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

variance, variable overhead spending variance, fixed overhead budget variance, fixed
overhead quantity variance. Therefore, (b) is accurate.
17. A Total cost per unit = Rs.41
Fixed cost per unit at 48,000 units = Rs.6,48,000 ÷ 48,000 = Rs.13.50.
Variable cost per unit = Rs.41.00 – Rs.13.50 = Rs.27.50
Cost savings = Commission = Rs.3.65.
Therefore, net cost = Rs.27.50 – Rs.3.65 = Rs.23.85
Net profit per unit = Rs.33.50 – Rs.23.85 = Rs.9.65
Total profit will increase by = 2,800 × Rs.9.65 = Rs.27,020.
18. E A standard which can be attained under the most favorable conditions is called Ideal
standard. Ideal standards are not widely used in practice because they may influence
employee’s motivation adversely. All the choices described here are incorrect. (a) Basic
standard is the standard established for use over a long period from which a current standard
can be developed. (b) Expected standard is standard based on conditions which may be
realized in true practice. (c) High standards represent the best possible performance. (d)
The standards which are set for use over a limited period to reflect current conditions is
called current standard.
19. E Activity based costing deals with the overhead costs. Overhead cost is the cost other than
direct cost. It does not segregate variable and fixed costs. It is based on historical costs. It
highlights the causes of costs. It is very costly. Therefore (e) is false.
20. D The accurate ans is (d). The sales price variance is determined by multiplying the
difference ranging from true price and budgeted price by true units.
true price = Rs. 2,37,540 ÷ 18,500 units = Rs.12.84
Budgeted = Rs. 2,27,700 ÷ 17,250 units = Rs.13.20
\ Sales price variance is 18,500 units (Rs.12.84 – Rs.13.20) = Rs.6,660 (adverse).
21. B The use of budgets by the management to monitor and control a company’s operations is
called budgetary control. Budget reports contain relevant info that compares true
outcomes to planned activities (budgets). The 1st financial budget prepared is the budgeted
income statement but not the cash budget. The amounts detailed in a budgeted income
statement are used in the determination of projected cash flows. A fixed budget, also called
a static budget, is based on a single predicted amount of sales or production quantity.
Successful budget should have adequate flexibility to meet changing business conditions.

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