MCQ for CA Final SCMPE - Chapter 5 Pricing Decision
Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 5 - Strategic Cost Management and Performance Evaluation - Chapter 5: Pricing Decision - For Practice relevant for May/Nov 23 Examinations
Q:1 ABC miners operates two divisions, one in Japan and other in United Kingdom (U.K). Mining Division is operated in Japan which is rich in raw emerald.
The other division is United Kingdom Processing Division. It processes the raw emerald into polished stone fit for human wearing.
The cost details of these divisions are as follows:
Division |
Japan Mining Division |
United Kingdom Processing Division |
Per carat of raw emerald |
Per carat of polished emerald |
|
Variable Cost |
2,500 Yen |
150 Pound |
Fixed Cost |
5,000 Yen |
350 Pound |
Several polishing companies in Japan buy raw emerald from other local Mining Companies at 9,000 Yen per carat. Current Foreign Exchange Rate is 50 yen = 1 Pound. Income Tax rates are 20% and 30% in Japan and the United Kingdom respectively
It takes 2 carats of Raw Yellow emerald to yield 1 carat of Polished Stone. Polished emerald sell for 3,000 Pounds per carat.
COMPUTE the transfer price for 1 carat of raw emerald transferred from Mining Division to the Processing Division under the method - 200% of Full Costs
- 15000
- 10000
- 7000
- 7500
Answer: 1
Q:2 ABC miners operates two divisions, one in Japan and other in United Kingdom (U.K). Mining Division is operated in Japan which is rich in raw emerald.
The other division is United Kingdom Processing Division. It processes the raw emerald into polished stone fit for human wearing.
The cost details of these divisions are as follows:
Division |
Japan Mining Division |
United Kingdom Processing Division |
Per carat of raw emerald |
Per carat of polished emerald |
|
Variable Cost |
2,500 Yen |
150 Pound |
Fixed Cost |
5,000 Yen |
350 Pound |
Several polishing companies in Japan buy raw emerald from other local Mining Companies at 9,000 Yen per carat. Current Foreign Exchange Rate is 50 yen = 1 Pound. Income Tax rates are 20% and 30% in Japan and the United Kingdom respectively
It takes 2 carats of Raw Yellow emerald to yield 1 carat of Polished Stone. Polished emerald sell for 3,000 Pounds per carat.
COMPUTE the transfer price for 1 carat of raw emerald transferred from Mining Division to the Processing Division under method-Market Price
- 15000
- 7000
- 9000
- 8500
Answer: 3
Q:3 APC Ltd. has two divisions- Division X and Division Y with full profit responsibility. DivisionX produces components Gex' which is supplied to both division Y and external customers.
Division Y produces a product called 'Gextin' which incorporates component 'Gex. For one unit of 'Gextin' two units of component 'Gex' and other materials are used.
Till date, Division Y has always bought component Gex' from division X at R50 per unit since the lowest price at which the component 'Gex' could have been bought by Division Y was 52 per unit
Division X charges the same price for component 'Gex' to both division Y and external customers. However, it does not incur selling and distribution costs when transferring internally.
Division Y has received a proposal from a new supplier who has offered to supply component ‘Gex’ for 47 per unit at least for the next three years.
Manager of Division Y requests the manager of Division X to supply component Gex' at or below, ₹ 47 per unit. Manager of Division X is. not ready to reduce the transfer price since the divisional performance evaluation is done based on profit margin ratio of the division.
The following additional information is made available to you:
Component 'Gex" |
Product 'Gextin" |
|
Selling Price per unit |
50 |
180 |
Less: Variable Costs |
||
Direct Materials |
||
Component 'Gex |
_ |
100 |
Other materials |
12 |
22 |
Direct labour |
16 |
13 |
Manufacturing Overhead |
2 |
5 |
Selling and Distribution Costs |
4 |
2 |
Contribution per unit |
16 |
38 |
Annual fixed costs |
₹ 40,00,000 |
₹ 20,00,000 |
Annual external demand (units) |
3,00,000 |
1,20,000 |
Capacity of plant (units) |
5,00,000 |
1,50,000 |
CALCULATE the Contribution of Division X External Sales
- 4800000
- 4340000
- 4150000
- 4160000
Answer: 4
Q:4 HDR Ltd produces units and incurs labour costs. A change in technology after the preparation of the budget resulted in a 25% increase in standard labour efficiency, such that it is now possible to produce 10 units instead of 8 units using 8 hours of labour- giving a revised standard labour requirement of 0.80 hours per unit. Details of actuals and budgeted for period XIl are:
Grade |
Original Standards(ex-ante) |
|
Revised Standards(ex-post) |
|
Actual(1,100 units) |
|
X |
1,100 units * 1 hrs. * ₹ 10 |
₹ 11,000 |
1,100 units * 0.80 hrs. * ₹ 10.00 |
₹ 8,800 |
1,200 hrs * ₹ 8.50 |
₹ 10,200 |
Calculate traditional variances-
Rate Variance
- 1800(F)
- 1400(F)
- 1200(F)
- 1000(F)
Answer: 1
Q:5 HDR Ltd produces units and incurs labour costs. A change in technology after the preparation of the budget resulted in a 25% increase in standard labour efficiency, such that it is now possible to produce 10 units instead of 8 units using 8 hours of labour- giving a revised standard labour requirement of 0.80 hours per unit. Details of actuals and budgeted for period XIl are:
Grade |
Original Standards(ex-ante) |
|
Revised Standards(ex-post) |
|
Actual(1,100 units) |
|
X |
1,100 units * 1 hrs. * ₹ 10 |
₹ 11,000 |
1,100 units * 0.80 hrs. * ₹ 10.00 |
₹ 8,800 |
1,200 hrs * ₹ 8.50 |
₹ 10,200 |
Planning Variances-
Total Variance
- 3,200(F)
- 2,200(F)
- 1,200(F)
- 2,250(F)
Answer: 2
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