QUESTIONS ON MANAGEMENT ACCOUTING
Wildlife escapes generates
average revenue of Rs. 4000 per person on its five-day package tours to
wildlife parks in Kenya. The variable costs per person are
Hotel Accomodation Rs. 1000
Meals Rs 300
Ground Transportation Rs 600
Park Tickets and other
costs Rs 200
Annual Fixed cost total Rs
Calculate the no. of package
tours that must be sold to break even
Calculate the revenue needed to
earn a target operating income of Rs 100,000
If fixed costs increase by Rs
24,000, what decrease in variable costs must be achieved to maintain the
breakeven point calculated in requirement (a)?
Classification of cost into
direct and indirect is a matter of policy â€“Elucidate the statement?
Use of Target Costing requires
detailed marketing research much in advance of launching a production. Do you
agree with this statement. Explain why?
Explain the concept of sunk
cost and opportunity cost with example?
XYZ Co. Ltd has received an
order which will require use of materials i.e., already in stock. There is
10,000 units in the stock which was purchased at a price of Rs 80 per unit. The
stock is not moving and the company has decided to dispose it off at Rs 60 per
unit. The material available in the market at Rs 100 per unit.
The budgeted income statement by product lines of
Multi Products Ltd.,
for 2003 is as follows:
Cost of goods sold
Income before tax
Income tax @ 40%
products are manufactured in the same facilities under common administrative
control. Fixed expenses are allocated among the products in proportion to their
budgeted sales volume:
Computer the budgeted break-even point of the company as a whole, from the data
What would be the effect on budgeted income if half of the budgeted sales
volume of Product B were shifted to Product A and C in equal rupee amounts, so
that the total budgeted sales in rupee remains the same?
What could be the effect of the shift in the product-mix suggested in (b) above
on the budgeted break-even point of the whole company?
Product Ltd., manufactures three different products. The relevant data of these
products are as under:
Name of the Product
Production capacity (unit)
Machine hours per unit
Variable cost per unit Rs
Selling price â€“Rs./unit Rs.
The total fixed overheads at current capacity level
are Rs. 40,000 per annum. The company has various alternatives for improving
profitability as given below:
(a) To stop the production of Jelly and use the
released capacity for producing pomades. The machines for both the products are
common. However, cream is produced on a special purpose machine.
(b) To export the total production of Jelly at current
price. On export the following additional revenue is expected.
8% duly drawback on export price
12% cash compensatory support against an export scheme of government.
5% replenishment license which can be sold in market at a premium of 80%.
(c) To replace the conventional machine used for Jelly
by a special purpose machine, which will reduce the production time from 4
hours to 3 hours per unit. Due to this change the variable cost of Jelly will
be reduced by Re.0.50 per unit. The released machine will be used for producing
pomade. This proposal will entail an additional burden of fixed cost to the
tune of Rs. 32,000 per annum.
Please advise the management about the right choice of
an alternative so as to maximize profits.
Write short notes on any of the
a) Target Costing
b) Activity-based Costing