Full Text Transcript
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FINAL (NEW COURSE)
MAY 2016
GROUP-II PAPER-5
ADVANCED MANAGEMENT
Roll No............................... ACCOUNTING
Total No. of Questions-6] [Total No. of Printed Pages-10
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Time Allowed-3 Hours Maximum Marks-100
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Answers to questions are to be given only in English except in the case of candidates
who have opted for Hindi medium. If a candidate who has not opted for Hindi
mediul!l, his answers in Hindi will not be valued.
Answer all questions.
Working notes should form part of the answer.
Marks
10
1. (a) E Ltd. is engaged in the manufacturing of three products in its, factory.
The following budget estimates are prepared for 2009-10 :
Products
A B .C
Sales (Units) 10,000 25,000 20,000
Selling Price p.u. (Rs.) 40 75 ; 85
Direct Materials p.U. (Rs.) 10 14 18
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Direct wages p.u. @ Rs. 2 p.hr. 8 12 10
Variable overhead p.U. (Rs.) 8 9. 10
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Fixed overhead (Rs.) p.U. 16 18 20
Profit/Loss -2 22 27
After the finalisation of the above manufacturing schedule, it is observed
that presently only 80% capacity being utilised by these three ,products.
The production activities are made at the same platform and itmay be
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interchangeable among products according to requirement. In order to improve
the profitability of the company the following three proposals are put for
consideration:
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(a) Discontinue product A and capacity released may be used for either product
B or C or equally shared. The fixed cost ofproduct A is avoidable. Expected
changes in material cost and selling price subject to the utilisation of
product A's capacity are as under:
Product B: Material cost increased by 10% and selling price
reduced by 2%.
P,roduct C: Material cost increased by 5% and selling price reduced
by 5%.
(b) Discontinue product A and divert the capacity so released and the idle
capacity to produce a new product D for meeting export demand whose
per unit cost data are as follows:
Rs.
Selling Price 60
Direct material 28
Direct wages@ Rs. 3 p. hr. 12
Variable overheads 6
Fixed cost (Total) 1,05,500
(c) Product A, Band C are continuously run andbire Qut the idle capacity
fixing a price in such a way that the same rate of profit per direct labour
hour is obtained in the original budget estimates.
Required:
(i) Prepare a statement of profitability of products A, Band C in existing
situation.
(ii) Evaluate the above proposals independently and calculate the overall
profitability of the company under each proposal.
(iii) What proposal should be accepted, if the company wants to maximise
its Profit?
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(b) A qompany is engaged in manufacturing two products A and B. Product
A uses one unit of component X and two units of component Y. Product B
uses two units of component X and one unit of component Y and two units .
of com_ponent Z. Component Z which is assembled in the factory uses one
unit of component Y.
Components X and Yare purchased from the market. The company has
prepared the following forecast of sales and inventory for the next year:
Prod uct A Product B
(Units) (Units)
Sales 80,000 1,50,000
Stock at the end of the year 10,000 20,000
Stock at the beginning of the year 30,000 50,000
The production of both the products and the assembling of the component
Z will be spread out uniformly throughout the year. The company at present
orders its inventory of X and Y in quantities equivalent to 3 months
production. The company has compiled the following data related to the
two components:
X Y
Price per unit (Rs.) 20 8'
Order placing cost per order (Rs.) 1,500 1,50'0
Carrying cost per annum 20% 20%
Required: '.
(i) Prepare a budget for production and requirements of components for the
next year.
(ii) Suggest the optimal order quantity of components X and Y.
(c) Identify the characteristics movement such as regular, irregular, cyclical, 3
seasonal, long-term trend, short-term etc. of time series in the following
situations:
(i) A factory delaying its production due to demolition of factory shed in
earthquake.
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(ii) An era of depression in business, .
(iii) The country needs more and more food grains due to constant growth of
population. ,;
(iv) Decline in death rate due to availability of proper health care facilities.
(v) A continuous increase in demand of small cars.
(vi) A demand of gold products is increasing during the festival time.
2. (a) AML Ltd. is engaged in production of three types of ice-cream products: 12
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Coco, Strawberry and Vanilla. The company presently sells 50,000 units of
Coco @ Rs. 25 per unit, Strawberry 20,000 @ Rs. 20 per unit and Vanilla
60,000 units @ Rs. 15 per unit. The demand is sensitive to selling price
and it has been observed that every reduction of Re. 1 per unit in selling
price, increases the demand for each product by 10% to the previous level.
The company has the production capacity of 60,500 units of Coco, 24,200
units of Strawberry and 72,600 units of Vanilla. The company marks up
25% on cost of the product..
The Company management decides to apply ABC analysis. For this purpose
it identifies four activities and the rates as follows:
Activity Cost Rate
Ordering Rs. 800 per purchase' order
Delivery Rs. 700 per delivery'
Shelf stocking Rs. 199 per hour
Customer support and assistance Rs. 1.10 p.u. sold.
The other relevant information for the products areas. follows:
Coco Strawbrry Vanilla
Direct Material p.u. (Rs.) 8 6 5
Direct Labour p.u. (Rs.) 5 4 3
No. of purchase orders 35 30 15
No. of deliveries 112 66 48
Shelf stocking hours 130 150 160
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Under the traditional costing system, store support costs are charged @30%
of prime cost. In ABC these costs are coming under customer support and
assistance.
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Required:
(i) Calculate target cost for each product after a reduction of selling price
required to achieve the sales equal to the production capacity.
(ii) Calculate the total cost and unit cost of each product at the maximum
level using traditional costing.
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(Hi) Calculate the total cost and unit cost of each product at the maximum
level using activity based costing.
(iv) Compare the cost of each product calculated in (i) and (ii) with (iii) and
comment on it.
(b) What are the essential requisites for the installation of Uniform costing 4
system?
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3. (a) X Ltd. produces and sells a single product. Standard cost card per unit of
the product is as follows:
(Rs.)
Direct materials: A 10 kg @ Rs. 5 per kg 50.00
B 5 kg @ Rs. 6 per kg 30.00
Direct wages 5 hours @ Rs. 5 per hour 25.00
Variable production overheads 5 hours @ 12 per hour 60.00
Fixed production overheads 25.00
Total standard cost 190.00
Standard gross profit 35.00
Standard selling price 225.00
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A fixed production overhea,d has been absorbed on the expected annual
output of 25,200 units produced evenly throughout the year. During the
month of December, 2009, the following were the actual results for an ..
actual production of 2,000 units:
(Rs.)
Sales 2,000 units @ Rs. 225 4,50,000
Direct materials: A 18,900 kg 99,225
B 10,750 kg 61,275
Direct Wages 10,500 hours (actually worked 10,300 hours) 50,400
Variable production overheads 1,15,000
Fixed production ove~heads 56,600
Total 3,82,500
Gross profit 67,500
The material price variance is extracted at the time of receipt of materials.
Material purchase were A 20,000 kg. @ Rs.5.25 per kg;' B 11,500 kg
@ Rs. 5.70 per kg.
Required:
(i) Calculate all variances.
(ii) Prepare an operating statement showing Standard gross 'profit, Variances
and Actual gross profit.
(iii) Explain the reason for the difference in actual gross profit given in the
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question and calculated in (ii) above.
(b) What is Backflushing in JIT? State the problems that must be addressed for 4
the effective functioning of the system.
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4. (a) An electronics firm which has developed a new type of fire-alarm system
has been asked to quote for a prospective contract. The customer requires
separate price quotations for each of the following possible orders:
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Number of fire-alarm systems
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First 100
Second 60
Third 40
The firm estimates the following cost per unit for the firstorder:
Direct Materials Rs.500
Direct Labour
Deptt. A (Highly automatic) 20 hours at Rs. 10 per hour.
Deptt. B (Skilled labour) 40 hours at Rs. 15 per hour.
Variable overheads absorbed 20% of direct labour
Fixed overheads absorbed
Deptt. A Rs. 8 per hour
Deptt. B Rs. 5 per hour
Determine a price per unit foreach ofthe three orders, assuming the firm
uses a mark up of 25% on total costs and allows for an, 80% learning
curve. Extract from 80% learning curve table:
x
1.0 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0
y (%) 100.0 91.7 89.5 87.6 86.1 84.4 83.0 81.5 80.0
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X represents the cumulative total volume produced to date expressed as
a multiple ofthe initialorder.
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Y isthe learning curve factor, for a given X value, expressed as a percentage
of the cost of the initial order.
(b) What are the applications of incremental/differentialcosts? 5
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5. {a) ABC Cooperative Bank receives and disburses different amount of cash in 7
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each month. The bank has an opening cash Balance of Rs. 15 crores in. the
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first month. Pattern of receipts and disbursements from past data is as
follows:
Monthly Cash receipts Monthly Cash disbursements
Rs. in Crores Probability Rs. in Crores Probability
30 0.20 33 0.15
42 0.40 60 0.20
36 0.25 39 0.40
99 0.15 57 0.25
Simulate the cash position over a period of 12 months.
Required:
(i) Calculate probability that the ABC Cooperative Bank will fall short in
payments.
(ii) Calculate average monthly shortfall.
(iii) If ABC Bank, can get an overdraft facility of Rs. 45 crores from other
Nationalized banks.
What is the probability that they will fall short in monthly payments?
Use the following sequence (rowwise) of paired random numbers.
. 1778 4316 7435 3123 7244 4692 5158 6808 9358 5478 9654 0977
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(b) A small project is composed of seven activities, whose time estimates are 4 .
listed below. Activities are identifies by their beginning (i) and ending (j) note
numbers:
Activity Estimated durations (in days)
(i-j) Optimistic Most likely Pessimistic
1-2 2 2 14
1-3 2 8 14
1-4 4. 4 16
2-5 2 2 2
3-5 4 10 28
4-6 4 10 16
5-6 6 12 30
(a) Draw the project network.
(b) Find the expected duration and variance for each activity. What is the
expected project length?
Given: Z 0.50 0.67 1.00 1.33 2.00
P 0.3085 0.2514 0.1587 0.0918 0.0228
(c) Brief the principles associated with synchronous manufacturing. 5
6. (a) X Ltd. supplies spare parts to an air craft company Y Ltd. The production 8
capacity of X J;.td. facilitates production of anyone spare part for a particular
period of time. The following are the cost and other information for the
production of the two different spare parts A and B :
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Per unit Part A Part B
Alloy usage 1.6 kgs. 1.6 kgs.
Machine Time: Machine A 0.6 hrs. 0.25 hrs.
Machine Time: Machine B 0.5hrs. 0.55 hrs.
Target Price (Rs.) 145 115
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Total hours available: Machine A 4,000 hours
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Machine B 4,500 hours
Alloy available is 13,000 kgs. @ Rs. 12.50 per kg.
Variable overheads per machine hours:
Machine A : Rs. 80
Machine B : Rs. 100
You are required to identify the spare part which will optimise contribution
at the offered price.
If Y Ltd. reduces target price by 10%and offers Rs. 60 per hour of unutilised
machine hour, what will be the total contribution from the spare part identified
above?
(b) What do you mean by Degeneracy in transportation problem? How this can 4
be solved?
(c) What is Price Discrimination? Under what circumstances it is possible? 4
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