Cost and Management Accounting — DU Bachelor of Management Studies Previous Year Question Papers

: Cost ,and Management Accounting Any assumptions made by you while attempting a question must be clearly stated. (a).Explainhowcostsareclassifiedbasedonthefunctionsofabusiness.Whyisitimportantfor a manager to separate ''Production" costs from "Period" costs when calculating the value of unsold inventory? (6 Marks) Particulars € per unit Variable overheads 20' Fixed overheads (€ 1,00,000) 10 Selling expenses ( 10% fixed) 13 Distribution expenses (20% fixed) 7 Administration expenses (= 50,000) 5 Prepare a budget for the production of (a) 8,000 units, and (b) 6,000 units. Assume that administration expenses are rigid for all levels of production. (12 marks) (a). "Target Costing is not merely a costing technique but a strategic profit management system." In light of this statement, discuss how the 'Price-Led, Cost-Driven' approach differs from traditional 'Cost-Plus' pricing. Explain why target costing is considered more effective in today's highly competitive market. (6 marks) (b) XYZ Industries. Ltd. manufactures a product 'A' by producing and assembling three components X, Y and Z. These components are made in a machine shop using three identical machines, each capable of producing any of the components. However, the total available machine capacity is 15,000 machine-hours per month, which is currently fully utilized to meet existing demand. From next month, the company expects the demand for A to rise 20%. The following information is given: Components Machine hours Variable cost (in f) Market price at which the required per unit component can be purchased if required (in F) Assembling / 35 (per unit of A) Fixed costs per month = 760,000 Selling price of Product A .320 per unit i). Calculate the current production level and profit of the company. ii). Identify which component should be purchased and determine how many units of that component should be bought to meet the increased demand by 20%. ili). Calculate the profit if the company follows the decision suggested in part (ii). (a) Explain the meaning and steps involved in Budgetary Control. (6 Marks) (b) A factory has three production departments (A, B, C) and two service departments (X and Y). The following primary overheads are to be distributed among the departments: Particulars Amount ® Rent and REtes 10,000 Motive Power 6,000 Canteen Expeuses 12,000 Elecincity/Lighting 4,000 Deparinental Data: Floor drea (sq ft) 2000 2500 Value of Machinery (€) 60000 40000 30000 10000 10000 Horse Power 60 30 50 10 Light Points 10 15 20 5 10 Service Dept A 8 a Other Service Dept i). Prepare the Primary Distribution Summary. ii). Re-apportion service department overheads using the Simultaneous Equation iii). Determine the total overheads of production Departments A, 8 and C. (a) Discuss the specific circumstances under which a firm may decide to set its selling price at or below its Marginal cost. (6 Marks)