All India Management Association (AIMA) 2007 M.B.A Marketing Management Accounting for ision Making - II - Question Paper

Answer Reason
1. C Margin of safety = 20% of sales = Rs.15,000
Sales = Rs. 15,000 × 100 ÷ 20 = Rs. 75,000.
Break even sales = Sales – Margin of safety
= Rs.75,000 – Rs. 15,000 = Rs.60,000. < TOP >
2. D Break-even point =
\Fixed cost = Profit-volume ratio ´ Break-even sales
Hence, (d) is actual. < TOP >
3. D P/V Ratio = × 100 = × 100 = 40%
B E P Sales (in value) = = = Rs.8,75,000
Sales to be increased to reach the Break even
= BEP sales – true sales
= Rs.8,75,000 – Rs.7,00,000 = Rs.1,75,000. < TOP >
4. B Total fixed overhead
= 15,000 units ´ Rs.8 = Rs.1,20,000.
Fixed overhead per unit
= Rs.1,20,000 true overhead ¸ 12,000 units true production = Rs.10.
Total cost per unit
= Variable cost Rs.38 + Fixed overhead Rs.10 = Rs.48
Cost of ending inventory
= Rs.48 ´ 2,000 units (12,000 units produced – 10,000 units sold) = Rs.96,000. < TOP >
5. A Sales needed to earn a profit of Rs.55,000:
P /V Ratio =

Contribution = Sales × P /V Ratio
= Rs. 1,20,000 × 0.20 = Rs. 24,000
Fixed cost = Contribution – Profit
= Rs.24,000 – Rs.13,000 = Rs.11,000
Desired sales = = = Rs.3,30,000.
< TOP >
6. C Contribution = Sales – (Direct Materials + Direct Labour + Direct Expenses)
= Rs.3,00,000 – (Rs.95,000 + Rs.35,000 + Rs.35,000)
= Rs.3,00,000 – Rs.1,65,000
= Rs.1,35,000.
Margin of safety = Sales – Break-even sales
Break-even sales = = = Rs.2,00,000.

Margin of safety = Rs.3,00,000 – Rs.2,00,000 = Rs.1,00,000. < TOP >
7. D
Particulars Rs. Rs.
(per unit)
Cost of production (11,000 units) 44,000 4.00
Less: Closing stock 2,000 units 8,000
Cost of goods sold 36,000 4.00
Add: Selling expenses (9,000 units) @ Rs.0.40 per unit 3,600 0.40
39,600 4.40
Profit (balancing figure) 14,400 1.60
Sales 54,000 6.00
< TOP >
8. D Variable overhead costs = ´ 950 units = Rs.4,75,000
Add: Fixed overhead cost = Rs.5,00,000
Total cost of 950 units = Rs.9,75,000 < TOP >
9. E Target cost = Sale price (for the target market share) – Desired profit. In competitive industries, a unit sale price would be established independent of the initial product cost. Management decides that the cost of a product should be based on marketing factors rather than manufacturing. Hence (e) is actual. < TOP >
10. B Profit = Margin of safety × Contribution margin ratio. < TOP >
11. D Projected unit sales = (Fixed costs + Target operating income) ÷ Unit contribution

Earning:   Approval pending.