CMA MAY-2022 EXAMINATION
INTERMEDIATE LEVEL II
MANAGEMENT ACCOUNTING
Course Code
Reading Time
: CM231
: 15 minutes
Total Marks
Writing Time
: 100
: 180 minutes
Instructions to Candidates

You MUST NOT write anything during the reading time.

Youshould attempt ALL questions.

Answers should be properly structured and relevant.

Carefully read ALL the requirements and sub-questions before attempting a specific
question.

ALL answers must be written in the answer book.

AVOID WRITING/MARKING on the question paper at any time which may cause
disciplinary action.

Start answering each question from a fresh sheet.

Answers should be clearly numbered with the sub-question number.
Allowable Materials

Writing Stationaries

Non-programmable Calculator
Assessment Structure
Section
A
Section
B
Question 1
Question 2
Question 3
Question 4
Question 5
Question 6
Question 7
Multiple Choice Questions
Modified True/False
Matching
Essay/Computational/Case
Essay/Computational/Case
Essay/Computational/Case
Essay/Computational/Case
Revision
Total
Subquestion
10
5
5
3
2
-
Marks
10
5
5
20
20
20
20
100
Expected Time
Required
20 minutes
10 minutes
10 minutes
32.50 minutes
32.50 minutes
32.50 minutes
32.50 minutes
10 minutes
180 minutes
RESTRICTED USE
This paper MUST NOT BE REMOVED from the examination venue
Do not turn the page until instructed
SECTION A [20 MARKS]
THERE ARE 3 (THREE) QUESTIONS IN THIS SECTION. ANSWER ALL THE
QUESTIONS IN THE ANSWER SCRIPT FOLLOWING THE EXAMPLE PROVIDED FOR
THE SPECIFIC QUESTION.
QUESTION 1
[10 × 1 = 10 MARKS]
There are ten (10) multiple-choice questions with five options. Pick the option that best
explains the given question. Write your answer on the answer script [DO NOT PUT ANY
MARK ON THE QUESTION PAPER]. Follow the example given below in providing your
answer.
Example:
(i) ICMAB stands for the –
(a) Institute of Cost Management Accounting of Bangladesh
(b) Institute of Cost and Management Accountants of Bangladesh
(c) Institute for Cost Managers and Accounting of Bangladesh
(d) Institute of Cost Management Accountants of Bangladesh
(e) Industrial Cost Management Accountants of Bangladesh
Answer: (i) (b)
(i)
(ii)
The role of managerial accounting information in assisting management is a(n):
(a) financial-directing role.
(b) attention-directing role.
(c) planning and controlling role.
(d) organizational role.
(e) problem-solving role.
Which of the following statements represents a similarity between financial and
managerial accounting?
(a) Both are useful in providing information for external users.
(b) Both are governed by GAAP.
(c) Both draw upon data from an organization's accounting system.
(d) Both rely heavily on published financial statements.
(e) Both are solely concerned with historical transactions
(ii)
The assignment of direct labor cost to individual jobs is based on:
(a) an estimate of the total time spent on the job.
(b) actual total payroll cost divided equally among all jobs in process.
(c) estimated total payroll cost divided equally among all jobs in process.
(d) the actual time spent on each job multiplied by the wage rate.
(e) the estimated time spent on each job multiplied by the wage rate.
(iv)
As production takes place, all manufacturing costs are added to the:
(a) Work-in-Process Inventory account.
(b) Manufacturing-Overhead Inventory account.
(c) Cost-of-Goods-Sold account.
(d) Finished-Goods Inventory account.
(e) Production Labor account.
(v)
The relevant range is that range of activity:
(a) where a company achieves its maximum efficiency.
(b) where units produced equal units sold.
(c) where management expects the firm to operate.
(d) where the firm will earn a profit.
(e) where expected results are abnormally high.
Which of the following would not typically be classified as a discretionary fixed cost?
(a) Charitable contributions
(b) Employee development (education) programs.
(c) Advertising.
(d) Outlays for research and development.
(e) Equipment depreciation.
(vi)
CMA May 2022 Examination, CM231 [Page 2 of 7]
(vii) Which of the following budgets is prepared at the end of the budget-construction cycle?
(a) Sales budget.
(b) Production budget.
(c) Budgeted financial statements.
(d) Cash budget.
(e) Overhead budget.
(viii) Responsibility accounting systems strive to:
(a) place blame on guilty individuals.
(b) provide information to managers.
(c) hold managers accountable for both controllable and noncontrollable costs.
(d) identify unfavorable variances.
(e) provide information so that managers can make decisions that are in the best
interest of their individual centers rather than in the best interests of the firm as a
whole.
(ix) Quality of conformance refers to:
(a) the extent to which a product is designed for its intended use.
(b) the extent to which a product adds value to a firm's product line.
(c) the extent to which a product meets the specifications of its design.
(d) the extent to which a product minimizes non-value-added activities in the production
process.
(e) a cost control that is achievable.
(x)
ROI is most appropriately used to evaluate the performance of:
(a) cost center managers.
(b) revenue center managers.
(c) profit center managers.
(d) investment center managers.
(e) both profit center managers and investment center managers.
QUESTION 2
[5 × 1 = 5 MARKS]
There are five (5) statements given under the question. Identify the statements as True or
False. If the statement is false, rewrite the statement on the answer script to make it ‘True’.
Reasoning is NOT required. Follow the example given below in providing your answer.
Example:
(a) ICMAB stands for the Industrial Cost Management and Accounting of
Bangladesh.
Answer:
(a) False. ICMAB stands for the Institute of Cost and Management
Accountants of Bangladesh.
Note:
 You will not get any mark if you simply rewrite as ICMAB does not stand for the
Industrial Cost Management Accountants of Bangladesh.
 If the statement is true, you need NOT to rewrite the statement rather only
mention that the statement is True.
(a)
(b)
(c)
(d)
(e)
The margin of safety in dollars equals the excess of actual sales over budgeted sales.
Most companies use the Variable Costing approach in preparing financial statements
for external reporting purposes.
Promotional pricing strategies are often a zero-sum game. If they work, competitors
copy them; if they don't work they have wasted money.
Environmental Management Accounting is concerned solely with understanding the
financialimpact of sustainability-related issues.
Accounting information systems must be computerized to be effective.
CMA May 2022 Examination, CM231 [Page 3 of 7]
QUESTION 3
[5 × 1 = 5 MARKS]
Match the items of column A with the most suitable items of column B. Match only one item
of column A with one item of column B. Write your answer on the answer script. Follow the
example given below in providing your answer.
Example:
Column A
1. ICMAB
Column B
(a) Professional Accountancy Body
(b) University
Answer: 1 (a)
Column A
1) Responsibility centers are
used to assign responsibility in
2) The Balanced Scorecard is a
management system that
3) When absorption costing is
used, fixed manufacturing
overhead is recognized as an
expense when
4) If there is excess capacity, the
minimum acceptable price for
a special order must cover
5) Inspection labor costs are
Column B
(a) variable and incremental fixed costs associated
with the special order
(b) the product is sold
(c) appraisal costs
(d) only variable costs associated with the special
order
(e) functional-based
responsibility
accounting
systems
(f) the product is completed
(g) defines
a
strategic-based
responsibility
accounting system
(h) prevention costs
(i) activity-based responsibility systems
(j) balances managers’ and employees’ needs.
END OF SECTION A
CMA May 2022 Examination, CM231 [Page 4 of 7]
SECTION B [80 MARKS]
THERE ARE 4 (FOUR) QUESTIONS IN THIS SECTION. ANSWER ALL THE QUESTIONS
IN THE ANSWER SCRIPT. SHOW ALL RELEVANT COMPUTATION.
QUESTION 4
[Marks: (4 + 4) + (8+4) = 20]
(a) (i) Show the differences between historical cost and standard cost.
(ii) From the following data of TZ Ltd. find variable cost and fixed cost using linear
equation
Month
January
February
Production in units
100
175
semi variable costs Tk.
500
650
(b)
Adam Ltd. has three product lines of belts. A.B. and C having contribution margins of
Tk. 3, Tk. 2 and Tk. 1 respectively. The Manager is planning to sell 2,00,000 units in
the forthcoming period, consisting of 20,000 A, 1,00,000 B and 80,000 C. The
company’s fixed costs for the period are Tk. 2,55,000.
Required:
(1)
What is the company break-even point in units, assuming that the given sales mix is
maintained?
(2)
If the mix is maintained, what is the total contribution margin at a volume of 2,00,000
units? andNet income?
QUESTION 5
[Marks: 4+(4 + 4 + 4+4 = 20]
(a)
What are various qualitative factors in decision making?
(b)
Crydoninc. manufactures an advanced swim fin for scuba divers. Management is now
preparing detailed budgets for the third quarter, July through September and has
assembled the following Information to assist in the budget preparation:
(i)
The marketing department has estimated sales as follows for the remainder of
the year (In pairs of swimfins):
July
August
September
(c)
(d)
(e)
6000
7000
5000
October
November
December
4000
3000
3000
The selling price of the swim fins is Tk. 50 per pair.
(ii) All sales are on account. Based on past experience sales are expected to be
collected in the followingpattern:
40% in the month of sale
50% in the month following sale
10% uncollectible
The beginning accounts receivable balance (Excluding uncollectible amounts) on
July 1 will be Tk.130,000
The company maintains finished goods inventories equal to 10% of the following month
sales. The inventory of finished goods on July 1. will be 600 pairs.
Each pair of swim fins requires 2 pounds geico compound. To prevent shortages the
company would like the inventory of geico compound on hand at the end of each
month to be equal to 20% of following month production needs. The inventory of geico
compound on July 12440 pounds.
Geico compound cost Tk. 250 per pound. Crydon pays for 60% of its purchases in the
month of purchase; the remainder is paid for in the following month. The accounts
payable balance for geico compound purchases will be Tk. 11,400 on July 1.
CMA May 2022 Examination, CM231 [Page 5 of 7]
Required:
(1) Prepare a sales budget, by month and in total, for the third quarter. Also prepare
a schedule of expected cash collection, by month and in total, for the third
quarter.
(2) Prepare a production budget for each of the month July through October.
(3) repare a materials purchase budget for geico compound by month and in total,
for the third quarter.
(4) Prepare a schedule of expected cash payments for geico compound, by month
and in total, for the third quarter.
QUESTION 6
[Marks : 3+3+(4+6+4) = 20]
(a) What is the transfer pricing problem ?
(b) Explain how transfer prices can impact performance measures, firmwide profits, and
the decision to decentralize decision making.
(c) The Bengal Manufacturing Corporation has a number of divisions including a furniture
division and a motel division. The Motel Division owns and operates a line of budget
motels located along major highways. Each year, the Motel Division purchases
furniture for the motel rooms. Currently, it purchases a basic dresser from an outside
supplier for Tk.80. Mr. Karim Biswas, manager of the Furniture Division, has approached
Hasanath Ali, manager of the Motel Division, about selling dressers to the Motel Division.
Biswas has researched the dressers costs and determined the following costs:
Direct materials
Tk. 16.00
Direct Labor
8.00
Variable overhead
6.00
Fixed overhead
24.00
Total manufacturing cost
Tk. 54.00
Currently, the Furniture Division has capacity to produce 75,000 dressers but is only
producing 60,000. The Motel Division needs 10,000 dressers per year.
Required
(i)
What is the maximum transfer price? The minimum transfer price ? Should the
transfer occur?
(ii) Suppose that Biswas and Hasanath agree on a transfer or Tk.60. What is the
benefit to each division? What is the benefit to the company as a whole ?
(iii) Suppose that the Furniture Division were operating at capacity. What would be
the maximum transfer price ? The minimum transfer price ? Should the transfer
take place in this case ? Why or why not ?
QUESTION 7
(a)
(b)
[Marks : 2+(8+6+4) = 20]
What is the difference between a static budget and a flexible budget ? Which of the two
budgets would be more useful when planning the company’s cash needs over a range
of activity?
Maxwell Company produces industrial ventilation fans. The company plans to produce
72,000 fans evenly over the next quarter at the following costs : direct material,
Tk.14,40,000; direct labor, Tk.360,000; variable manufacturing overhead, Tk.450,000;
and fixed manufacturing overhead, Tk.900,000. The last amount includes Tk.72,000 of
straight-line depreciation and Tk.108,000 of supervisory salaries.
Shortly after the conclusion of the quarter’s first month, Maxwell reported the following costs:
Direct materials
Direct Labor
Variable manufacturing overhead
Depreciation
Supervisory salaries
Fixed manufacturing overhead
Total
Tk. 432,500
110,600
152,000
24,000
37,800
239,000
Tk. 995,900
CMA May 2022 Examination, CM231 [Page 6 of 7]
Habibur Rahman and his crews turned out 20,000 fans during the month – a
remarkable feat given that the firm’s manufacturing plant was closed for several days
because of storm damage and flooding. Rahman was especially pleased with the fact
that overall financial performance for the period was favorable when compared with the
budget. His pleasure, however, was very short-lived, as Maxwell’s general manager
issued a stern warning that performance must improve, and improve quickly, if
Rahman had any hopes of keeping his job..
Required
(i)
Prepare a performance report that compares budgeted and actual costs for the
period just ended. This report Habibur Rahman likely used when assessing his
performance
(ii)
Prepare a performance report that compares flexible budget and actual costs for
the period just ended. This report General Manager likely used when assessing
Habibur Rahman’s performance.
(iii)
Which of the two reports is preferred? Should Rahman be praised for outstanding
performance or is the general manager’s warning appropriate ? Explain.
END OF SECTION B
CMA May 2022 Examination, CM231 [Page 7 of 7]