INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE

EPGPK08
End Term CMA 2022

Name: ______________________________ Roll No. _________________

Invigilator’s Signature…………………………………….

Max Time: 120 min plus 15 min for scanning and uploading Date:
Max Marks: 75
Read Instructions Carefully
a) FOR INCORRECT METHODS/incomplete steps-- THERE IS NO STEP MARKS
b) Please ensure that the rough work if any, notes and assumptions are properly mentioned/shown.
c) Marks are shown against each question.
d) All questions are compulsory. This is an open Book exam, pen and paper mode only. Start
each answer from a fresh page. Write the answers in order of appearance. Negative marks for
not following the order and/or writing the answers in an untidy manner.
e) ENSURE THAT YOU WRITE YOUR ROLL NUMBER, page number, and put your signature
on all the pages.
f) Negative marks will be added for late submissions and will be decided by the subject professor.
g) Total time is 135 min including writing, scanning and uploading in lms, if conducted online.
Otherwise, the exam time is only 120 mins.

Q1. Generally, companies follow one of two broad cost strategies: offering a quality product
at a low price, or offering a unique product or service priced higher than the competition. Is it
possible to follow a strategy that is "in the middle"? (4 marks) (Max 10 lines)
Q2. Why do organizations use budgeted rates instead of actual rates to allocate the costs of
support departments to each other and to user departments and divisions? Explain (4 marks)
(max 10 lines)
Q3. Harris, Inc., has just completed two jobs: Job A and Job B, which were similar in terms
of complexity, production processes, and units manufactured. Job A was manufactured by
Joe who earns Rs. 14 per hour, whereas Job B was completed by Susan who earns Rs. 20 per
hour. If Joe and Susan are equally efficient, would the company be better off using direct
labor cost or direct labor hours as the cost driver in its predetermined overhead rate? Briefly
explain. (4 marks) (Max 10 lines)
Q4. In discussing the operation of her automobile, a doctor once observed that gasoline is a
fixed cost because the cost per gallon is relatively stable. Insurance, on the other hand, is a
variable cost because the cost per mile varies inversely with the number of miles driven. Do
you agree with the doctor's observations? Give your reasons for yes/no. (4 marks) (Max 10
lines)
Q5. Madi Corporation has a single facility that it uses for manufacturing, sales, and
administrative activities. Should the company's building depreciation charge be expensed in
its entirety or is a different accounting procedure appropriate? Think in different types of
cost. Explain. (4 marks) (Max 10 lines)
Q6. Coffee Platch is an espresso stand in a downtown office building. The average selling
price of a cup of coffee is 2.39 and the average variable expense per cup is 0.47. Other
information are as follows:
i. The average fixed expense per month is 1255.
ii. The target profit for the month is 2600.
iii. Sales increases by 15%

Determine the following (show calculation):

a. Cups of coffee would have to be sold to attain the target profit.
b. Sales revenue that must be generated to attain the target profits
c. CM per unit
d. CM ratio
e. BE in units
f. BE in sales
g. MOS in Units
h. MOS ratio
i. MOS
j. OL
k. Increase in profit %
(18 marks)

Q7. Look at the following data:

Service departments Operation departments

Admin Bacs Accounting others
Department Rs 180000 Rs 90000 Rs 190000 Rs 900000
cost before
allocation
No. of 15 10 20 80
employees
No. of PCs 2 20 18 102
Other information is as follows: Bacs: Business administration computer services
What are the service departments? Show the allocation bases with respect to the service
departments. Then, rank the service departments for step down method of redistribution of
OH. Give proper reasons for your ranking of service departments. (9 marks)

Q8. The following data relate to the manufacture of a standard product during a four week
period ending June 30, 2019: (in ) Rs.
DM 3000
Wages 7000
Machine hours worked 1000
Machine hour rate 0.50
Office OH @ 20% on work cost
 Selling OH per unit 0.08
Units produced 20000
Units sold @ Re. 1 per unit 16000
Prepare a cost sheet for total and per unit; and profit total and per unit (10 marks)

Q9. (8 marks)

Q9.1.  Refer to the figure above. Line A is the: ----------------------

Q9.2.  Refer to the figure above. Line C represents the level of: ----------------------
 
Q9.3.  Refer to the figure above. The slope of line A is equal to the: 
A. fixed cost per unit.
B. selling price per unit.
C. profit per unit.
D. variable cost per unit.
E. unit contribution margin.
 
Q9.4. Refer to the figure above. The slope of line B is equal to the: 
A. fixed cost per unit.
B. selling price per unit.
C. variable cost per unit.
D. profit per unit.
E. unit contribution margin.
 

Q9.5. Refer to the figure above. The vertical distance between the total cost line and the total
revenue line represents: 
A. fixed cost.
B. variable cost.
C. profit or loss at that volume.
D. semi-variable cost.
E. the safety margin.
 

Q9.6. Refer to the figure above. Assume that the company whose cost structure is depicted in
the figure expects to produce a loss for the upcoming period. The loss would be shown on the
graph: 
A. by the area immediately above the break-even point.
B. by the area immediately below the total cost line.
C. by the area diagonally to the right of the break-even point.
D. by the area diagonally to the left of the break-even point.
E. in some other area not mentioned above.
 
Q9.7.  Refer to the figure above. At a given sales volume, the vertical distance between the
fixed cost line and the total cost line represents: 
A. fixed cost.
B. variable cost.
C. profit or loss at that volume.
D. semi-variable cost.
E. the safety margin.
 

Q9.8.  Refer to the figure above. Assume that the company whose cost structure is depicted in
the figure expects to produce a profit for the upcoming accounting period. The profit would
be shown on the graph by the letter: 
A. D.
B. E.
C. F.
D. G.
E. H.

Q10. Strongheart Enterprises anticipated selling 27,000 units of a major product and paying
sales commissions of $6 per unit. Actual sales and sales commissions totaled 27,500 units
and $171,400, respectively. Calculate the budget performance based on both static budget
and flexible budget basis and give the cost variance report (show calculation) : (10 marks)
Static Budget variance: …………

Flexible budget variance: ……………..