INSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNING

GHAZIABAD
END-TERM EXAMINATIONS-DECEMBER 2008
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Subject Code: IMT – 58 Time Allowed: 3 Hours
Subject Name: Management Accounting Max Marks: 50
Notes:
(a) Answer any FOUR questions from SECTION-A. SECTION-B (Case Study)
is compulsory. Each question of SECTION-A carries 9 MARKS and the Case
Study (SECTION-B) carries 14 MARKS.
(b) No doubts or clarification shall be entertained. In case of doubts/clarifications,
make reasonable assumptions and proceed.
(c) For students enrolled in January 2008 and July 2008 (batches), the question
paper would be treated for 70 marks instead of 50 marks.

Section A: Marks: 36

1. What are the ‘methods’ of ascertaining cost. Explain any six of them.

2. Raw material is the most important element of cost in any

manufacturing operation. What are the different methods of issue of
raw material from stores for production? Explain any three.

3. What is Process Costing? Explain the terms ‘By-products’, ‘Joint

Products’, ‘Scrap’ and ‘Waste’ used in process costing.

4. Explain the terms Break-even points, Safety margin and ‘Key factors
in production’ used in marginal costing.

5. Describe the implication of selling at a price less than its marginal

cost. When would you advocate selling below marginal cost?

6. What is the distinction between budgeting and standard costing? How

do you exercise Budgetary control?

7. Explain the steps necessary for the setting of standards in standard

costing system. What are the circumstances that call for a revision of a
standard.

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Section B: (Case Study) Marks: 14

A market gardener from Meerut is currently producing Potatoes, Turnips,

Parsnips and Carrots for the nearby Delhi market. He is planning his
production for the next season.

The gardener is quite well off. He is intelligent too. But he is not so literate.
He came to know that you are a prospective Management Accountant. So,
he has approached you to recommend to him the optimal mix of vegetable
production for the coming year.

From the rudimentary records kept for him by his manager-cum-tractor

driver, he has given you the following data for the current year:

Potatoes Turnips Parsnips Carrots

Area occupied (in acres) 50 40 60 50
Yield per acre (in tones) 20 16 18 24
Selling Price per Tonne (in 1,000 1,250 1,500 1,350
Rs.)
Variable costs per acre:
Fertilizers 700 1,500 2,900 3,800
Seeds 1,300 1,400 2,600 3,500
Pesticides 500 1,400 2,400 3,500
Direct wages 8,000 9,000 10,000 11,400

A scientist from Indian Institute of Agriculture of the Ministry of

Agriculture advised him that the land which is being used for the production
of carrots and parsnips can be used for either crops, but not for potatoes and
turnips. The land being used for potatoes and turnips can again be used for
either crop, but not for carrots and parsnips.

He has also entered into a contract with a wholesaler who is located in the
Delhi Subzi Mandi. The wholesaler guarantees him to off load all his
produce on delivery to the wholesale market in Delhi. But he (wholesaler)
has put certain conditions in return for providing an adequate market service.
Accordingly, the gardener had given commitment to produce for the
wholesaler each year at least:

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 (1) 80 tonnes each of potatoes and turnips, and
(2) 72 tonnes each of parsnips and carrots.

Fixed overheads incurred each seasons in the last three years are:
Activity Amounts (Rs.)
Growing 40,000
Harvesting 13,000
Transport and export 10,000
General administration 60,000
Notional rent 30,000
Total 153,000

(a) You are required to prepare a statement to show:

(1) The profit of the current year.
(2) The profit of the production mix which you would recommend.

(b) Assuming that the land could be calculated in such a way that any of the
above crops could be produced and there were no market commitment or
compulsion for the gardener, you are required to:
(1) Advise the market gardener on which crop he should concentrate
for his production.
(2) Calculate the profit, if he were to do so.
(3) Calculate the break-even point of sale (in terms of rupees).

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