INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN PROFESSIONALI EXAMINATION-FALL (WINTER), 2003 on Tuesday, the 9th December, 2003 * 1127 ‘STRATEGIC MANAGEMENT ACCOUNTING. Time Allowed—2 Hours 40 Minutes: Maximun Marks-90, w w) ay fu) io) (i) (il) Altampt ALL questions. Answers must be neal, relavant and briat. In marking paper, the examiners take into account clarity of expasition, fogic of argiments, offective prosontation, language and use of clear diagramichart, where appropriate. fiead the instructions punted on the top cover of answer script CAREFULLY botore atlompting the paper, Use af non- programmable scientific calculators of : @ Casio IN-82 LB, 0 Casio Ix-82 Super, 0 Casio tr-850 0, 0 Casio fx-280 HA, models is allowed. DO NOT write your Namo, Reg. No. or Rall No. anywhere inside the answer sorpt Question No. 1'— "Multiple Choie Question” printed separately, 18 an integral part of this paper. Marks @.2 (a) “Performance evaluation seeks to achieve goal congmience and 5 mana-gefial effort” Describe what is meant by this statement, (b) A software house is developing & new product ~an activity based gesting package. | Is expected to have a five years! economic If. Since, outcomes cannot be forecasted at this stage with certainty, therefore, multiple estimates with their associated Subjective probabilities have been projected. as follows Net.cash inflows (Fs in. 000s) Year sa ae ede Oy SL ‘Outcomes Optimistic (P= 0.3) 25 45 BO 5O 30 Most likely (P= 0.5) 20 30 50 30, 20 Pessimistic (P =0.2) 1035 328 10 PTO,Marics The immadiate outlay raquired is Rs. 100,000. Apart from the above mentioned outlay, all other cash flows arise at tho yearond 2 ‘The company's cost of capital is 14% Required (i) Caletilate the expected cash flows foreach year. 5 (i) Calculate the expected Intemal Rate of Return of the project. 10 (il) State whether results in (i) and (il) above indicate that the project. 2 shoulé be accepted or rejected and why 2 Q.3 (@) What do you understand from Activity Based Management. Differ 8 entiate between value added and non-value added cost by giving examplos ? b} ABC Limited provides you with the following miscellaneous data regarding t's operations for 2002 : Pariculars. Bs. Gross protit 100,000,000 Net loss (25,000,000) Sales 500,000,000 Direct material used 175,000,000 Direct labour 128,000,000 Fixed manufacturing overheads 75,000,000 Fixed selling and administrative expenses 50,000,000 Assume that there were no begining or ending inventories. Required = = Catoulate : (We (0) Contribution margin in rupees riable selling and administrative expenses (ii) Variable manufacturing overheads (iv) Breakeven point in sales rupees, and {¥) Manutacturing cost of goods sold eee w@.4 (a) Variable costs. and fixed costs are the two mast frequently recog- nized cost behaviour patterns in existing management accounting ‘system. What underlying assumptions are under consideration when we define the fixes and variable costs 7 (b) The flexible budget and actual results of WB Ltd, for the month of April are as under = Actual Budget Besults Units 12,000 10,000 As. Rs. Revenue 2.160.000 1.859.000 Vanable costs Direct material 720,000 668,200 Direct manutacturing labour 192,000 198,000 Dirt masking about 72000 $7,500 Manufacturing overheads: 144,000, 130,500: Marketing overheads: 60,000 45,700 “386.000 3,120,000 Contribution margin’ 972,000 _730,000 Fixed costs > Manufacturing overheads 285,000 Marketing overheads. 420,000 Total fixed costs: 705,000 Total costs 1,825,000 Operating Income Required : (i) Catculate exible budget at activity tovel of 10,000 units: (il) Variance from flexible budget. (ii) Sales volume variance Marks Pro.Ww) wi (vi (wit) oe) i) oi) (xii) i) (xiv) oo (ar (by The process of establishing objectives or goals and a suitabl course of action for achieving the abjestives or goals, is called The précess of engaging to of moré people werkiig Idgether ina siuotured way to achieve specific goals. is called ‘The piocess of directing and iniluenting the task related acti: ties of group members or-an entira organisation, is called The process of ensuring that eotual activities conform to planned activities, is catled The ability to use'the procedures, techniques and knowledge. of a specialized field, is callod The ability to work with Understanding snd motivating otter people as individual or in groups, is celled The abilty to integrate and coordinate all of an organisation interests and activities, is called : ‘An. organisation with a legalized, formal and hierarchical structure, is called ‘The possibility that workers who reoeive special attention will perform better simply because they received that atten- tion, is called The traditional view of motivation, which holds that work is distasteful to employees, is called A sysiem that interacts with its environment is called an Deserite the concept or philosophy of the Slob Design” List andl briefly discuss basic approachas towards development of “Job Design’. THE END Marks 10 105 Marks, Required: (i) Gan different prices be charged 10 business travellers and 14 ploasure travellers ? Show ail yeur computations/workings. (i) Explain the key factor that drives your answer in requirement above. (ii) How might Sky Air implement price discrimination ? 5 THE END