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ASSIGNMENT
SEMESTER – 1
MBO025
SUBMITTED BY:
MUSHTAQ AHMAD PARA
MBA
ROLL NO.- 520950361
MBA- I semester
MB0025- Financial & Management Accounting
Book ID- ( B0907 )
Assignment Set 2
Ans. Modern business world is full of competition, uncertainty and exposed to different types
of risks. The complexity of managerial problems has led to development of various managerial
tools, techniques and procedures useful for the management in managing the business
successfully. In this direction, planning and control plays an important role. Budgeting is the
most common and powerful standard device of palling and control.
• To forecast and plan for future to avoid losses and to maximize profits.
• To help the concern in planning the activities both physical and financial.
• To bring about coordination between different functions of the enterprise.
• To control; actual actions by ensuring that actual are in tune with targets
Budgetary control: When one relates control function to budget, we find a system what is generally
termed as budgetary control. Control signifies such systematic efforts which help the management to
know whether actual performance is in line with predetermined goal, policy and plans. It is basically a
measurement tool. Yardsticks should be laid down. Standards must be set up.
The procedure to be followed in the preparation and control of budget may differ from business to
business. But, a general pattern of outline of budget preparation and control may go a long way to
achieve the end results. The steps are as follows:
Formulation of policies: The business policies are the foundation stone of budget construction.
Function policies should be formulated in advance. Long-range policies with short term projections
should be made for the functional areas such as sales, production, inventory, cash management,
capital expenditure.
Preparation of forecasts:
Based on the formulated policies, forecast should be made in respect of each function. Activity based
concepts should be introduced at the micro level for each function Forecasts should not be considered
as a mere estimates. Scientific methods should be adopted for forecasting. Analysis of various factors
based on past, and present, future forecast should be made.
Preparation of budgets:
Forecasts are converted into written codified document. Such written documents can be used for
coordination purposes. Function budgets will act as guidelines for implementation.
Forecast combinations:
While developing the budgets, through a Master Budget various permutations and combination
processes are considered and developed. Based on this, establishment of the most preferred one
which will yield optimum benefits should be considered. All the factor components should be identified
which are likely to cause disturbances while implementing the budgets
In the absence of any value, the current liability is always taken as 1 unit
Substituting CA in [1],
For 2.6 CAR, the current asset is Rs.1,10,000 x 2.6 / 1.6 = Rs.1,78,750
= 96,250
Therefore,
= 1,78,750 – 96250
= Rs. 82,500
Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It
expresses the relationship between gross profit and sales.
[Gross Profit Ratio = (Gross profit / Net sales) × 100]
Cost Of Goods Sold [COGS] = Opening stock + Purchases – closing stock
= 70000 + 350000-35000
= 450000 – 385000
= 500000 – 50000
= 450000 Rs.
= (65000/450000) X 100
= 14.4%
Q3. From the following Balance Sheet of William & Co Ltd., you are required to prepare a Schedule of
Changes in Working capital & Statement of Sources and Application of funds.
Balance Sheet
Ans.
Q4. Bring out the difference between cash flow and funds flow statement
Q5. a. DELL computers sell 100 PCs at Rs.42,000. The variable expenses amount to Rs.28,000 per PC.
The total fixed expenses is Rs.14,00,000. Prepare an income statement.
Ans.
Income Statement
No. Of computers produced 100
No. Of computers sold 100
Unit selling price per computer 42000
unit variable cost per computer 28000
4200000
Sales revenue =No. Of computers sold X
unit selling price
Less variable cost (100 X 28000) -2800000
Less Fixed expenses -1400000
Profit or loss 0
Sales at present 50,000 units per annum. Selling price Rs.6 per unit, Prime cost Rs.3 per unit.
Variable overheads Re.1 per unit. Fixed cost Rs.75, 000 per annum.
Solution:
BEP = Fixed cost / (SP – VC) per unit
= 80,000 / (6 – 4)
= 80,000 / 2
BEP = 40,000 units.
BEP in rupees = BEP in units x selling price per unit
= 40,000 x Rs.6
= Rs.2, 40,000
MOS = Actual Sales – BEP Sales
= (55,000 x 6) – 2,40,000
MOS = Rs.90,000
Q6. What is cost variable analysis?
Ans. A variable cost changes in total in direct proportion to a change in the level of activity or cost
driver. If activity increases, say by 20%, total variable cost also increases by 20 %. The total variable
cost increases proportionately with activity. Variable cost fixed per unit but varies in total.
It is a graphic or visual presentation of the relationship between costs, volume and profit. It indicates
the point of production at which there is neither profit nor loss. It also indicates the estimated profit or
loss at different levels of production. While constructing the chart, the following assumption is
normally considered.
b) Fixed costs shall remain fixed during the relevant volume range of graph.
c) Variable cost per unit will remain constant during the relevant volume range of graph
It is an extension of or even part of marginal costing. It is a technique of studying cost volume profit
relationship. Basically, the break even analysis is aimed at measuring the variations of cost
with volume. It is a simple method of presenting the effect of changes in volume on profits. It is also
known as CVP analysis. The various assumptions are: