Campus: Ahmedabad Stream: PGDBE

Level: ACL- 2 Year/Semester 2nd

Module Name: FAF Assignment Type: Module assignment

Student’s Name: Kushan Machhar Assessor’s Name: Ms. Dharini Shah

Issued on: 28th March , 2009. Reqd. Submission Date: 9th April , 2010.

Actual Submission Date: 9th April , 2010. Submitted to : Mrs. Sonika Shah

Higher Level Skills

Students are expected to develop the following skills in this assignment:

 Cognitive skills of critical thinking, analysis and synthesis.

 Effective use of communication and information technology for business applications.
 Effective self-management in terms of planning, motivation, initiative and enterprise.
Certificate by the Student:

Plagiarism is a serious College offence.

I certify that this is my own work. I have referenced all relevant materials.

_______________________

(Student’s Name/Signatures)

EXPECTED OUTCOMES Assessment Criteria – To achieve each Achieved (Y/N)

outcome a student must demonstrate the
ability to :

Understand clearly the new positioning of the Indian That he is aware of what is happening in
consumer. India.

Appreciate the increased Purchasing power of the That he is able to see the changes in
Indian woman. Be aware of the boom and buoyancy in consumer Behaviour and discern the
the market place. trends of the times.

Be able to critically examine the current issues in the That he is able “to see ” – visualize and
business sphere from a brand manager’s Perspective. conceptualize the future for his brands
Assignment Grading Summary (To be filled by the Assessor)

Achieved Yes/No (Y /
Grades Grade Descriptors
N)

P A Pass grade is achieved by meeting all the requirements defined.

M1 Identify and apply strategies to find appropriate solutions.

M2 Select/design and apply appropriate methods/techniques.

M3 Present and communicate appropriate findings.

D1 Use critical reflection to evaluate own work and justify valid conclusions.

Ability to anticipate and solve complex tasks in relation to the

D2
assignment.

D3 Demonstrate convergent, lateral and creative thinking.

OVERALL ASSESSMENT GRADE:

TUTOR’S COMMENTS ON

ASSIGNMENT:

SUGGESTED MAKE UP PLAN

(applicable in case the student is asked

to re-do the assignment)

REVISED ASSESSMENT GRADE

TUTOR’S COMMENT ON REVISED

WORK (IF ANY)

Date: Assessor’s Name / Signatures:

 .

Declaration
I , kushan machhar , hereby declare that assignment work is an authenticated work carried out by us at
WLC COLLEGE AHMEDABAD Under the guidance of Ms. Dharini Shah for Module Assignment,
and this work has not been submitted for similar purpose anywhere else except toWLC COLLEGE
NOIDA, affiliated to WLC COLLEGE UK.

Date:8th April , 2010.

Place: Ahmadabad
Q1. Discuss Fixed Budget, Flexible Budget and Zero bases Budget along with examples?

Ans:- Fixed Budget :- A budget which is made without regard to potential variations in
business activity. Such budgeting might be effective for firms with low variable costs, but
otherwise is likely to be inaccurate

fixed budget is one used by a company that has no allowances for possible
changes in their budgetary needs. This is practical where a company has some reasonable control
over any possible expenses. And can forecast with some degree off accuracy what their potential
costs may be for a given period. However, this means normally doesn’t have much success when
the company has too many variables in its future expenses that can’t be predicted. In such cases
any type of fixed budget would not serve as a realistic fiscal plan for that given company for its
operating purposes

It has two characteristics: (1) it is geared toward only one level of activity; (2)
actual results are compared against budgeted (standard) costs only at the original budget activity
level. A Flexible (Variable) Budget differs from a static budget on both scores. First, it is not
geared to only one activity level, but rather, toward a range of activity. Second, actual results are
not compared against budgeted costs at the original budget activity level. Managers look at what
activity level was attained during a period and then turn to the flexible budget to determine what
costs should have been at that actual level of activity

Example:

Item: Paid To: Monthly Amount: Wk.Budget:

House/Rent Pmt. First Mortgage Bank $525.00 $121.15
House Insurance Fire & Casualty $20.83 $4.80
Cable State Cable Company $45.00 $10.39
Trash Removal Landfill Collectors Co. $35.00 $8.08
Car Payment Auto Finance Inc. $425.00 $98.08
Car Insurance Auto Insurance Co. $39.17 $9.04
Car - Plates Auto License Branch $13.33 $3.08
Club Dues Tennis Club $18.75 $4.33
Magazine Subs Mag. Sub. Service $4.17 $.97
Savings Mutual Fund $50.00 $11.54
TOTAL N/A $876.25 $271.46
Flexible Budget:- A flexible budget is an operating budget that features alternative estimates
for various line items. The idea behind the alternatives is that by planning for potential changes
in production costs or sales volume, the business can respond quickly and keep the company
profitable. Sometimes referred to as a variable or dynamic budget, households and non-profit
organizations can also make use of this particular approach to budgeting.

Like all budgets, the flexible budget involves the establishment of line items
that address each type of expense incurred for a given financial period. A limit or value is
assigned to each line item, with the total amount of the budget coming to something less than the
anticipated income for that same period. Ideally, the amount allotted for each budgetary item will
be sufficient to cover all related expenses, and the income levels will be sufficient to allow the
budget to stand as is.

The flexible budget model is a little different because of the built-in

contingency approach that makes it possible to quickly amend the line items in the event of some
unforeseen complication. For example, if shipments of raw materials are delayed and adversely
affect the rates of output related to one or more products, it is possible to adjust the various line
items that will be affected by this slowdown in product, and keep the budget balanced. Should
sales volume suddenly drop, affecting the amount of generated revenue, the flexible format
makes it easy to quickly change the amounts associated with specific line items to reflect the new
set of circumstances.

Flexible-Budget in (000)

Budget Actual Variance

Suits 10 10 0

Revenue $1,550 $1,600 $ 50 F

Variable costs 1,150 1,200 50 U

Contribution margin $400 $ 400 $0

Fixed costs 286 300 14 U

Operating income $ 114 $ 100 $ 14 U

Zero bases budget:-

A method of budgeting in which all expenses must be justified for each new period. Zero-based
budgeting starts from a "zero base" and every function within an organization is analyzed for its
needs and costs. Budgets are then built around what is needed for the upcoming period,
regardless of whether the budget is higher or lower than the previous one.
ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them
to specific functional areas of the organization, where costs can be first grouped, then measured
against previous results and current expectations. 

Zero-based budgeting can lower costs by avoiding blanket increases or decreases to a prior
period's budget. It is, however, a time-consuming process that takes much longer than traditional,
cost-based budgeting. The practice also favors areas that achieve direct revenues or production;
their contributions are more easily justified than in departments such as client service and
research and development

Zero base budgeting can be more of a challenge than other budgeting methods. Often, this
approach requires the organization or company to be more realistic about the ability to fund each
line item. In some cases, this may help a corporation to think twice about expenditures that could
undermine the continued operation of the company if the anticipated revenue for the calendar
year falls below projections. Alternatively, zero base budgeting does not preclude the addition of
a new venture during the calendar year, if collected revenue exceeds those initial projections.
Q-2(a) Prepare cash Budget for the three months ending 30th June, 2001.

Ans:-

Particular April May June

Opening Balance 6000 3950 3000

Sales
Cash (10%) 1600 1700 1800
Credit 6300 (feb) 6750 (Mar) 7200 (April)
6750 (Mar) 7200 (April) 7650 (May)
Total = 13050 13,950 14850

Advance of sales of
Vehicle ----- ----- 9000

Dividend ----- ----- 1000

Total 20,650 19,600 29,650

Less
Raw Material 9600 9000 9200
Wages 2400 (April) 800 (April) 900 (May)
750 (Mar ) 2700 (May) 3000 (June)
3150 3500 3900

Plant and Machinery 2000 2000 2000

Dividend ----- ----- 10000

Income Tax ----- ----- 2000

Overhead 1950 2100 2250

Closing Balance 3950 3000 300

Q-2(b):- Discuss the significance and importance of various types of costs used in decision
making
and their characteristics.
Ans:-

:- In management accounting, cost accounting establishes budget and actual cost

of operations, processes, departments or product and the analysis of variances, profitability or
social use of funds. Managers use cost accounting to support decision-making to cut a company's
costs and improve profitability.

Costs are measured in units of nominal currency by convention. Cost

accounting can be viewed as translating the supply chain (the series of events in the production
process that, in concert, result in a product) into financial values.

In view of the complexity of businesses and increasing changes in industry,

trade and commerce, costing is becoming very important :
 
1. It assists management to make decision for example make or buy, whether to accept a
special order and others.

2. It assists management in planning and control.

3. Costing assists management to appreciate scarce resources in the increasingly complex

business operations.

4. Understanding costing assists in cost awareness, cost control / management.

5. Using marginal cost in competitive tendering and others is vital to an organization’s

survival.

Characteristics of costs:-

1.It implies the cause ,and effect in the department in some way or the other to which it has
incurred.

2.It takes place after it has incurred.

3.Must not be on the determinance of prudence, it must be based on actual facts and figures.

4.Past cost should not form the basis of future cost.

5.It helps to maintain close control over cost of production.

6.It helps to fix Selling Price

Q-3(c):- Discuss the practical implications of the cash budget.

Ans:-

It is very important to ensure that sufficient cash is available to meet obligations and to make
sure that idle cash is appropriately invested to maximize the return to the company.  One
function of the company "treasurer" is to examine the cash flows of the business, and pinpoint
anticipated periods of excess or deficit cash flows.  A detailed cash budget is often maintained,
and updated on a regular basis.  The cash budget is a major component of a cash planning system
and represents the overall plan of activity that depicts cash inflows and outflows for a stated
period of time.  A future chapter provides an in-depth look at cash budgeting.

You may tend to associate cash shortages as a sign of weakness, and, indeed, that may be true. 
However, such is not always the case.  A very successful company with a great product or
service may be rapidly expanding via new business locations, added inventory levels, growing
receivables, and so forth.  All of these events give rise to the need for cash and can create a real
crunch even though the business is fundamentally prospering.  To sustain the growth, careful
planning must occur.

 The control of receipts from cash sales should begin at the point of sale and continue
through to deposit at the bank. Specifically, cash registers (or other point-of-sale
terminals) should be used, actual cash on hand at the end of the day should be compared
to register tapes, and daily bank deposits should be made. Any cash shortages or excesses
should be identified and recorded in a Cash Short & Over account.
 Control of receipts from customers on account begins when payments are received (in the
mail or otherwise). The person opening the mail should prepare a listing of checks
received and forward the list to the accounting department. The checks are forwarded to a
 cashier who prepares a daily bank deposit. The accounting department enters the
information from the listing of checks into the accounting records and compares the
listing to a copy of the deposit slip prepared by the cashier.
 The controls over cash disbursements include procedures that allow only authorized
payments for actual expenditures and maintenance of proper separation of duties. Control
features include requiring that significant disbursements be made by check, performance
of periodic bank reconciliations, proper utilization of petty cash systems, and verification
of supporting documentation before disbursing funds.