MBAG-206
Sri Sathya Sai Institute of Higher Learning
(Deemed to be University)
Vidyagiri, Prasanthi Nilayam
Master of Business Administration
Second Semester Examinations, April 2019
Management Accounting
Duration : 3 Hours
Note:
13/04/2019
Max. Marks : 100
1. Answer Sections A, B & C in the answer book provided.
2. Comply with the instructions given in the Main Answer Book carefully.
SECTION – A
(4x5=20 Marks)
I. Answer the following Questions. Each Question carries FIVE Marks.
1. Define Management Accounting and bring out its importance to a firm.
2. What is Break Even Point? What factors can cause a firm’s Break Even Point to change?
3. What is EVA? Distinguish it from MVA.
4. Describe the impact of the following actions on the current ratio, the value of which is 2 now.
a)
b)
c)
d)
e)
The firm buys inventory on credit.
A major debtor filed insolvency.
Bills Payable was paid by issuing a cheque.
Bank loan taken to pay a supplier.
A debtor paid his due in full.
(5x1=5 Marks)
SECTION – B
(4x10=40 Marks)
II. Answer ANY FOUR of the following questions. Each question carries TEN Marks.
5. a) “Service firms do not manufacture products; therefore, budgeting is not important to service firms”.
Do you agree? Justify with an example.
b) Squeek Ltd. is currently operating at 60% capacity. Sales at 60% capacity is ₹ 30,00,000. Following
data for this activity level is given:
Variable
Semi Variable
Fixed
Expenses in ₹ Expenses in ₹ Expenses in ₹
Factory expenses
3,00,000
1,00,000
6,80,000
Administration expenses
3,00,000
1,20,000
6,40,000
Selling expenses
2,40,000
1,40,000
6,00,000
Semi variable expenses are constant between 55% and 75% of capacity; increase by 10% between 75%
and 90% capacity and by 20% between 90% and 100% capacity.
You are required to prepare a flexible budget at 70%, 80%, and 100% capacity levels.
(4+6=10 Marks)
Page 1 of 4
MBAG-206
6. Anoop Ltd. has a capacity to manufacture 10000 units of a component per month. Currently the domestic
demand is 7500 units per month which it currently meets and sells at ₹ 150 per unit. The cost information
for the month just concluded for 7500 units is given below:
Particulars
₹
Direct Material
2,25,000
Direct Labour
3,00,000
Other Variable Costs- Set ups, Material handling etc
[ 150 batches of 50 units each @ ₹ 500 per batch]
75,000
Fixed manufacturing costs
2,75,000
Fixed distribution costs
1,25,000
Total Cost 10,00,000
The company has received a special one-time order for 2500 units of the component at a price of ₹ 100
per unit. The company can manufacture the additional quantity of 2500 units in 25 batches of 100 units
per batch at a cost of ₹ 500 per batch of 100 units.
a) Evaluate whether it is worthwhile for the company to accept the special offer to sell the 2500 units @
100 per unit?
b) If the capacity of the plant is restricted to 9000 units, will it be advisable to accept the special onetime
order of 2500 units given that the special order must be executed in full or rejected totally?
(6+4=10 Marks)
7. From the following particulars prepare the balance sheet.
Sales / Total Assets
3
Sales / Fixed Assets
5
Sales / Current Assets
7.5
Sales / Inventory
20
Debtors Velocity (360 days in a year)
24 days
Total Assets / Net Worth
2.5
Current Ratio
2
Debt / Equity
1
Sales (Assume all are credit sales)
₹ 36,00,000
Break Up of Net worth:
50% Equity;
30% General Reserve;
20% P&L a/c
8. S Ltd. produces an article A by blending two basic raw materials, X and Y. Following data is given
Material
Standard Mix
X 75 % @ ₹10 per kg
Y 25 % @ ₹ 20 per kg
Standard loss in processing is 5 %. During Jan 2019 the company produced 3800 kg of A. Stock position
is as follows:
Material
Stock on 1.1.2019
Stock on 31.1.2019 Purchases during Jan 2019
X
350 kg @ ₹ 8 per kg
250 kg
3000 kg @ ₹ 12 per kg
Y
200 kg @ ₹ 25 per kg
100 kg
700 kg @ ₹ 15 per kg
Issues to production are done at LIFO basis. Calculate all material variances.
Page 2 of 4
MBAG-206
9. A Japanese soft drink company is planning to open a subsidiary company in India to produce mineral
water. It is estimated 40,000 bottles of mineral water can be produced and sold annually. Cost estimate for
40,000 bottles p.a. in India is given below:
Particulars
Total Annual Cost in ₹ Variable portion in %
Material
2,10,000
100%
Labour
1,50,000
80%
Factory Overhead
92,000
60%
Administration Overhead
40,000
35%
The Indian production will be sold by manufacturer’s representatives who will receive a commission of
8% of the sale price. No portion of Japanese office expenses is to be allocated to the Indian subsidiary.
You are required to:
a) Compute the sale price per bottle to enable the management to realise an estimated 10% profit on sale
price in India
b) Calculate break-even point in rupee and units for the Indian subsidiary if the selling price is fixed at ₹
14 per bottle.
(5+5=10 Marks)
SECTION – C
(2x20=40 Marks)
III. Answer ANY TWO of the following questions. Each question carries TWENTY Marks.
10. Balance Sheets of Zucark Ltd. on 31.3.2018 and 31.3.2019 are given below:
Liabilities
Equity Capital
Securities Premium
General Reserve
31.3.18
(in ₹)
5,00,000
NIL
1,00,000
P&L a/c
Bank Loan
2,20,000
50,000
Interest on Bank loan due
Provision for
depreciation on
machinery
Provision for income tax
Proposed Dividend
Provision for corporate
dividend tax
Creditors
Total
2,250
1,90,000
31.3.19
Assets
(in ₹)
6,00,000 Machinery
1,00,000 Investments
1,30,000 Other current
assets
3,32,000 Cash & Bank
NIL Preliminary
expenses
NIL
2,68,640
70,000
60,000
9,000
90,000
1,20,000
18,000
98,750
13,00,000
41,360
17,00,000
Total
31.3.18
(in ₹)
6,00,000
3,00,000
2,35,000
31.3.19
(in ₹)
9,00,000
NIL
4,50,000
1,25,000
40,000
3,20,000
30,000
13,00,000
17,00,000
During 18-19, income tax for 17-18 paid amounted to ₹ 78,000; Machinery costing ₹ 1,00,000
(accumulated depreciation ₹ 79,200) was sold for ₹ 20,000; Investments were sold at a profit of 18%.
You are required to prepare cash flow statement as per AS -3. (Indirect Method)
Page 3 of 4
MBAG-206
11. Fruito Ltd. wants profitability information about its’ individual products – Lemon, Grapes, and Papaya
bottled juice. It gives the following information:
Particulars
Revenue (₹)
Cost of goods sold(₹)
Cost of bottles returned (₹)
Number of purchase orders placed
Number of Deliveries received
Hours of shelf stocking time
Units sold
Lemon
79,350
60,000
1,200
36
30
54
12,600
Grapes
2,10,060
1,50,000
Nil
84
219
540
1,10,400
Papaya
1,20,990
90,000
Nil
36
66
270
30,600
Following further information is available:
Activity
Bottle returns
Ordering
Delivery
Shelf Stocking
Customer Support
Description of Activity
Total Costs
Cost Allocation
Basis
(₹)
Returning of empty bottles to
1,200 Direct tracing to
stores
product line
Placing of orders of purchase
15,600 156 purchase
orders
Physical delivery of goods
25,200 315 deliveries
Stocking of goods on store shelf
17,280 864 hours of time
Assistance provided to
30,720 1,53,600 units
customers including bagging
and checkout
90,000
Required:
a) Currently Fruito Ltd. allocates all costs (other than the cost of goods sold) on the basis of cost of
goods sold of each product line. Calculate operating income and operating income as a percentage of
revenue of each product line.
b) If Fruito Ltd allocates store support costs (all costs other than cost of goods sold) to the products on
the basis of ABC system, calculate the operating income and operating income as a percentage of
revenue of each product line.
c) Compare and give your comments based on your calculations.
(5+10+5=20 Marks)
12. What is a Balanced Scorecard? How is it used by a business firm? Explain the major components of a
Balanced Scorecard with suitable examples.
®®®®®®
Page 4 of 4