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Q.1 MCQs: Overwriting/correction/multiple circles carries zero mark.

1. A company produces four products A,B,C and D using maximum labour hours available (overtime or any other increase in labour hours is not possible). The current data are as follows:

Particulars (per unit)

A

B

C

D

Selling Price

70

40

60

75

Direct Material Cost

45

24

30

62

Direct Labour Cost

20

10

20

10

Direct Labour Hours

02

01

02

01

If the company receives an additional order for 100 units of A, then:

a)A Should be produced replacing B.

b)A should be produced replacing C.

c)A should be produced replacing D.

d)Order should not be accepted.

2. Flexible budget:

a)is prepared along with the static/master budget.

b)is prepared based on actual data.

c)is prepared at the end of a period when actual output is known.

d)None of the above.

3. Fixed overheads:

a)can never be changed.

b)do not automatically change with the change in level of activity within the relevant range.

c)Variance can be used to assess efficiency of operations.

d)None of the above.

4. A company allocates sales promotion cost at Rs. 10 for every unit sold. Hence, this cost is a:

a)Variable cost.

b)partly variable, partly fixed.

c)managed/discretionary cost.

d)inventoriable cost.

5. While using standard costing system for performance evaluation and control:

a)Actuals should be compared with static budget.

b)Actuals should be compared with Rolling Forecast.

c)Actuals should be compared with Flexible Budget.

d)Rolling forecast should be compared with Flexible Budget.

6. Sales for ABC company for 2011 were Rs. 10,00,000 and traveling expenses Rs. 1,00,000. For 2012, the company has budgeted 50% increase in sales. If inflation is 10% then the budget for traveling expenses in 2012 should be;

a)Rs. 1,65,000

b)Rs. 1,50,000

c)Traveling expenses will not increase in same proportion as it is not perfectly variable.

d)Rs. 1,10,000 (as it is a fixed expense)

7. Budgeting exercise should typically start with preparation of;

a)sales budget as revenue is the focus of every company.

b)production budget as sales depends on how much is produced.

c)expense budget as profit planning involves control of expenses.

d)budget for the constraining / limiting resource.

8. When a company wants to open a new branch:

a)Only avoidable/escapable costs of the branch are relevant.

b)Only non-avoidable/non-escapable costs of the branch are relevant.

c)Only variable costs of the branch are relevant.

d)All costs of the branch are relevant.

Q.2 Alpha Software Ltd. (ASL) maintains a team of ten (10) high quality resource professionals called "warriors". They are multi-skilled individuals who can be deployed on any client engagement as critical resources for short duration. The details of billing rate and cost structure of this team are as follows:

1.Billing rate per person = 25000 fixed + 1000X, where X = number of days of engagement

2.ASL's variable costs per person = 400X, where X = number of days of engagement

3.ASL's fixed overheads per month for maintaining this team = 100,000

Sub-Question 1:

In a particular month, ASL received a request that would require 5 resource persons for 4 days each. No part deployment was possible. Based on the resource planning, ASL could deploy 3 resource persons during this period of requirement but had to meet the shortage in one of the following options (no part withdrawal was possible):

(a)Cancel 2 contracts each for 1 resource person for 6 days

(b)Cancel 1 contract for 3 resource persons for 3 days

The best option is

Reason(s)

Sub-Question 2:

Assume thatASL decided to accept the request for 5 resource persons for 4 days each and cancelled one of the options as per question 1 selected by you. Further assume that 3 resource persons available would not be deployed if ASL did not accept the request. What is the lowest quote that ASL should charge for this request?

The lowest quote to be charged

Q. 3 Hospital Supply Co. manufactures hydraulic hoists used by hospitals to move bedridden patients. It has a capacity of 4000 units per month but generally operated at 3000 units per month. The regular selling price is $4350 per unit. The typical cost structure for normal volume of 3000 units per month is as follows (amounts are in $ per unit):

Unit manufacturing costs:

Variable materials

550

Variable labour

825

Variable overhead

420

Fixed overhead

660

Total unit manufacturing costs

2455

Unit marketing costs:

Variable

275

Fixed

770

Total unit marketing costs

1045

TOTAL UNIT COSTS

3500

Break-even point in units

(b) An inventory of 200 units of an obsolete model of the hoist remains in the store. These must be sold through regular channels as soon as possible otherwise the inventory would be valueless.

The minimum price per unit that would be acceptable in selling these units