CWA ICWA Exam Papers Final Group IV
Management Accounting Enterprise Performance Management June 2011
This Paper has 36 answerable questions with 2 answered.
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
Answer Question No. 1 (carrying 25 marks) which is compulsory and any five more
questions(each carrying 15 marks) from the rest.
Wherever required, the candidates may make suitable assumptions and
state them clearly in the answer.
Please: (i) Answer all bits of a question at one place.
(ii) Open a new page for answer to a new question.
1. (a) Out of the different options given against each of the following statements, only one is the most appropriate option. You are required to write it down. 1×5
(i) Which of the following parameters are covered in Balanced Score Card?
(a) Customers’ Perspective;
(b) Financial Perspective;
(c) Suppliers’ Perspective.
(A) (a) and (b);
(B) (b) and (c);
(C) (a) and (c);
(D) (a),(b) and (c).
(ii) In a TQM environment, external bench marking is preferred to standard costing as aperformance measurement technique because:
(A) Standard Costs is applicable in a traditional mass–production industry.
(B) TQM refers to a pre–determined internal standard and emphasizes continuous improvement.
(C) Concept of standard costing is alien to the emphasis given on employee–empowerment in TQM.
(D) Standard costs become obsolete quickly.
(iii) The idea of value chain was first suggested by:
(A) Michael Porter;
(B) Joseph Juran;
(C) Goldratt and Core;
(D) John Shank.
(iv) Baysein decision method is used for:
(A) Make or Buy decision;
(B) To take care of uncertainty involved in introducing a new product;
(C) To determine the demand of a product;
(D) Product modification strategies.
(v) The concept of target costing originated in:
(b) State if each of the following statements is True or False: 1×5
(i) The term value has four different meanings—exchange value, cost value, use value and wealth value. (0)
(ii) The phrases—right first time or zero defects—were promoted by the Japanese Quality expert Kaoru Ishikawa. (0)
(iii) The Balance Score Card (BSC) puts more stress on financial parameters than on non–financial parameters since its objectives is the growth of the organization. (0)
(iv) The key factors of Theory of Constraints are contribution and profit. (0)
(v) EVA encourages short term performance. (0)
(c) Fill in the gap, with the proper/more appropriate word(s) given in the brackets, in each of the following sentences: 1×5
(i) PDCA refers to Plan,_____,Check, Act (Decide/Do) (0)
(ii) Optimized production Technology known as “_____” is a management philsophy developed by Dr.Eliyahu Moshe Goldratt. (Theory of Constraints/Throughput). (0)
(iii) One of the ten principles of Lean Supply Chain is to ‘make your customers and suppliers your real ‘________’.(friends/partners). (0)
(iv) The Break–Even Chart is ____because it gives a meaningful picture of a given set of cost–volume–profit relationship. (dynamic/static). (0)
(v) A good management control framework will enhance organizational adaptability, accelerate productivity and enhance _______.(competitiveness/profits). (0)
(d) Distinguish between: 2×5
(i) Strategic Planning vs. Management Control. (0)
(ii) Theory X vs. Theory Y. (0)
(iii) Management Control vs. Operational Control. (0)
(iv) Symbiotic Relationship vs. Synergistic Relationship. (0)
(v) Management Style vs. Culture. (0)
2. (a) What is Intranet? What are its advantages? 1+4 (0)
(b) what is lean manufacturing? Briefly describe the lean system. Explain how adoption of lean manufacturing affects the profitability of an organization. 2+5+3 (0)
3. (a) In Organic Chemicals Ltd.,the old boiler equipment is about to be replaced, either by a coal–fired system or by an oil–fired system. Finance costs 15% a year and the other estimated costs are as follows:
Initial cost of boiler
Annual operating costs 70
60 p.a. 100
If the company expected the new boiler system to last at least for 15 years, which system should be chosen?
Given — Annuity at 15% = 5.847. 5 (0)
(b) Even Keel Ltd., manufactures and sells a single product X whose price is Rs. 40 per unit and the variable cost is Rs. 16 per unit.
(i) If the fixes costs for this year are Rs. 4,80,000 and the annual sales are at 60% margin of safety, calculate the rate of net return on sales, assuming an income tax level of 40%
(ii) For the next year, it is proposed to add another product line Y whose selling price would be Rs. 50 per unit and the variable cost of Rs. 10 per unit. The total fixed costs are estimated at Rs. 6,66,600. The sales mix of X : Y would be 7 : 3. At what level of sales next year, would Even Keel Ltd., break even? Give separately for both X and Y the break even sales in Rupees and quantities..
4. (a) “Purpose of Sensitivity Analysis is to identify the critical variable in the project analysis.”— Discuss. 5 (0)
(b) X Ltd., is sensitive to changes in the levels of plant value, running cost and saving of a project. It is considering a project with the following cash flows:
Year Purchase of
The cost of capital is 8 %. Measure the sensitivity of the project to changes in the levels of plant value. Running costs ans savings (considering each factor at a time) such that Net Present value becomes Zero. The present value facotr st 8% ars as follows:
5. (a) What do you mean by ‘Balance Score Card’? 5 (0)
(b) Division K is a profit center which produces three products L,M &N. Each product has an external market:
Products L M N
External Market Price per unit
Variable Cost of production in Division L
Labour Hours required per unit in Div. L Rs. 48
3 Rs. 46
4 Rs. 40
Product M can be transferred to Division J, but the maximum quantity that might be required for transfer is 300 units of M.
Products L M N
The maximum External Sales are (units) 800 500 300
Instead of receiving transfers of Product M from Division K, Division J could buy similar product in the open market at a slightly cheaper price of Rs. 45 per unit.
What should the transfer price be for each units of Y, if the total labour hours available inDivision K are:
(i) 3,800 hours;
(ii) 5,600 hours;
6. (a) What do you mean by the ‘Cause–Effect Diagram?’. 5 (0)
(b) S. Ltd., is engaged in manufacturing activities. It has received a request from one of its important customers to supply a product which will require conversion of Material M, which is a non–moving item.
The following details are available:
Book value of Material M
Realizable value of Material M
Replacement Cost of Material M Rs.
It is estimated that conversion of one unit of M into one unit of finished product will require one unit of labour hour. At present labour is paid @ Rs. 20 per hour.
Other costs are as follows:
Out of Poket Expenses
Allocated Overheads Rs.
Rs. 30 per unit
10 per unit
The labour will be re–deployed from other activities. It is estimated that the temporary redeployment will not result in loss of contribution. The employees to be redeployed are permanent employees of the Co.
Estimate the minimum price to be charged from the customer so that the company is not worse–off by executing the order.
7. (a) What is a Decision Tree? 5 (0)
(b) Mr. X is trying to decide whether to travel to Sri Lanka from Delhi to negotiate the sale of a shipment of China novelties. He holds the novelties stock and is fairly confident but by no means sure that if he makes the trip he will sell the novelities at a price that will give him a profit of Rs. 3,00,000. He puts the probability of obtaining the order at 0.6. If he does not make the trip, he will certainly not get the order.
If the novelties are not sold in Sri Lanka, there is an Indian Customer who will certainly buy them at a price that leaves him a profit of Rs. 1,50,000 and his offer will be open at least till Mr. X returns from Sri Lanka. Mr. X estimates the expenses of trip to Sri Lanka at Rs. 25,000. He is however, is concerned that his absence, even for only three days, may lead to production inefficiencies in the factory. These could cause him to miss the dead–line on an another contract, with the consequences that a late penalty of Rs. 1,00,000 will be invoked. Mr. X assesses the probability of missing the deadline under these circumstances at 0.4. Further, he believes that in his absence, there will be a lower standard of house–keeping in the factory and the raw material and labour costs on the other contract will rise by about Rs. 20,000 above the budgeted figure.
Draw an appropriate decision tree for Mr. X’s problem and using the Expected Monetary Value (EMV) as the appropriate criterion for decision, find the appropriate initial decision. 10 (0)
8. Write short notes on any three out of the following: 3×5
(i) Target Costing; (0)
(ii) Quality Circle — A way to quality improvement; (0)
(iii) Enterprise Risk Management; (0)
(iv) Supply Chain Management. (0)