Page 187 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes 2. From the following table, prepare the common size statement analysis:

Particulars 2000 (`) 2001 (`)
Sales 20,00,000 24,00,000
Miscellaneous Income 20,000 16,000
20,20,000 24,16,000
Materials consumed 11,00,000 12,96,000
Wages 3,00,000 4,08,000
Factory expenses 2,00,000 2,16,000
Offi ce expenses 90,000 1,00,000
Interest 1,00,000 1,20,000
Depreciation 1,40,000 1,50,000
Profi t 90,000 1,26,000
20,20,000 24,16,000
3. A company has owner’s equity of ` 1,00,000. It has supplied the following accounting
ratios:
Current Debt to Total Debt = 0.40
Total Debt to Owner’s Equity = 0.60
Fixed Assets to Owner’s Equity = 0.60
Total Assets Turnover = 2 times
Inventory Turnover = 8 times

With the information given above, you are required to prepare a summarised Balance
Sheet of the company.
4. How is an available-for-sale investment recorded on the fi nancial statements?

5. Comment on the following statements:
(a) An increase in money sales should always be viewed favorably.

(b) The influence of price-level changes cannot be detected by using a comparative
statement.

(c) An expansion of plant, property, and equipment should be financed by sales of
capital stock.
(d) Intangible assets should be eliminated when the balance sheet is reconstructed for
analytical purposes.
(e) An increase in liabilities should be viewed with alarm.

6. Is the trend of total liabilities of significance in analyzing the financial condition of a

business? If so, what other trends should be used in connection therewith?
7. Write a report in which you list and discuss favorable and unfavorable fi nancial and
operating tendencies

8. Analysis shows that Zodiac Corporation incurred the following five-year gross margin and
cost histories in serving customer number 128.
Year 1 Year 2 Year 3 Year 4 Year 5
Gross Margin 602,000 638,000 636,000 652,000 670,000
Cost of engineering changes 6,600 12,120 7,000 7,200 80,250
Special packaging 66,200 73,360 82,600 78,100 80,400

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