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BBA402
Winter 2016

1. What are the advantages and limitations of Budgetary control?

Advantages of Budgetary Control
Limitations of Budgetary Control

Answer: Some advantages of budgetary control are:

Maximisation of profit Budgetary control increases a companys
profits by proper planning and co-ordination of different functions. It also
helps to achieve a control over capital and revenue

Q2. Explain the method to prepare a Fund Flow Statement. Give an

example of Fund Flow Statement.
Method of preparing Fund Flow Statement
Example of a Fund Flow Statement
Answer:
The following is the procedure for preparing fund flow statement as depicted in Table.
1. Determine the increase or decrease in working capital by preparing a statement of
changes in

3. The standard material cost of producing each unit of product K is as

follows :
4.8 kg of material @ Rs. 5 per kg.
Actual material cost of producing 200 units of product K is as follows:
1,200 kg of material costing Rs. 4,800.
Compute :
(i) Material Cost Variance
(ii) Material Price Variance
(iii) Material Usage Variance
From the above particulars, compute :
(i) Material Cost Variance
(ii) Material Price Variance
(iii) Material Usage Variance

Answer: Computation of:

Materials Standard cost Total Actual cost
Total
Units price (Rs.) Units Price (Rs.)
K 960 5 4800 1200 4 4800
Material Cost Variance
Material cost variance = Standard cost of materials Actual cost of materials
used
OR

4 From the following information prepare a Balance Sheet. Show the

working.
(a) Working Capital Rs. 75,000, (b) Reserves and Surplus Rs. 1,00,000,
(c) bank Overdraft Rs. 60,000, (d) Current Ratio 1.75, (e)Liquid Ratio
1.15, (f) Fixed Assets to Proprietors funds 0.75, (g) Long term
Liabilities Nil
From the above particulars, prepare the Balance Sheet. Show workings

Answer:
Liabilities Amount Assets Amount

Q5. What is Transfer Pricing? Explain Transfer pricing options.

Answer: Transfer pricing is an important area of management accounting. Many departments are
involved in the production of a product in a manufacturing company. When the products are sold, the
company earns revenue and adds it to profits. If each department is considered separately as a profit
centre, we have to assign a price for the movement of goods between departments. This helps us in
finding out

Q6. If : S.P (p.u.) Rs. 100, V.C. (p.u.) Rs. 50,

Total Fixed Cost : Rs. 1, 00, 000
Find : i) BEP
ii) P/V Ratio
iii) Sales required to earn profit of Rs. 50,000
iv) New BEP if S.P. is reduced by 15 % due to competition.

Answer: contribution = s.p v.c

= 100-50

=50

i) BEP = Fixed cost / p.v. cost

= 100000/50%

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