Accounting For Management Decisions

St. Joseph’s College of Commerce B.B.M. 2014 V Sem Accounting For Management Decisions Question Paper PDF Download

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  1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – OCTOBER 2014

B.B.M.– V SEMESTER

 ACCOUNTING FOR MANAGEMENT DECISIONS

Duration: 3 Hours                                                                                     Max. Marks: 100

 

SECTION A

  1. Answer ALL the questions. Each carries 2 marks.                    (2 x10 = 20)
  1. What is the difference between ‘absorption costing’ and ‘marginal costing?
  2. Briefly explain what is ‘KAIZEN COSTING’?
  3. What are ‘activity drivers’ in Activity based Costing?
  4. From the following data calculate break even point in terms of units and also the new B.E.P. If selling price is reduced by10%. Fixed expenses Rs.2,00,000, Variable expenses: Material Rs.3 per unit,  Labour Rs.2 per unit, Selling price Rs.10 per unit.
  5. What is the difference between Break Even chart and Profit/Volume Chart?
  6.  Mention the situations when a product can be priced below the Marginal cost?
  7. P/V ratio is 60% and marginal cost of the product is Rs.50.  What will be the Selling Price?
  8.  Explain, how Marginal costing is applied in measuring the performance efficiencies of a department or product line or sales division?
  9. Explain: (a)  Opportunity Cost  (b) Sunk cost
  10. Define Budget and Budgetary control?

 

SECTION – B

  1. II) Answer FOUR Each carries 5 marks. (4 x 5 = 20)

 

  1. You are required to calculate the Break Even point in the following case:

The fixed costs for the year is Rs.80,000; variable cost per unit for the single product being made is Rs.4. Estimated sales for the period are valued at Rs.2,00,000. The number of units involved coincides with the expected volume of output. Each Unit sells at Rs.20. Calculate the Break even point.

 

  1. Meenakshi ltd manufactures auto parts. The following costs are incurred for processing 1,00,000 units of a component.
Direct materials cost Rs.5 lakhs
Direct Labour cost Rs.8 Lakhs
Variable factory overheads Rs.6 Lakhs
Fixed factory overheads Rs.5 Lakhs

The purchase price of the component is Rs.22. The fixed overheads would continue to be  incurred even when the component is bought from outside although there would be reduction to the extent of Rs.2,00,000

Required

  1. Shoud the part be made or bought, considering that the present facility when released following a buying decision would remain idle?
  2. In case the released (spare) capacity can be rented out to another company for Rs.1.5 Lakhs, what would be the decision?
  1. What is a Cash Budget? Explain the need for a cash Budget?
  2. Discuss in detail about ‘Balance Score Card’?
  3. Briefly explain the process involved in Target Costing?
  4. Asgar Ltd supplies you the following information
Normal capacity of plant 10,000 units
Fixed cost Rs.1,00,000
Marginal cost per unit Rs.75
Estimated selling price Rs.80
Estimated sales volume at this selling price 5,000 units

Suggest whether the plant should be temporarily closed down

 

SECTION –C

  1. Answer THREE questions. Each carries 15 marks.                                          (3 x 15 = 45)

 

  1. A company produces a single product which is sold by it presently in the domestic market at Rs.75 per unit. The present production and sale is 40,000 units per month, representing 50% of the capacity available. The cost data of the product are as follows.

Variable cost per unit Rs.50; Fixed cost per month Rs.10 Lakhs.

To improve the profitability the management has 3 proposals on hand as under

  1. To accept an export order for 30,000 units per month at reduced price of Rs.60 per unit, incurring additional variable costs of Rs. 5 per unit towards export packing duties etc.
  2. To increase the domestic market sales by selling to a domestic chain stores 30,000 units at Rs.55 per unit, retaining the existing sales at the existing price.
  • To reduce the selling price for the increased domestic sale as advised by the sales department as under
Reduced selling price per unit by    Rs Increase in sales expected (units)
5 10,000
8 30,000
11 35,000

 

Prepare a table to present the results of the above proposals and give your comments and advice on the proposals.

 

  1. Work out a flexible budget for overhead expenses on the basis of the following data available and determine overhead rates at 60%, 80% and 100% capacity levels
 

 

 80% capacity

levels

 
Variable overheads

Indirect Materials

Indirect Labour

  

Rs.1,44,000

Rs.64,000
Semi-Variable overheads

Power (80%variable)

Repairs & maintenance (60% fixed)

  

Rs.1,50,000

Rs.60,000
Fixed overheads

Depreciation

Insurance

Others

  

Rs.   27,000

Rs.   20,000

Rs.   79,000

 
Estimated direct labour hours 1,60,000 hours

 

  1. A company is expected to have Rs.25,000 cash in hand on 1st April 2004 and it requires you to prepare an estimate of cash position during the three months. April to June 2004. The following information is supplied to you
Month Sales (Rs.) Purchases(Rs.) Wages(Rs.) Expenses(Rs.)
Feb 70,000 40,000 8,000 6,000
March 80,000 50,000 8,000 7,000
April 92,000 52,000 9,000 7,000
May 1,00,000 60,000 10,000 8,000
June 1,20,000 55,000 12,000 9,000

 

Other information (a) 20% of Sales of each month is for Cash, 50% of credit Sales is collected in the next month and 50% in the following month (b) Suppliers allow credit of half a month (c) Delay in payment of wages and expenses – ½   month  (d) Income tax of Rs.25,000 to be paid in June 2004.

 

 

 

  1. Draw the Break Even chart from the following information:

Output-80,000units

Selling Price Rs.20 per unit

Variable cost Rs.10 per unit

Fixed Cost: Rs.4,00,000

 

  1. What is Activity Based Costing? Briefly explain the steps in Activity Based Costing.

 

Section – D

  1. IV) Compulsory question.                                                (15 marks)

 

  1. An umbrella manufacturer makes an average profit of Rs.2.50 per unit on selling price of Rs.14.30 by producing and selling 60,000 units @ 60% of potential capacity

His cost of sales per unit is as follows

Direct Materials Rs.3.50
Direct wages Rs.1.25
Factory overhead (50% fixed) Rs.6.25
Sales overhead (25% variable) Re. 0.80

 

During the current year, he intends to produce the same number but estimates that his fixed cost would go up by 10%, while the rates of direct wages and direct materials will increase by 8% and 6% respectively. However the selling price cannot be changed

Under this situation, he obtains an offer for further 20%of his potential capacity. What minimum price would you recommend for a further decrease in potential capacity by @20%of his potential capacity. What minimum price would recommend for acceptance of this offer to ensure the manufacturer an overall profit Rs.1,67,300 ?

 

 

 

St. Joseph’s College of Commerce B.B.A. 2015 Accounting For Management Decisions Question Paper PDF Download

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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – SEPT/OCT. 2015
B.B.M. – V SEMESTER
M1 11 502: ACCOUNTING FOR MANAGEMENT DECISIONS
Duration: 3 Hours                                                                                         Max. Marks: 100
SECTION – A
I) Answer ALL the questions.  Each carries 2 marks.                                       (10×2=20)
  1. What is Budgetary Control?
  2. What do you mean by Target Costing?
  3. State four assumptions of Break even analysis.
  4. If Fixed Cost is Rs.10,000  and profit volume ratio is 50%,calculate the break even point.
  5. What is the difference between relevant and irrelevant cost?
  6. State the benefits Kaizen Costing.
  7. State the importance of limiting factor in decision making.
  8. State any four factors that influence Make or Buy decision.
  9. What do you mean by Activity Based Costing?
  10. What is Balance Score Card?
SECTION – B
II) Answer any FOUR questions.  Each carries 5 marks.                                  (4×5=20)
  11. A company has annual fixed cost of Rs.14,00,000. In the year2014,sales amounted to Rs.60,00,000 as compared with Rs. 45,00,000 in the year 2013.The profit in 2014 was Rs.4,20,000 higher than in 2013. If there is reduction in selling price in 2015 by 10% and company desires to earn the same profit as in 2014 ,what would be the required sales volume?
  12. A company is manufacturing and selling Electric Motors in the domestic market, at Rs.6,900 each made up as under

 

      Rs.
Direct Material   3200
Direct Labour     400
Variable Overheads  1,000
Fixed Overheads     200
Depreciation     200
Variable Selling Overheads     100
Royalty on production     200
Profit

 

Central Excise

   1,000
  6,300
     600
  6,900

A foreign buyer has offered to buy 200 such motors at Rs.5000 each.

As a Cost Accountant of the company would you advise acceptance of offer if production capacity is available?
  13. For production of 10,000 electrical automatic irons, the following are the budgeted expense:

Direct material                                               Rs. 60

Direct labour                                                        30

Variable Overheads                                             25

Fixed Overheads (Rs. 1,50,000)                          15

Variable expenses  (direct)                                    5

Selling expenses (10% fixed)                               15

Administrative expenses

(Rs. 50,000 rigid for all levels of production)      5

Distribution expenses (20% fixed)                       5

Total cost of sale per unit                                  160

Prepare a budget for production of 6,000 and 8,000 irons, showing distinctly marginal cost and total cost.

 
  14. What are the benefits of implementing Activity Based  Costing System?
  15. Explain the features of Target Costing.
  16. A Manufacturing Company finds that while the cost of making a component part is Rs.10,the same is available in the market at Rs.9 with the assurance of continued supply. Give your suggestions whether to make or buy this part.

 

The cost information is given below;

Rs.

Materials                                 3.50

Direct  Labour                        4.00

Other variable Expenses       1.00

Fixed Expenses                       1.50

————

10.00

———–
SECTION – C
III) Answer any THREE questions.  Each carries 15 marks.                             (3×15=45)                                                                                                 
  17. A department of a company attains sales of Rs.6,00,000 at 80% of its capacity and its expenses are given below:

Administration Cost(Fixed)

Office Salaries                        Rs. 90,000

General Expenses                  2 per cent of sales

Depreciation                           7,500

Rates and Taxes                     8,750

Selling Costs:  

Salaries                                    8 per cent of sales

Travelling Expenses              2 per cent of sales

Sales Office                             1 per cent of sales

General Expenses                  1 per cent of sales

 

 

 

Distribution Costs:

Wages (Fixed)                         15,000

Rent                                          1 per cent of sales

Other Expenses                       4 per cent of sales

Draw up Flexible Budget at 90% and 100% of normal capacity.
  18. A company manufactures three products A,B and C. There are no common processes and the sales  of one product does not affect prices or volume of sales of any other.

The company’s budgeted Profit/Loss for 2015 has been abstracted as follows:

  Total

(Rs.)

 A

(Rs.)

 B

(Rs.)

 C

(Rs.)
Sales 3,00,000 45,000 2,25,000 30,000
Production Cost:

Variable

Fixed

  

 

1,80,000

60,000

  

 

24,000

3,000

  

 

1,44,000

48,000

  

 

12,000

9,000
Factory Cost 2,40,000 27,000 1,92,000 21,000
Selling and Administrative Cost

Variable

Fixed

  

 

 

24,000

6,000

  

 

 

8,100

2,100

  

 

 

8,100

1,800

  

 

 

7,800

2,100
Total Cost 2,70,000 37,200 2,01,900 30,900
Profit  30,000   7,800     23,100 ( -) 900

 

On the basis of the above, the board had almost decided to eliminate product C, on which a loss was budgeted. Meanwhile, they have sought your opinion. As the Cost Accounting expert, what would be your advice? Give reasons for your answer.
  19. Prepare a cash budget for three months ending 30th June 2015 from the information given below:

 

Month Sales(Rs.) Materials(Rs) Wages(Rs) Overheads(Rs)
February 14,000 9,600 3,000 1,700
March 15,000 9,000 3,000 1,900
April 16,000 9,200 3,200 2,000
May 17,000 10,000 3,600 2,200
June 18,000 10,400 4,000 2,300

Credit terms are:

a.                   a.Sales /Debtors – 10% sales are on cash, 50%of the credit sales are collected next month and the balance in the following month.

 

b. Creditors : Materials –2 Months

Wages      -1/4 Month

Overheads -1/2 Month

 

Cash and Bank balance on 1st April 2015 is expected to be Rs.6000

Other relevant information is:

i) Plant and machinery will be installed in February ,2015 at a cost of Rs. 96,000.The monthly instalment of Rs.2,000 is payable from April onwards.

ii) Dividend @5% on Preference Share Capital of Rs. 2,00,000 will be paid on 1st June

iii) Advance to be received for sale of vehicles Rs. 9,000 in June.

iv )Dividends from investments amounting to Rs. 1,000 are expected  to be received in June.

v) Income Tax (advance) to be paid in June is Rs.2,000.

 
  20. From the following data calculate the Break even Point and profit  if output is   50,000 Units by drawing a  Break Even Chart.

Fixed Expenses :Rs.1,50,000

Variable Cost Per Unit :Rs. 10

Selling Price Per Unit : Rs.15

 
  21. What is Life Cycle Costing? Explain the process of Life Cycle Costing.
 

SECTION – D
IV) Case Study                                                                                                      (1×15=15)                                                                                          
  22. The licensed capacity of Goodwill India Company Ltd. is Rs. 80,00,000.At present the sales are Rs. 60,00,000  and the  sales demand is a key factor .It is proposed by the management that  in order to utilize the existing capacity, the selling price of the product should be reduced by 5%.

The revenue account of the company is summarized below:

Rs

Sales                                                     60,00,000

Direct Materials       18,00,000

Direct Wages            12,00,000

Variable Overheads  4,80,000

Fixed Overheads      17,20,000

————–          52,00,000

—————-

Profit                                          8,00,000

—————–

The following changes are expected in the costs:

a)  Sales forecast Rs. 76,00,000 (at reduced price)

b)  Direct Wages rates and variable overheads are expected to increase by 5%

c)  Direct Material prices are expected to increase by 2%

d)  Fixed overheads will increase by Rs.80,000

 

You are required to forecast the effect of change in selling price and costs on profit.

 
     

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