M.Com DCM 6202 MANAGEMENET ACCOUNTING

Description

SESSION	MARCH 2024
PROGRAM	MASTER OF COMMERCE (M.COM)
SEMESTER	II
COURSE CODE & NAME	DCM6202 MANAGEMENT ACCOUNTING

 

 

Assignment Set – 1

 

1. Elaborate on the  steps  involved  in  setting  up  a  standard  costing  system  in  an organization. Also, differentiate between standard costing and budgetary control

Ans 1.

Steps Involved in Setting Up a Standard Costing System in an Organization

1. Defining Standards: The first step in setting up a standard costing system is to define the standards. Standards are predetermined costs for materials, labor, and overheads. These standards should be realistic and achievable, reflecting the efficient level of performance. This involves analyzing past data, considering current conditions, and predicting future trends. It requires the collaboration of various departments like production, finance, and human resources to ensure comprehensive and accurate standards.
2. Establishing Cost \

 

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2. The income and expenditure forecasts for the months of March to August 2023 aregiven as follows:

 

Months   Sales        Purchase    Wages    Manufacturing    Office        Selling

(Credit)    (Credit)     Rs.         expenses             Expenses   Expenses

Rs.           Rs.                            Rs.                      Rs.             Rs.

 

March     60,000     36,000       9,000     3,500                  2,000          4,000

April       62,000     38,000       8,000     3,750                  1,500          5,000

May        64,000     33,000       10,000   4,000                  2,500          4,500

 

June        58,000     35,000       8,500     3,750                  2,000          3,500

July         56,000     39,000       9,500     5,000                  1,000          3,500

August    60,000     34,000       8,000     5,200                  1,500          4,500

 

You are given the following information:

1. Plant Costing Rs.16000 is due for delivery in July payable 10% on delivery and the balance after 3 months.
2. Advance tax of Rs.8,000 is payable in March and June each.
3. Creditors allow 2 months credit and debtors are paying one month late.

Opening balance of cash Rs.8000. Expenses are paid with a lag of one month.

Prepare cash budget for the months of May to July 2023.

Ans 2.

To prepare a cash budget for the months of May to July 2023, we’ll follow these steps:

1. Determine the cash inflows, which primarily come from collections from debtors.
2. Determine the cash outflows, which include payments for purchases, wages, manufacturing expenses, office expenses

 

 

3. The competing companies P Ltd. and Q Ltd. produce and sell the same type of

product in the same market. For the year ending March 2021 their forecasted profit and loss accounts are as follows:

 

Particulars                            P Ltd.                                   Q Ltd.

Sales                                     300000                                300000

Less: Variable cost               (200000)                              (225000)

Fixed cost                           (50000)                                (25000)

Total Cost                          (250000)                              (250000)

Estimated profit                   50000                                  50000

 

You are required to calculate:

1. P/V ratio and Break-even in sales (Rs.) of both the firms
2. State volume at which each business will earn a profit of Rs.30000

 

Ans 3.

To calculate the P/V (Profit/Volume) ratio and Break-even sales, we’ll use the following formulas:

1. P/V Ratio (also known as Contribution Margin Ratio):

​P/V Ratio = (Sales−Variable Cost) ​/ Sales

1. Break-even Sale

 

 

 

Assignment Set – 2

 

 

4. Explain in detail the important decisions taken in management accounting for appraising choices with respect to operational decision-making.

Ans 4.

Management accounting plays a crucial role in operational decision-making by providing vital information and tools for appraising choices effectively. Several important decisions in management accounting significantly impact operational decisions:

1. Cost-Volume-Profit (CVP) Analysis:

5. “Analysis without interpretation is meaningless and interpretation without analysis is impossible”. Discuss this statement considering techniques and the objectives of financial statement analysis.

Ans 5.

The statement “Analysis without interpretation is meaningless and interpretation without analysis is impossible” encapsulates the essential interdependence between the analytical process and its subsequent interpretation in financial statement analysis. Financial statement analysis involves the systematic examination of financial information to make informed decisions about a company’s performance, financial health, and

 

 

6. The following is the Balance sheet of Praveen Ltd. as on Dec 2022 and Dec 2023:

Liabilities      2022            2023            Assets          2022            2023

 

Share              2,00,000      2,50,000      Land &        2,00,000      1,90,00 capital                                                     Building

 

General          50,000         60,000         Plant            1,50,000      1,74,000

Reserve

Profit &         30,500         30,600         Stock           1,00,000      74,000

Loss A/c

Bank Loan     70,000         –                   Debtors        80,000         64,200 (Short

Term)

Creditors        1,50,000      1,35,200      Cash            500              600

 

Provision       30,000         35,000         Bank            –                   8,000 for taxation

 

5,30,500      5,10,800                           5,30,500      5,10,800

Additional information:

2023. a) Depreciation was written off plant R14,000 in 2023. b)   Dividend of Rs.20,000 was paid in 2023.
2024. c) Income tax provision made during the year was Rs.25,000
2025. d) A piece of land has been sold during the year at cost.

 

Ans 6.

To prepare the statement of sources and application of funds for the year 2023 and a schedule of changes in working capital based on the Balance Sheet information provided, let’s break down the calculations step by step.

Statement of Sources and Application of Funds for the year 2023:

Sources of Funds:

• Increase in Share Capital: Rs. 50,000 (2,50,000 – 2,00,000)
• Increase in Bank Loan: Rs. 70,000