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

27. C The costs which are not incurred but appeared in cost accounts only are called imputed costs. e.g. the notional rent charged on business premises owned by the proprietor is imputed cost. < TOP >
28. A Net value added is derived by deducting depreciation from the gross value added and not vice versa. Thus statement in option (a) is false. The value added is the most relevant concept and the statement forms part of social responsibility reporting (b). Value added statements reflect the broader view of the company’s objectives and responsibilities (c). It measures the value of increase in resources (d). The approaches adopted are additive approach and subtractive approach in computing value added (e). Thus, the options (b), (c), (d) and (e) are actual statements. < TOP >
29. E Management decision analysis is based on the concept of relevant costs. Relevant costs differ among decision options. Thus, incremental (differential or avoidable) costs are always relevant. Replacement cost is also relevant. Historical costs occurred in the past, are sunk costs and not relevant to most management decision analysis. < TOP >
30. C Economic value added measure considers the cost of debt as well as the cost of equity while computing profit of a business. Gross Value added (a) is arrived at by deducting from sales revenue and any other direct income and investment income, the cost of all materials and services and other extraordinary expenses and thus it includes other expenses in addition to the cost of debt and equity. And is not the accurate ans. Net value added (b) is derived by deducting depreciation from the gross value added. Market value added (d) is the difference ranging from the market value of the invested capital and book value of invested capital. It is a measure of shareholders’ value. And is not the accurate ans. Brand Value Added (e) is a tool that quantifies the economic value of a brand. And is not the accurate ans. Thus, (c) is the accurate ans. < TOP >
31. A All research, administrative and selling costs are treated as period costs.
i. Direct labor costs and Direct material costs are product or inventorial costs.
ii. Indirect materials costs are treated as manufacturing overhead costs.
iii. Power costs and repair costs are treated as product costs.
The accurate ans is (a). < TOP >
32. A Variable cost per unit = Rs.12 + Rs.4 = Rs.16
Contribution per unit = Rs.24 – Rs.16 = Rs.8

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