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© The Institute of Chartered Accountants of India
PAPER – 5: ADVANCED MANAGEMENT ACCOUNTING
Question No.1 is compulsory.
Answer any five questions from the remaining six questions.
Working Notes should form part of the answer.
No statistical table will be distributed along with the question paper.
Graph papers will be provided.
(a) A shoe manufacturer has a net profit of ` 25 per pair on a selling price of `143. He is
producing 6,000 pairs per annum which is 60% of the potential capacity. The cost per
pair is as under:
Works Overheads (50% fixed)
Administrative Overheads (75% fixed)
During the current year the manufacturer also estimates demand of 6,000 pairs but
anticipates that the fixed charges to go up by 10% while the rate of direct labour and
direct materials will increase by 8% and 6% respectively. But he has no option of
increasing the selling price. Under this situation he obtains an offer to utilise further 20%
of capacity. What minimum price will you recommend to ensure an overall profit of
(b) ABC Ltd. has supermarkets located in most towns and cities. Over the last few years,
profits have fallen. ABC Ltd. has recognized that customer care has been paid
insufficient attention. ABC Ltd. has now realized the importance of the customer
experience at its...