ASSIGNMENT

DRIVE SPRING 2018

PROGRAM Master of Business Administraton- MBA
SEMESTER Semester 1

SUBJECT CODE & NAME MB0041 - FINANCIAL AND MANAGEMENT ACCOUNTING

BK ID B2121
CREDIT & MARKS 4 Credits, 30 marks each

Note –You have to answer all questons. Kindly note that answers for 10 marks questons should be
approximately of 400 words.

Q.No Questons Marks Total Marks

1 Following informaton obtained from a manufacturing company:
Direct Material – 150000
Office Expenses – 120000
Factory Expenses – 90000
Total Sales – 650000
Prime Cost – 450000
15% of the output is in stock
Calculate:
(a) Direct Expenses (b) Factory Cost (c) Cost of Producton(d) Cost of Sale (e)Profit
Prepare Cost Sheet 5*2=10 10

Answer:
Cost Sheet
Direct Materials 150000
Direct Expenses (Prime cost minus Direct materials) 300000
Prime Cost 450000
Factory Expenses 90000
Factory Cost (Prime Cost + Factory Expenses) 540000
Office Expenses 120000
Cost Of Producton(Factory Cost + Office Expenses) 660000
Less: Closing stock of finished goods (15% of Cost of Producton) -99000
Cost Of Sales 561000
Profit (Total Sales minus Cost Of Sales) 89000
Total Sales 650000
(a) Direct Expenses – Rs. 3,00,000
(b) Factory Cost – Rs. 5,40,000
(c) Cost of Producton – 6,60,000
(d) Cost of Sale – 5,61,000
(e) Profit – 89,000

2 Assets Fixed Asset 15,00,000

Current Asset 500000

Liabilites Accounts Payable 200000

Reserve and Surplus 100000
10% Debentures 300000
6% Preference Share Capital 300000
 Equity Share Capital 1100000
1. Calculate Debt-Rato
2. Calculate Debt-equity Ratio

Answer: Debt rato = Total liabilites to outsiders/Total assets

= (Debentures + accounts payable)/ (Fixed +current assets)
= (3,00,000 + 2,00,000) / (15,00,000 + 5,00,000)
= 5,00,000 / 20,00,000
= 1/4 or 0.25

Debt-equity rato = (Debentures)/(Equity capital + Preference capital + Reserves)

= (3,00,000) /(11,00,000 + 3,00,000 +1,00,000)
= 3,00,000 / 15,00,000
= 1/5 or 0.2

3 Present a Vertcal Analysis of ABC Ltd based on the following figures, also interpret the result.

P&L extract for the year ended 31st March, 2017

Partculars Amount
Sales 1500000
Less : Cost of Goods Sold Material 70000
Wages 50000
Factory Overheads 10000
Gross Profit 1370000
Less : Selling & Distributon overheads 20000
Administratve Overheads 15000
Earnings before Interest and Tax 1335000
Less: Interest 35000
Earnings before Tax 1300000
Less: Tax 50000
Net Profit 1200000
Capital Employed 12000000

Answer:
Common-size Statement for the year ended 31st Mar 2017

Partculars Amount %
Sales 1500000 100
Less : Cost of Goods Sold Material 70000 4.67
Wages 50000 3.33
Factory Overheads 10000 0.67
Gross Profit 1370000 91.33
Less : Selling & Distributon overheads 20000 1.33
Administratve Overheads 15000 1.00
Earnings before Interest and Tax 1335000 89.00
Less: Interest 35000 2.33
Profit before Tax 1300000 86.67
Income Tax 50000 3.33
Profit After Tax 1250000 83.33
Capital Employed 12000000
Net Profit as % of Capital Employed 10.41

Analytcal insights:
 Wages are 3.33% of the sales. There could be room for process engineering or improving labour efficiency.
 Admin costs account for 1% but selling costs 1.33%. This needs more analysis.
  The business generates 10.41% profit on invested capital, which may be inadequate.

4. XYZ ltd has recorded a sale of 60000 units in a year, with a selling price of Rs 6 per unit. Moreover, the company has recorded a
prime cost and variable overhead to be Rs 3 and Rs 1 respectvely. The
company had a fixed cost of Rs 100000
1. Calculate BEP ( in Rupees)
2. Calculate MOS

Answer:
BEP in units = Fixed cost / (SP - VC) per unit
= 100000 / (6 – 4)
= 100000 / 2
= 50,000 units

BEP in rupees = BEP in units x selling price per unit

= 50,000 x Rs 6
= Rs. 3, 00,000

MOS = (Actual sales – BEP sales) / Actual sales

= ((60,000 x 6) – 3, 00,000) / (60,000*6)
= 60, 000 / 3, 60,000
= 16.66%

5. From the following informaton and assumpton that the balance in hand on 1st Jan 2016 is Rs.1,35,000, prepare a
cash budget for January 2016 to June 2016
Month Materials Sales Wages Sales & Producton Administratve
Distributon Overhead Overhead
Overhead
January 60900 154000 25000 10000 12000 2500
February 70000 145000 25900 12000 12000 2700
March 61000 123000 23000 15000 12000 2200
April 71000 113000 32000 19000 13000 4000
May 84000 170000 29500 21000 16000 3500
June 87600 155000 25600 24000 16000 3000

Assume that 50% are cash sales. Assets are to be required in Feb. and April. Therefore, provision should be made for payment of Rs.
26,000 and Rs. 60,000 for the same. An applicaton has been made to a bank for grant of loan of Rs. 50,000 and it is hoped that it will
be received in the month of May. It is antcipated that a dividend of Rs. 70,000 will be paid in June. Debtors are allowed 1month
credit. Sales commission @ 3% on sales is to be paid. Creditors (for goods and overhead) grant one month’s credit.

Answer:
PARTICULARS January February March April May June Total
RECEIPTS
Cash Sales 77000 72500 61500 56500 85000 77500 430000
Collecton from Debtors 77000 72500 61500 56500 85000 352500
Bank loan 50000 50000
77000 149500 134000 118000 191500 162500 832500
PAYMENTS
Materials 60900 70000 61000 71000 84000 346900
Wages 25000 25900 23000 32000 29500 25600 161000
Sales and distributon 10000 12000 15000 19000 21000 77000
overhead
Producton overheads 12000 12000 12000 13000 16000 65000
Administratve overheads 2500 2700 2200 4000 3500 14900
 Sales commission 4620 4350 3690 3390 5100 4650 25800
Capital expenses 26000 60000 86000
Dividend 70000 70000
29620 141650 123390 185590 141600 224750 846600
Op. bal in the beginning 135000 182380 190230 200840 133250 183150
of thereceipts/(payments)
Cash month 47380 7850 10610 -67590 49900 -62250
182380 190230 200840 133250 183150 120900

6. Elucidate Enterprise resource planning and accountng.

Answer:
Enterprise Resource Planning systems or ERP systems are integrated software applicaton packages that manage the
business processes end to end, including support functons like accountng, human resources, technology etc. The thrust of an ERP is
in automatng actvites and linking their impact on different functons, in preventng multple record-keeping, and in improving
integrity of data and enabling better analysis.
ERP systems have a huge role to play in the bookkeeping and accountng functon of a business. In an ERP when the actvity is
documented the accountng takes place simultaneously. Be it an invoice or a purchase approval or payroll, when the concerned
department enters the document in the system, it is uploaded into the journal, the ledger and subsidiary ledgers automatcally.
This makes the accountant’s job both much easier and much tougher. Easier because he does not spend tme recording transactons
in his books; but tougher because if the actvity link to the ledger account is wrong or incomplete, his accountng can go horribly
wrong.
Accountng with an ERP system requires:
a) Precise chart of accounts, cost centres and subsidiary ledgers
b) Clear documentaton of all actvites and capture of all inputs of data that the accountant requires
c) Well laid-down and implemented change management process
d) Sanity check of the system links to make sure there are no errors
e) Systematc overhaul of the system at least once a year