2 MANAGEMENT ACCOUNTING [G3] Gh I C M A GRADUATION LEVEL wy FALL 2016 EXAMINATIONS Pakistan Saturday, the 25th February 2017 (Attempt all questions, (i) Write your Roll No. in the space provided above. Gil) Answers must be neat, relevant and brief itis not necessary to maintain the sequence. (iv) _Use of non-programmable scientific calculators of any model is allowed, (¥)_ Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper. (v)__ In marking the question paper, the examiners take into account clarity of exposition, logic of arguments, effective presentation, language and use of clear diagram’ chart, where appropriate (vi) DO NOT write your Name, Reg. No. or Roll No., or any irrelevant information inside the answer script (vi) Question No. 1 ~"Muttiple Choice Questions" printed separately, is an integral part ofthis question paper. (&%) Question Paper must be returned to invigilator before leaving the examination hall DURING EXTRA READING TIME, WRITING IS STRICTLY PROHIBITED IN THE ANSWER SCRIPT EXAMINEES ARE ADVISED TO MANAGE SOLUTIONS/ ANSWERS WITHIN PROPOSED TIME Marks Question No. 2 Proposed Time: 30 Min. | Total Marks : 15 Sapphire Textile Mils Limited (STML) manufactures four products ‘A’, 'B', ‘C’ and ‘D’. The direct labour cost per hour is Rs. 750. Other output and cost data for the period just ended are as follows: Output No.of Production Material Cost Direct Labour Machine Products (ree Runs in the per Unit Hours per Hours per Period (Rupees) Unit Unit A 15 30 3,000 15 15 B 15 3.0 412,000 45 45 c 150 75 3,000 15 15 D 150 75 12,000 45 45 21.0 Overhead Costs: Rs. ‘000" ‘Short run variable costs 462 Setup cost 1,638 Expediting and scheduling costs 1,365 Material handling costs 1,155 4,620 Required: Prepare unit costs for each product using (a) Traditional Costing Method 06 (b) Activity Based Costing Method 09 Maal 2096 10f6 PTOQuestion No. 3 Proposed Time: 30 Min. | Total Marks : 15 (a) Briefly explain four altemative methods of allocating joint costs to products. (b) Modern Paints Limited produces two joint products ‘Matte Finish’ (MF) and ‘Eggshell’ (ES) together with a by-product ‘Gloss’ (GL), from a single main process (Grinding-Blending-Filtering). MF is sold at the point of separation for Rs. 200 per Ib, whereas product ES is sold for Rs. 300 per Ib after further processing (finishing) into product ‘Satin-Silk’ (SS). By-product GL is sold without further processing for Rs. 75 per Ib. Planned output for Grinding-Blending-Fitering [Process-A] is as under: Pounds (Ib) MF 600 ES 300 GL 60 Carcinogenic waste: [arises at the end of processing and disposed of at a cost of Rs. 75 per lb] 40 7,000 Process-8, which is used for further processing of product ES into product SS, has the following cost structure: Rupees Fixed costs (per month) 240,000 Variable costs (per Ib processed) 59.50 Actual data for the month of January 2017 is as under: Grinding-Blending-Filtering [Process-A] Rupees Opening work-in-process, Nil Materials input (10,000 Ib) 7,000,000 Direct labour 400,000 Variable overhead 160,000 Fixed overhead 240,000 7,800,000 Output Pounds (Ib) Product MF 5,000 Product ES 4,000 By-product GL 400 Carcinogenic waste 600 Nil Finishing [Process-B] Pounds (Ib) ‘Opening work-in-process, Nil Input of product ES 4,000 Output of product SS 3,800 Closing work-in-process (60% converted) 400 Maal 2096 2086 Marks 04Marks Required {i) Allocate pre-separation costs to product MF and ES on final sales value method. o7 (ii) Advise the management of Modem Paints Limited whether or not, on purely financial grounds, it should continue to process product ES into product SS: 04 ‘+ if product ES could be sold at the point of separation for Rs. 180.50 per Ib and ‘+ if 50% of fixed costs of finishing process could be avoided by not processing product ES further. Question No. 4 Proposed Time: 25 Min. | Total Marks : 13 Prime Furniture is currently appraising a major capital investment which will revolutionise its business. This investment involves purchase of new equipment for Rs.170 million which has a useful life of 9 years. Prime Furniture operates in a tax free zone and expected cash fixed costs to use the new equipment would be Rs.93 milion per year. They expect to incur cash variable costs equal to ‘9% of cash revenues, The expected cash revenue stream for this investment is as follows: 120 135 160 175 185 145, 130 115, 1 2 3 4 5 6 7 8 9 You have recently been appointed as the Management Accountant for this project and have been assigned with the responsibilty of preparing the financial evaluation of proposed investment. Initial investigation showed that it has cost of capital of 11%. Required: ‘As Management Accountant of Prime Fumiture, you are required to calculate payback period and discounted payback period in years. (Round off decimal places upto two digits) 13 Question No. 5 Proposed Time: 15 Min. | Total Marks : 09 (a) Briefly describe the following: (b) (i) Stock out costs ot i) Lead time ot Re-order point ot (iv) Safety stock on HMP Engineering Company imports a high value part for its manufacturing process. Following data relating to the component has been extracted from their records for the last twelve months. ‘Minimum usage in a month (Units) 300 Minimum lead time (Months) 3 Maximum usage in a month (Units) 500 Maximum lead time (Months) i Re-order quantity (Units) 800 Average usage in a month (Units) 250 Maal 2096 30f6 PTORequired: Calculate the following (i) Re-order level i) Average lead time (iii) Average lead time usage (iv) Minimum level (v) Average stock level Question No. 6 Proposed Time: 20 Min. | Total Marks : 12 The Computer division of Bright Vocational Training Institute runs short courses of ‘MS Office’ and ‘Advance Excel’ at its small campus. The campus has a total capacity of 20 students per course and can run five courses in a month Divisional management planned five courses for the campus in February 2017 and expect 80 students to participate in these courses. Budgeted data for revenue and cost of the campus is as under Rupees Fixed Cost Coaching Fee per Month ‘Per Course Per Student Revenue = = 4,000 Instructor wages - 20,000 - Classroom and lab supplies - - 400 Uttities 10,000 4,000 - Campus rent 40,000 - - Insurance 4,000 . ] Administrative expenses 35,000 2,000 200 The actual operating results for February 2017 were as under. Rupees Revenue (after 5% discount offered) 285,000 Instructor wages 82,000 Classroom and lab supplies 20,000 Utilities 15,000 Campus rent (10% rent increased) 44,000 Insurance 4,000 Administrative expenses 45,000 Courses offered (No.) 4 Students enrolled (No.) 75 Required: Prepare the following budgets for the month of February 2017: (a) Planning Budget (b) Flexible Budget Maal 2096 40f6 Marks o1 1 1 o1 1 06 06Question No. 7 Proposed Time: 36 Min, | Total Marks : 46 Ideal Comfort industries produces a large range of king sized bed sheet cover set (KS). Overhead is applied to production on the basis of direct labour hours. During January 2017, 1,000 bed sheet cover sets were manufactured and sold. Selected information for the production of January is given below: Rupees Total standard cost allowed for the month’s production Direct material 750,000 Direct labour 400,000 Variable manufacturing overhead 150,000 4,300,000 ‘Standard overhead rate per direct labour hour 120 ‘Standard price of one meter of material 250 Actual material costs incurred 700,000 Actual overhead costs incurred 144,000 Direct material quantity variance (60,000) Adv. Difference between standard and actual cost per set 50_Fav. Actual direct labour hours were recorded as 1,300, Required: Calculate the following for the month of January 2017: (a) Standard cost per set and actual cost per set {b) Standard quantity (meters) of material required per bed sheet cover set (c) Direct material total and price variances {d) Standard direct labour rate per hour (e) Direct labour rate, efficiency and total variances Question No. 8 Proposed Time: 18 Min, | Total Marks : 10 Hamza Industries manufactures data storage devices and uses just-n time (JIT) costing. The standard unit cost is as under: Rs. per unit Direct material 400 Conversion costs 200 600 ‘Actual results for the moth of December 2016 were as under: Direct materials purchased on account (Rs.) 41,000,000 Conversion costs (Rs.) 20,500,000 Devices completed (Units) 100,500 Devices sold (Units) 99,500 Required: (a) Journalize these transactions and prepare a T-account for the conversion costs. (b) Make the entry to close the conversion costs account. (c) Make T-accounts for cost of goods sold and raw and in-process inventory. THE END Maal 2096 5of6 Marks 02 02 03 02 o7 06 o1 03 PTOPESO WALUE TEREST Facron PVI( n= (1+ r= Year o Interest Rate 10% 1k we | 19% | tam | 19% | 16% | 17% | tom | tO | 2mm 808% 0.9008 (0.5029 | 0.8860 | 0.772 | 08886 | 08821 | 08547 | 08475 | 0.0 | 08S 08264 atte 7972 | 07a | 0.7605 | 07561 | a7aa2 | 07305 | 0.7162 | 070m | o6s4s 07519 07312 (07118 | 0696" | 046750 | 08575 | 06807 | 08244 | 0.066 | O50 | OSTAT 06830 ‘05867 (05255 | 06130 | 0602 | osr16 | as823 | 05sa7 | o5ise | over | oes 05209 0505 (05674 | 05428 | O5te8 | 04872 | 04761 | 04681 | 04371 | 0.4100 | OADTS 05845 sme (0506s | oan | 0.4856 | 0.4323 | anos | ova | oaro4 [0.521 | oxmo 05132 0487 (0.4523 | 04261 | 0.3066 | 03739 | 03698 | 0.3332 | 0.3139 | 0 | o27et 04885 0400 (0.4039 | 0.3762 | 0.9506 | 03280 | 03060 | 02848 | 0.2660 | 0.2487 | 02026 2st 0.308 0-308 | 0-30 | 0.75 | 02643 | 02890 | 02434 | 0.265 | 0.200 | 0.1008 03855 03522 ‘o-sa0 | 0.2046 | 02607 | 0.2472 | 02267 | 02080 | 0.1011 | 0.1756 | 0.1615, star VALUE INTEREST FAcTORFOR AK ANNUITY MFA, n= Gs Year o 10% 11% Interest Rate) tae [19% | 1% | 15m | t6% | 17m | tem | 19% | 2m 09091 09008 (08929 | 0.850 | 0.672 | 0.606 | 0.8621 | 0547 | OATS | 8405 | 08935 17385 card ‘vaoot | 168er | 1646r | 16257 | 16082 | 1.6052 | 15886 | 15405 | 15278 2.4858 24437 ‘anie | 29512 | 23216 | 2.2682 | 22460 | 2.2006 | 2.1745 | 2.1900 | 2.1085 3.1690 31024 ‘30373 | 29745 | 29137 | 2.860 | 27082 | 2.7432 | 26901 | 28986 | 25887 37908 36959 ‘3004s | 35172 | 3.49ar | 3.9522 | 32743 | 31065 | 3 1272 | 30576 | 29008 4353 42005 “4.1714 | 3.9075 | a.2087 | 37645 | 6847 | 35002 | 34076 | 3.4006 | 3.2255 4684 ari 45658 | 44726 | 47865 | 41608 | 0386 | 59724 | 38116 | 37057 | 36046 5340 51451 “4.9676 | 4.7068 | 46360 | 44873 | 43496 | 42072 | 40776 | 3954 | 3.8572 57500 55370 3262 | 6.1317 | 4.464 | 4.7706 | 4606 | 4.4506 | 43000 | 41635 | 40310 6.16 58802 6502 | 54262 | 5281 | 5018S | 48582 | 46585 | Ansar | 3980 | 4.1925 2 Payback period FORMULAS 1- Break-even sales (Units) = Fixed cost + Contribution margin per unit A+(B+0) Where, A = Last period negative cumulative cash flow, B = Absolute value of cumulative cash flow at the end of period c Total cash flow during the period after ‘A’. Maal 2096 6 of