📊 CMA (BMB207) — 2025-26 Paper Prediction
Theory + Numerical Analysis
🔍 Situation Analysis — Why This Year Will Have Numericals
3 Strong Reasons to Expect Numericals in 2025-26:
1. Subject returned after 15 years: Teachers will want to test deep understanding — not just definitions. Numericals test application (K4/K5 level), which is what returning subjects demand.
2. FMCF Pattern: FMCF was theory-only → next year got theory + numericals. Same pattern expected here.
3. Syllabus has heavy numerical content: Unit II (CVP, BEP, Decisions), Unit IV (Variance Analysis), Unit V (Process Costing, Equivalent Units, Joint Costs) — all these are inherently numerical. It would be unusual to ask only theory from these units.
Expected Paper Mix: ~60% Theory + ~40% Numericals
📋 Section-wise Expected Pattern
| Section | Questions | Marks | Type | Likely Units |
|---|
| Section A (Q1) | 7 short | 2×7=14 | Pure Theory (K1/K2) | All Units — 1-2 per unit |
| Section B (Q2) | Any 3 of 5 | 7×3=21 | Theory + Small Numericals | Mix of all 5 units |
| Q3 (Unit I) | 1 of 2 | 7 | Theory or Cost Sheet Numerical | Unit I |
| Q4 (Unit II) | 1 of 2 | 7 | BEP / CVP Numerical | Unit II 🔥 |
| Q5 (Unit III) | 1 of 2 | 7 | Budget Preparation / Theory | Unit III |
| Q6 (Unit IV) | 1 of 2 | 7 | Variance Calculation | Unit IV 🔥 |
| Q7 (Unit V) | 1 of 2 | 7 | Process Costing / Theory | Unit V 🔥 |
📘 UNIT I — Management Accounting & Cost Concepts (10 Hours)
🟢 Theory Questions (High Probability)
🔴 Very High Theory
Q1. Define Management Accounting. Differentiate it from Financial Accounting.
Management Accounting: The process of identifying, measuring, analyzing, and communicating financial information to help managers make decisions.
Differences:
| Basis | Management Accounting | Financial Accounting |
|---|
| Users | Internal (managers) | External (investors, govt) |
| Mandatory | No | Yes (legal requirement) |
| Time focus | Future (planning) | Past (historical) |
| Format | No fixed format | Prescribed format |
| Audit | Not required | Statutory audit required |
🔴 Very High Theory
Q2. What is Activity-Based Costing (ABC)? How does it differ from Traditional Costing?
ABC: A costing method that assigns overhead costs to products based on activities that drive costs, rather than volume-based allocation.
Steps in ABC: (1) Identify activities → (2) Assign costs to activities (cost pools) → (3) Identify cost drivers → (4) Calculate cost driver rate → (5) Assign cost to products
Difference from Traditional Costing:
| Basis | ABC | Traditional |
|---|
| Overhead allocation | Activity-based | Volume-based (labour hrs) |
| Accuracy | More accurate | Less accurate |
| Cost drivers | Multiple | Single (usually) |
| Suitable for | Diverse products | Homogeneous products |
🟡 Medium Theory
Q3. Explain the components of Total Cost / Prepare a Cost Sheet format.
Cost Sheet Structure:
Direct Material + Direct Labour + Direct Expenses = Prime Cost
Prime Cost + Factory Overheads = Works Cost (Factory Cost)
Works Cost + Office & Admin Overheads = Cost of Production
Cost of Production + Opening Stock – Closing Stock = Cost of Goods Sold
Cost of Goods Sold + Selling & Distribution Overheads = Cost of Sales (Total Cost)
Total Cost + Profit = Sales
🔵 Numerical Questions (Expected)
🔴 Very High Numerical
Q4. Prepare a Cost Sheet from given data (likely in Section C or B)
Sample Problem:
A factory produces 1,000 units. Data given:
Raw Material consumed: ₹40,000 | Direct Wages: ₹20,000 | Factory Overheads: ₹15,000
Office Overheads: ₹8,000 | Selling Overheads: ₹5,000 | Profit: 20% on cost
Prepare a Cost Sheet showing all components and Selling Price per unit.
Answer outline:
Prime Cost = 40,000 + 20,000 = ₹60,000
Works Cost = 60,000 + 15,000 = ₹75,000
Cost of Production = 75,000 + 8,000 = ₹83,000
Total Cost = 83,000 + 5,000 = ₹88,000
Profit (20%) = ₹17,600
Sales = ₹1,05,600 | SP per unit = ₹105.60
📗 UNIT II — CVP Analysis & Decision Making (8 Hours) 🔥 Most Important
🟢 Theory Questions
🔴 Very High Theory
Q5. Explain CVP Analysis. What are its assumptions?
CVP Analysis (Cost-Volume-Profit) studies the relationship between cost, volume of output, and profit to help in planning and decision-making.
Key concepts: Contribution, P/V Ratio, BEP, Margin of Safety
Assumptions:
(1) Costs are either fixed or variable — no semi-variable
(2) Selling price remains constant
(3) Fixed costs remain constant over the relevant range
(4) Variable cost per unit is constant
(5) Sales mix remains constant (for multiple products)
(6) Production = Sales (no stock changes)
🔴 Very High Theory
Q6. Explain Make or Buy Decision with decision criteria.
Make or Buy: A management decision on whether to produce a component internally or purchase from outside.
Decision Rule:
• If Marginal Cost of Making < Purchase Price → Make it
• If Purchase Price < Marginal Cost of Making → Buy it
Factors considered: (1) Available capacity, (2) Quality control, (3) Reliability of supplier, (4) Strategic importance, (5) Fixed cost avoidability
Note: Fixed costs are relevant only if they can be avoided by buying outside.
🟡 Medium Theory
Q7. What is Shut Down vs Continue Decision? When should a firm shut down?
A firm should temporarily shut down if:
Selling Price < Variable Cost per unit (i.e., Contribution is negative)
If Contribution is positive (even if loss overall), the firm should continue — because contribution helps recover fixed costs.
Rule:
• If SP > VC → Continue (contribution covers some fixed cost)
• If SP < VC → Shut down (every unit sold increases loss)
Fixed costs will be incurred whether firm operates or not (in short run).
🔵 Numerical Questions (HIGH probability — Unit II has most numericals)
🔴 Very High Numerical
Q8. BEP + P/V Ratio + Margin of Safety Calculation
Sample Problem:
Selling Price = ₹50/unit | Variable Cost = ₹30/unit | Fixed Cost = ₹1,00,000/year
Actual Sales = 8,000 units
Calculate: (i) P/V Ratio (ii) BEP in units (iii) BEP in ₹ (iv) Margin of Safety
Solution:
Contribution per unit = 50 – 30 = ₹20
P/V Ratio = 20/50 × 100 = 40%
BEP (units) = 1,00,000 / 20 = 5,000 units
BEP (₹) = 1,00,000 / 0.40 = ₹2,50,000
Margin of Safety = 8,000 – 5,000 = 3,000 units = ₹1,50,000 (37.5%)
🔴 Very High Numerical
Q9. Make or Buy Numerical Decision
Sample Problem:
A company makes a component at: DM = ₹8, DL = ₹5, Variable OH = ₹3, Fixed OH = ₹4 per unit
An outside supplier offers the component at ₹18 per unit. Should the company make or buy?
Solution:
Marginal Cost of Making = 8 + 5 + 3 = ₹16 (Fixed cost ignored if unavoidable)
Purchase Price = ₹18
Since Marginal Cost (₹16) < Purchase Price (₹18) → MAKE the component
Saving = ₹18 – ₹16 = ₹2 per unit
🟡 Medium Numerical
Q10. Key Factor / Limiting Factor Numerical
Sample Problem:
Two products A and B. Machine hours available = 3,000 hrs.
Product A: SP=₹100, VC=₹60, Machine hrs=2 per unit, Demand=1,000
Product B: SP=₹80, VC=₹40, Machine hrs=3 per unit, Demand=800
Solution:
Contribution A = ₹40 | Contribution B = ₹40
Contribution per machine hour: A = 40/2 = ₹20 | B = 40/3 = ₹13.33
Priority: Product A first
Produce 1,000 A = 2,000 hrs used | Remaining = 1,000 hrs → 333 units of B
📙 UNIT III — Budgets & Budgetary Control (4 Hours)
🟢 Theory Questions
🔴 Very High Theory
Q11. Explain Fixed vs Flexible Budget with example.
| Basis | Fixed Budget | Flexible Budget |
|---|
| Activity level | One level only | Multiple levels |
| Adjusts? | No — stays rigid | Yes — adjusts to actual |
| Use | Stable conditions | Varying output |
| Control | Less effective | More effective |
| Example | Rent budget | Production cost budget |
Flexible Budget shows costs at different output levels (60%, 80%, 100% capacity)
🔴 Very High Theory
Q12. Define Zero-Based Budgeting (ZBB). Advantages and Limitations.
ZBB: Every budget period starts from zero — all expenses must be justified afresh, regardless of past budgets.
Advantages: (1) Eliminates unnecessary spending (2) Efficient resource allocation (3) Focuses on value for money (4) Challenges status quo
Limitations: (1) Time-consuming and costly (2) Requires skilled managers (3) May create uncertainty (4) Short-term focus may ignore long-term needs
🔵 Numerical Questions
🔴 Very High Numerical
Q13. Flexible Budget Preparation at different activity levels
Sample Problem:
Prepare a Flexible Budget at 60%, 80%, 100% capacity from:
Fixed Costs: Factory rent ₹20,000, Salaries ₹15,000
Variable Costs per unit: Material ₹10, Labour ₹6, Power ₹2
Normal capacity = 1,000 units
Solution outline:
| Item | 60% (600 u) | 80% (800 u) | 100% (1000 u) |
|---|
| Material | 6,000 | 8,000 | 10,000 |
| Labour | 3,600 | 4,800 | 6,000 |
| Power | 1,200 | 1,600 | 2,000 |
| Fixed Costs | 35,000 | 35,000 | 35,000 |
| Total | 45,800 | 49,400 | 53,000 |
📕 UNIT IV — Standard Costing & Variance Analysis (8 Hours) 🔥
🟢 Theory Questions
🔴 Very High Theory
Q14. What is Standard Costing? Advantages and Limitations.
Standard Costing: A technique where predetermined (standard) costs are set and compared with actual costs. Variances are analyzed for control.
Advantages: Cost control | Performance measurement | Helps budgeting | Simplifies accounting | Motivates employees
Limitations: Setting standards is difficult | Costly to maintain | May become outdated | Unfavorable variances may demoralize employees | Not suitable for non-repetitive work
🔵 Numerical Questions (MOST LIKELY in Section B or Q6)
🔴 Very High Numerical
Q15. Material Variance Calculation (MPV + MUV + MCV)
Sample Problem:
Standard: 5 kg @ ₹10/kg per unit | Actual Production: 200 units
Actual: 1,100 kg purchased and used @ ₹9/kg
Calculate: (i) Material Cost Variance (ii) Material Price Variance (iii) Material Usage Variance
Solution:
Standard Qty for actual production = 200 × 5 = 1,000 kg
Standard Cost = 1,000 × 10 = ₹10,000
Actual Cost = 1,100 × 9 = ₹9,900
MCV = SC – AC = 10,000 – 9,900 = ₹100 (F)
MPV = (SP – AP) × AQ = (10 – 9) × 1,100 = ₹1,100 (F)
MUV = (SQ – AQ) × SP = (1,000 – 1,100) × 10 = ₹1,000 (A)
Check: MCV = MPV + MUV → 100(F) = 1,100(F) – 1,000(A) ✓
🔴 Very High Numerical
Q16. Sales Variance Calculation (SPV + SVV + SV)
Sample Problem:
Budgeted: 500 units @ ₹60 each | Actual: 600 units @ ₹55 each
Standard Cost per unit = ₹40
Calculate: (i) Sales Price Variance (ii) Sales Volume Variance (iii) Total Sales Variance
Solution:
Sales Price Variance = (AP – SP) × AQ = (55 – 60) × 600 = ₹3,000 (A)
Sales Volume Variance = (AQ – BQ) × SP = (600 – 500) × 60 = ₹6,000 (F)
Total Sales Variance = Actual Sales – Budgeted Sales
= (600×55) – (500×60) = 33,000 – 30,000 = ₹3,000 (F)
📓 UNIT V — Process Costing, Target/Life Cycle/Quality Costing (10 Hours) 🔥
🟢 Theory Questions
🔴 Very High Theory
Q17. What is Target Costing? How does it differ from Traditional Cost-Based Pricing?
Target Costing: Market price is set first by competitive forces. Desired profit is subtracted to get the maximum allowable (target) cost.
Formula: Target Cost = Market Price – Desired Profit
| Basis | Target Costing | Traditional Pricing |
|---|
| Starting point | Market price | Cost of production |
| Focus | Customer value | Internal costs |
| Price set by | Market | Company |
| Cost managed | Before production | After production |
🔴 Very High Theory
Q18. Explain Life Cycle Costing and its stages.
Life Cycle Costing tracks all costs of a product from birth to disposal — across its entire life.
Stages:
(1) R&D / Design: Highest cost commitment (80% costs locked here)
(2) Introduction: High costs, low sales, losses
(3) Growth: Sales increase, costs fall, profits rise
(4) Maturity: Peak sales, stable costs, maximum profit
(5) Decline: Falling sales, product withdrawn
Importance: Helps in long-term pricing, investment decisions, and product discontinuation planning.
🔴 Very High