The Hindu Business Line : New syllabus — more focused on problems

The November 2008 paper on advanced management accounting (formerly cost accounting) is the first one incorporating the new syllabus. What follows is an analysis of the paper.

1(a) The problem is on the limiting factor section of marginal costing. Two scenarios are given. One, the data for peak season time and, two, for off-season time. Contribution per unit would be different for the same product in two different times. In each of the cases, best product mix to get maximum profit is asked. Peak season is to be handled keeping labour hours as limiting factor and off-season is to be handled keeping number of units as limiting factor.

There is an element of ambiguity in the latter portion of the question, wherein it is stated that labour is freely available during non-peak season (off-season) followed with maximum production possible of individual product restrictions. It might possibly have confused the students whether restriction in the units would only be applicable for off-season time.

In fact, the restriction is also applicable for peak season. Specific fixed costs are provided for two out of three units. A fairly good problem for 12 marks.

1(b) This is an interesting problem on assignment on minimisation as well as maximisation. The question has been well drafted by the paper-setters and the students would have enjoyed doing it. An ideal problem for eight marks.

2(a) It is a problem on transfer pricing with three divisions involved. Transfer price effect is like chain holding problems on a holding company. A good question that deserves 11 marks.

2(b) This theory question for five marks is on the difference between traditional management accounting and value-chain analysis. A fairly good question for 5 marks.

3(a) It is a problem on standard costing with variances provided to seek the input figures of actual materials purchased, production, sales volume, hours worked and variable and fixed overheads incurred. In simple terms, it is a reverse working problem. It is fully justified for 11 marks.

3(b) On throughput costing and application of theory of constraints, this is a welcome question in the new sector of throughput costing. It is a fairly simple question for 5 marks.

4(a) On crashing in network analysis, the first part of this question is on finding the minimum duration and the cost. The second part of the question, about optimum duration and cost, carries only one mark.

It is not fair to award only one mark, as re-computation is needed to get the final answers. However, if both the questions were taken up cumulatively, then too, the marks are not commensurate to the time and complexity involved in the question. Definitely not a difficult problem as a whole, but a time-consuming one.

4(b) It is a problem on budgetary control, wherein production cost budget is to be prepared for the first six months of the financial year 2009-10, keeping corresponding previous year’s first half actual data and additional data in the process. A welcome question carrying 6 marks.

5(a) A simple theory question of 4 marks, on the requisites for installation of uniform costing system.

5(b) It is a theory question on test of hypothesis, which is a new area included in the syllabus.

5(c) An elementary question on relevant costing for 7 marks; students would have latched on to it.

6(a) A rudimentary problem on TQM, carrying 4 marks. A careful study of the problem itself would have yielded the answer for students having a fair knowledge of costing.

6(b) A transportation problem, involving minimisation. The problem is of course to be formulated under LPP. Though simple, the problem would have placed the student in a tight spot if his/her basics are not strong. The nine marks allotted to this question are fully justified.

6(c) A basic theory question on trend analysis. Since it has been asked for the first time under the new syllabus, the examiner had stuck only to the basics of this topic. A cursory glance at the first few pages of this topic would have given the student an opportunity to grab 3 marks.

7(a) It is a shutdown-continue problem, involving the basics of marginal costing technique. Six marks can easily be secured with a basic knowledge on the subject.

7(b) A basic and relatively simple question on Just-in-time for six marks.

7(c) Skimming and penetration pricing policies are to be explained (4 marks).

General comments

The questions are easier than those asked under the old syllabus. Except for Question 7(c), answers to the theory questions are available in the first page of the respective chapters

From the accompanying table it can be found that the theory segment is getting diluted.

The questions are easier as well. There are, however, more problem-oriented questions, even though the questions are seemingly easier than those in the old syllabus.

Definitely the students taking the exam under the new syllabus are better placed than the old syllabus students.

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