132 Rs. 10

Standard loss: 10%
Actual output: 180 units.

(b) A company has a normal capacity of 120 machines working 8 hours per day of 25 days in a
month. The fixed overheads are budgeted at Rs. 1,44,000 per month. The standard time
required to manufacture one unit of production is 4 hours.


In April 2006, the company worked 24 days of 840 machine hours per day and produced 5,305
units of output. The actual fixed overheads were Rs. 1,42,000.

Compute:
(i) Efficiency Variance; (ii) Capacity Variance;
(iii) Calendar Variance. (7.5,7.5)
3) The standard labour component and the actual labour component engaged in a week for a job
are as under:
Skilled Semi-skilled Unskilled
Workers workers workers
(a) Standard number of
workers in the gang 32 12 6
(b) Standard wage rate
per hour (Rs.) 3 2 1
(c) Actual number of workers
employed in the gang
during the week 28 18 4
(d) Actual wage rate per
hour (Rs.) 4 3 2

During the 40-hour working week, the gang produced 1,800 standard labour hours of work.
Calculate the different labour variances. (15)

Chapter4:- Absorption Costing Vs. Variable Costing
2010
1) Sunita Enterprises released the figures given below from its records for Year 1 and Year 2:

Year 1 Year 2
Sales units 2,40,000 2,40,000
Production units 2,40,000 4,00,000
Selling price per unit 20 20
Variable manufacturing cost per unit 12 12
Annual fixed manufacturing cost 12,00,000 12,00,000
Variable marketing and administrative costs per unit 1.25 1.25
Fixed marketing and administrative costs 4,20,000 4,20,000

(i) Prepare income statements for both years, using full-absorption costing. (ii) Prepare income
statements for both years, using variable costing. (iii) Comment on the different operating
profit figures.

2009


1) Distinguish between Absorption costing and Marginal costing. (6)

2008
1) Compared with absorption costing, when will variable costing report lower profits, higher profits
and equal profits. (5)
2) Define marginal costing and explain its main characteristics. (5)
2007
1) Distinguish between:
(i) Absorption costing and Variable costing. (4)

2006
1) (a) What is the distinction between 'Product Cost' and 'Period Cost' with reference to income
statement under Absorption Costing and Marginal Costing ? (5)
(b) Super Pro uct Ltd. prepares monthly income statements. Data relating to the months of
March and April, 2006 are given below:
March April
Opening Inventory Nil 150 units
Production 500 units 400 units
Sales 350 units 520 units
Variable Cost data :
Manufacturing cost per unit produced Rs.10,000 Rs.10,000
Distribution cost per unit sold Rs.3,000 Rs.3,000
Fixed Cost data :
Manufacturing Costs Rs. 20,00,000 Rs. 20,00,000
Distribution Costs Rs. 6,00,000 Rs.6,00,000


Selling Price per unit Rs. 24,000.
Stocks are valued on FIFO basis.
Prepare:
(i) Income statements for March and April under Marginal Costing; (5)
(ii) Income statements for March and April under Absorption Costing.(5)

2005
1) Prepare income statements under marginal costing and absorption costing from the
following information for the year 2006-07 :
Opening Stock :500 units valued at Rs. 35,000 including variable cost
of Rs. 50 per unit
Fixed Cost :Rs. 1,00,000
Output :5,000 units,
Variable Cost :Rs. 60 per unit
Sales :3,000 units @ Rs. 100 per unit
Closing Stock is valued on the basis of FIFO. Also explain the reason for the differences in profits
in both the cases.(6)

2) Write short note on:
Application of Marginal Costing (5)

3) What are the points of difference between marginal costing and absorption costing? (5)

Chapter5:- Cost-Volume-Profit Analysis
2010
1) A company has a fixed cost of Rs. 2, 00,000. It sells two product!?-X and Y in"'flte ratio of 2 : 1. If
contribution of X is ~ 10 per unit and of Y is ~ 20 per unit, how many units of each X and Y would
be sold at break-even point?

2) When volume is 3,000 units, average cost is 4 per unit whereas the average cost comes down to
3.50 per unit when volume increases to 4,000 units. The Break-even point is 5,000 units. Find
the P/V Ratio.
3) Assumptions of Break-even Chart
4) In a purely competitive market 10,000 units of a product can be manufactured and sold
and a certain amount of profit is generated. It is estimated that 2,000 units of that product
need to be manufactured and sold in a monopoly to earn the same amount of profi t. Profit


under both the market conditions is targeted at Rs.2,00,000. The variable cost per unit is ~
100 and the total fixed cost is Rs.60,000. You are required to determine selling prices
under both monopoly and competitive conditions.

2009
1) What is margin of safety? How can unsatisfactory margin of safety ratio be improved? (5)

2) You are given the following information:
Year Sales Profit
2007 12,00,000 80,000
2008 14,00,000 1,30,000
Calculate:
(i) P/V Ratio;
(ii) Break-even sales;
(iii) Profit when sales are Rs. 18,00,000
(iv) Sales required to earn a profit of Rs. 1,20,000 and
(v) Margin of safety for the year 2007. (10)

3) Short note on P/V Ratio. (3)

2008
1) Fill in the blanks.
a) When sales increase from Rs. 40,000 to Rs, 60,000 ~ profit increases
by Rs. 5,000, the P/V ratio is __ (2)
b) A company which has a margin of safety of Rs, 4 lakhs makes a profit
of Rs. 80,000. Its fixed cost is Rs. 5lakhs. Its break-even sales will be Rs ._____ (2)


2) What is meant by margin of safety and angle of incidence? Show these on a break-even
chart.(6)

3) There are two factories under the same management. It is desired to merge these two factories.
The following information is available:

Factory A Factory B
Capacity operation 100% 60%
Sales Rs. 300 lakhs 120 lakhs
Variable costs Rs. 220 lakhs 90 lakhs
Fixed cost Rs. 40 lakhs 20 lakhs
You are required to calculate:
(i) the capacity of the merged plant for the purpose of breaking-even; and
(ii) the profit on working at 75% of the merged capacity. (9)
4) Key factor and its significance (3)
5) Short Note Cost volume profit analysis (4)

2007
1) Attempt the following (working notes should form part of the answer) :
(i) Total fixed cost Rs. 12,000; Contribution Rs. 20,000, No. of units sold 10,000; Variable cost is
60% of sales. Define selling price per unit and also the total profit/loss.
(ii) Total fixed cost Rs. 12,000, Actual sales Rs. 48,000, Margin of safety Rs. 8,000. Determine the
P/V ratio.
(iii) When output is 3,000 units, the average cost per unit is Rs. 4. When output is increased to
4,000 units, the average cost is Rs, 3.50 per unit. The break-even point is 5,000 units. Find the
P/V ratio. (8)
2) (a)What are the limitations of break-even analysis? (4)
(b) ABZ Ltd. is operating at 100% capacity and its annual sales are Rs. 12 lakhs. Fixed cost is Rs. 4
lakhs and total variable cost Rs. 6 lakhs. Prepare a break-even chart showing the following:


(i) B.E. point in terms of % capacity; ~ .5
(ii) Margin of safety;
(iii) New B.E. point if fixed cost is increased by Rs. 1 lakh . (11)

3) The following particulars are extracted from the records of AB Ltd. :
Particulars Product A Product B
Sales (per unit) Rs. 100 Rs. 120
Consumption of materials 2 kg 3kg
Material cost Rs.10 Rs. 15
Direct wage cost Rs. 15 Rs.10
Direct expenses Rs. 5 Rs.6
Machine hours used 3 hours 2 hours
Overhead expenses :
Fixed Rs. 5 Rs.10
Variable Rs. 15 Rs.20
Direct wage per hour is Rs. 5.
(a) Comment on the profitability of each product (Both use the same raw
material) when:
(i) Total sales potential in units is limited;
(ii) Total sales potential in value is limited; ~
(iii) Raw material is in short supply; and
(iv) Production capacity (in terms of machine hours) is the limiting factor.
(b) Assuming raw material as the key-factor, availability of which is 10,000kg 1~and maximum sa.les
potential of each product being 3,500 units, find out the product mix which yield the maximum profit.


2006
1) What is break-even point? What are the limitations of breakeven analysis ? (5)
2) Given below are the sales and profits of the two halves of the year:
Ist half IInd half
Sales Rs. 1,00,000 Rs. 1,20,000
Profit Rs. 30,000 Rs. 38,000
Fixed Cost during the first half is equal to that during the second half. Selling price and per unit
Variable Cost remain unchanged.
Calculate the following :
(i) P/V ratio for each half and for the year.
(ii) Fixed Cost for each half and for the year.
(iii) BEP for each half and for the year.
(iv) Half-yearly sale to earn half-yearly profit of Rs, 40,000.
(v) Annual sale to earn annual profit of Rs. 90,000.
3) A retail dealer in garments is currently selling 24,000 shirts annually. He supplies the following
details for the year ended 31stDecember, 2006:
Rs.
Selling Price per shirt 40
Variable Cost per shirt 25
Fixed Cost:
Staff salaries for the year 1,20,000
General office costs for the year 80,000
Advertising costs for the year 40,000
As a Cost Accountant of the firm you are required to answer the following each part independently:
(i) Calculate the break-even point and margin of safety in sales revenue and number of shirts sold.
(ii) Assume that 20,000 shirts were sold in a year. Find out the net profit of the firm.
(iii) If it is decided to introduce selling commission of Rs. 3 per shirt, how many shirts would


require to be sold in a year to earn a net income of Rs. 15,000.
(iv) Assuming that for the year 2007 an additional Staff salary of Rs. 33,000 is anticipated, and
price of a shirt is likely to be increased by 15%, what should be the break-even point in
number of shirts and sales revenue?
2005
1) M/s Natraj Stationers manufacture plastic files for office use. The break-up of its cost and
sales is as follows :
Variable cost per file :Rs. 40

Fixed Cost :Rs. 60,000 per year
Production capacity :3,000 files per year
Selling Price :Rs. 100 per file.

You are required to compute the following:
(i) Break-even point;
(ii) Number of files to be sold to earn a net profit of Rs. 30,000.
(iii) If the firm manufactures and sells 500 files more per year with an additional fixed
cost of Rs. 2,000, what should be the selling price to earn the same .amount of profit
per file as in (ii) above. (9)
2) Mansarovar Auto Products produces and sells two small components - P and Q - used in
automobiles.
Details regarding unit income and costs of these components are as under:

Products
P Q
Rs. Rs.
Selling Price 12 20
Direct Materials 2 4
Direct Labour 2 1
Variable Factory overheads 2 4
Fixed Factory overheads 2 4
Total Cost of Goods sold 8 13
Gross Profit per unit 4 7

Factory overheads both fixed and variable, have been accounted for on a machine-hour basis.

As far as can be determined, the sales outlook is such that the plant could operate at full
capacity on either or both products. Both P and Q are processed through the same cost centres.
Selling costs are all fixed.


Which product should be preferred? Give a brief explanation in support of your answer. (10)

3) The ratio of variable cost to sales is 70%. The break-even point occurs at 60% of the capacity
sales. Find the capacity sales when fixed costs are Rs. 90,000. Also compute profit at 75%
of the capacity sales. (5)

Chapter6:-Decision Making
2010
1) Short note Relevant Costs

2009
1) AB Ltd. has got a Machine No. 201. It manufactures product X with its selling price Rs. 100
and marginal cost Rs. 60. The machine takes 20 hours to produce it. The company uses a
component 'Y', that can be manufactured on Machine No. 201 in 3 hours at a marginal cost
of Rs. 5. However, the component 'Y' can be bought from the market at a price of Rs. 10.
Should the component 'Y' be made on Machine No. 201? (9)
2) A firm has a capacity to manufacture 15,000 units of a product per annum. Presently, it
produces 10,000 units which are sold in the domestic market at Rs. 25 per unit. The production
cost of it per unit is as under:
Rs.
Material 8.00
Labour 6.00
Factory overheads:
Fixed 2.00
Variable 1.50
Office overheads (fixed) 1.00
Selling overheads:
Fixed 0.50
Variable 1.00


Total 20.00
A foreign customer is interested in the product and he is willing to buy 5,000units (one order
but at a price of Rs. 17.50per unit. Should the order be accepted by the firm? If yes, what
possibly be the underlying assumptions? Will your advice be different if the price offered is Rs.
15 per unit? (9)
3) Short note Relevant costs (3)

2008
1) What are the cost and non-cost factors in accepting export orders? (4)
2) Company has a capacity of producing 50,000 units of a product in a month. The sales
department reports that the following schedule of selling prices is possible:
Volume of sales Selling price
(% capacity) per unit
50% 2.00
60% 1.90
70% 1.85
8O% 1.80
90% 1.70
100% 1.60
Total fixed cost at 100% capacity is Rs. 20,000 per month and variable cost per unit is Re, 1 per
unit.
Prepare a statement showing total and differential costs and incremental revenue at each of the
above levels of production and sales. At which level the profit will be maximum? Give reasons.
(11)
3) What do you mean by relevant costs and irrelevant costs in decision making?
Give examples. (5)
4) Xpro & Co. Ltd. annually manufactures 10,000 units of a product at a cost of Rs. 4 per unit and
sells these in the home market at a selling price of Rs. 4.25 per unit. In the next year, there is a
fall in demand in home market which can absorb 10,000 units only at a price of Rs. 3.72 per unit.
The total cost of 10,000 units is made up as follows:


Materials Rs. 15, 000
Wages Rs. 11, 000
Fixed overhead Rs. 8, 000
Variable overhead Rs. 6, 000
The foreign market is explored and it has been observed that this market can consume 20,000
units of the product at a price of Rs. 3.55 per unit. (Assume that Co. has sufficient plant capacity
to produce additional output.) It is also discovered that fixed overheads will increase by 10% for
additional output above initial output of 10,000 units. Is it worth-while to try to capture the
foreign market? Give reasons. (10)
5) Short Note Make or 'buy decisions. (4)

2007
1) "The technique of variable costing is more used to provide a reasonable and sound basis for
managerial decisions than to arrive at product cost." Explain his statement with reference to the
various types of decisions in which variable costing is useful. (15)
Differential cost. (4)

2006
1) (a) What is differential costing? Explain its importance in decision-making.
(b) Smart Exports Ltd. is producing and selling 20,000 units of its product in the market
at a price of Rs. 60 per unit. The per unit cost is as follows:
Direct material Rs. 10 per unit
Direct Labour Rs. 7 per unit
Factory Expenses :
Fixed Rs.12 per unit
Variable Rs.4 per unit
Office and Selling Expenses :


Fixed Rs. 6 per unit
Variable Rs. 3 per unit
An importer from Australia placed an order for 6,000 units at a price of Rs. 30 per unit.
Execution of Australian order will result in an additional total cost of Rs. 10,000 over and above
the variable cost. Should the Australian order be accepted?
2005
1) A producer installed a machine which can produce product A as well as product 'B'. Annual
maximum machine running capacity is 4,000 hours. Cost details about the product are as
follows:

Product'A' Product'B'
Selling price per unit Rs.50 Rs.20
Variable cost per unit Rs. 30 Rs. 12
Machine hours required per unit of product 10 hrs 2 hrs
Annual demand 300 units 1,600 units
Annual fixed cost: Rs. 10,000

Calculate optimum product-mix showing annual contribution and profit. Give necessary
explanation. Also show that a product-mix other than that suggested by you will affect the
profits. (10)

2) What is differential cost analysis? In what way is it useful to the management? (5)

Chapter7:- Responsibility Accounting
2010
1) Discuss any two financial measures of divisional performance measurement. (6)
2) Define responsibility accounting. Explain various responsibility centres that are necessary
ingredients for the success of the system of responsibility accounting. (9)

2009

1) Explain the essential ingredients of the system of Responsibility Accounting. (6)

2) Return On Investment (ROI as a measurement of performance (3)

3) What are the criteria for evaluating the performance of a division? (6)


4) Write notes on the following as used in Responsibility Accounting.
(i) Cost centre (ii) Revenue centre (iii) Profit centre. (9)

2008

1) Define and explain responsibility accounting. What are the prerequisites for introducing
responsibility accounting in a company? (8)

2007

1) (a) What is meant by divisional performance measurement? Describe any two techniques
used for this purpose.(7)

2006
1) What is system of Responsibility Accounting. What are its benefits? (6)

2005
1) Write a note on - Responsibility Centres - Cost Centre a Profit Centre. (5)

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