Description

SESSION JULY-AUGUST 2024
PROGRAM BACHELOR OF BUSINESS ADMINISTRATION
SEMESTER (4BBA)
COURSE CODE & NAME DBB2203 MANAGEMENT ACCOUNTING

Assignment Set – 1

1. What is material variance and its types? Explain each variance with examples and
formulas.
Ans 1.
Material Variance and Its Types
Material variance refers to the difference between the standard cost of materials allowed for
actual production and the actual cost incurred. It helps management analyze the efficiency and
effectiveness of material procurement and usage in production. By identifying these variances,
businesses can determine whether costs are being managed efficiently and take corrective actions
if needed.
Material variance can be divided into the following types:
1. Material Cost Variance (MCV)
Formula:
MCV = (Standard Cost of Material – Actual Cost of Material)
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2. What do you mean by Cash Flow Statement. How Cash Flow Statement is different from
Fund flow Statement.
Ans 2.
Cash Flow Statement
A Cash Flow Statement is a financial report that provides information about a company’s cash
inflows and outflows over a specific period. It helps stakeholders understand how a business
generates and uses cash to operate, invest, and finance its activities. The statement categorizes
cash flows into three main activities:
 Operating Activities: These include cash flows from the primary revenue-generating
activities of the business, such as cash receipts from sales and payments for goods,
3. Prepare Flexible Budget at 50%, 70% and 90 % Capacity.
Production at 50% Capacity 5,000 Units
Raw Materials Rs. 50 per unit
Direct Labor Rs.40 per unit
Direct Expenses Rs.20 per unit
Factory Expenses (Rent) Rs.50,000 (Fixed)
Office Rent Rs. 20,000 (Fixed)
Administration Expenses Rs.60,000 (60 %Variable)
Distribution Expenses Rs. 20,000 (40 % Variable)
Variable Factory Expenses Rs. 10 per unit
Ans 3.
Flexible Budget Preparation
To prepare a flexible budget at 50%, 70%, and 90% capacities, we follow these steps:
Step 1: Determine Units of Production
At 50% capacity, the production is 5,000 units. For 70% and 90%, production increases
proportionally:
Production at x% = Units at 50% × ( x
50)
 50% Capacity: 5,000 units
Assignment Set – 2
4. Write a note on:
a. Functions of Management Accounting
b. Difference between Management accounting and Financial accounting
Ans 4.
a. Functions of Management Accounting
Management accounting plays a pivotal role in supporting internal decision-making processes
within an organization. Its primary function is to collect, analyze, and present financial and nonfinancial
information to managers, enabling them to plan, control, and make informed decisions.
One of its core functions is planning, where management accountants assist in setting short-term
and long-term goals by preparing budgets and forecasts. These plans help organizations allocate
resources efficiently and prepare for future challenges.
Another key function is controlling, where management accounting monitors organizational
5. XYZ company expects the following net cash inflows for the next five years: Rs 20,000,
Rs.25,000, Rs.30,000, Rs.35,000, and Rs.40,000 respectively from the Project. The initial
investment of project is Rs.50,000.
Calculate:
a. Payback period
b. Post payback profitability
c. Net present value when the discount rate is 10%.
Solution
Given the data:
 Initial Investment: ₹50,000
 Net Cash Inflows over 5 years: ₹20,000, ₹25,000, ₹30,000, ₹35,000, ₹40,000
 Discount Rate: 10%
a. Payback Period
The Payback Period is the time it takes to recover the initial investment from the project’s net
cash inflows.
1. Cumulative Cash Flow Calculation:
 Year 1: ₹20,000 (Cumulative: ₹20,000)
 Year 2: ₹25,000 (Cumulative: ₹45,000)
6. Statement of Profit and Loss of XYZ Ltd.
Particulars 31st March 2023 31st March 2024
I. Revenue from Operation (Sales) 7,00,000 8,50,000
II. Other Income 30,000 30,000
III. Total Revenue (I+II) 7,30,000 8,80,000
IV. Expenses
a. Material Consumed 3,30,000 4,20,000
b. Manufacturing Expenses 1,20,000 1,30,000
c. Other Expenses 1,20,000 1,30,000
Total 5,70,000 6,80,000
V. Profit Before Tax (III-IV) 1,60,000 2,00,000
VI. Tax @ 50% 80,000 1,00,000
VII. Profit After Tax (V-VI) 80,000 1,00,000
Questions:
a. Prepare a Common Size Statement of Profit and Loss.
b. As a management accountant, write an interpretation of the Common Size Statement of
Profit and Loss.
Ans 6.
Preparation of Common Size Statement of Profit and Loss
A Common Size Statement expresses each item in the profit and loss account as a percentage of
total revenue. This approach helps analyze the proportional changes and compare financial
performance over multiple years.
Steps to Prepare Common Size Statement
1. Identify the Line Items: Each line item from the statement of profit and loss is taken,
including revenues, expenses, and profits.