Symbiosis International Education Centre 2008 M.B.A Business Administration Management accounting - Question Paper

choices (a), (c), (d) and (e) are not accurate.
10. C The costs associated with materials and products that fail to meet quality standards and
outcome in manufacturing losses are known as internal failure costs. These defects are
identified before they are shipped to customers. Scrap and the costs of spoiled units that can
not be salvaged are internal failure costs. Defects create additional costs because they lead
to down time in the production process.
11. C Return on Investment is used to measure the financial performance of a company. This can
be improved by decreasing expenses. Hence, the ans is (c).
12. B
Fixed overhead recovery rate =
As there is no under or over absorption of overheads, Absorbed overhead = true fixed
overhead = Rs.1,23,600
fixed overhead cost Rs.1,26,000
= =Rs.24 per unit
Production (Units) 5,250 units
Particulars Rs.
Budgeted fixed overhead 1,26,000
Less: Favorable fixed overhead expenditure variance 2,400
true fixed overhead 1,23,600
true production = = 5,150 units
Overhead absorbed Rs.1,23,600
=
Fixed overhead rate Rs.24
13. D Using production related budgets, units to produce = Budgeted sales + desired ending
finished goods inventory + desired equivalent units in ending work-in-process inventory –
beginning finished goods inventory – equivalent units in beginning work-in-process
inventory.
Therefore, units to produce = 6,25,000 + 1,80,000 + 64,000 – 85,000 – 56,000 = 7,28,000.
14. B Contribution margin approach for pricing ignores fixed cost. In contribution approach
pricing models, only variable costs are used as the basis of pricing. The pricing model is
concerned only with the costs that vary with the product or service being priced. Therefore,
fixed cost has no relevancy with these differential cost techniques. Other techniques
mentioned in (a), (c), (d) and (e) consider the fixed cost in pricing the goods.
15. C Profit = Rs.9,17,000 – Rs.6,88,800 – Rs.1,35,000 = Rs.93,200
Revised variable cost = Rs.6,88,800 × 1.20 = Rs.8,26,560
Markup % on variable cost = [(Rs.1,35,000 + Rs.93,200) ÷ Rs.8,26,560] × 100 = 27.61%.
16. B The production control supervisor has the most control over the materials usage variance.
The materials usage variance measures the amount of material used over the amount
specified in the standard. Production control supervisor is not responsible for material price

Earning:   Approval pending.