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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH CMA JUNE, 2017 EXAMINATION
BUSINESS LEVEL
SUBJECT: GE 02. FUNDAMENTALS OF MANAGEMENT ACCOUNTING.
Time: Three hours Full Marks: 100
All questions are to be attempted.
Show computations, where necessary.
Answer must be brief, relevant, neat and clean.
Start answering each question from a fresh sheet.
Q. No. 1
(a) Target costing is an important cost engineering tool during new product development process. Critically evaluate the role of management accountant in a target costing environment.
(b) How does management accountant confirm shareholder value? Identify any conflicting role between management accountant and financial accountant while adding value to shareholders.
(c) Budgetary control is used as a performance management tool. In an autocratic management set-up, do you believe that budgetary control can bring the desired outcome? Explain in detail.
[Marks: (7+7+6) = 20]
Q. No. 2
(a) Following information has been accumulated for Company A for the year 2016:
Inventory Data: Beginning (Tk.) Ending (Tk.)
Raw Material 15,000 20,000
Work in Process 20,000 30,000
Finished Goods 0 ?
Other Data:
Total Manufacturing Cost Tk. 290,000
Sales Revenue Tk. 500,000
Selling Price per Unit Tk. 25.00 Based on the above data, calculate:
(i) Cost of Finished Goods ending inventory if the company manufactured 25,000 units during the period.
(ii) Compute the amount of inventoriable cost.
(iii) Compute gross profit and gross profit percentage.
(b) Based on the following overhead cost information, develop a total cost formula and estimate total overhead cost for January 2018 if direct labor hours for the month estimated to be 20,000.
Overhead Cost Elements Fixed Component Variable Component (per Direct Labor Hour)
Utility Tk. 5,000 Tk. 2.10
Maintenance 8,000 5.30
Depreciation 12,000 -
Insurance - 3.90
Supplies 3,000 2.20
Rent 15,000 -
Factory wage 5.50
[Marks: (10+10) = 20]
Page 2 of 3 CMA JUNE, 2017 EXAMINATION
BUSINESS LEVEL
SUBJECT: GE 02. FUNDAMENTALS OF MANAGEMENT ACCOUNTING.
Q. No. 3
ABC Machining makes use of standard costing to control its variable production cost. Its fixed costs are controlled through a budgetary control system. The standard variable cost of the product manufactured by the company is given below which is captured from the standard cost card:
Elements of Cost Quantity Rate (Tk.) Amount (Tk.)
Direct materials 4 kg 40 160
Direct labor 5 hours 16 80
Variable overhead 75% of Direct Labor 60
Standard variable cost per unit 300
During a week, the firm manufactured 120 units of the product. The details of actual costs incurred were as follows:
Direct materials : 500 kg. @ Tk. 38 Time recorded in Time office : 620 Hours Time spent of production : 580 Hours Actual wages paid : Tk. 11,200 Variable overhead : Tk. 7,500
Calculate the total cost variance and analyze it in as mush details as possible.
[Marks: 10]
Q. No. 4
The number of Headphone sold and the total cost over the last 8 (Eight) months in an outlet of MISSION Electric Ltd. are given below:
Sl. No. Month # Headphone Sold Total costs (Tk.)
1 January 650 27,500
2 February 720 29,600
3 March 560 24,800
4 April 450 21,500
5 May 570 25,100
6 June 350 18,500
7 July 445 21,350
8 August 625 26,750
Required:
1. Using the high Low method, determine the formula for Headphone costs.
2. What Headphone cost would you expect to be incurred during a month in which 460 Headphone are Sold?
[Marks: (6+4) = 10]
Q. No. 5
FROZEN Dairy, an Ice-cream manufacturing company, is expecting peak sales in August. The company’s budgeted sales for the third quarter of 2017 are given below:
July August September Total Budgeted Sales (‘000) 600,000 900,000 500,000 2,000,000
Page 3 of 3 CMA JUNE, 2017 EXAMINATION
BUSINESS LEVEL
SUBJECT: GE 02. FUNDAMENTALS OF MANAGEMENT ACCOUNTING.
Q. No. 5 (cont’d………)
From the past experience, the company has learned that 20% of a month’s sales are collected in the month of sale that another 70 % is collected in the month following sale, and that remaining 10% is collected in the second month following sales. Bad debts are negligible and can be ignored. May sales totaled 430,000, and June sales totaled 540,000.
Required:
1. Prepare a schedule of budgeted cash collections from sales by months and in total, for the third quarter.
2. Assume that the company will prepare a budgeted balance sheet as of September 30.
Compute the accounts receivable as of that date.
[Marks: (15+5) = 20]
Q. No. 6
(a) Variable cost per unit is a very important piece of information whereas fixed cost per unit is used very rarely or cautiously. What type of worse decision a company may undertake by using fixed cost per unit data?
(b) R & W Ltd. manufactures and sells specialized Fountain Pen. The sale price of V7 model fountain Pens is Tk. 900/unit. Variable expenses are Tk. 630/unit. And fixed expenses associated with the product total Tk. 1,350,000/month. At present, the company is selling 8,000 Pen per month.
Required: (Use Rounding Figure)
1. Compute the company’s BEP in number of Pen and in total Tk. sales.
2. Calculate the new BEP sales if sales price reduced by 10% and variable cost increased by 5%.
3. Considering req. 2 what would be the sales unit to achieve a minimum net income of Tk. 720,000 per month?
4. If the variable expenses per Pen increase as a percentage of the selling price will it result in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.)
[Marks: 4+(4 x 4) = 20]
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