Q.1

The question required analyzing two proposals for completion of new orders during the slack period of July and August. The question was easy but most students made the mistake of assuming that 32.5% spare capacity can be utilized for the whole year. They failed to comprehend that since the orders were expected to be received by the end of June and were to be completed by August end, only two months spare capacity was available.

Q.2

The performance in this question was average. The following mistakes were generally noted:

Opening and closing stocks were ignored.

While calculating factory overhead variance, only fixed costs were deducted from total actual overhead costs of Rs.6,297 and variable costs were ignored.

In many cases, the reconciliation between the profit calculated under the two methods was not prepared. Many students gave reasons for difference in profit which was not required.

Q.3

This question on working back the standard cost from actual cost was the worst attempted question. All sorts of errors were made. It was evident that the students did not have good command over the topic. It is felt that many students know how to calculate the variances as they have memorized the formulas, however they are unable to work back the figures mainly because they lack in-depth understanding of the topic. Another common mistake was that instead of preparing standard cost sheet for a single product many students produced standard cost sheet for the total production of 4865 units.

Q.4

This question was well attempted by a large number of students and many of them secured full marks. However, many students performed poorly also. To arrive at the required conclusion two alternative monthly production plans were to be drawn up i.e. by having 2 months stock at month-end and the other having a uniform production of 18,000 units. Increase in-holding costs due to increase in stock should have been compared with extra production costs of Rs.20 per unit for production in excess of 18,000 units. Students made various types of mistake in these calculations.

Q.5

Part (a) was a bit lengthy, however parts (b) and (c) required few calculations only. 28% of the students did not attempt the question. Of the remaining very few could give significantly correct answers. Some of the common mistakes were as under:

(i)

Many students revised the sales figures of restaurants and banquet hall on the basis of change in the sales revenue from hotel rooms instead of revising them on the basis of room occupancy. Similarly while calculating the variable costs the same mistake was repeated.

(ii)

Many students failed to realize that the contract with Florence Limited was for 240 days i.e. the normal season as well as the additional 120 days. They kept the sales revenue of the normal season unchanged, instead of revising it as required in the question.

Q.6

In part (i) large number of students did not read the question properly. They computed the required ratios based on the current policy of the company and did not calculate them if the policy was changed to avail discount. A large majority just computed the ratios under the two assumptions without giving any comments or recommendations. Many mistakes were seen in the computation of ratios also. One of the often repeated mistake was that discount was calculated by reference to creditors instead of cost of sales.