|
Question |
Chapter |
Level of Question |
|
|
1(a) |
Target Costing |
5 |
A |
|
1(b) |
Total Quality Management |
5 |
B |
|
1(c) |
Service Sector Costing |
5 |
B |
|
1(d) |
Transportation |
5 |
B |
|
2(a) |
Total Quality Management |
8 |
C |
|
2(b) |
Pricing |
8 |
A |
|
3(a) |
Transfer Pricing |
8 |
A |
|
3(b) |
Budgeting |
8 |
B |
|
4(a) |
Standard Costing |
8 |
B |
|
4(b) |
Network Analysis |
8 |
B |
|
5(a) |
Learning Curve + Life Cycle + Pricing |
8 |
B |
|
5(b) |
Relevant Cost |
8 |
A |
|
6(a) |
Marginal Costing |
8 |
B |
|
6(b) |
LPP – Graphical Method |
8 |
B |
|
7(a) |
Assignment |
8 |
C |
|
7(b) |
Performance Measurement |
4 |
C |
|
7(c) |
Simulation |
4 |
B |
|
7(d) |
ABC Costing |
4 |
B |
|
7(e) |
Pricing |
4 |
C |
A denotes innovative question
B denotes concept based question
C denotes average question
|
Q 1(a): |
5 Marks |
||
|
UK Ltd prepared a Draft Budget for the next year as follows: |
|||
|
Quantity |
10,000 units |
||
|
Rs. |
|||
|
Selling Price per Unit |
60 |
||
|
Variable Cost per Unit |
|||
|
– Direct Materials |
16 |
||
|
– Direct Labour (2 hours ×Rs. 6) |
12 |
||
|
– Variable Overheads (2 hrsRs. 1) |
2 |
||
|
Contribution per Unit |
30 |
||
|
Total Budgeted Contribution |
3,00,000 |
||
|
Less: Total Budgeted Fixed Overheads |
2,80,000 |
||
|
Total Budgeted Profit |
20,000 |
The Board of Directors are not satisfied with this Draft Budget and suggested the following changes for the better profit:
(i) The Budgeted Profit is Rs. 50,000,
(ii) The Company should spend Rs. 57,000 on advertisement and the Target Sales Price up to Rs. 64 per unit.
(iii) It is expected that the Sales Volume will also rise, inspite of the price rise, to 12,000 units.
In order to achieve the extra Production Capacity, however, the work force must be able to reduce the time taken to make each unit of the product. It is proposed to offer a pay and productivity deal in which the wages rate per hour is increased to Rs. 8. The hourly rate for Variable Overheads will be unaffected.
You are required to calculate the target labour time require to achieve the Target Profit.
Ans. 1(a)
|
1. Target Contribution Per Unit = |
Fixed Cost + Target Profit |
= |
(2,80,000 + 57,000) + 50,000 |
= Rs. 32.25 PerUnit |
|
Sale Quantity |
12,000 Units |
|||
2. Target Variable Cost Per Unit = New sale Price – Target Contribution pu = Rs. 64 – Rs. 32.25 = Rs. 31.75 Per Unit
3. Direct Materials + Direct Labour + VOH = Rs. 16+ (H × Rs. 8) + (H × Rs. 1) = Rs. 31.75
Solving, we have 9H = 15.75. So, H = 15.75 / 9 = 1.75 Hours
Q 1(b): 5 Marks Supreme Prakashan Ltd is in the business of publishing a leading newspaper which has a wide customer base. It measures quality of service in terms of –
(i) Print Quantity
(ii) On time Delivery
(iii) Number of Damaged and Unsold Paper
To improve its business prospects and performance, the Company is considering installing a scheduling and tracking system which involve an annual additional cost of Rs. 3,00,000, beside Equipments costing Rs. 4,00,000 needed for the installation of System.
To purchase the Equipment, the Company is planning to utilize the proceeds of an Investment fetching an Annual Income of 9%. Details, regarding the present and future performance are given as under:–
|
|
Present |
Expected |
|
On–Time Delivery |
85% |
97% |
|
Variable Cost per lot of Newspaper Damaged and Unsold |
Rs. 40 |
Rs. 40 |
|
Fixed Cost |
Rs. 50,000 |
Rs. 50,000 |
|
No. of lots of Newspaper Damaged and Unsold |
6,000 |
1,000 |
It is expected that each percentage increase in on time performance will result in Revenue Increase of Rs. 36,000 per annum. Required Contribution Margin is 40%.Should Supreme Prakashan Ltd install the New System?
Ans. 1(b)Statement of Decision For New System
|
Relevant Costs |
Rs. |
Relevant Benefits |
Rs. |
|
|
Annual Costs of new system (given) |
3,00,000 |
Contribution Earned (Rs. 36,000 × 12 times × 40%) |
1,72,800 |
|
|
Income lost on Capital Investment (Rs. 4,00,000¯9%) |
36,000 |
Savings in Variable Costs: |
||
|
Fixed Costs (Apportionment, and not relevant) |
Nil |
(6,000 – 1,000) × Rs. 40 |
2,00,000 |
|
|
Net Benefit (balancing figure) |
36,800 |
|||
|
Total |
3,72,800 |
Total |
3,72,800 |
|
Decision: The new system may be implemented.
Courtesy: CA Vikas Kumar
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