Cost & Management Accounting - State the Benefits of Value Engineering. Briefly Explain the Importance of Capital Budgeting.

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Cost & Management Accounting

1. (i) Distinguish between direct and indirect cost

(ii) Explain the limitations of ratio analysis

2. State the benefits of value engineering.

3. Briefly explain the importance of capital budgeting.

4. The following data relate to the manufacture of a product during the month of

January :

Raw materials consumed Rs. 80,000

Direct wages Rs. 48,000

Office overhead 10% of works cost

Units produced 4,000

Machine hours worked 8,000

Machine hour rate Rs. 4

Selling overhead Rs. 1.50 per unit

Units sold 3,600 at Rs. 50 each

Prepare a cost sheet.

5. Explain the concept of margin of safety and angle of incidence in break-even analysis.

Illustrate your answer graphically

6. Sales 1,000 units at Rs. 10 each Rs. 10,000; Variable cost Rs. 6 per unit ; Fixed Cost

Rs.

8,000.

(a) Calculate break even point;

(b) if the selling price is reduced to Rs. 9, what is the new break even point?

7. The standard estimate for materials to manufacture, 1,000 units of a commodity is

400 kgs.,

at Rs. 2.50 per kg.

When 2,000 units of the commodity are manufactured, it is found that 820 kgs. of

materials

are consumed at Rs. 2.60 per kg.

Calculate the material variance.

Overhead 70%

Closing work-in progress: 1, 600 units.

8. Prepare a cash budget for the three months ending 30th June, 2005 from the

information

given below:

Month Sales Materials Wages Overheads

Rs. Rs. Rs. Rs.

February 14,000 9,600 3,000 1,700

March 15,000 9,000 3,000 1,900

April 16,000 9,200 3,200 2,000

May 17,000 10,000 3,600 2,200

June 18,000 10,400 4,000 2,300

(a) Credit terms :

Sales/Debtors – 10% sales are on cash, 50% of the credit sales are collected next month

and the balance in the following month.

Creditors: Materials 2 Months

Wages Month

Overheads Month

(b) Cash and bank balance on 1st April 2005 is...