BBA-VI 562 Subjective Dec 2016

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College Name: _________________________________________________________________
Student Name: _______________________ Seat No: _______________________________
Copy No: _________________________
KARACHI UNIVERSITY BUSINESS SCHOOL

UNIVERSITY OF KARACHI
FINAL EXAMINATION DECEMBER 2016; AFFILIATED COLLEGE
MANAGERIAL ACCOUNTING; BA (H)–562 (PART B)
BBA – VI
Date: January 14, 2017 Max Time: 2 Hrs
Max Marks: 40
INSTRUCTIONS:
1. Attempt any 4 questions. Do not write anything on the question paper.
2. Mobile phones or any other communicating device will not be allowed in the
examination room. Students will have to remove the batteries of these devices before
entering the examination hall.
Q1 The controller for Shakeel Machining has established the following overhead cost pools and cost
drivers:
Budgeted
Overhead Cost Pool Overhead Cost Cost Driver
Machine setups Rs 240,000 Number of setups
Material handling 90,000 Units of raw material
Quality control inspection 48,000 Number of inspections
Other overhead costs 160,000 Machine hours
Total Rs 538,000
Budgeted Level
Overhead Cost Pool for Cost Driver Overhead Rate
Machine setups 200 setups Rs 1,200 per setup
Material handling 60,000 units Rs 1.50 per unit
Quality control 1,200 inspections Rs 40 per inspection
Other overhead 20,000 machine hours Rs 8 per machine hour
Order no. 715 has the following production requirements:
Machine setups: 7
Raw material: 11,200 units
Inspections: 16
Machine hours: 850
Required:
a) Compute the total overhead that should be assigned to order no. 715 by using activity-based
costing.
b) Suppose that Shakeel were to use a single, predetermined overhead rate based on machine hours.
Compute the rate per hour and the total overhead assigned to order no. 715.
c) Discuss the merits of an activity-based costing system in comparison with a traditional costing
system.
Q2 Hanif Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words,
on average, 80% of the hospital’s beds are occupied by patients. At his level of occupancy the
hospital’s operating costs are Rs 32 per occupied bed per day assuming a 30-day month. This
Rs 32 figure contains both variable and fixed cost elements.
During June, the hospital’s occupancy rate was only 60%. A total of Rs 326,700 in operating
cost was incurred during the month.
Required:
1. Using the high-low method estimate:
a) The variable cost per occupied bed on a daily basis.
b) The total fixed operating cost per month.
2. Assume an occupancy rate of 70% per month. What amount to total operating cost would you
expect the hospital to incur?
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Q3 Ebad Company installs lawn sod in home yards. The company’s most recent monthly contribution
format income statement follows:
Amount Percentage of Sales

Sales Rs 80,000 100%
Variable expenses 32,000 40%
Contribution margin 48,000 60%
Fixed expenses 38,000
Net operating income 10,000
Required:
1. Compute the company’s degree of operating leverage
2. Using the degree of operating leverage, estimate the impact on net operating income of a 5%
increase in sales.
3. Verify your estimate from part (2) above by constructing a new contribution format income
statement for the company assuming a 5% increase in sales.
Q4 The Saleem & Jamal Company manufactures an engine for carpet cleaners called the "Snooper."
Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.
Sales Rs 1,600,000
Less: Cost of goods sold 1,120,000
Gross margin Rs 480,000
Less: Operating expenses 100,000
Net income Rs 380,000
Cost of goods sold consists of Rs 800,000 of variable costs and Rs 320,000 of fixed costs. Operating
expenses consist of Rs 40,000 of variable costs and Rs 60,000 of fixed costs.
Required:
a) Calculate the break-even point in units and sales rupees.
b) Calculate the safety margin.
c) Saleem & Jamal received an order for 6,000 units at a price of Rs 25.00. There will be no increase
in fixed costs, but variable costs will be reduced by Rs 0.54 per unit because of cheaper packaging.
Determine the projected increase or decrease in profit from the order.
Q5 Imran Company has the following historical collection pattern for its credit sales:
70% collected in month of sale

15% collected in the first month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
Budgeted credit sales for the last six months of the year follow.
July Rs 30,000
August 35,000
September 40,000
October 45,000
November 50,000
December 42,500
Required:
a) Calculate the estimated total cash collections during October.
b) Calculate the estimated total cash collections during the year's fourth quarter.
END OF SUBJECTIVE PAPER

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Page 1 of 2

College Name: _________________________________________________________________

Student Name: _ Seat No: _________

Copy No: _________________________

KARACHI UNIVERSITY BUSINESS SCHOOL

Order no. 715 has the following production requirements:

Amount Percentage of Sales

70% collected in month of sale

END OF SUBJECTIVE PAPER

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