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IMT-58: Management Accounting-MT3

IMT-58: Management Accounting-MT3

Part - A

Question 1: Management accounting is an extension of financial accounting. Explain.

Question 2: "All controllable costs are direct costs. Not all direct costs are controllable." Explain with the help of suitable examples.

Question 3: LIFO is acceptable, because it makes use of historical cost; replacement cost is not acceptable because it adjusts cost figures to a value that is not related to the amount paid for them. Explain this point of view for dealing with the problem of changes in the purchasing power of money. How would match the cost of non current assets with current revenue?

Question 4: A company has three production departments and two service departments. Distribute summary of overheads is as follow:

Production departments:

Rs.

A

25000

B

20800

C

25400

Service departments:

Rs.

X

12400

Y

4500

The expenses of service departments are charged on a percentage basis, which is as follows;

Department

A

B

C

C

Y

X

30

30

30

-

10

Y

25

30

25

20

-

Apportion the cost of service departments by using the repeated distribution method.

Question 5: What is meant by under/over absorption of factory overheads? How will you account for them in cost accounts? Does it bear any impact while submitting quotations?

 

 

PART – B

 

Question 1: How does ABC differ from activity-based management?

Question 2: The following details are available in respect of a small tool manufacturing firm;

Annual estimated demand per year (Unit)                                 1,600

Cost of production per unit                                                         Rs. 5

Carrying costs per unit for one year                                             Re.1

Setting up cost per batch                                                          Rs. 50

Determine EOQ.

Question 3: What is meant by ‘equivalent units’? Discuss its importance in valuing work in progress.

Question 4: Distinguish between marginal costing and absorption costing. Also, examine their relative appropriateness.

Question 5: Discuss the importance of the following in relation to break-even analysis.

a. Break even point

b. Margin of Safety

c. Contribution

d. Profit volume ratio

 

PART - C

1. What do you understand by terms budget and budgetary control? What are the advantages in your own organization?

2. Explain why a decision centre should be treated as a profit centre rather than as a cost centre.

3. What is the significance of term “variance” relating to standard costing? What types of variances are computed for?

a. Material

b. Labour, and

c. Factory overheads.

4. What is an opportunity cost? When do opportunity costs affect short run decisions? What accounting problems do opportunity costs involve?

5. The “volume-cost-profit relationships provide management with a simplified framework for organizing its thinking on a number of problems”. Discuss.

 

Case Study - 1

 

Year 1 Year 2

Sales Rs. 2,00,000                  Decrease in sales price and decrease in fixed costs are the only changes.

M/S Ratio  25%                                40%

P/V Ratio   33-1/3%                         30%

Required:

a.   Decreased sales amount in 2nd year.

b.   Decreased fixed cost in 2nd year.

c.    New Profit in 2nd year.

d.   New BEP in 2nd year.

 

 

Case Study - 2

A Ltd. Makes a product which passes through two processes before it is completed and transferred to finished stock. The following data related to the month of December.

 

Particulars

Process-l(Rs.)

Process-2(Rs.)

Process-3(Rs.)

Opening stock

7,500

9,000

22,500

Direct Materials

15,000

15,750

0

Direct wages

11,200

11,250

0

Factory overheads

10,500

4,500

0

Closing stock

3,700

4,500

11,250

Inter-process profit includes in opening stock

 

1,500

8,250

 

Out of the process 1 is transferred to process II at 25% profit on the transfer price. Output of process II is transferred to finished stock at 20% profit on the transfer price. Stocks in process are valued at prime cost. Finished stock is valued at the price at which it is received from process II. Sales during the period were Rs. 1,40,000.

Prepare process cost account and finished goods showing the profit element at each stage.

 

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