ISA II –Management Accounting

1. Prepare cash budget for the month of May, June and July 2019 from the anticipated
figures.
Month Credit Credit Wages Office Selling
sales Purchases Rs. Exp. Rs Exp.
Rs. Rs. Rs.
March 90,000 26,000 8,000 3,000 8,000
April 92,000 28,000 7,000 2,500 6,000
May 94,000 43,000 12,000 6,500 4,500
June 88,000 45,000 9,500 3,000 3,500
July 56,000 49,000 8,500 2,000 2,500
1. Cash balance as on May 2019 Rs. 8,000.
2. Plant costing Rs. 80,,000 is due for delivery in July, payable 10% on delivery and balance
after 3 months.
3. Advance tax Rs. 8,000 payable in March and June.
4. Credit period allowed by suppliers 2 months
5. Credit period allowed to customers 1 month.
6. Lag in payment of office expenses ½ month.
7. Lag in payment of office and selling expenses 1 month.
8. Wages are paid on first day of next month.
2. Department of Mysore Silk Limited attained sales at Rs. 10,00,000 at 80% of its normal
capacity and its expenses are given below:
Administrative costs:
Office salaries Rs. 1,00,000
General expenses 2% of sales
Depreciation Rs. 10,500
Rates and taxes Rs. 12,750
Distribution cost
Wages Rs. 25,000
Rent 1% of sales
Other expenses 4% of sales
Selling costs
Salaries 8% of sales
Travelling expenses 2% of sales
Sales office expenses 1% of sales
General expenses 1% of sales
Draw up flexible, administrative, selling and distribution cost budget operating at 50% ,
90% and 100% capacity.
3. From the following information , prepare a flexible budget to show level of activity of
70%,80% and 100%.
1. Sales based on normal level of activity of 70% are 70,000 units at Rs. 30 per unit. If
output increased to 70% it is thought that selling price should be reduced by 5% and
if output reaches 100%, it would be necessary to reduce original selling price by
further 5% in order to reach wide market.
2. Prime cost are
Direct material Rs. 9 p.u
Direct labour Rs.9 p.u
Direct expenses Rs. 2 p.u
Total 20
If output reaches 80% level of activity as above , the quantity discount will be
received and this will lead to reduction of purchase price of raw material by 8 %.
3. Variable overheads: salesman commission is 5% on sales value.
4. Semi variable overhead at normal level capacity.
Rs.
Supervision 80,000
Power 70,000
Heat and light 60,000
Maintenance 60,000
Indirect labour 2,00,000
Salesman’s expenses 1,20,000
Transport 4,00,000
Semi variable overheads are expected to increase by 5% if output reaches at level
of activity of 90% and by further 5% , if it reaches the 100% level.
5. Fixed overheads are
Rs.
Rent and rates 30,000
Depreciation 70,000
Administration 75,000
Sales depreciation expenses 40,000
Advertising 60,000
General expenses 20,000
4. Write notes on
a. Stages involved in target costing
b. Enterprise resource planning- Features and benefits