THE INSTITUTE OF BANKERS, HANGLADESH (IBD)

Banking Diploma Examination, November-December, 2019

DAIBB
Management Accounting (MA)
Time--J hours ond 30 minutes
Full marks-100
l•a.u ma rks--50
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Mu1<s
I. (a) What is meant by Manaj!,cmenl Accountinp,? ..
(h) Discuss bricny the role of management accounting in planning. con1rol and decision- 9
making in a bank with examples relevanl to your answer.
(c) Discuss the limitations of Management Accounting. 7
(a) Define cost. "All cos1s arc variable in the long run and all are fixed if a short enough view 6
is adopted."-Do you agree with this s1atemen1? Give reasons in support of your answer.
(b) Star Ltd. sells 1,200 units of"DlPTV" al Tk. 92 per unit. Cost of direct materi11ls is 30% of 14
the cost of goods sold. The ra1io of direct wages and factory overhead is S : 2. 1be
administrative and selling expenses amount to Tk. 21,200. The nel profit during the cum:.nt
yenr is Tk. 24,400. The company plans to sell 1,SOO units next year at Tk. 96 per unit.
Wages rates and raw materials prices arc expected ro increase by 20% and 10%
respectively. Factory overhead is applied on 1hc basis of direct labor coS1. Other costs will
remain unchanged.
Show the difference in ncl profits of the two years.
3. (a) What is break-even point? "The break-even point analysis is a good technique for
managerial decision-making..._ Explain.
(h) The Rupali Company is considering 2 new products-A & 8 to introduce. Each product
rec1uires an increase· in annual fixed expenses of Tk. 4,00,000. Each product has lhe same
selling price and variable cost per unit.(Tk. 10 and Tk. 8 rcspect.ively). Management. after
studying past experiences with similar products, has prepared the following subjCC1ive
probability distribution :
Evenb Probability ProbablJJty
(Un Us demanded) (Product A) (Product B)
so.ooo 0·10
1.00.000 0 · 10 0·10
2,00,000 0·20 0·10
3,00,000 0·40 0·20
4,00,000 0 ·20 0·40
S,00,000 0·10 0·10

Required:
(i) What is the BEP for each product?
- 1·00
- H)O

(if) Which produce should be chosen? Why?

(iii) Suppose that management was absolutely certain that 3,00,000 units or product B
would be sold. which product would then be chosen? Why?
4. Mention the relative merits and demerits of various techniques of capital Budgeting. 8
A BC Ltd. is raced with the problem or replacing a machine. Two machines are available in 12
the market. Both require an initial outlay of Tk. 10.000 and have a life of S ~ - The
company's required rate of return is 10% and pays lax @ SO%. Depreciation and
investment allowances are as follows: •
Depreciation : I st year 80% of cost and 2nd year 20% or cosL
Investment allowances: Isl year 20% of cost.
Cash inflows before tax are as follows :

Machine-I
Machine-2
Detcrmlnr:
(iJ IRR of each machine
ll
4.000
6 ,000
1
4,000
3.000
.Yw:
l
4,000
2.000
~
4,000
s.ooo
~·
4.000
4.000

(ii) Net Present Value (NPV) of each machine

{iii) Which machine should be purchased?
f Pltttu~ turn owr

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 2
Marks
s. (a) Discuss the usefulness of Ca.c;h Flow Statement. • . s
(h) The following are lhe paniculars of X Ltd. for the year 2017 and 2018 : 15
Assets 2017 2018
Taka Taka
Fixed assets 6,0S,000 s.10.000
Accounts Receivable 1,20.000 1,40,000
Inventory 2,00.000 1.80.000
Cash 90,000 60,000
Preliminary Expenses 60.000 40,000
Total Assets : 10.1s.ooo 9,90,000
LiabUltics :
Equity Share Capital 4.00.000 S,00,000
I 0% Preference Share Capital 2.00.000
5% Debentures 1.00.000
Capiral Redemption Reserve 1.00.000
Retained Earnings 2,S0,000 60,000
Accounts Payable t .S0.000 1.40,000
Other Liabilities (Current) 75,000 90,000
Total Liabilities &Equity: I0,7S,000 9,90.000
The following additional infonnation for the year 2018 is relevant :
(i) Preference shares were redeemed at a premium of 10%.
(ii) Fixed assets were purchased for Tk. I ,9S,000. .
(iii) Fixed assets at the book value ofTk. 1,40,000 were sold for ;n. 80,000.
( iv) Dividend ofTk. 40,000 on equity shares was paid.
You arc required to prepare a statement of cnsh0ow under indirect method. E."ltplain the
reasons for decline in cash balance over the years.
6. (o) Define working capital. Distinguish bet~een permanent and temporary ~orking capital. 8
Mention the determmants of working capital.
(b) Cost sheet of a company provides the following data : 12
Cost per unit
Taka
Raw material 50·00
Direct Labor 20·00
Overheads (lncludJn~ depreciation ofTk. 10) 40·00
Total cost I 10·00
Profit 20·00
Selling price 130·00
Additional information :
Average raw material in stock is for one month. Average material in progress is for half
month. Credit allowed by suppliers : One month; credit allowed to debtors : one month.
Average time lag in payment of wages : IO days; average time lag in payment of overheads
JO days. 25% of the sales .ire on cash basis. Cash in hand is expected to be
n . 1.00.000. Finis~cd goods lie in 1he warehouse for one month.
You an: required to prepare a stalcment showing the working capital needed to finance n
level of the activity of 50,000 units of outpul. Production is carried on evenly throughout
the year and wages and overheads accrue similarly. Stale your ussumptions. if nny. clearly.
Define Cash Budget. What factors are to be considered while preparing cash budget? 6
7. (a)
Sales forecast and other financial information of a limited company are given below for the 14
Cb} year 2020. You an: n:quired 10 prepare a Cosh Budget for the year on quarterly ba.c;is :
(i) Sales forecast Tk. J,90,000, Tk. 7,50.000. Tk. 3,90.000. Tk. 3.90.000 respectively
in the 1st . 2nd. 3rd nnd -t1h quaners.
(ii) Debtors at the beginning of the year Tk. 25.000.
(iii) Cash balance at the beginning or the year Tk. 8,000.
(iv) Collections from snles : Two-thirds in cum:nt qua.rter and the res1 In the ne>.1 qunrter.
(v) Budgeted expc:ndi1urc :
(I) Raw materials. labor and overhead Tk. 2.20,000. Tk. 11.40,000 ond
Tk. 1.00,000 rcspcctivdy in those quaners.
(2) Purchase of fixed a.c;sets Tk. 1,50,000 and Tk. 50.000 respectively in the lnl
and 4th quaners.
I (vi) Minimum cash balance Tk. 8,000 required.
(vii) Borrowings: When required should be in mulliple~ ofTk. !-,000.
(viii) Repayments : When the c~h bnlnncc excc:ed.<1 the minimum. at 8% per annum intcrcsl.
(ix) Assume thot borrowing is mode l\l the beginning of a qunner and the n:rnymenls nt
the end.

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 3
Marta
8. ,4
(a) Company A's cost slructure includes costs that are mostly variable, whereas company B "s
cost structure includes costs that are mostly fixed. (n a rime of increasing sales, which
company will tend to realize the most rapid increase in profits? Explain.
(b) Otobi Limited sells lwo products. Model A 100 and Model B900. Monthly sales and the 6
contribution margin ratios for the two products follow :
Product
Model A I 00 Model B900 Total
Sales Tk. 7 ,00,000 Tk. 3,00.000 Tk. I 0,00,000
Contribution margin ratio 60% 70% ?
The company's fixed expense~ total Tk. 5.98,S00 per month.
Required:
(i) Prepare an income statement for the company as a whole.
(ii) Compute the break-even point for lhe company based on current sales mix.
(Iii) If sales increases by Tk. 50,000 per month, by how much would you expect net
operating income 10 increase? What are your assumptions?
(c) Novelties Company produces and sales highly faddish products directed toward the preteen Ht
market. A new produci has come onto the market that the company is anxious to produce
and sell. Enough capacity e xists in the company's plant to produce 30,000 units each
month. Variable costs to manufacture and sell one unit would be Tk. 1·60 and fixed costs
would tolal Tk. 40,000 per.month.
The marketing department predicrs tl;at demand for the product will exceed the 30,000 units
that lhe company is able 10 produce. Additional production capacity can be rented from
another company at a fixed cost ofTk. 2,000 per month. Variable costs in the rented facility
would total Tk. I ·75 per unit. due to somewhat less efficienl operations than in the main
plant. The product would sell for Tk. 2·50 per unit.
Required:
(I) Compute the monthly break-even point for the new product in unils and in total
sales in Taka.
(ii) How many units must be sold each month 10 make a monthly profit ofTk. 9,0007
(iii) Ir 1hc sales manager rc:ceivcs a bonus of Tk. 0· 1S for each unit sold in excess of the
break-even point. how money units must be sold each monlh to cam a return ;,r
:?5% on the monthly investment in fixed costs?
9. (u) There arc four groups of financial ratios : liquidi1y. leverage, activity and profilabilily.
Fin:mcial :malysis is conduclcd by four types or analysts : management. equity investors.
long-tenn creditors nnd shon-1erm creditors.
You an: n:quired to:
(i) e xplain e:ich type of ratio
(ii) c:xpl:1in the emphasis of each t ~ of analyst and
(iii) suuc i( the !i:lmC b.lsic approach tu financial analysis should be taken by each group
of analysts
(h) While working. on a financial institution. you have come across the following statements.
Give your views and comments on these statements with the necessary arguments:
(iJ The sale of compa.11}' /\ h:ivc bccn growing at a faster raJe than those of company B.
n,e profitability of company A must. therefore. be g.rca1er than that of company B.
(ii) From the view point o( equity shareholders. debt in the capital stnictun: affects
both rhe risk Wld the profitability of the finn.
(iii) Firm X ant.I Y have the same expc."Ctet.l sales volume for next year and they arc
identical in every n:spc.-cl except that 1hc finn X has a greater proportion of fh:cd
costs. If snlcs arc cxp,..-cted 10 inc:rcas.: (decrease). firm X will have greater (lower)
profit from opcr:llions than linn V.
(i1•) Assume Calico has a protil margin of 20% and Mafa1lal has a protit margin or
:?5¾. It is. rhcreforc, obvious 1h11t Mafa1lal is a better investment thnn Calico.
(1') Firm A is aggressively making capital expenditure and linn B is not. Finn A is
clearly more efficient and profitable than linn B.

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 4

Marks
I 0. Write short notes on ~ny Rve of 1hc rollowing : ◄ •S=20
(oJ Committed fixed cost and Olscrction.iry fixed cost
(bJ Causes or default cuhurc in Bangladesh
(CJ Aged n:ceivables
(dJ Margin or safety
( tt) Deficit budget .
(/) Cost leadership
(g) Total Quality M3nagement (TQM)
(h) Theory or constraints

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