You are on page 1of 9

© Copyright Reserved

Serial No………………

Institute of Certified Management Accountants of Sri Lanka
Foundation Level Pilot Paper
Instructions to Candidates
1. Time allowed is three (3) hours. 2. Answer all questions in Part I and four (4) questions from Part II selecting two (2) question from each of the Sections A and B. 3. The answers should be given in the English Language.


Subject Code

Management Accounting Fundamentals
PART I Question No. 01 (15 Marks)

(MAF / FL 1)

Answer all parts of Question No.1. Select the most correct answer to each question. Write the number of the selected answer in your answer booklet with the English letter. E.g. (1) (a), (2) (b) etc… (For sub-questions 2 and 7, please show your workings) (1) Which of the following is NOT a factor in cost-volume-profit analysis? (a) Units sold (b) Selling price (c) Total variable costs (d) Fixed costs of a product Lal Manufacturing Plc uses standard costing. The following details have been extracted from the standard cost card in respect of direct materials. 8 kg @ Rs. 100/kg = Rs. 80 per unit Budgeted production in May 2011 - 900 units The following details relate to actual materials purchased and issued to production during 2011 when actual production was 920 units. Materials purchased Materials issued to production 8,250 kg costing Rs. 676,500 7,544 kg May


Calculate the material price variance for the period. (a) Rs.16,500/(b) Rs.16,000/(c) Rs.18,400/(d) Rs. 3,440/-

Institute of Certified Management Accountants of Sri Lanka Foundation Level - Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper


so it should just be ignored. Order costs are Rs. Calculate the economic order quantity (EOQ) for the following item of inventory: (7) Institute of Certified Management Accountants of Sri Lanka Foundation Level .500. (d) is not found in governmental budgets.) 26 28 20 24 18 Select the correct answer. It absorbs overheads on the basis of standard labor hours.000 items. 20.000 (Rs. 240. (c) Overheads were Rs. Each unit currently costs Rs. (b) provides managers with a hedge against unexpected circumstances.600 2.per order.10 and fixed cost per unit is Rs.20 (d) Fixed cost is Rs.900 1.000 over-absorbed.000 hours (5) Overheads Output Labour hours Which ONE of the following statements is correct? (a) Overheads were Rs. (c) should be totally eliminated from the budget.000 and variable cost per unit is Rs.20 (c) Variable cost per unit is Rs.000 (Rs. (a) Total fixed costs is Rs. 190. 240.000 1.000 under-absorbed. (b) Overheads were Rs.8 (4) Which of the following is NOT a major benefit of budgets? (a) Compels planning (b) Eliminates innovation (c) Provides performance criteria (d) Promotes coordination and communication ABC Ltd operates a standard costing system.000 units 1. It has collected the following information for the cost analysis for its expansion. The following information is provided in respect to Amal Printers.000 and total variable cost at any level is Rs. (d) Overheads were Rs.000 Cost per unit (Rs.) 500.000 units 900.8 and fixed cost per unit is Rs. 190.30/. Month January February March April May Level of activity (units) 1.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper 2 . Details of budgeted and actual figures are as follows: Budget 2. Quantity required per year 64.200 1.000 under-absorbed.000.8 (b) Variable cost per unit is Rs.000 hours Actual 2. 80. Inventory holding costs are estimated at 6% of inventory value per year.(3) Vostro is planning to expand its business operations.20. (6) Budgetary slack: (a) is going to be included in budget estimates.010.) 440.000 over-absorbed.

000 35.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper 3 .415.000 Raw material control a/c Wage control a/c Factory overhead a/c 415.000 Balance c/d 450.(8) The main objective of cost classification is to (a) Study the behavior of cost (b) Control costs (c) Understand the various cost concepts (d) Provide cost information for decision making and control Which of the following is NOT a major difference between Management Accounting and Financial Accounting? (a) Legal requirement (b) Time dimension (c) Generally accepted accounting principles (d) Used for decision making (9) (10) H Plc operates an integrated cost book keeping system.000 The entry represents the value of the transfer to the (a) Material control account (b) Cost of sales account (c) Sales account (d) Finished goods stock account (10 × 2 Marks = Total 20 Marks) End of Part I Institute of Certified Management Accountants of Sri Lanka Foundation Level .000 ? 200.000 100.000/.000 450. 2011 shows the following information: Work-in-Progress Account 150. The Work-in-Progress (WIP) Account at the end of the 31st March.

000 600.200/kg Direct labour 20 each in all three departments The administration costs are absorbed as 30% of the total production cost.000 600.000 600. (03 Marks) You are given the following information about Job AA321. Calculate the amount of under or over absorption in the production department A.000 1.209.190 18.000  3.000 32 8 500 100 9.000 after working 10.PART II Section A Answer any 2 questions Question No.000  200.000  12. Calculate the selling price to be quoted for the job.000  200.000 120. 02 (20 Marks) Construct is an engineering company which has three factories.000 240.500  1. (08 Marks) The actual production overhead incurred in the department A was Rs.000  450.000  600. It is the policy of the company to have 15% margin on sales value.000  450.000 12  8 100  100   A   615.250  The expenses for the period were: Power Lighting Stores overheads Welfare of staff Depreciation Repairs General overheads Rent and rates Rs.000  3.300 labour hours. Direct material 10kgs @ Rs. which was completed during the period.000 1.000 60.000 The company apportions the expenses in the service department Y according to direct wages and those of service department X in the ratio of 5:3:2 to the production departments.000 800. metres)  Labour hours   Production department B C 919. You are required to: (a) Assuming the overheads are absorbed based on direct labour hours.     Direct wages (Rs.500 3. 2012 for one of its factories. calculate the overhead absorption rates for the production departments. The following information has been extracted for the quarter ended 31st March.000 6.)  Light points  Area (sq.000 4.000 600. (05 Marks) (Total 20 Marks) 4 Institute of Certified Management Accountants of Sri Lanka Foundation Level .)  Number of employees  Electricity (kwh)  Asset value (Rs.000 4.000   300.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper . The job has passed through all three departments. 22. (d) (04 Marks) (b) (c) In what circumstances is it appropriate to absorb production overheads using a plant-wide rate? Explain your answer.500 4.950.000  20  300  10.600 Service department X  Y 300.)  Direct materials (Rs.000   1.200.000 16.500 9.000 11.

720.000.14 per unit 2.000 600.Question No.000/-? (04 Marks) Assume that unit sale price decreases to Rs.15.000 Less: Total Variable Cost @ Rs.) (Rs.000 900.000 (03 Marks) (02 Marks) (c) (d) (e) (f) As the assistant management accountant.100.000 130. Sale Value Profit (Rs.600.000 80. (04 Marks) Explain the main difference between the Marginal Costing & Absorption Costing.per unit and the sale price and fixed cost remain unchanged. The estimated income statement for the next period is as follows: Super XL Units sold 150. (03 Marks) If the variable cost increases to Rs. calculate breakeven sales value. From the following information.19/.20 per unit 3.16/. How many units should be sold in order to earn a profit of Rs. Calculate the number of units to be sold in order to maintain the same profit of Rs. (04 Marks) (Total 20 Marks) Institute of Certified Management Accountants of Sri Lanka Foundation Level .) 400.000) Operating Income 600. briefly explain two limitations in the above analysis to the finance director.and the variable cost per unit increased to Rs.000 Assume that the planned profit has been achieved: You are required to: (a) (b) Calculate the breakeven point in units and in sales value.000/-.000 Revenue @ Rs.000 Less: Fixed Cost (300.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper 5 . 03 (20 Marks) Brown & Company retail a product – Super XL.

Thereafter.000 units of ABC were produced.000 Fixed 30.000 Production expenses: Variable 70. Sales 180. the speaker said “A Budget can be recognized as the combination of all the management functions”. You are required to prepare profit statements for the year based on: (a) Absorption costing (b) Marginal costing (c) (b) (10 Marks) Prepare a reconciliation statement to explain difference in the profit figures you report for part (ii) above. (05 Marks) Gayan Ltd. (05 Marks) Supun Limited produces a single product called ‘ABC’.100.for every 500 units.Question No. Produces and sells one item called X. the company hopes to increase the volume of sales by 20% based on previous month’s sales for the next budgeted period. Unit selling price is fixed to generate Rs.000 units were sold.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper . In a period 40. 04 (20 Marks) (a) Briefly explain two arguments each in favor of marginal costing and absorption costing methods. Rs.000 There was no opening stock of finished goods and the working progress stock may be assumed to be the same at the end of the year as it was at the beginning of the year.) Labour Production overhead costs Variable cost Fixed cost Total production cost Rs. 6 Institute of Certified Management Accountants of Sri Lanka Foundation Level . (05 Marks) (Total 20 Marks) End of Section A Section B Answer any 2 questions Question No.000/.000 units total fixed production overhead cost will increase by Rs. The Company’s future estimates for the final quarter (October – December) of year 2012 are as follows. The cost and the revenue data are as follows. and 36.500 units.000 Administration & selling O/H 50.300/. when you participated in a company sponsored seminar. Explain this statement. (1) Expected unit cost is as follows: Raw material (2 kgs. 05 (20 Marks) (a) As a trainee management accountant. 200 100 100 100 500 (b) Fixed production overhead is absorbed based on 3. (2) Expected sales in October 2012 are 2.000 units per month. If production units exceed a contribution.

in order to expand the current operations.200 which is imported from India in the same month. .000 shares at Rs. In December. Payment has to be paid in the same month.Within the month of sales 20% .000 100.they are eligible to get 10% cash discount. Payments are made in one month in arrears. are as follows: Trade creditors Accrued selling and distribution expenses Accrued dividends Stock – Finished goods (625 Units) .Balance unable to collect Material suppliers are allowed a one month credit period and 10% quantity discount for the purchases above 5.000 150.including Rs. (The future exchange rate is estimated to be 125 LKR= 1 USD) Balances as at 1st October 2012. Estimated monthly fixed administration overhead cost is Rs.(3) Stock policy: Finished goods Raw materials – equal to 25% of next month sales – equal to 40% of next month’s required quantity for production (4) From the total sales of each month.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper 7 . (i) Production budget (in units) (03 Marks) (ii) Material purchases budget (in kgs.50. November and December of year 2012.20% after two months .From September sales Bank favourable balance Rs. the company is planning to issue 30. 600.) (03 Marks) (iii) Cash budget (09 Marks) (Total 20 Marks) Institute of Certified Management Accountants of Sri Lanka Foundation Level . These funds will be used to purchase a plant worth of $ 10% on gross sales per month.50% after one month . Monthly selling and distribution expenses consist of Rs.000 210.000 (5) (6) (7) (8) (9) You are required to prepare the following budgets for the months of October.000 350.each.000/fixed assets depreciation.Raw material (2. .50.000 250.15/.000/.000 50.000/. Cash collections from the trade debtors are as follows.000 190. 40% is on cash and the balance is on credit.100 kg) Trade debtors – From August sales .000 kgs.

15/.100 kgs for Rs.per hour 2 hours @ Rs. (04 Marks) A manufacturer of an article for which there is a high demand advised his team of managers to prepare standard cost per unit for the product. 2. The company operates a standard costing system. 06 (20 Marks) (a) When a standard costing system is introduced by the management.900 kgs 4. Material usage variance. Briefly describe the four different types of performance standards. Fixed overhead expenditure variance.000 per month Fixed production overheads are absorbed based on the volume of production. (Rs. Actual Results No.40/.100 3.per hour Monthly budgeted production 2.000 units Total budgeted fixed production overheads Rs.) 60 30 20 10 120 (b) Direct material: Direct labour: Variable production overheads Fixed production overheads Total standard cost per unit 1½ kgs per unit @ Rs. of units produced Material purchased Material used Labour hours Variable overheads Actual fixed overhead You are required to calculate: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Material price variance. Variable overhead efficiency variance.100 for Rs.200 Rs.200 2.22.49. 2 hours @ Rs.Question No.20.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper 8 .65.10/. there are four different types of performance standards that an organization could aim for. Labour rate variance.per kg. 600 Rs. 130. Labour efficiency variance. Fixed overhead volume variance.000 (16 Marks) (Total 20 Marks) Institute of Certified Management Accountants of Sri Lanka Foundation Level . Variable overhead expenditure variance. You produced the following the standard cost card with the assistance of other managers.

000 10.000 9. • • • • • • The closing WIP in process 1 was 80% complete for materials.of labour and Rs. (14 Marks) (Total 20 Marks) End of Section B End of Part II End of Question Paper (iii) Prepare abnormal loss and gain accounts.200 Input (units) Output (in units) OWIP Units Value Input during the month (Rs.) Material Labour Overheads CWIP units 26. (06 Marks) (b) A manufacturing company produces a variety of food products in different processing operations.740 37.000 60. The total input is inclusive of opening WIP. 07 (20 Marks) (a) Explain the type of business which makes job costing and process costing methods appropriate.200/.000/. It is the policy of the company to value opening WIP in the process using weighted average method.680 4.000 36.800 You have also been provided the following additional information.Question No.400 40. You are required to prepare: (i) (ii) Prepare the process account 1 and 2. The normal loss is 5% of total input during the period in process 1 and process 2.575 1. Process 1 15. Institute of Certified Management Accountants of Sri Lanka Foundation Level . The closing WIP in process 2 was 75% complete for conversion costs.000 41. 40% complete for conversion cost.per unit in process 2.6.3.overheads.000 Process 2 10. Your answer should include two examples each for these two costing methods.Management Accounting Fundamentals (MAF / FL 1) -Pilot Paper 9 . There is no scrap sales value for normal loss in process 1 but can be scrapped for Rs. Prepare scrap sales value of the normal loss account.500 2. You have been given the following information about the processes for one month.15/. The opening WIP in process 2 was 40% complete for conversion cost and comprising of Rs.