Semester I-mb0041-financial And Management Accounting.doc

ASSIGNMENT DRIVE PROGRAM SEMESTER

SPRING 2018 Master of Business Administraton- MBA Semester 1

SUBJECT CODE & NAME BK ID CREDIT & MARKS

MB0041 - FINANCIAL AND MANAGEMENT ACCOUNTING B2121 4 Credits, 30 marks each

Note –You have to answer all questons. Kindly note that answers for 10 marks questons should be approximately of 400 words. Q.No Questons Marks Total Marks 1 Following informaton obtained from a manufacturing company: Direct Material – 150000 Office Expenses – 120000 Factory Expenses – 90000 Total Sales – 650000 Prime Cost – 450000 15% of the output is in stock Calculate: (a) Direct Expenses (b) Factory Cost (c) Cost of Producton(d) Cost of Sale (e)Profit Prepare Cost Sheet 5*2=10 10 Answer: Cost Sheet Direct Materials Direct Expenses (Prime cost minus Direct materials) Prime Cost Factory Expenses Factory Cost (Prime Cost + Factory Expenses) Office Expenses Cost Of Producton(Factory Cost + Office Expenses) Less: Closing stock of finished goods (15% of Cost of Producton) Cost Of Sales Profit (Total Sales minus Cost Of Sales) Total Sales (a) Direct Expenses – Rs. 3,00,000 (b) Factory Cost – Rs. 5,40,000 (c) Cost of Producton – 6,60,000 (d) Cost of Sale – 5,61,000 (e) Profit – 89,000 2

Assets

Fixed Asset Current Asset

15,00,000 500000

Liabilites

Accounts Payable Reserve and Surplus 10% Debentures 6% Preference Share Capital

200000 100000 300000 300000

150000 300000 450000 90000 540000 120000 660000 -99000 561000 89000 650000

Equity Share Capital 1. Calculate Debt-Rato 2. Calculate Debt-equity Ratio

1100000

Answer: Debt rato

= Total liabilites to outsiders/Total assets = (Debentures + accounts payable)/ (Fixed +current assets) = (3,00,000 + 2,00,000) / (15,00,000 + 5,00,000) = 5,00,000 / 20,00,000 = 1/4 or 0.25

Debt-equity rato

= = = =

3

(Debentures)/(Equity capital + Preference capital + Reserves) (3,00,000) /(11,00,000 + 3,00,000 +1,00,000) 3,00,000 / 15,00,000 1/5 or 0.2

Present a Vertcal Analysis of ABC Ltd based on the following figures, also interpret the result.

P&L extract for the year ended 31st March, 2017 Partculars Sales Less : Cost of Goods Sold Material Wages Factory Overheads Gross Profit Less : Selling & Distributon overheads Administratve Overheads Earnings before Interest and Tax Less: Interest Earnings before Tax Less: Tax Net Profit Capital Employed

Amount 1500000 70000 50000 10000 1370000 20000 15000 1335000 35000 1300000 50000 1200000 12000000

Answer: Common-size Statement for the year ended 31st Mar 2017 Partculars Sales Less : Cost of Goods Sold Material Wages Factory Overheads Gross Profit Less : Selling & Distributon overheads Administratve Overheads Earnings before Interest and Tax Less: Interest Profit before Tax Income Tax Profit After Tax Capital Employed Net Profit as % of Capital Employed

Amount 1500000 70000 50000 10000 1370000 20000 15000 1335000 35000 1300000 50000 1250000 12000000

% 100 4.67 3.33 0.67 91.33 1.33 1.00 89.00 2.33 86.67 3.33 83.33 10.41

Analytcal insights:  Wages are 3.33% of the sales. There could be room for process engineering or improving labour efficiency.  Admin costs account for 1% but selling costs 1.33%. This needs more analysis.



The business generates 10.41% profit on invested capital, which may be inadequate.

4. XYZ ltd has recorded a sale of 60000 units in a year, with a selling price of Rs 6 per unit. Moreover, the company has recorded a prime cost and variable overhead to be Rs 3 and Rs 1 respectvely. The company had a fixed cost of Rs 100000 1. Calculate BEP ( in Rupees) 2. Calculate MOS Answer: BEP in units = Fixed cost / (SP - VC) per unit = 100000 / (6 – 4) = 100000 / 2 = 50,000 units BEP in rupees

MOS

= BEP in units x selling price per unit = 50,000 x Rs 6 = Rs. 3, 00,000

= (Actual sales – BEP sales) / Actual sales = ((60,000 x 6) – 3, 00,000) / (60,000*6) = 60, 000 / 3, 60,000 = 16.66%

5. From the following informaton and assumpton that the balance in hand on 1st Jan 2016 is Rs.1,35,000, prepare a

cash budget for January 2016 to June 2016 Month

Materials

Sales

Wages

January February March April May June

60900 70000 61000 71000 84000 87600

154000 145000 123000 113000 170000 155000

25000 25900 23000 32000 29500 25600

Sales & Distributon Overhead 10000 12000 15000 19000 21000 24000

Producton Overhead

Administratve Overhead

12000 12000 12000 13000 16000 16000

2500 2700 2200 4000 3500 3000

Assume that 50% are cash sales. Assets are to be required in Feb. and April. Therefore, provision should be made for payment of Rs. 26,000 and Rs. 60,000 for the same. An applicaton has been made to a bank for grant of loan of Rs. 50,000 and it is hoped that it will be received in the month of May. It is antcipated that a dividend of Rs. 70,000 will be paid in June. Debtors are allowed 1month credit. Sales commission @ 3% on sales is to be paid. Creditors (for goods and overhead) grant one month’s credit. Answer: PARTICULARS RECEIPTS Cash Sales Collecton from Debtors Bank loan PAYMENTS Materials Wages Sales and distributon overhead Producton overheads Administratve overheads

January

February

March

April

May

June

Total

77000

72500 77000

61500 72500

56500 61500

77500 85000

77000

149500

134000

118000

85000 56500 50000 191500

162500

430000 352500 50000 832500

60900 25900 10000 12000 2500

70000 23000 12000 12000 2700

61000 32000 15000 12000 2200

71000 29500 19000 13000 4000

84000 25600 21000 16000 3500

346900 161000 77000 65000 14900

25000

Sales commission Capital expenses Dividend Op. bal in the beginning of thereceipts/(payments) month Cash

4620

4350 26000

3690

3390 60000

5100

4650

29620

141650

123390

185590

141600

70000 224750

135000 47380 182380

182380 7850 190230

190230 10610 200840

200840 -67590 133250

133250 49900 183150

183150 -62250 120900

25800 86000 70000 846600

6. Elucidate Enterprise resource planning and accountng. Answer: Enterprise Resource Planning systems or ERP systems are integrated software applicaton packages that manage the business processes end to end, including support functons like accountng, human resources, technology etc. The thrust of an ERP is in automatng actvites and linking their impact on different functons, in preventng multple record-keeping, and in improving integrity of data and enabling better analysis. ERP systems have a huge role to play in the bookkeeping and accountng functon of a business. In an ERP when the actvity is documented the accountng takes place simultaneously. Be it an invoice or a purchase approval or payroll, when the concerned department enters the document in the system, it is uploaded into the journal, the ledger and subsidiary ledgers automatcally. This makes the accountant’s job both much easier and much tougher. Easier because he does not spend tme recording transactons in his books; but tougher because if the actvity link to the ledger account is wrong or incomplete, his accountng can go horribly wrong. Accountng with an ERP system requires: a) Precise chart of accounts, cost centres and subsidiary ledgers b) Clear documentaton of all actvites and capture of all inputs of data that the accountant requires c) Well laid-down and implemented change management process d) Sanity check of the system links to make sure there are no errors e) Systematc overhaul of the system at least once a year