# Old question paper (PU) | Hospitality accounting II 2017

## Pokhara University

Level: Bachelor                         Semester-Fall                         Year: 2017

Programme: BHM                                                                     Full Marks: 100

Course: Hospitality Accounting II                                              Pass Marks: 45

Time: 3hrs

Candidates are required to give their answers in their own words as far as practicable.

The figures in the margin indicate full marks.

Section “A”

Attempt all the questions.     10*2

1. Point out two objectives of management accounting.
2. What do you mean by leverage? State its type.
3. Point out four differences between fixed cost and variable cost.
4. State the classification of cost on the basis of element.
5. Point out differences between Management accounting and cost accounting.
6. What do you mean by allocation cost?
7. Calculate economic order quality from the followings:

Annual requirement:       50,000 units

Carrying cost per unit:    Rs. 2

Ordering cost per order: Rs. 500

1. Calculate variable cost per unit from the followings:

Units of output   500 units           1,500 units

Mixed cost        Rs. 12,500        Rs. 17,500

1. Sales Rs. 10,00,000; Variable cost Rs. 4,00,000 and profit 10% of sales calculate total fixed cost.
2. Sales revenue Rs. 7,50,000 and Breakeven sales Rs. 4,00,000 calculate safety of margin.

Section “B”

Attempt any six questions.     6*10

1. “The management accounting functions are to collect data from various units, analyze them and feed forward to the concerned unit for the management actions” Explain it with the objective and role of management accounting.
2. Differentiate between perpetual inventory system and periodic inventory system with example.
3. The Moonlight company uses about 75000 marble per year and the usage fairly constant at 6250 marble per month. The marble cost Rs. 1.50 per unit and the carrying cost is estimated to be 205 of the average inventory investment on the annual basis. The cost to place an order and process the delivery is Rs. 18. It takes 45 days to receive delivery from the data of an order and a safety stock of 3250 marble is required.  i.) What is the most economic order quantity and frequency of order? ii) What is the reorder point?   iii) What is the most economic order quantity if the marble cost Rs. 4.50 each instead of Rs. 1.50 each.
1. Hotel Barahi has requested for assistance in analyzing its 100-room property. It provides following information:
• The Average room sales price is Rs. 60
• Annul fixed costs equal Rs. 4,00,000
• Variable costs per room sold equal Rs. 20

Required:

a) Determine hotel’s breakeven point in rupees.

b) If revenues equal Rs. 7,80,000 what is the hotel’s margin of safety in rooms?

c) If hotel desires to generate a profit of Rs. 100,000, how many rooms must be sold?

d) What is the occupancy percentage for the hotel when profit earned is Rs. 100,000?

15.  Parmila Garments Pvt. Ltd, which manufactures only one kind of standard size trousers, has developed the following revenue expenses budget for the next year.

 Particulars 5,000 Units 10,000 Units Direct Material Rs 20,000 Rs. 40,000 Direct Labor Rs 10,000 Rs 20,000 Manufacturing overheads Rs 10,000 Rs 15,000 Administrative Overheads Rs 12,000 Rs.12,000 Depreciation Rs 10,000 Rs 10,000 Selling & Distribution Overheads Rs 12,000 Rs 22,000 Total Rs 74,000 Rs 119,000

Required:

• Identify the cost as variable, fixed and semi-variable.
• Segregate the semi-variable cost into variable and fixed using high-low point method.
• Prepare the flexible budget for 8,000 units and 10,000 units of output.
1. The Himalayan Company is considering discontinuing department Y, one of the three departments, it currently maintains. The following information has been gathered for the three departments.
 Departments X Y Z 120000 100000 160000 80000 84000 120000 Operating Expenses; Salaries Rent Utilities 16000 4000 2000 12800 4000 5400 24000 6000 4000 Total fixed cost 102,000 106200 154000 Net Income 18000 6200 6000

The department Y is eliminated, the space it occupies will be divided equally among department X and Z. utilities are allocated on the basis of floor space occupied. 70% of the salaries in Department Y would be eliminated and the other 30% would be split equally between department X and Z.

Required:

• Prepare a combined income statement for department X and Z on the assumption that department Y is dropped.
• Should the Department Y be eliminated support your answer with quantitative and qualitative factors.            17.  Below given Company’s Income Statement for a period based on planned production and sales of 60,000unites, with sales at Rs. 15 per unit. Company has the capacity to produce 1,00,000 units. A chain store has just approached company with an offer to buy 20,000 units at Rs. 10. The variable portion of selling and administrative cost is a 2% of selling price (i.e Rs. 0.30 per unit on regular selling price), which company would not have to pay on the special order. The management is hensitant to accept the order because the average manufacturing cost of Rs. 13 per unit (Rs. 7,80,000/60,000) is greater than the Rs. 10 price offered.

Income Statement

 Particulars Rs Sales (60000 units at Rs.15/unit) 9,00,000 Less:Manufacturing costs:Materials Rs.4/unit 2,40,000 Direct Labour (rs.3/unit) 1,80,000 Overhead (1/3 variable) 3,60,000 7,80,000 Gross Margin 1,20,000 Less: Selling and administrative expenses 80,000 Operating Income 40,000

i) Should the company accept the chain stores offer? If yes, why?

ii) If the offer unit will be 55000 unit instead of 20000 unit, what will be your decision and opportunity cost if any?

Section “C”

Case analysis 20

1. Butwal Trading Company is preparing budgets for three months from January 2017 to March 2017.

Balance sheet as on 31 December 2016

 Liabilities Amounts Assets Amounts Account payables 240000 Cash balance 20,000 Shareholder’s Equity 1000,000 Finished goods 30000 units @ 14 Raw materials 80000 units @ 3 420000   240000 Retained Earning 240000 Account Receivable 400000 Plant and machinery 400000 Total 1,480,000 Total 1480000

Sales and production budget

 Particular/months Nov Dec Jan Feb March April Sales Units 25000 30000 30000 40000 45000 40000 Sale price 20 20 20 20 20 20 Sale revenue 500000 600000 600000 800000 900000 800000 Production Units 30000 40000 40000 45000 40000 40000

 Particulars/Months Jan Fed March Production Units 40000 45000 40000 Variable Mgf Cost Indirect Material @ Rs1 40000 45000 40000 Indirection labor @ Rs2 80000 90000 80000 Rent and others 22000 32000 22000 Depreciation 8000 8000 8000 Total 150000 175000 150000

The company has policy, 20% of the sale would be in cash and 80% on credit. Credit sales would realize 50% in the month of sales, 30% in the next month and the balance would be in the following next month of sales. One unit of finished goods would need 2 units of raw material and one unit of raw material would cost Rs 3. Each unit of finished goods would need no Direct labor hour and cost per Direct labor hour would be Rs. 5. The desire ending invertory of finished product and the raw material would be sufficient to meet next month’s sales and production need respectively.

A minimum balance of cash would be Rs. 20000. All expenses including direct labor cost would be payable in the month when they become due, purchase would be paid in the next month of purchase. The company would like to buy a new stamping machine at a cost of Rs. 200000 in early january next year.

A line of credit to meet deficiency of cash would be available from a commercial bank at an interest rate of 12% p.a. The borrowing would be in a multiple of Rs. 10000 and repayment would be in Rs. 5000. The interset would be payable for the amount of load repaid.

Required:

a. Material purchase budget.

b. Cash collection and disbursement budget.

c. Budgeted income statement as on 31 March 2017.

d. Budgeted Balance sheet as on 31 March 2017.