MANAGEMENT DEVELOPMENT INSTITUTE GURGAON

PGPM20-21
Term II
Management Accounting II
Mid-term-exam (Closed Book)
Time allowed: Maximum 2.00 Hrs Section D
Weightage 30 Marks Maximum marks 30
Instructions:
1. Attempt all question
2. Only calculator allowed.
3. Only handwritten answer accepted, do calculation on white A4 size
paper and submit pdf to GP office.

Q-1 [Marks 5+5+5 = 15]

(A) What are the differences between Cost Control and Cost Reduction? What kinds of
challenges occurs in the Cost Control and Reduction in the Manufacturing concerns?

(B) M/S Sunlight & Co. Ltd. has three production departments X, Y, Z and two service
departments P & Q.
The following particulars extracted from the books of the company:
Rs
Indirect Wages 2,000
Rent and Rates 5,000
Depreciation on Machinery 10,000
General lighting 500
Power 1,000
Sundries 12,000
The following further details are available:
Total X Y Z P Q
Floor Space (sq .ft) 10,000 2,000 2,500 3,000 2,000 500
Light points 50 10 15 15 5 5
Direct wages (Rs) 10,000 3,000 2,000 3,000 1,500 500
HP of Machinery 100 50 10 30 5 5
Value of Machinery 80,00 1,00,00
(Rs) 2,50,000 60,000 0 0 5,000 5,000
Apportion the overhead costs to various departments on the most equitable basis.
(C) Calculate the degree of Operating Leverage, degree of Financial Leverage and the
degree of Combined Leverage for the following firms and also interpret and evaluate the
result obtained:
Firm X Firm Y Firm Z
(i) Output(units) 80000 22500 1,50,000
(ii) Variable Cost per unit (Rs.) 1.50 1.10 1.20
(ii) Fixed Cost(Rs.) 10,000 20,000 8,000
(iv)Interest on Loan Fund(Rs.) 6,000 10,000 -
(v) Selling price per unit (Rs.) 2.50 5.00 1.50

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Q-2 [Marks 5+5+5 = 15]

(A)

(i)State the uses of Marginal Costing technique in decision making process. How
CVP analysis aid in the profit planning issues.

(ii) How to approximate: Traditional Costing versus Activity-Based Costing

(B)
(i) Product Z has a P/V ratio of 28%. Fixed operating costs directly attributable to
Product Z during the Quarter II of the financial year will be Rs2,80,000. Calculate the
Sales Revenue required to achieve a quarterly profit of Rs70,000.

(ii)Toli Ltd. earned a contribution of Rs50 per unit on 65,000 units sold. Company’s
debt is Rs30,00,000 at 12% rate of interest and Fixed Costs are Rs7,50,000. Calculate
the Financial Leverage

(C)Atul Autoparts, Inc., previously used a cost system that allocated all factory overhead
costs to products based on 350 percent of direct labor cost. The company has just
implemented an ABC system that traces indirect costs to products based on consumption of
major activities as indicated below. Compare the total annual costs of Product X using both
the traditional volume-based and the new ABC systems.

Activity Annual Cost Driver OH Cost Product X Cost

  Quantity   Driver Consumption
Labor Rs.300,000 Rs. 30,000 Rs.10,000
Machining 20,000 hours Rs.500,000 800 hours
Setup 10,000 hours Rs.100,000 100 hours
Production order 2,000 orders Rs.200,000 12 orders
Material handling 1,000 requisitions Rs. 20,000 5 requisitions
Parts administration 12,000 parts Rs.480,000 18 parts

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