CWA ICWA Inter Stage II : Management Accounting Performance Management - June 2009

CWA ICWA Inter - Stage II • Management Accounting Performance Management • June 2009

This Paper has 38 answerable questions with 0 answered.

1—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

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 from the most appropriate options given:

1x5

(i)

MRP is a production planning system that starts with ___________.

(A)

TQM

(B)

Master production schedule

(C)

Budgeting

(0)

(ii)

The adoption of JIT normally requires to improve ____________.

(A)

Inventory

(B)

Production time

(C)

Quality standards

(0)

(iii)

When MRP is extended most important resources is known as _________.

(A)

Inventory control

(B)

ERP

(C)

MRP–II

(0)

(iv)

Appraisal Costs are connected with ________ requirements.

(A)

Measuring conformity

(B)

Manpower planning

(C)

Resource matching

(0)

(v)

External failure costs are discovered ___________ to customers.

(A)

Before the delivery

(B)

After the delivery

(C)

At the time of delivery

(0)

(b)

From the following choose the most appropriate answer:

1x5

(i)

Period cost means

(A)	Variable cost
(B)	Fixed cost
(C)	Prime cost

(0)

(ii)

If the fixed cost is Rs.10,000 and profit–volume (PV) ratio is 50% the break–even will be

(A)	Rs.20,000
(B)	Rs.50,000
(C)	Rs.10,000

(0)

(iii)

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 increased and sales grow

(0)

(iv)

An increase in sales price

(A)	Lowers the BEP
(B)	Increases the BEP
(C)	Lowers the new profit

(0)

(v)

An increase in variable cost

(A)	Reduces contribution
(B)	Increase PV ratio
(C)	Increases margin of safety

(0)

(c)

Which of the following statements are True or False:

1x5

(i)

A budget manual is the summary of all budgets.

(0)

(ii)

JIT philosophy is dedicated to the elimination of waste.

(0)

(iii)

Labour efficiency variance is the difference between standard hours for actual output and actual hours.

(0)

(iv)

Recovered overheads and absorbed overheads mean one and the same thing.

(0)

(v)

ERP bridges the information gap across the organization.

(0)

(d)

Define the following terms in not more than two sentences:

1x5

(i)

Perfection Standards;

(0)

(ii)

Capacity Cost;

(0)

(iii)

Cross Sectional Comparison;

(0)

(iv)

Financial Planning Model;

(0)

(v)

Economic Value Added (EVA).

(0)

(a)

An Airline Company’s budget and actual for the quarter January to March 2009 are as under:

	Rs. In ’000
	Budget	Actuals
Income Variable Cost Contribution Fixed Cost Operating Profit/(Loss)	2,000 1,200 800 700 100	2,090 1,452 638 680 (42)

The following further details are available:

(i)
(ii)

There was a 9% decrease in air–fare resulting in a 5% decrease in the income for the quarter.
Variable cost like fuel, wage, catering etc. are increased by 10% over the budget.

Prepare an analysis reconciling the budget and actual profits for the quarter.

(0)

(b)

State behavioural aspects of Budgeting.

(0)

(a)

MNQ Ltd. has two plants operating at 100% and 75% of their capacities respectively. The Company is considering a proposal to merge the two plants to optimize the available capacity. The following details regarding their present performance/operations as follows:

	Plant I	Plant II
Sales (Rs. in’000) Variable Cost (Rs. In’000) Fixed Cost (Rs. In’000)	2,000 1,400 300	750 540 140

You are required to work out

(i)
(ii)
(iii)

The capacity at which the merged plant will break–even.
The profit of merged plant working at 80% and 90% capacity.
Sales required if the merged plant is required to earn an overall profit of Rs.22 thousands.

(0)

(b)

Great Eastern Enterprises which makes only one product, sells 1,00,000 units of its product making a loss of Rs.1,00,000. The variable cost per unit of the product is Rs.8 and the fixed cost is Rs.3,00,000. The company has estimated its sale demand as follows:

Sales Unit	Probability
1,00,000 1,20,000 1,40,000 1,60,000 1,80,000	0.10 0.15 0.20 0.30 0.25

Required:

(i)	What is the probability that the company will continue to make losses?

(ii)	What is the probability that the company will make a profit of at least Rs.60,000?

3+3

(0)

(a)

State the practical application of Linear Programming.

(0)

(b)

A manufacturer produces three models. VX–I, VX–II, VX–III, of a certain product. They uses two types of raw materials, A and B of which 4,000 and 6,000 units respectively are available. The raw material requirements per unit of the three models are given below:

Raw materials	Requirement per unit of given model
	VX–I	VX–II	VX–III
A B	2 4	3 2	5 7

The labour time for each unit of model VX–I is twice that of model VX–II and three times that of model VX–III. The entire labour force of the factory can produce the equivalent of 2,500 units of model. VX–I. The market survey indicates that the minimum demand of the three models are 500, 500 and 375 units respectively. However, the ratios of the number of units produced must be equal to 3:2:5. Assume that the profit per unit of models VX–I, VX–II, and VX–III are Rs.60,000, Rs.40,000 and Rs.1,00,000 respectively. Formulate the problem as a linear programming model in order to determine the number of units of each product which will maximize profit (solution not required).

(0)

(a)

Readymade Ltd. had identified the following overhead activities, cost and activity drivers for the coming years:

Activity	Expected cost (Rs.)	Driver	Capacity
Set up Ordering Machine costs Receiving	60,000 45,000 90,000 25,000	No. of set ups No. of orders Machine hours No. of parts	300 4,500 18,000 50,000

Assume that each activity corresponds to a process. The following two jobs were completed during the year.

	Job X	Job Y
Direct materials Direct labour (50 hour/job) Units completed No.set ups No. of orders Machine hours Parts used	(Rs.)750 (Rs.)600 (Nos.)100 1 4 20 hrs. 20	850 600 50 1 2 30 hrs. 40

Normal activity is 4,000 Direct Labour Hours.

You are required to:

Determine the unit cost for each job using ABC. Is it better method than traditional overheads allocation? Why?

6+2=8

(0)

(b)

For the month of April 2009, the following information is provided about overheads expenses in an organization: Actual variable overheads Rs.6,00,000; Budgeted variable overheads Rs.8,00,000; Budgeted output 1,500 units; Actual output 1,300 units; Actual hrs.worked 1,800 hrs.; Standard time 3 hrs./unit.
Calculate variances relating to overheads.

(0)

(a)

The following table contains processing costs of two jobs on various machines. Each job must be processed on one machine. Determine the optional set of pairings that will minimize total processing costs.

		JOBS
		1	2	3	4
Machine	A B C D	14 12 16 17	20 10 19 13	11 15 18 15	19 9 15 14

(0)

(b)

A hospital record shows the cost of carrying out health checks in the last five accounting periods have been as follows:

Period	No. of patients seen	Total cost (Rs.)
1 2 3 4 5	650 940 1,260 990 1,150	17,125 17,800 18,650 17,980 18,360

Using the high–low method, estimate the cost of carrying out health checks on 850 patients in period 6.

(0)

(a)

Your company fixes the inter–divisional transfer price for its products on the basis of cost, plus a return on investment in the division. The Budget for Division A for 2009–10 appears as under.

Investment in Division A	Rs.
Fixed Assets Current Assets Debtors Annual fixed cost of the division Variable cost per unit of product Budgeted volume Desired ROI	5,00,000 3,00,000 2,00,000 8,00,000 10 4,00,000 units per year 28

Determine the transfer price for Division A.

(0)

(b)

The sales manager of XYZ Ltd. is judged by the total sales. Exceeding the sales budget is considered good performance. The sale budget and the cost data for the current year are shown below:

Particulars	Products			Rs. in ’000
	Silk	Cotton	Wool	Total
Sales Budget Variable Cost Contribution Actual Sales	450 225 225 1,500	900 405 495 1,200	1,650 495 1,155 600	3,000 1,125 1,875 3,300

Actual prices were equal to budgeted price and variable cost incurred were as budgeted per unit.

(i)
(ii)

Did the sales manager perform well?
Suggest better performance measurement criterion to be used by the company.

(0)

Write short notes on any four from the following:

4x4

(a)

Simulation;

(0)

(b)

Investment Centre;

(0)

(c)

ABC and Service Organization;

(0)

(d)

MBO;

(0)

(e)

Customer Profitability Analysis;

(0)

(f)

Non–financial measures of Profitability.

(0)

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