General:

The paper was well attempted and the passing percentage was high. The question-wise comments are given hereunder:

Q.1

Production under various constraints: This was an easy question requiring calculation of maximum contribution under various constraints in order to decide whether to produce component A or component B. Most students were able to calculate contribution margin per component correctly but faltered in calculating maximum number of components that can be produced. Many students used long mathematical equations and had to abandon the question halfway. Simple arithmetic calculations would have given the correct answer. Clerical errors such as wrong use of machine hour rate etc. were common

Q.2

Network diagram and critical path: As many as 20% did not attempt this question indicating the students’ selective preparations. Common mistakes were:

Mean activity time was not calculated according to the usual formula of (o+4m+p)/6. Some students drew 3 diagrams using optimistic, pessimistic and most likely time estimates.

Rough network diagrams were drawn and in some cases no time duration was mentioned between two activities.

Some students mentioned only the critical path without showing the duration of other paths.

Q.3

It was an easy question requiring reconciliation of budgeted contribution with actual profit and variance analysis, but was the worst attempted. The conceptual understanding of the relationship between various figures was lacking. Common mistakes were as follows:

A large number of students either did not attempt the question or were unable to even calculate the different variances.

A large number didn’t know how to reconcile the budgeted contribution and actual profit. Most of them did not take fixed costs as a reconciling item. Some were not very sure whether a particular  variance should be added or deducted in the reconciliation.

Almost all students laid blame on sales department for low sales volume even though they had sold the full 800 units produced in the quarter.

Many students named the variable overhead efficiency variance as expenditure variance and vice versa.

The presentation of the note to Managing Director was mostly poor and haphazard.

Q.4

The performance in this question was good. However, the following mistakes were made by considerable number of students:

Students did not deduct the scrap value of normal loss from total cost of input to ascertain the cost of production per unit.

The students used a number of different methods to calculate unit cost of  abnormal gain/loss whereas cost of good production and abnormal gain/loss has the same unit cost.

Q.5

Absorption vs. activity-based costing (ABC): This question of 22 marks was well attempted with 70% students securing pass marks. Common mistakes noted were as follows:

(i)

While making calculations under the ABC method the students used the same machine hour rates as given in the question for making calculations under absorption costing; instead of making fresh calculations on the basis of cost drivers.

(ii)

In part (b) the students were required to compare the results and comment on the reasons for the differences under the two methods. Instead, many students just commented that ABC is a better costing method, and could not secure any marks.

Q.6

Calculating ROCE etc: In this question only 19% of the students could secure passing marks. A frequent mistake was that contribution was calculated for one-night stay instead of two-nights stay. In fact most students were unaware where to begin or conclude their answers. They didn’t plan their answers and ended up doing various steps but without co-relating one with another.

Q.7

EOQ calculations: Here the response was average. A common mistake was that in  calculating total ordering costs the students made their calculations on the basis of estimated quantity of 100,000 units instead of Actual usage of 125,000 units.