Siddhartha Sen

Roll Number: 581117638

MBA- I semester MB0041- Financial & Management Accounting 4 Credits Assignment Set 1
1. 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. Ans: 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. 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. 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. If change has a material effect in current period and the effect of change is ascertainable the amount of change should be disclosed. If the change has a material effect in current period and the effect of change is not ascertainable wholly or in part, the fact should be disclosed. If change has no material effect in current period but which is reasonably accepted to have a material effect in later periods, the fact of such change should be appropriately disclosed. Materiality principle: Accountants follow the materiality principle, which states that the requirements of any accounting principle may be ignored when there is no effect on the users of financial information. Certainly, tracking individual paper clips or pieces of paper is immaterial and excessively burdensome to any companys accounting department. Although there is no definitive measure of materiality, the accountants judgment on such matters must be sound. Several thousand dollars may not be material to an entity such as General Motors, but that same figure is quite material to a small, family-owned business. Full disclosure means to disclose all the details of a security problem which are known. It is a philosophy of security management completely opposed to the idea of security through

Siddhartha Sen

Roll Number: 581117638

obscurity. The concept of full disclosure is controversial, but not new; it has been an issue for locksmiths since the 19th century. Full disclosure requires that full details of security vulnerability are disclosed to the public, including details of the vulnerability and how to detect and exploit it. The theory behind full disclosure is that releasing vulnerability information results in quicker fixes and better security. Fixes are produced faster because vendors and authors are forced to respond in order to save face. Security is improved because the window of exposure, the amount of time the vulnerability is open to attack, is reduced. The full disclosure principle states that any future event that may or will occur, and that will have a material economic impact on the financial position of the business, should be disclosed to probable and potential readers of the statements. Such disclosures are most frequently made by footnotes. For example, a hotel should report the building of a new wing, or the future acquisition of another property. A restaurant facing a lawsuit from a customer who was injured by tripping over a frayed carpet edge should disclose the contingency of the lawsuit. Similarly, if accounting practices of the current financial statements were changed and differ from those previously reported, the changes should be disclosed. Changes from one period to the next that affect current and future business operations should be reported if possible. Changes of this nature include changes made to the method used to determine depreciation expense or to the method of inventory valuation; such changes would increase or decrease the value of ending inventory, cost of sales, gross margin, and net income or loss. All changes disclosed should indicate the dollar effects such disclosures have on financial statements. 2. Journalize the below transactions, prepare relevant ledger accounts and finally trial balance.
M/s Ventak Enterprise Pvt Ltd.

Siddhartha Sen

Roll Number: 581117638

Ans: Journal
Date 01/01/2009 Particulars Cash A/c Dr Goods A/c Dr Furniture A/c Dr T(o capital A/c Being assets brought in as Capital) Bank A/c Dr Cash Advance A/c Dr Bank Purchases Dr Rithik Advance Packing Cash Purchases Dr Discount received Bank Cash A/c Advance Advance A/c Shyam Sales Packing Cash Mr X A/c Discount A/c sales Drawings A/c purchases Cash A/c Shyam Rithik A/c Cash Stolen goods A/c Goods LIP Cash Embezzlement A/c Dr Cash LF Debit(Rs) 200000 100000 50000 Credit(Rs)

350000

01/01/2009 2/1/2009 3/1/2009

100000 100000 9000 90000 88000 79000 9000 1000 1000 88000 4400 83600 10000 10000 10000 80000 90000 1000 1000 88200 1800 90000 4000 4000 64000 64000 63200 63200 4000 4000 1000 1000 1000 1000

4/1/2009 5/1/2009 6/1/2009

7/1/2009 8/1/2009 9/1/2009 10/1/2009 11/1/2009 12/1/2009 13/01/2009

Siddhartha Sen Ledger accounts Cash A/c Particulars To Capital A/c To Advance To Shyam

Roll Number: 581117638

Amount (Rs) 200000 10000 64000

Particulars By bank By packing By packing By Rithik BY LIP By Embezzlement

Amount (Rs) 100000 1,000 1,000 63,200 1000 1000

Capital A/c Particulars

Amount (Rs)

Particulars By cash By goods By furniture Particulars By goods Particulars

Amount (Rs) 2,00000 1,00000 50000 Amount (Rs) 4000 Amount (Rs)

Goods A/c Particulars To Capital A/c Furniture A/c Particulars To Capital A/c Bank A/c Particulars To Cashl A/c Advance A/c Particulars To Bank A/c To sales Purchases A/c Particulars To Rithik A/c To advance To discount received To Bank Rithik A/c Particulars To cash Packing A/c Particulars

Amount (Rs) 1,00000 Amount (Rs) 50,000 Amount (Rs) 1,00,000 Amount (Rs) 9,000 10,000

Particulars By advance Particulars By purchases By purchases By cash Particulars By Drawings

Amount (Rs) 9000 Amount (Rs) 79,000 88000 10,000 Amount (Rs) 4000

Amount (Rs) 79000 9,000 4400 83600 Amount (Rs) 63200 Amount (Rs)

Particulars By purchases Particulars

Amount (Rs) 79000 Amount (Rs)

Siddhartha Sen To Cash A/c Discount received Particulars To sales Sales A/c Particulars To

Roll Number: 581117638 1,000 Amount (Rs) 1800 Amount (Rs) 200000 Particulars By purchases Particulars By advance A/c By Shyam By Mr. X A/c By Discount Particulars By cash Particulars Amount (Rs) 4400 Amount (Rs) 10,000 80,000 88,200 1,800 Amount (Rs) 64000 Amount (Rs)

Shyam A/c Particulars To salesl A/c Packing A/c Particulars To Cashl A/c Mr. X A.c Particulars To Sales A/c Drawings A/c Particulars To purchases Stolen goods A/c Particulars To goods LIP A/c Particulars To Cashl A/c Embezzlement Particulars To Cash A/c Trial Balance
Date

Amount (Rs) 80,000 Amount (Rs) 1,000 Amount (Rs) 88200 Amount (Rs) 4000 Amount (Rs) 4000 Amount (Rs) 1000 Amount (Rs) 1000

Particulars

Amount (Rs)

Particulars

Amount (Rs)

Particulars

Amount (Rs)

Particulars

Amount (Rs)

Particulars

Amount (Rs)

Particulars To Capital Alc

1/1/2009 1/1/2009 2/1/2009

Amount (Rs) 3,50,000

Date

Particulars By Cash By Goods By Furniture By Bank By Advance

1/1/2009 1/1/2009 2/1/2009

To Cash To Bank

1,00,000 9,000

Amount (Rs) 200000 100000 50000 100000 9000

Siddhartha Sen
3.01.2009 04.01.2009 05.01.2009 06.01.2009 07.01.2009 08.01.2009 09.01.2009 10.01.2009 11.01.2009 12.01.2009 13.01.2009 To Rithik To Advance To Cash To Discount received To Bank To Advance To Sales To Cash To Sales To Purchases To Shyam To Cash To goods To Cash To Cash 79,000 9,000 1,000 4400 83600 10000 90000 1000 90000 4000 64000 63200 4000 1000 1000 3.01.2009 04.01.2009 05.01.2009 06.01.2009 07.01.2009 08.01.2009 09.01.2009 10.01.2009 11.01.2009 12.01.2009 13.01.2009 By Purchases By Cash By Advance By Shyam By purchases By Packing

Roll Number: 581117638

88000 1000

By Packing By Mr.X By Discount By Drawings By Cash By Rithik By Stolen goods By LIP By Embezzlement

88000 10000 10000 80000 1000 88200 1800 4000 64000 63200 4000 1000 1000

964200

9642 00

3. 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. Ans: The trial balance is prepared to check the arithmetical accuracy of accounts. If the trial balance does not tally, it implies that there are arithmetical errors in the accounts which require location, detection and rectification thereof. Even if the trial balance tallies, there may still exist some errors. There are two types of errors: Errors which are not revealed by the trial balance, and Errors which are revealed by the trial balance. Errors may happen at any of the following stages of the accounting cycle. At Recording Stage Errors of principle Errors of omission Errors of commission At Posting Stage Error of omission Complete Partial Error of commission Posting to wrong account Posting on the wrong side Posting of wrong amount At Balancing Stage Wrong totaling Wrong balancing

Siddhartha Sen

Roll Number: 581117638

Preparation of Trial Balance: Error of Omission, Error of Commission Taking wrong amount Taking wrong account Taking to the wrong side Errors can be classified into the following four categories on the basis of the nature of errors and explained here under. 1. Errors of commission 2. Errors of omission 3. Errors of principle 4. Compensating (offsetting) errors 5. Errors of Duplication Errors of Commission These errors by definition are of clerical nature. These errors may be committed at the time of recording and/or posting. At the time of recording, the wrong amount may be recorded in journal which will be carried throughout. Such errors will not affect the agreement of the trial balance. These errors may also be committed at the time of posting, by way of posting wrong amount, to the wrong side of an account or in the wrong account. The errors resulting in posting to wrong account will not affect agreement of trial balance, whereas, other errors of posting will resulting disagreement of trial balance. For example, an amount of Rs. 10,000 received from customer (Debtor) is correctly recorded on the debit side of the cash book but while posting, the customer's account is credited with Rs. 1,000. This is an error, which is committed at the time of posting, by posting wrong amount to the account. This will result in disagreement of trial balance, since the credit total of the trail balance will be short by Rs. 9,000. Care should be taken while recording and posting. It should be thoroughly checked and rechecked before passing it on. Errors of Principle Accounting entries are recorded as per the generally accepted accounting principles. If any of these principles are violated or ignored, errors resulting from such violations are known as errors of principle. As an illustration, Periodicity principle requires maintaining proper distinction between capital and revenue items. An error of principle may occur due to incorrect classification of expenditure or receipts between capital and revenue. This is very important because it will have an impact on financial statements. It may lead to under/over stating of income or assets or liabilities, etc. For example, amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the asset account. Instead, if this amount is debited to maintenance and repairs account, it is treated as a revenue expense. This is an error of principle. Since instead of asset account, i.e. buildings, the maintenance and repairs account (expense) is debited, the trial balance will still tally but would not be correct as per generally accepted accounting principles. Such errors are not disclosed by the trial balance. This will result in understating of income due to extra charge under maintenance and repairs account and understating the value of buildings in the balance sheet.

Siddhartha Sen

Roll Number: 581117638

4. Let us assume you have been recently appointed as Management Accountant of a small but upcoming firm. Your immediate supervisor has asked you to prepare certain financial ratios from the balance sheet of one of their clients M/s Vinod Enterprise.

The director intent to transfer a sum of Rs.5000 out of the current years profit to provision for tax. The financial ratios needed are: a. Return on capital employed b. Current ratio c. Fixed assets to net worth d. Debt - Equity ratio e. Return on owners capital. Ans: a. Return on capital employed = fixed asset + investment + current asset current liability = 87500+25000 +30000+13500+7000 -30000 - 5000 = 128000 b. Current ratio = current asset/current liability = 50500 / (30000 +5000) = 1.443 c. Fixed assets to net worth = fixed asset/share holders fund = 87500/60000 = 1.458 d. Debt - Equity ratio
= = = external equity/internal equity 20000 / 60000 0.333

Siddhartha Sen = = =

e. Return on owners capital

net profit / shareholder fund 21000/50000*100 42

Roll Number: 581117638

5. A friend of you has approached to help him out in setting his books of accounts in order. Unfortunately he is struck with difference in trial balance. Help him in redrafting the trial balance.

Ans: Errors may be detected in the process of closing books and accounts for preparation of trial balance. The errors detected in the process may be either one- sided errors or twosided errors. However, once such errors are located they must be rectified immediately. Rectification Of One-sided Errors Located Before Preparation Of Trial Balance One-sided errors are those errors which affect only one side of an account. Wrong totaling of subsidiary books, posting a wrong amount, posting on the wrong side are some of the examples of one-sided errors. Since two accounts are not involved in these errors, journal entry can not be passed for rectifying such errors. The one- sided error is rectified by making an additional posting on the affected side of the ledger account.

Siddhartha Sen

Roll Number: 581117638

Rectification of Two-sided Errors Located before Preparation of Trial Balance The errors that affect two or more accounts are called two-sided errors. Correction of such two-sided errors needs to make rectification journal entries since such errors involve two or more accounts. Therefore, one account is debited and another account is credited to rectify two-sided errors. The rules of debit and credit are applied to rectify these errors.

The following three steps are taken to rectify the two-sided errors. a. Identify correct entry b. Rewrite wrong entry c. Find rectifying entry by making adjustment of correct entry and wrong entry
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 particulars stock capital cash Bank od sales purchases Return inwards Return outwards Carriage inwards Carriage outwards salaries debtors wages creditors Land n building plant Trade exp debit 94120 1400 9320 236400 106400 13400 2960 2360 14260 9600 16300 3660 37360 15000 20900 2090 299490 299490 credit 13450

6. Explain the accounting treatment of bad debt and provision for doubtful debts with suitable example. Ans: First let's distinguish between a bad and a doubtful debt. A debt owing to a business that is not expected to be paid is a bad debt. A doubtful debt is a debt, which the business considers may not be paid. The distinction is important because the accounting treatment differs, as shown below.

Siddhartha Sen

Roll Number: 581117638

Double entry: Bad and doubtful debts form part of the double entry bookkeeping system. Note that the general principles of double entry bookkeeping are not covered here but form part of the ICM Accounting unit. Accounting treatment for bad debts: If we decide that there is no probability of collecting an overdue amount, we need to reduce the balance sitting on that customer's account to zero. We do not want to show a balance owing that in fact will never be recovered because this would be overstating our debtors and therefore overstating our assets. The amount being written off represents a bad debt and so we transfer this balance to the expense account - `bad debts'. We then need to reflect this expense in our accounts and therefore transfer the balance to the profit and loss account. The entries are as follows: Debit: Bad debt account Credit: Customer's account Transferring to the final accounts: Debit: Profit and loss account Credit: Bad debt account. Accounting treatment for doubtful debts: A doubtful debt may not turn into a bad debt. In fact, it may not be possible to isolate specific customers when computing an amount which may turn bad. Experience may allow us to estimate the level of bad debt that tends to arise in our business. But however we arrive at this figure, prudence dictates that we should provide for this in our final accounts. The accounting entries will be as follows: Debit: Profit and loss account Credit: Provision for bad debts The provision will be shown on the balance sheet as a deduction from debtors. We are thus reducing the value of debtors to comply with the requirement to show assets at conservative values. The provision will be increased or decreased in subsequent years depending on the level of debtors and likely level of bad debt determined at the end of the year. Increases to the provision in subsequent years will be debited to the profit and loss account. Decreases in the provision will be credited to the profit and loss account. The provision will be calculated after all bad debts have been written off. Note that the auditors pay particular attention to bad debt provisions because of the ease with which they can be used to manipulate profit and create a `hidden reserve'. Let's now look at an example.

Siddhartha Sen

Roll Number: 581117638

Example Alice Beeton runs a food and drinks business. Her customers are given 60 days credit. Alice is about to prepare her accounts as at the year ending 30June 2000. Alice has run a number of promotions this year and has determined that the provision for bad debts will need to be increased from 2 per cent to 3 per cent of her debtors. The net debtors for last year were 28, 000. Debtors are currently 32,900. In addition it bas been decided to write off two overdue debts, wbkb are: 31 March - F 12,500 31 May - A Ward 400 Show all the relevant entries in the accounts. Suggested solution Step 1 Currently, the balances that have gone bad are sitting on the customer accounts. These need to be transferred to the bad debts (expense) account. Step 2 The increase/decrease in provision needs to be calculated. Remember the provision is calculated on the net debtors - ie net of bad debts. We can now show the provision for bad debts. Step 3 We can now show the entries in the final accounts. The profit and loss account shows the expenses incurred - the bad debts and increase in the provision for bad debts. The balance sheet shows the asset, 'debtors' and the `provision for bad debts'. Note: the balance sheet is not part of the double entry bookkeeping system.

Siddhartha Sen

Roll Number: 581117638

MBA- I semester MB0041- Financial & Management Accounting 4 Credits Assignment Set 2
1. 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. Ans: The concept of the Balanced Scorecard (BSC) was developed in the early 1990s as a new approach to performance measurement due to problems of short-termism and past orientation in management accounting (Kaplan and Norton, 1992). The concept of the BSC is based on the assumption that the efficient use of investment capital is no longer the sole determinant for competitive advantages, but increasingly soft factors such as intellectual capital, knowledge creation or excellent customer orientation become more important. As a reaction Kaplan and Norton suggested a new performance measurement approach that focuses on corporate strategy in four perspectives (Kaplan and Norton, 1992, 1997, 2001). This BSC aims to make the contribution and the transformation of soft factors and intangible assets into long-term financial success explicit and thus controllable. Increasingly, as balanced scorecard (BSC) concepts become more refined, we have had more inquiries asking for examples of organizations that have implemented the BSC, how the BSC applies to a particular business sector, metrics are appropriate for that sector, etc. This section provides a database of working balanced scorecard examples that our research has located. By 2004 about 57% of global companies were working with the balanced scorecard (according to Bain). Much of the information in the commercial sector is proprietary, because it relates to the strategies of specific companies. Public-sector (government) organizations are usually not concerned with proprietary information, but also they may not have a mandate (or much funding) to post their management information on web sites. Balanced Score Card An Indian perspective: The Balanced Scorecard is a framework for integrating the measures derived from the vision and strategy of an organization with the financial measures of its past performance. The objectives and measures are drawn from four perspectives: financial, customer, internal business process and learning and growth. Once set up, the scorecard allows managers to show results focused on both the long and short term measures of success. The concept is still new to Indian corporate, though it was developed some time ago in 1992. In the Indian context, Organizations like the Murugappa group and the Mahindras have adopted the Balanced Scorecard. But overall, there are not more 4-5 organizations in India that are using this technique. From the above points, it becomes clear that the Balanced Scorecard technique offers numerous advantages to the organizations using it. But as far as Corporate India is concerned, there is little awareness among the organizations about this newly used tool of

Siddhartha Sen

Roll Number: 581117638

performance measurement. With the integration of the financial markets worldwide, it is high time for the Indian companies to implement this technique at the earliest. As far as the implementation aspect is concerned, it takes approximately six months to a year which is not a very long period. Therefore, it is advised that the organization should come forward and realize the true potential of Balanced Scorecard. Below shown is an example of a Balance Score Card strategy map for a Bank for its credit card.

2. What is DuPont analysis? Explain all the ratios involved in this analysis. Your answer should be supported with the chart. Ans: DuPont Analysis: It is a method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity".

Siddhartha Sen

Roll Number: 581117638

The Du Pont analysis can be depicted via the following chart:

At the apex of the Du Pont chart is the Return On Total Assets (ROTA), defined as the product of the Net Profit Margin (NPM) and the Total Assets Turnover Ratio (TATR). As a formula this can be shown as follows: (Net profit/Total asset) = (Net profit/Net sales)*(Net sales/Total assets) (ROTA) (NPM) (TATR)

Such decomposition helps in understanding how the return on total assets is influenced by the net profit margin and the total assets turnover ratio. The left side of the Du Pont chart shows details underlying the net profit margin ratio. A detailed examination of this side presents areas where cost reductions may be effected to improve the net profit margin. The right side of the chart highlights the determinants of total assets turnover ratio. If this study is supplemented by the study of other ratios such as inventory, debtors, fixed asset turnover ratios, a deeper insight into efficiencies and inefficiencies of asset utilization can be sought. The basic Du Pont analysis can be extended to explore the determinants of the Return On Equity (ROE).

Siddhartha Sen

Roll Number: 581117638

Return on equity= Asset turnover * Net profit margin*leverage (Net profit/Equity) = (Net profit/Sales)*(Sales/Total assets)*(Total assets/Equity) (ROE) (NPM) (TATR) 1/(1- DR)

Where DR is the debt ratio= debt (D)/assets (A) Breaking ROE into these three parts allows evaluation of how well one can manage the companys assets, expenses, and debt. A manager has basically three ways of improving operating performance in terms of ROA and ROE. These are: Increase capital asset turnover Increase operating profit margins Change financial leverage

Each of these primary drivers is impacted by the specific decisions on cost control, efficiency productivity, marketing choices etc. Importance of Dupiont Analysis Any decision affecting the product prices, per unit costs, volume or efficiency has an impact on the profit margin or turnover ratios. Similarly any decision affecting the amount and ratio of debt or equity used will affect the financial structure and the overall cost of capital of a company. Therefore, these financial concepts are very important to evaluate as every business is competing for limited capital resources. Understanding the interrelationships among the various ratios such as turnover ratios, leverage, and profitability ratios helps companies to put their money areas where the risk adjusted return is the maximum.

Siddhartha Sen

Roll Number: 581117638

3. Prepare Funds Flow statement from the following balance sheets and additional information.

Additional information 1. Provision for depreciation on P&M was RS40,000 o 31st March 1998 and Rs.45,000 on 31st March 1999 2. Machinery costing Rs.36000 (acc dep Rs12,000) was sold for Rs.20,000 3. Investment costing Rs.30000 were sold at a profit of 20% on cost 4. Tax of Rs.30000 were paid Ans:
Statement of changes in working capital 1998 current assets debtors stock BR bank total current liabilities creditors BP total working capital net decrease in WC 50000 80000 70000 40000 240000 50000 30000 80000 160000 1999 30000 90000 50000 30000 200000 60000 20000 80000 120000 40000 40000 incrase decrea se 20000 10000 20000 10000

10000 10000

Adjusted P\L a\c Goodwill w off Prelim exp w off 5000 2000 P\L AC Pft on invest sale 40000 f 6000

Siddhartha Sen Loss on sale f machine Transfer to reserve Prov for tax Prov for dep Prov for dep P\L AC

Roll Number: 581117638 4000 10000 40000 17000 40000 50000 173000 Fund operation from 122000

173000

Fund flow statement sources shares Sale f machine Sale f investment Fund from operation Decrease in WC

150000 20000 36000 122000 40000 368000

Application Redemption f deb Purchase f plant Purchase f land Purchase f investment Tax paid

50000 141000 9000 138000 30000 368000

4. The standard cost of a certain chemical mixture is: 35% Material A at Rs.25 per kg 65% Material B at Rs.36 per kg A standard loss of 5% is expected in production During a period there is used: 125kg of Material A at Rs.27 per kg and 275kg of Material B at Rs.34 per kg The actual output was 365 kg Calculate a. Material cost variance b. Material price variance c. Material mix variance d. Material yield variance Hint: Use net standard output (deduct the loss) Ans: The standard mix of product MS is as follows: Materials A B % of Material 35 65 Price/kg 25 36

Siddhartha Sen

Roll Number: 581117638

Actual production for a month was 365 kgs of MS. The standard loss in production is 5 % of input. So total Material consume 385kg. So actual cost is:
Materials % of Qty Price/kg Total cost Material A 35 385* 35% = 134.75 25 3368.75 B 65 385 * 65% = 36 9009 250.25 Total : 12377.75

Materials A B

Qty 125 275

Price/kg 27 34

Cost 3375 9350 Total: 12725

a. Material cost variance = Standard Cost Actual Cost = 12377.75 12725 = - 347.25 (Non Favorable) b. Material Price Variance = (Standard Price Actual Price) x Actual quantity used. MPV = (SP AP) AQ = (25 - 27) 125 = - 250 non fav. c. Material Mix Variance = Revised standard quantity for each material actual MMV Quantity for each material) x standard price. Where RSQ = standard quantity for each material / total of standard quantity of all types of materials x actual mix total RSQ = Total weight of actual mix / total weight of standard mix (x) standard quantity. RSQ = For A = 365 / 400 * 134.75 = 123 For B = 365/400 * 250.25 = 228 MMV for A = (123 125) * 27 = -54 For B = (228 275) * 34 = -1598 Total Mix variance = -54 1598 = -1652 non FAV

Siddhartha Sen

Roll Number: 581117638

d. Material Yield Variance MYV = (Standard yield Actual Yield) x standard rate per unit of output or (Standard Loss Actual Loss) A = (385 - 365) * 25 = 500 B = (385 - 365) * 36 = 720