Diploma in Islamic Banking Examination, April-2024

PART-II
204: Management Accounting

Answer to the question number 1 (b)

Mim Corporation
Income Statement based on Absorption Costing
For the year ended ……….
Sl.N Particulars Year-1 Year-2
o.
1 Revenue/sales (8,000X50) 4,00,000 4,00,000
2 Cost of Goods Sold:
3 Beginning Inventory - 64,000
4 Add: Cost of goods manufactured 200,000 120,000
5 Add: Fixed cost per year 120,000 120,000
6 Cost of Goods Available for Sale 320,000 304,000
(4+5)
7 Less: Ending Inventory 64,000 -
8 Cost of Goods Sold (6-7) 256,000 304,000
9 Gross profit/ Contribution 144,000 96,000
margin (1-8)
10 Less: Selling and Administrative
Costs
11 Variable Sales and Admin (8000 X 32,000 32,0000
4)
12 Fixed cost per year 70,000 70,000
13 Total Selling and Administrative 1,02,000 1,02,000
Costs (11+12)
14 Net profit/(loss) (9-13) 42,000 (6,000)

Working:

Ending inventory Calculation:

Variable Cost =2,000X20=40,000
Proportionate fixed cost/unit= 120,000/10,000=12;
Fixed Cost= 2,000*12=24,000
Ending Inventory= (2,000X20)+(2,000X12)=40,000+24,000=64,000
 Mim Corporation
Income Statement based on Variable Costing
For the year ended ……….
Sl.N Particulars Year-1 Year-2
o.
1 Revenue/sales (8,000X50) 4,00,000 4,00,000
2 Cost of Goods Sold:
3 Beginning Inventory - 40,000
4 Add: Cost of goods manufactured 2,00,000 1,20,000
5 Cost of Goods Available for Sale 2,00,000 1,60,000
(3+4)
6 Less: Ending Inventory 40,000 -
7 Cost of Goods Sold (5-6) 1,60,000 1,60,000
8 Gross profit/ Contribution 2,40,000 2,40,000
margin (1-7)
9 Less: Selling and Administrative
Costs
10 Variable Sales and Admin (8000 X 32,000 32,0000
4)
11 Fixed Expenses:
12 Fixed overhead cost 120,000 120,00
0
13 Fixed Selling and admin Costs 70,000 70,000
14 Total Selling and Administrative 2,22,000 2,22,000
Costs (10+12+13)
14 Net profit/(loss) (9-13) 18,000 18,000

Working:

Beginning inventory Calculation:

Variable Cost =2,000X20=40,000
Mim Corporation
Reconciliation
Particulars Year-1 Year-2
Net Profit under Variable Costing 18,000 18,000
Add: Ending Inventory (64,000-40,000) 24,000
Less: Beginning Inventory (24,000)
Net profit Under Absorption Costing 42,000 (6,000)
 Answer to the question 2(b)

Ratio Firm Industry Evaluation/Comments

Current Ratio 3.20 times 2.50 times A healthy current ratio is between
1.2 and 2. Firm position is better
than the industry potion higher. So
firm can easily meet firm short term
obligations. But excess liquidity
reduces profitability of the firm.
Acid Test Ratio 1.75 times 1.90 times It indicates that the firm maintains
lower inventory than industry which
might put pressure on cash
management. Ideally, a business
should have an acid-test ratio of at
least 1:1.
Debt to Assets 23% 33% It is a leverage ratio that defines how much
debt a company carries compared to the
value of the assets it owns. Here Firm
ration is lower than Industry. So it indicates
that firm position is better than industry.
Inventory 8.7 times 5.5 times Inventory turnover is the rate that
Turnover inventory stock is sold, or used, and
replaced. A higher ratio tends to point to
strong sales and a lower one to weak sales.
It indicates that the company maintains
huge inventories
Average 33 days 40 days The average collection period refers to the
Collection length of time a business needs to collect
Period its accounts receivables. A low average
collection period indicates that an
organization collects payments faster.
Net Profit 3.80% 3.50% Net profit margin is one of the most
Margin important indicators of a company's overall
financial health. Here, Firm net profit
margin is better than Industry.
Return on 11.50% 9.75% Return on investment (ROI) is an
Investment approximate measure of an investment's
profitability. Firm ROI is higher than
Industry.
 Answer to the question 3(b)

XYZ Corporation
Cash Budget
For the month of March 2024

January Feb March

Cash balance 2,000 4,580 6,590
A Receipt
Sales Revenue 3,080 2,010 360
A Total receipt 5,080 6,590 6,950
Payment
Purchase 2,500
B S&A 250
Equipment 200
Dividend 300
B Total 500 - 2,750
(A-B) Closing Cash 4,580 6,590 4,200

Working

Collection of Sale Revenue

Credit Sales November December January February March
November 2,000 200 1,400 300
December 2,200 220 1,540 330
January 2,400 240 1,680 360
Cash Sales 800 900 1,000
Total 6,600 1,000 2,520 3,080 2,010 360
 Answer to the question 5(b)

5.b.i)
mn
We Know, FVn= PV0 (1+ [i/m])

3 Months MTDR @8.00%

FV3= PV0 (1+ [0.06/4]) 4*3 [Future Value after 3 Years (considering 3 months MTDR with Auto Reneal Basis)]
4*3
FV3= 100,000 (1+ [0.08/4])
FV3= 126,824

6 Months MTDR @8.25%

FV3= PV0 (1+ [0.0825/2]) 2*3 [Future Value after 3 Years (considering 6 months MTDR with Auto Reneal Basis)]
2*3
FV3= 100,000 (1+ [0.0825/2])
FV3= 127,760

12 Months MTDR @8.50%

FV3= PV0 (1+ [0.0850/1]) 1*3 [Future Value after 3 Years (considering 12 months MTDR with Auto Reneal Basis)]
1*3
FV3= 100,000 (1+ [0.0850/1])
FV3= 128,702

5.b.ii)

Effective Annual Interest Rate= (1+ [i/m]) m-1

1) EAIR (Quarterly)= (1+ [i/m]) m-1

4
= (1+ [0.08/4]) -1
= 8.24%

2) EAIR (Semi Annually))= (1+ [i/m]) m-1

2
= (1+ [0.0825/2]) -1
= 8.51%

3) EAIR (Yearly)= (1+ [i/1]) 1-1

1
= (1+ [0.085/1]) -1
= 8.77%
5.C

We are given:
Principal Amount 1,000,000
Year 5
Rate of Return 12% Interest factor 3.60
Monthly Installment 20,758
Yearly Installment 277,410

Answer to the question 6(b)

Depriciation =(80,000-10,000)/5= Tk. 14,000 Per Year

Cash flows Earning Earning Net Cash Cumulative PV of NCB PV of NCB
At the end of Depriciatio PVIF PVIF @12%
before taxes Before Tax Tax @ 50% (5) After Tax Benefit Cash Benefit @10% @15%
Year (t) (1) n (3) @10% (9) (11)
(CFBT) (2) (4=2-3) (6=4-5) (7=6+3) (8) (10=7*9) (12=7*11)
1 100,000 80,000 20,000 10,000 10,000 90,000 90,000 0.90909 81,818 0.86957 78,261
2 100,000 80,000 20,000 10,000 10,000 90,000 180,000 0.82645 74,381 0.95614 86,053
3 150,000 80,000 70,000 35,000 35,000 115,000 295,000 0.75131 86,401 0.65752 75,615
4 150,000 80,000 70,000 35,000 35,000 115,000 410,000 0.68301 78,546 0.57175 65,751
5 250,000 80,000 170,000 85,000 85,000 165,000 575,000 0.62092 102,452 0.49718 82,035
5 (Salvage
0
Value) - 0.62092 - 0.43233 -
Total EAT 175,000 PV of Cash Inflow 423,597 387,715
Average EAT 35,000 Intial Investment 400,000 400,000
NPV 23,597 (12,285)
i.

Payback Period=3 Years+(4,00,000-2,95,000)/1,15,000 Years=3.91 Years

Average Rate of Return=Average Earning/Initial Investment=35,000/4,00,000=0.0.0875=8.75%

NPV=PV of Cash Inflow-Initial Investment=(Tk.4,23,597-4,00,000)=Tk.23,597

IRR=0.10+[23,597/(23,597+12285)]*(0.15-0.10)
IRR=13.29%

ii)
Acceptability of the Project: Project is accepted as the NPV is Positive
 Answer to the question7 (b)

i.

We are Given,
D1= Dividend of the Next Year= Tk.5 Per Share
G=Growth Rate=5%
P=Current Share Price=Tk.120
Tax Rate=40%

We Know,
Cost of Ordinary Share (Ke)=(D1/P)+G [Dividend Growth Model]
Ke=(5/120)+0.05
Ke=(5/120)+0.05=.0917=9.17%

Cost of 12% Preferred Stock (Kp)=12% (Given)

Calculation of WACC
Source of Capital Existing Amount Weight Cost Weighted Cost
Ordinary Share Capital 300,000 0.600 0.0917 0.05502
12% Preference shares 100,000 0.200 0.1200 0.02400
10% Bond 100,000 0.200 0.0600 0.01200
Total 500,000 1.000 WACC 0.09102
WACC 9.102%

ii.
Revised Cost of Ordinary Share (Ke)=(D1/P)+G [Dividend Growth Model]
Ke=(6/115)+0.05 [D1 will be Tk.6 Per Share and Market Price will be Tk.115]
Ke=0.10217=10.22%

Cost of 14% Bond (Kd)=(Given Rate*(1-Tax Rate)= 0.14(1-0.40)=0.084=8.40%

Calculation of WACC (Revised Capital Structure)

Source of Capital Amount Weight Cost Weighted Cost
Ordinary Share Capital 300,000 0.43 0.1022 0.0438
12% Preference shares 100,000 0.14 0.1200 0.0171
10% Bond 100,000 0.14 0.0600 0.0086
14% Bond 200,000 0.29 0.0840 0.0240
Total 700,000 1.00 WACC 0.0935
WACC 9.35%

Therefore, Marginal Weighted Average Cost of Capital=WACC(Revised Capital Structure)-WACC(Previous Capital Structure)
= 9.35%-9.102%
0.25%
 Diploma in Islamic Banking Examination, November 2024
204: Management Accounting and Financial Management

Answer to the question 1 (C)

Variable cost Tk. (70+6+4) = Tk.80
Fixed Cost: Tk.1,20,000
Selling price per unit: Tk.100
Contribution margin = (Sales Price - Variable cost)

= Tk.(100-80)
= Tk. 20
Requirements:
i) Calculate Break-Even Point in quantity and amount.
Break-Even Point (Units) = Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)

= 1,20,000/20 units
= 6,000 units
Break-even Sales = Total Fixed Costs / (Contribution Margin) Contribution Margin = 1 - (Variable
Costs / Revenues)

Break-Even Sales (Volume)=Fixed Cost/CM Ratio

CM Ratio = CM Per Unit/Sales Per Unit
= 1- (80/100)
= 0.20
= 20%
Break-Even Sales (Volume) = 1,20,000/0.20
= Tk.6,00,000
ii) Find out the sales level in units required for earning an annual profit of
Tk.130,000 before tax

Sales Volume to earn a Profit of Tk. 130,000 Before Tax

= (Fixed Cost + Desired Profit)/CM Ratio
= (120,000+130,000)/0.20
=Tk. 12,50, 000
 Answer to the question 2 (b)
Collection from credit sales/debtors
Credit sales Oct'23 Nov'23 Dec'23 Total
2,000 Oct'23 200 1,400 300 1,900
2,200 Nov'23 220 1,540 1,760
2,400 Dec'23 240 240
6,600 0 200 1,620 2,080 3,900

Cash Budget for XXX company

Particulars Oct'23 Nov'23 Dec'23
Opening cash balance 1,000 1,000 1,000
A. Receipts
cash Sales 700 750 800
Collection from credit sales/debtors 200 1,620 2,080
Investment taken from Bank 370
Total 1,900 3,370 4,250
B. Payments
Purchase 2,500
Selling & Administration cost 250
Equipment 200
Cash Divident 300
Investment to be made 900 2,370
Total 900 2,370 3,250
Surplus (A-B) 1,000 1,000 1,000
 Answer to the question 3 (b)
Particulars Amount Amount
Raw Material used 50,000
Direct wages (1200 hours @25) 30,000
Direct Expense 60,000
Prime cost 140,000
Factory Overhead cost
Add: Factory Indirect materials 50,000
Less:. Factory Lobour 80,000
Add: Opening work in Process 45,000
Less:. Ending Work in process 50,000
Factory or work cost 265,000
Administrative expense
Add: Fixed 50,000
Less:. Variable 14,000
64,000
Production cost 329,000
Add: Opeining finished goods 120,000
Less:. Ending Finished goods 70,000
Cost of Goods Sold 379,000
Selling expense
Fixed 30,000
Variable 75,000
105,000
Profit 16,000
Sales 500,000
 Answer to the question 4(C)

i)
Current Assets
Current Ratio=
Current Liabilities times

Current assets Stock in Trade + Sundry debtors + Cash & Bank Balance
95,000+1,00,000+5,000
2,00,000

Current Liabilites= Bank Overdraft + Sundry Creditors

10,000+70,000
80,000

200000
Current Ratio=
80000

2.5 times
Ideal 2:1 \
Current Assets -Stock in Trade
Liquid Ratio= times
Current Liabilities

2,00,000-95,000
Liquid Ratio= times
80,000

1,05,000
times
80,000

1.31 times

Credit period Avg debtor* days /Months

allowed to Net credit sales

100000*12
620,000

17.14 Months

Stock Turnover COGS

ratio Avg Investory

COGS 550,000
Avg Investory 95,000
5.79 time
 Answer to the question 5(b)

Flat Value 7,500,000

Down Pmt 2,500,000
Bank Investment 5,000,000
Bank Rate (4/12) 0.0033
Duration 240

Interest factor 165

Monthly Installment 30,299

Answer to the question 5(C)

Scholarship amount 15,000

No of student 100
Total Scholarship amount 1,500,000
Duration 5
RR 0.10

RR factor 4
Amount required 5,686,180
 Answer to the question 6(C)

Given information
Price of C/S 120
Current Dividen (Do) 5
Growth 0.05
Expected Dividend (D1) 5.25
Cost of C/s 0.09375
Cost of Preferred stock 0.12
Cost of debt 0.1
Tax Rate 0.35
Cost of debt after tax 0.065
Particulars Amount Weight Cost Weighted cost
Common Stock 400,000 0.6667 0.0938 0.0625
Preferred stock 100,000 0.1667 0.1200 0.0200
Debt 100,000 0.1667 0.0650 0.0108
Total 600,000 1.0000 0.0933
WACC 9.3333
 Answer to the question 6(C)

Year Cash Flow PVIF@15% PV

0 (500,000) 1.0000 (500,000)
1 200,000 0.8750 175,000
2 200,000 0.7560 151,200
3 250,000 0.6580 164,500
4 250,000 0.5720 143,000
5 150,000 0.4970 74,550
5 50,000 0.4970 24,850
NPV 233,100

Positive NPV

Payback= 2+ 100000/250000 2.4 years