Suggested Answers Final Examinations Summer 2011 MANAGEMENT ACCOUNTING

Transcription

1 MANAGEMENT ACCOUNTING A.1 (a) Budgeted sales 8,250,000 / 275 units 30,000 Sale price variance % Rs. 330,000 A (30,000/3x1.2) Actual sales (8,745, ,000) / units 33, Sale volume variance (33,000 30,000) 275 Rs. 825,000 F Material price variance A ( ) 63,900 2/3 Rs. 59,640 A B ( ) 105,600 2/3 Rs. 56,320 A Total material price variance Rs. 115,960 A Material mix variance Actual mix at standard cost- Material A 63, Rs. 2,236,500 - Material B 105, Rs. 2,112,000 Rs. 4,348,500 Standard mix* ( ) 169,500 (130* / 5) 4,407,000 Mix variance Rs. 58,500 F Material yield variance: Standard output from actual input 169,500 / 5 units 33,900 Actual output units 33,000 Yield variance units 900 s Yield variance Rs. 117,000 A Labour rate variance Standard rate per hour 2,700,000 / (30, ) Rs. 60 Actual average rate per hour ( ) / 3 Rs. 64 Actual labour hours worked 3,041,920 / 64 hours 47,530 Labour rate variance 47,530 (64-60) Rs. 190,120 A Labour efficiency variance: Standard labour hours required 33, ,500 Actual labour hours used 47,530 Efficiency variance hours 1,970 F Labour efficiency variance 1, Rs. 118,200 F (b) (1) Sales price variance: The variance arose on account of discount allowed by the company in March The decision to allow this discount does not seem appropriate on account of the following: The company had already managed to surpass the budgeted sales quantity in January & February The raw material prices and labour rate have seen increased from February, After allowing discount, the sale in March made less contribution margin as compared to February. (2) Yield variance: Although there could have been more than one reason for the above variance, it may have been due to. use of cheaper materials as indicated by favourable mix variance. Another important point is that the adverse yield variance may have been partly on account of poor labour performance. This aspect needs to be investigated. (3) Adverse labour rate variance: It was on account of increase in wages which was a conscious decision of the management. It seems that in the short run i.e. in February and March the extra cost could not be recouped by the increased efficiency. However, in the long run it may have far reaching positive effect.

2 Punjnad Juice Company statement for projected working capital: A.2 MANAGEMENT ACCOUNTING No. of Units Year 1 Year 2 Opening stock A 1,000 Production B 15,000 20,000 Sales C 14,000 18,000 Closing stock D 1,000 3, Current Assets: Stock Raw material (B 80 3/12) 300, ,000 Finished goods W-1 168, ,714 Debtors rate of provision for doubtful debts (200 C/12)X , , ,583 1,167,464 Current liabilities: Creditors for supply of raw material W-2 250, ,333 Creditors for expenses W-3 65,833 72, , ,000 Working capital required Net 383, ,464 W-1 Finished goods Materials ( B x 80) 1,200,000 1,600,000 Labour & variable overheads (B 40) 600, ,000 Fixed overheads (20 24,000) 480, ,000 Depreciation (10 x 24,000) 240, ,000 Cost of goods manufactured E 2,520,000 3,120,000 Finished goods {E/B 1,000} and {(E+168,000)/(B+A) D} 168, ,714 W-2 Creditors for raw material Material consumed(b 80) 1,200,000 1,600,000 Closing stock (1,200,000 x 3/12) 300, ,000 Opening stock ,000 Purchases during the year F 1,500,000 1,700,000 Creditors outstanding (F 2/12) 250, ,333 W-3 Creditors for expenses Variable overheads (10 B/12) 12,500 16,667 Fixed overheads (20 24,000/12) 40,000 40,000 Fixed selling expenses (2 24,000/12) 4,000 4,000 Variable selling expenses (8 C/12) 9,333 12,000 65,833 72,667 After option 2 A.3 W-1 Burger Fries Cold drink Ice cream Total Sale price per unit A Sale ratio B Weightage (A B) C Item wise Sale (Rs. in million) D Contribution % E 40% 45% 50% 60% Contribution Margin (Rs. in million) (D E) F Average contribution margin % (82.15/ ) 45.39% Cost per deal{a (100 E)} Cost per Deal

3 MANAGEMENT ACCOUNTING OPTION 1 Sale of individual items 30% (1.25x181 million) 67,875,000 Sale of deals 70% (1.25x181 million) 158,375,000 Total 25% ( million) 226,250,000 Contribution Sale CM % W-1 30,808,463 Individual items 67,875, W 1 32,802,630 Deal 1 (60% of 158,375,000) 95,025, W 1 24,997,910 Deal 2 (40% of 158,375,000) 63,350, ,609,003 Total contribution from option I 226,250,000 W 1: Contribution margin on Deals Deal 1 Deal 2 Selling price Cost of deals Contribution margin Contribution margin % OPTION - 2 Total sale ( million) 244,350,000 Home delivery sale 30,000,000 Outlet sales 214,350,000 Sale price Sale ratio Item wise Sale Contribution Weight-age Contribution Outlets Home Delivery Total %(W.2) Margin Burger ,582,873 17,197, ,780, ,945,081 Fries ,448,895 6,687,898 48,136, ,042,748 Cold drink ,896,133 6,114,650 44,010, ,504,044 Ice cream ,422,099-28,422, ,211, ,350,000 30,000, ,350,000 76,702,923 Additional cost on home delivery sets: Variable cost of home delivery 30,000,000/600*20 Fixed cost of home delivery Total contribution from option II (1,000,000) (850,000) 74,852,923 W-2 COMPUTATION OF REVISED CONTRIBUTION MARGIN PER UNIT Sale price Present cost (Rs.) (Rs.) Revised CM (Rs.) CM % Burger Fries Cold drink Ice cream Conclusion: Option 1 is more profitable A.4 MW Oct-Mar Apr-Jly Aug-Sep Total W-1 Factory consumption capacity A 4.00 Non-production use B Factory cap. C 3.75 Machine / capacity usage D 1/3 80% 2/3x90% 3/3 100% Factory consumption (C D) E MW Total consumption F Available for sale (5.0 Mw F) G Number of DAYS H Chargeable units to utility 16,200,000 7,200, ,000 24,840,000

4 MANAGEMENT ACCOUNTING Computation of total and per megawatt costs: Operational (12*1,500,000) 18,000,000 Labour Cost (12x250,000) 3,000,000 Other related costs (12x500,000) 6,000,000 Depreciation (Rs million) / 6 years 16,000,000 Fuel Cost (12x24,000,000) 288,000,000 Total generation cost 331,000,000 Financing cost of interconnecting structure (15M*16%) 2,400,000 Profit required 60,000, ,400,000 Less: Amount presently being paid 180,000,000 Amount to be charged from utility company 213,400,000 Chargeable units to the utility company to be charged to the utility company 8.59 A.5 Landed cost price of good unit W-1 FML Pak LMN China PQR Singapore Purchase price per units Freight-in per unit C & F value space Import duty at 10%{(126.50/1.15)-100} Cost per good unit ( / 0.93) (301.40/0.99) (313.50/0.99) Recovery through sale of defective rang (40/100)(40/100) (40x0.0.07) / (40x0.01) per unit (2.80) (0.40) (0.40) Purchasing priority W-2 ANNUAL REQUIREMENT OF PRIMARY RAW MATERIAL AND QUANTITIES OUGHT TO BE PURCHASED FROM EACH SUPPLIER Units Capacity of Department B net of normal losses 4,000,000 Output loss -(5/95*4,000,000) 210,526 required in department B 4,210,526 Material required to be put into Department-A to get above output (4,210,526/90%) 4,678,362 Totals Defective Good C&F per units Cost To be purchased from LMN 2,000,000 20,000 1,980, ,800,000 To be purchased from FML 1,600, ,000 1,488, ,200,000 To be purchased from PQR (Balancing) 1,222,588 12,226 1,210, ,281, ,226 4,678,362 1,449,281,338 Proceeds from sale of scrap units (144226*40) (5,769,040) Cost material 1,443,512,298

5 Statement of department wise cost Quantities: No. of units Received from preceding dept(4000,000/0.95) Put into department (4,210,526/0.9) 4,678,362 4,210,526 Process losses (467,836) (210,526) 4210,526 4,000,000 Cost uncured: Depart-B Depart-B Raw material/cost from provably dept W-2 1,443,512,298 1,818,635,094 Wages (4,210,526 18/60 200);(4,210,526 12/60 250) 252,631, ,526,300 Variable over heads (60% and 75% of wages) 151,578, ,894,725 Fixed over heads (10M 1,263,158/2,105,263)(10M 842,105/2,105,263) 6,000,000 4,000,000 Sales of Scrap (75 467,836)( ,526) (35,087,700) (26,315,750) Total cost of goods manufactured 1,818,635,094 2,164,740,369 Cost per unit A-6 LINEAR PROGRAMMING Variables Let x = number of tables Let y = number of chairs Constraints Machine hours x + 0.5y,<=600 Eq. 1 Labour hours 1.5x + 2y <=1,890 Eq. 2 2x <= y Eq. 3 x>=100 Eq. 4 Machine Labour Available hours 715 2,250 Less: Hours required for confirmed order Tables (40) (60) Chairs (75) (300) (115) (360) 600 1,890 Contribution margin per unit Table Chair Sale price 2, Cost of sales Material 1, Machine cost Labour Other manufacturing cost ,

6 Objective function is to maximize 560x + 205y x + 0.5y = Eq. 1 if y = 0, x = 600; if x = 0, y = 1, x + 2y = 1, Eq. 2 if y = 0, x = 1,260; if x = 0, y = 945 Optimal solution is at points P,Q and R Point P can be ascertained by solving equation 2 and 4 Putting the value of x = 100 i.e. Equation 2, in Equation 4 we get: y = 1,890 y = (1, ) /2 = 870 Point Q can be ascertained by solving equation 1 and 2 Multiplying Eq. 1 by 4, we get 4x +2y = 2, Eq. 5 Subtracting Equation 5 from Equation 2, we get: 2.5x = 510 x = 204 Putting the value of x in Equation 1 we get: y = 600 y = 792 Point R can be ascertained by solving equation 1 and 3 x + 0.5y = 600 2x = y OR x = 0.5y 0.5y +0.5y = 600 y = 600 Putting the value of y in equation 1 we get: x = 600 x = 300 Putting the above values in objective function we get: At point P: x = = 56,000; y = = 178,350; Total = 234,350 At point Q: x = = 114,240 y = = 162,360; Total = 276,600 At point R: x = = 168,000; y = = 123,000; Total = 291,000 Contribution is maximized at point R, profit = Rs. 291,000 (THE END)