DCM3101 MANAGEMENT ACCOUNTING MARCH 2025

Description

SESSION	March 2025
PROGRAM	BACHELOR OF COMMERCE (B.com)
SEMESTER	V
course CODE & NAME	DCM3101 Management Accounting

 

 

 

Assignment Set – 1

 

 

Q1. 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.

Standard Costing

Standard costing is a cost control method wherein predetermined costs are set for products or services and then compared with the actual costs incurred. The primary goal is to analyze variances, improve efficiency, and support managerial decision-making. Implementing a standard costing system involves careful planning and coordination across various departments.

Steps to Set Up a Standard Costing System

1. Establishing Cost Centers and Classification

The first step is to identify and define cost centers within the organization. These are specific units or departments where costs are accumulated and analyzed. Proper classification of costs into direct

 

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Q2. Differentiate between Management accounting, Financial accounting, and Cost accounting.

Ans 2.

Types of Accounting

Accounting is a broad field that comprises various branches such as financial accounting, cost accounting, and management accounting, each serving distinct purposes. While they are interrelated and often work in tandem, each has a unique focus area, methodology, and audience.

Management Accounting

Management accounting is primarily concerned with providing internal financial information to the management to support decision-making, planning, and control. It includes budgeting, forecasting,

 

 

Q3. The competing companies, P Ltd. and Q Ltd., produce and sell the same type of product in the same market. For the year ended 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 2+2+6

Comparison of P Ltd. and Q Ltd. – Break-even Analysis and Target Profit Calculation

Ans 3.

Introduction

P Ltd. and Q Ltd. are two competing firms that sell identical products in the same market. While both report the same sales and profits, their cost structures differ significantly. Analyzing their Profit-Volume (P/V) ratio, Break-even sales, and sales required to earn a specific profit provides insights into their cost behavior and profit stability. The P/V ratio helps assess how much contribution is generated per rupee of sales, and break-even analysis shows how much sales are required to cover

 

 

 

Assignment Set – 2

 

Q4. A Company’s reported profit of Rs 90000 after incorporating the following, you are required to calculate the Funds From operations.

Particulars	Amt (Rs.)
Profit on sale of non-current assets	50,000
Profit on revaluation of investment	3,000
Dividend income on investment	5,000
Loss on sale of equipment	11,000
Premium on redemption of debentures	2,000
Discount on issue of debentures	2,500
Depreciation on machinery	25,000
Depletion of natural resources	11,500
Amortization of goodwill	25,000
Interim dividend	12,500
Excess provision of taxation	21,000
Transfer to General reserve	6,000
Preliminary expenses are written off	1,500

 

Ans 4.

Funds From Operations

Funds From Operations (FFO) refers to the amount of cash flow generated from the normal operating activities of a business. It reflects the actual operational profitability by adjusting the net profit for all non-operating items and non-cash items. The goal is to arrive at a more accurate picture of funds available from business operations, which helps in cash flow analysis and fund flow statements.

The given profit includes various non-operating and non-cash items, so we must add or subtract them

 

 

Q5. Analysis without interpretation is meaningless and interpretation without analysis is impossible. Discuss this statement considering techniques and the importance of financial statement analysis.

Ans 5.

Financial Statement Analysis

Financial statement analysis involves examining the balance sheet, income statement, and cash flow statement of an organization to assess its financial health, performance, and trends. The analysis helps stakeholders, including management, investors, and creditors, make informed decisions. However, the true value of this analysis depends on the interpretation of the results. Thus, analysis and

 

Q6. The comparative statements of Income and Financial position are given below:

	2023 (Rs.)	2024(Rs.)
Net Sales	100000	150000
Less: Cost of Sales	70000	110000
Gross Profit	30000	40000
Less: Operating expenses	20000	25000
Net Profit	10000	15000
Cash in hand	5000	8000
Cash at Bank	4000	2000
Debtors	40000	25000
Stock at cost	15000	10000
Fixed Assets (Net)	56000	65000
	120000	110000
Creditors	36000	12000
Bills Payable	2000	1000
Mortgage Loan	10000	20000
Equity & Share Capital	60000	70000
Reserves & Surplus	12000	7000
	120000	110000

 

You are required to calculate the following ratios for both years:

• Current ratio
• Acid test ratio
• Debtors’ Turnover Ratio
• Average collection period
• Stock turnover ratio.

(Assume 360 days in a year)

Ans 6.

Ratio Analysis Based on Comparative Financial Statements (2023 and 2024)

Ratio analysis helps evaluate the financial health and operational efficiency of a company over time. Here, we will calculate and compare five important ratios: Current Ratio, Acid-Test Ratio, Debtors’ Turnover Ratio, Average Collection Period, and Stock Turnover Ratio.

1. Current Ratio

Formula:
Current Ratio = Current Assets / Current Liabilities

Current Assets: