BBA402 MANAGEMENT ACCOUNTING

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ASSIGNMENT

 

 

 

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

 

 

Q.1 Budgetary control is a strong business tool that helps companies maximize profits. Explain the

advantages of budgetary control.

 

Ans :  Advantages of budgetary control :

 

Every business needs to have a budgetary control system in place for effective and proper financial planning for the business. Sometimes the lack of a proper accountability program in a business may cause the business to make losses and incur unnecessary expenses. The benefits of budgetary control in business include the following;

 

 

 

 

Q.2 The success of a business enterprise depends to a great extent on how efficiently and effectively it can control costs. 

Give the meaning of standard costing.  Describe estimated cost and standard cost. 

 

Ans :  Meaning of standard costing  :

 

Standard costing is an important subtopic of cost accounting. Standard costs are usually associated with a manufacturing company’s costs of direct material, direct labor, and manufacturing overhead.

Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, many manufacturers assign the expected or standard cost. This means that a manufacturer’s inventories and cost of goods sold will begin with amounts reflecting the standard costs, not the actual costs, of a product. Manufacturers, of course, still have to pay the actual costs. As a result there are almost always differences

 

 

 

Q.3 Variance analysis is a tool for measuring performance and depends on the principle of

management by exception. Explain the uses of variance. 

From the following information, calculate sales margin price variance and sales margin volume

Budgeted sale                                                     Actual sale
product	Qty. units	Sales price per unit (rs)	Standard price per unit (rs)	product	Qty. units	sales price per (rs)
A	600	20	12	A	800	24
B	400	15	9	B	600	12
	1000				1400

variance.

 

 

 

 

 

 

 

 

 

 

 

 

Ans : The uses of variances  :

 

Variance analysis, also described as analysis of variance or ANOVA, involves assessing the difference between two figures. Its uses are described below :

 

1. Budget vs. Actual Costs:

 

Variance analysis is important to assist with managing budgets by controlling budgeted versus actual costs. In program and project management, for example, financial data are generally assessed at key intervals or milestones. For instance, a monthly closing report might provide quantitative data about expenses, revenue and remaining inventory levels.

 

 

Q.4 The following are the summarised trading and profit & loss accounts of Mysore Jewellers for the

year ending 31 December 2002 and the balance sheet as on that date.

 

                            Trading and profit & loss account

 

To opening stock                     76,250     By sales                                 5,00,000

By closing stock                      98,500

To purchases                         3,22,250      

To gross profit                       2,00,000

                                            5,98,500                                                  5,98,500

 

To selling expenses                22,000           By gross profit b/d               2,00,000            

To administrative expenses     98,000           By dividend on shares              9,000

To loss on sale of assets           2,000            By profit on sale of shares        3,000

To net profit                           90,000                                                                               

                                             2,12,000                                                  2,12,000 

 

You are required to calculate the following ratios:

1. Gross profit ratio

2. Net profit ratio

3. Operating ratio

4. Operating profit ratio

5. Stock turnover ratio

6. Turnover of fixed assets

7. Return on total resources

 

A

 

Calculation of all the ratios 

 

10

10

 

Q.5 Explain the determinants of working capital requirements. 

 

Ans : Determinants of working capital requirements :

 

Requirements Of working capital depend upon various factors such as nature of business, size of business, the flow of business activities. However, small organization relatively needs lesser working capital than the big business organization. Following are the factors which affect the working capital of a firm:

 

1. Size Of Business:-

 

Working capital requirement of a firm is directly influenced by the size of its business operation. Big business organizations require more working capital than the small business organization. Therefore, the size of organization is one of the major determinants of working capital.

 

 

 

 

Q.6 From the following information prepare (i) a statement of sources and uses of funds and (ii) a

schedule of changes in working capital for M/s. Eshwari  & co.  Balance sheets as on 31stMarch

2010 and 2011 are:

 

Additional Information

 

(i)

Depreciation of Rs. 2,500 charged on Land & Buildings

 

(ii)

Building amounting to Rs. 5,000 was sold for Rs. 4,700.

 

A

Calculation and preparation of schedule of changes

in working capital  

Preparation of statement of sources and uses of

funds 

5

 

5

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