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

Material usage 1,12,500 kg
Add: Closing raw material 28,000 kg
1,40,500 kg
Less: Opening raw material 24,200 kg
needed purchases 1,16,300 kg
28. D If there is no labor rate variance the true labor rate is equal to Standard labor rate =
Rs.22.40
Labor efficiency variance = Standard rate × (Standard hours ~ true hours)
= Rs.22.40 × (5 hours × 78 units ~350 hours)
= Rs.22.40 × (390 hours ~ 350 hours) = Rs. 22.40 × 40 hours = Rs. 896 (F).
29. A Under full cost pricing, the normal mark-up is not based on sales value. It is generally based
on total cost or variable cost to recover profit and/or fixed cost. Full cost pricing is designed
to recover both fixed costs and variable costs. Contribution margin pricing and full cost
pricing are complementary to every other but not competing. Pricing decision may be
influenced by internal factors and contribution margin approach to pricing is concerned with
the cost, quantity and profit. Therefore (a) is false.
30. C Standard material cost
= true material cost + Favorable material price variance – adverse material usage
variance
Standard material cost = Rs.60,750 + Rs.2,850 – Rs.900 = Rs.62,700
Standard material cost per unit = Rs.62,700 ÷ 7,600 = Rs.8.25.
31. B A budget manual defines how a budget is to be prepared. Items usually included in a
budget manual are a planning calendar and distribution instructions for all budget
schedules. Distribution instructions are important because, once a schedule is prepared,
other departments within the organization will use the schedule to prepare their own
budgets. Without distribution instructions, someone who needs a particular schedule may be
overlooked.
ans (a) is incorrect because employees training policies are not needed in the budget
manual. ans (c) is incorrect because employee hiring policies are not needed for budget
preparation. They are already available in the personnel manual. ans (d) is incorrect
because software documentation is not needed in the budget preparation process. ans
(e) is incorrect because the authorization of transactions is not necessary for budget
preparation purposes.
32. C The major advantage of adopting target costing is that it is deployed during a products
design and planning stage so that it can have a maximum impact in determining the level of
the locked in costs. Target costing is not deployed at the product selling stage. Therefore (c)

Earning:   Approval pending.