Management Accounting Solved Papers: November' 2017 | Dibrugarh University | B.Com 5th Sem

[Management Accounting Solved Question Papers, Dibrugarh University Solved Question Papers, 2017, B.Com 5th Sem]

Management Accounting Solved Question Papers
2017 (November)
COMMERCE (General/Speciality)
Course: 503 (Management Accounting)
The figures in the margin indicate full marks for the questions
Full Marks: 80
Pass Marks: 24
Time: 3 hours

1. (a) write true or false:               1x4=4

(i) Management Accounting supplies information to the management so that later may be able to discharge all its functions properly.
(ii) Cash receipt from issue of shares is a Financing activity.
(iii) Contribution is the difference between sales and variable.
(iv) Flexible budget is a capacity budget.
(b) Write True or False:                         1x4=4
(i) Management Accounting and Cost Accounting are synonymous.        False
(ii) Building sold on credit is a source of fund.         False
(iii) Marginal Cost = Total Cost – Variable Cost.       False, Fixed Cost
(iv) Budget is related to a definite future period.                      True                                                      
2.       Write short notes on (any four):                       4x4=16
a) Scope of Management Accounting.
Ans: Scope of Management Accounting: The field of management accounting is very wide. The main purpose of management accounting is to provide information to the management to perform its functions of planning directing and controlling. Management accounting includes various areas of specialization to render effective service to the management.
a)      Financial Accounting: Financial Accounting deals with financial aspects by preparation of Profit and Loss Account and Balance Sheet. Management accounting rearranges and uses the financial statements. Therefore it is closely related and connected with financial accounting.
b)      Cost Accounting: Cost accounting is an essential part of management accounting. Cost accounting, through its various techniques, reveals efficiency of various divisions, departments and products. Management accounting makes use of all this data by focusing it towards managerial decisions.
c)       Budgeting and Forecasting: Budgeting is setting targets by estimating expenditure and revenue for a given period. Forecasting is prediction of what will happen as a result of a given set of circumstances. Targets are fixed for various departments and responsibility is pinpointed for achieving the targets. Actual results are compared with preset targets and performance is evaluated.
d)      Inventory Control: This includes, planning, coordinating and control of inventory from the time of acquisition to the stage of disposal. This is done through various techniques of inventory control like stock levels, ABC and VED analysis physical stock verification, etc.
e)      Statistical Analysis: In order to make the information more useful statistical tools are applied. These tools include charts, graphs, diagrams index numbers, etc. For the purpose of forecasting, other tools such as time series regression analysis and sampling techniques are used.
b) Profit-volume Ratio.
Ans: Profit-Volume Ratio expresses the relationship between contribution and sales. It indicates the relative profitability of diff products, processes and departments. Higher the P/V ratio, more will be the profit and lower the P/V ratio lesser will be the profit. Hence, it should be the aim of every concern to improve the P/V ratio which can be done by increasing selling price, reducing variable cost etc.
It can be calculated as follows:
P/V ratio = (S – VC)/ S  X 100
= Cont / Sales X 100
= Change in profit or loss / Change in sales
Uses of P/V Ratio:
1. To compute the variable costs for any volume of sales.
2. To measure the efficiency or to choose a most profitable line. The overall profitability of the firm can be improved by increasing the sales/output of a product giving a higher PV ratio.
3. To determine break-even point and the level of output required to earn a desired profit.
4. To decide more profitable sales-mix.
c) Operating Activities.
Ans: Cash flow from operating activities: These are cash flows from regular course of operations. The operations of a firm include manufacturing, trading, rendering of services etc. Examples of cash flows from operating activities are:
a. Cash sales
b. Cash received from debtors on account of credit sales
c. Cash purchase of goods
d. Cash paid to suppliers on account of credit purchases
e. Wages paid to employees and staff
f. Cash operating expenses
g. Income from investing activities
d) Production Budget.
Ans: Production budget is usually prepared on the basis of sales budget. But it also takes into account the stock levels desired to be maintained. The estimated output of business firm during a budget period will be forecast in production budget. The production budget determines the level of activity of the produce business and facilities planning of production so as to maximum efficiency. The production budget is prepared by the chief executives of the production department. While preparing the production budget, the factors like estimated sales, availability of raw materials, plant capacity, availability of labour, budgeted stock requirements etc. are carefully considered.
e) Profit-volume Graph.
Ans: It shows the amount of profit or loss at different levels of output. When the output is zero, total loss will be equal to fixed costs. The fixed costs are recovered gradually when the volume of output is increased. When the output reaches the Break even point, the whole fixed costs are recovered. The firm incurs no loss or earns no profit. Thereafter, the firm makes a profit and the amount of profit increases with the increase in sales volume.
The same data used for drawing a Break even chart may be used for constructing a P/V chart. The following steps may be followed for constructing a P/V chart.
1. Sales or units of output are plotted along the X axis
2. The Y axis is used for marking fixed costs losses and profits
3. Points of Profits or losses are marked at different levels of sales and these points are joined to get the profit or loss line.
4. The point where the profit or loss line intersects the X axis is marked as the Break even point.
5. The angle at the BEP measures the angle of incidence.
6. The distance between BEP and actual sales on the X axis measures the margin of safety.
3.       (a) Define Management Accounting. Discuss its functions and limitations. 3+6+5=14
Ans: Management Accounting: Meaning and Definitions:
The term management accounting refers to accounting for the management. Management accounting provides necessary information to assist the management in the creation of policy and in the day-to-day operations. It enables the management to discharge all its functions i.e. planning, organization, staffing, direction and control efficiently with the help of accounting information.
In the words of R.N. Anthony “Management accounting is concerned with accounting information that is useful to management”.
Anglo American Council of Productivity defines management accounting as “Management accounting is the presentation of accounting information is such a way as to assist management in the creation of policy and in the day-to-day operations of an undertaking”.
According to T.G. Rose “Management accounting is the adaptation and analysis of accounting information, and its diagnosis and explanation in such a way as to assist management”.
From the above explanations, it is clear that management accounting is that form of accounting which enables a business to be conducted more efficiently.
Functions of Management Accounting
Main objective of management accounting is to help the management in performing its functions efficiently. The major functions of management are planning, organizing, directing and controlling. Management accounting helps the management in performing these functions effectively. Management accounting helps the management is two ways:
I. Providing necessary accounting information to management
II. Helps in various activities and tasks performed by the management.
I. Providing necessary accounting information to management:
(a) Measuring: For helping the management in measuring the work efficiency in different areas it is done on the past and present incidents with context to the future. In standard costing and budgetary any control, standard and actual performance is compared to find out efficiency.
(b) Recording: In management accounting both the quantitative and qualitative types of data are included and this accounting is done on the basis of assumptions and even those items which cannot be expressed financially are included in management accounting.
(c) Analysis: The work of management accounting is to collect and analyze the fact related to the managerial problems and then present them in clear and simple way.
(d) Reporting: For the use of management various reports are prepared. Generally two types of reports are prepared:-
a. Regular Reports
b. Special Reports.
II. Helping in Managerial works and Activities:
The main functions of management are planning, organizing, staffing, directing and controlling. Management accounting provides information to the various levels of managers to fulfill the above mentioned responsibilities properly and effectively. It is helpful in various management functions as under:-
(a) Planning: Through management accounting forecasts regarding the sales, purchases, production etc. can be obtained, which helps in making justifiable plans. The tools of management accounting like standard costing, cost -volume-profit analysis etc. are of great managerial costing, help in planning.
(b) Organizing: In management accounting whole organization is divided into various departments, on the basis of work or production, and then detailed information is prepared to simplify the thing. The budgetary control and establishing cost centre techniques of management accounting helps which result in efficient management.
(c) Staffing: Merit rating and job evaluation are two important functions to be performed for staffing. Generally only those employs are useful for the organization, whose value of work done by them is more than the value paid to them. Thus by doing cost-benefit analysis management accounting is useful in staffing functions.
(d) Directing: For proper directing, the essentials are co-ordination, leadership, communications and motivation. In all these tasks management accounting is of great help. By analyzing the financial and non financial motivational factors, management accounting can be an asset to find out the best motivational factor.
(e) Co-ordination: The targets of different departments are communicated to them and their performance is reported to the management from time to time. This continual reporting helps the management in coordinating various activities to improve the overall performance.
Limitations of Management Accounting
Management accounting, being comparatively a new discipline, suffers from certain limitations, which limit its effectiveness. These limitations are as follows:
1. Limitations of basic records: Management accounting derives its information from financial accounting, cost accounting and other records. The strength and weakness of the management accounting, therefore, depends upon the strength and weakness of these basic records. In other words, their limitations are also the limitations of management accounting.
2. Persistent efforts. The conclusions draws by the management accountant are not executed automatically. He has to convince people at all levels. In other words, he must be an efficient salesman in selling his ideas.
3. Management accounting is only a tool: Management accounting cannot replace the management. Management accountant is only an adviser to the management. The decision regarding implementing his advice is to be taken by the management. There is always a temptation to take an easy course of arriving at decision by intuition rather than going by the advice of the management accountant.
4. Wide scope: Management accounting has a very wide scope incorporating many disciplines. It considers both monetary as well as non-monetary factors. This all brings inexactness and subjectivity in the conclusions obtained through it.
5. Top-heavy structure: The installation of management accounting system requires heavy costs on account of an elaborate organization and numerous rules and regulations. It can, therefore, be adopted only by big concerns.
6. Opposition to change: Management accounting demands a break away from traditional accounting practices. It calls for a rearrangement of the personnel and their activities, which is generally not like by the people involved.
7. Evolutionary stage: Management accounting is still in its initial stage. It has, therefore, the same impediments as a new discipline will have, e.g., fluidity of concepts, raw techniques and imperfect analytical tools.
8. Intuitive Decisions: Management accounting helps in scientific decision making. Yet, because of simplicity and personal factors the management has a tendency to arrive at decisions by intuition.
(b) “Management Accounting is concerned with those accounting data and information, which are useful to management.” Elucidate the statement.           14
Ans: The term management accounting refers to accounting for the management. Management accounting provides necessary information to assist the management in the creation of policy and in the day-to-day operations. It enables the management to discharge all its functions i.e. planning, organization, staffing, direction and control efficiently with the help of accounting information.
In the words of R.N. Anthony “Management accounting is concerned with accounting information that is useful to management”.
Anglo American Council of Productivity defines management accounting as “Management accounting is the presentation of accounting information is such a way as to assist management in the creation of policy and in the day-to-day operations of an undertaking”.
According to T.G. Rose “Management accounting is the adaptation and analysis of accounting information, and its diagnosis and explanation in such a way as to assist management”.
From the above explanations, it is clear that management accounting is that form of accounting which enables a business to be conducted more efficiently.
The primary objective is to enable the management to maximize profits or minimize losses. The fundamental objective of management accounting is to assist management in their functions. The other main objectives are:
1.       Planning and policy formulation: planning is one of the primary functions of management. It involves forecasting on the basis of available information.
2.       Help in the interpretation process: The main object is to present financial information. The financial information must be presented in easily understandable manner.
3.       Helps in decision making: Management accounting makes decision making process more modern and scientific by providing significant information relating to various alternatives.
4.       Controlling: The actual results are compared with pre determined objectives. The management is able to control performance of each and every individual with the help of management accounting devices.
5.       Reporting: This facilitates management to take proper and timely decisions. It presents the different alternative plans before the management in a comparative manner.
6.       Motivating: Delegation increases the job satisfaction of employees and encourages them to look forward. so it serves as a motivational devise.
7.       Helps in organizing: “Return on capital employed” is one of the tools if management accounting. All these aspects are helpful in setting up effective and efficient organization.
8.       Coordinating operations: It provides tools which are helpful in coordinating the activities of different sections.
From the above explanations, it is clear that management accounting is that form of accounting which enables a business to be conducted more efficiently.
4.       (a) Distinguish between the following:                         7+7=14
(i) Funds Flow Statement and Income Statement.
Ans: Difference between Income Statement and Funds Flow Statement
Income Statement
Funds Flow Statement
Income statement is a summary of total income and total expenses and losses of a particular period.
Funds flow statement is the statement of changes in financial position.
Income statement is prepared to ascertain the profit earn or loss suffered by a firm.
Funds Flow Statement is prepared to identify how the profit has been utilized.
Income statement is prepared on the basis of nominal accounts.
Funds flow statement is prepared on the basis of balance sheet.
Income statement is helpful in measuring the profitability of a firm.
Funds flow statement is helpful in determining the net changes in working capital.
It is usually prepared after six months or a year.
It is usually prepared every month.
This matches the cost of goods sold with the revenue in order to know the profit or loss.
This statement matches the funds raised with funds applied without making any distinction between capital and revenue items.
It presents the result of all financial transactions of the business during a specified period.
It presents information only relating to working capital and thus its scope is limited.
It is not very reliable as items shown in profit or loss account can be easily manipulated by the management.
It is more reliable as items shown in this statement cannot be easily manipulated by the management.
(ii) Funds Flow Statement and Balance Sheet.
Ans: Difference between Funds flow statement and Balance sheet:
(i) Balance sheet is a statement showing the financial position of the concern on a particular date. It shows all assets and liabilities whether current or fixed, tangible or intangible etc., while Funds Flow Statement shows the changes in current assets an current liabilities during a particular period of time.
(ii) Balance Sheet shows the total financial position on a particular date and its utility is very limited for the management. On the other hand, Funds Flow Statement is a comparative statement of assets and liabilities and depicts the changes in working capital during the period of two Balance sheets.
(iii) Funds Flow Statement is an analysis and control device for the management. It is a modern technique of knowing the inflows and outflows of funds during a particular period. Balance Sheet represents the balance of various assets and liabilities and does not present analysis of any kind.
(iv) There are two views of the financial position of the firm-long term and short-term. Short-term financial position means the solvency of the firm in the near future while on the other hand, long-term financial position means future financial structure of the firm. Both are inter-relate but there is a differences in their analysis. The short-term view of the financial position of the firm cannot be had from the Balance Sheet.
(b) The following are the Ledger Balances taken from the books of a limited company as on 31st March:
Credit Balances
2016 Rs.
2017 Rs.
Debit Balances
2016 Rs.
2017 Rs.
Share Capital
Sundry Creditors
Bills Payable
Bank Overdraft
Provision for Tax
Surplus A/c
Cash at Bank
Land & Building
Machinery & Plant


Additional Information:
a)      During the year ended 31st March, 2017, an additional dividend of Rs. 26,000 was paid.
b)      The assets of an another company was purchased for Rs. 60,000 payable in fully paid shares of the company. The assets consisted of stock Rs. 21,640, machinery Rs. 18,360 and goodwill Rs. 20,000. In addition, sundry purchase of plant were made totalling Rs. 5,650.
c)       Income tax paid during 2016-17 was Rs. 25,000.
d)      The net profit for the year before tax was Rs. 62,530.
Prepare a Cash Flow Statement by indirect method.       14
5.       (a) From the following data, calculate:
(i)           Profit-volume ratio:
(ii)         Fixed cost;
(iii)       Sales at  break-even point;
(iv)        Sales required to earn a profit of Rs. 20,000:        3+3+4+4=14

Sales (Rs. )
Profit (Rs.)
Period – I
Period – II
(b) What do you mean by Marginal Costing? Discuss its usefulness and limitations.      2+7+5=14
Ans: Marginal Costing: It is the technique of costing in which only marginal costs or variable are charged to output or production. The cost of the output includes only variable costs .Fixed costs are not charged to output. These are regarded as ‘Period Costs’. These are incurred for a period. Therefore, these fixed costs are directly transferred to Costing Profit and Loss Account.
According to CIMA, marginal costing is “the ascertainment, by differentiating between fixed and variable costs, of marginal costs and of the effect on profit of changes in volume or type of output. Under marginal costing, it is assumed that all costs can be classified into fixed and variable costs. Fixed costs remain constant irrespective of the volume of output. Variable costs change in direct proportion with the volume of output. The variable or marginal cost per unit remains constant at all levels of output.”
Thus, Marginal costing is defined as the ascertainment of marginal cost and of the ‘effect on profit of changes in volume or type of output by differentiating between fixed costs and variable costs. Marginal costing is mainly concerned with providing information to management to assist in decision making and to exercise control. Marginal costing is also known as ‘variable costing’ or ‘out of pocket costing’.
Advantages of Marginal Costing
a)      Simple and Easy: It is very simple to understand and easy to operate.
b)      Helpful in Cost control: Marginal costing divides total cost into fixed and variable cost. Marginal costing by concentrating all efforts on the variable costs can control total cost.
c)       Profit Planning: It helps in short-term profit planning by making a study of relationship between cost, volume and Profits, both in terms of quantity and graphs.
d)      Evaluation of Performance: The different products and divisions have different profit earning potentialities. Marginal cost analysis is very useful for evaluating the performance of each sector.
e)      Helpful in Decision Making: It is a technique of analysis and presentation of costs which help management in taking many managerial decisions such as make or buy decision, selling price decisions, Key or limiting factor, Selection of suitable Product mix etc.
f)       Production Planning: It helps the management in Production planning. The effect of alternative production policy can be readily available and decision can be taken that would yield the maximum return to Business.
g)      It removes the complexities of under-absorption of overheads.
h)      The distinction between product cost and period cost helps easy understanding of marginal cost statements.
Disadvantages of Marginal Costing
a)      It is based on an unrealistic assumption that all costs can be segregated into fixed and variable costs. In the long term sales price, fixed cost and variable cost per unit may vary.
b)      All costs are not divisible into fixed and variable. There are certain costs which are semi-variable in nature. The separation of costs into fixed and variable is difficult and sometimes gives misleading results.
c)       Under marginal costing, stocks and work in progress are understated. The exclusion of fixed costs from Stock Valuation affects profit, and true and fair view of financial affairs of an organization.

d)      Marginal cost data becomes unrealistic in case of highly fluctuating levels of production, e.g., in case of seasonal factories.
e)      It can correctly assess the profitability on a short-term basis only, but for long term it is not effective.
f)       It does not provide any effective yardstick for evaluation of performance.
g)      Contribution of marginal costing is not a foolproof indicator of profitability.
h)      Marginal cost, if confused with total cost while fixing selling price may lead to a disaster.
6.       (a) Define the terms ‘budget’ and budgetary control’. Explain in detail the classification of budgets according to (i) time, (ii) function and (iii) flexibility.     2 ½ +2 ½+9=14
Ans: Budget: A budget is the monetary and / or quantitative expression of business plans and policies to be pursued in the future period of time. Budgeting is preparing budgets and other procedures for planning, coordination and control or business enterprises.
I.C.M.A. defines a budget as “A financial and / or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective”.
Budgetary control is the process of preparation of budgets for various activities and comparing the budgeted figures for arriving at deviations if any, which are to be eliminated in future. Thus budget is a means and budgetary control is the end result. Budgetary control is a continuous process which helps in planning and coordination. It also provides a method of control.
According to Brown and Howard “Budgetary control is a system of coordinating costs which includes the preparation of budgets, coordinating the work of departments and establishing responsibilities, comparing the actual performance with the budgeted and acting upon results to achieve maximum profitability”.
Wheldon characterizes budgetary control as planning in advance of the various functions of a business so that the business as a whole is controlled.
I.C.M.A. define budgetary control as “the establishment of budgets, relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results either to secure by individual actions the objectives of that policy or to provide a basis for its revision”.
Types of Budgets
As budgets serve different purposes, different types of budgets have been developed. The following are the different classification of budgets developed on the basis of time, functions, and flexibility or capacity.
(A) Classification on the basis of Time:
1. Long-term budgets
2. Short-term budgets
3. Current budgets
(B) Classification according to functions:
1. Functional or subsidiary budgets
2. Master budgets
(C) Classification on the basis of capacity:
1. Fixed budgets.
2. Flexible budgets
(A) Classification on the basis of time
1. Long-term budgets: Long-term budgets are prepared for a longer period varies between five to ten years. It is usually developed by the top level management. These budgets summarise the general plan of operations and its expected consequences. Long-term budgets are prepared for important activities like composition of its capital expenditure, new product development and research, long-term finance etc.
2. Short-term budgets: These budgets are usually prepared for a period of one year. Sometimes they may be prepared for shorter period as for quarterly or half yearly. The scope of budgeting activity may vary considerably among different organization.
3. Current budgets: Current budgets are prepared for the current operations of the business. The planning period of a budget generally in months or weeks. As per ICMA London, “Current budget is a budget which is established for use over a short period of time and related to current conditions.”
(b) Classification on the basis of function
1. Functional budget: The functional budget is one which relates to any of the functions of an organization. The number of functional budgets depends upon the size and nature of business. The following are the commonly used:
(i) Sales budget
(ii) Purchase budget
(iii) Production budget
(iv) Selling and distribution cost budget
(v) Labour cost budget
(vi) Cash budget
(vii) Capital expenditure budget
2. Master budget: The master budget is a summary budget. This budget encompasses all the functional activities into one harmonious unit. The ICMA England defines a Master Budget as the summary budget incorporating its functional budgets, which is finally approved, adopted and employed.
(C) Classification on the basis of capacity
1. Fixed budget: A fixed budget, on the other hand is a budget which is designed to remain unchanged irrespective of the level of activity actually attained. In a fixed budgetary control, budgets are prepared for one level of activity whereas in a flexibility budgetary control system, a series of budgets are prepared one for each level of alternative production levels or volumes. According to ICWA London ‘Fixed budget is a budget which is designed to remain unchanged irrespective of the level of activity actually attained.”
Fixed budget is usually prepared before the beginning of the financial year. This type of budget is not going to highlight the cost variance due to the difference in the levels of activity. Fixed budgets are suitable under static conditions.
2. Flexible budget: Flexible Budget: A flexible budget is defined as “a budget which, by recognizing the difference between fixed, semi-variable and variable cost is designed to change in relation to the level of activity attained”. Flexible budgets represent the amount of expense that is reasonably necessary to achieve each level of output specified. In other words, the allowances given under flexibility budgetary control system serve as standards of what costs should be at each level of output.
According to ICMA, England defined Flexible Budget is a budget which is designed to change in accordance with the level of activity actually attained.”
According to the principles that guide the preparation of the flexible budget a series of fixed budgets are drawn for different levels of activity. A flexible budget often shows the budgeted expenses against each item of cost corresponding to the different levels of activity. This budget has come into use for solving the problems caused by the application of the fixed budget.
(b) A manufacturing company manufactures two products X and Y. An estimate of the number of units expected to be sold in the first seven months of 2016 is given below:

Products – X
Product – Y
It is anticipated that:
1.       There will be no work-in-progress at the end of each month;
2.       Finished units equal to half of the anticipated  sales  for the next month will be in stock at the  end of each month (including December 2015)
The budgeted production  and  production cost for the year ending 31st December, 2016 are as follows:

Products – X
Product – Y
Direct Material
Direct wages
Other Manufacturing Expenses
(Apportion able to each type of product)
11000 units
Rs. 12 per unit
Rs. 5 per unit
Rs. 33,000
12000 units
Rs. 19 per unit
Rs. 7 per unit
Rs. 48,000
You are required to prepare:
a)      A production budget showing number of units to be manufactured each month;  
b)      A summarized production cost budget for six months period from January to June 2016       8+6=14
(Old Course)
Full Marks: 80
Pass Marks: 32
1.       (a) Write True or False:                          1x4=4
(i)      The origin of Management Accounting is due to limitations of Financial Accounting and Cost Accounting.  True
(ii)    Cash Flow Statement is a substitute of Cash Account.             False
(iii)   Margin of Safety = Fixed Cost/PV Ratio.        False
(iv)  Material Cost Variance = Material Price Variance x Material Usage Variance.                False
(b) Fill in the blanks:                        1x4=4
(i)    Management Accountant is ____ in  position to Cost Accountant.
(ii)   In a Funds Flow Statement, all receipts are treated as source of funds.
(i)      Break-even analysis is also known as CVP analysis.
(ii)    Budgetary Control is a system of controlling Cost.
2.       Write short notes on (any four)
(a)     Nature of Management Accounting.
(b)   Limitations of Funds Flow Statement.
(c)    Break-even Chart.
(d)   Sales Budget.
(e)   Labour cost variance.
3.       (a) Define Management Accounting. Distinguish between Management Accounting and Financial Accounting. 3+9=12
(b) Discuss in detail the functions of Management Accounting.                  12
4.       (a) The following are the Balance Sheets of Blue Sky Co. Ltd. For the years 2014-15 and 2015-16:
Share Capital:
Shares of Rs. 10 each.
P/L A/c
10% Debentures


Additional information:
(i)      Dividend paid during the year – Rs. 17,500
(ii)    Land was   revalued  during the year at Rs. 1,50,000 and the profit on revaluation transferred to Profit and Loss A/c.
From the above information, prepare a Cash Flow Statement for the year ended 31st March, 2016.  11
(b) Explain the meaning, importance and objectives of Funds Flow Statement.                  3+4+4=11
5.       (a)  “The technique of marginal costing is a valuable aid to management.” Discuss.    11
(b) You are provided the following information:
Units of output
Fixed Cost
Variable cost per unit
Selling price per unit
Rs. 7,50,000
Rs. 2
Rs. 5
You are required to determine –
(i)       Break-even  point;
(ii)    Profit-volume ratio;
(iii)   Sales required to earn a profit of Rs. 6,00,000                    3+3+5=11
6.       (a)  Explain the meaning and objectives of sales budget. Distinguish between sales budget and production budget.                                 2+3+6=11
(b) AB Ltd. has prepared  the budget for the production of 100000 units of the commodity  manufactured by them for a costing period as under:

Per Unit (Rs.)
Raw Materials
Direct Labour
Direct Expenses
Works Overheads  (60%  fixed)
Administrative Overheads (80%  Fixed)
Selling Overheads  (50%  fixed)
The annual production during the period was only 60000 units.
Calculate the revised budgeted cost per unit.           11          
7.       (a) What is standard costing? Explain its advantages and disadvantages.     2+5+4=11
(b) From the data given below, calculate the material price variance, material usage variance and material mix variance:
Consumption per 100 units of product
Raw Materials
40 units @ Rs. 50 per unit
60 units @ Rs. 40 per unit
50 units @ Rs. 50 per unit
60 units @ Rs. 45 per unit

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