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Management Information

The document provides a management information exam with 7 questions testing various accounting concepts over 2 hours. Question 1 tests understanding of profitability, throughput costing, and preparing income statements. Question 2 covers limiting factors, overcoming constraints, and product mix optimization. Question 3 examines spending variances, calculating price and quantity variances. Question 4 tests factors influencing markups, return on investment, and residual income calculations. Question 5 looks at effects of automation on costs, contribution margin calculations, and possible negatives. Question 6 asks why net present value is best for investment appraisal. Question 7 requires inventory valuation and cost of goods sold calculations under average cost and FIFO methods.

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40 views2 pages

Management Information

The document provides a management information exam with 7 questions testing various accounting concepts over 2 hours. Question 1 tests understanding of profitability, throughput costing, and preparing income statements. Question 2 covers limiting factors, overcoming constraints, and product mix optimization. Question 3 examines spending variances, calculating price and quantity variances. Question 4 tests factors influencing markups, return on investment, and residual income calculations. Question 5 looks at effects of automation on costs, contribution margin calculations, and possible negatives. Question 6 asks why net present value is best for investment appraisal. Question 7 requires inventory valuation and cost of goods sold calculations under average cost and FIFO methods.

Uploaded by

Mahedi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MANAGEMENT INFORMATION

Time allowed - 2 hours


Full marks ‐ 100
[N.B. - The figures in the margin indicate full marks. Question must be answered in English. Examiner will take
account of the quality of language and of the way in which the answers are presented. Different parts, if any, of
the same question must be answered in one place in order of sequence.]
Marks
1. (a) A selling price in excess of the full cost per unit will always result in an overall profit for the
organization – Do you agree? Please explain. 5
(b) Explain throughput costing? What advantages is it purported to have over variable and
absorption costing? 5
(c) Shikol Steel Products Co. is a manufacturer of gardening equipment. The income statement for
last year is given below developed under the Marginal costing system:
Tk.
Sales 754,000
Less: Variable manufacturing cost (102,000)
Variable marketing and general expenses (54,000)
Contribution margin 598,000
Less: Fixed manufacturing cost (78,000)
Fixed marketing and general expenses (46,000)
Operating income 474,000
The variable and fixed costs in inventories for last year were:
Beginning Inventory Ending Inventory
Work in process:
Variable cost Tk.7,000 Tk.8,000
Fixed cost 6,000 11,000
Total Tk.13,000 Tk.19,000
Finished goods:
Variable cost Tk.28,000 Tk.20,000
Fixed cost 16,000 9,000
Total Tk.44,000 Tk.29,000
There were no cost variances.
Required: Prepare an absorption costing income statement for last year, including inventory
detail and explain the profit difference between the systems. 9

2. A business manufactures high quality bags. The following information relates to four different
products of the business:
Amount in Tk. Deluxe Grande Lite Midi
Sales price 180 270 360 324
Direct labor cost 54 36 126 90
Direct material cost 84 65 90 100
Labor hours required per unit 9 6 21 15
Materials required per unit 18 Kg 45 Kg 30 Kg 36 Kg
Maximum sales demand (unit) 15,000 15,000 15,000 15,000
Due to the specialist nature of the work, only 150,000 skilled labor hours are available in the next quarter.
Required:
(a) Explain, using two examples, what is meant by a limiting factor? 5
(b) How may a company overcome a limiting factor? 5
(c) Advise the business on the mix of products that it should produce during the quarter in order to
maximize profit if labor hours are limited to 150,000 hours. 10
3. (a) Briefly explain why a favorable spending variance on variable overhead may not always be
desirable. 4
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(b) The following information pertains to June 2017 of Apex Chemical Company:
Direct Material Direct Labor
Standard price per unit of input Tk.19 per pound Tk.18 per hour
Actual price per unit of input Tk.21 per pound Tk.17 per hour
Standard inputs allowed per unit of output 9 pound 6 hours
Actual units of input 5000 pound 3050 hours
Actual units of output 1200 units
Required: Compute the price and quantity variances for direct materials and direct labor. 8
4. (a) What factors may influence the level of markups? 4
(b) An investment centre with capital employed of TK.570,000 is budgeted to earn a profit of
Tk.119,700 next year. A proposed non-current asset investment of Tk.50,000, not included in
the budget at present, will earn a profit next year of Tk.8,500 after depreciation. The
Company’s cost of capital is 15%.
Calculate the budgeted Return on Investment and Residual Income for next year, both with and
without the investment. 8
(c) Joynal Products is a furniture producing company and is using cost-based pricing to determine
the selling price for its new product based on the following information.
Production for the year 50,000 units
Fixed cost Tk.1,400,000 per year
Variable cost Tk.400 per unit
Investment in plant Tk.6,000,000
Working Capital Tk.2,000,000
Effective tax rate 37%
Required: What is the target price that Joynal Products needs to set for the new product to
achieve a 20% after-tax Return on Investment (ROI)? 8
5. (a) Suppose a company decided to automate a production line. Explain what effects this would
have on a company's cost structure using CVP terminology. Could these changes have any
possible negative effect on the firm? 6
(b) Alfath & Co. is an industrial components manufacturer. One of their products that is used as a
sub-component in coffee maker manufacturing is CFM392.
This component has the following financial structure per unit:
Tk.
Selling price 300
Direct Materials 40
Direct Labor 30
Variable Manufacturing overhead 24
Fixed Manufacturing overhead 60
Shipping and handling 6
Fixed Selling and Administrative overhead 20
Total cost 180
During the next year, CFM392 sales are expected to be 10,000 units. All of the costs will
remain the same except for material which will increase by 10% and labor by 15%.The selling
price per unit for next year will be Tk.320.
Required: Based on the above data, what will be the contribution margin from CFM392 for
next year? 6
6. Why Net Present Value is the Best Measure for Investment Appraisal? 5
7. Zakaria Company, sold 12,000 cases of Product Q for Tk.120,000 during the second quarter of the
year. Facts related to its beginning inventory and purchases are as follows:
April. 1 Beginning inventory 5,000 cases @ Tk.4.00
10 Purchases 3,000 cases @ Tk.5.00
May 13 Purchases 8,000 cases @ Tk.4.50
June 5 Purchases 2,000 cases @ Tk.5.00
For the quarter ended June 30, compute the ending inventory, cost of goods sold and gross margin
under two methods: (a) average-cost, and (b) FIFO. 12
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