BBA402 MANAGEMENT ACCOUNTING

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ASSIGNMENT

DRIVE
SUMMER 2015
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;

1. 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.

2. 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


3. 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 :

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


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:

1. 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.

AGAIN.png

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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