FM11

Financial & Management Accounting

Assignment - I
Assignment Code: 2014FM11B1 Last Date of
Sumission: 1!
t"
#ctoe$ 2014
Ma%imum Ma$&s: 100
Attempt all the questions. All the questions are compulsory and carry equal
marks.
Section-A
1' Discuss management accounting as an efective tool of fnancial control.
2' What do you mean by cash from operating activities? How is it calculated?
(' The volumecostproft relationship provides management with a simplifed
framewor! for organi"ing its thin!ing on a number of problems.# Discuss
4' $ecently a conference spea!er discussing budgets % standard costs made the
following statement &udgets % standard costs are not the same things' they
have diferent purposes % are set up % used in diferent ways' yet a specifc
relationship e(ists between them.#
)n the light of above statement identify the similarities % diferences between
budgets % standards.
Section-B
Case Stud)
&atty % *o. is currently wor!ing at +,- capacity % produces .,',,, units. /t
0,- wor!ing raw material cost increases by 1- % selling price falls by 1-.
/t 2,- wor!ing raw material cost increases by +- % selling price falls by
+-.
/t +,- capacity wor!ing the product costs $s..2, per unit % is sold at
$s.1,, per unit. The unit cost of $s..2, is made up as follows3
4aterial $s..,,
Wages $s.5,
6actory 7verheads $s.5, 89,- f(ed:
/dministration 7verheads $s.1, 8+,- f(ed:
FM11*+ul) 2014 ,age 1*(
-uestion: ;repare a marginal cost statement showing the estimated proft
of the business when it is operated at 0,- % 2,- capacity.
/lso calculate brea!even points at these levels.
FM11
Financial & Management Accounting
Assignment - II
Assignment Code: 2014FM11B2 Last Date of
Sumission: 1!
t"
.o/eme$ 2014
Ma%imum Ma$&s: 100
Attempt all the questions. All the questions are compulsory and carry equal
marks.
Section-A
1' What is $esponsibility accounting? How is it associated with the goal of
controllability? <(plain clearly main ob=ectives % features of responsibility
accounting.
2' ;rincipal budget factor 8or limiting factor: is of vital signifcance to
management. *omment on this statement' giving a list of such
principal budget factors.
(' What are the steps involved in managerial decision ma!ing?
4' <(plain the concept of relevant cost in managerial decision ma!ing.
/lso discuss the efects of changing inventory levels on cost.
Section-B
Case Stud)
4>s ;recision *ompany ?td. 8;*?: is in the business of ma!ing 6ingertrips@
calculators. 6ingertrips brand of calculators has a good reputation among students'
oAce staf % college faculty for its Buality % price. )ts current mar!et price is $s.5.,
per calculator. )ts unit cost structure is given as follows3
0s'
Direct material cost
Direct ?abour cost
Cariable overheads 8including printing cost $s.1 %
pac!aging cost $s.+:
/llocated f(ed overheads
.+,
9,
9,
+,
FM11*+ul) 2014 ,age 2*(
1otal 12,
The ;*? was started three years ago. / mar!et research had estimated a
demand for .2,,,, calculators annually. The ;*? was set up with an
installed capacity of 1,,,,, calculators. &ut even after three years the
annual demand for 6ingertrip calculators stood at .+,,,, units. The *<7 of
;*?' &harm Dharan' was concerened about its future prospects. 4eanwhile'
he got an e(port order from Dutch <(im ?td. 8D<?:' Detherlands' for .,,,,,
calculators at $s.10, per calculator.
D<? is in business of mar!eting stationery to schools % oAces % has planned
to start selling calculators as well. )t would import the 6ingertrip calculators
but put its own brand name % would also ta!e care of pac!aging to suit the
local mar!et reBuirements. )nitially' it is oneyear contract renewable
depending on mar!et conditions.
The *<7 of ;*? is interested in the order as it would help in utili"ing the
spare capacity of +,,,, units. The mar!eting manager of ;*?' Eonal
agarwal' supports the proposal because the calculator would be sold in
Detherlands under a diferent brand name' % the sale of 6ingertrip calculator
in the local mar!et would not be adversely afected.
/ccording to Fohn 4athew' production manager' to increase the production
capacity of +,,,, units' a new machine' similar to the one being currently
used' would have to be acBuired. Two alternative machines are available in
the mar!et. The frst machine could be leased at an annual cost of $s.1+
?a!h. The maintenance cost per year is estimated to be $s.1 la!h. The
second machine uses a new technology. )t can be leased at an yearly rental
of $s.5, la!hs. However' the maintenance cost would be ..+ la!h per year.
The new technology based machine would also reduce the labour cost %
variable overhead cost by $s.+ % $s.1 per calculator respectively.
1"e C2# as&s t"e 3nance manage$ to ca$$) out a 3nancial anal)sis
of t"e alte$nati/es'
FM11*+ul) 2014 ,age (*(