DMBA217 MANAGEMENT ACCOUNTING JULY-AUGUST 2025

Description

SESSION	JULY-AUGUST 2025
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	II
COURSE CODE & NAME	DMBA217 MANAGEMENT ACCOUNTING

 

 

Assignment Set – 1

 

 

Q1. Explain Management Accounting and highlight key challenges of implementing management accounting in organisations?       3+7     

Ans 1.

Management Accounting is a specialized branch of accounting that focuses on providing financial and non-financial information to managers for decision-making, planning, and control purposes. Unlike financial accounting, which records and reports transactions for external users, management accounting emphasizes internal analysis, forecasting, and strategy formulation to enhance business performance. It integrates accounting, finance, and management disciplines to ensure effective organizational control.

Management Accounting can be defined as the process of preparing management reports and

 

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Q2. Discuss the role of Fund Flow Analysis in financial decision-making and explain how does an increase or decrease in working capital impact fund flow? 5+5         

Ans 2.

Fund Flow Analysis is a vital financial tool used to examine the movement of funds within an organization during a specific period. It highlights how financial resources are generated and utilized, providing insights into the company’s financial health and liquidity position. This analysis helps management understand the changes in working capital and assists in strategic financial decision-making.

Role of Fund Flow Analysis in Financial Decision-Making

Fund Flow Analysis serves as a bridge between the balance sheet and the income statement

 

 

Q3. From the following balance sheets of Joy Ltd prepare a cash flow statement with the indirect method.

Liabilities	31/3/24	31/3/25
Equity share capital	3,00,000	4,00,000
8% redeemable preference share capital	1,50,000	1,00,000
General reserve	40,000	70,000
Profit and loss account	30,000	48,000
Proposed dividend	42,000	50,000
Trade payables	55,000	83,000
Bills payable	20,000	16,000
Provision for taxation	40,000	50,000
Total	6,77,000	8,17,000
Assets
Goodwill	1,15,000	90,000
Land and buildings	2,00,000	1,70,000
Plant	80,000	2,00,000
Trade receivables	1,60,000	2,00,000
Stock	77,000	1,09,000
Bills receivable	20,000	30,000
Cash	15,000	10,000
Bank	10,000	8,000
Total	6,77,000	8,17,000

 

Ans 3.

Cash Flow Statement of Joy Ltd. for the Year Ended 31st March, 2025 (Indirect Method)

Step 1: Calculation of Net Profit for the Year

Profit & Loss Account (Closing ₹48,000 – Opening ₹30,000) = ₹18,000

Add: Transfer to General Reserve = ₹30,000

Add: Proposed Dividend = ₹50,000

Net Profit for the Year = ₹98,000

Step 2: Cash Flow Statement (Indirect Method)

 

 

 

Assignment Set – 2

 

 

Q4. ‘The profit is the product of the P/V ratio and the margin of safety’. Comment. 10

Ans 4.

The statement “Profit is the product of the P/V ratio and the margin of safety” is an important principle in cost–volume–profit (CVP) analysis, which forms the basis of managerial decision-making in management accounting. The Profit/Volume (P/V) ratio, also known as the contribution margin ratio, measures the relationship between contribution and sales, while the margin of safety indicates how much sales can fall before the business reaches its break-even point. Together, these two elements determine the amount of profit a firm earns beyond

 

 

Q5. Outline the steps to install a budgetary control system in an organisation, including roles of the Budget Controller and Budget Committee. 6+4     

Ans 5.

Steps to Install a Budgetary Control System

A budgetary control system is a systematic process for planning, coordinating, and controlling financial activities within an organisation. Its installation requires careful structuring, clear communication, and accountability mechanisms.

1. Establishment of Objectives:

The first step is to clearly define the objectives of budgeting, such as cost minimisation, profit maximisation, and efficient utilisation of resources. These objectives must align with the

 

 

Q6. Standard time = 1.5 hours per unit;

Standard rate (SR) = ₹120 per hour.

Actual output = 600 units;

Actual hours (AH) = 960 hours at Actual rate (AR) = ₹125 per hour.

Compute the following:

Labour Cost Variance (LCV),

Labour Rate Variance (LRV) and

Labour Efficiency Variance (LEV). 3+3+4

Ans 6.

Calculation of Labour Cost Variances

Given:

Particular	Symbol	Value
Standard time per unit	ST	1.5 hours
Standard rate	SR	₹120 per hour
Actual output	AO	600 units
Actual hours	AH	960 hours
Actual rate	AR	₹125 per hour

 

Step 1: Calculation of Standard Hours (SH)

Formula:

SH = Actual Output × Standard Time per Unit

= 600 × 1.5

= 900 hours

Step 2: Calculation of Standard Labour Cost (SLC)

Formula:

SLC = SH × SR

= 900 × 120