MBA- I semester MB0041- Financial & Management Accounting 4 Credits Book ID- ( B1130 ) Assignment Set 1- (60 Marks)

) Note: Answer all the questions. Q1. Accounting Principles are the rules based on which accounting takes place and these rules are universally accepted. Explain the principles of materiality and principles of full disclosure. Explain why these two principles are contradicting each other. Your answer should be substantiated with relevant examples. (10 Marks) Ans. Principles of Materiality: - While important details of financial status must be informed to all relevant parties, insignificant facts, which do not influence any decisions of the investors or any interested group, need not to b e communicated. Such less significant facts are not regarded as material facts. What is material and what is not material depends upon the nature of information and the party to whom the information is provided. While income has to be shown for income tax purposes, the amount can be rounded off to the nearest ten and fraction does not matter. The statement of account sent to a debtor contains all the details regarding invoices raised, amount outstanding during a particular period. Principles of Full disclosure: - The business enterprise should disclose relevant information to all the parties concerned with the organization. It means that any information of substance or of interest to the average investors will have to be disclosed in the financial statements. The company Act 1956 requires that income statement and balance sheet of a company must give a fair and true view of the state of affairs of the company. Full discloser of all relevant facts in accounts is the necessity in order to make accounting record useful. It is not a new thing , but is based on convention. Even in older times people used to speak truth and in full was incorporated in accounts too. Thus, full discloser is a very important convention. For examples: - a hotel should report the building of a new wing, or the future acquisition of another property. A restaurant facing a lawsuit from a customer who was injured by tripping over a frayed carpet edge should disclose the contingency of the lawsuit. Similarly, is accounting practices of the current financial statements were changed and differ from those previously reported, the changes should be disclosed. Changes from one period to the next that affect current and future business operations should be reported if possible. Changes of this nature include changes made to the method used to determine depreciation expenses or to the method of inventory valuation, such changes would increase or decrease the value of ending inventory,

cost of sale, gross margin and net income or loss. All changes disclosed should indicate the dollar effects such disclosures have on financial statements. Q 2. Journalize the below transactions, prepare relevant ledger accounts and finally trial balance. . ( 6+6+3 = 15 Marks) M/s Ventak Enterprise Pvt Ltd. Started business with cash Rs. 2,00,000 Goods Rs. 1,00,000 Furniture Rs. 50,000 Opened Current Account with Rs. 1,00,000 Placed an order with Ritik for the supply of goods of the list price of Rs. 1, 00, 00. In this connection, we paid 9% of the list price as an advance by cheque. Ritik supplied goods of the list price of Rs. 1, 00,000 less 12% trade discount. Packing and delivery charges Rs. 1,000. Purchased goods from Murali of the list price of Rs. 1,00,000 less 12% trade discount and paid him by cheque under a cash discount of 5% Received an order from Shyam for supply of goods of the list price of Rs. 1, 00,000 with an advance of 10% of list price. Supplied the above goods at 10% trade discount. Packing and delivery charges Rs. 1000. Goods costing Rs. 80,000 sold to Mr X at a profit of 20% on sales less 10% trade discount and 2% cash discount Goods (cost Rs. 3,000, Sales Price Rs. 4,000) taken away by the proprietor for his personal use. Shyam became insolvent and paid 80 paise in a rupee in full and final settlement Paid Ritik 80% on account. Goods (Cost Rs. 3,000 , Sales Price Rs. 4,000) stolen Paid Life Insurance Premium Rs. 1,000. Cash embezzled by an employee Rs. 1,000.

01.01.200 9 01.01.200 9 02.01.200 9 03.01.200 9 04.01.200 9 05.01.200 9 06.01.200 9 07.01.200 9 08.01.200 9 09.01.200 9 10.01.200 9 11.01.200 9 12.01.200 9 13.01.200 9

Ans.

Journal Entry of M/s Ventak Enterprise Pvt Ltd.

Date

Particular

01.01.2009 Cash A/c Dr. Goods A/c Dr Furniture A/c Dr To capital A/c (Being cash , goods & furniture brought in as capital) 01.01.2009 Bank A/c Dr. To cash A/c (Being the current A/c opent with Rs.100000) 01.01.2009 Ritik A/c Dr. To Bank A/c (Being advance paid to Ritik) 03.01.2009 Purchase A/c Dr. Frieght A/c Dr. To Trade Discount To Ritik A/c (Being goods purchase on credit) List Price Less: Trade Discount @12% Rs.100000 Rs. 12000 Rs. 88000 Add: Packing & Delivery Charge Rs. 1000 Rs. 89000 04.01.2009 Purchase A/c Dr. To Bank A/c To Discount A/c To Trade Discount (Being goods purchase against cheque) List Price Less: Trade Discount @12% Lee: Cash Discount 5% Rs.100000 Rs. 12000 Rs. 88000 Rs. 4400 Rs. 83600

L. Debit F. Amount (in Rs.) 200000 100000 50000

Credit Amount (In Rs.)

350000 100000 100000 9000 9000 100000 1000 12000 89000

100000 83600 4400 12000

05.01.2009 Cash /A/c Dr. To Shyam A/c (Being an advance received from Shyam) 06.01.2009 Shyam A/c Trade Discount To Frieght A/c To Sales A/c (Being goods sold on credit) List Price Less: Trade Discount @10% Dr. Dr.

10000 10000 91000 10000 1000 100000

Rs.100000 Rs. 10000 Rs. 90000 Add: Packing & Delivery Charge Rs. 1000 Rs. 91000

Ledger
Capital A/c Amou nt Date Particulars 35000 01-010 09 By, Cash A/c By, Goods A/c By, Furniture A/c Total 35000 0 Total 01-209 Amou nt 20000 0 10000 0 50000 35000 0 35000 0

Date 31-0109

Particulars To, Balance C/d

By, Balance B/d

Cash A/c Date 01-0109 05-0109 07-0109 09-0109 Particulars To, Capital A/c To, Shyam A/c To, Sales A/c To, Shyam A/c Amou nt Date 20000 01-010 09 10-0110000 09 12-0184672 09 13-0164800 09 31-0109 35947 2 Total 19347 2 Particulars By, Bank A/c By, Ritik A/c By, Drawing A/c By, Loss by Embzzlement A/c By, Balance C/d Amou nt 10000 0 64000 1000 1000 19347 2 35947 2

Total 01-209 To, Balance B/d

Stock A/c Date Particulars Amou nt Date Particulars Amou nt

01-0109

To, Capital A/c

Total 01-209 To, Balance B/d

10000 0 08-01-09 11-01-09 31-01-09 10000 0 Total

By, Drawing A/c By, Stolen A/c By, Balance C/d

3000 3000 94000 10000 0

94000

Date 01-0109 Total 01-2-09

Particulars To, Capital A/c

Furniture A/c Amou nt Date 50000 31-01-09 50000 Total 50000

Particulars By, Balance C/d

Amou nt 50000 50000

To, Balance B/d

Date 01-0109

Particulars To, Cash A/c

Total 01-209 To, Balance B/d

Bank A/c Amou nt Date 10000 0 01-01-09 01-01-09 31-01-09 10000 0 Total

Particulars By, Ritik A/c By, Purchase A/c By, Balance C/d

Amou nt 9000 83600 7400 10000 0

7400

Ritik A/c Date 01-0109 03-0109 10-0109 Particulars To, Bank A/c To, Trade Discount To, Cash A/c Amou nt Date Particulars By, Purchase A/c By, Frieght A/c Amou nt 10000 0 1000

9000 03-01-09 12000 64000

31-0109 Total

16000 10100 0

Total 01-2-09 By, Balance B/d

10100 0 16000

Date 03-0109 04-1-09 Total 01-209

Particulars To, Purchase A/c To, Bank A/c

Purchase A/c Amou nt Date Particulars 10000 31-010 09 By, Balance C/d 10000 0 20000 0 Total 20000 0

Amou nt 20000 0 20000 0

By, Balance B/d

Date 05-0109 06-0109 09-0109 09-0109 Total

Particulars To, Cash A/c To, Trade Discount To, Cash A/c To, Bad debts A/c

Shyam A/c Amou nt Date Particulars 06-0110000 09 By, Sales A/c 10000 64800 16200 10100 0 By, Frieght A/c

Amou nt 10000 0 1000

Total

10100 0

Sales A/c Date 31-00109 Particulars To, Balance C/d Amou nt Date 19600 06-010 09 07-01Particulars By, Shyam A/c By, Cash A/c Amou nt 10000 0 96000

09 Total 19600 0 Total 19600 0 19600 0

01-2-09

By, Balance B/d

Date 06-0109 Total

Particulars To, Shyam A/c

Frieght A/c Amou nt Date Particulars 03-011000 09 By, Ritik A/c 1000 Total

Amou nt 1000 1000

Date 06-0109 07-0109 31-0109 Total

Particulars To, Shyam A/c To, Sale A/c To, Balance C/d

Trade Discount A/c Amou nt Date 10000 03-01-09 10000 04-01-09 4000 24000

Particulars

Amou nt 12000 12000

By, Ritik A/c By, Purchase A/c

Total 01-2-09 By, Balance B/d

24000 4400

Date 07-0109 31-0109 Total

Particulars To, Sale A/c To, Balance C/d

Cash Discount A/c Amou nt Date 1728 04-01-09 2672 4400

Particulars

Amou nt 4400

By, Purchase A/c

Total 01-2-09 By, Balance B/d

4400 2672

Date 08-0109 12-0109 Total 01-209

Particulars To, Goods A/c To, Cash A/c

Drawing Discount A/c Amou nt Date Particulars 3000 31-01-09 1000 4000 By, Balance C/d

Amou nt 4000

Total

4000

To, Balance B/d

4000 Bad Debt A/c Amou nt Date 16200 31-01-09 16200 Total

Date 06-0109 Total 01-209

Particulars To, Shyam A/c

Particulars By, Balance C/d

Amou nt 16200 1000

To, Balance B/d

16200

Date 11-0109 Total 01-209

Particulars To, Goods A/c

Stolen A/c Amou nt Date Particulars 31-013000 09 By, Balance C/d 3000 Total

Amou nt 3000 3000

To, Balance B/d

3000

Date 13-0109 Total

Loss by Embezzlement A/c Amou Particulars nt Date Particulars 31-01To, Cash A/c 1000 09 By, Balance C/d 1000 Total

Amou nt 1000 1000

01-209

To, Balance B/d

1000

Trial Balance
Accounts Debit Balance Capital Cash Stock Furniture Bank Purchase Ritik Sales Trade Discount Cash Discount Drawing Discount Bad Debts Stolen Loss by Embezzlement Debit Credit 350000 193472 94000 50000 7400 200000 16000 196000 4400 2672 4000 16200 3000 1000 569072 569072

Q 3. Explain any two types of errors that are disclosed by trial balance with examples and rectification entry. Note - Avoid giving examples given in the self learning material. Ans. Types of Errors that are disclosed by trial balance: - Accountants prepare trial balance to checks this correctness of accounts. If total of debits balances does not agree with the total of credit balances, it is a clear cut indication that certain errors have been committed while recording the transactions the books of original entry or subsidiary books. All errors of accounting procedure can be classified as errors of principle: When a transaction is recorded again the fundamental principles of accounting, it is an error of principle. For Example if revenue expenditure is treated as capital expenditure or vice versa. Clerical Error: - Errors of Omission when a transaction is either wholly or partially not

recorded in the books, it is an error of omission. Error of Commission: - When an entry is inco09rrctly recorded either wholly or partially incorrect posting, calculation, casting or balancing. Compensating errors: - Sometimes an error is counter-balanced by another in such a way that is not disclosed by the trial balance. Correction of Errors in next accounting period. As stated earlier, that it is advisable to locate and rectify the error before preparing the final accounts for the year. But in certain cases when after considerable search, the accountant fails to locate the error and he is in a hurry to prepare the final accounts of the business for filing the return for sales tax or income tax purposes, he transfers the amount of difference of trial balance to a newly opened suspense Account In the next accounting period as and when the errors are located these are corrected with references to suspense account. When all the error are disclosed and rectified the suspense account shall be closed automatically. Those errors which do not affect the trial balance cant be corrected with the help of suspense account. For Example - It is found that debit total of trial balance was less by Rs. 500/- for the reason that wilsons account was not debited with Rs. 500/- the following rectifying entry is required to be passed. From the point of view of rectification of the error, these can be divided into 2 groups: Error affecting one account only Errors affecting two or more accounts Errors affecting one account: Casting error , error of posting, carry forward, balancing, Omission from Trial balance. Such errors should first of all be located and rectified. These are rectified either with the help of journal entry of by giving an explanatory note in the account concerned. Rectification: - All types of errors in accounts can be rectified at two stages: 1. Before preparation of the final accounts 2. After Preparation of the final accounts Errors rectified within the accounting period. The Proper method of correction of an error is to pass journal entry in such a way that it corrects the mistake that has been committed also gives effect to the entry that should have been passed, But while errors are being rectified before the

preparation of final accounting.

Q4. Let us assume you have been recently appointed as Management Accountant of a small but upcoming firm. Your immediate supervisor has asked you to prepare certain financial ratios from the balance sheet of one of their clients M/s Vinod Enterprise. Liabilities Equity Share Capital 8% Pref Share Capital Reserve Fund 6% Debentures Sundry Creditors P & L account Year 2000-1000 Year 2001-20000 Total Amount 50000 10000 40000 20000 30000 Assets Fixed assets Investments Stock Sundry Debtors Bank Balance Preliminary expenses Amount 87500 25000 30000 13500 7000

21000 171000

8000 171000

The director intent to transfer a sum of Rs.5000 out of the current years profit to provision for tax. The financial ratios needed are: a. Return on capital employed b. Current ratio c. Fixed assets to networth d. Debt - Equity ratio e. Return on owners capital. (10 Marks) Ans. (a) Return on Capital Employed = Fixed asset + Investment + Current Asset Current Liability

= 87500 + 25000 + 30000 + 13500 + 7000 30000 = Rs. 133000/(b) Current Ratio = Current Assets Current Liability 30000 + 13500 + 7000 = 30000 50500 = 30000 =1.683

(c) Fixed Assets to net worth Fixed Assets = Shareholders fund 87500 = 50000 + 10000 (d) Debt-Equity ratio Fixed equity Internal equity 20000 = 50000 + 10000 =

87500 = 1.458 60000

20000 = 0.333 60000

(e) Return on owners Capital Net Profit = 100 Share holders equity 21000 = 100 = 42 50000 Q 5. A friend of you has approached to help him out in setting his books of accounts in order. Unfortunately he is struck with difference in trial balance. Help him in redrafting the trial balance. Sl.no 1 2 Particulars Stock on Dec,2008 Capital Dr 31st 100 13, 450 192, Cr

1, 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Cash in hand Bank Overdraft Sales 106, Purchases Returns inward 2, Returns outward Carriage outward Carriage inward 9, Salaries Wages Sundry debtors Sundry creditors Stock on 1st Jan 2006 15, Land and building 000 20, Plant and machinery 900 2, Trade expenses 090 395, 540 Ans:S.N. Particular Trial Balance L.F. Dr. (Rs.) Amount Cr. (Rs.) Amount 540 395, 600 3, 660 16, 300 37, 360 94, 120 960 2, 360 14, 260 400 13, 400 400 9, 320 236, 400

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Capital Cash in hand Bank Overdraft Sales Purchases Return Inward Return Outward Carriage Outward Carriage Inward Salaries Wages Sundry Debtors Sundry Creditors Opening Stock on 01.01.2006 Land & Building Plant & Machinery Trade Expenses

13450 1400 9320 236400 106400 13400 2960 2360 14260 9600 3660 16300 37360 94120

15 16 17

15000 20900 2090 299490 299490

Q 6. Explain the accounting treatment of bad debt and provision for doubtful debts with suitable example. Ans:- First lets distinguish between a bad and a doubtful debt. A debt owing to a business that is not expected to be paid is a bad debt. A doubtful debt is a debt, which the business considers may not be paid. The Distinction is important because the accounting treatment differs, as shown below Double Entry. Bad and Doubtful debts from part of the double entry book keeping system. Note that the general

principles of double entry book keeping are not covered here but form part of the ICM Accounting unit. Accounting Treatment for Bad Debts: If we decide that there is no probability of collecting an overdue amount, we need to reduce the balance sitting on that customers account to zero. We do not want to show a balance owing that in act will never be recovered because this would be over stating our debtors and therefore overstating our assets. We need to reflect this expense in our accounts and therefore transfer the balance to the profit and loss account. The Entries are as follows: Debit: Bad debt A/c Credit: Customers account Transferring to the final account: Debit: Profit and loss account Credit: Bed debt account. Accounting Treatment for doubtful debts: A doubtful debt may not turn into a bad debt. In fact, it may not be possible to isolate specific customers when computing an amount which may turn bad. But however we arrive at this figure, prudence dictates that we should provide for this in our final accounts. The accounting entries will be as follows: Debit: Profit and loss account Credit: Provision for bad debts The Provision will be shown on the balance sheet as a deduction from debtors. Increases to the provision in subsequent year will be debited to the profit and less account. The procision will be calculated after all bad debts have been written off. Note that the auditor pay particular attention to bad debt provisions because of the ease with which they can be used to manipulate profit and crate a hidden reserve. Example: - Alice Beeton runs a food and drink business. Her customer are given 60 days credit. Alice is about to prepare her accounts as at the year ending 30 June 2000. Alice has run a number of promotions this year and has determined that the provision for bad debts will need to be increased from 2% to 3% of her debtors. The net debtors for last year were 28,000. Debtors are currently 32,900. 31st March F 12500

31st May A Ward 400 Show all the relevant entries in the accounts. The profit and loss account shows the expenses incurred the bad debts and increase in the provision for bad debts.

MBA- I semester MB0041- Financial & Management Accounting 4 Credits Book ID- ( B1130 ) Assignment Set 2- (60 Marks) Note: Answer all the questions. Q1. The Balanced Score Card is a framework for integrating measures derived from strategy. Take an Indian company which has adopted balance score card successfully and explain how it had derived benefits out of this framework. Ans:- Every Corporate Entity can reveal its performance through income statement and position statement. These statements have remained static over a long period of time. These can easily measure the tangible aspect of business but unable to reveal anything about the intangible aspect of the business - the solution lies in implementing the technique of Balanced Scorecard to evaluate a company's performance Balanced Scorecard---An introduction and its perspectives Kaplan and Norton observed that due to the involvement of numerable variables in the attainment of corporate goals it was becoming increasingly difficult for management to obtain a perfect balance between the operational and financial factors. In order to resolve this problem they developed the balanced scorecard approach, which supplemented traditional financial measures with criteria that measured performance from the perspective of customers, internal business processes, and learning and growth. This approach enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth. It provides a framework involving critical indicators or key business factors to balance the long- term and short-term objectives. It links and balances financial and non-financial indicators, tangible and intangible measures, internal and external aspects, performance drivers and outcomes. It also balances the external measures like shareholders, customers and internal measures like critical business processes, innovation, learning, and growth. It considers results from past efforts and the measures that drive future performance. Recognizing some of the weaknesses and vagueness of previous management approaches, this approach was developed in the early 1990's by Drs. Robert Kaplan (Harvard Business School and David Norton (Balanced Scorecard Collaborative). The balance scorecard approach provides a clear prescription as to what companies should measure in order to balance the financial perspective. The balanced scorecard is a management system that enables organizations to clarify their vision and strategy and translate them into action. The balanced score card retains traditional financial measures. Nut financial measures tell the story of past events, an adequate story for term capabilities and customer relationships were no critical for success.

The Score card suggest that we view the organization from four perspective: a. The Learning and growth perspectives: b. The Business Process perspective: c. The customer Perspective: d. The Financial Perspective: Indian Company adapted Balance score card The balanced scorecard is a framework for integrating the measures derived from the vision and strategy of an organization with the financial measures of its past performance. The objective and measures are drawn from four perspectives: Financial, Customer, Internal business process and learning and growth. The concept is still new to Indian Corporate, through it was developed some time ago in 1992. In the India Context, Organization like the Murugappa group and the Mahindras have adopted the Balanced scorecard. But overall there are not more 4-5 Organization in Indian That are using this technique. From the above points, It becomes cl3ear that the Balanced scorecard technique offers numerous advantages to the organization using it. But as far as corporate India is concerned, there is little awareness among the organization about this newly used tool of performance measurement with the integration of the financial markets worldwide, it is high time for the Indian companies to implement this technique at the earliest. As for as the implementation aspect is concerned, it takes approximately six months to a year which is not a very long period. Therefore, it is advised that the organization should comne forward and realize the true potential of Balanced scorecard.

Q 2. What is DuPont analysis? Explain all the ratios involved in this analysis. Your answer should be supported with the chart. Ans:- DU PONT ANALYSIS A method of performance measurement that was started by the DUPONT corporation in the 1920s. With this method, assets are measured at their gross book value rather thin at net book value in order to produce a higher return on equity (ROE). It is also known as DU PONT identy.

The Du Pont analysis can be depicted via the following chart:

DU PONT CHART

The apex of the Du pont chart is the teturtn on total assets (ROTA) defined as the product of the net profits margin (NPM) and total assets turnover ratio (TATR). Net Profit Net Profit Net Sales = Total Asset Net Sales Total Assets

Such decomposition helps in understanding how the return on total assets is influenced by the net profit margin and the total assets turnover ratio. A manager has basically three ways of improving operating performace in terms of ROA and ROE. These are : Increase capital asset turnover Increase operating profit margins Change financial leverage

Each of these primary drivers is impacted by the specific decisions on cost control, efficiency, productivity, marketing choices etc. Q 3. Prepare Funds Flow statement from the following balance sheets and additional information Liabilities 1998 750,0 Eq Share capital 00 250,0 13% debentures 00 40, Profit and loss a/c 000 40, General reserve 000 50, Creditors 000 30, Bills payable 000 50, Provision for tax 000 Prov for dep on land and 100,0 building 00 1999 900000 200000 50,000 50,000 60,000 20,000 60,000 140000 Assets Good will Plant & Machinery Land & building Investments Debtors Stock Bills receivable Bank Preliminary expenses 1998 20,000 350000 650000 40,000 50,000 80,000 70,000 40,000 10,000 1999 15,000 450000 659000 148000 30,000 90,000 50,000 30,000 8,000

Total Additional information

1310000

148000 0

131000 0

1480000

1. Provision for depreciation on P&M was RS40,000 o 31st March 1998 and Rs.45,000 on 31st March 1999 2. Machinery costing Rs.36000 (acc dep Rs12,000) was sold for Rs.20,000 3. Investment costing Rs.30000 were sold at a profit of 20% on cost 4. Tax of Rs.30000 were paid (20 marks) Ans:Statement of change in Working Capital
Particular Current Assets Debtors Stock Bills receivable Bank Total Current Assets (A) Current Liabilities Creditors Bills Payable Total Current Liabilities(B) Working Capital (A-B) Net Decrease in Working Capital Total 1998 Rs. 1999 Rs. Increa se Decreas e

50000 80000 70000 40000 240000

30000 90000 50000 30000 200000

-20000 10000 -20000 -10000

50000 30000 80000 160000

60000 20000 80000 120000 40000 160000

-10000 10000

160000

40000 60000

-60000

Adjusted Profit & Loss A/c

Particular To goodwill written off To Preliminary expense write off To loss on Sale of machine To transfer of reserve To provision for tax To provision for depreciation on land & Building To provision for depreciation on Plant & Machinary To Profit & loss A/c Dr. Amount (Rs) 5000 Particular By Profit & loss A/c By Profit on Sale of Investment By fund from operation Cr. Amount (Rs) 40000

2000

6000

4000 10000 40000

122000

17000

40000

50000 168000 168000

Fund Flow Statement

Sources Issue of Shares Sale of Machine Sale of Investment Funds from operation Dr. Amount (Rs) Applications Cr. Amount (Rs) 50000 141000 9000 138000

Redemption of 150000 debentures 20000 Purchase of Plant 36000 Purchase of Land Purchase of 122000 Investment

Decrease in Working Capital

40000 Tax Paid 368000

30000 368000

Q 4. The standard cost of a certain chemical mixture is: 35% Material A at Rs.25 per kg 65% Material B at Rs.36 per kg A standard loss of 5% is expected in production During a period there is used: 125kg of Material A at Rs.27 per kg and 275kg of Material B at Rs.34 per kg The actual output was 365 kg Calculate a. Material cost variance b. Material price variance c. Material mix variance d. Material yield variance Hint: Use net standard output (deduct the loss)

Ans:-. Material Material A Material B Total Standard SQ kg 140 260 400 SR Rs 25 36 SC Rs 3500 9360 12860 Actual AQ kg 125 275 400 AR Rs 27 34 AC Rs 3375 9350 12725

Less : Loss 20 5% 380 ( a ) Material cost variance = standard cost Actual Cost = SQ SR AQ AR Material A Material B = 140 25 125 27 = 3500 3375 = 125 (Fav) = 260 36 275 34 = 9360 9350 = 10 (Fav)

( b ) Material price Variance Material A Material B

= (Standard Price Actual Price) Actual Quantity

= (SP - AP) AQ = (25 27) 125 = 250 (Adv) = (36 34) 275 = 550 (Fav)

( c ) Material Mix Variance = (Revised standard quantity for each material Actual Material mix variance quantity for each material) standard price Revised Standard Quantity (RSQ) = Total weight of actual mix Standard Quantity Total weight of Standard mix

400 140 400 = 140 Material Mix Variance of Material A = (140 125) 25 = 375 (Fav) 400 = 260 RSQ of Material B 400 = 260 Material Mix Variance of Material B = (260 - 275) 36 = 540 (Adv) RSQ of Material A =

( d ) Material Yield Variance output Material A Material B

= (Standard yield Actual yield) Standard rate per unit of

= (380 365) 25 = 375 (Fav) = (380 365) 36 = 540 (Fav)