BBA 402 &MANAGEMENT ACCOUNTING

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ASSIGNMENT

DRIVE	WINTER 2015
PROGRAM	BBA
SEMESTER	IV
SUBJECT CODE & NAME	BBA 402 &MANAGEMENT ACCOUNTING
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.

Q1. What are the advantages and limitations of Budgetary control?

Advantages of Budgetary Control

Limitations of Budgetary Control

Answer: Some advantages of budgetary control are:

Ø  Maximisation of profit – Budgetary control increases a company’s profits by proper planning and co-ordination of different functions. It also helps to achieve a control over capital and revenue expenses by making the best use of available resources.

Ø  Co-ordination – Budgetary control enables the optimal functioning of various departments and sectors since the budgets of various departments are dependent on one another. To achieve the budgeted targets, the co-ordina

Q2. The capacity of your organization is to produce 40,000 units of valve p.a. Due to protracted power cuts, the organization can operate at 60 % capacity level. Ascertain the working capital requirements at the current level of production based on the following :

Elements of Cost                             Per Unit

     Rs.

Raw-materials                        6

Direct labour                                           3

Overhead                                                  4

Total Cost                                                 13

Profit                                                          3

    16

Raw-materials are in stock, on an average, for 2 months. W.I.P 1/2 a month. Finished goods are in stock, on an average for 1 month. Credit allowed to Debtors 3 months and received from suppliers of raw-materials is 1.5 months. Lag in payment of wages 1/2 a month. There is usually no lag in payment of overheads.

Ascertain the working capital requirements at the current level of production based on the above data

Answer: Statement showing determination of net working capital

(A) Current assets:

 (i) Stock of materials for 2 month: (24000 × Rs 6 × 2/12)                                                  24,000

 (ii) Work-in-progress for 0.5 month:

a)      Material (24000 × Rs 6 × 0.5/12)

Q3. The standard material cost of producing each unit of product K is as follows :

4.8 kg of material @ Rs. 5 per kg.

Actual material cost of producing 200 units of product K is as follows:

1,200 kg of material costing Rs. 4,800.

Compute :

(i) Material Cost Variance

(ii) Material Price Variance

(iii) Material Usage Variance

From the above particulars, compute :

(i) Material Cost Variance

(ii) Material Price Variance

(iii) Material Usage Variance

Answer: Computation of:

Materials            Standard cost                    Total                      Actual cost                          Total

Units     price (Rs.)                                           Units     Price (Rs.)

K                             960         5                              4800                       1200       4                              4800

Q4 From the following information prepare a Balance Sheet. Show the working.

(a) Working Capital Rs. 75,000, (b) Reserves and Surplus Rs. 1,00,000, (c) bank Overdraft Rs. 60,000, (d) Current Ratio 1.75, (e)Liquid Ratio 1.15, (f) Fixed Assets to Proprietor’s funds 0.75, (g) Long term Liabilities Nil

From the above particulars, prepare the Balance Sheet. Show workings

Answer:

Liabilities

Amount

Assets

Amount

Q5 Explain the objectives of analysis of financial statements. What are the types of analysis?

Objectives of analysis of financial statements

Types of analysis

Answer: Financial analysis is performed for the following reasons:

Ø  Measuring the profitability – The main objective of a business is to earn profits by receiving satisfactory return on the investments. Financial analysis is performed to determine whether or not adequate profits are made on the capital invested in the business. This analysis allows the organisation to identify its capacity to pay any interest and dividend.

Ø  Indicating the trend of achievements – Trend of achievements such as gross profits, net profit, sales, purchases, expenses, etc. can be determined by comparing the financial statements of the previous years. Financial analysis

Q6. From the following data find (a) Sales and (b) New Break-even Sales, if Selling price is reduced by 10 % :

Rs.

Fixed Cost                                           4,000

Break-even Sales                             20,000

Profit                                                    1,000

Selling price per unit     20

From the above data find

(a) Sales and

(b) New Break-even Sales,

if Selling price is reduced by 10 % :

Answer: Sales = variable cost + Fixed cost + profit

                                = (16*1000) + 4000 + 1000

                                = 16000 + 5000

                                = 21000

Break-even Sales = Price per Unit × Break-even Sales Units

20000 = 20 x Break-even Sales Units

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