HAILEY COLLEGE OF BANKING & FINANCE

UNIVERSITY OF THE PUNJAB, LAHORE

Mor MID/ TIME MAXIMUM
PROGRAM SEMESTER SESSION
/ Eve FINAL ALLOWED MARKS
MBA (2 years) Mor Mid+Final 1st 2020-22 3 hours 75
Teacher’s Name Mr.Ammar Ud Din
Course Management Accounting & Decision Making
Student’ Name Roll #

INSTRUCTIONS
1. Attempt all questions and read carefully before answering.
2. Complete your paper within prescribed time (i.e. 3 hours. One extra hour is given for downloading,
converting file into PDF and submission through email).
3. Answers should be “HAND-WRITTEN” on any large size paper sheets (for example: A4 or Legal
size paper sheets).
4. Students should scan the answer sheets or take photos of the answer sheets and submit the same to the
concerned teacher in “SINGLE PDF FILE” through email. (multiple files, multiple mails, files other
than PDF format will not be entertained – strictly follow the instructions and submit only one PDF file
through email)
5. Students must ensure to write “Name”, “Roll Number”, “Program of Study”, “Semester” and “Title
of the Course” AT THE TOP OF ANSWER SHEET and in SUBJECT of the email.
6. Strict disciplinary actions may be imposed upon any student found to be guilty of cheating or any
academic dishonesty.

Welcome to the Examination

Email: ammarforone@gmail.com

MID TERM EXAMINATION

Q1) From the given data, calculate (1) order point (2) normal maximum inventory (3) absolute maximum
inventory (4) Determine the cost of storing one unit for a year.
Order quantity 8000 units, order cost per order $160, safety stock 600 units, lead time 12 days, working
days per year 260, maximum daily use 460 units which is a 160% of minimum daily use, normal daily use
400 units. (4)

Q2) Royal Company which is known as LED Lights repairs Company. It uses 38,000 units of a part that
is used in LED Lights each year. Minimum and maximum consumptions of units are 100 and 300 units
respectively and has a lead time of 30 days. The cost to place an order is $30 and cost of carry one unit of
inventory is $4 per year. Company orders in lots of 500 units presently.
Requirements: Determine savings if EOQ ordered. (5)
Q4) The following information was extracted from Nicholson Company for 2020.
Raw-material-purchases……………………………………… $ 185,000
Direct labor…………………………………………………… 264,000
Indirect labor…………………………………………………. 119,000
Selling and administrative salaries…………………………… 137,000
Building depreciation..……………………………………….. 90,000
Other selling and administrative expenses…………………… 225,000
Other factory costs…………………………………………… 360,000
Sales revenue ……………..………………………………… 1,595,000
Note: 22 % of building was used for selling and administrative functions.
Inventory data:
January 1 December 31
Raw material………………………………………………… $ 16,800 $ 19,200
Work in process……………………………………………… 36,700 63,100
Finished goods .……………………………………………... 112,100 98,900
Required: Compute the Company’s cost of goods sold. (4)

Q5) Explain in detail the economic order quantity theory in your own words. (12)
Q6) Explain cost behavior analysis and its importance in management accounting in your own words. (10)

FINAL TERM EXAMINATION

Q1) Zidaan Company produced and sold 60,000 compact disks each year at a price of $22 per disk. Annual fixed
cost of a Company is $252,000 out of which $180,000 allocated to manufacturing and the remaining to marketing
department. Variable manufacturing costs and variable marketing costs are $7 and $3.5 per unit.
Required.
1. Compute break-even point in sales dollars for the year for Zidaan.
2. Compute the number of sales units required to earn a net income of $190,000 during the year.
3. Compute the selling price that provides the same contribution-margin ratio in the coming year, if variable
manufacturing cost increased by 10%. Show your working. (4)

Q2) Zolton Company expects to incur the following cost to produce and sell 80,000 units of its products.
Variable and fixed manufacturing costs are $220,000 and $90,000 respectively. Variable and fixed marketing and
administrative expenses are $110,000 and $65,000
Required:
1. What price does the Company have to charge for the product in order just to break even if 75,000 units are
produced and sold?
2. If management decides on a price of $9 and has a profit objective of 13% of sales, what sales volume is required?
(4)
Q3) Corrigan Enterprises produced two electrical component models. Data of each model is as follows. For Model
no. 6000: Variable cost is $50.00 per unit, annual fixed cost is $200,000. For Model no. 4000: Variable cost is
$52.00 per unit, annual fixed cost is $190,000.Selling price of model no. 6000 is $90 per unit and $100 for model
no. 4000. Maximum ten machines can be hired for the production of Model no. 6000 and maximum five machines
can be hired for the production of second model. Supplier will charge the rent $40,000 per machine per annum that
produced Model 6000 and for other model he will charge $50,000 per machine per annum. The production capacity
of a machine which produce model 6000 and model 4000 is 1,500 units and 2,500 units respectively.
Required: How many units must the company sell to break even if Model no. 6000 is selected? (9)
Q4) Over the past few months, Wilson Tech Company produced and sold 10,000 units of Wartex each
month. Monthly costs for Wartex are as follows:
Direct materials……………………………………………………… $ 25,000
Direct labour………………………………………………………… 45,000
Variable factory overhead…………………………………………… ?
Fixed factory overhead……………………………………………… 45,000
Variable marketing expenses (Shipping and sales commissions)…… one half of variable FOH
Allocated marketing and administrative expenses…………………… 30,000
Total costs……………………………………………………. $190,000
The normal sales price is $25.00 per unit. One of the company’s sales person has been negotiating a
contract with a prospective customer who has offered to purchase 16,000 units of Wartex for $12.00 per
unit. The salesperson does not expect any repeat business from this customer after this sale and does not
believe that this sale will affect the normal sales of Wartex. The company has a production capacity
sufficient to produce only 16,000 units of Wartex. As a consequence, the Company would have to rent
additional equipment at a cost of $10,000 and pay overtime in the amount of $15,000 to manufacture the
additional quantity of Wartex required.
Required: Prepare a differential cost analysis showing whether the Company should accept this special
order. (4)

Q5) Four years ago A. ltd purchase a leather cutting machine costing $30,000 and depreciate it using fixed
installment method. Company can save annual operating expenses of $5,400 if old machinery is replaced
by the new one. Old machinery has only one year remaining life and A. ltd. Can purchase the new
machinery for $4,000, but it would last only a year. Company thinks that it bears the loss of $600 if new
machinery purchased that is why company is against the purchase of new machinery.
Required: What you think that Company analysis is correct or wrong. Justify your answer. (4)

Q6) What we discuss about differential cost analysis in class? Explain in detail in your own words.
(15)

GOOD LUCK