MANAGEMENT INFORMATION

Time allowed- 2:15 hours

Total marks- 100
[N.B. - The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account of the
quality of language and the manner in which the answers are presented. Different parts, if any, of the same question must be
answered in one place in order of sequence.]
Marks
1. (a) Define the following with suitable examples? 9
i) Cost unit.
ii) Product cost.
iii) Period Cost.
(b) AB Limited manufactures four products, W, X, Y and Z. Output and cost data for the period ended on 31
December 2019 are as follows:
No. of Material Direct labour Machine hours Total machine
Product Output
production runs cost hours per unit per unit or labour hours
Units Tk. Per unit
W 10 2 20 1 1 10
X 10 2 80 3 3 30
Y 100 5 20 1 1 100
Z 100 5 80 3 3 300
Direct labour cost per hour is Tk. 10. Overhead costs are as follows:
Tk.
Short-run variable costs 3,080
Set-up cost 10,920
Production and scheduling costs 9,100
Materials handling costs 7,700
Requirement: Calculate product wise cost per unit using activity based costing. 12
2. XR Limited manufactures and sells a single product. The budgeted income statement contained in the master budget
for the forthcoming year is as follows:
Tk. Tk.
Sales revenue (20,000 units) 640,000
Variable materials cost 190,000
Variable labour cost 172,000
Variable overhead 13,000
Fixed overhead 155,000
530,000
Budgeted net profit 110,000
The Board of Directors wishes to know what the budgeted profit will be if a higher quality material is used. This will
increase material cost per unit by 10% but sales volume will be increased by 5%.
Requirement: Calculate the revised budgeted profit as per the requirement of Board. 10
3. (a) K Hussain & Associates is a law firm in Bangladesh. They have traditionally measured their success in terms of Return
on Investment. They have decided to modernize their approach and plan to use the Balance Scorecard to measure
performance. Sketch a Balance Scorecard for the firm using the four perspectives. 6
(b) Dhaka Limited manufactures and sells a single product. An extract from the flexed budget for the production cost
is as follows: Activity level 80% 90%
Tk Tk
Direct material 3,200 3,600
Direct labour 2,800 2,900
Production overhead 5,400 5,800
Total production cost 11,400 12,300
Requirement: What would be the total production cost in a budget that is flexed at the 88% level of activity? 10
4. The standard labour cost of product X is as follows:
2 hours of Z grade labour is required for producing one unit of product X. Standard labour rate is Tk. 10 per hour.
In a month, 1,000 units of product X were produced, and the cost of Z grade labour was Tk. 17,825 for 2,300 hours of work.
Requirement: Calculate the following: 6
(a) The labour cost variance.
(b) The labour rate variance.
(c) The labour efficiency variance.
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5. DK Limited makes two products, the Y and the Z. Unit variable costs are as follows:
Y (Tk.) Z (Tk.)
Materials 1 3
Labour (Tk. 9 per hour) 18 9
Overhead 1 1
The sales price per unit is Tk. 26 for Y and Tk. 17 for Z. During May 2020, the available labour is limited to 8,000
hours. Sales demand in May is expected to be 3,000 units for Ys and 5,000 units for Zs.
Requirement: Determine the profit-maximizing production mix, assuming that monthly fixed cost is Tk. 20,000,
and that no inventories are held at any point. 10
6. (a) What factors influence the level of markups? 5
(b) The Mongol Theater Group is evaluating ticket prices for its recent drama. Studies show that Friday and Saturday
night drama average more than twice the number of audiences compared to other days. The following
information pertains to the theater hall's normal operations per season:
Average audiences per drama (all dramas) 250 audiences
Average audiences per Friday and Saturday night dramas 350 audiences
Number of dramas per season 30 dramas
Theater hall capacity 350 seats
Variable operating costs per operating hour Tk.3000
Marketing costs per season for drama Tk.139,500
Customer-service costs per season for drama Tk.25,000
The Theater hall is open for 4 operating hours on each day a drama is played. All employees work by the hour except
for the administrators. A maximum of one drama is played per day and each audience has only one ticket per drama.
Requirement: The theater hall authority wants to charge more for dramas on Friday and Saturday. What is the
minimum price that should be charged for peak attendance nights? 8
7. (a) The IRR method has a number of advantages and disadvantages when compared with the NPV method- Explain. 6
(b) BD Limited wishes to expand its operations. Six possible capital investments have been identified, but the
company only has access to a total of Tk. 610,000. The projects may not be postponed until a future period. After
the projects end, it is unlikely that similar investment opportunities will occur.
Expected net cash flows (including residual values) are:
Year (Tk.)
Project
0 1 2 3 4 5
A (246,000) 70,000 70,000 70,000 70,000 70,000
B (180,000) 75,000 87,000 64,000
C (175,000) 48,000 48,000 63,000 73,000
D (180,000) 62,000 62,000 62,000 62,000
E (180,000) 40,000 50,000 60,000 70,000 40,000
F (150,000) 35,000 82,000 82,000
All projects are believed to have similar risks on company's existing capital investments. Any surplus funds may
be invested in the money market to earn a return of 9% per year. The money market may be assumed to be an
efficient market. BD Limited’s cost of capital is 12% per year.
Requirement: Calculate the expected Net Present Value for each project, and rank the projects. 8
8. Ramadi Enterprise has obtained the following data for the first year of operations:
Sales (Taka) 3,946,000
Direct materials and labor (Taka) 1,326,000
Variable manufacturing overhead (Taka) 537,000
Fixed manufacturing overhead (Taka) 768,000
Variable selling expenses (Taka) 432,250
Fixed selling expenses (Taka) 145,268
Units produced 135,000
Units sold 125,500
Units expected to be produced 135,000
Requirements:
(a) Using variable costing, prepare an income statement for the first year of operations. Assume budgeted fixed 5
costs were equal to actual fixed costs.
(b) Using absorption costing, prepare an income statement for the first year of operations. Assume budgeted 5
fixed cost was equal to actual fixed cost.
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