Managem Course ‘Part + -A-Managemont ecousting & ae ores aking «don MOY 2010 Roll No. .. Total No. of Questions ~ 5 Total No. of Printed Pages — 6 Time Allowed —3 Hours ‘Maximum Marks ~ 100 LOM Answer alll questions. All questions carry equal marks. Marks 1. Neel Candy Company is a wholesale distributor of candy. The company services 4+84+8 groceries, convenience stores, and drugstores in a large metropolitan area. Small but 20 steady growth in sales has been achieved over the past few years, while candy prices have been increasing. The company is formulating its plan for the coming fiscal year. Presented below are the data used to project the current year’s after-tax net income of % 2,64,960. __ Average selling price 9.60 per box Average variable costs : Candy production % 4.80 per box Selling expenses 0.96 per box Annual fixed costs ‘ Selling %3,84,000 Administrative % 6,72,000 Expected annual sales volume 3,90,000 boxes ‘Tax rate 40% Manufacturers of candy have announced that they will increase prices of their products at an average of 15% in the coming year due to increase in raw materials (sugar, cocoa, peanuts, etc.) and labour costs. Neel Candy Company expects that all other costs will remain at the same rates or levels as the current year. (@) What is Neel Candy Company’s break-even’ point in boxes of candy for the ‘current year? LOM PTO.@ LOM Marks (b) What selling price per box must Neel Candy Company charge to cover the 15% increase in variable production costs of candy and still maintain the current contribution margin percentage ? (©) What volume of sales in Rupees must Neel Candy Company achieve in the coming year to maintain the same net income after taxes, as projected for the current year, if the selling price of candy remains at € 9.60 per box and the variable production costs of eandy increases by 15% ? Beta Lid. receives an order for 15 numbers of a special plrpose machine tool to be 20 executed over a period of four years. The company schedules its production in such a way that the rate of production will double that ofthe previous year Beta Ltd. will recruit for this purpose 10 technocrats who will work 5 hours a day for 240 days in a year. In case of necessity it will be extended to 6 murs per day for 300 days in a year. The technocrats will be given special training for 2000 hours which will be a part of their working hours in year 1. The training would enable a learning curve ratio of 80%. The labour cost of training and other associated costs will be @ part ofthe initial capital investment. In case of excess the technocrats will be used on other contracts and will be paid separately. Following are the details : Selling price per machine % 25 lakhs ‘Materials and other components cost per machine © lakhs Labour rate per hour z= 100 Variable overheads 20% of labour cost Specific fixed over cost per annum @ 3 lakhs ‘Apart from the initial capital investment of © 150 lakhs all cash flows can be ‘assumed to arise at year ends. The company has a cost of capital of 15%. ‘You are required to calculate : (The worth of the order. i) Other factors to be considered before a final decision is made, LOM@) LOM Marks Mis Cyber Info Tech Inc. is currently engaged in manufacturing four products, 6+8+6 Details of the four products and relevant information are given below : ed Particulars ae ixermal | Ups | Foot podals Output in units 120 100 | 80 120 Cost per unit: Direct Material (2) 40 so | 30 60 Director Labour @ 28 21 14 21 Machine hours (per unit) 4 a: o| a) 3 All the four products are usually produced in production runs of 20 units and sold in batches of 10 units each. The production overhéad is currently absorbed by using machine hour rate, and the total of the production overhead for the period has been analyzed as follows : Particulars Amount @), Machine Department Cost (rent, business rates, depreciation and supervision) 10,430 Set-up cost 5,250 Stores consumables : 3,600 Inspection/quality control 2,100 ‘Materials handling and dispatch 4,620 26,000 i ‘You have ascertained the following cost drivers to be used for the overhead costs, Cost Cost Drivers Set up costs Number of production runs Stores and consumables Requisition raised” Inspection / quality control ‘Number of production runs Materials handled and dispatch | Orders executed LOM P.L.O.