{"id":20734,"date":"2023-04-11T16:32:57","date_gmt":"2023-04-11T11:02:57","guid":{"rendered":"https:\/\/gstguntur.com\/?p=20734"},"modified":"2023-04-11T16:34:20","modified_gmt":"2023-04-11T11:04:20","slug":"strategic-analysis-of-operating-income-ca-final-scmpe-question-bank","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/strategic-analysis-of-operating-income-ca-final-scmpe-question-bank\/","title":{"rendered":"Strategic Analysis of Operating Income \u2013 CA Final SCMPE Question Bank"},"content":{"rendered":"

Strategic Analysis of Operating Income \u2013 CA Final SCMPE Question Bank<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Strategic Analysis of Operating Income \u2013 CA Final SCMPE Question Bank<\/h2>\n

Question 1.
\nState with a brief reason whether you would recommend an activity based system of costing in each of the following independent situations: (May 2012, 5 marks)
\n(i) Company K produces one product. The overhead costs mainly consist of depreciation.
\n(ii) Company L produces 5 different products using different production facilities.
\n(iii) A consultancy firm consisting of lawyers, accountants and computer engineers provides management consultancy services to clients.
\n(iv) Company S produces two different labour intensive products. The contribution per unit in both products is very high. The BEP is very low. All the work is carried on efficiently to meet the target costs.
\nAnswer:<\/p>\n\n\n\n\n\n\n\n
Description<\/td>\nRecommend ABC Yes\/No<\/td>\nReason<\/td>\n<\/tr>\n
(i) K produces one product. ‘ Overhead is mainly depreciation<\/td>\nNo<\/td>\n\u2022 One product situation. For allocation of overhead, ABC is not required.
\n\u2022\u00a0ABC for cost reduction not beneficial since most of the overhead is depreciation.<\/td>\n<\/tr>\n
(ii) L produces 5 different products with different facilities.<\/td>\nYes<\/td>\n\u2022\u00a0Multi product situation. ABC is required for allocation of overhead.
\n\u2022\u00a0ABC is necessary for pricing.
\n\u2022\u00a0Cost drivers are likely to be differei it.
\n\u2022\u00a0Cost reduction may be possible.
\n\u2022\u00a0Production facilities\u00a0are different.<\/td>\n<\/tr>\n
(iii) Professional services – lawyers\/ accountants\/ computer engineers<\/td>\nYes<\/td>\n\u2022 Variety of services. Hence ABC is required for cost allocation.
\n\u2022\u00a0Services are very different.
\n\u2022 ABC is necessary for pricing.
\n\u2022 Cost reduction possible.<\/td>\n<\/tr>\n
(iv) S produces 2 different labour intensive products. High unit contribution and efficient operations.<\/td>\nNo<\/td>\n\u2022 Different products, but labour intensive. Hence, overhead allocation based on readily traceable direct labour cost will be accurate. Hence, ABC not required for cost allocation.
\n\u2022\u00a0Low BEP level implies low level of fixed cost as a % of sale price or as a % of total cost.
\n\u2022 Many fixed cost activity drivers are likely to align with the direct labour costs. Hence not required for cost allocation.
\n\u2022 Efficient operation. Hence ABC not required even for cost reduction or ABC management.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\"Strategic<\/p>\n

Question 2.
\nIn the context of Activity Based Costing System, explain the following statement: (Nov 2012, 4 marks)
\n\u201cStrategic cost analysis should exploit nternal linkages.\u201d
\nAnswer:<\/p>\n

    \n
  • Activity based costing is an accounting methodology that assigns cost to activities rather than to products or services.<\/li>\n
  • Activity based costing tracks the flow of activities by creating internal link between activity\/ resource consumption and cost object.<\/li>\n
  • Exploiting internal linkages means taking advantage of the relationships among the activities that exist within a firm\u2019s segment of value chain.<\/li>\n
  • Activity cost and analysis are essential parts of this strategic analysis. Activities not based on production units\/sales units, based on the variable activity drivers are analyzed.<\/li>\n
  • The traditional costing system is not rich enough to supply the information needed for thorough analysis of linkages.<\/li>\n<\/ul>\n

    \"Strategic<\/p>\n

    Question 3.
    \nAnswer the following question:
    \nIndicated activity drivers in respect of each of the following activity cost pools: (May 2016, 4 marks)
    \n(i) Manufacturing cost
    \n(ii) Human resources cost
    \n(iii) Marketing and sales costs
    \n(iv) Accounting costs
    \nAnswer:
    \nActivity drivers:
    \n(i) Manufacturing cost<\/p>\n

      \n
    • No. of output produced<\/li>\n
    • No. of machine used in production.<\/li>\n<\/ul>\n

      (ii) Human resource cost<\/p>\n

        \n
      • Numbers of employees, employed and worked.<\/li>\n
      • Number of activities done by employee.<\/li>\n<\/ul>\n

        (iii) Marketing and Sales costs<\/p>\n

          \n
        • Number of units sold<\/li>\n
        • Number of places visited and number of strategy adopted.<\/li>\n<\/ul>\n

          (iv) Accounting cost<\/p>\n

            \n
          • Number of records recorded<\/li>\n
          • Number of transactions<\/li>\n
          • Number of employees employed.<\/li>\n<\/ul>\n

            \"Strategic<\/p>\n

            Question 4.
            \nTraditional Ltd. is a manufacturer of a range of goods. The cost structure of its different products is as follows: (May 2009, 5 marks)
            \n\"Strategic
            \nTraditional Ltd. was absorbing overheads on the basis of direct labour hours. A newly appointed management accountant has suggested that the company snouia introduce ABC system ana nas identified cost drivers and cost pools as follows:
            \n\"Strategic
            \nYou are required to calculate activity based production cost of all the three products.
            \nAnswer:
            \nThe total production overheads are \u20b9 26,00,000.
            \nProduct A: 10,000 \u00d7 \u20b9 30 = \u20b9 3,00,000
            \nProduct B: 20,000 \u00d7 \u20b9 40 = \u20b9 8,00,000
            \nProduct C: 30,000 \u00d7 \u20b9 50 = \u20b9 15,00,000<\/p>\n

            On the basis of ABC analysis this amount will be apportioned as follows :
            \nStatement of Activity Based Production Cost
            \n\"Strategic<\/p>\n

            \"Strategic<\/p>\n

            Question 5.
            \nA bank offers three products, viz., deposits, Loans and Credit Cards. The bank has selected 4 activities for a detailed budgeting exercise, following activity based costing methods. (Nov 2009, 12 marks)<\/p>\n

            The bank wants to know the product wise total cost per unit for the selected activities, so that prices may be fixed accordingly.
            \nThe following information is made available to formulae the budget :
            \n\"Strategic
            \nThe activity drivers and their budgeted quantities are given below:
            \n\"Strategic
            \nThe bank budgets a volume of 58,600 deposit accounts, 13,000 loan accounts, and 14,000 Credit Card accounts.
            \nYou are required to:
            \n(i) Calculate the budgeted rate for each activity.
            \n(ii) Prepare the budgeted cost statement activity wise.
            \n(iii) Find the budgeted product cost per account for each product using (i) and (ii) above.
            \nAnswer:
            \nBudget Cost Statement
            \n\"Strategic<\/p>\n

            Working Notes:
            \n\"Strategic<\/p>\n

            \"Strategic<\/p>\n

            Question 6.
            \nAML Ltd. is engaged in production of three types of ice-cream products: Coco, Strawberry and Vanilla. The company presently sells 50,000 units of Coco @ 25 per unit, Strawberry 20,000 @ \u20b9 20 per unit and Vanilla 60,000 units @ \u20b9 15 per unit. The demand \u00a1s sensitive to selling price and it has been observed that every reduction of \u20b9 1 per unit in selling price, increases the demand for each product by 10% to the previous level. The company has the production capacity of 60,500 units of Coco, 24,200 units of Strawberry and 72,600 units of Vanilla. The company marks up 25% on cost of the product. (May 2010, 12 marks)<\/p>\n

            The Company management decides to apply ABC analysis. For this purpose it identifies four activities and the rates as follows:
            \nActivity – Cost Rate
            \nOrdering – \u20b9 800 per purchase order
            \nDelivery – \u20b9 700 per delivery
            \nShelf stocking – \u20b9 199 per hour
            \nCustomer support and assistance \u20b9 1.10 pu. sold.<\/p>\n

            The other relevant information for the products are as follows:
            \n\"Strategic
            \nUnder the traditional costing system, store support costs are charged @ 30% of prime cost. In ABC these costs are coming under customer support and assistance.<\/p>\n

            Required:
            \n(i) Calculate target cost for each product after a reduction of selling price required to achieve the sales equal to the production capacity.
            \n(ii) Calculate the total cost and unit cost of each product at the maximum level using traditional costing.
            \n(iii) Calculate the total cost and unit cost of each product at the maximum level using activity based costing.
            \n(iv) Compare the cost of each product calculated in (i) and (ii) with (iii) and comment on it.
            \nAnswer:
            \n(i) Cost of products under target costing Demanded unit and selling price<\/p>\n\n\n\n\n\n\n\n
            Coco<\/td>\nStrawberry<\/td>\nVanilla<\/td>\n<\/tr>\n
            Selling Price<\/td>\nDemand<\/td>\nSelling Price<\/td>\nDemand<\/td>\nSelling Price<\/td>\nDemand<\/td>\n<\/tr>\n
            25<\/td>\n50,000<\/td>\n20<\/td>\n20,000<\/td>\n15<\/td>\n60,000<\/td>\n<\/tr>\n
            24<\/td>\n55,000<\/td>\n19<\/td>\n22,000<\/td>\n14<\/td>\n66,000<\/td>\n<\/tr>\n
            23<\/td>\n60,500<\/td>\n18<\/td>\n24,200<\/td>\n13<\/td>\n72,600<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            \"Strategic<\/p>\n

            Target cost of each product after reduction in selling price<\/p>\n\n\n\n\n\n\n
            <\/td>\nCoco<\/td>\nStrawberry<\/td>\nVanilla<\/td>\n<\/tr>\n
            Selling price after reduction<\/td>\n23.00<\/td>\n18.00<\/td>\n13.00<\/td>\n<\/tr>\n
            Profit marks up 25% on cost i.e. 20% on selling price<\/td>\n4.60<\/td>\n3.60<\/td>\n2.60<\/td>\n<\/tr>\n
            Target cost of production (per unit)<\/td>\n18.40<\/td>\n14.40<\/td>\n10.40<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            (ii) Cost of product under traditional costing<\/p>\n\n\n\n\n\n\n\n\n\n\n
            <\/td>\nCoco<\/td>\nStrawberry<\/td>\nVanilla<\/td>\n<\/tr>\n
            <\/td>\n(\u20b9)<\/td>\n(\u20b9)<\/td>\n(\u20b9)<\/td>\n<\/tr>\n
            Units<\/td>\n60,500<\/td>\n24,200<\/td>\n72,600<\/td>\n<\/tr>\n
            Material cost (8,6,5, per unit)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 .<\/td>\n8<\/td>\n6<\/td>\n5<\/td>\n<\/tr>\n
            Labour cost (5,4,3 per unit)<\/td>\n5<\/span><\/td>\n4<\/span><\/td>\n3<\/td>\n<\/tr>\n
            Prime cost<\/td>\n13<\/span><\/td>\n10<\/span><\/td>\n8<\/span><\/td>\n<\/tr>\n
            Store support costs (30% of prime)<\/td>\n3.90<\/span><\/td>\n3<\/span><\/td>\n2.40<\/span><\/td>\n<\/tr>\n
            Cost per unit<\/td>\n16.90<\/span><\/td>\n43.00<\/span><\/td>\n10.40<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            \"Strategic<\/p>\n

            (iii) Cost of product under activity based costing<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
            <\/td>\nCoco<\/td>\nStrawberry<\/td>\nVanilla<\/td>\n<\/tr>\n
            <\/td>\n(\u20b9)<\/td>\n‘ (\u20b9)<\/td>\n(\u20b9)<\/td>\n<\/tr>\n
            Units<\/td>\n60,500<\/td>\n24,200<\/td>\n72,600<\/td>\n<\/tr>\n
            Material cost (8,6,5, per unit)<\/td>\n4,84,000<\/td>\n1,45,200<\/td>\n3,63,000<\/td>\n<\/tr>\n
            Labour cost (5,4,3 per unit)<\/td>\n3,02,500<\/td>\n96,800<\/td>\n2,17,800<\/td>\n<\/tr>\n
            Prime cost<\/td>\n7,86,500<\/td>\n2,42,000<\/td>\n5,80,800<\/td>\n<\/tr>\n
            Ordering cost @ \u20b9 800 (35, 30, 15)<\/td>\n28,000<\/td>\n24,000<\/td>\n12,000<\/td>\n<\/tr>\n
            Delivery cost @ \u20b9 700 (112, 66, 48)<\/td>\n78,400<\/td>\n46,200<\/td>\n33,600<\/td>\n<\/tr>\n
            Shelf stocking @ \u20b9 199, (130, 150, 160)<\/td>\n25,870<\/td>\n29,850<\/td>\n31,840<\/td>\n<\/tr>\n
            Customer Support \u20b9 1.10<\/td>\n66,550<\/td>\n26,620<\/td>\n79,860<\/td>\n<\/tr>\n
            Cost Per unit<\/td>\n16.29<\/td>\n15.23<\/td>\n10.17<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            (iv) Comparative Analysis of cost of production (\u20b9)<\/p>\n\n\n\n\n\n\n\n\n\n
            <\/td>\nCoco<\/td>\nStrawberry<\/td>\nVanilla<\/td>\n<\/tr>\n
            <\/td>\n(\u20b9)<\/td>\n(\u20b9)<\/td>\n(\u20b9)<\/td>\n<\/tr>\n
            (a) As per Target Costing<\/td>\n18.40<\/td>\n14.40<\/td>\n10.40<\/td>\n<\/tr>\n
            (b) As per traditional Costing<\/td>\n16.90<\/td>\n13.00<\/td>\n10.40<\/td>\n<\/tr>\n
            (c) As per Activity Based Costing<\/td>\n16.29<\/td>\n15.23<\/td>\n10.17<\/td>\n<\/tr>\n
            (a) – (c)<\/td>\n2.11<\/td>\n-0.83<\/td>\n0.23<\/td>\n<\/tr>\n
            (b) – (c)<\/td>\n0.61<\/td>\n-2.23<\/td>\n0.23<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            Note: (a) The cost of product of strawberry is higher in ABC method in comparison to target costing and traditional methods. It indicated that actual profit undpr target, costing is less than targeted. For remaining two products, k ABC is most suitable.<\/p>\n

            \"Strategic<\/p>\n

            Question 7.
            \nFruitolay has decided to increase the size of the store. It wants the information about the probability of the individual product lines: Lemon, grapes and papaya. It provides the following data for the 2009 for each product line: (Nov 2010, 11 marks)
            \n\"Strategic<\/p>\n

            Required:
            \n(i) Fruitolay currently allocates store support coats (all costs other than the cost of goods sold) to the product line on the basis of the cost of goods sold of each product line. Calculate the operating income and operating income as the percentage of revenue of each product line.
            \n(ii) If Fruitolay allocates store support costs (all costs other than the cost of goods sold) to the product lines on the basis of ABC system, calculate the operating income and operating income as the percentage of revenue of each product line.
            \n(iii) Compare both the systems.
            \nAnswer:
            \n(i) Traditional Costing System<\/p>\n\n\n\n\n\n\n\n\n
            Particulars<\/td>\nLemon<\/td>\nGrapes<\/td>\nPapaya<\/td>\nTotal<\/td>\n<\/tr>\n
            Revenue<\/td>\n79,350<\/td>\n2,10,060<\/td>\n1,20,990<\/td>\n4,10,400<\/td>\n<\/tr>\n
            Less: Cost of goods sold (COGS)<\/td>\n60,000<\/td>\n1,50,000<\/td>\n90,000<\/td>\n3,00,000<\/td>\n<\/tr>\n
            Less: Store Support Cost<\/td>\n18,000<\/td>\n45,000<\/td>\n27,000<\/td>\n90,000<\/td>\n<\/tr>\n
            Operating income<\/td>\n1,350<\/td>\n15,060<\/td>\n3,990<\/td>\n20,400<\/td>\n<\/tr>\n
            Operating Income %<\/td>\n1.70%<\/td>\n7.17%<\/td>\n3.30%<\/td>\n4.97%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            \"Strategic<\/p>\n

            (ii) ABC System Overhead Allocation Rate<\/p>\n\n\n\n\n\n\n\n
            Activity<\/td>\nCost Heirarchy Level<\/td>\nTotal Costs (\u20b9)<\/td>\nQuantity of Cost Allocation Base<\/td>\nOverhead Allocation Rate<\/td>\n<\/tr>\n
            Ordering<\/td>\nBatch<\/td>\n15600<\/td>\n156 Purchase orders<\/td>\n\u20b9 100<\/td>\n<\/tr>\n
            Delivery self<\/td>\nBatch<\/td>\n25200<\/td>\n315 delivering orders<\/td>\n\u20b9 80<\/td>\n<\/tr>\n
            Stocking<\/td>\nOutput unit<\/td>\n17280<\/td>\n864 self stocking hours<\/td>\n\u20b9 20<\/td>\n<\/tr>\n
            Customer Support<\/td>\nOutput unit<\/td>\n30720<\/td>\n153600 items sold<\/td>\n\u20b9 0.20<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            Store Support Cost<\/p>\n\n\n\n\n\n\n\n\n\n
            Particulars<\/td>\nCost Driver<\/td>\nLemon<\/td>\nGrapes<\/td>\nPapaya<\/td>\nTotal<\/td>\n<\/tr>\n
            Bottle Returns<\/td>\nDirect<\/td>\n1200<\/td>\n0<\/td>\n0<\/td>\n1200<\/td>\n<\/tr>\n
            Ordering<\/td>\nPurchase orders<\/td>\n3600<\/td>\n8400<\/td>\n3600<\/td>\n15600<\/td>\n<\/tr>\n
            Delivery<\/td>\nDeliveries<\/td>\n2400<\/td>\n17520<\/td>\n5280<\/td>\n25200<\/td>\n<\/tr>\n
            Self Stocking<\/td>\nHours of time<\/td>\n1080<\/td>\n10800<\/td>\n5400<\/td>\n17280<\/td>\n<\/tr>\n
            Customer Support<\/td>\nItems Sold<\/td>\n2520<\/td>\n22080<\/td>\n6120<\/td>\n30720<\/td>\n<\/tr>\n
            Grand Total<\/td>\n<\/td>\n10800<\/td>\n58800<\/td>\n20400<\/td>\n90000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            \"Strategic<\/p>\n

            Operating Income<\/p>\n\n\n\n\n\n\n\n\n
            Particulars<\/td>\nLemon<\/td>\nGrapes<\/td>\nPapaya<\/td>\nTotal<\/td>\n<\/tr>\n
            Revenue<\/td>\n79350<\/td>\n210060<\/td>\n120990<\/td>\n410400<\/td>\n<\/tr>\n
            Less: Cost of goods sold<\/td>\n60000<\/td>\n150000<\/td>\n90000<\/td>\n300000<\/td>\n<\/tr>\n
            Less: Store Support Cost<\/td>\n10800<\/td>\n58800<\/td>\n20400<\/td>\n90000<\/td>\n<\/tr>\n
            Operating income<\/td>\n8550<\/td>\n1260<\/td>\n10590<\/td>\n20400<\/td>\n<\/tr>\n
            Operating income %<\/td>\n10.78%<\/td>\n0.60%<\/td>\n8.75%<\/td>\n4.97%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            Summary\/Comparison<\/p>\n\n\n\n\n\n
            Particulars<\/td>\nLemon<\/td>\nGrapes<\/td>\nPapaya<\/td>\nTotal<\/td>\n<\/tr>\n
            Under Traditional Costing System<\/td>\n1.70%<\/td>\n7.17%<\/td>\n3.30%<\/td>\n4.97%<\/td>\n<\/tr>\n
            Under ABC System<\/td>\n10.78%<\/td>\n0.60%<\/td>\n8.75%<\/td>\n4.97%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

            The grapes line drops sizeably when ABC is used. Although it constitutes 50%; COGS, it uses a higher percentage of total resources in each activity area, especially the high cost of customer support area. In contrast, lemon line draws a much lower percentage of total resources used in each activity area than its percentage of total COGS. Hence under ABC, Lemon is most profitable. Fruitolay can explore ways to increase sales of lemons and also explore price increases on grapes.<\/p>\n

            Operating Income Ranking is highest for Grapes under Traditional System because other products bear its overhead cost, whereas under ABC a more accurate picture shows Grapes as the lowest ranking product.<\/p>\n

            \"Strategic<\/p>\n

            Question 8.
            \nDuring the last 20 years, KL Ltd.’s manufacturing operation has become increasingly automated with computer-controlled robots replacing operators. KL currently manufactures over 100 products of varying levels of design complexity. A single plant wise overhead absorption rate, based on direct labour hours is used to absorb overhead costs. (May 2011, 8 marks)
            \nIn the quarter ended March, KL’s manufacturing overhead costs were:
            \n\"Strategic
            \nDuring the quarter, the company reviewed the Cost Accounting System and concluded that absorbing overhead costs to individual products on a labour hour absorption basis was meaningless and that overhead costs should be attributed to products using an Activity Based Costing (ABC) system. The following are identified as the most significant activities:<\/p>\n

              \n
            1. Receiving component consignments from suppliers’.<\/li>\n
            2. Setting up equipment for production runs<\/li>\n
            3. Quality inspections<\/li>\n
            4. Despatching goods as per customers’ orders.<\/li>\n<\/ol>\n

              Equipment operation and maintenance expenses are apportioned as:<\/p>\n

                \n
              • Component stores 15%, production runs 70% and despatch 15% Technicians’ wages are apportioned as:<\/li>\n
              • Equipment maintenance 30%, set up equipment for production runs 40% and quality inspections 30%.<\/li>\n<\/ul>\n

                During the quarter:<\/p>\n

                  \n
                1. 980 component consignments were received from suppliers.<\/li>\n
                2. 1020 production runs were set up<\/li>\n
                3. 640 quality inspections were carried out.<\/li>\n
                4. 420 orders were despatched to customers.<\/li>\n<\/ol>\n

                  KL’s production during the quarter included component R. The following information is available.
                  \n\"Strategic
                  \nCalculate the unit manufacturing overhead cost of component R using ABC system.
                  \nAnswer:
                  \n\"Strategic
                  \nNote: Equipment operations expenses and Maintenance allocated on the basis 15% 70%, and 15% as per the information given in the question.
                  \nThe next step is to identify cost drivers for each activity and established cost driver rates by dividing the activity costs by a measure of cost drive usage for the period. The calculations are as follows.
                  \nReceiving supplies (\u20b9 61,330\/980) = \u20b9 62.58 per component
                  \nPerforming set ups(\u20b9 1,56,850\/1020) = \u20b9 153.77 per set up
                  \nDespatching goods (\u20b9 66,320\/420) = \u20b9157.93 per goods order despatched
                  \nQuality Inspection (\u20b9 25,500\/640) = \u20b9 39.84
                  \nAt last the costs are assigned to components based on their cost driver usage.<\/p>\n

                  \"Strategic<\/p>\n

                  The assignments are as follows.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                  Particulars<\/td>\n(\u20b9)<\/td>\n<\/tr>\n
                  Direct Labour<\/td>\n300<\/td>\n<\/tr>\n
                  Direct Materials<\/td>\n‘1200<\/td>\n<\/tr>\n
                  Receiving supplies<\/td>\n2816.1<\/td>\n<\/tr>\n
                  Performing Set up<\/td>\n2460.32<\/td>\n<\/tr>\n
                  Quality Inspection<\/td>\n398.4<\/td>\n<\/tr>\n
                  Despatching goods<\/td>\n3474.46<\/span><\/td>\n<\/tr>\n
                  Total Cost<\/td>\n10649.28<\/td>\n<\/tr>\n
                  <\/td>\n(\u20b9)<\/td>\n<\/tr>\n
                  No. of units produced<\/td>\n560<\/td>\n<\/tr>\n
                  Cost per unit<\/td>\n19.01<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                  For components the overhead costs have been assigned as follows (for components R)
                  \nReceiving supplies (45 receipts at \u20b9 62.58)
                  \nPerforming setups (16 production runs at \u20b9 153.77)
                  \nQuality Inspections (10 at \u20b9 39.84)
                  \nDespatching goods (22 at \u20b9 157.90).<\/p>\n

                  \"Strategic<\/p>\n

                  Question 9.
                  \nPO Ltd. makes two products P and Q, which are similar products with slight difference in dimensions, but use the same manufacturing processes and facilities. Production may be made interchangeably after altering machine setup. Production time is the same for both products. The cost structure is as follows: (Nov 2011)
                  \n\"Strategic
                  \nFixed cost per unit has been calculated based on the total practical capacity of 20,000 units per annum (which is either P or Q or both put together). Market demand is expected to be the deciding factor regarding the product mix for the next 2 years. The company does not stock inventory of finished goods. The company wishes to know whether ABC system is to be Set up at a cost of \u20b9 10,000 per month for the purpose of tracking and recording the fixed overhead costs for allocation to products.<\/p>\n

                  Support your advice with appropriate reasons. (6 marks)
                  \nIndependent of the above, if you are told to assume that fixed costs stated above, consist of a non-cash component of depreciation to plant at \u20b9 90,000 for the year, will your advice change? Explain. (2 marks)
                  \nAnswer:<\/p>\n\n\n\n\n\n\n\n\n
                  Data<\/td>\nReasoning<\/td>\nDecision<\/td>\n<\/tr>\n
                  (i) Similar Products, Similar Production Resources<\/td>\nOH Cost based on production units is appropriate. ABC will also yield identical results<\/td>\nABC system not required for OH allocation<\/td>\n<\/tr>\n
                  (ii) Present OH Cost = \u20b9 10\/u. Proposed . Increase due to ABC system: 120000 \/ 20000 = \u20b9 6\/u<\/td>\nCurrent OH cost of \u20b9 10\/u will increase by \u20b9 6 per unit due to installing ABC system (60% increase)<\/td>\nFor allocation purpose, ABC not justified<\/td>\n<\/tr>\n
                  (iii) Both have positive contribution\/u. Market demand determines the mix<\/td>\nOH allocation has no role in decision making<\/td>\nNo need for ABC System<\/td>\n<\/tr>\n
                  (iv) For the purpose of OH allocation, ABC need not be installed. However, if the fixed overheads of \u20b9 2,00,000 are analysed by activity and thereby a saving of at least \u20b9 1,20,000 be expected (which is the cost of installing ABC system), then, ABC system may be installed<\/td>\n<\/tr>\n
                  (v) For the non cash component of depn. = \u20b9 90,000, FC that can be saved is a maximum of \u20b9 1,10,000 (\u20b9 2,00,000 – \u20b9 90,000).<\/p>\n

                  Hence, this is clearly less than ABC cost installation. Hence do not install ABC System<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                  \"Strategic<\/p>\n

                  Question 10.
                  \nDEF Bank operated for years under the assumption that profitability can be increased by increasing Rupee volumes. But that has not been the case. Cost Analysis has revealed the following: (May 2013)<\/p>\n\n\n\n\n\n\n\n
                  Activity<\/td>\nActivity Cost (\u20b9)<\/td>\nActivity Driver Activity Capacity<\/td>\n<\/tr>\n
                  Providing ATM service<\/td>\n1,00,000<\/td>\nNo. of transactions<\/td>\n2,00,000<\/td>\n<\/tr>\n
                  Computer processing<\/td>\n10,00,000<\/td>\nNo. of transactions<\/td>\n25,00,000<\/td>\n<\/tr>\n
                  Issuing Statements<\/td>\n8,00,000<\/td>\nNo. of statements<\/td>\n5,00,000<\/td>\n<\/tr>\n
                  Customer inquiries<\/td>\n3,60,000<\/td>\nTelephone minutes<\/td>\n6,00,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                  The following annual information on three products was also made available:<\/p>\n\n\n\n\n\n\n\n\n
                  Checking Accounts<\/td>\nPersonal Loans<\/td>\nGold Visa<\/td>\n<\/tr>\n
                  Units of product<\/td>\n30,000<\/td>\n5,000<\/td>\n10,000<\/td>\n<\/tr>\n
                  ATM transactions<\/td>\n1,80,000<\/td>\n0<\/td>\n20,000<\/td>\n<\/tr>\n
                  Computer transactions<\/td>\n20,00,000<\/td>\n2,00,000<\/td>\n3,00,000<\/td>\n<\/tr>\n
                  Number of statements<\/td>\n3,00,000<\/td>\n50,000<\/td>\n1,50,000<\/td>\n<\/tr>\n
                  Telephone minutes<\/td>\n3,50,000<\/td>\n90,000<\/td>\n1,60,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                  \"Strategic<\/p>\n

                  Required:
                  \n(i) Calculate rates for each activity.
                  \n(ii) Using the rates computed in requirement (i), calculate the cost of each product. (8 marks)
                  \nAnswer:
                  \nComputation showing Rates for each Activity
                  \n\"Strategic<\/p>\n

                  Computation showing Cost of each Product
                  \n\"Strategic<\/p>\n

                  \"Strategic<\/p>\n

                  Question 11.
                  \nMK Ltd. manufactures four products, namely A, B, C and D using the same plant and process. The following information relates to a production period: (Nov 2013, 8 marks)
                  \n\"Strategic
                  \nThe four .products are similar and are usually produced in production runs of 24 units and sold in batches of 12 units. The total overheads incurred by the company for the period are as follows:
                  \n\"Strategic
                  \nDuring the period the following cost drivers are to be used for the overhead cost:
                  \nCost – Cost driver
                  \nSetup cost – No. of production runs
                  \nStore receiving – Requisitions raised
                  \nInspection – No. of production runs
                  \nMaterial handling and dispatch – Orders executed<\/p>\n

                  It is also determined that:<\/p>\n

                    \n
                  • Machine operation and maintenance cost should be apportioned between setup cost, store receiving and inspection activity in the ratio 4 : 3 : 2.<\/li>\n
                  • Number of requisition raised on store is 50 for each product and the no. of orders executed is 192, each order being for a batch of 12 units of a product.<\/li>\n<\/ul>\n

                    Calculate the total overhead cost per unit of each product using activity based costing after finding activity wise overheads allocated to each product.
                    \nAnswer:
                    \n1. Computation of ABC Recovery Rates<\/p>\n\n\n\n\n\n\n\n
                    Activity<\/td>\nActivity Cost Pool<\/td>\nCost Driver<\/td>\nQuantity<\/td>\nABC Rate<\/td>\n<\/tr>\n
                    Set Up<\/td>\n20,000 + 28,000 = \u20b9 48,000<\/td>\nNo. of Production Runs<\/td>\n96<\/td>\n\u20b9 500 per Run<\/td>\n<\/tr>\n
                    Stores Receiving<\/td>\n15,000 + 21,000 = \u20b9 36,000<\/td>\nRequisitions raised<\/td>\n50 \u00d7 4 = 200<\/td>\n\u20b9180 per Reqn.<\/td>\n<\/tr>\n
                    Inspection<\/td>\n10,000+ 14,000 = \u20b9 24,000<\/td>\nNo. of Production Runs<\/td>\n96<\/td>\n\u20b9 250 per, Run<\/td>\n<\/tr>\n
                    Material Handling<\/td>\nGiven = \u20b9 2,592<\/td>\nOrders executed<\/td>\n192<\/td>\n7 13.5 per Batch<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    \"Strategic<\/p>\n

                    Note:
                    \nMachine Operation and Maintenance Cost of \u20b9 63,000 is apportioned to the first three activities in the ratio 4:3:2, i.e. \u20b9 28,000, \u20b9 21,000 and \u20b9 14,000
                    \nNumber of Production Runs and Number of Batches are computed as under:<\/p>\n\n\n\n\n\n\n\n\n
                    Product<\/td>\nA<\/td>\nB<\/td>\nC<\/td>\nD<\/td>\nTotal<\/td>\n<\/tr>\n
                    (a)<\/td>\nOutput Quantity<\/td>\n720 units<\/td>\n600 units<\/td>\n480 units<\/td>\n504 units<\/td>\n<\/td>\n<\/tr>\n
                    (b)<\/td>\nQuantity per Production Run<\/td>\n24 units<\/td>\n24 units<\/td>\n24 units<\/td>\n24 units<\/td>\n<\/td>\n<\/tr>\n
                    (c)<\/td>\nNumber of Production Runs (a \u00f7 b)<\/td>\n30 runs<\/td>\n25 runs<\/td>\n20 runs<\/td>\n21 runs<\/td>\n96 runs<\/td>\n<\/tr>\n
                    (d)<\/td>\nQuantity per Batch Order<\/td>\n12 units<\/td>\n12 units<\/td>\n12 units<\/td>\n12 units<\/td>\n<\/td>\n<\/tr>\n
                    (e)<\/td>\nNumber of Batches (a \u00f7 b)<\/td>\n60 batches<\/td>\n50 batches<\/td>\n40 batches<\/td>\n42 batches<\/td>\n192 batches<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    2. Computation of OH Costs using ABC System<\/p>\n\n\n\n\n\n\n\n\n\n\n
                    Product<\/td>\nA<\/td>\nB<\/td>\nC<\/td>\n\u25a1<\/td>\nTotal<\/td>\n<\/tr>\n
                    \u2022 Set up<\/td>\n500 \u00d7 30 = \u20b9 15,000<\/td>\n500 \u00d7 25 = \u20b9 12,500<\/td>\n500 \u00d7 20 = \u20b9 10,000<\/td>\n500\u00d7 21 = \u20b9 10,500<\/td>\n\u20b9 48,000<\/td>\n<\/tr>\n
                    \u2022 Stores Receiving<\/td>\n7 9,000<\/td>\n\u20b9 9,000<\/td>\n\u20b9 9,000<\/td>\n\u20b9 9,000<\/td>\n\u20b9 36,000<\/td>\n<\/tr>\n
                    \u2022 Inspection<\/td>\n250 \u00d7 30 = \u20b9 7,500<\/td>\n250 \u00d7 25 = \u20b9 6,250<\/td>\n250 \u00d7 20 = \u20b9 5,000<\/td>\n250 \u00d7 21 = \u20b9 5,250<\/td>\n\u20b9 24,000<\/td>\n<\/tr>\n
                    \u2022 Material Handling<\/td>\n13.50 \u00d7 60 = \u20b9 810<\/td>\n13.50 \u00d7 50 = \u20b9 675<\/td>\n13.50 \u00d7 40 = \u20b9 540<\/td>\n‘13.50 \u00d7 42 = \u20b9 567<\/td>\n\u20b9 2,592<\/td>\n<\/tr>\n
                    (a) Total OH Cost<\/td>\n\u20b9 32,310<\/td>\n\u20b9 28,425<\/td>\n\u20b9 24,540<\/td>\n\u20b9 25,317<\/td>\n\u20b9 1,10,592<\/td>\n<\/tr>\n
                    (b) Output Quantity<\/td>\n720 units<\/td>\n600 units<\/td>\n480 units<\/td>\n504 units<\/td>\n<\/td>\n<\/tr>\n
                    (c) OH Cost p.u.<\/td>\n\u20b9 44.875<\/td>\n\u20b9 47.375<\/td>\n\u20b9 51.125<\/td>\n\u20b9 50.232<\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    \"Strategic<\/p>\n

                    Question 12.
                    \nPQR Ltd. specializes in the distribution of pharmaceutical products. It buys from pharmaceutical companies and resells to each of the three different markets: (May 2014, 8 marks)
                    \n(i) General Supermarket chains
                    \n(ii) Drug Store chains .
                    \n(iii) Chemist shops
                    \nThe company plans to use activity based costing for analyzing the profitability of its distribution channels. The following data for the quarter ending March, 2014 is given:<\/p>\n\n\n\n\n\n\n\n\n\n
                    <\/td>\nGeneral supermarket chains<\/td>\nDrug store chains<\/td>\nChemist shops<\/td>\n<\/tr>\n
                    Average sales per delivery<\/td>\n\u20b9 96,500<\/td>\n\u20b9 32,450<\/td>\n\u20b9 6,225<\/td>\n<\/tr>\n
                    Average cost of goods sold per delivery<\/td>\n\u20b9 94,650<\/td>\n\u20b9 31,800<\/td>\n\u20b9 5,950<\/td>\n<\/tr>\n
                    Number of deliveries<\/td>\n960<\/td>\n2,470<\/td>\n8,570<\/td>\n<\/tr>\n
                    Total number of orders<\/td>\n1,000<\/td>\n2,650<\/td>\n9,500<\/td>\n<\/tr>\n
                    Average number of cartons shipped per delivery<\/td>\n250<\/td>\n75<\/td>\n12<\/td>\n<\/tr>\n
                    Average number of hours of shelf stocking per delivery<\/td>\n2<\/td>\n0.5<\/td>\n0.1<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    The following information is available in respect of operating costs (other than cost of goods sold for the quarter ending March, 2014:<\/p>\n\n\n\n\n\n\n\n
                    Activity Area<\/td>\nCost driver<\/td>\nTotal cost (\u20b9)<\/td>\n<\/tr>\n
                    Customer purchase order processing<\/td>\nPurchase order by customers<\/td>\n5,91,750<\/td>\n<\/tr>\n
                    Customer store delivery<\/td>\nNumber of deliveries<\/td>\n9,60,000<\/td>\n<\/tr>\n
                    Cartons dispatched to customer stores<\/td>\nNumber of Cartons dispatched to customer stores<\/td>\n7,92,135<\/td>\n<\/tr>\n
                    Shelf stocking at customer store<\/td>\nHours of shelf stocking<\/td>\n80,240<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    \"Strategic<\/p>\n

                    Compute the operating income of each distribution channel for the quarter ending March, 2014 using activity based costing.
                    \nAnswer:
                    \nStatement showing operating Income of Distribution Channels of POR Ltd.<\/p>\n\n\n\n\n\n\n\n\n
                    Particulars<\/td>\nGeneral Supermarket Chains (\u20b9)<\/td>\nDrug Store Chains (\u20b9)<\/td>\nChemist Shops (\u20b9)<\/td>\nTotal (\u20b9)<\/td>\n<\/tr>\n
                    Sales<\/p>\n

                    (Number of Deliveries x Average Sales per delivery)<\/td>\n

                    		9,26,40,000 (960 \u00d7 \u20b9 96,500)<\/td>\n8,01,51,500 (2,470 \u00d7 \u20b9 32,450)<\/td>\n5,33,48,250 (8,570 \u00d7\u00a0\u20b9 6,225)<\/td>\n22,61,39,750<\/td>\n<\/tr>\n
                    Less: Cost of Goods $old (Number of Deliveries x Average Cost of Goods Sold per delivery)<\/td>\n9,08,64,000 (960 \u00d7 \u20b9 94,650)<\/td>\n7,85,46,000 (2,470 x \u20b9 31,800)<\/td>\n5,09,91,500 (8,570 \u00d7 \u20b9 5,950)<\/td>\n22,04,01,500<\/td>\n<\/tr>\n
                    Gross Margin<\/td>\n17,76,000<\/td>\n16,05,500<\/td>\n23,56,750<\/td>\n57,38,250<\/td>\n<\/tr>\n
                    Less: Operating Costs<\/td>\n5,20,200<\/td>\n6,19,425<\/td>\n12,84,500<\/td>\n24,24,125<\/td>\n<\/tr>\n
                    Operating Income<\/td>\n12,55,800<\/td>\n9,86,075<\/td>\n10,72,250<\/td>\n33,14,125<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    \"Strategic<\/p>\n

                    Workings Notes:
                    \nStatement Showing Operating Cost of Distribution Channels of POR Ltd.<\/p>\n\n\n\n\n\n\n\n\n
                    Particulars<\/td>\nGeneral Supermarket Chains (\u20b9)<\/td>\nDrug Store Chains (\u20b9)<\/td>\nChemist Shops (\u20b9)<\/td>\nTotal (\u20b9)<\/td>\n<\/tr>\n
                    Customer Purchase Order Processing<\/td>\n45,000 (\u20b9 45 \u00d7 1,000)<\/td>\n1,19,250 (\u20b9 45 \u00d7 2,650)<\/td>\n4,27,500 (\u20b9 45 \u00d7 9,500)<\/td>\n5,91,750<\/td>\n<\/tr>\n
                    Customer Store Delivery<\/td>\n76,800 (\u20b9 80 \u00d7 960)<\/td>\n1,97,600 (\u20b9 80 \u00d7 2,470)<\/td>\n6,85,600 (\u20b9 80 \u00d7 8,570)<\/td>\n9,60,000<\/td>\n<\/tr>\n
                    Cartons Dispatched to Customer Stores<\/td>\n3,60,000 (\u20b9 1.5 \u00d7 2,40,000)<\/td>\n2,77,875 (\u20b9 1.5 \u00d7x 1,85,250)<\/td>\n1,54,260 (\u20b9 1.5 \u00d7 1,02,840)<\/td>\n7,92,135<\/td>\n<\/tr>\n
                    Shelf Stocking at Customer Store<\/td>\n38,400 (\u20b9 20 \u00d7 1,920)<\/td>\n24,700 (\u20b9 20 \u00d7 1,235)<\/td>\n17,140 (\u20b9 20 \u00d7 857)<\/td>\n80,240<\/td>\n<\/tr>\n
                    <\/td>\n5,20,200<\/td>\n6,19,425<\/td>\n12,84,500<\/td>\n24,24,125<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    Computation of Rate Per Unit of Cost Allocation Base<\/p>\n\n\n\n\n\n\n\n
                    Activity<\/td>\nActivity Cost [a] (\u20b9)<\/td>\nActivity Driver<\/td>\nNo. of Units of Activity Drive [b]<\/td>\nCost Driver Rate [a]\/[b] (\u20b9)<\/td>\n<\/tr>\n
                    Customer Purchase Order Processing<\/td>\n5,91,750<\/td>\nPurchase Order by Customers<\/td>\n13,150<\/td>\n45.00<\/td>\n<\/tr>\n
                    Customer Store Delivery<\/td>\n9,60,000<\/td>\nNumber of Deliveries<\/td>\n12,000<\/td>\n80.00<\/td>\n<\/tr>\n
                    Cartons Dispatched to Customer Stores<\/td>\n7,92,135<\/td>\nNumber of Cartons Dispatched to Customer Stores<\/td>\n5,28,090<\/td>\n1.50<\/td>\n<\/tr>\n
                    Shelf Stocking at Customer Store<\/td>\n80,240<\/td>\nHours of Shelf Stocking<\/td>\n4,012<\/td>\n20.00<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                    \"Strategic<\/p>\n

                    No. of Units of Activity Driver:
                    \nPurchase Order by Customers
                    \n= 1,000 +2,650+9,500
                    \n= 13,150
                    \nNumber of Deliveries = 960 + 2,470 + 8,570
                    \n= 12,000
                    \nNumber of Cartons Dispatched to Customer Stores = Number of Deliveries \u00d7 Average Number of Cartons Shipped per delivery
                    \n= (960 \u00d7 250) + (2,470 \u00d7 75) + (8,570 \u00d7 12)
                    \n= 2,40,000 + 1,85,250 + 1,02,840
                    \n= 5,28,090
                    \nHours of Shelf Stocking = Number of Deliveries \u00d7 Average Number of Hours of Shelf Stocking per delivery
                    \n= (960 \u00d7 2.0) + (2,470 \u00d7 0.5) + (8,570 \u00d7 0.1)
                    \n= 1,920 + 1,235 + 857
                    \n= 4,012<\/p>\n

                    \"Strategic<\/p>\n

                    Question 13.
                    \nA company manufactures several products of varying designs and models. It uses a single overhead recovery rate based on direct labour hours. The overheads incurred by the Company in the first half of the year are as under: (Nov 2014, 10 marks)
                    \n\"Strategic
                    \nDuring this period, the company introduced activity based costing system and the following significant activities were identified:<\/p>\n

                      \n
                    • Receiving materials and components<\/li>\n
                    • Set up of machines for production runs<\/li>\n
                    • Quality inspection<\/li>\n<\/ul>\n

                      It is also determined that:<\/p>\n

                        \n
                      • The machine operation and machine maintenance expenses should be apportioned between stores and production activity in 1 : 4 ratio.<\/li>\n
                      • The technical staff salaries should be apportioned between machine maintenance, set up and quality inspection in 3 : 4 : 3 ratio.<\/li>\n<\/ul>\n

                        \"Strategic<\/p>\n

                        The consumption of activities during the period under review are as under:<\/p>\n

                          \n
                        • Direct labour hours worked – 80,000<\/li>\n
                        • Production set-ups – 4,080<\/li>\n
                        • Material and components consignments received from suppliers – 3,920<\/li>\n
                        • Number of quality inspection carried out – 2,560<\/li>\n<\/ul>\n

                          The direct wages rate is \u20b9 12 per hour.
                          \nThe data relating to two products manufactured by the company during the period are as under:
                          \n\"Strategic
                          \nA potential customer has approached the company for the supply of 24,000 units of a component \u2018R\u2019 to be delivered in lots of 3000 units per quarter. The job will involve an initial design cost of \u20b9 60,000 and the manufacture will involve the following per quarter.
                          \n\"Strategic<\/p>\n

                          You are required to
                          \n1. Calculate the cost of products P and Q based on the existing system of single overhead Recovery rate.
                          \n2. Determine the cost of products P and Q using Activity Based Costing system.
                          \n3. Compute the sales values per quarter of components \u2018R\u2019 using Activity Based Costing system, (considering a mark up of 25% on cost)
                          \nAnswer:
                          \n1. Statement of Computation of Unit Cost of Product P and O on the Existing System<\/p>\n\n\n\n\n\n\n\n\n\n
                          Particulars<\/td>\nP(\u20b9)<\/td>\nQ(\u20b9)<\/td>\n<\/tr>\n
                          Direct Material<\/td>\n12,000<\/td>\n8,000<\/td>\n<\/tr>\n
                          Direct Labour Cost<\/td>\n11,520 (\u20b9 12 \u00d7 960 hr.)<\/td>\n1,200 (\u20b9 12 \u00d7 100 hr.)<\/td>\n<\/tr>\n
                          Overheads (Direct Labour Hours \u00d7\u00a0\u20b9 52.5 per hour)<\/td>\n\u00a050,400<\/td>\n5,250<\/td>\n<\/tr>\n
                          Total Cost<\/td>\n73,920<\/td>\n14,450<\/td>\n<\/tr>\n
                          Quantity Produced (units)<\/td>\n15,000<\/td>\n5,000<\/td>\n<\/tr>\n
                          Cost per unit<\/td>\n4.928<\/td>\n2.89<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          Single Factory Direct Labour Hour Overhead Rate = \\(\\frac{\u20b9 42,00,000}{80,000 \\text { labourhours }}\\)
                          \n= \u20b9 52.50 per Direct Labour Hour<\/p>\n

                          \"Strategic<\/p>\n

                          2. Workings
                          \n\"Strategic
                          \n(1) \u20b9 3,75,000 + Share of Technician\u2019s Salary (\u20b9 12,75,000 \u00d7 \\(\\frac{3}{10}\\))
                          \n(2) \u20b9 12,75,000 – Share to Machine Maintenance (\u20b9 12,7,000\u00d7 \\(\\frac{3}{10}\\))
                          \nTo identify the cost drivers for each activity and establish cost driver rates by dividing the activity costs by a measure of cost driver usage for the period.<\/p>\n

                          Calculation of Activities Cost Driver Rate<\/p>\n\n\n\n\n\n\n
                          Overheads<\/td>\nActivity Cost Driver Rate<\/td>\n<\/tr>\n
                          Receiving Supplies\u00a0 \\(\\left[\\frac{\u20b9 10,81,500}{3,920}\\right]\\)<\/td>\n\u20b9 275.89 Per consignment<\/td>\n<\/tr>\n
                          Performing Setups \\(\\left[\\frac{\u20b9 27,36,000}{4,080}\\right]\\)<\/td>\n\u20b9 670.59 per setup<\/td>\n<\/tr>\n
                          Quantity Inspection \\(\\left[\\frac{\u20b9 3,82,500}{2,560}\\right]\\)<\/td>\n\u20b9 149.41 per quality inspection<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          Thus, costs are assigned to components based on their cost driver usage. The assignments are as follows:<\/p>\n

                          \"Strategic<\/p>\n

                          Statement of Determination of the Cost of Product P & Q using Activity Based Costing System<\/p>\n\n\n\n\n\n\n\n\n\n\n\n
                          Particulars<\/td>\nP(\u20b9)<\/td>\nQ(\u20b9)<\/td>\n<\/tr>\n
                          Direct Materials<\/td>\n12,000<\/td>\n8,000<\/td>\n<\/tr>\n
                          Direct Labour @ * 12 per hour<\/td>\n11,520<\/td>\n1,200<\/td>\n<\/tr>\n
                          Receiving Supplies<\/td>\n13,243
                          \n(\u20b9 275.89 \u00d7 48 Con.)<\/td>\n                          		14,346
                          \n(\u20b9 275.89 \u00d7 52 Con.)<\/td>\n<\/tr>\n
                          Performing Setups<\/td>\n24,141
                          \n(\u20b9 670.59 \u00d7 36 Set-ups)<\/td>\n                          		16,094
                          \n(\u20b9 670.59 \u00d7 24 Set-ups)<\/td>\n<\/tr>\n
                          Quality Inspections<\/td>\n4,482
                          \n(\u20b9 149.41 \u00d7 30 Ql)<\/td>\n                          		1,494
                          \n(\u20b9 149.41 \u00d7 10 Ql)<\/td>\n<\/tr>\n
                          Total Costs<\/td>\n65,386<\/td>\n41,134<\/td>\n<\/tr>\n
                          No. of Units Produced<\/td>\n15,000<\/td>\n5,000<\/td>\n<\/tr>\n
                          Cost Per Unit<\/td>\n4.36<\/td>\n8.23<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          3. Calculation of Sales Value per Quarter of Component \u2018R\u2019 (using ABC)<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
                          Particulars of Costs<\/td>\nAmount (\u20b9)<\/td>\n<\/tr>\n
                          Direct Materials<\/td>\n12,000<\/td>\n<\/tr>\n
                          Direct Labour (@ \u20b9 12 per hour)<\/td>\n3,600 (\u20b9 12 \u00d7 300 Hr.)<\/td>\n<\/tr>\n
                          Initial Design Cost (\u20b9 60,000 \u00f7 8 Quarter)<\/td>\n7,500<\/td>\n<\/tr>\n
                          Receiving Supplies<\/td>\n5,518
                          \n(\u20b9 275.89 \u00d7 20 Con.)<\/td>\n<\/tr>\n
                          Performing Setups<\/td>\n4,024
                          \n(\u20b9 670.59 \u00d7 6 Set-ups)<\/td>\n<\/tr>\n
                          Quality Inspections<\/td>\n3,586
                          \n(\u20b9 149.41 \u00d7 24 Ql)<\/td>\n<\/tr>\n
                          Total Costs<\/td>\n36,228<\/td>\n<\/tr>\n
                          Add: Margin 25% of \u20b9 36,228<\/td>\n9,057<\/td>\n<\/tr>\n
                          Total Sales Value<\/td>\n45,285<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          \"Strategic<\/p>\n

                          Question 14.
                          \nLinex Limited manufactures three products P, Q and R which are similar in nature and are usually produced in production runs of 100 units. Product P and R require both machine hours and assembly hours, whereas product Q requires only machine hours. The overheads incurred by the company during the first quarter are as under: (May 2015, 8 marks)
                          \n\"Strategic
                          \nThe data related to the three products during the period are as under:
                          \n\"Strategic
                          \nPrepare a statement showing details of overhead costs allocated to each product type using activity based costing.
                          \nAnswer:
                          \nComputation of Activity Rate<\/p>\n\n\n\n\n\n\n\n\n\n\n
                          Cost Pool<\/td>\nCost (?) [A]<\/td>\nCost Driver [B]<\/td>\nCost Driver Rate (\u20b9) [C] = [A] \u00f7 [B]<\/td>\n<\/tr>\n
                          Machine Department Expenses<\/td>\n18,48,000<\/td>\nMachine Hours (1,32,000 hrs.)<\/td>\n\u00a014<\/td>\n<\/tr>\n
                          Assembly Department Expenses<\/td>\n6,72,000<\/td>\nAssembly Hours (42,000 hrs.)<\/td>\n16.00<\/td>\n<\/tr>\n
                          Setup Cost<\/td>\n90,000<\/td>\nNo. of Production Runs (450*)<\/td>\n200<\/td>\n<\/tr>\n
                          Stores Receiving Cost<\/td>\n1,20,000<\/td>\nNo. of Requisitions Raised on the Stores (120)<\/td>\n1000<\/td>\n<\/tr>\n
                          Order Processing and Dispatch<\/td>\n1,80,000<\/td>\nNo. of Customers Orders Executed (3,750)<\/td>\n48<\/td>\n<\/tr>\n
                          Inspection and Quality Control Cost<\/td>\n36,000<\/td>\nNo. of Production Runs (450*)<\/td>\n80<\/td>\n<\/tr>\n
                          Total (\u20b9)<\/td>\n29,46,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          *Number of Production Run is 450 (150 + 120 + 180)<\/p>\n

                          \"Strategic<\/p>\n

                          Statement Showing Overheads Allocation
                          \n\"Strategic<\/p>\n

                          \"Strategic<\/p>\n

                          Question 15.
                          \nX Ltd. makes a single product with the following details: (Nov 2015)<\/p>\n\n\n\n\n\n\n\n\n\n\n
                          Description<\/td>\nCurrent Situation<\/td>\nProposed Change<\/td>\n<\/tr>\n
                          Selling Price (\u20b9\/ unit)<\/td>\n10<\/td>\n<\/td>\n<\/tr>\n
                          Direct Costs (\u20b9\/ unit)<\/td>\n5<\/td>\n<\/td>\n<\/tr>\n
                          Present number of setups per production period, (before each production run, setup is done)<\/td>\n42<\/td>\n<\/td>\n<\/tr>\n
                          Cost per set up (\u20b9)<\/td>\n450<\/td>\nDecrease by \u20b9 90<\/td>\n<\/tr>\n
                          Production units per run<\/td>\n960<\/td>\n1008<\/td>\n<\/tr>\n
                          Engineering hours for production period<\/td>\n500<\/td>\n422<\/td>\n<\/tr>\n
                          Cost per engineering hour (\u20b9)<\/td>\n10<\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          The company has begun Activity Based Costing of fixed costs and has presently identified two cost drivers, viz, production runs and engineering hours. Of the total fixed costs presently at \u20b9 96,000, after the above, \u20b9 72,100 remains to be analysed. There are changes as proposed above for the next production period for the same volume of output.
                          \n(i) How many units and in how many production runs should X Ltd. produce in the changed scenario in order to break – even?
                          \n(ii) Should X Ltd. continue to break up the remaining fixed costs into activity based costs? Why?\u00a0 (8 marks)
                          \nAnswer:
                          \n(a) Workings
                          \nStatement Showing \u2018Non-unit Level Overhead Costs\u2019<\/p>\n\n\n\n\n\n\n\n\n\n
                          Particulars<\/td>\nCurrent Situation<\/td>\nProposed Situation<\/td>\n<\/tr>\n
                          No. of Production Runs\/ Setups<\/td>\n42<\/td>\n40 \\(\\left(\\frac{960 \\text { runs } \\times 42 \\text { setup }}{1,008 \\text { units }}\\right) .\\)<\/td>\n<\/tr>\n
                          Cost per Setup<\/td>\n\u20b9 450<\/td>\n\u20b9 360\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u2019<\/td>\n<\/tr>\n
                          Production Units per run<\/td>\n960 units<\/td>\n1,008 units<\/td>\n<\/tr>\n
                          Production Units<\/td>\n40,320 (960 units \u00d7 42)<\/td>\n40320<\/td>\n<\/tr>\n
                          Engineering Hrs.<\/td>\n500.<\/td>\n422<\/td>\n<\/tr>\n
                          Engineering Cost per hour<\/td>\n\u20b9 10<\/td>\n\u20b9 10<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          \"Strategic<\/p>\n

                          Requirement of Question
                          \n(i) Break Even Point (Changed Scenario)
                          \nBreak Even Point
                          \n= \\(\\frac{\\text { Fixed Cost }+ \\text { (Setup Cost } \\times \\text { No. of Setups) }+ \\text { (Engineering Costs } \\times \\text { No. of Engineering Hrs.) }}{\\text { (Price }- \\text { Unit Variable Cost) }}\\)
                          \n= \\(\\frac{\u20b9 72,100+(\u20b9 360 \\times 40 \\text { Setups })+(\u20b9 10 \\times 422 \\mathrm{hrs} .)}{(\u20b9 10-\u20b9 5)}\\) = 18,144 units<\/p>\n

                          Break Even Point (No. of Production Runs).
                          \n= \\(\\frac{\\text { Break Even(units) }}{\\text { Production(unitsperrun) }}=\\frac{18,144 \\text { units }}{1,008 \\text { units }}\\) = 18 Runs<\/p>\n

                          (ii) A company should adopt Activity Based Costing (ABC) system for accurate product costing, ps traditional volume based costing system does not take into account the Non-unit Level Overhead Costs such as Setup Cost, Inspection Cost, and Material Handling Cost etc.<\/p>\n

                          Cost Analysis under ABC system showed that while these costs are largely fixed with respect to sales volume, but they are not fixed to other appropriate cost drivers. If break up of the remaining \u20b9 72,100 fixed costs consist of only a small portion of these costs, ABC need not be applied. However, it may also be noted that the primary study has resulted in cost savings. If the savings in cost are expected to exceed the cost of study and implementing ABC, it may be justified. Further it is pertinent to mention that ABC offers no increase in product-costing accuracy for single-product setting.<\/p>\n

                          \"Strategic<\/p>\n

                          Question 16.
                          \nSpeedo Limited is a specialist car manufacturer that produces various models of cars. The organization is due to celebrate its 100th anniversary next year. To mark the occasion, Speedo Limited intends to produce a sports car; the Model Royal. As this will be a special edition, production will be limited to 1,000 numbers of Model Royal Cars. (Nov 2016)<\/p>\n

                          Speedo Limited is considering using a target costing approach and has conducted market research to determine the features that consumers require in a sports car. Based on this market research and knowledge of competitor\u2019s products, company has decided to price the Model Royal at \u20b9 9.75 lacs. Company requires an operating profit margin of 25% of the selling price of the car. Details for the forthcoming year are as follows:
                          \nForecast of direct costs for a Model Royal Car-
                          \nLabour – \u20b9 2,50,000
                          \nMaterial – \u20b9 14,75,000
                          \nForecast of annual overhead costs:<\/p>\n\n\n\n\n\n
                          <\/td>\n\u20b9 in lacs<\/td>\nCost driver<\/td>\n<\/tr>\n
                          Production line cost<\/td>\n2,310<\/td>\nSee note 1<\/td>\n<\/tr>\n
                          Transportation costs<\/td>\n900<\/td>\nSee note 2<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          Note 1:
                          \nThe production line that would be used for Model Royal has a capacity of 60,000 machine hours per year. The production line time required for Model Royal is 6 machine hours per car. This production line will also be used to make other cars and will be working at full capacity.<\/p>\n

                          \"Strategic<\/p>\n

                          Note 2:
                          \nSome models of cars are delivered to showrooms using car transporters. 60% of the transportation costs are related to the number of deliveries made. 40% of the transportation costs are related to the distance travelled.<\/p>\n

                          The car transporters have forecast to make a total of 640 deliveries in the year and carry 10 cars each time. The car transporter will always carry its maximum capacity of 10 cars.<\/p>\n

                          The total annual distance travelled by car transporters is expected to be 2.25.0 kms. 50,000 kms of this is for the delivery of Model Royal cars only. All 1,000 Model Royal cars that will be produced will be delivered in the year using the car transporters.<\/p>\n

                          Required:
                          \n(i) Calculate the forecast total cost of producing and delivering a Model Royal car using Activity Based Costing principles to assign the overhead costs.
                          \n(ii) Calculate the cost gap that currently exists between the forecast total cost and the target total cost of a Model Royal car. (10 marks)
                          \nAnswer:
                          \nComputation of overhead using Activity Based Costing
                          \n\"Strategic<\/p>\n

                          Target cost, forecast total cost and cost Gap
                          \n\"Strategic<\/p>\n

                          \"Strategic<\/p>\n

                          Question 17.
                          \nA company can make any or both of products A and B in a production period not exceeding a total of 10,000 units due to non-availability of the required material and labour. Until now, the company had been taking decisions on the product mix, based on the following marginai cost analysis. (May 2017)
                          \n\"Strategic
                          \nSince the decisions based on the above approach did not yield the required results, the fixed costs were analysed as follows for 10,000 units of only A or 10,000 units of only B.
                          \n\"Strategic
                          \n\u20b9 30,000 can be taken as the unanalysed fixed cost, and unavoidable whether A or B or both are produced.<\/p>\n

                          The following cost reduction measures were taken by the Product Managers of A and B:
                          \n\"Strategic
                          \nFurther, the Management ensured availability of raw material and labour to support a production of 15000 units of either A or B or both together. There was no change to the step costs or contribution. However, the total unanalysed fixed cost increased to \u20b9 32,000.<\/p>\n

                          (i) Based on the principles of Activity Based Costing, prepare a statement showing the contribution and item wise analysed overheads for each product, arrive at the profitability of A and B and then the final profits if 15000 units of only A or 15000 units of only B are manufactured.
                          \n(ii) Find the minimum break-even point in units if only product A is manufactured after the cost reduction. (12 marks)
                          \nAnswer:
                          \n(i)
                          \n\"Strategic<\/p>\n

                          (ii) BEP = \\(\\frac{\\text { Fixed Cost }}{\\text { Contribution perunit }}\\) = \\(\\frac{32,000}{40}\\)
                          \n= 800 units
                          \nSetup Cost (fixed for 2,000 units); 1 Production Run; \u20b9 4,000\/
                          \nStep Cost (fixed for 2,000 units); \u20b9 4,000\/-
                          \nDistribution Cost will have to be recovered on the basis of 30 units.
                          \nLet BEP (unit) – \u2018K\u2019
                          \n40 \u00d7 K = \u20b9 32,000 + \u20b9 8,000 + \\(\\left(\\frac{K}{30 \\text { units }}\\right)\\) Boxes \u00d7 \u20b9 120
                          \nK = 1,111.11 units
                          \nRefining, 1,111.11 will have 37.03 boxes or say 38 boxes. The last box will cost \u20b9 120 which is equivalent to contribution from 3 units. Hence, BEP is 1,114 units.<\/p>\n

                          \"Strategic<\/p>\n

                          Question 18.
                          \nA Company produces three products P, Q and R for which the standard cost per unit and quantities produced are as under: (Nov 2017)<\/p>\n\n\n\n\n\n\n\n
                          Products<\/td>\nP<\/td>\nQ<\/td>\nR<\/td>\n<\/tr>\n
                          Units produced and sold<\/td>\n36,000<\/td>\n48,000<\/td>\n96,000<\/td>\n<\/tr>\n
                          Direct material cost per unit (\u20b9)<\/td>\n60<\/td>\n48<\/td>\n45<\/td>\n<\/tr>\n
                          Direct labour cost per unit (\u20b9)<\/td>\n30<\/td>\n24<\/td>\n18<\/td>\n<\/tr>\n
                          Machine hours per unit (hours)<\/td>\n0.50<\/td>\n0.40<\/td>\n0.30<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          Total production overheads are absorbed on machine hour basis. The rate is 60 per machine hour.<\/p>\n

                          The Company has analysed its operations and determined that five activities act as cost drivers for overheads. Data relating to five activities are given below:<\/p>\n\n\n\n\n\n\n\n\n
                          Activity Area<\/td>\nCost driver<\/td>\nCost of each activity as % of total production overhead cost<\/td>\n<\/tr>\n
                          Store receiving<\/td>\nNumber of requisitions<\/td>\n25%<\/td>\n<\/tr>\n
                          Machine set up<\/td>\nNumber of set ups<\/td>\n20%<\/td>\n<\/tr>\n
                          Machine running<\/td>\nMachine hours worked<\/td>\n25%<\/td>\n<\/tr>\n
                          Packing<\/td>\nPacking time in hours<\/td>\n16%<\/td>\n<\/tr>\n
                          Storage<\/td>\nArea in square metres<\/td>\n14%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          \"Strategic<\/p>\n

                          The investigation into the production overhead activities for the period revealed the foIlowing:<\/p>\n\n\n\n\n\n\n\n
                          Activity<\/td>\nP<\/td>\nQ<\/td>\nR<\/td>\n<\/tr>\n
                          Number of requisitions<\/td>\n1,200<\/td>\n1,500<\/td>\n3,900<\/td>\n<\/tr>\n
                          Number of machine set ups<\/td>\n60<\/td>\n120<\/td>\n320<\/td>\n<\/tr>\n
                          Packing hours<\/td>\n3,000<\/td>\n4,800<\/td>\n10,200<\/td>\n<\/tr>\n
                          Storage (Sq metres)<\/td>\n10,800<\/td>\n12,000<\/td>\n19,200<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          Required:
                          \n(i) Calculate total production overheads.
                          \n(ii) Prepare product cost statement showing per unit cost under traditional absorption costing method.
                          \n(iii) Calculate the cost driver rates.
                          \n(iv) Prepare product cost statement showing per unit cost under activity based costing method.
                          \n(v) What is the difference in costs due to adoption of traditional absorption
                          \ncosting method and activity based costing method? (10 marks)
                          \nAnswer:
                          \n(i) Total Machine Hours and Production Overhead<\/p>\n\n\n\n\n
                          P<\/td>\nR<\/td>\nR<\/td>\nTotal<\/td>\n<\/tr>\n
                          36000 \u00d7 0.5 = 18000 hours<\/td>\n48000 \u00d7 0.4 = 19200 hours<\/td>\n96000 \u00d7 0.3 = 28800 hours<\/td>\n66000 hours<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          So, total Production Overheads = 66000 hrs \u00d7 \u20b9 60 = \u20b9 39,60,000<\/p>\n

                          (ii) Computation of ABC Rates
                          \n\"Strategic<\/p>\n

                          (iii) Overhead Cost Allocation using ABC Rates (\u20b9)
                          \n\"Strategic<\/p>\n

                          \"Strategic<\/p>\n

                          (iv) Statement of Cost<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
                          Particulars<\/td>\nP<\/td>\nQ<\/td>\nR<\/td>\n<\/tr>\n
                          (a) Direct Material per unit (Given)<\/td>\n60<\/td>\n48<\/td>\n45<\/td>\n<\/tr>\n
                          (b) Direct Labour per unit (Given)<\/td>\n30<\/td>\n24<\/td>\n18<\/td>\n<\/tr>\n
                          (c) Prime Cost per unit (a + b)<\/td>\n90<\/td>\n72<\/td>\n63<\/td>\n<\/tr>\n
                          (d) Overhead Cost per unit under Traditional System (hr \u00d7\u00a0\u20b9 60)<\/td>\n0.5 \u00d7 60 = 30.00<\/td>\n0.4 \u00d7 60 = 24.00<\/td>\n0.3 \u00d7 60 = 18.00<\/td>\n<\/tr>\n
                          (e) Total Cost per unit under Traditional System (c + d)<\/td>\n120<\/td>\n96<\/td>\n81<\/td>\n<\/tr>\n
                          (f) Overhead Cost per unit under ABC – System (as per – 3)<\/td>\n22.03<\/td>\n21.47<\/td>\n22.25<\/td>\n<\/tr>\n
                          (g) Total Cost per unit under ABC System (c + f)<\/td>\n112.03<\/td>\n93.47<\/td>\n85.25<\/td>\n<\/tr>\n
                          (h)Difference between Traditional & ABC System (e – g)<\/td>\n7.97<\/td>\n2.53<\/td>\n-4.25<\/td>\n<\/tr>\n
                          (i) Effect under Traditional System<\/td>\nOver Costed<\/td>\nOver Costed<\/td>\nUnder Costed<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          \"Strategic<\/p>\n

                          Question 19.
                          \nFast Cook Ltd., is a pressure cooker manufacturing company doing business through wholesalers and retailers. The company is following Activity Based Costing system. Average cost per cooker is \u20b9 600 and the listed price is \u20b9 1000. But cookers are sold at a discount of 25% on listed price on orders for above 200 units and at a discount of 20% on orders for 200 units or less.<\/p>\n

                          The company wants to analyse the profitability of two of its wholesale customers A and B and two of its retail customers X and Y on the basis of the business with them during last year. This is to explore the opportunities to increase the profitability from the customers. The relevant data pertaining to the last year are given below : (Nov 2018)<\/p>\n\n\n\n\n\n\n\n\n
                          Customer<\/td>\nA<\/td>\nB<\/td>\nX<\/td>\nY<\/td>\n<\/tr>\n
                          No. of purchase orders<\/td>\n50<\/td>\n65<\/td>\n230<\/td>\n270<\/td>\n<\/tr>\n
                          No. of cookers purchased per order<\/td>\n500<\/td>\n300<\/td>\n40<\/td>\n30<\/td>\n<\/tr>\n
                          No. of visits to customers place<\/td>\n10<\/td>\n15<\/td>\n25<\/td>\n22<\/td>\n<\/tr>\n
                          No. of ordinary deliveries<\/td>\n45<\/td>\n50<\/td>\n175<\/td>\n200<\/td>\n<\/tr>\n
                          No. of speed deliveries<\/td>\n5<\/td>\n15<\/td>\n50<\/td>\n65<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          \"Strategic<\/p>\n

                          The activity, cost driver and the rate are as follows:<\/p>\n\n\n\n\n\n\n\n
                          Activity<\/td>\nCost Driver<\/td>\nCost per unit of Driver<\/td>\n<\/tr>\n
                          Order processing<\/td>\nNo. of purchase orders<\/td>\n1300<\/td>\n<\/tr>\n
                          Visiting customers<\/td>\nNo. of customers visited<\/td>\n7400<\/td>\n<\/tr>\n
                          Ordinary delivery<\/td>\nNo. of ordinary deliveries<\/td>\n2000<\/td>\n<\/tr>\n
                          Speed delivery<\/td>\nNo. of speed deliveries<\/td>\n6000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                          Required:
                          \n(i) Evaluate the customer profitability by calculating the profit per cooker from each customer. (12 marks)
                          \n(ii) Recommend steps to be taken to improve profitability from less profitable customers. (4 marks)
                          \n(iii) List down the service organisations for which customer profitability analysis is useful. (2 marks)
                          \n(iv) Explain the specific benefits of customer profitability analysis. (2 marks)
                          \nAnswer:
                          \n(i) Statement of customer profitability by calculating profit per cooker
                          \n\"Strategic<\/p>\n