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Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA (PART TIME) SEMESTER 1 EXAMINATION WINTER 2018
Subject Code: 4519904 Date: 24/12/2018
Subject Name: Management Accounting
Time: 10:30AM TO 01:30PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q.1 Explain the following terms in brief:
Functions of Accounting
Trend analysis
Qualitative characteristics of financial statements
Sunk cost Opportunity cost
Fundamental accounting assumptions
Rules of Real account Nominal account.
Users of Financial Statement
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Q.2 Differentiate between Financial Accounting and Management
Accounting.
07
What do you mean by Accounting concepts? Explain any 5 accounting concepts
in detail.
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OR
'Costing system has become an essential tool in the hands of management.'
Comment.
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Q .3 Write a short note on IFRS. 0 7
Marginal costing rewards sales whereas absorption costing rewards production.
Comment.
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OR
Q.3 A product is finally obtained after it passes through three distinct processes. The
following information is available from the cost records.
Process I Process II Process III Total
Rs. Rs. Rs. Rs.
Materials 2600 2000 1025 5625
Direct wages 2250 3680 1400 7330
Production overheads 7330
500units Rs. 4 per unit were introduced in process I. Production overheads are
absorbed as a percentage of direct wages.
The actual output and normal loss of the respective processes are given below:
Output Normal loss as a percentage of input Value of scrap
(units) (per unit)
Process I 450 10% Rs. 2
Process II 340 20% Rs. 4
Process III 270 25% Rs. 5
Prepare the process accounts and the abnormal gain/ loss accounts.
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You are required to prepare Vertical Profit Loss account (with schedules) of
Sanjay Industries Ltd. for the year ending 31st March, 2018.
Particulars Debit Credit
Stock, 1st April 2017 675000
Sales 3060000
Wages 270000
Share capital (Authorised capital 200000
shares of Rs. 10 each)
900000
Discount 27000
Purchases 2205000
Carriage inward 8550
Purchase returns 90000
Patents trademark 43200
Salaries 67500
Bills receivable 45000
Sundry expenses 63450
Bills payable 63000
Rent 36000
Debtors Creditors 247500 157500
Plant Machinery 261000
Furniture Fittings 153000
Cash at bank 415800
General reserve 139500
Profit loss account, 31st March 2017 54000
Total 4491000 4491000
Adjustments:
1. Outstanding rent amounted to Rs. 7200 while outstanding salaries Rs.
8100 at the end of the year.
2. Make a provision for doubtful debts amounting to Rs. 4590.
3. Stock on 31st March 2018 was valued at Rs. 792000.
4. Depreciate plant and machinery at 14% and furniture fittings at 18%.
5. Amortise patents and trademarks at 5%.
6. Provide for managerial remuneration at 10% of the net profits before
tax.
7. Make a provision for income tax at 35%.
The board of directors proposes a dividend at 10% for the year ended 31st
March 2018 after transfer to General reserve at of profit after tax.
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Q.4
CASE STUDY
Kajal Patel has decided to purchase a personal computer. She has narrowed the
choice to two: HP and Dell. Both brands have the same processing speed, 6.4
gigabytes of hard-disk capacity, a 3.5 inch disk drive, a CD ROM drive and
each comes with the same basic software support package. Both come from
mail-order companies with good reputations. The selling price for each is
identical. After some review, Kajal discovers that the cost of operating and
maintaining HP over a three-year period is estimated to be Rs. 3,000. For Dell,
the operating and maintenance cost is Rs. 6,000. The sales agent for HP,
emphasized the lower operating and maintenance costs. The agent for Dell,
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however, emphasized the service reputation of the product and the faster
delivery time. (Dell can be purchased and delivered one week sooner than HP)
Based on all the available information, Kajal has decided to buy Dell.
What is the total product purchased by Kajal?
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When asked why she decided to buy Dell, Kajal responded, "I think that Dell
offers more value than HP". What are the possible sources of this greater value?
What implications does this have for the management accounting information
system?
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OR
Q.4 How does the strategic positioning differ for the two companies? 07
Suppose that Kajal's decision was prompted mostly by the desire to receive the
computer quickly. Informed that it was losing sales because of the longer time
to produce and deliver its products, the management of the company producing
HP decided to improve delivery performance by improving its internal
processes. These improvements decreased the number of defective units and the
time required to produce its product. Consequently, delivery time and costs both
decreased and the company was able to lower it prices on HP. Explain how
these actions translate into strengthening the competitive position of the HP PC
relative to the Dell PC. Also discuss the implications for the management
accounting information system.
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Q.5

CASE STUDY
A company operates a hotel. It is spread over six floors of a building excluding
the ground floor with a restaurant in the sixth floor. On the ground floor, the
hotel operates a sports centre including a swimming pool and a shopping
arcade.
The hotel has a capacity of 100 single rooms and 20 double rooms. The average
occupancy of both single and double rooms is expected to be 80% throughout
the year of 365 days. The rent for double room has been fixed at 125% of the
rent of a single room. Cost are as under:
Variable costs: Single rooms Rs. 220 each per day
Double rooms Rs. 350 each per day
Fixed costs: Single rooms Rs. 120 each per day
Double rooms Rs. 250 each per day
The income and costs relating to the service centres are as under:
Restaurant:
Estimated average sales per day Rs. 25000
Contribution 30% of sales
Fixed costs Rs. 800000 per annum.
Sports center:
Average number of persons expected to use the centre per day is 50.
Average contribution per day per person is Rs. 15.
Fixed costs Rs. 400000 per annum
Shopping arcade:
Average contribution per month is Rs. 35000
Fixed costs Rs. 400000 per annum.
Calculate the rent chargeable for single and double rooms per day in such a way
that the hotel earns a margin of safety of 20% on hiring of rooms.
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The hotel wants to reserve the normal occupancy of ten single rooms for its
regular customer by allowing a discount of 10% on room rent. What increase in
occupancy ratio is required in respect of the remaining rooms to earn the total
profit of above 50 lakhs?
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OR
Q.5 Evaluate the profitability of the three services centres and work for the tatal
profit of the hotel per annum based on the rent of Rs. 460 per day for single
room and Rs. 575 per day for double room.
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An associate company wishes to take the entire complex hotel on lease for a
total rent of Rs. 175 lacs for five years. The associate company is prepared to
pay the entire lease rent in advance. Taking the capital recovery factor for 10%
of return for 5 years at 3.79, advise the management of the hotel company
whether or not leasing arrangement should be entered into.
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