= 21,60,000. = Solution to Q. 2 Working Notes:

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C.A. FINAL Solution to Q. 1 1) Calculation of total kms. for the year Kms. per round trip Round trips per day Days per month No. of months p.a. (30 2) 6 25 12 1,08,000 kms.

1 C.A. FINAL Solution to Q. 1 1) Calculation of total kms. for the year Kms. per round trip Round trips per day Days per month No. of months p.a. (30 2) ,08,000 kms. 2) Calculation of total passenger kms. for the year passenger kms. 20 1,08,000 21,60,000 passenger kms. Statement showing the total collection required per annum & the fare per passenger km. I) Fixed Cost Amount Depreciation of Bus (4,00,000 10,000/5) 78,000 Interest on Loan 10,000 Insurance 15,000 Garage Rent 9,000 Road Tax 3,000 Repairs & Maintenance 15,000 Administrative Charges 5,000 Salary of Drivers & Conductors (5,000 12) 60,000 Repairs/Replacement of tyres & tubes 3,600 Total Fixed Cost 1,98,600 II) Variable Cost Diesel & Oil cost (1,08,000 5) 5,40,000 III) Total Cost (I + II) 80 7,38,600 IV) Profit (20% of Total Revenue) 20 1,84,650 V) Total Revenue 100 9,23,250 Fare for passenger km. TotalRevenue TotalPassenger Kms. 9,23,250 21,60, Solution to Q. 2 Working Notes: 1) Calculation of total tonnes to be transported per truck per month Tonnes per trip Trips per day Days per month 10 Tonner Truck tonnes 8 Tonner Truck tonnes 1

2 2) Calculation of total number of trucks required Total tonnes tobe transported per month Tonnes tobe transported per truck per month Tonner trucks 20 trucks Tonner trucks 25 trucks 960 3) Calculation of total kms. per annum Kms. per round trip Round trips per day Days per month Months per annum No. of trucks 10 Tonner trucks (6 2) kms. 8 Tonner trucks (6 2) kms. Statement showing the total cost p.a. & the cost per tonne of operating 10 tonne & 8 tonne truck 10 Tonner Trucks (20) 8 Tonner Trucks (25) I) Fixed Cost Depreciation of trucks 40,00,000 42,50,000 10,00, Tonner 20 5 II) 8,50,000 8 Tonner 25 5 Repairs & Maintenance 12,00,000 12,00, Tonner 60, Tonner 48, Other Fixed Expenses 60,000 36,000 Salary of Drivers 38,40,000 48,00, Tonner (8,000 12) Tonner (8,000 12) 2 25 Other Staff Expenses 1,08,000 1,08,000 Variable Cost 92,08,000 1,03,94,000 Diesel Cost 63,36,000 59,40,000 Type Kms. Cost 10 Tonner ,45,600? 8 Tonner ,32,000? Lubricant & Sundries 69,120 86,400 Type Kms. Cost 10 Tonner ,45,600? 8 Tonner ,32,000? 2 64,05,120 60,26,400 III) Total Cost (I + II) 1,56,13,120 1,64,20,400

3 Transportation cost per tonne Totalcost per annum Total tonnes tobe transported per annum 10 Tonner Truck 8 Tonner Truck 1,56,13, ,88,000 1,64,20, ,88,000 Solution to Q. 3 Break up of Total Seats Total seats available 260 Less: Seats reserved for Haltgo (D to B) - 50 Balance seats available from A to B 210 Note: Since 50 seats are booked from D to B by Haltgo, hence 50 seats from A to D can be booked by travel agents. Existing Situation Profit per Flight ( ) ( ) Revenue per passenger (Gross Fare) 5,000 Less: Total Variable Cost per passenger: 10% Commission on Fare 500 Food Contribution per passenger 4,200 Contribution per flight (Contribution for 240 passengers) 10,08,000 Less: Fixed Costs per flight Fuel Cost 90,000 Annual Lease Cost 2,00,000 Ground Service, Baggage Handling/Checking in 40,000 Flight Crew Salaries 48,000 3,78,000 Profit per flight 6,30,000 Break-even Point Break-even Number of Passengers TotalFixedCost perflight Contribution perpassenger 3,78, Passengers 4,200 Proposed Situation Contribution per Passenger (A to D) ( ) ( ) Revenue per passenger (Gross Fare) 3,000 Less: Total Variable Cost per passenger: 10% Commission on Fare 300 Food Contribution per passenger 2,400 3

4 Statement showing Additional Revenue/Expenditure from Haltgo Ltd. s Offer Additional Cost ( ) Revenue ( ) I) Additional Inflow Revenue from Destination D to B (50 Seats 2,700) 1,35,000 Contribution from Destination A to D (50 Seats 2,400) 1,20,000 2,55,000 II) Additional Outflow/Contribution lost Contribution lost for Destination A to B (30 Seats 4,200) 1,26,000 Snacks (260 Passengers 200) 52,000 Fuel Cost 45,000 Airport Landing/Baggage Handling Charges 19,000 2,42,000 Addition Net Income 13,000 Decision Accept Haltgo s offer since profit is increasing by 13,000. Solution to Q. 4 Statement showing the additional profit for the 1 st option 1) Using Incremental Revenue & Differential Approach Gift Shop Restaurant Lodge I] Incremental Revenue Receipts & Sales 6,000 8,000 20,000 48,000 Gift shop 10% 80% 64,000 Restaurant 10% 80% 1,80,000 Lodge 10% 90% Total (I) 6,000 8,000 20,000 II) Differential Cost a) Cost of Sales 3,300 4,400-26,400 Gift shop 10% 80% 35,200 Restaurant 10% 80% b) Suppliers ,600 2,400 Gift shop 10% 80% 6,400 Restaurant 10% 80% 14,400 Lodge 10% 90% c) Variable Electricity Charges

5 640 Gift shop 10% 80% 1,920 Restaurant 10% 80% 13,500-9,900 Lodge 10% 90% Total (II) 3,640 5,360 2,000 III) Additional Profit (I II) 2,360 2,640 18,000 Total Additional Profit 2, , ,000 23,000 Less: Advertisement cost ( 12,000) 11,000 2) Statement showing additional profit for the 2 nd option using incremental revenue and differential cost approach. Gift Shop Restaurant Lodge I] Incremental Revenue Receipts/Sales 34,200 45,600 80,000 Gift shop 48, % 5% 80% 4 Restaurant 64, % 95% 80% 4 Lodge 1,80, % 50% 90% 4 Total (I) 34,200 45,600 80,000 II) Differential Cost a) Cost of Sales 19,800 26,400-26, Gift shop 30% 80% 4 35,200 8 Restaurant 30% 80% 4 b) Suppliers 1,800 4,800 12,800 2,400 8 Gift shop 30% 80% 4 6,400 8 Restaurant 30% 80% 4 14,400 8 Lodge 40% 90% 4 c) Salaries 9,600 9,600 40,800 8 Gift shop 4, Restaurant 4,

6 8 Lodge 25,200(40012) 4 d) Electricity Charges Variable ,200 ( ) 8 Gift shop 30% 80% 4 ( 3,2001,920) 8 Restaurant 30% 80% 4 ( 13,500 9,900) 8 Lodge 40% 90% 4 Fixed 1,280 3,840 13,800 8 Gift shop Restaurant 1, Lodge 6,900 4 Total (II) 32,720 45,600 70,600 III) Additional Profit (I II) 1,480 Nil 9,400 Total additional profit 1, ,400 10,880 Hence, the additional profit with 1 st option is higher than 2 nd option. Hence, Mr. Philips should prefer the 1 st option. Comment: Now, if Mr. Philips wants to increase profit further, then instead of opting for one of the two options, he should opt for both the options together. In that case, the additional profit would be 11,000 & 10,880 21,880. Solution to Q. 5 (i) Expected ROCE under the Budget (ii) Profit Centre Estimated Revenue (%) Amount ( in lakhs) Contribution (%) Amount ( in lakhs) Accommodation Restaurant Bar Less: Fixed Cost Gross Profit ROCE (before tax) under the Budget 16.55% ( / ) Extra Revenue to be Earned from per Occupancy of Two-Night Offer Profit Centre Amount ( ) (%) Contribution ( ) Accommodation 1, Restaurant Bar Total 1,200 6

7 (iii) PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / ROCE (before tax) Required 20.55% (16.55% + 4%) Gross Profit Required lakhs (approx.) ( 110 lakhs 20.55%) Additional Contribution Required 4.40 lakhs No of Two-Nights Offer at reduced price to be Sold 367 ( ) ( 4.40 lakhs / 1,200) Increase in Contribution from, Restaurant & Bar by 15% increase in Price 1.53 lakhs [( 18 lakhs 15%) ( 12 lakhs 15%) 0.4] Additional Contribution required from Accommodation 2.87 lakhs ( 4.40 lakhs 1.53 lakhs) Required increase in Revenue 4.78 lakhs ( 2.87 lakhs / 0.60) Required percentage increase in Rent 16% (approx.) ( 4.78 lakhs / 30 lakhs 100) Solution to Q. 6 Part 1 & 2 Statement showing the operating cost per hour for the two types of machines Type XR 1 Type XR 50 Variable running cost 27,500 64,000 Fixed cost 20,000 97,500 Total operating cost 47,500 1,61,500 Working hours 1,100 2,000 Cost per hour Statement showing the cost of a satisfactory Brain scan on the two types of machine Type XR 1 Type XR 50 Operating cost per scan (hrs. required per scan cost per hour) Cost of X ray plate per scan Total cost per scan Rejection rate 10% 6% Cost per effective scan Since the cost per effective scan is lower with Machine XR 50 hence the hospital should prefer Machine XR 50. Solution to Q. 7 Calculation of total occupied bed-days for the year i.e. [Beds Days Occupancy %] + Extra Bed days General Ward [ %] + Cottage Ward Deluxe Ward Rs.12,000 36,600 bed-days Rs.20 [ %] ,400 bed-days [ %] + 0 6,480 bed-days 7

8 Statement showing the total collection required for the year Amt. 1. Rent (10,000 12) 1,20, Hire charges for extra beds 12, Heart specialist fees (15,000 3) 45, Other Expenses Salary to supervisors, nurses 4,25,000 Repairs & maintenance 90,000 Salary to doctors 13,50,000 Food supplied to patients 40,000 Laundry charges for their bed linens 80,500 Medicines supplied 74,000 Cost of oxygen, X-ray etc. 49,500 General administration charges 63,000 Total cost excluding rent based on takings 23,49,000 Rent based on takings (5% of taking) 1,56,600 Total Cost 80 25,05,600 (+) Profit (20% of takings) 20 6,26,400 Takings/Collection ,32,000 Calculation of total equivalent general ward bed-days i.e. 36,000 + (14, ) + (6,480 5) 1,05,000 The rent chargeable per general ward bed days 31,32, ,05,000 & including service tax, rent chargeable will be % The rent chargeable per cottage ward bed days & including ST, rent chargeable will be % The rent chargeable per deluxe ward bed days & including ST, rent chargeable will be % Solution to Q. 8 Working Note Calculation of total occupied room days Room days per month No. of months Occupancy % Normal season (50 30) 8 80% 9,600 Off season (50 30) 4 50% 3,000 12,600 Part 1 Statement showing the total collection required & the tariff per occupied room day 8 Amount I) Fixed Cost 15,75,000 II) Variable Cost (12,600 75) 9,45,000

9 III) Total Cost (I + II) 25,20,000 IV) Profit (25% of 25,20,000) 6,30,000 V) Total collection required 31,50,000 Tariff per room day Part 2 Totalcollection required Totaloccupiedroom days Break even occupancy (room days) 9 31,50, ,600 Totalfixedcost Contribution perroom day 9000 room days Break even occupancy in normal season Total occupancy required Total occupancy in off season 9000 room days 3000 room days 6000 room days Part 3 Revised tariff per room day % 225 Revised contribution per room day Revised occupancy Normal season (50 30) 8 100% 12,000 Off season (50 30) 4 70% 4,200 16,200 Statement showing the revised profit 15,75,000 15,75, Amount Revised contribution (16, ) 24,30,000 Less: Fixed Cost 15,75,000 Profit 8,55,000 Since, with the revised tariff the overall profit increases, hence the revised tariff should be implemented. Part 4 In order to earn earlier profit, contribution required will be fixed cost + earlier profit 15,75, ,30,000 22,05,000 With the revised tariff, this contribution can be achieved with the help of days % in the room days required to earn the earlier profit with revised tariff 14,700-12, % 12,600 Solution to Q. 9 Working Notes: 1) Calculation of total bookings per annum (2,500 3) + (1,000 2) + (700 7) 7, , ,900 14,400 bookings 22,05, room 150

10 Part 1 Statement showing the cost per annum & the cost per booking Amount I) Specific service related fixed cost Salary (20,000 12) 2,40,000 Mobile phone charges (3,000 12) 36,000 Conveyance (4,000 12) 48,000 3,24,000 II) General fixed cost apportioned Rent (4,000 12) 48,000 Telephone expenses (2,400 12) 28,800 Security charges (1,600 12) 19,200 Miscellaneous expenses (1,000 12) 12,000 1,08,000 III) Total Cost (I + II) 4,32,000 Rs. 4,32,000 Total cost per booking 30 14,400 Part 2 Since cost per booking & charge per booking are the same, hence there will be no profit for the wholeyear. Part 3 To justify the setting of the new service, at least the specific fixed cost should be recovered (since general fixed cost are incurred even otherwise) SpecificFixedCost Minimum bookings required (Break even point) Collection per booking bookings Solution to Q. 10 Working Note: Calculation of contribution per ticket under old structure Commission per ticket Variable cost per ticket (9,000 10%) Calculation of contribution per ticket under the revised structure Part 1 a) Break even point (tickets) b) Desired sales (tickets) FixedCost Contribution perticket FixedCost DesiredProfit Contribution perticket Part 2 a) 1,40,000 Break even point (tickets) 467 tickets approx b) Desired sales (tickets) 1,40,00070, tickets 300 Increase in the no. of tickets required for a) Break even point tickets b) Desired sales tickets 1,40, tickets 700 Rs. 3,24,000 10,800 Rs.30 1,40,00070, tickets

SOLUTIONS TO ASSIGNMENT PROBLEMS. Problem No.1

SOLUTIONS TO ASSIGNMENT PROBLEMS Problem No.1 3. OPERATING COSTING Calculation of passenger km: Onward: 25 days x 3 trips x 20 km x 12 months 18,000 x 40 passengers 7,20,000 pass. Km. Return: 25 days x