Postgraduate Diploma in Management (PGDM) : 2020-22 Term 2 - End-Term Examination (February, 2021) Cost & Management Accounting (CMA)

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Postgraduate Diploma in Management (PGDM): 2020-22 Max Marks: 40

Term 2 | End-Term Examination (February, 2021) Duration: 2 hrs


Cost & Management Accounting (CMA) No. of Page(s): 3

Question-1 (CLO-3 (PLO-4a), Marks: 15)


Borolene manufactures and sells two beautification cream, Borolene and Shovolene. In July 2019, Company’s Budget
Department gathered the following data in order to prepare budgets for 2020 for the financial year 2020-21:
2020-21 Projected Sales Closing and opening stock projections
Product Units Price Stocks Positions Opening Closing
Borolene 50000 Rs 710 Product April 1, 2020 March 31, 2021
Shovolene 40000 Rs 640 Borolene 11000 15000
Shovolene 8000 12000
Materials used for production
To produce 1 unit of Borolene and Shovolene, the following direct materials are used:
Quantity used per Unit
Direct material Unit Borolene Shovolene
O Kg 1.5 1.75
P Kg 1.75 1.5
Q Kg 1 .5
Projected data for 2013 with respect to direct materials are as follows:
Direct material Purchase Price Opening Inventories Closing Inventories
April 1, 2020 March 31, 2021
O Rs.8 11,000 kg 16,000 kg
P Rs.6 12,000 kg 13,000 kg
Q Rs.5 9,000 kg 10,000 kg
Projected direct manufacturing labor requirements and rates for 2020 are as follows:
Product Hours per Unit Rate per hour
Borolene 11 Rs.22
Shovolene 9 Rs.23
Manufacturing overhead is allocated at the rate of Rs.31 per direct manufacturing labour-hour.
Prepare the following budgets:
1. Revenue budget (in Rs.)
2. Production budget (in units)
3. Direct materials budget for production (in quantities)
4. Direct materials purchases budget (in Rs.)
5. Direct manufacturing labour budget (in Rs.)
6. Overhead Budget (Rs)
7. Value of Budgeted Opening Stock Inventory April 1, 2020 (Rs)
8. Value of budgeted closing stock inventory at March 31, 2021 (in Rs.)
9. Income Statement at 31st March 2021.

Question-2 (CLO-3 (PLO-4a), Marks: 10)


Utility Ltd a rapidly growing distributor of electronic components, is formulating its plans for 2018. Smita Dhir, the firm’s
marketing director, has completed the revenue budget presented here.
Utility Ltd
2020-21 Budgeted Revenues (in ‘000)
Month Revenues Month Revenues
January Rs 9,000 July Rs15,000
February 10,000 August 15,000
March 9,000 September 16,000
April 11,500 October 16,000
May 12,500 November 15,000
June 14,000 December 17,000
Rajan Dev, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash-flow projection. The
following information will be used in preparing the cash flow projection:
a. Utility Ltd ‘s excellent record in accounts receivable collection is expected to continue: 60% of billings are collected the
month after the sale and the remaining 40%,2 months after.
b. The purchase of electronic components is Utility Ltd’s largest expenditure and is estimated to be 40% of revenues. Utility
Ltd receives 70% of the parts 1 (one) month prior to sale and 30% during the month of sale.
c. Historically, 75% of accounts payable have been paid 1 month after receipt of the purchased components, and the
remaining 25% is paid 2 months after receipt.
What you have to do:
(a)Prepare Schedule of collection and
(b) Schedule of Cash Payments.

Question-3 (CLO-4 (PLO-4a), Marks: 7.5)


(a) Soumya Raju have been hired as Consultant by Altex Corp, medicine company who assists Managing Director. The company
was struggling by working with inadequate cost data. Raju’s mandate is to install Flexible Budgeting System. Raju was asked to
consider the following data of a month and recommend how variances might be computed and presented to top management
with recommendations. How do you like to help Raju in completing her assignment?
Budgeted Fixed Costs Per Month Rs 8,00,000
Actual Revenue Rs 17,28,000
Budgeted Selling Price per unit of Output Rs 75.00
Budgeted Variable Costs per unit of Output Rs 35.00
Static Budget in Output Units 23,000
Actual Output Units produced and sold. 24,000
Actual Variable Costs Rs 8,64,000

(b) Below presented budgeted and actual data of productions of 3750 Dessert Muffins. The data contains variable costs
comprises of material and labour.

Standard Costs Actual Performance


Production (Unit) 3750 3750
Material Qty 1.5 6000
Material Price ( Rate @ Rs) 25 176000
Labour Hours 1 4400
Labour Rate (Rate @Rs) 45
Material Cost (Rs) 140625 176000
Labour Charges (Rs) 168750 180000
Total (Rs) 309375 356000
You are to calculate Material Price Variance and Usage Variance and Labour Rate and Efficiency Variance.

Question -4 (CLO-4 (PLO-4a), Marks: 7.5)


Problem 4(a)
(a) Funkool Toys, manufactures and sells 16,000 units of Burberry Dolls, in 2019. The full cost per unit is Rs 300. Yahoo Toys
earns a 20 % return on the Investment in the company Rs 20 lakhs in 2019.
(b) Calculate the selling price per unit of the Burberry Doll in 2019.
(c) If the selling price in requirement (a) represents a markup percentage of 37.5% % on variable cost per unit, calculate the
variable cost per unit of Burberry Doll in 2019.
(d) Calculate Burberry Dolls operating income if it had increased the selling price to Rs 330. At this price Burberry Dolls would
have sold 15000 units of Doll. Assume no change in total fixed costs. Should Burberry Doll increase the selling price to Rs
330?
Problem 4(b): The following financial data apply to the videotape production plant of the HMV for October 2018.
Budgeted Manufacturing
Cost per Video Tape
Direct material Rs 15
Direct manufacturing labor 8
Variable manufacturing overhead 7
Fixed manufacturing overhead 10
Total manufacturing cost Rs 40
Variable manufacturing overhead varies with the number of units produced. Fixed manufacturing overhead of Rs 10 per tape is
based on budgeted fixed manufacturing overhead of Rs 15,00,000 per month and budgeted production of 1,50,000 tapes per
month. The HMV sells each tape for Rs 50.
Marketing costs have two components:
 Variable marketing costs (sales commissions) of 5 % of revenues
 Fixed monthly costs of Rs 6,50,000
During October, Ravi, a HMV salesperson, asked the President for permission to sell 1,000 tapes at Rs 38 per tape to a customer
not in HMV's normal marketing channels. The president refused this special order because the selling price was below the total
budgeted manufacturing cost.
Required: (1) What would have been the effect on monthly operating income of accepting the special order? (2) Comment on the
president's "below manufacturing costs" reasoning for rejecting the special order. (3) What other factors should the president
consider before accepting or rejecting the special order?

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