Roll No……………

Total No. of Questions — 6] [Total No. of Printed Pages — 3

Time Allowed : 3 Hours Maximum Marks : 100
Answers to questions are to be given only in English except in the cases of candidates who
have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers
in Hindi, his answers in Hindi will not be valued.
Question No. 1 is compulsory.
Answer any four Questions from the rest. Working notes should form part of the answer.
Make assumptions wherever necessary.
Marks
1. (a) State the general guidelines to be used in adopting a pricing policy in a 3 (0)

manufacturing organization.
(b) A company which has developed a new machine has observed that the time 3 (0)

taken to manufacture the first machine is 600 hours. Calculate the time which
the company will take to manufacture the second machine if the actual
learning curve rate is (i) 80% and (ii) 90%. Explain which of the two learning
rates will show faster learning.
(c) A company manufactures three types of products namely P, Q and R. The data 7 (0)

relating to a period are as under:

P Q R
Machine hours per unit 10 18 14
Direct labour hours per 4 12 8
unit @ Rs. 20 90 80 120
Direct Material per unit 3,000 5,000 20,000
(Rs.)
Production (units)

Currently the company uses traditional costing method and absorbs all
production overheads on the basis of machine hours. The machine hour rate of
overheads is Rs. 6 per hour.
The company proposes to use activity based costing system and the activity
analysis is as under:

P Q R
Batch size (units) 150 500 1,000
Number of purchase 3 10 8
orders per batch 5 4 3
Number of inspections per
batch

The total production overheads are analysed as under:

Machine set up costs 20%

Machine operation costs 30%
Inspection costs 40%
Material procurement related costs 10%

Required:
 Calculate the cost per unit of each product using traditional method of
(i)
absorbing all production overheads on the basis of machine hours.
Calculate the cost per unit of each product using activity based costing
(ii)
principles.
(d) A single product manufacturing company has an installed capacity of 3,00,000 11 (0)

units per annum. The normal capacity utilization of the company is 90%. The
company has prepared the following budget for a year:

Variable costs:
Factory costs Rs. 33 per unit
Selling and Administration costs Rs. 9 per unit
Fixed costs:
Factory costs Rs. 21,60,000
Selling and Administration costs Rs. 7,56,000
Selling Price:
Selling price per unit Rs. 60
The actual production, sales, price and cost data relating to the
year under review are as given below:
Production 2,40,000 units
Sales 2,25,000 units
Finished goods stock in the beginning of 15,000 units
the year: Rs. 1,20,000
Actual factory variable costs exceeded the
budget by

Required:

(i) Calculate the budgeted profit and break-even point in units.

What increase in selling price was necessary during the year under
(ii)
review to maintain the budgeted profit?
Prepare statements showing the actual profit during the year under
(iii) review by using (1) absorption costing method and (2) marginal costing
method.
2. (a) Discuss the benefits accruing from the implementation of a Total Quality 4 (0)

Management programme in an organization.

(b) Explain the concept of relevancy of cost by citing three examples each of 4 (0)

relevant costs and non–relevant costs.

(c) A manufacturing company has furnished the following financial data relating to 11 (0)

the actual output of 9,600 units produced in the last quarter:

Rs.
Sales
Costs:
Direct Materials 59,400 4,45,500
Direct Wages 89,400
Variable Overheads 1,45,500
Fixed Overheads 78,000 3,72,300
Profit 73,200
 The standard wage rate is Rs. 4.50 per hour and the standard variable
overhead rate is Rs. 7.50 per hour. The company uses a JIT system and the
budgeted production and sales quantity is 10,000 units.

The following are the variances from standard costs recorded during the last
quarter:
Rs.
Direct materials Price V 600 A
Usage V 1,200 A
Direct Wages Rate V 1,500 F
Efficiency V 4,500 A
Variable Overheads Expense V 6,000 F
Efficiency V 7,500 A
Fixed Overheads Expense V 3,000 A
Sales Price V 13,500 F

You are required to:

(i) Prepare the Original budget and Standard cost sheet per unit of output;
(ii) Produce a statement reconciling the budgeted profit with actual profit.

3. (a) Describe the four types of bench marking of critical success factors. 4 (0)

(b) Explain, how the implementation of JIT approach to manufacturing can be a 4 (0)

major source of competitive advantage.

(c) A project consists of seven activities and the time estimates of the activities 11 (0)

are furnished as under:

Activity Optimistic Most likely Pessimistic
Days Days Days
1–2 4 10 16
1–3 3 6 9
1–4 4 7 16
2–5 5 5 5
3–5 8 11 32
4–6 4 10 16
5–6 2 5 8
Required:
(i) Draw the network diagram.
(ii) Identify the critical path and its duration.
What is the probability that the project will be completed in 5 days earlier
(iii)
than the critical path duration?
(iv) What project duration will provide 95% confidence level of completion
(Z0.95 =1.65) ?
Given
Z 1.00 1.09 1.18 1.25 1.33
Probability 0.1587 0.1379 0.1190 0.1056 0.0918

4. (a) State the methods in which initial feasible solution can be arrived at in a 3 (0)

transportation problem.
(b) State the advantages and limitations of Zero Based Budgeting. 5 (0)
 (c) A large business consultancy firm is organized in to several divisions. One of 11 (0)

the divisions is the Information Technology (IT) division which provides

consultancy services to its clients as well as to the other divisions of the firm.
The consultants in the IT divisions always work in a team of three professional
consultants on each day of consulting assignment. The external clients are
charged a fee at the rate of Rs. 4,500 for each consulting day. The fee
represents the cost plus 150% profit mark up. The break up of cost involved in
the consultancy fee is estimated at 80% as being variable and the balance is
fixed.

The textiles division of the consultancy firm which has undertaken a big
assignment requires the services of two teams of IT consultants to work five
days in a week for a period of 48 weeks. While the director of the textiles
division intends to negotiate the transfer price for the consultancy work, the
director of IT division proposes to charge the textiles division at Rs. 4,500 per
consulting day.

In respect of the consulting work of the textiles division, IT division will be able
to reduce the variable costs by Rs. 200 per consulting day. This is possible in
all cases of internal consultations because of the use of specialized equipment.

You are required to explain the implications and set transfer prices per
consulting day at which the IT division can provide consultancy services to the
textiles division such that the profit of the business consultancy firm as a
whole is maximized in each of the following scenarios:

(i) Every team of the IT division is fully engaged during the 48 week period
in providing consultancy services to external clients and that the IT
division has no spare capacity of consultancy teams to take up the
textiles division assignment.
(ii) IT division will be able to spare only one team of consultants to provide
services to the textiles division during the 48 week period and all other
teams are fully engaged in providing services to external clients.
(iii) A new external client has come forward to pay IT division a total fee of
Rs. 15,84,000 for engaging the services of two teams of consultants
during the aforesaid period of 48 weeks.

5. (a) State the characteristic features of a database created for operational control 4 (0)

and decision making.

(b) Discuss, how target costing may assist a company in controlling costs and 4 (0)

pricing of products.
(c) The costs and selling prices per unit of two products manufacturing by a 11 (0)

company are as under:

Product A (Rs.) B (Rs.)
Selling Price 500 450
Variable costs:
Direct Materials @ Rs. 25 per kg. 100 100
Direct Labour @ Rs. 20 per hour 80 40
Painting @ Rs. 30 per hour 30 60
 Variable overheads 190 175
Fixed costs @ Rs. 17.50/D.L.Hr. 70 35
Total costs 470 410
Profit 30 40

In any month the maximum availability of inputs is limited to the following:

Direct Materials 480 kg.

Direct Labour hours 400 hours
Painting hours 200 hours

Required:

Formulate a linear programme to determine the production plan which

(i)
maximizes the profits by using graphical approach.
State the optimal product mix and the monthly profit derived from your
(ii)
solution in (i) above.
(iii) If the company can sell the painting time at Rs. 40 per hour as a
separate service, show what modification will be required in the
formulation of the linear programming problem. You are required to re–
formulate the problem but not to solve.
6. (a) Enumerate the uses of Pareto Analysis. 3 (0)

(b) A single counter ticket booking centre employs one booking clerk. A passenger 8 (0)

on arrival immediately goes to the booking counter for being served if the
counter is free. If, on the other hand, the counter is engaged, the passenger
will have to wait. The passengers are served on first come first served basis.
The time of arrival and the time of service varies from one minute to six
minutes. The distribution of arrival and service time is as under:
Arrival / Service Arrival Service
Time (Minutes) (Probability) (Probability)
1 0.05 0.10
2 0.20 0.20
3 0.35 0.40
4 0.25 0.20
5 0.10 0.10
6 0.05 —

Required:

(i) Simulate the arrival and service of 10 passengers starting from 9 A.M. by
using the following random numbers in pairs respectively for arrival and
service. Random numbers 60 09 16 12 08 18 36 65 38 25 07 11 08 79 59
61 53 77 03 10.
(ii) Determine the total duration of
(1) Idle time of booking clerk and
(2) Waiting time of passengers.
(c) A city health centre provides health and other related services to the citizens 8 (0)

who are covered under insurance plan. The health centre receives a payment
from the insurance company each time any patient attends the centre for
consultation as under:
 Consultations Payment from Insurance
involving company
Rs.
No treatment 60
Minor treatment 250
Major treatment 500

In addition, the adult patients will have to make a co-payment which is

equivalent to the amount of payment for the respective category of treatment
made by the insurance company. However, children and senior citizens are not
required to make any such copayment.

The health centre will remain open for 6 days in a week for 52 weeks in a year.
Each physician treated 20 patients per day although the maximum number of
patients that could have been treated by a physician on any working day is 24
patients.

The health centre received a fixed income of Rs. 2,25,280 per annum for
promotion of health products from the manufacturers.

The annual expenditure of the health centre is estimated as under:

Materials and consumable (100% variable) Rs. 22,32,000

Staff salaries per annum per employee (fixed):
Physician Rs. 4,50,000
Assistants Rs. 1,50,000
Administrative staff Rs. 90,000
Establishment and other operating costs (fixed) Rs. 16,00,000

The non–financial information is as under:

(i) Staff:
Number of physicians employed 6
Assistants 7
Administrative staff 2
(ii) Patient Mix:
Adults 50%
Children 40%
Senior Citizens 10%
(iii) Mix of patient appointments (%)
Consultation requiring no treatment 70%
Minor treatment 20%
Major treatment 10%

Required:

(i) Calculate the Net income of the city health centre for the next year;
Determine the percentage of maximum capacity required to be utilized
(ii)
next year in order to break even.