problem 1: prepare short notes on:
a) P V Ratio.
b) Margin of Safety.
c) Material Variances.
d) Absorption Costing.
problem 2: Describe the meaning of the term `variance analysis’. What is its significance in controlling and monitoring costs?
a) What are the pre-requisites of installation of responsibility accounting system?
b) Differentiate between ‘cost centre’ and ‘profit centre’.
a) Differentiate between standard costing and budgetary control.
b) Computation of variances in standard costing is not an end in itself, however a means to an end. Discuss.
Ramesh developed original specification of a product and founded Ramesh Manufacturing Ltd. In the year 2007 the firm manufactured 980 nos at an average price of Rs.900/- each. In the year 2008 due to continuous price rise of the inputs, he increased his prices at an average of 12%, as he knew he could sell plant’s full capacity of 980 nos per year. In spite of price rise for the product, which sold for over Rs.1000/- for the first time? Ramesh was surprised to learn in late 2008 (as might be seen from the financial statements) that Ramesh Manufacturing Ltd shows a decline in earnings and still worse, decline in cash flow.
His accountant has bought the given:
i) We are following FIFO system for the main purpose of issues.
ii) Costs are going up faster than 12% and they will go up further in the year 2009.
iii) We are not setting aside sufficient to replace the machinery; we require to set aside Rs.1,65,000/- not Rs.1,50,000/- so as to be able to buy new machinery.
iv) It is still not late to switch to LIFO for 2008. This will decrease closing inventory to Rs.3,30,000/- and increase cost of goods sold
a) Determine the weighted average inflation factor for the firm using LIFO?
b) If the firm desires a 15 % profit margin on sales, how much must the firm charge for the product per unit?