JAIIB Paper 3 Module D Quiz 7

Labour rate variance = actual hours × (standard rate − actual rate) = 130 × (₹21 − ₹23) = ₹-260. A higher actual rate creates an adverse variance.

Contribution = sales − variable costs = ₹575,000 − ₹316,250 = ₹258,750. P/V ratio = contribution ÷ sales × 100 = 45.0%.

Break-even units = fixed costs ÷ contribution per unit = ₹115,000 ÷ ₹25 = 4,600 units. At this output, contribution equals fixed costs and profit is zero.

Equivalent units express incomplete work in terms of fully completed units, allowing costs to be assigned fairly between completed output and closing work in progress.

Sunk costs have already been incurred and cannot be recovered by the decision at hand. Decisions should focus on relevant future costs and benefits.

Patient-day is a common composite cost unit for hospital services. Cost units should reflect the service delivered, such as passenger-kilometre, room-day or tonne-kilometre.

Break-even units = fixed costs ÷ contribution per unit = ₹80,000 ÷ ₹50 = 1,600 units. At this output, contribution equals fixed costs and profit is zero.

Rate variance = AH × (SR − AR) = 200 × (₹150 − ₹160) = −₹2,000, i.e. ₹2,000 adverse.

Management accounting is tailored to internal users and may include budgets, forecasts, variance analysis and decision models. Financial accounting is primarily for external reporting under applicable standards.

Retention money is withheld by the customer until completion, defect-liability or other contractual conditions are satisfied. It affects cash flow and recognition/collection of contract amounts.

The sales budget often drives production, inventory, purchase, labour and cash budgets. In some entities, a capacity or resource constraint may be the key starting point instead.

Total cost at the stated activity level = variable cost + fixed cost = ₹150,000 + ₹60,000 = ₹210,000.

Labour rate variance = actual hours × (standard rate − actual rate) = 120 × (₹21 − ₹19) = ₹240. A higher actual rate creates an adverse variance.

Under reverse charge, the recipient pays GST for specified categories of supplies under the statute. Eligibility for ITC on tax paid under reverse charge is subject to conditions.

Material usage variance = standard price × (standard quantity − actual quantity) = ₹15 × (300 − 300) = ₹0. Positive is favourable; negative is adverse.

Production budget = sales + desired closing stock − opening stock = 550 + 150 − 160 = 540 units.

Participative budgeting involves managers and employees in budget preparation. It can improve ownership and local information, although slack and negotiation issues must be managed.

An indirect tax is levied on a supply or transaction and its economic burden can generally be passed to the buyer through prices. GST is a major example.

Cost behaviour assumptions are valid only within a defined range of activity. Beyond that range, capacity changes, step costs or price effects may alter the pattern.

A limiting factor constrains operations. Budgets should be built around the principal constraint and resources allocated to maximise the objective within that constraint.