Copyright Reserved Serial No Operational Level May 2014 Examination Examination Date : 11 th May 2014 Number of Pages : 05 Examination Time: 9.30 a:m. 12.30 p:m. Number of Questions: 07 Instructions to Candidates 1. Time allowed is three (3) hours. 2. Total: 100 Marks. 3. Answer all questions in Part I and four (4) questions from Part II selecting two (2) question from each of the Sections A and B. 4. The answers should be in English Language. Subject Subject Code Operational Management Accounting (OMA / OL 1-201) PART I Question No. 01 (20 Marks) For questions 1 to 5, select the most appropriate answer from the given answers under,, & for each question and write only the letter [i.e. or or or ]relating to the most appropriate answer against the question number, in the answer booklet. (1) Which of the following is a/are function(s) of management accounting? (i) To collect accounting information that are useful for different managerial functions. (ii) To allocate costs between cost of goods sold and inventories for internal and external profit reporting. (iii) To provide information for planning, control and performance measurement. (i) only. (i) & (ii) only. (i) and (iii) only. (2) The following two statements are given: (i) is concerned with cost accumulation for inventory valuation to meet the requirements of external reporting and internal profit measurement. (ii) relates to the provision of appropriate information for decisionmaking, planning, control and performance evaluation. The blanks for (i) and (ii) above should be respectively: Cost accounting and Management accounting Management accounting and Cost accounting Financial Accounting and Cost accounting None of the above 1
(3) Which of the following is a/are characteristic(s) of a process costing system? (i) A cost of production report is used to collect, summarize and compute total and unit costs. (ii) Production is accumulated and reported by departments. (iii) Costs are posted to departmental work in process accounts. (iv) Production in process at the end of a period is restated in terms of completed units. (i), (ii) and (iii) only. (i), (iii) and (iv) only. (ii), (iii) and (iv) only. (4) Which of the following is not a method of allocation of joint costs? (i) Physical Output method (ii) Sales Value method (iii) Net Realizable Value method (i) only. (ii) only. (iii) only. None of the above. (5) Fill in the blank: Net Realizable Value = Further Processing Costs (6) The unit cost of a particular product is as follows: Material cost Rs.250/-, Labour cost Rs.150/- and Overhead cost Rs.200/-. What is the profit margin if it is 20% on total cost? Rs.120 Rs.720 Rs.600 None of the above (7) Fill in the blank: Shadow price = + Contribution per limiting factor (8) Fixed costs will be the same regardless of the decision that is taken; The unit variable cost is constant, regardless of the output quantity of a product or service; The estimates of sales demand for each product, and the resources required to make each product, are known with certainty; Units of output are divisible, and a profit-maximizing solution might include fractions of units as the optimum output level. The above mentioned statements are assumptions of: Limiting factor analysis Feasibility analysis Contribution analysis None of the above (9) The learning curve can be applied for: (i) Pricing decisions (ii) Work scheduling (iii) Standard setting 2
(i) & (ii) only. (i) & (iii) only. (ii) and (iii) only. (10) The following formula refers to: Idle capacity ratio Production volume ratio Efficiency ratio None of the above Standard hours produced * 100% Budgeted capacity (10 2 Marks = Total 20 Marks) End of Part I PART II Section A Answer any two (2) questions Question No. 02 (20 Marks) Briefly explain the decision making process. (09 Marks) Briefly explain the Scientific management movement. (05 Marks) Explain the meaning of Abnormal gain and state how it is accounted. (03 Marks) Explain the budgeting process in brief. (03 Marks) Question No. 03 (20 Marks) Explain any five (05) of the following with examples. Cost object (e) (f) Relevant cost and irrelevant costs Escapable costs and Inescapable costs Product costs and Period costs Shutdown costs and Sunk costs Computer-aided design (CAD) 3
Question No. 04 (20 Marks) A shoe manufacturing firm has a production level of 2,000 units of a product. The present costs and selling price data are as follows: Per unit Selling price Rs. 100 Variable cost Rs. 25 Fixed cost is Rs.45,000/- The management is considering the following two alternatives: Alternative I: To accept an export order for another 500 units at Rs.95/- per unit. The expenditure of the export order will increase the fixed costs by Rs.15,000. Alternative II: To reduce the production units to 1000 units and buy 1000 units from the market at Rs.50/- per unit. This decision will result in a reduction of the present fixed costs from Rs.45,000/- to Rs.35,000/-. Calculate the profitability of the two options and decide which option is the best. (12 Marks) Briefly explain Price takers and Price setters. (05 Marks) Briefly explain single loop feedback and double loop feedback. (03 Marks) End of Section A Section B Answer any two (2) questions Question No. 05 (20 Marks) X manufacturers incurs the following expenses in the production of their product, XX. Materials (1000 units) Rs. 10,000 Labour Rs. 8,000 Indirect expenses Rs. 5,500 Normal wastage is 10% of the input. Wastage is sold at price of Rs.15 per unit. Draw up the process account and calculate the cost per unit. Y manufacturers have a production process of toys and the details of process 1 for the month of January 2013 are as follows. Units started during the period in production - 100,000 Inventory - Opening - 20,000(60% completed) - Closing - 10,000 (50% completed) You are required to calculate the equivalent units based on (i) First In First Out method (ii) Weighted Average Cost method 4
Question No. 06 (20 Marks) PQR enterprises produce three products A, B and C through their common manufacturing process. The expected output is as follows: Product A - 500,000 units Product B - 300,000 units Product C - 200,000 units Other details are as follows: Cost of Materials Rs.750,000 Conversion Costs Variable Rs.300,000; Fixed Rs.400,000 During the manufacturing process a cost of Rs.10,000/- inputs are subjected to wastage. Selling price at split off point, selling price after further processing and the further processing costs are as follows: A B C Further processing cost (Rs.) 2.00 1.00 0.50 Selling price at split off point (Rs.) 6.20 5.10 6.90 Selling price after further processing (Rs./Kg) 10.00 8.00 7.00 Calculate the net joint cost and the allocation of the joint cost to the three products and calculate the value of output of the three products. Differentiate between ABC costing and Traditional Costing. (06 Marks) What are the disadvantages of incremental budgeting? (04 Marks) Question No. 07 (20 Marks) Ranil limited produces a single toy and sells it at Rs.150/- each. The marginal cost of production is Rs.60/- each and fixed cost is Rs.9,000/- per annum. You are required to calculate the following: Profits for annual sales of 1 unit, 25 units, 100 units and 300 units. (05 Marks) Profit volume ratio (C/S Ratio). (05 Marks) Breakeven point in units. (03 Marks) Breakeven sales in values. (03 Marks) (e) Sales to earn a profit of Rs.5,000/-. (04 Marks) End of Section B End of Part II End of Question Paper 5