Name Roll No.

Program Subject Learning Centre

MBA Spring 2012-Semester I-MB0038- Management Process and Organization Behaviour

Assignment Set- 1 (60 Marks) Q1.The Balanced Score Card is a framework for integrating measures derived from strategy. Take an Indian company which has adopted balance score card successfully and explain how it had derived benefits out of this framework.The Balanced scorecard The Balanced Score Card is a framework for integrating measures derived from strategy. While retaining financial measures of past performance, the Balanced Score Card introduces the drivers of future financial performance. (Figure 1) The drivers (customer, internal business process, learning & growth perspectives) are derived from the organizations strategy translated into objectives and measures. The Balanced Score Card is more than a measurement system it can be used as an organizing framework for their management processes. The real power of the Balanced Score Card is when it is transformed from a measurement system to a management system. It fills the void that exists in most management systems the lack of a systematic process to implement and obtain feedback about strategy The Balanced scorecard The Balanced Score Card is a framework for integrating measures derived from strategy. While retaining financial measures of past performance, the Balanced Score Card introduces the drivers of future financial performance. (Figure 1) The drivers (customer, internal business process, learning & growth perspectives) are derived from the organizations strategy translated into objectives and measures. The Balanced Score Card is more than a measurement system it can be used as an organizing framework for their management processes. The real power of the Balanced Score Card is when it is transformed from a measurement system to a management system. It fills the void that exists in most management systems the lack of a systematic process to implement and obtain feedback about strategy

Q2.What is DuPont analysis? Explain all the ratios involved in this analysis. Your answer should be supported with the chart.

Return on Investments represents the earning power of the company. It depends on Net profit ratio and capital turnover ratio. A change in any of these ratios will change the firms earning capacity. This chart shows how the return on capital employed is affected by various factors such as cost of goods sold, change in working capital, change in selling and administrative expenses etc. This chart helps the management in detecting the core issues that confront the management and it helps in effective use of capital. Q3.Accounting Principles are the rules based on which accounting takes place and these rules are universally accepted. Explain the principles of materiality and principles of full disclosure. Explain why these two principles are contradicting each other. Your answer should be substantiated with relevant examples. Principle of Full Disclosure The business enterprise should disclose relevant information to all the parties concerned with the organization. It means that any information of substance or of interest to the average investors will have to be disclosed in the financial statements.

The Companies Act, 1956 requires that income statement and balance sheet of a company must give a fair and true view of the state of affairs of the company. Principle of Materiality While important details of financial status must be informed to all relevant parties, insignificant facts which do not influence any decisions of the investors or any interested group, need not be communicated. Such less significant facts are not regarded as material facts. What is material and what is not material depends upon the nature of information and the party to whom the information is provided. While income has to be shown for income tax purposes, the amount can be rounded off to the nearest ten and fraction does not matter. The statement of account sent to a debtor contains all the details regarding invoices raised, amount outstanding during a particular period. The information on debtors furnished to Registrar of Companies need not be in detail. Q4.Explain any two types of errors that are disclosed by trial balance with examples and rectification entry. Note - Avoid giving examples given in the self- learning material. Those errors that can be disclosed by trial balance can easily be located. As soon as the trial balance does not tally, the accountant can proceed to find out the spots where the errors might have been committed. The total amount of difference in the trial balance is temporarily transferred to a Suspense Account so that it can be mitigated as and when the errors get rectified. Therefore the suspense account gets debited or credited as the case may be on rectification of these types of errors. The following are the errors which are disclosed by trial balance: a) Posting a wrong amount: This mistake may occur while posting an entry from subsidiary book to ledger.

b) Posting to the wrong side of an account: This error is committed while posting entries from subsidiary books to ledger.

c) Wrong Totaling: Both under casting and over casting are detected by trial balance. If any account is wrongly totaled, it gets reflected in the trial balance.

d) Omitting to post an entry from subsidiary book to ledger: If an entry made in the subsidiary

e) Omission of an account altogether from being shown in trial balance:

f) Posting an amount to a correct account more than once: This result in imbalance in the trial balance.

g) Posting an item to the same side of two different ledger accounts: If two accounts are debited /credited for the same transaction, this type of error occurs.

Q5.Distinguish between financial accounting and management accounting Financial accounting is the preparation and communication of financial information to outsiders such as creditors, bankers, government, customers and so on. Another objective of financial accounting is to give complete picture of the enterprise to shareholders. Management accounting on the other hand aims at preparing and reporting the financial data to the management on regular basis. Management is entrusted with the responsibility of taking appropriate decisions, planning, performance evaluation, control, management of costs, cost determination etc., For both financial accounting and management accounting the financial data is the same and the reports prepared in financial accounting are also used in management accounting But the following are major differences between Financial accounting and Management accounting.

Q6. XYZ Ltd provides the following informationSchedule of changes in working capital:

Prepare a schedule of changes in working capital Hint: Net Working capital: Jan 1st 89000 and Dec31st 110000

Details Current Assets Cash in hand Cash at Bank Sundry Debtors Bills Receivable Inventory Total Current Assets(A) Current Liabilities Sundry Creditors Bills Payables Outstanding expenses

Jan 1 13,000 15,000 65,000 16,000 90,000 1,99,000 30,000 12,000 6,000

Balance as on Dec 31 20.000 20,000 1,05,000 30,000 84,000 2,59,000 58,000 12,000 6,000

Increase 7,000 5,000 40,000 14,000 -

Effect of WC Decrease

6,000

4,000 1,000

28,000 -

10

Bank overdraft 30,000 Short term loans 32,000 Total Current Liabilities(B) 1,10,000 Working Capital (A)-(B) 89,000 Net Increase in working capital(balancing figure) 21,000 1,10,000

42,000 36,000 1,49,000 1,10,000

12,000 4,000

1,10,000

71,000

21,000 71,000

11

Name Roll No. Program Subject Learning Centre

MBA Spring 2012-Semester I-MB0038- Management Process and Organization Behaviour

12

Assignment Set- 2

Net profit before tax and extra ordinary items ADD:income tax Adjustment for depreciation Goodwill return off 7000 6000 3000

110000

13

Loss on sale of plant LESS Profit on sale of land Interest received Operating profit before working capital changes ADD Decrease in current assets Stock Debtors Increase in current liabilities Creditors Outstanding expenses LESS increase in current assets Bills receivable Decrease in current liabilities Bills payable Cash generated from operating activities Less payment on Income tax Net cash from operating activities

4000 130000 30000 20000 50000 80000 2000 3000 2000 1000 2000 3000 5000 83000 7000 76000 8000

14

15

Discontinue manufacture of dolls Readymade garments Total cost Profit (loss) 134000 36000 Dolls 13000 (1000) Total 147000 35000

Q4. Describe the essential features of budgetary control. An effective budgeting system should have essential features to get best results. In this direction, the following may be considered as essential features of an effective budgeting. Business Policies defined: The top management of an organization strives to have an action plan for every activity and for each department. Every budget should reflect the business policies formulated from time to time. The policies should be precise and the same must be clearly defined. No ambiguity should enter the document. Clear knowledge should be provided to all the personnel concerned who are going to execute the policies. Periodic suggestions should be called for. Forecasting: Business forecasts are the foundation of budgets. Time and again discussions should be arranged to derive the most profitable combinations of forecasts. Better results can be anticipated based on the sound forecasts. As far as possible, quantitative techniques should be made use of while forecasting Formation of Budget Committee: A budget committee is a group of representatives of various important departments in an organization. The functions of committee should be specified clearly. The committee plays a vital role in the preparation and execution of budget estimated. It brings coordination among other departments. It aids in the finalization of policies and programs. Nonfinancial activities are also considered to make it a wholesome affair. Accounting System: To make the budget a successful document, there should be proper flow of accurate and timely information. The accounting adopted by the organization should be proper and must be fine-tuned from time to time Organizational efficiency: To make the budget preparation and its subsequent implementation a success, an efficient, adequate and best organization is necessary a budgeting system should always

16

be supported by a sound organizational structure. There must be a clear cut demarcation of lines of authority and responsibility. There must also be a delegation of authority from top to bottom line. Management Philosophy: Every management should set a healthy philosophy while opting for the budget. Management must wholeheartedly support the activities which developing a budget. Encouragement should flow from top management. All the members must be involved to make it a workable preposition and a dream-driven document. Reporting system: Proper feedback system should be established. Provision should be made for corrective measures whenever comparative measures are proposed. Availability of statistical information: Since budgets are always prepared and expressed in quantitative terms, it is essential that sufficient and accurate relevant data should be made available to each department. Motivation: Since budget acts as a mirror, the entire organization should become smart in its approach. Every employees both executive and non-executives should be made part of the overall exercise. Employees should be persuaded than pressurized to appreciate the benefits of the budgets so that the fruits can be shared by all the members of the organization. Q5. Briefly describe labor mix variance and yield variance. Labour Mix Variance This variance arises only when different types of workers (women and men workers, trained, semitrained and untrained workers, are employed in manufacturing. If actual working force of different grades of workers is not in the pre-determined ratio, then the mix variance will occur. The variance shows to the management as to how much of the labor cost variance is due to the changes in the composition of labor force. It is calculated as follows: LMV = (Revised standard hours actual hours worked) x standard hourly rate Shorten (RSLH ALH) x SR Where revised standard hour = total time of actual worker / total time of standard workers x standard labor rate. Revised standard labor hours = total time of actual workers / total time of standard workers x standard labor hours Skilled worker = 80 / 80 x 80 = 80 hours Unskilled = 80 / 80 x 80 = 80 hours LMV = Skilled = (3,200 4,800) 1.50 = Rs. 2,400 ADV Unskilled = (6,400 4,800) Re.1 = Rs.1, 600 FAV Total labor mix variance Rs. 800 ADV. Labour Yield Variance This is due to the difference in the standard output specified and the actual output obtained. The formula is as follows: LYV = (Actual output Standard output) x standard cost per unit Q6. How is standard costing related to budgetary control? Although budgetary control and standard costing both are based on some common principles; both are pre-determined, comparison will be made with the actual costs and both system need a revision of the standards or the budget, these two systems have certain differences which are as follows: 1. Budgetary control deals with the operation of a department or the business as a whole in terms of revenue and expenditure. Standard costing is a system of costing which makes a comparison between standard costs of each product or service with its actual cost. 2. Budgetary control covers as a whole in terms of revenue and expenditures such as purchases, sales, production, finance etc. Standard costing is related to a product and its cost only. 3. Budgetary control is applicable to utmost all business organizations. Standard costing is applicable to manufacturing concerns producing standard products and services. 4. Budgetary control is concerned with a specific period and is based on the totals of amounts.

17

Standard costing is concerned with the standard costs, which are worked out generally per unit of production. 5. Budgetary control is not based on standard costing system. Standard costing cannot exist in the absence of a budgetary control system.

18