FM11 Financial & Management Accounting
FM11 Financial & Management Accounting Assignment - I Last Date of Submission: 15th October 2014 Maximum Marks: 100
Assignment Code: 2014FM11B1
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A 1.
Discuss management accounting as an effective tool of financial control.
2.
What do you mean by cash from operating activities? How is it calculated?
3.
The “volume-cost-profit relationship provides management with a simplified framework for organizing its thinking on a number of problems.” Discuss
4.
Recently a conference speaker discussing budgets & standard costs made the following statement- “Budgets & standard costs are not the same things, they have different purposes & are set up & used in different ways, yet a specific relationship exists between them.” In the light of above statement identify the similarities & differences between budgets & standards.
Section-B Case Study Batty & Co. is currently working at 50% capacity & produces 10,000 units. At 60% working raw material cost increases by 2% & selling price falls by 2%. At 80% working raw material cost increases by 5% & selling price falls by 5%. At 50% capacity working the product costs Rs.180 per unit & is sold at Rs.200 per unit. The unit cost of Rs.180 is made up as follows: Material
Rs.100
Wages
Rs.30
Factory Overheads
Rs.30 (40% fixed)
Administration Overheads
Rs.20 (50% fixed)
Question:
Prepare a marginal cost statement showing the estimated profit of the business when it is operated at 60% & 80% capacity. Also calculate break-even points at these levels.
FM11/July 2014
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FM11 Financial & Management Accounting Assignment - II Last Date of Submission: 15th November 2014 Maximum Marks: 100
Assignment Code: 2014FM11B2
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A 1.
What is Responsibility accounting? How is it associated with the goal of controllability? Explain clearly main objectives & features of responsibility accounting.
2.
Principal budget factor (or limiting factor) is of vital significance to management. Comment on this statement, giving a list of such principal budget factors.
3.
What are the steps involved in managerial decision making?
4.
Explain the concept of relevant cost in managerial decision making. Also discuss the effects of changing inventory levels on cost. Section-B Case Study
M/s Precision Company Ltd. (PCL) is in the business of making Fingertrips’ calculators. Fingertrips brand of calculators has a good reputation among students, office staff & college faculty for its quality & price. Its current market price is Rs.310 per calculator. Its unit cost structure is given as follows:
Direct material cost Direct Labour cost Variable overheads (including printing cost Rs.2 & packaging cost Rs.5) Allocated fixed overheads Total
Rs. 150 40 40 50 280
The PCL was started three years ago. A market research had estimated a demand for 180000 calculators annually. The PCL was set up with an installed capacity of 200000 calculators. But even after three years the annual demand for Fingertrip calculators stood at 150000 units. The FM11/July 2014
Page 2/3
CEO of PCL, Bharm Dharan, was concerened about its future prospects. Meanwhile, he got an export order from Dutch Exim Ltd. (DEL), Netherlands, for 100000 calculators at Rs.260 per calculator. DEL is in business of marketing stationery to schools & offices & has planned to start selling calculators as well. It would import the Fingertrip calculators but put its own brand name & would also take care of packaging to suit the local market requirements. Initially, it is one-year contract renewable depending on market conditions. The CEO of PCL is interested in the order as it would help in utilizing the spare capacity of 50000 units. The marketing manager of PCL, Sonal agarwal, supports the proposal because the calculator would be sold in Netherlands under a different brand name, & the sale of Fingertrip calculator in the local market would not be adversely affected. According to John Mathew, production manager, to increase the production capacity of 50000 units, a new machine, similar to the one being currently used, would have to be acquired. Two alternative machines are available in the market. The first machine could be leased at an annual cost of Rs.25 Lakh. The maintenance cost per year is estimated to be Rs.2 lakh. The second machine uses a new technology. It can be leased at an yearly rental of Rs.30 lakhs. However, the maintenance cost would be 1.5 lakh per year. The new technology based machine would also reduce the labour cost & variable overhead cost by Rs.5 & Rs.2 per calculator respectively. The CEO asks the finance manager to carry out a financial analysis of the alternatives.
FM11/July 2014
Page 3/3
Assignment Code: 2014FM11B1
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A 1.
Discuss management accounting as an effective tool of financial control.
2.
What do you mean by cash from operating activities? How is it calculated?
3.
The “volume-cost-profit relationship provides management with a simplified framework for organizing its thinking on a number of problems.” Discuss
4.
Recently a conference speaker discussing budgets & standard costs made the following statement- “Budgets & standard costs are not the same things, they have different purposes & are set up & used in different ways, yet a specific relationship exists between them.” In the light of above statement identify the similarities & differences between budgets & standards.
Section-B Case Study Batty & Co. is currently working at 50% capacity & produces 10,000 units. At 60% working raw material cost increases by 2% & selling price falls by 2%. At 80% working raw material cost increases by 5% & selling price falls by 5%. At 50% capacity working the product costs Rs.180 per unit & is sold at Rs.200 per unit. The unit cost of Rs.180 is made up as follows: Material
Rs.100
Wages
Rs.30
Factory Overheads
Rs.30 (40% fixed)
Administration Overheads
Rs.20 (50% fixed)
Question:
Prepare a marginal cost statement showing the estimated profit of the business when it is operated at 60% & 80% capacity. Also calculate break-even points at these levels.
FM11/July 2014
Page 1/3
FM11 Financial & Management Accounting Assignment - II Last Date of Submission: 15th November 2014 Maximum Marks: 100
Assignment Code: 2014FM11B2
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A 1.
What is Responsibility accounting? How is it associated with the goal of controllability? Explain clearly main objectives & features of responsibility accounting.
2.
Principal budget factor (or limiting factor) is of vital significance to management. Comment on this statement, giving a list of such principal budget factors.
3.
What are the steps involved in managerial decision making?
4.
Explain the concept of relevant cost in managerial decision making. Also discuss the effects of changing inventory levels on cost. Section-B Case Study
M/s Precision Company Ltd. (PCL) is in the business of making Fingertrips’ calculators. Fingertrips brand of calculators has a good reputation among students, office staff & college faculty for its quality & price. Its current market price is Rs.310 per calculator. Its unit cost structure is given as follows:
Direct material cost Direct Labour cost Variable overheads (including printing cost Rs.2 & packaging cost Rs.5) Allocated fixed overheads Total
Rs. 150 40 40 50 280
The PCL was started three years ago. A market research had estimated a demand for 180000 calculators annually. The PCL was set up with an installed capacity of 200000 calculators. But even after three years the annual demand for Fingertrip calculators stood at 150000 units. The FM11/July 2014
Page 2/3
CEO of PCL, Bharm Dharan, was concerened about its future prospects. Meanwhile, he got an export order from Dutch Exim Ltd. (DEL), Netherlands, for 100000 calculators at Rs.260 per calculator. DEL is in business of marketing stationery to schools & offices & has planned to start selling calculators as well. It would import the Fingertrip calculators but put its own brand name & would also take care of packaging to suit the local market requirements. Initially, it is one-year contract renewable depending on market conditions. The CEO of PCL is interested in the order as it would help in utilizing the spare capacity of 50000 units. The marketing manager of PCL, Sonal agarwal, supports the proposal because the calculator would be sold in Netherlands under a different brand name, & the sale of Fingertrip calculator in the local market would not be adversely affected. According to John Mathew, production manager, to increase the production capacity of 50000 units, a new machine, similar to the one being currently used, would have to be acquired. Two alternative machines are available in the market. The first machine could be leased at an annual cost of Rs.25 Lakh. The maintenance cost per year is estimated to be Rs.2 lakh. The second machine uses a new technology. It can be leased at an yearly rental of Rs.30 lakhs. However, the maintenance cost would be 1.5 lakh per year. The new technology based machine would also reduce the labour cost & variable overhead cost by Rs.5 & Rs.2 per calculator respectively. The CEO asks the finance manager to carry out a financial analysis of the alternatives.
FM11/July 2014
Page 3/3
