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

Fixed costs = Rs.6,48,000 + Rs.3,02,400 = Rs.9,50,400
Break even point in units = = 1,18,800 units.
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33. D In fixing selling price - competitors’ price, unique product feature, price of the substitutes and capturing market share are considered. Product costs sets a floor to the price. Product costs, which set a ceiling to the price, are not accurate. Therefore, (d) is the ans. < TOP >
34. A Relevant costs are those expected future costs that vary with the action taken. All other costs are presumed to be constant and thus have no effect on the decision. It is considered in the analysis of decisions to make or buy a product, accept a special order, change capital equipment or delete a product line. It applies to many special decisions but not in determining a product price. < TOP >
35. D Depreciation on a machinery and factory rent are fixed costs. Suppliers and other indirect materials are variable costs and advertising is a discretionary fixed cost. Maintenance of machinery is a semi-variable costs consisting of planned maintenance that is undertaken whatever the level of the activity and a variable component that is directly related to the level of activity. So (d) is accurate. < TOP >
36. E Target costing is based on the premises of (i) Orienting products to customer affordability, (ii) Orienting products to market driven pricing, (iii) Treating product cost as an independent variable during the definition of a product’s requirements and (iv) Proactively working to achieve target cost during product and process development. It is not based on the premise of treating product cost as an dependent variable during the definition of a product’s requirements. Therefore, (e) is accurate choice. < TOP >
37. D Wood, Metal, Fabric and Leather used in the chair would be treated as direct cost but the staples used to fix the fabric will be treated as indirect cost. < TOP >
38. D Variable cost per unit = = = = Rs.12.80. < TOP >
39. C Under marginal costing technique, products are valued at variable cost. Fixed costs are not considered for evaluation of product. Therefore, this statement is accurate. Other statements provided in (a), (b), (d) and (e) are not accurate. < TOP >
40. B Fixed overhead cost per unit = Rs.9,60,000 ÷ 80,000 units = Rs.12.
Profit under absorption costing = Rs.88,200
Fixed manufacturing overhead costs of increased inventory

Earning:   Approval pending.