2023 (MAY)

No.of Question Paper

: 4375
rNameof the Paper Management Accounting
Nameofthe Course : B.Com. (Prog.) CBCS
Semester :VI
Duration : 3hours
MaximumnMarks : 75
answer.
Attempt all questioms. Show your working notes as part of youtallowed.
calculator is
All questions carry equal marks. Use of simple
0.1. (4) Explain the significance of cost reduction in the present economy.7
Wention some important techniques used for cost control. various
responsibility centre? Discuss briefly the nature and 8
Ib) What is
centres. [Page5
rpes of responsibility
Chapter 1.
Ans. (a) See Q. 5, [Page 38
b)See Q. 1,Chapter 6. Or different from
respect it is
Management Accounting? In what 7
(a) What is
cost accounting? any two methods used for measurement
(b) Discuss with suitable examples
of divisional performance. [Page 1
Accounting. See Q. 1, Chapter 1. See Q. 3,
Ans. (a) Management management accounting and cost accounting. [Page 4
Difference between [Page 38
Chapter 1. factories located in
(b) See Q.2, Chapter 6. sandals in its two
is producing Doctors 15
Q. 2. B Ltd.
Gurugram and NOIDA. NOIDA
Gurugram
750
50
35
740
Selling Price 73,00,000
Variable Cost 2,00,000
740,000 730,000
Fixed Cost (total)
Fixed Cost 20,000
Deprecationincluded in 30,000.
30,000
40,000
Sales (units)
Production Capacity (units)
Factory and which Factory
Required: pointfor Gurugram and NOIDA
() Break-even
ismoreprofitable? Factory.
BEP for Gurugram and NOIDA product mix of 3: 2.
(ii) Cash company as a whole assuming
(iii) BEP forthe NOIDA
Sol. Gurugram
Particulars R)
50 50
(S) (35)
Selling Price () (40)
10 15
Less: Variable Cost (C=$-V)
Contribution
169
170 Shiv Das DELHI UNIVERSITY SERIES
MANAGEMENT ACCOUNTNG (Sr. No. 4375)-2023 (MAY) 11
10 x100 =20% 15 Sol. (a)() Cost-indifference point = Difference in Fixed Cost
Contribution (C) x100 =30%
PV Ratio=
Sales (S)
x 100 50
2,00,000
50 Difference in Variable Cost
(FC) 3,00,000
Fixed Cost
Depreciation
(D)
(FC - D)
(40,000)
1,60,000 (30,000) (1,00,(70-40)
000-58,000) 42,000 30
Cash Fxed Cost
Fixed Cost 2,70,000 =1400 hundred copies
() As we know, Break-even Point (BEr) =
Contribution When production is 87,000 copies or 870
(2,00,000
hundred copies:
= 20,000 units Particulars Machine A)
For Gurugram: BEP = 10 Machine B)
Variable Cost (Material + Labour) (A (870x*70) 60,900| (870x*40) 34,800
3,00, 000
= 20,000 units Fixed Cost (B
For NOIDA: BEP = 15 58,000 1,00,000
Total Cost (A+ B) 1,18,900
Both the factories break-even at 20,000 units. When output is Jess Hh 134,800
20,000 units, Gurugram factory gives loss. But when output is more than Derision, Cost is less in Machine A, so Machine A is more economical
20,000 units, NOIDA factory will be more profitable. (b) See Q.4(6)(or), 2018 (May). Pages 131-132
(i) As we know, Cash Break-even Point (BEP) =
Cash Fixed Cos 0.3. (a) What do you mean by relevant costs and irrelevant costs in decision
Contribution making? 5
For Gurugram: Cash BEP = 1,60,000
10 =16,000 units (b) Star cycies purchases 20,000 bells per annum from an outsider supplier at
32,70,000 5 each. The management feels that these be manufactured and not purchased.
For NOIDA: Cash BEP =
15 = 18,000 units Amachine costing 750,000 will be required to manufacture the item within the
(ii) BEP for the whole company Product mix (3:2)] factory. The machine has an annual capacity of 30,000 units and life of 5years.
The following additional information is also available: 10
= Combined i contribution =(10x+(15x*6+6=12 Material cost per bell will be 2.00
Total Fixed Cost Labour Cost 1.00
.:. Breakeven Point (BEP) = (2,00,000 +3,00,000) 100% of Labour Cost
Combined Contribution 12 Variables Overhead
=41,667 units You are required to advise whether:
Or
(a) Xerox Ltd. is evaluating twO new () the company should continue to purchase the bells from outsider
photocopying machines to replace the
firn's existing copier machine, which is torn supplier or should make them in the factory; and
machines is shown below:
out. The analysis of two alternative (ii) the company should accept the order to supply 5,000 bells to the market
at a selling price of R4.50 per unit?
Cost of 100 copies Ans. (a) See Q.2, Chapter 5. [Page 33
Machine A ) Machine B) (b) Marginal Cost Statement
Material and Labour Cost 70 ) per bell
Annual Lease Cost (Fixed) 40 ()
58,000 1,00,000 Material Cost 2.00
Required: Labour Cost
1.00
()Compute the cost-indifference point for two alternatives. Variable Overhead (1 x 100%) 1.00
(ii) If the
management expects to produce 87,000 copies next year, which Total Variable Cost 4.00
copier would be more economical? 750,000
Add: Depreciation (5 years x 20.000
0.50
(b) Nikunj company has a production
capacity utilisation is80%. Opening capacity of 12,500 units and normal Cost of manufactured bell 4.50

was 1000 units. During the year inventory of finished goods on 1st Jan 2022 Purchase Cost of the bell 5.00
0.50
while it sold only 10,000 units. ending 31st Dec 2022, it produced 11,000 units Saving if produced (5.00--4.50)
Saving per annum (20,000 x30.50) 10,000
Standard variable cost per unit is 6.50 and standard fixed Conclusion. The company should make the bells as it will save 10,000.
unit is 1.50. Fixed Selling and factory cost per
The company sells its product atAdministration Overhead amounted to 10,000. 20,000 bells.
(ih) Depreciation is fully recovered on the production offor taking this
10 per unit. Therefore, only variable cost of 4 will be considered
You are required to prepare income statement under 10,000 bells
costing. Explain the reason for difference in profit, if Absorption and Variable decision. As the machine capacity is 30,000 bells, additional
4 only. As the selling price is ?4.50.
any. can be produced at variable cost of
 MANAGEMENT ACCOUNTING (Sr. No. 4375)-2023 (MAY) 173
Or
SERIES
172Shiv Das DELHI UNIVERSITY
contribution of <0.50 per bell. On 10,000 bell (a)CCalculate Efficiency, Activity and capacity ratio from the following figures: 5
Itthewilladditional profitisor10,000
result in profit bells x 0.50 =5,000. Thus the company BudgetedProduction 88 Units
should accept the Order. Standard hours per unit 10
Or Actual Production 75 Units
consideration influencing a "mal. Actual Working Hours
(a) State the quantitative and qualitative
600
or buy" decision. 5 (b) Fromthe following, calculate labour variances for department Xand Y: 10
followino
(b) Hamleys Ltd. which produces three products furnishes you the Department X Department Y
data for the year 2022: 10
Products Actual direct wages 2,00,000 1,80,000
Standard hours produced 80,000 60,000
Toys Action Games Activity Kits 3.50
Selling Price per unit (O 100 75 50 Standard rate per hour
10% 20% Actual hours worked 82,000 58,000
Profit/Volume Ratio 40%
Sales Potential (Units) 40,000 25,000 10,000 75 units x 10 hours = 750 hours
Sol, (a) Standard hours for actual output = hours
Raw Material Content as %of Variable Cost 50% 50% 50% = 88 units x 10 hours = 880
Budgeted hours
The Fixed Expenses are estimated at 6,80,000. The Company uses a single Standard hours for actual output x 100
raw material in all three products. Raw material is in short supply and the Efficiency Ratio = Actual hours
company has a quota for the supply of raw materials of the value of 18,00.000 750 x 100 = 125%
for the year for the manufacture of its products to meet sales demand.
600
Required: Standard hours for actual output x 100
() Find aproduct mix which willgive the maximum profit, keeping in Activity Ratio = Budgeted hours
mind the short supply of raw material.
(i) Find the maximum profit. 750 x 100 = 85.23%
Ans. (a) In all decisions, there are cost and non-cost factors, i.e., quantitative 880
and qualitative considerations. In make or buy decisions, quantitative factor is Actual hours
about comparing own variable cost to manufacture with outside supplier's price. Capacity Ratio = Budgeted hours x 100
Itis proftable to buy from outside when supplier's price is less than firm's own 600
variable or marginal cost. x 100 = 68.18%
The qualitative factors in make or buy decision are as follows: 880
- Actual Cost
() Assurance of continuous supply if purchased from (b) Labour Cost Variance= Standard Cost
(i) There should be no increase in price during theoutside.period for which A= (80,000x 3)-2,00,000 =40,000 (F)
agreement is made. B= (60,000 x 3.5)- 1,80,000 = 30,000 (F)
Rate) x Actual Hours
(i) The quality of the product or component should be the
same and not Labour Rate Variance = (Standard Rate - Actual
compromised. 2,00,000
(b) See Q. 13, Unit V. A
=3 x 82,000
Page 117 82,000
Q. 4. (a) Distinguish between Standard Costing and
(b) The standard cost of a Raw material used in Bydgetary Control. 5 = (246,000-2,00,000 =46,000 (F)
40% Material A at 20 per kg Nilkalam Ltd. is as follows: 10 1,80,000
B= x 58,000
60% Material B at 30 per kg 58,000
A standard loss of 10% is expected in =72,03,000-1,80,000 = (23,000 (E)
period showed the following usage: production. The cost records for a Labour Efficiency Variance = (Standard Hr. - Actual
Hr.) x Standard Rate
90 kg Material A at a cost of 18 per kg A = (80,000- 82,000) x 3 6,000 (A)
110 kg MaterialB at a cost of 34 per kg B= (60,000- 58,000) x 3.5 =7,000 (F)
Zero-base
The quantity produced was 182 kg of good product. Q.5. (a) What is Zero Base Budgeting? What are the advantages of
Calculate All Material Variances. approach over traditional approach?
Wakefit Ltd. and conditions
Ans. (a) See Q. 1, Chapter 3. [Page 17 (b) Following information is related to 2022 of 10
(b) See Q. 3(0r), 2019 (May). expected to prevail in 2023. Prepare a budget for 2023:
[Pages 138-139
 MANAGEMENT ACCOUNTING
(Sr. No.
4375)2023 (MAY 175
UNIVERSITY SERIES () flexible
The, budget of Paradise Ltd. at two levels of activity is as
174 Shiv Das DELHI Capacity Levels follow:
) 80% )
2022 Actuals DirectMaterials 100% ()
1,00,000 (40,000 units) 42,50,000 63,25,000
Sales 53,000 DirectWages 16,00,000 20,00,000
Raw material 11,000 Power
Repairs and Maintenance 1,60,000 2,00,000
16,000 2,60,000 3,.00,000
Wages Consumablesstores 3,20,000
Variable Overheads 10,000 4,00,000
Fixed Overheads Supervision 3,00,000 3,00,000
) Indirectlabour 6,00,000 6,50,000
2023 Prospects 2,00,000
150,000 (60,000 units) Rent and taxes 2,00,000
Sales 5% price increase 60,000 75,000
Raw material Tools
10% increase in wage rate Administration 3,50,000 3,50,000
Wages 5% increase in productivity Selling Expenses 1,00,000 1,00,000
One Lathe 28,000 Depreciation 3,00,000 3,00,000
Additional plant
One Drill9,000 Total 85,00,000 1,12,00,000
10%
the contribution to
The company is operating at 80% level of activity and
Rate of Deprecation
Ans. (a) ZBB. See Q.9, Chapter 2. [Page 13 32.5%. The company has received a new
Advantages of ZBB: sales ratio at this level of activity is to 100%.
capacity utilisation
() ZBB discards the attitude of accepting the present situation without order which willtake the
challenging each item in the budget. Required: level of activity.
(i) In ZBB all itemsof the budget are to be justified afresh. () Calculate the profits earned by the company at 80% 10
(iiü) Inefficient and loss making activities are identified and removed if ZBB is (i) Find the break-even level of activity.
[Page 9
adopted. Ans. (a) See Q. 1, Chapter 2.
(io) It promotes a team of talented managers who tend to respond to changes (b Flexible Budget
in business conditions. 80% ) 100% )
Capacity levels
() In ZBB inflated budget demands are weeded out. Direct Materials-Variable 42,50,000 63,25,000
(b) Budget for 2023 16,00,000 20,00,000
Direct Wages -Variable 2,00,000
Actual for 2022 Budget for 2023 Power--Variable 1,60,000
(40,000 units) () (60,000 units) () 3,20,000 4,00,000
Consumables storesVariable
Sales 1,00,000 60,000 75,000
Raw material (A) 1,50,000 Tools -Variable
53,000 83,475*, Repairs and Maintenance-Semi-Variable",
Wages 11,000 1,60,000 2,00,000
Variable Overheads 16.000 17,286*2 Variable
1,00,000 1,00,000
Fixed Overtheads
10.000
24,000"3 Fixed
Total Cost 13,700®4 Indirect Labour Semi-variable
Profit (B) 90,000 1,38,461 2,00,000 2,50,000
Variable
(A-B) 10,000 11,539 4,00,000 4,00,000
Working Notes: In 2023, cost calculations are as Fixed
3,00,000
follows: Supervision-Fixed 3,00,000
, Materials = 53,000 x 60,000 units
A0 0 sumite X105% = Rent and Rates-Fixed 2,00,000 2,00,000
83,475 3,50,000 3,50,000
Administration--Fixed
", Wages =11,000 x 60,000 units 1,00,000 1,00,000
Add: 10% increase in40,000 units 16,500 Selling Expenses Fixed
wage rate Depreciation--Fixed 3,00,000 3,00,000
Less: Savings due to increase in 1,650 Total Cost 85,00,000 1,12,00,000
productivity18,150 x 105 (864)
() Given: P/V ratio of 80% = 32.50%
*, 17,286 Variable cost ratio = 100% -32.50% =67.50%
Variable Overheads = 16,000 x 60,000 units
An 0m unit
24,000 Total Sales at 80% = 67,50,000* =(1,00,00,000
", Fixed Overheads =10.000 67.50%
28,000+9,000 x10
10013,700 732,50,000
Contribution 32.5% of 1,00,00,000
(a) Define Budgetary Or Less: Fixed Cost (17,50,000)
organisation. control. State the advantages of (3,00,000+2,00,000+3,50,000+1,00,000+3,00,000-+1,00,000+4,00,000)
budgetary control in an Profit 15,00,000
(R42,50,00+16,00,000-+1,60,000+3,20,000+60,000+*1,60,000+*2,00,000) =267,50,000
 SERIES
176 Shiv Das DELHI UNIVERSITY
Fixed Cost
(ii) Break Even Point = P/VRatio
17,50, 000
=53,84,615
32.50%
753,84,615
Break-even Activity Level = x 80 = 43.08%
1,00,00,000

Working Notes:
Semi-variable cost segregation into fixed and variable:
73,00,000-2,60,000 40,000
2,000 per 1% capacity
1Repairs and Maintenance = 100-80 20

Variable cost at 80% =2000 x 80 =1,60,000

Fixed Cost =2,60,000 - 1,60,000 = 1,00,000
Variable cost at 100% = 2,000 x 100 = 2,00,000
(6,50,000 -6,00,000) 50,000
*, Indirect Labour = 100-80 20 =2,500per 1% capacity
Variable Cost at 80% = 2,500 x 80 =200,000
Fixed Cost =6,00,000-*2,00,000 =24,00,000
Variable Cost at 100% = 2,500 x 100 =2,50,000
 2023 (MAY)
St. No. of Question Paper : 4391
Name of the Paper : Management Accounting
Name of the Course : B.Com. (Prog.) CBCS
Semester : VI
Duration : 3 hours
Maximum Marks : 75

Attempt allquestions. Show your working notes as part of your answer.

Allquestions carry equal marks. Use of simple calculator is allowed.
0.1. (a) "The roles and responsibilities of a management accountant differ
from a financial accountant." Examine this statement in the light of current
changing business environmnent. 7
(b) Define and explain responsibility accounting. What are the pre-requisites
forAns.
introducing responsibility accounting in a company?
(a) Management accounting is a system of collecting and presenting
relevant economic information relating to the business enterprise for the purpose
of planning, collecting and making decisions so that optimum use of company
resources can be made. Management accounting's role is mainly to provide
relevant information for internal managerial use. Financial accounting, on the
financial
other hand, provides information about the financial profit and loss and
assets and liabilities for internal use and mainly to satisfy statutory requirements
department
to meet the informnational needs of shareholders, creditors, income tax
and other externalparties.
Difference between Roles and Responsibilities of Management Aceountant and
Financial Accountant:
historic data
(i) A Financial Accountant produces financial statements with
business.
to provide an overview of the performance and worth of the
Whereas A Management Accountant provides forecasts and predictions
using estimated figures, aiming to provide a solution to a problem for the
management.
(ü) Financial Accountant may be looked at as the people who produce reports
for internal. and external audiences, whereas Management Accountant
generates reports and data that are intended for internal use only.
(iil) A financial accountant will create statements and financial reçords that
are intended for people outside of the organisation. These detailed
reports include Balance Sheets, Profit and Loss statements and Cash Flow
Statements. On the other hand, Management Accountant may work. on
Budgetary planning, cost finding, forecasting, cost and profit analysis and
performance reports.
(iv) A business may seek the services of a Chartered (Financial) Accountant
who may use the precise data provided by he business. A Management
Accountant is employed by the business itself.
(v) Financial Accountant must comply with accounting standards, whereas
Management Accountant need not comply with the accounting standards
required as the information is required for internal decision-making use
only. 177
 MANAGEMENT ACCOUNTING (Sr. No.
178 Shiy Das DELHI UNIVERSITY SERIES 14,000
4391)-2023(MAY) 179
Cost per unit: Year 1 = 1 A00 1units = 10 and Year 2 = 12,000
1 1,000 units 12
In fact Financial Accountant is the forerunner of Management Accountant Closing Stock is valued at cost per unit:
Modern business environment has changed drastically and in this age Year 1 =400 x*10, =4,000 and Year 2=200 x12*, =2.400
competition a business can survive only if it is run efficiently. For this Management
Accounting is a necessity requirement as it helps in planning and controlling and () Income Statement
also it adds to its profitability. (Variable Costing)
(b) See Q. 3, Chapter . Or
Page 39 Particulars Year 1 ) Year 2 ()
Sales @30 p.u. (A) 30,000 36,000
(a) "Cost reduction through various techniques of management accounting Manufacturing Cost (Variable) 7,000 5,000
and other areas of discipline is an effort to reduce waste and improve overai Add: Opening Stock 2,000
performance and proft without compromising the product quality and its Less: Closing Stock (2,000) (1,000)
use." Elucidate. Cost of Go0d Sold 5,000 6,000
(b) How will you measure the divisional performance? Suggest soma Marketing and Administrative Cost (Variable) 10,000 12,000
important financial measures. Total Variable Cost (B) 15,000 18,000
Ans. (a) See Q. 5 and Q. 6, Chapter 1. Page 5 Contribution (C=A-B) 15,000 18,000
(b) See Q. 2, Chapter 6. Page 38 Fixed Cost: Manufacturing 7,000 7,000
0. 2. (a) "SP" Limited sells its products at 30per unit. The company uses a Administrative 4,000 4,000
First-In First-Out actual costing system. A new fixed manufacturing overhead Total Fixed Cost. (D) 11,000 11,000
allocation rate is computed each year by dividing the actual fixed manufacturing Net Proft (C- D) 4,000 7,000
overhead cost by the actual production cost. The following simplified data are Or
related to its first two years of operation: 15 of the year: 15
Year 1 Given below are the sales and total cost of the two halves
Unit Data; Sales Year 2 IInd half
1,000 1,200 1* half
Production 1,400 1,000 1,00,000 1,20,000
Cost ():Wariable Manufacturing 7,000 5,000 Sales
Fixed Manufacturing Total Cost <70,000 Z82,000
7,000 7,000
Nariable Marketing and Administration 10,000 12,000 equal to that of the second half. Selling
Fixed Marketing and Administration Fixed Cost during the first half is
4,000 4,000 Calculate the following:
Required: Prepare income statements based on: price and per unit variable cost remain unchanged.
0) PV ratio for each half and for the year.
(a) Absorption Costing and (b) Variable Costing for each year.
Sol. (a) Income Statement
(i) Fixed Cost for each half and for the year.
(iün) BEP for each half and for the year.
(Absorption Costing) (iv) Half-yearly sale to earn half-yearly profit of 40,000.
Particulars
Sales @30 p.u.
Year 1 () Year 2 () (v) Annual sale to earn annual profit of 790,000.
(A) 30,000 Sol. Income Statement
36,000
Manufacturing Cost: Variable 7,000 5,000 (Variable Costing)
Fixed I|nd half ()
7,000 7,000 Particulars st half ()
Add: Opening Stock (400 x10°,) 14,000 12,000 1,00,000 1,20,000
Sales
Less: Closing Stock' 4,000 (70,000) (82,000)
Less: Total Cost
Cost of Good Sold (4,000) (2,400) 30,000 38,000
10,000 Profit
Marketing and Administration Expenses: Variable 13,600
10,000 12,000 Difference in Profits
Fixed 4,000 4,000 (i) P/V Ratio = Diference in Sales x 100
Total Cost
Net Profit (B) 24,000 29,600 (38,000-30,000) x 100 = 8,000 x 100 = 40%
(A-B) 6,000 6,400
Working Notes: (1,20,000- 1,00,000) 20,000
Particulars Year 1 () Year 2 () (i) Fixed Cost = (Sales x P/V Ratio) - Profit
= (1,00,000 x 40%) - 30,000
Units of Producton
Unis of Sales 1,400 1,000
Units of Opering Stock 1,000 1,200 For 1st Half Year = 10,000
=20,000
Units of ClosIng Stodk (1,400 - 1,000) =400
400
(1,400-1,200) =200
and Fixed Cost for fullyear =10,000 x 2
 MANAGEMENT ACCOUNTING(Sr. No. 4391l)-2023 (MAY) 181
will be:
180 Shiy Das DELHI UNIVERSITY SERIES Total contribution from this mix 3,00,000
Fired Cost Product B = 50,000 Units x 6 =
(ii) BEP= Product A=7,000 Units x 75 = 35,000
P/V Ratio 73,35,000
10,000
Contribution (Total)
For 1st Half = 40% =25,000 Or
20,000 units of its product in the homne market
and BEP for full vear =25,000 x 2 =50,000 XYZis producing and sellingper unit cost is as follows: 15
unit. The
Fixed Cost+ Profit at a price of 60 per Per Unit ()
(iv) Sales (Half Year) = PV Ratio
10
(10,000 +40,000) =1,25,000 Direct Material 7
40%
Direct Labour
(20,000 +90,000) 2,75,000 Factory Expenses: 12
() Annual Sales Required = 40%
Fixed 4
.3. (a) Acompany produces two products Aand Busing similar inputs Variable
and facilities. The availability of labour hours in ayear is 2,35,000 hours and
this is considered as the limiting factor. The following details are available for Office and Selling Expenses: 6
Fixed 3
the two products. 15 Variable 42
ProductA ProductB Total
Selling price per unit () 100 50
placed an order for 6,000 units at a price of 30 per
Direct material per unit () 50 An importer from Russia additional total cost of Z10,000
11 will result in an
order
Direct Labour (5 per hour) 25 20 unit. Execution of Russian Should the Russian order be
accepted? Show
Estimated sale demand (Nos.) 10,000 50,000 over and above the variable cost.
Other variable costs common to both products are: complete workings. [Pages 134-135
() Variable production overheads 72 per hour of direct labour. Ans. See Q. 5(0r)(b), 2018 (May). Or
(i) Variable selling overheads 10% of sale price. Costing
In the context of the above limiting factor, you are required to Differentiate between Budgetary ControlSystem and Standard merits.
Q.4. highlighting their relative
production plan that will maximize contribution to the companycalculate a
and also System as a tool of planningand cost
control 15
workout total contribution at the level. [Page 17
Sol. Ans. See Q.1, Chapter 3.
Or
3,00,000
Particulars Product A Product B
cost sheet of a company based on a budgeted volume of sale of 15
The
Selling Prlce per unit (A) 100 50 units per quarter shows the following: .) Per Unit
Direct Material Elements of Cost
50 11
Direct Labour 50
25 20 Direct Materials
Variable Production Overhead 20
Direct Labour 60
Variable Seling Overhead @10% of S.P.
10 5
Factory Overheads (50% fixed) Variable) 30
Variable Cost
(B) Selling and Administration Overhead (1/3 discussed, it was
Contributon per unit (A-B)
95 44 The selling price is 180 per unit.
When the budget was
5 6 volume of 2,50,000
Hours per unit
25+5 =5 felt that the company would be able to achieve only a that
quarter. The company therefore decided
Contribution per hour 20-+5=4
Ranking 5+5=1 6+4=1.50 units of production and sales percampaign should be launched to achieve the
Therefore, Product B should be an äggressive sales promotion
consume 50,000 x 4 hrs. = 2,00,000 produced. This means 50,000 units of B will following improved operations:
by spending 20,00,000 on special
hours. Remainingg 35,000 hours, i.e., 2,35,000
-2.00,000) should be used to manufacture to Product A, i.e., 7000 Proposal 1: Sell 4,00,000 units per quarter
overheads will increase by 240,00,000
units advertising. In this case the fixed factory
hours + 5 hours) of Product A. The product mix suggested is 50,000 units of(35,000
B and .per quarter.
7,000units of A. by reducing the selling price by
Proposal 2: Sell 5,00,000 units per quartervariable
case, the selling and administration
20 per unit on all sales. In this
184 Shiv Das DELHI UNIVERSITY SERIES
Price) x Actual Quantitu
Material Price Variance = (Standard Price - Actual
A = (R4-4.20) x 28 5.60 (A)
B - (5 - R4.80) x 44 8.80 (F)
C = (6-R6.50) x 88 44.00 (A)
Total 40.80(A)
Standard Price
Material Mix Variance = (Revised SO* - Actual Quantity) x
A = (32 - 28) x 4 Z16 (F)
B = (48 - 44) x 5 20 (F)
C = (80 - 88) x 6 Z48 (A)
Total 12 (A)
Material YieldVariance ==(Actual Yield - Standard Yield) x Standard Output Price
160 795
=100 -.150 x100 100

= (100 - 106.67) x7.95 =R53.03 (A)

Working Note:
* Revised Standard Quantity:
30 45
For A = x 160 = 32 kg For B
150 150
x 160 = 48 kg
75
For C
150 x 160 = 80 kg