CMA Inter Suggested Answers | Dec 24 Paper 12 Management Accounting (MA)
Table of Contents
CMA Inter Dec 24 Suggested Answer Other Subjects Blogs :
MCQs
(i) _______ criteria are a set of standards for a company’s behaviour used by socially conscious investors to screen potential investments.
Answer :
(ii) M/s SB Limited produces 10,000 units of Product - S and 15,000 units of Product - R at a total cost of ₹ 2,00,000. Total Cost of the company is apportioned into two types of activities, Machine hour related and Labour hour related in the ratio of 3:2.
|
Particulars |
Product - S |
Product - R |
|
Machine Hour |
3,000 |
2,000 |
|
Labour Hour |
5,000 |
3,000 |
The Cost Per Unit of Product - S and Product - R are:
Answer :
(iii) Which of the following is the main cost driver of customer order processing activity?
Answer :
(iv) M/s Zimbra Limited sold 65,000 units of its product at ₹ 80 per unit. P/V Ratio is 20%. If total Fixed Cost is ₹ 6,40,000, the Margin of Safety (Units) is _______.
Answer :
(v) To obtain the break-even point in rupee sales value, total fixed costs are divided by
Answer :
(vi) M/s Littles Limited operates in single shift. Standard production is 8 units per shift of 8 hours at ₹ 200 per hour. Actual production is 5 units per shift. The company allows 1 hour for lunch break. Actual rate of labour hour is ₹ 210. The Labour Efficiency Variance is
Answer :
(vii) Which one of the following is not considered as a method of Transfer Pricing?
Answer :
(viii) What is the name given to a budget that has been prepared by re-evaluating activities and comparing the incremental costs of those activities with their incremental benefits?
Answer :
(ix) WDV of Fixed Asset of M/s Vanguard Limited as on 31-03-2024 is ₹ 22,50,000. On 01-07-2024, the Company sold an asset having WDV of ₹ 2,50,000 for ₹ 2,75,000. Other income for the year 2024-25 is ₹ 2,00,000. The ROI of the company is _______.
Answer :
(x) Which of the following is the formula for calculating RI (Residual Income)?
Answer :
(xi) The theory of learning curves will only hold if which of the following conditions apply?
Answer :
(xii) M/s Zeon Limited is currently manufacturing a component of a finished product which is readily available at market at ₹ 25 per unit. In-house manufacturing cost per unit comprises of Direct Material cost of ₹ 10 and other Overheads of ₹ 15 of which 60% is fixed. If the company decides to buy the component from open market instead of manufacturing in-house, the machine can be used to manufacture another component fetching a contribution of ₹ 12 per unit. The relevant cost per unit of manufacturing the product in-house is _______.
Answer :
(xiii) M/s Nikita Limited purchases raw materials at ₹ 35.40 inclusive of GST @ 18%. The company is eligible for Input Tax Credit of GST paid. Machine hour rate is ₹ 576. The product is manufactured in a specialized die having facility to manufacture 2 products at a time. The cycle time per short is 25 seconds. The Cost of Production per unit is:
Answer :
(xiv) According to DuPont model, the main functional parameters that drive Return on Equity (ROE) is:
Answer :
(xv) Which of the following is not true?
Answer :
Question 2 (a)
“Though Management Accounting is very closely linked to Cost Accounting, there is clear demarcation between the two.” – In this context, compare Cost Accounting and Management Accounting in a tabular form.
Answer :
Question 2 (b)
ASTHAMA Ltd. manufactures three Product P, Q and R which are similar in nature and are usually produced in production runs of 100 units. Product P and R require both machine hours and assembly hours, whereas Product Q requires only machine hours. The overheads incurred by the company during the first quarter of year 2024-25 are as under:
|
Particulars |
Amount (₹) |
|
Machine Department Expenses |
18,48,000 |
|
Assembly Department Expenses |
6,72,000 |
|
Setup Costs |
90,000 |
|
Stores Receiving Cost |
1,20,000 |
|
Order Processing and Dispatch |
1,80,000 |
|
Inspection and Quality Control Cost |
36,000 |
The data related to the three products during the period are as under:
|
Particulars |
P |
Q |
R |
|
Units produced and sold |
15,000 |
12,000 |
18,000 |
|
Machine hours worked |
30,000 hrs. |
48,000 hrs. |
54,000 hrs. |
|
Assembly hours worked (Direct Labour hours) |
15,000 hrs. |
- |
27,000 hrs. |
|
Customers’ orders executed (in numbers) |
1,250 |
1000 |
1500 |
|
Number of requisitions raised on stores |
40 |
30 |
50 |
You are required to
(i) Calculate the cost driver rates that are used for tracing the appropriate amount of overheads to the respective products.
(ii) Prepare a statement showing details of overhead costs allocated to each product using Activity Based Costing.
Answer :
Question 3
M/s Garlic Hotels has three categories of rooms in the hotel. Five suit rooms, 50 superior rooms and 40 standard rooms. Room tariff of standard room is ₹ 5,000/- per day. Garlic Hotels provides you the following details in respect of its standard rooms for the financial year 2023-24:
|
Particulars |
Amount (₹ in Lakhs) |
|
Total Room tariff collected |
400 |
|
Variable Cost |
160 |
|
Fixed Cost - Standard Rooms |
60 |
|
Apportioned Cost of Hotel’s Administrative Charges |
100 |
|
Salary of Housekeeping Staff |
As stated below |
Based on occupancy, the hotel employed following housekeeping staff at ₹ 60,000/- per month per staff.
|
Room Days |
No. of Housekeeping Staff engaged |
|
Less than 7500 |
10 |
|
7500 to 9500 |
15 |
|
Above 9500 |
20 |
The projections for the next financial year are as under:
(i) All costs, except apportioned cost of hotel’s administrative charges, will go up by 10%.
(ii) Apportioned cost of hotel’s administrative charges will increase by ₹ 11 lacs.
(iii) There will be a salary hike of housekeeping staff by 5%.
(iv) Room tariff will increase by 10%. However, room occupancy is not likely to increase in the next financial year.
The Management of Garlic Hotels is actively considering a proposal to convert all standard rooms to superior rooms. In that event, the Fixed Cost of standard rooms can be avoided.
You are required to:
(i) Determine the profitability of the hotel in respect of Standard Room segment for both the years.
(ii) Calculate the Break-Even Room Occupancy for the next financial year.
(iii) Suggest increase, if any, in room tariff in order to justify the continuance of standard room segment at the existing occupancy.
Answer :
Question 4 (a)
M/s Srikar Limited provides you the following data for the year ended 31-03-2024:
|
Particulars |
Amount (in ₹) |
|
Selling Price Per Unit |
200 |
|
Raw Material Cost Per Unit |
100 |
|
Direct Labour Per Unit |
30 |
|
Variable & Fixed Overhead Cost |
1,00,000 |
M/s Srikar Limited sold 2000 units in 2024-25. In 2025-26, the selling price per unit will remain the same. Direct wage rate will increase by 20% and fixed cost will decrease by ₹ 6000. If 3,000 units are sold in 2025-26, the total Variable & Fixed Overhead will be ₹ 1,14,000.
You are required to:
(i) Calculate the profit per unit in 2024-25.
(ii) Determine the units to be sold in 2025-26 in order to earn the same amount of profit per unit as in 2024-25.
Answer :
Question 4 (b)
AKONA Ltd. manufactures two types of mobile phones, XB and YB. Due to severe competition, it has to reduce the prices for the next production period. The following information is provided:
|
Particulars |
XB |
YB |
|
Current period: |
||
|
Selling price (₹ / unit) |
10,000 |
12,000 |
|
P/V Ratio |
25% |
30% |
|
Product-specific fixed cost (₹) |
10,00,000 |
15,00,000 |
|
Next Period: |
|
|
|
Selling price (₹ / unit) |
8,000 |
9,000 |
For the next period, the company wants the current P/V ratio to be maintained and to achieve a break-even for both the products at 400 units.
It is assumed that the number of units to be sold for XB and YB to break-even as well as the total number of units of XB and YB to be sold during the year are the same.
You are required to:
Analyze the cost reduction program to be envisaged (i.e., reduction in fixed expenses product-wise).
Answer :
Question 5
BOSTIN Ltd. uses standard costing system in its factory. It started trading on 1st April, 2023, for manufacturing and selling one product. The standard cost per unit was:
Production overhead costs (all classified as fixed) were budgeted at ₹ 9,00,000 per annum. The standard time for producing one unit is 12 machine hours, and normal capacity is 60,000 machine hours per annum. Production overhead is absorbed on machine hour.
For the year ended 31st March, 2024, the costs incurred and other relevant information are given below:
|
Particulars |
Amount/Details |
|
Direct Material used |
100,000 kilograms at a cost of ₹ 10,50,000 |
|
Direct wages paid |
₹ 3,10,000 for 62,000 hours |
|
Production overhead |
₹ 9,26,000 |
|
Machine Capacity used |
60,000 hours |
|
Actual output |
4,800 units |
Assume no stock of work-in-progress or finished goods at the year end.
You are required to
(i) Calculate the standard product cost for one unit.
(ii) Analyze the variances for Material (Cost, Price and Usage), Labour (Rate, Efficiency and Cost) and Fixed overheads (Expenditure, Efficiency, Capacity and Cost.)
Answer :
Question 6 (a)
KAUN Ltd. using Standard Costing System, produces a chemical product by blending two basic raw materials.
The standard cost of a chemical mixture is as follows:
A standard loss of 20% on input is expected in production. The cost records for a period have shown the following usage:
The quantity processed was 680 kilograms of good product.
From the above given information, analyze the following variances:
Answer :
Question 6 (b)
G Ltd. manufactures two products called ‘M’ and ‘N’. Both products use a common raw material Z. The raw material Z is purchased @ ₹ 72 per kg from the market. The company has decided to review inventory management policies for the forthcoming year.
The following forecast information has been extracted from departmental estimates for the year ended 31st March, 2025 (the budget period):
|
Particulars |
M |
N |
|
Sales (units) |
28,000 |
13,000 |
|
Finished goods stock increase by year-end |
320 |
160 |
|
Post-production rejection rate (%) |
4 |
6 |
|
Material Z usage (per completed unit, net of wastage) |
5 kg |
6 kg |
|
Material Z wastage (%) |
10 |
5 |
Additional information:
The management of G Ltd. has decided that there should not be more than 40 orders in a year for the raw material Z.
You are required to
(a) Prepare functional budgets for the year ended 31st March, 2025 under the following headings:
(i) Production budget for Products M and N (in units).
(ii) Purchases budget for Material Z (in kgs and value).
Answer :
Question 7 (a)
The Cost Sheet of M/s Aptamil Limited for the year ended 31-03-2024 is as under:
|
Particulars |
Cost Per Unit (in ₹) |
|
Direct Material |
5 |
|
Direct Labour |
3 |
|
Direct Expenses |
2 |
|
Prime Cost |
10 |
|
Factory Overheads |
4 |
|
Works Cost |
14 |
|
Office & Administrative Overheads |
4 |
|
Cost of Goods Sold |
18 |
|
Selling & Distribution Overheads |
2 |
|
Cost of Sales |
20 |
The company sold 5 lac units of its product during 2023-24 at a margin of 15% on cost. There is no opening & closing stock of finished goods. On 01-07-2023 the company sold an asset for ₹ 2,50,000 to M/s Isomil Limited. The cost and accumulated depreciation of the asset as on 31-03-2023 is ₹ 3,50,000 and ₹ 1,50,000 respectively. The company charges depreciation at 10% under Written Down Value (WDV) method. There is no tax on profit on sale of asset. The market capitalization of the company comprises of the following:
|
Particulars |
Amount (in ₹) |
|
12% Bond |
10,00,000 |
|
Equity Share Capital |
7,00,000 |
|
Reserve & Surplus |
1,00,000 |
|
18,00,000 |
Additional Information:
(i) Risk-free rate of return is 10%.
(ii) NIFTY return is 15%.
(iii) Effective rate of tax applicable to the company is 30%.
(iv) Beta factor (β) of the company is 0.90. Assume Principle of Capital Asset Pricing Model (CAPM) holds good.
You are required to
Calculate Economic Value Added (EVA) of M/s Aptamil Limited as on 31-03-2024 and comment on your answer.
Answer :
Question 7 (b)
NITOZ Ltd., a manufacturer of fountain pens, received an order for 16 units of a new fountain pen named GOLDX. The first unit was made in 20 direct labour hours. The production manager expects 80% (index is -0.322) learning effect for this type of operation. So far 6 units have been completed and a total of 81.91 direct labour hours have been used. The cost and sales price of the first unit of fountain pen have been estimated as follows:
|
Particulars |
₹ |
|
Direct Materials |
20 |
|
Direct Labour (20 hrs. × ₹6) |
120 |
|
Variable overhead (₹ 0.50 per direct Labour hour) |
10 |
|
Fixed overhead apportioned (₹ 5 per direct Labour hour) |
100 |
|
Profit Mark-up (20% on cost) |
50 |
|
Sales Price |
300 |
You are required to
(i) Analyze the estimated sales price of fountain pen for the initial order of 16 units.
(ii) Assess the minimum quoted price per unit if a repeat order of 20 units is also received from the same customer. (Approximate up to two decimal points)
[Given: (4)(−0.322) = 0.640, (10)(−0.322) = 4.095,
(20)(−0.322) = 0.3811, (30)(−0.322) = 0.3345,
(36)(−0.322) = 0.3154]
Answer :
Question 8 (a)
Mr. Gurbik, a farm owner, is seriously considering the drilling of a farm well. In the past, only 70% of wells drilled were successful at 200 feet of depth in that area. Moreover, on finding no water at 200 feet, some persons drilled it further up to 250 feet but only 20% struck water at 250 feet. The prevailing cost of drilling is ₹ 50 per feet.
The farm owner has estimated that in case he does not get his own well, he will have to pay ₹ 15,000 over the next 10 years (in Present Value Terms) to buy water from the
The following decisions can be optimal:
(i) Do not drill any well,
(ii) Drill up to 200 feet and
(iii) If no water is found at 200 feet, drill further up to 250 feet.
You are required to
(i) Draw an appropriate Decision Tree.
(ii) Identify the farm owner’s strategy under EMV Approach.
Answer :
Question 8 (b)
“A responsibility accounting system helps organizational unit managers to conduct the five basic control functions” – In this context, discuss the said basic control functions.
Answer :
Management Accounting detailed analysis
CMA Intermediate - Paper 12: Management Accounting
Chapter-wise Weightage Analysis (December 2024 Exam)
| Chapter | Question Reference | Marks | Weightage |
| Section A: Introduction to Management Accounting | Q2(a): Comparison of Cost and Management Accounting | 7 Marks | 5% |
| Section B: Activity-Based Costing (ABC) | Q2(b): ABC calculation and cost driver rates | 14 Marks | 10% |
| Section C: Decision Making Tools | - Q3: Standard Room profitability analysis and BEP - Q4: Profit per unit, required sales for profit - Q6(b): Functional Budgets |
42 Marks | 30% |
| Section D: Standard Costing and Variance Analysis | - Q5: Variance Analysis for Material, Labour, and Fixed Overhead - Q6(a): Material Mix and Yield Variances |
28 Marks | 15% |
| Section E: Forecasting, Budgeting, and Budgetary Control | Q6(b): Production and Purchase Budgets | Included in Q6 | 15% |
| Section F: Divisional Performance Measurement | - Q4(b): P/V Ratio, Break-even units, Fixed cost analysis - Q5: ROI-related components |
Included | 10% |
| Section G: Responsibility Accounting | Not explicitly tested | 0 Marks | 0% |
| Section H: Decision Theory | - Q3: Break-even analysis - Q4(b): Cost reduction and break-even comparison |
Included in Q3/Q4 | 10% |
Observations
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