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Spring 2009
MGT402- Cost & Management Accounting (Session - 4)
Question No: 1 ( Marks: 1 ) - Please choose one
All of the following are a part of Planning Process EXCEPT:
► Identifying the objectives
► Search for alternative actions
► Data gathering for alternatives
► Selection of a fixed action
Units
Work in process June 01 (40% complete to conversion) 30,000
Units started in process 220,000
Units completed and transferred out 160,000
Lost in process 35,000
Work in process June 30 (60% complete to conversion) 55,000
Under Gruden's cost accounting system, the costs incurred on the lost units are absorbed
by the remaining good units.
Required: Using the average cost method, what are the equivalent units for the
materials?
► 193,000 units
► 215,000 units
► 211,000 units
► 250,000 units
Required: The numbers of equivalent units as to material, using FIFO method would be:
► 24,000 units
► 26,000 units
► 28,000 units
► 20,000 units
► Glycerin
► Meat Hides
► Fats
► Flour Bran
Rs.
Sales price 300,000
Variable cost 240,000
Fixed Cost 40,000
Assuming that Label increased sales of Product A by 20%, the profit of the product A
would be which of the following?
► Rs. 20,000
► Rs. 24,000
► Rs. 32,000
► Rs. 80,000
vIf the department is discontinued, what will be the impact on the company’s overall
net operating income?
vWhich costs are irrelevant to this decision?
Rs.
Direct material 4,760
Direct Labour 28,800
Fixed factory overhead 670
Supplies 736
Indirect Labor 3,600
Other charges 576
Total 39,142
Cost per unit 10.30
Required:
You are required to prepare flexible budget at 60% and 75% capacity levels.
Particulars Rs.
Sales 4,000,000
Less: variable expenses 1,800,000
Contribution margin 2,200,000
Less: fixed expenses 720,000
Net income 1480,000
The company has no beginning or ending inventories. A total of 80,000 units were
produced and sold last month.
Required:
vWhat is the company's contribution margin ratio?
v What is the company's break-even in units?
vHow many units would the company have to sell to attain a target profit of Rs.
820,000?
Answer:
Contribution Margin:
Contribution margin in rupees= Rs 2,200,000
Sales in rupees = Rs 4,000,000
Contribution margin ratio = Contribution margin in rupees/ sales in rupees
= 2,200,000/4,000,000
= 0.55
Break Even in Units:
Break even in units = Target Contribution margin/contribution margin per unit
Target contribution margin = fixed costs = Rs 720,000
Contribution Margin per unit = Contribution Margin/ units produced
= 2,200,000/80,000
= 27.5
Break even units = 720,000 / 27.5
= 26182
Assuming that the direct labor hours for January, February and March are 2,640, 4,740
and 2,370 hours respectively.
Required:
Prepare factory overhead budget for the first quarter.
Items Rupees
Indirect material 2000x3= 6000
Indirect labour 900x0.2x2640+900x0.2x4740+900x0.2x2370 =
1755000
Maintenance 1200x0.3x2640+1200x0.3x4740+1200x0.3x2370
= 35100000
Heat and light 300x3 =900
Power 200x0.55x2640+200x0.55x4740+200x0.55x2370
= 1072500
Insurance 270x3 = 810
Taxes 600x3 = 1800
Payroll taxes 0
Depreciation 1350x3 = 4050
Total 3794106