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ASSIGNMENT
| DRIVE FALL | 2014 |
| PROGRAM | BBA |
| SUBJECT CODE & NAME | BBA402 MANAGEMENT ACCOUNTING |
| SEMESTER | 4 |
| BK ID | B1713 |
| CREDITS | 4 |
| MARKS | 60 |
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;
- The role of the budgetary control in a business is to monitor and control all income and expenses. It also helps with managing the demands for cash and minimizes borrowing of money to operate the business.
- When there is a budgetary control system
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 between the actual costs and the standard costs, and those differences are known as variances.
Standard costing and the related variances is a valuable management tool. If a variance arises, management becomes aware that manufacturing costs have differed from the standard (planned, expected) costs. If actual costs are
- Marginal costing plays a major role in making certain decisions. It provides information to management regarding the behavior of costs and the incidence of such costs on the profitability of an undertaking. Please explain the advantages of marginal costing.
Answer : What is Marginal Costing?
It is a costing technique where only variable cost or direct cost will be charged to the cost unit produced.
Marginal costing also shows the effect on profit of changes in volume/type of output by differentiating between fixed and variable costs.
Salient Points:
Q.4 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
variance.
| 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 | |||||
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 :
- 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
Calculation of standard margin price variance and sales margin volume variance :
| Pro. | Budgeted sale price per unit(rs) | St. cost per unit | St. sale margin | Budgeted quantity | Budgeted profit | Actual sales price | Actual sales margin | Actual sales quantity(unit) | Actual profit (rs) |
| A | 20 | 12 | 8 | 600 | 4800 | 24 | 12 | 800 | 9600 |
| B | 15 | 9 | 6 | 400 | 2400 | 12 | 3 | 600 | 1800 |
| Total | 1000 | 7200 | 1400 | 11400 |
Sales margin volume variance(SMVV) = SM(AQ – BQ)
For A = 8(800 – 600) = Rs. 1600
For B = 6(600-400) = Rs. 1200
Total sales margin volume variance = 1600 + 1200 = Rs. 2800
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:
- Size Of Business:-
Working capital requirement of a firm is directly
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.
Answer :
| Statement of sources and uses of funds | |||
| Sources of Fund | Amount | Application of Fund | Amount |
| Equity Share Capital | 12,500 | Redeemable Preference Shares | 5,000 |
| Decrease in Working Capital | 3,750 | Purchase of Building | 25,000 |
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