1.8 ACCOUNTING FOR MANAGERS
1. Arun the managing director is surprised that his profit every year is quite
different from what he wants or expects to achieve. someone advised him to
install a formal system of budgeting. He employs a fresh accountant to do this.
For two years, the accountant faithfully makes all budgets based on previous
year accounts. The problem remains unsolved. Advise Arun the managing
director and the accountant on what steps they should take. Make assumptions
about what is lacking.
2. In a factory, actual fixed cost overheads were different from the standard fixed
overheads because the actual output, actual time consumed, actual rate per
hour and per unit of output differed. Compute the variances taking assumed
figures.
3. A company has to decide whether to Make or Buy. Through differential cost
analysis, how will you ascertain the net difference between the two alternatives
so as to assist the management in their decision making? Use hypothetical
figures to illustrate.
4. As a management accountant you were asked to introduce a system of capital
expenditure control for your organization. Explain the important feature you
want to incorporate in the system you propose to introduce with the suitable
example of a project involving capital expenditure.

1.6 STATISTICS FOR MANAGERS
1. A random sample of 1000 workers from south India show that their mean wages
are Rs. 47 per week with a standard deviation of Rs. 28. A random sample of
1500 workers from North India gives a mean wage of Rs. 49 per week with a
standard deviation of Rs. 40. Is there any significant difference between their
mean levels of wages?
2. Calculate seasonal indices for the data given below by the link relative method

Quarter	Years
2007	2008	2009	2010	2011
I	45	48	49	52	60
II	54	56	63	65	70
III	72	63	70	75	84
IV	60	56	65	72	66

3. The following is the summary of a survey on the color of pens purchased by
persons belonging to different age groups. use chi-square test at 5 % level of
significance to find whether the age of the person has any association with the
choice of color.
4

Color Age Group	Blue	Black	Red
Less than 20	8	12	20
20-50	10	15	10
Above 50	10	10	5

6. The following data represents rainfall (x) and yield of paddy per hectare (y) in a
particular area.

x	113	102	95	120	140	130	125
y	1.8	1.5	1.3	1.9	1.1	2.0	1.7

a) Fit the regression equation x on y
b) Estimate y when x = 145
c) Calculate karl pearson’s coefficient of correlation.
d) Calculate regression coefficient x on y and y on x
e) Check whether the regression line is a good fit.