MANAGEMENT ACCOUNTING [G3]
GRADUATION LEVEL
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Maximum Marks: 100
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D U RING E X TR A R EA DIN G T IM E , W R IT ING IS ST RICT L Y P R OH IBITE D IN T HE A NS WER S CR IPT
EXAMINEES ARE ADVISED TO MANAGE SOLUTIONS/ ANSWERS WITHIN PROPOSED TIME
Time Allowed: 10 Min.  Total Marks : 10
Question No. 1
Multiple Choice Questions [MCQs]
Proposed Time: 30 Min.  Total Marks : 14
Question No. 2
Majestic Tech produces and sells desktop computers and laptops having sales units mix of 3 : 4. Its Income
Statement for the year is:
Majestic Tech
Income Statement
For the year Ended June 30, 2015
`
Desktops
Total
Per Unit
Laptops
Total
Per Unit
Total
(Rs. in million)
(Rs. '000')
(Rs. in million)
(Rs. '000')
(Rs. in million)
2,250
30
4,500
45
6,750
9
6
3
1
19
11
1,500
700
700
200
3,100
1,400
15
7
7
2
31
14
2,175
1,150
925
275
4,525
2,225
(825)
1,400
(700)
700
Sales
Production costs:
Materials
675
Direct labour
450
Variable factory overhead
225
75
Fixed factory overhead
1,425
Total production cost
825
Gross profit
Fixed marketing and administrative expenses
Income before tax
Income tax @ 50%
Net income
Due to saturation of desktop market, management has decided to reduce laptop price to rupees 40,000,
effective from July 01, 2015, and to spend an additional amount of Rs. 25 million in 2015-16 for advertising.
As a result, Majestic Tech estimates that 80% of its 2015-16 revenue would be from laptop sales. The sales
unit mix for desktops and laptops are expected to be 1 : 3 in 2015-16 at all volume levels. Material costs are
expected to drop by 20% and 14% for desktops and laptops, respectively. However, all direct labour costs
are expected to increase by 30%.
Required:
(a) Calculate break-even units of desktops and laptops for 2014-15.
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(b)
Compute Sales (Rupees) required to earn profit of 7.5% on sales in 2015-16.
(c)
Identify and calculate break-even units of desktops and laptops for 2015-16.
Proposed Time: 25 Min.  Total Marks : 13
Question No. 3
Marine Enterprises, is engaged in the manufacturing of fishing equipment for fishing industry since a
decade. Recently, some of other manufacturers newly entered in to the same business of Marine
Enterprises. As a result, a price competitive situation has occurred in the market, to handle this situation
Marine wants to offer best prices for the products as compare to competitors; Marine Enterprises changed
his costing approach to ABC, from traditional full costing approach.
The following budgeted information is related to Marine Enterprises for the forthcoming period:
Products
A
Sales and production (units)
Selling price per unit
Prime cost per unit
Time required for production:
B
C
30,000 20,000 10,000
4,600
9,600
7,400
3,100
8,300
6,400
Machine department (machine hour per unit)
2.5
5.5
4.5
Assembly department (direct labour hours per unit)
7.5
3.5
3.5
Overheads allocated and apportioned to production departments (including service cost centre cost) were to
be recovered in product cost as follows:
Machine department at
Assembly department at
Rs. 120 per machine hour
Rs. 82.5 per direct labour hour
The above overheads could be re-analyzed in to cost pools as follows:
Cost Pool
Machine services
Assembly services
Set-up-costs
Order processing
Purchasing
Rs. ‘000’
17,000
15,000
1,200
7,200
4,000
Cost Driver
Quantity for the Period
Machine hours
210,000
Direct labour hours
270,000
Set-ups
260
Customer orders
16,000
Suppliers orders
5,600
Following estimates have also been provided for the period:
Products
A
Number of set-ups
Customer orders
Suppliers’ orders
B
C
72
100
66
4,800 4,800 6,800
1,800 2,000 1,700
Required:
Prepare and present profit statement of Marine Enterprises using the activity-based costing approach.
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Proposed Time: 30 Min.  Total Marks : 14
Question No. 4
(a)
Capital investment decisions are particularly difficult in non-profit organisations such as national and
government organisations, since it is not always possible to quantify the costs and benefits of a
project. Discuss
(b)
Fazal Textile has received an offer from local Power Generation firm to provide breakdown free power
supply for longer term. The equipment and installations of transmission line would cost Rs. 5,000,000.
Management believes that the power supply would provide substantial annual reductions in costs, as
shown below:
Rupees
Electricity cost
Power breakdown cost
695,000
555,000
The new power system would require considerable maintenance work to keep it in proper adjustment.
The company engineers estimate that maintenance cost would increase by Rs. 16,000 per annum if
new system operates. The transmission system needs an overhaul at the end of every 2 years
amounting to Rs. 200,000 per overhaul.
The contract period would be 10 years with salvage value (of installations) of Rs. 70,000. After 10
years company will be able to purchase a new power generation system from an international supplier
amounting to Rs. 30 million.
Fazal Textile requires a rate of return before tax of at least 18% on investment and uses straight-line
deprecation method.
Required:
(i) Should Fazal Textile accept the offer or not? Ignore taxation.
(ii)
Should Fazal Textile accept the offer or not, if taxation rate is 35%?
(Support your answers with proper working)
Proposed Time: 20 Min.  Total Marks :09
Question No. 5
Wescod Chemicals Company produces "STAR GLUE", an industrial grade adhesive. The product passes
through several processes. Details of the first process, "Polymerization" for the month of June, are given
below:
Production data
Opening work in progress
Degree of completion:
Materials (100% complete)
Conversion (25% complete)
Units transferred to Process 2
Cost incurred during the period:
Materials
Conversion
Closing work in progress
Degree of completion:
Materials (100% complete)
Conversion (50% complete)
Units
1,000
Rupees
49,700
9,438
4,250
250,000
215,000
750
Required:
(a)
Make a statement of equivalent units showing the equivalent units and their cost per unit using
weighted average method.
(b)
Prepare Process Account
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Proposed Time: 20 Min.  Total Marks : 14
Question No. 6
Khan enterprises have following data for May 2016:
Production/ sales quantity
Sales
Variable costs
Labour
Material
Budget
Unit
Rupees
250
75,000
Actual
Unit
Rupees
225
70,000
35,000
13,000
48,000
27,000
19,000
8,000
30,000
15,000
45,000
25,000
15,000
10,000
Contribution
Fixed cost
Profit
Required:
Report showing actual, flexible budget and variances.
Proposed Time: 30 Min.  Total Marks : 16
Question No. 7
(a) Under what circumstances standard costing techniques may be effectively utilized?
(b) Qasim manufacturers operate a standard marginal costing system. It makes a single product using a
single raw material. Standard data has been worked-out per bag of product as under:
Selling price
Direct material
Direct labour
Variable production overhead
Contribution margin
Rupees per Bag
11,000
50 kgs @ Rs. 150 per kg 7,500
40 hrs @ Rs. 40 per hr
1,600
40 hrs @ Rs. 20 per hr
800
9,900
1,100
Budgeted production is 1,020 bags per month and budgeted fixed overhead are Rs. 800,000 per
month.
During March 1,000 bags were produced and sold @ Rs. 12,000 per bag. Relevant details of this
production are as under:
Direct material, (MS), bought and used 45,000 kgs costing
Direct labour, worked 30,000 hours, total wages for the month were
Actual variable production overhead for the month was
Actual fixed overheads for the month were
Total production cost
Rs. '000'
6,100
1,350
550
8,000
1,000
9,000
Required:
(i) Selling price variance.
(ii) Sales volume contribution variance.
(iii) Direct labour cost variance, analysed into rate and efficiency variances.
(iv) Variable production overhead variance, analysed into expenditure and efficiency variances.
(v) Total variable production cost variance.
(vi) Fixed production overhead expenditure variance.
(vii) Budgeted and actual net profit for the month.
(viii) Reconciliation of budgeted and actual profit.
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Proposed Time: 15 Min.  Total Marks : 10
Question No. 8
(a)
Differentiate between conventional cost accounting and throughput accounting.
(b)
Following data of Safari enterprises is available for latest period:
Machine Hours per Unit
Alpha
Beta
Gama
1
2
3
2
4
2
3
3
3
2,000 1,500
2,400
Machine hours required:
Blending machine
Baking oven
Packing machine
Sales demand (units)
Maximum capacity is as follows:
Hours Available
14,000
15,400
14,000
Blending machine
Baking oven
Packing machine
Required:
(c)
(i)
Calculate the machine utilisation rate for each machine.
(ii)
Identify which machine is the bottleneck resource.
Data extracted from records of Galaxy incorporations is tabulated below:
Sales price
Material cost
(Rs./ Hour)
Product
Simplex
Deluxe
150
200
70
110
Conversion cost for both products is Rs. 60 per hour.
Required:
(i)
Calculate TA ratio for both products.
(ii)
Rank products.
THE END
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