Numer

ical
s

1)Twooft
hedi
vi
sionsoft
hePQRCor
por
ati
onar
etheI
nter
medi
ateDi
vi
sionandt
heFi
nal
Div
isi
on.The

I
nter
medi
ateDi
vi
sionpr
oducest
hreepr
oduct
s:A,
B,andC.Nor
mal
l
ythesepr
oduct
sar
esol
dbot
hto

out
sidecust
omer
sandt
otheFi
nal
Div
isi
on.TheFi
nal
Div
isi
onusesPr
oduct
sA,
BandCi
nmanuf
act
uri
ng

Pr
oduct
sX,
Y,andZ,
respect
ivel
y.I
nrecentweeks,
thesuppl
yofPr
oduct
sA,
B,andChast
ight
enedt
osuchan

ext
entt
hatt
heFi
nal
Div
isi
onhasbeenoper
ati
ngconsi
der
abl
ybel
owcapaci
tybecauseoft
hel
ackoft
hese

pr
oduct
s.Consequent
ly,
theI
nter
medi
ateDi
vi
sionhasbeent
oldt
osel
lal
li
tspr
oduct
stot
heFi
nal
Div
isi
on.

Thef
inanci
alf
act
saboutt
hesepr
oduct
sar
easf
oll
ows:

I
nter
medi
ateDi
vi
sion

Pr
oductA(
Rs.
) Pr
oductB(
Rs.
) Pr
oductC(
Rs.
)

Tr
ansf
erPr
ice 600 600 900

Var
iabl
eManuf
act
uri
ngCost 180 360 300

Cont
ri
but
ionPerUni
t 420 240 600

Fi
xedCost
s(t
otal
) 30,
00,
000 60,
00,
000 45,
00,
000

TheI
nter
medi
ateDi
vi
sionhasamont
hlycapaci
tyof50,
000uni
ts.Thepr
ocessi
ngConst
rai
ntsar
esuch

t
hatcapaci
typr
oduct
ioncanbeobt
ainedonl
ybypr
oduci
ngatl
east10,
000uni
tsofeachpr
oduct
.The

r
emai
ningcapaci
tycanbeusedt
opr
oduce20,
000uni
tsofanycombi
nat
ionoft
het
hreepr
oduct
s.

TheI
nter
medi
ateDi
vi
sioncannotexceedt
hecapaci
tyof50,
000Uni
ts.

TheFi
nal
Div
isi
onhassuf
fi
cientcapaci
tyt
opr
oduceabout40per
centmor
ethani
tisnowpr
oduci
ng

becauset
heav
ail
abi
l
ityofPr
oduct
sA,
B,andCi
sli
mit
ingpr
oduct
ion.Al
so,
theFi
nal
Div
isi
oncansel
l

al
lthepr
oduct
sthati
tcanpr
oduceatt
hepr
ocessi
ndi
cat
ed.

Fi
nalDi
vi
sion

Pr
oductX(
Rs) Pr
oductY(
Rs) Pr
oductZ(
Rs)

Sel
l
ingPr
ice 1,
680 1,
800 1,
800

Page1of1
 Var
iabl
eCost

I
nsi
dePur
chase 600 600 900

Ot
herVar
iabl
eCost 300 300 480

Tot
alVar
iabl
eCost 900 900 1,
380

Cont
ri
but
ionperUni
t 780 900 420

Fi
xedCost
s(Tot
al) 60,
00,
000 60,
00,
000 1,
20,
00,
000

1) Ify
ouweretheManageroft
heInt
ermedi
ateDi
vi
sion,
whatpr
oduct
swoul
dyousel
ltot
heFi
nal
Div
isi
on?whati
sthe
amountofprof
itt
haty
ouwouldearnont
hesesal
es?

2) I
fyouweretheManageroftheFi
nalDi
vi
sion,Whatpr
oductswoul
dyouorderf
rom t
heInt
ermedi
ateDi
vi
sion,
assumi
ng
t
hattheI
nter
medi
ateDivi
sionmustsel
lal
l i
tspr
oduct
iontoyou?Whatpr
ofi
tswouldyouear
n?

3) Whatpr
oducti
onpatt
ernopt
imizestot
alcompanypr
ofit
?Howdoesthi
saf
fecttheprof
it
softheInter
mediat
eDi
visi
on?I
f
youwer
etheexecut
ivevi
cepresi
dentofPQRandprescri
bedt
heopt
imum pat
tern,
what,i
fanyt
hing,woul
dyoudoabout
t
hedist
ri
but
ionofpr
ofit
sbetweenthetwodiv
isi
ons?

2) Fr
om t
hef
oll
owi
ngpr
ojectdet
ail
s,cal
cul
atet
hesensi
ti
vi
tyof
,

(
a)Pr
ojectCost
,

(
b)Annual
CashFl
ow,

(
c)CostofCapi
tal
.

Whi
chv
ari
abl
eismor
esensi
ti
ve?

Pr
ojectCost Rs.12,
00,
000

Annual
CashFl
ow Rs.04,
50,
000

Li
feoft
hePr
oject 4Year
s

CostofCapi
tal 14%

Theannui
tyf
act
or@14%f
or4y
ear
sis2.
9137andat18%f
or4y
ear
sar
e2.
6667

3) Thef
oll
owi
ngi
sthepr
ofi
tpl
anpr
epar
edf
oracompanyABCLt
d.Fort
hey ng31stMar
earendi ch,

2016

Page2of2
 Per
for
manceEv
aluat
ionRepor
t

Par
ti
cul
ars Pr
oductLi
ne Tot
al(
RsLakhs)

A B C

Sal
esRev
enue 1,
000 600 400 2,
000

Cont
rol
l
abl
eVar
iabl
es 500 360 280 1,
140

Costtomakesal
es 500 240 120 860
Contr
oll
abl
eCont
ribut
ion
Margi
n

Commonfi
rm-
widecost
s 660
(f
ixed)

Pr
ofi
t 200

Thei
ncomest
atementf
ort earended31stMar
hey ch2015showedt
hef
oll
owi
ng,

Par
ti
cul
ars Pr
oductLi
ne Tot
al(
RsLakhs)

A B C

Sal
es 660 660 880 2,
000

Less:
Speci
alDi
scount 20 - - 20

640 660 880 2,

180

Cont
rol
l
abl
eVar
iabl
es 332 400 620 1,
352

Costt
omakeandsel
l

Cont
rol
l
abl
eMar
gin 308 260 260 828

Commonfi
rm-
wideCost
s 670
(f
ixed)

Pr
ofi
t 158

Speci
aldi
scount
swer
egr
ant
edonl
argeor
der
sandaddi
ti
onal
appr
opr
iat
ionofRs.6l
akhswas

appr
ovedf
oradv
ert
isi
ngandsal
espr
omot
ion.Ther
ewasnochangei
nthesel
l
ingpr
ices.

Youar
erequi
redt
opr
epar
eananal
ysi
soft
hechangesi
nneti
ncomet
hatwoul
dbehel
pful
inf
ixi
ng

r
esponsi
bil
i
tyusi
ngt
hecont
ri
but
ionappr
oach.
Page3of3
4) Fr
om t
hef
oll
owi
ngdet
ail
s,det
ermi
net
heneti
ncomeofPQSLi
mit
edf
ort earended31stMar
hey ch

2018:

Rs

Sal
es 10,
00,
000

CostofSal
es 6,
00,
000

Var
iabl
eExpenses 1,
80,
000

Fi
xedEx
penses(
fort
hepr
ofi
tCent
ers) 90,
000

Cont
rol
l
abl
eExpenses 10,
000

Ot
herAl
l
ocat
ions 10,
000

Tax@ 2% 20,
000

5) Thef
oll
owi
ngdet
ail
sar
egi
venf
orUni
tXandUni
tYofacompany
,

Ex
pect
edMont
hlySal
est
oBusi
nessUni
tY 5000Uni
ts

Var
iabl
eCostPerUni
t Rs5

Mont
hlyFi
xedCostassi
gnedt
othePr
oduct Rs.20,
000

I
nvest
menti
nwor
kingcapi
tal
andot
herf
aci
l
iti
es Rs.1,
20,
000

Compet
it
iveRet
urnonI
nvest
ment
s 10%

Youar
erequi
redt
ocal
cul
atet
het
ransf
erpr
ice.

6) Ther
ear
ethr
eeBusi
nessuni
tsofacompanymanuf
act
uri
ngchemi
cal
product
s.Thef
oll
owi
ngdat
a

i
sav
ail
abl
efort
hey
ear2015:

Busi
nessUni
t NetSal
es Oper
ati
ngCost
s Oper
ati
ngAsset
s

(
Rs) (
Rs) (
Rs)

A 3,
00,
000 2,
55,
000 1,
25,
000

Page4of4
 B 15,
00,
000 12,
00,
000 7,
50,
000

C 14,
00,
000 10,
50,
000 12,
50,
000

St
atewhi
chbusi
nessuni
tist
hebestper
for
merasperROI
?

7) TheZmanuf
act
uri
ngcompanypr
oducesaspeci
alki
ndofcementwhi
chi
spackagedandsol
din

bagsof20kgs.Dur
ingt
hepastmont
hit
srev
enueandcostpat
ter
nswer
easf
oll
ows:

Sel
l
ingPr
iceperBag Rs.300

Var
iabl
eCostPerbag Rs.160

Fi
xedCost Rs.1,
00,
000

Quant
it
y 3,
000bags

Consi
dereachoft
hef
oll
owi
ngsepar
atel
y:

1) Whati
sthebr
eakev
enquant
it
y?

2) Assumea10%i
ncr
easei
nsel
l
ingpr
ice.Whati
sthenewbr
eakev
enpoi
nt?

3) Assumea50%i
ncr
easei
nFi
xedCost
.Whati
sthenewbr
eakev
enpoi
nt?

4) Assumea10%i
ncr
easei
npr
oduct
ionv
olume,
whati
stheper
cent
agechangei
npr
ofi
ts?

5) Assumet
hatt
hev
ari
abl
ecosti
ncr
easest
oRs.200perbag.Whati
sthenewbr
eakev
en?

8)Det
ermi
net
hesal
esofaf
ir
m wi
tht
hef
oll
owi
ngf
inanci
aldat
a:

Cur
rentRat
io–1.
5

Aci
dTestRat
io–1.
2

Cur
rentLi
abi
l
iti
es–8,
00,
000

I
nvent
oryTur
nov
erRat
io–5Ti
mes

9)TheBudgetv
ersusAct
ual
compar
isonf
orDi
vi
sionABCofcompanyXatt
heendoft
hehal
fyeari
sas

f
oll
ows:

Budget(
RsLakhs) Act
ual(
RsLakhs)

Page5of5
 Sal
es 400 370

Mat
eri
alandot
herv
ari
abl
ecost
s 240 218

Empl
oyeeandot
herFi
xedCost
s 60 60

Sal
esPr
omot
ion 20 14

Oper
ati
ngPr
ofi
t 80 78

NetWor
kingCapi
tal 200 206

Fi
xedAsset
s 80 74

Fort
hisdi
vi
sion,
whi
char
easofper
for
mancewoul
dyoul
i
ket
oinv
est
igat
eandwhatwoul
dbet
he

cor
rect
iveact
ion,
ifany
,youwoul
dli
ket
oouti
npl
ace?

10)Raj
endr
aLt
d.Pr
oducesandsel
l
s2500uni
tsofapr
oductpermont
honanav
erage.Thest
andar
dcostperuni
t

i
sgi
venbel
ow:

Di
rectMat
eri
al:
16Kg@ Rs.10perKg

Di
rectLabor
:5hour
s@ Rs.8perLaborHour

Var
iabl
ePr
oduct
ionOv
erheads:
5Hour
s@ Rs.4perhour

Fi
xedpr
oduct
ionOv
erheads:
5hour
s@ Rs.12perhour

St
andar
dSel
l
ingPr
iceperuni
tisRs.350

TheBudgetf
ort
hemont
hofJanuar
y2016i
ncl
udest
hef
oll
owi
ngdet
ail
s:

Page6of6
Di
rectLabor
:12500hour
s

Var
iabl
ePr
oduct
ionOv
erheads:
Rs.50,
000

Fi
xedPr
oduct
ionOv
erheads:
Rs.1,
50,
000

11)Att
hebegi
nni
ngoft
heJanuar
y2016,
fini
shedst
ockwas2000uni
ts.Wor
kinPr
ogr
essi
snegl
i
gibl
eand

i
gnor
ed.

Act
ual
Dat
afort
hemont
hisgi
venbel
ow:

Sal
es2400uni
ts@ Rs.320peruni
t

Pr
oduct
ion:
2600uni
ts

Di
rectMat
eri
alConsumed:
42500Kg@ Rs.9.
50perKg

Di
rectWages:
13200hour
s@ Rs.7.
80perhour

Var
iabl
ePr
oduct
ionOv
erheads:
Rs.52000

Fi
xedPr
oduct
ionOv
erheads:
Rs.1,
52,
000

Youar
erequest
edt
ocomput
e

1. Rev
enueVar
iance

2. CostVar
iance

3. Oper
ati
ngVar
ianceSt
atement

4. Oper
ati
ngPr
ofi
tSt
atement

12)TheSal
esManagerofPandaLi
mit
edi
sjudgedbyt
het
otal
sal
es.Exceedi
ngt
hesal
esbudgeti
sconsi
der
ed

goodper
for
mance.Thesal
ebudgetandt
hecostdat
afort
hey
ear2016ar
eshownbel
ow

Par
ti
cul
ars Pr
oduct
s RS.

Sar
i LongCl
oth BedSheet
s Tot
al

Sal
esBudget 4,
50,
000 9,
00,
000 16,
50,
000 30,
00,
000

Page7of7
 Var
iabl
eCost 2,
25,
000 4,
05,
000 4,
95,
000 11,
25,
000

Cont
ri
but
ion 2,
25,
000 4,
95,
000 11,
55,
000 18,
75,
000

Act
ual
Sal
es 15,
00,
000 12,
00,
000 6,
00,
000 33,
00,
000

Act
ual
Pri
ceswer
eequal
tobudget
edpr
iceandv
ari
abl
ecosti
ncur
redwasasbudget
edperuni
t.

(
a) Doest
hesal
esmanagerper
for
m wel
l
?Suppor
tyouranswerwi
thCal
cul
ati
ons

(
b) Suggestbet
terper
for
mancemeasur
ementcr
it
eri
ont
obeusedbyt
hecompany
.

13)Fr
om t
hef
oll
owi
ngi
nfor
mat
ionpr
epar
eapr
icel
evel
adj
ust
edst
atementofcashf
lowandascer
tai
n

t
hemonet
aryl
ossduet
oinf
lat
ion.

Dat
e Par
ti
cul
ars Rs. Pr
iceI
ndex

Januar
y1,
2016 Openi
ngCash 15000 100

Febr
uar
y1,
2016 CashSal
es 45000 103

Mar
ch1,
2016 Pay
mentt
oCr
edi
tor
s 25000 105

Mar
ch31,
2016 Pay
mentf
orExpenses 3000 108

14)Af
ir
m hast
otal
annual
sal
es(
all
Credi
t)of10,
00,
000andaccount
srecei
vabl
eof1,
60,
000.Howr
api
dly(
in

howmanyday
s)mustaccount
srecei
vabl
ebecol
l
ect
edi
fmanagementwant
stor
educet
heaccount
s

r
ecei
vabl
eto1,
20,
000?(
Assumea360-
dayy
ear
)

15) Cal
cul
atet
hebr
eak-
evenpoi
nti
nuni
tsandr
upeesf
rom t
hef
oll
owi
ngdat
a:

Cont
ri
but
ionmar
ginr
ati
o30%

Cont
ri
but
ionmar
ginperuni
t6

Fi
xedCostpermont
h20,
000

I
ftheneti
ncomei
sRs.60,
000,
whati
stheamountofsal
esi
nrupees?

Page8of8
16) Af
ir
miswonder
ingwhet
hert
osel
lgoodst
oacust
omeroncr
edi
tornot
.Ther
evenuesf
rom sal
ewi
l
lber
s.

10,
000andt
hecostofsal
ewi
l
lbeRs.8,
000.Whatshoul
dbet
hemi
nimum pr
obabi
l
ityt
hatt
hecust
omerwi
l
l

pay
,inor
dert
osel
lpr
ofi
tabl
y?

17) Af
act
oryi
scur
rent
lywor
kingat50%capaci
tyandpr
oduces10,
000uni
ts.At60%capaci
tyut
il
izat
ionr
aw

mat
eri
alcosti
ncr
easesby2%andsel
l
ingpr
icef
all
sby2%.At80%capaci
tyut
il
izat
ion,
rawmat
eri
alcost

i
ncr
easeby5%andsel
l
ingpr
icef
all
by5%.At50%wor
kingt
hepr
oductcostRs.180/
-andi
ssol
datRs.200

peruni
t.Theuni
tcosti
fRs.180i
smadeupasf
oll
ows:

Mat
eri
al–Rs.100,
Labor–Rs.30,
Fact
oryOv
erhead–Rs.30(
40%ofFi
xed)
,Admi
nist
rat
iveOv
erhead–

Rs.20(
50%ofFi
xed)

Est
imat
epr
ofi
tsatal
lthr
eel
evel
sofcapaci
tyut
il
izat
ion.

18)TheBudgetv
ersusAct
ual
compar
isonf
orDi
vi
sionXYZofMi
l
kyWayCompanyatt
heendofhal
fyeari
sas

Fol
l
ows

Head Fi
gur
esi
nLacs

Budget
ed Act
ual

Sal
es 400 370

Mat
eri
alandOtherVar
iabl
e 240 218
Cost
s

Empl
oyeeandot
herf
ixedcost
s 60 60

Sal
espr
omot
ion 20 14

Oper
ati
ngPr
ofi
t 80 78

NetWor
kingCapi
tal 200 206

Fi
xedAsset
s 80 74

Fort
hisdi
vi
sion,
whi
char
easofper
for
mancewoul
dyoul
i
ket
oinv
est
igat
eandwhatwoul
dbet
hecor
rect
ive

act
ion,
ifany
,youwoul
dli
ket
oputi
npl
ace?

19)TheBudgetv
ersusAct
ual
compar
isonf
orDi
vi
sionXYZofMi
l
kyWayCompanyatt
heendofhal
fyeari
sas

Page9of9
 Fol
l
ows

Head Fi
gur
esi
nLacs

Budget
ed Act
ual

Sal
es 400 370

Mat
eri
alandOtherVar
iabl
e 240 218
Cost
s

Empl
oyeeandot
herf
ixedcost
s 60 60

Sal
espr
omot
ion 20 14

Oper
ati
ngPr
ofi
t 80 78

NetWor
kingCapi
tal 200 206

Fi
xedAsset
s 80 74

Fort
hisdi
vi
sion,
whi
char
easofper
for
mancewoul
dyoul
i
ket
oinv
est
igat
eandwhatwoul
dbet
hecor
rect
ive

act
ion,
ifany
,youwoul
dli
ket
oputi
npl
ace?

Theor
yQuest
ionBank:

1.
Wri
teShor
tNot
esonAnyTwooft
heFol
l
owi
ng

1. Zer
oBasedBudget
ing

2. Bal
anceScor
eCar
d

3. St
rat
egyandTact
ics

2. Whati
sEconomi
cVal
ueAddi
ti
on?I
sitsuper
iort
oROI
?Just
if
yyourst
atementgi
vi
ngsui
tabl
e

exampl
es.

3.Whati
saPr
ofi
tCent
er?Whatar
etheChar
act
eri
sti
csofPr
ofi
tCent
re?

4.St
atet
heconceptofManagementByObj
ect
ives(
MBO)
?Hi
ghl
i
ghtt
heweaknessofMBO

5.Expl
ainbr
ief
lyt
hev
ari
ousst
agesofmanagementcont
rol
process.Pl
easeexpl
aint
hesal
i
entf
eat
uresofeach.

6.Whati
smanagementaudi
t?Whatar
eit
sobj
ect
ives?

7.Expl
aint
het
erm St
rat
egi
cBusi
nessUni
t?Howi
saSt
rat
egi
cBusi
nessuni
tcr
eat
edandenumer
atet
he

Page10of10
 adv
ant
agesanddi
sadv
ant
agesofcr
eat
ingaSt
rat
egi
cBusi
nessUni
tgi
vi
ngsui
tabl
eexampl
es.

8.St
atet
hei
mpor
tanceoft
heconceptofst
rat
egyi
ntheManagementCont
rol
Syst
emsgi
vi
nga

sui
tabl
eexampl
eandal
sobr
ingouti
tsi
mpor
tance.

9.Expl
aint
het
erm Ret
urnonNetwor
th?Whati
sit
ssi
gni
fi
cancei
nmanagementcont
rol
?

10.
Dist
ingui
shbet
weenst
rat
egyandpol
i
cy.

11.St
atet
hei
mpor
tanceofManagementbyObj
ect
ivesi
nanor
gani
zat
iongi
vi
ngasui
tabl
eexampl
e.

12.Expl
aint
hemet
hodsav
ail
abl
eformeasur
ementofper
for
manceofi
nvest
mentcent
ers

13.Br
ief
lydescr
ibeov
eral
lfr
amewor
kofmanagementcont
rol
.Howdoesi
trel
atet
ost
rat
egi
cpl
anni
ngand

cont
rol
.

14.Whatar
ethedi
ff
erental
ter
nat
ivesf
ormeasur
ingt
heper
for
manceofabusi
nessuni
t?

15.Whati
sint
ernal
audi
t?Expl
aint
hei
mpor
tanceofi
nter
nal
audi
tasmanagementcont
rol
process.

16.Expl
aint
hemanagementcont
rol
syst
em i
nser
viceor
gani
zat
ion?

17.HowLi
nearPr
ogr
ammi
ngi
susedt
odet
ermi
net
hedi
vi
sional
goal
sinamul
tidi
vi
sional
company
?

18.Whati
sfi
nanci
algoal
set
ti
ng?Expl
aint
het
echni
quesoff
inanci
alf
orecast
ing

19.Whati
sanor
gani
zat
ional
behav
ior
?Whydot
hemanager
sneedaconcept
ual
framewor
kforst
udy
ingbehav
ior

i
ntheor
gani
zat
ion?

20.Whati
sRet
urnonNetWor
th?Whati
sit
ssi
gni
fi
cancei
nManagementCont
rol
?

21.
Ever
ySt
rat
egi
cBusi
nessUni
tisaPr
ofi
tCent
erbutev
eryPr
ofi
tCent
eri
snotaSt
rat
egi
cBusi
nessUni
t.

Expl
ain.

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