P-10-Set-2.pdf - COST MANAGEMENT ACCOUNTING AND FINANCIAL MANAGEMENT Paper-10 Syllabus-2016 Set-2 Answer of Postal test Paper Set-2 www.globalcma.in

# P-10-Set-2.pdf - COST MANAGEMENT ACCOUNTING AND FINANCIAL...

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COST & MANAGEMENT ACCOUNTING AND FINANCIAL MANAGEMENT Paper-10 Answer of Postal test Paper Set-2 Syllabus-2016 Set-2

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FINANCIAL REPORTING Sol. 1 (a) Match the following (i) Inter firm comparison Technique for evaluating performance (ii) Benefit Cost Ratio Capital Budgeting (iii) Organisation has to be both Effective and Efficient (iv)Zero based Budgeting Decision Making Sol. 1 (b) MCQ (i) A (ii) A (iii) A Sol. 1 (c) Fill in the blanks (i) Engineering (ii) Competing (iii) Current Liabilities (iv) Internal Rate of Return Sol. 1 (d) True/False (i) False (ii) True (iii) False (iv) True Sol. 2 (a) Transfer price decisions can be taken on the following basis. A. Transfer Price: - Marginal Cost + Opportunity Cost i.e. Rs (5 + 5) = Rs 10 Note: Marginal Cost = Rs 2, 50,000 / 50,000 units = Rs 5 Opportunity cost Rs 5 are computed on the basis that the Division X will sacrifice Rs 5 if they sell the product to Division Y. B. In this situation, the transfer price will be worked out as under: Transfer price = Marginal Cost + Contribution + Profit foregone by Division Z = Rs (5 + 5 + 4) = Rs 14 In situation (B), if Division Y purchases from Division X, it will not purchase from external supplier. Hence, the supplier will stop purchasing from Division Z, which will result in a loss of profit to Division Z @ Rs 4 per unit, and therefore this amount will be recovered from the transfer price. Sol. 2 (b) One of the recent developments in the field of management accounting is the responsibility accounting, which is helpful in exercising cost control. ‗Responsibility Accounting is a system of accounting that recognizes various responsibility centers throughout the organization and reflects the plans and actions of each of these centers by assigning particular revenues and costs to the one having the pertinent responsibility. It is also called profitability accounting and activity accounting. It is a system in which the person holding the supervisory posts as president, function head, foreman, etc are given a report showing the performance of the company or department or section as the case may be. The report will show the data relating to operational results of the area and the items of which he is responsible for control. Responsibility accounting
FINANCIAL REPORTING follows the basic principles of any system of cost control like budgetary control and standard costing. It differs only in the sense that it lays emphasis on human beings and fixes responsibilities for individuals. It is based on the belief that control can be exercised by human beings, so responsibilities should be fixed for individuals. Principles of responsibility accounting are as follows: (a) A target is fixed for each department or responsibility center. (b) Actual performance is compared with the target.

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