Ka Set
THE INSTITUTE OF BANKERS, BANGLADESH (IBB)
Banking Diploma Examination, July, 2018
DAIBB
Management Accounting (MA)
Time-3 hours and 30 minutes
Fun marks---100
Pass marks-50
[N. B.-The figures in the right margin indicate full marks. Answer any five questions. Different parts of a question should be answered in a same place. Use of calculator is permissible. ]
Mark
1. (a) Discuss briefly the role of Management Accounting in planning, control and decision making a in bank with examples relevant to your answer. 7(c) Distinguish between Management Accounting and Financial Accounting. 6
2. (a) Discuss the difference between Product Cost and Period Cost. 5
Inventories | January-l | Deccmbcr-31 |
Finished goods | 350 units | 450 units |
Work in process | Tk. 90,000 | Tk. 45,000 |
Raw material’s | Tk. 35,000 | Tk. 50,000 |
Finished goods unit cost | 162 | ? |
Depreciation : | ||
Office equipment | 2800 | |
Factory plant and Machinery | 21500 | |
Vehicle engaged for marketing | 3200 | |
Maintains : Generation machine |
9500 | |
Factory building | 5200 | |
Internal roads and drain | 10000 | |
Sales @ Tk. 220 per unit | 8,53,600 | |
Income Tax paid | 5000 | |
Miscellaneous expenses and cost : | ||
Fuel (gas bill) | 4500 | |
Telephone factory | 6000 | |
Power for light (90% for factory, 10% for administration) | 3000 | |
Water | 4000 | |
Land, rates and taxes (80% factory, 20% office) | 4300 | |
Indirect materials | 2645 | |
Raw materials purchase | 3,64,000 | |
Direct labour | 1,62,500 | |
Wages paid to worker which there was no production due to power failure. | 17000 | |
Leave and bonus | 40000 |
Factory office expenses : | ||
Factory foreman salary ‘ . | 6000 | |
Factory manager salary | 16000 | |
Truck, hire cost to carry purchased materials | 8000 | |
Purchase discount | 5200 | |
Marketing expenses | 20000 | |
Administration expenses | 15000 | |
Interest earned (aher tax deduction) . | 6000 |
(i) Statement of cost of goods sold. 8
(ii) Income statement showing gross and net profit in total and per unit. 7
(c) Following is the cost statement of ABC Company :10
Raw materials | T k. 50 per unit |
Direct labour cost | Tk. 20 per unit |
Overheads cost | Tk. 40 per unit |
Total cost | Tk. 10 per unit |
Profit | Tk. 30 per unit |
Selling price | Tk. 140 er unit |
(i) Average Raw material, in stock . One month
(ii) Average Raw materials in process Half a month
(iii) Stock of finished goods 30 days
(iv) 20% sales are cash sales . .
(v) Expected cash balance Tk. 1,00,000
(vi) Credit allowed to debtors Two months
(vii) Credit allowed by creditors 45 days
(viii) Time lag in payment of wages 15 days
(ix) Time lag in payment of overhead 1 month
(Note: 360 days in a year)
You are required to prepare statement showing the working capital requirement if level of activity of the company is 70,000 units. Assume 360 days In a year.
Year | Cash benefits (in taka) |
1 | 500000 |
2 | 10,00,000 |
3 | 8,00,000 |
4 | 10,00,000 |
5 | 5,00,000 |
6 | 6,00,000 |
Required :
(i) Payback period.
(ii) Average Annual Rate of Return (ARR).
(iii) Net Present Value (NPV).
(iv) Present value of payback period.
(v) Profitability Index (131)
(vi) Comment on financial viability of buying the machine.
(The present values of Tk. 1 for six years at 10% are : 0.909, 0.826, 0.751, 0.683, 0.621, 0.564)
Per pair | Taka |
Selling price | 30.00 |
Variable cost | 19.50 |
Salesmen’s commission | 1.50 |
Total variable cost | 21.00 |
Annual fixed expenses are :- | |
Rent | 60,000 |
Salaries | 2,00,000 |
Advertising | 80,000 |
Other fixed expenses | 20,000 |
Total | 3,60,000 |
(i) Calculate the annual break-even point in units and in taka sales. Also determine the profit or loss if 45,000 pairs of shoes are sold.
(ii) The sales commissions are proposed to be discontinued, but instead a fixed amount of Tk. 54.000 is to be incurred in fixed salaries. A reduction in selling price of 5% is also proposed. What will be the Break-even point in unit and in taka sales?
(iii) It is proposed to pay the store manager 50 paisa per pair as additional commission. The selling price is also proposed to be increased by l0%. What would be the Break-even point in units and in sales taka?
(iv) Refer to the original data. If the store manager were to be paid 30 paisa (Tk. 0-30) commission on each pair of shoes sold in excess of the Break-even point. What would be store‘s net profit, if 50,000 pairs were sold?
(v) Determine the point of indifference between commission plan and salary plan.
(Note: Consider each part of the question separately.)
(b) What are the assumptions underlying in construction of a Break-even chart? 4
(c) “The effect of a price rise is always to increase the p/v ratio and to get reduced the Break-even point.” Explain the statement with example.
Taka | |
Cost of acquiring additional land for runway | 7,000,000 |
Cost of runway construction | 20,000,000 |
Cost of extending perimeter fence | 2,984,000 |
Cost of runway lights | 3,960,000 |
Annual cost of maintenance of new runway | 2,800,000 |
Annual incremental revenue from landing fees | 4,000,000 |
Required:
(a) Compute the initial cost of the investment in the long runway.
(b) Compute the annual cost or benefit from the runway.
(c) Prepare a net present value analysis of the proposed long runway.
(d) Should the Board representatives approve the runway?
- The financial statements of LLM Company are presented below :
LLM Company
Income Statement
for the year ended December 31, 2017
Particulars | Amount |
Amount
|
Taka |
Taka
|
|
Net Sales (All on account) |
6.00.000
|
|
Less : Cost of goods sold |
4.50.000
|
|
Gross profit |
1,50,000
|
|
Less : Operating expenses : Selling expenses | 60,000 | |
Administrative expenses | 25,000 | |
Total operating expenses |
85,000
|
|
Net operating income |
65,000
|
|
Less: Interest expenses |
5000
|
|
Income before tax |
60,000
|
|
Less: Income Tax expenses |
17,500
|
|
Net Income |
42,500
|
Comparative Balance Sheet
on 31st December
Assets : | 2014 |
2016
|
Taka |
Taka
|
|
Cash | 60.000 | 32,500 |
Accounts Receivable(Net) | 50,000 | 35,000 |
Merchandise Inventories | 95,000 | 87,500 |
Land | 75.000 | - |
Property, Plant and Equipment | 1,75,000 | 1,95,000 |
Accumulated Depreciation | 75,000 | 60,000 |
Total Assets | 3,80,000 | 2,90,000 |
Liabilities and Stockholder’s Equity : | - | |
Accounts Payable | 65,000 | 82,500 |
Income Taxes Payable | 37,500 | 50,000 |
Notes Payable | 50,000 | 25,000 |
Bond ‘ 75,000 Common Share | 62,500 | 62,500 |
Retained camings | 90,000 | 70,000 |
Total Liabilities and Stockholder’s Equity | 3,805,000 | 290,000 |
Additional Information:
(a) During the year Plant and Equipment was sold for Tk. 25,000 cash.
(b) The original costs of the assets were Tk. 37,500 and has a book value of Tk. 25,000 at time of sale.
(c) Dividend of Tk. 25,000 were declared and paid.
(d) Depreciation expenses altogether Tk. 27,500.
(e) Additional equipment was purchased for Tk. 17,500.
(f) In the year of 2017 LLM Company issued Bond to purchase land. These Bonds were exchanged with the land owner.
Required:
(i) Prepare a statement of Cash Flow for 2017, under the direct method.
(ii) Prepare a statement of Cash 1" low for 2017, under the indirect method.
- (a) What is profitability? How can a firm improve the profitability of a project? 5
Product (A) | Product (B) | |
Units products and sold | 600 units | 500 units |
Taka | Taka | |
Direct Materials (per unit) | 2.00 | 4.00 |
Direct Labour (per unit) | 4.00 | 4.00 |
Factory overhead per unit (40% iixcd) | 5.00 | 3.00 |
Selling and administrative overhead (60% fixed) | 8.00 | 5.00 |
Total cost per unit | 19.00 | 16.00 |
Selling price per unit | 23.00 | 19.00 |
Factory overheads are absorbed on the basis of machine hours which is the limiting (key) factor. The machine hour rate is Tk. 2 per hour. The company receives an offer from China for the purchase of product ‘A‘ at a price of Tk. 17-50 per unit. Alternatively, the company has another offer from Iran for purchase of product B at a price of Tk. 15-50 per unit. In both case a special packing charge 0f Tk. 0.50 per unit has to be borne by the company. The company can accept either of the two export orders and in both the case the company can supply such quantities as may be possible by utilizing the balance 0f 25% 0f its capacity.
You are required to prepare:--
(i) A statement showing the economics of the two export proposals giving your recommendations as to which proposal should be accepted.
(ii) A statement showing the overall profitability of the company after incorporating the export proposal recommended by you.
Purchase: If the firm purchases the machine, its cost of Tk. 80.000 will be financed with a 5 year. 14% loan requiring equal end-of-year payments of Tk. 23,302. The machine will be depreciated under straight line method, assuming zero salvage value. The firm will pay Tk. 2.000 per year for a service contract that covers all maintenance costs; insurance and other costs will be borne by the firm. The firm plans to keep the equipment and use it beyond its 5 year recovery period.
Required:
(a) Determine the after-tax cash outflows of MML under each alternative. 8
(b) Find the present value of each after-tax cash outflow stream, using the after-tax cost of debt. 8
(c) Which alternative lease or purchase--would you recommend? Why? 4
(b) Cost of capital and financial leverage;
(c) Budgetary control systems;
(d) Management report;
(e) Variance analysis;
(f) Inventory management;
(g) Hire purchase finance;
(h) Receivables management.
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