Question

1a. If you were a Chief Financial Officer (CFO), please identify the five tools/techniques learned in management accounting that can be used in your company? Please also briefly explain why.

1b. The sales budget is provided below for the product of Company ABC.

Jan	10,000 units
Feb	40,000 units
Mar	50,000 units
Apr	60,000 units
May	40,000 units

1. Finished goods at the end of each month must be 20% of the next month’s budgeted sales.
2. On Dec 31 of the last year, the finished goods totaled 3,000 units.
3. The selling price is $1 per unit.
4. 70% of the credit sales are collected in the month of sale, 25% in the month following sale, and the remainder are uncollectible.

Prepare a budget showing the required production each month for January, February, March, and the quarter.

Prepare the cash collection for each month for January, February, March, and the quarter.

Answer 1

1 (a)
Five tools/techniques of Management Accounting:
1) Finanncial Planning: Financial Planning is most important and intial analysis as needed before starting
any business or product line. Under Financial Planning Predetermination of Cost, Revenue and quantitive
details plained and systematic estimation of the cost, revenue and other item is determined. It is very
important to find the required obejective of a company. A person never ever reach there, if he never
know that where he want to go! So Financial Modelling play the role to reach you there, where
you want to go.
2) Ration Analysis: Ratio Analysis is also very imporant to know the real condition of an entity by
computing various type of ratio and comparing the same with privous period or target firm.
Foe example by computing Current Ratio of an Entity if result is 1 then need to worry if last year
the same ratio was 2.
3) Financial Statement Analysis : Analysing financial statement of current period with prious year
in the way of growth percentage is called Horizental Analysis . There is another way of analysing by
computing percentage of each item of total or revenue is called as Vertical Analysis. This type of analysis
give chance to make new strategy to improve financial growth.
4) Cost Accounting : Using varous cost accounting tecchniques like analysing per unit cost with another
line item or prios year costing or targeted firm give way to control consting and wastage of resources.
5) Cash Flow Statement : Cash Flow Statement present scenario of cash activity changed during a particular
period. Operating Activity show what eaxctly cash operating in a business by way of revenue and changes in
working capital of an entity.
1 (b)
Production Budget	$
	January	February	March	Total of Quarter
Sale Unit	10,000	40,000	50,000	1,00,000
Add: Ending Inventory (20% of next month sale)	8,000	10,000	12,000	12,000
Less: Begnning Inventory	3,000	8,000	10,000	3,000
Production Required	15,000	42,000	52,000	1,09,000
* Ending inventory for March (60,000*20%) = $ 12,000
Cash Collectio Budget	$
	January	February	March	Total of Quarter
Sale Unit	10,000	40,000	50,000	1,00,000
Per unit sale Price	1	1	1	1
Sales Amount	10,000	40,000	50,000	1,00,000
Cash collection: 70 % in same month of sale	7,000	28,000	35,000	70,000
Cash collection: 25% in next month of sale	-	2,500	10,000	12,500
Total Monthly Collection	7,000	30,500	45,000	82,500
** 25 % collected in January could not be ascertain as sales detail for Dec is not give.