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Semester II Examination Papers
IIBM Institute of Business Management
IIBM Institute of Business Management
Semester-II Examination Paper MM.100
Management Accounting

1. If the variable cost(VC) be Rs 5 and the sales revenue(SR) be Rs 8 then the V/V ratio is given
by
a. 1.6
b. 3
c. 40
d. 0.625
2. Re-order level =a
a. Minimum level + (normal usage * average delivery time)
b. (Daily usage + lead time) * safety stock
c. (Daily usage * lead time) + average stock
d. (Average stock level - minimum level)/2
3. Acid test ratio is the ratio between
a. Quick assets and current liabilities
b. Net credit sales and average debtors
c. Cost of goods sold and average inventory
d. None
..
10. Performa statements are otherwise called as
a. Master budget
b. Capital budget
c. Strategic plan
d. Rolling budget
e. There is no such budget
Part Two:
1. Define ‘Liquidity Ratio’.
2. Define ‘Debt Equity’ ratio.
3. What do you mean by ‘Batch costing’?
4. Explain ‘The margin of safety’.
....
Caselet 1
Sound Future Communication Ltd is planning profit for the current year. This Chairman and
Managing Director of the Company, Mr., wise Has asked the Accounts and Finance Department
to prepare the Budget outlining The implication of achieving the Profit goal of Rs 7 lakhs .The
Budgeting Department has compiled the information related to its operating and financing
activities as detailed in schedules I to VIII.
I. Balance Sheet as at March 1 of the Current year
Liabilities Amount Assets Amount
Share capital Rs 31,77,428 Fixed assets Rs 48,00,000
Retained earnings 18,96,400 Less: Accumulated
C..
0.02).
Semester II Examination Papers
IIBM Institute of Business Management
VIII Other Information
??Income Tax rate is 50 percent
??Cash dividend amount to Rs 80,000 at the end of quarter 2 and quarter 4
??At the end of the 4th quarter equipment costing Rs 6,00,000 was purchased
Assignment
Prepare a comprehensive, quarter –wise, budget to show the projected income of SFCL for the year.
Caselet 2
M/s Precision Company Ltd is in the business of making Fingertips brand calculation .Fingertips brand of
calculators has a good reputation among students, office staff and college faculty for its quality and
price. Its current market price is Rs 310 per calculator .Its unit cost structure is given in Exhibit1:
Exhibit 1 Cost Structure of Finger trips Calculators
Direct material cost Rs 150
Direct labour cost 40
Variable overheads(including printing cost ,Rs 2 and packaging cost , Rs 5) 40
Allocated Fixed Overheads 50
_____
...
calculators in the local market would not be adversely affected. According to John Mathew, production
manager , to increase the capacity by 50,000 units, a new machine ,similar to the one being currently
used, would have to be acquired .Two alternative machines are available in the market. The first
machine could be leased at an annual cost of Rs 25 lakhs. The maintenance cost available per year is
estimated to be Rs 2 lakhs. The second machine uses a new technology. It can be leased for a yearly
rental of Rs 30 lakhs. However the maintenance cost would be Rs 1.5 lakhs per year. The new
Technology based machine would also reduce the labor cost and the variable overhead cost by Rs 5 and
Rs 2 per calculator respectively. The CEO asks the finance manager to carry out a financial analysis of the
alternatives.
REQUIRED
Based on the financial analysis, what recommendation would you, as the finance manager, make to the
CEO of PCL?

1. Managerial accounting information is sometimes described as a means to an end whereas
financial accounting information is described as an end in itself. In what sense is this true?
2. Absorption and variable costing are two different methods of measuring profit and valuing
inventory. Explain.
END OF SECTION C