Master of Business Administration-MBA Semester I Subject Name Financial & Management Accounting

Answer - 1 Management Accounting uses the following tools or techniques to fulfill its responsibilities and duties toward management. a) Financial Statement Analysis: Financial Statements are indicators of two significant factors that include profitability and financial soundness. Analysis and interpretation of financial statements enables full diagnosis of the profitability and financial soundness of the firm. Analysis means methodical classification of the data given in the financial statement. Funds flow analysis: Funds flow analysis is an important tool for management accountant. It reveals the changes in working capital position, the sources from which the working capital was obtained and the purpose for which it was used. It also reveals the changes that have taken place behind the Balance Sheet. Cash flow analysis: Cash flow statement identifies the sources and application of cash. It is prepared on the basis of actual or estimated data. It depicts the changes in the cash position from one period to another. Cost Techniques that includes marginal costing, differential costing standard costing and responsibility costing: Standard costing is the preparation and use of standard costs, their comparison with actual costs and the analysis of variance. It discloses the cost of deviations from standards. It aims at assessing the cost of a product, process or operation under standard operating condition. Budgetary control: has become an essential tool of management for controlling costs and to maximize profit. It helps to compare the current performance with pre-planned performance thereby correcting the deviations if any. Management Reporting: Management reporting system is an organized method of providing each manager with all the data and only those data which he needs for his decisions, when he needs them and in a form which aids his understanding and stimulates his action.

b)

c)

d)

e)

f)

Answer - 2 Contribution per unit = sales- Variable cost = Rs 25- Rs 20 =Rs 5.

Contribution

= = =

Contribution per unit x Out put 5 x 80000

400,000

Profit

= = =

Contribution Fixed cost 400000- 3,05,000 95000

Answer - 3 An effective budgeting system should have essential features to get best results. In this direction, the following may be considered as essential features of an effective budgeting. a) Business Policies defined: The top management of an organization strives to have an action plan for every activity and for each department. Every budget should reflect the business policies formulated from time to time. No ambiguity should enter the document. Forecasting: Business forecasts are the foundation of budgets. Time and again discussion should be arranged to derive the most profitable combinations of forecasts. Better results can be anticipated based on the sound forecasts. Formation of Budget Committee: A budget committee is a group of representatives of various important departments in a organization. The function of committee should be specified clearly. The committee plays a vital role in the preparation and execution of budget estimates.

b)

c)

d)

Accounting system: To make the budget a successful document there, should be proper flow of accurate and time information. The accounting adopted by the organization should be proper and must be fine- tuned from time to time. Organizational efficiency: To make the budget preparation and its subsequent implementation a success, and efficient adequate and best organization is necessary a budgeting system should always be supported by a sound organizational structure. Management Philosophy: Every management should set a healthy philosophy while opting for the budget. Management must whole heartedly support the activities which developing a budget. Reporting system: Proper feedback system should be established. Provision should be made for corrective measure whenever comparative measures are proposed. Availability of statistical information: Since budget are always prepared and expressed in quantitative terms, it is essential that sufficient and accurate relevant data should be made available to each department. Motivation. Since budget acts as a minor, the entire organization should become smart in its approach. Every employee, executive and non- executive should be made part of the overall exercise.

f)

g)

h) j)

k)

Answer - 4 Statement of expected Cash receipt

Collection form Cash Sales Collection Debtors January February March April May Total from 8400 1875 0 6300 0 1276 50 1050 0 2625 0 6750 0 1317 50 1470 0 2812 5 4950 0 1173 25 April 3750 0 May 2750 0 June 2500 0

Answer - 5 Decision analysis

Particular Make cost Total Relevant cost: Material( 20000 Units 36000 Labour 48000 Purchasing cost(20000 Units)Additional cost of purchasing from outside 84000 Differential Cost 7000 per month Favoring making of the parts0.35 per unit Per Unit 1.8 2.4 Buy cost Total 9000 0 1000 9100 0 Per unit 4.5 0.05

4.2

4.55

Answer - 6
Working Note: Details of Cash and Credit sales_ Month wise Jan Sales Cash 20 Feb Mar 140 25.0 0 Ap r 15 0 Ma y 11 0 35.0 0 Jun e 100

80 100 25% 36.0 0 2.40 0.80 5.00

Jan: 60 Labour(Halfhour) Fixed overheads Total costs