BBA 402 - MANAGEMENT ACCOUNTING

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ASSIGNMENT

DRIVE	SPRING 2016
PROGRAM	BBA
SUBJECT CODE & NAME	BBA 402 - MANAGEMENT ACCOUNTING
BOOK ID	B1712
SEMESTER	4
CREDITS	2
MARKS	30

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. Differentiate between :

a) Standard Costing and Budgetary Control

b) Estimated Cost, Historical Cost and Standard Cost

Answer: a) Standard Costing and Budgetary Control

Although budgetary control and standard costing both are based on some common principles, both are pre-determined, and a comparison will be made with the actual costs and both system need a revision of the standards or the budget. These two systems have certain differences which are as follows:

• Budgetary control is mainly concerned with the operation of the business as a whole, and hence it is extensive. Standard costing is mainly concerned with the control of expenses, and hence it is more intensive. Budgetary control deals with

Q2. a) Product X is estimated to require 20 hours per unit. The standard rate per hour is Re.1. During a month 2000 units were produced. For this 38,000 hours were taken at Rs. 1.05 per hour. Calculate the variances.

b) In this illustration, if it is assumed that 100 hours is lost due to breakdown of machinery, calculate the necessary variances.

Answer: Calculation of  labour variances

Standard hours x standard rate = total                   Actual hour x actual rate = total

2000*20 = 40000 * 1 = 40000                                        38000 * 1.05 = 39900

Q3. If : S.P (p.u.) Rs. 100, V.C. (p.u.) Rs. 50,

Total Fixed Cost : Rs. 1, 00, 000

Find : i) BEP

ii) P/V Ratio

iii) Sales required to earn profit of Rs. 50,000

iv) New BEP if S.P. is reduced by 15 % due to competition.

Answer: contribution = s.p – v.c

= 100-50

=50

i) BEP = Fixed

Q4. Given the Balance Sheet of a Company as under :

Liabilities	Rs.	Assets	Rs.
Equity shares of Rs. 10 each	10,00,000	Fixed Assets	15,00,000
General Reserves	2,00,000	Stock	5,00,000
7 % Debentures	3,00,000	Receivables	4,00,000
Term Loan from X Bank	5,00,000	Cash	1,00,000
Overdraft	2,00,000
Creditors and Bills	3,00,000
	25,00,000		25,00,000

Calculate :

i) Current ratio

ii) Quick ratio

iii) Debt-equity ratio

iv) Proprietary ratio

v) Solvency ratio

Answer: i) Current Ratio

Current ratio = Current Assets/ Current Liabilities

Current Assets = Stock+ Receivables+ Cash

                               

Q5. What are the uses and limitations of a Cash Flow Statement?

Answer: Uses of Cash Flow Statement

By creating a cash flow budget, we can project the sources and applications of funds for the future periods. We can identify any cash deficit periods in advance so that we can take corrective actions in advance to alleviate the deficit. This may involve shifting the timing of certain transactions. It may also determine when money will be borrowed. If borrowing is involved, it will also determine the amount of cash that needs to be borrowed. Periods of excess

Q6. What is Transfer Pricing? Explain Transfer pricing options.

Answer: Transfer pricing is an important area of management accounting. Many departments are involved in the production of a product in a manufacturing company. When the products are sold, the company earns revenue and adds it to profits. If each department is considered separately as a profit centre, we have to assign a price for the movement of goods between departments. This helps us in finding out how much each department contributes to the price. Ascribing a price for sales between departments is called transfer pricing.

Transfer pricing options

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