Role of Management Accounting with math

Q. Explain the role of Management Accounting in a bank (November 2011).
Or. Management Accounting is beneficial for banking operation - comments with the example.

1. Collection, Classification, Analysis and Presentation of Financial data
2. Systematic and reliable planning
3. Ascertainment, Reduction and Control of cost 

4. Product Pricing
5. Measurement of work performance
6. Preparation of statement of cost and other necessary statement
7. Preparation of Master Plan of Development of Industry
8. Role of Financial Management in Industry 9. Forward looking
10. Efficiency Analysis
11. Helping in decision making

Problem: A pro forma cost sheet of a company provides the following data:

Estimated cost per unit of production is:

Costs per unit	Taka
Raw materials	52.00
Direct labor	19.50
Overheads	39.00
Total cost per unit	110.50
Profits	19.50
Selling price	130.00

The following is the additional information available:

Average raw materials and finished goods in stock	One month
Average materials in process	Half a month
Credit allowed by supplier	One month
Credit allowed by debtor	Two month
Time lag in payment of wages	One and half month
Overheads	One month
Cash balance I expected	Tk.1,20,000
One forth of the sales are on cash basis

You are required to prepare a statement showing the working capital needed to finance a level of activity of 70,000 units of output. You may assume that production is carried on evenly throughout the year (52 weeks) and wages and overheads accrue similarly.

Solution:

Estimation of working capital requirements:

(A) Investment in Inventory
(i) Investment in Raw materials = RM consumption * RM consumption period/No. of weeks (ii) Investment in WIP=Cost of goods sold*WIP consumption period /No. of weeks (iii) Investment in finished goods=cost of production* FG consumption period/No. of weeks	(52*70,000*4)          52 (110.5*70,000*2)          52 (110.5*70,000*4)          52	2,80,000 2,97,500 5,95,000
Total Inventory Investment (i+ii+iii)		11,72,500
(B) Investment in debtors= (Credit sale at cost*8)/No. of weeks	(130*70,000*0.75*8)          52	10,50,000
(C) Cash Balance required		1,20,000
(D) Total investment in current assets (A+B+C)		23,42,500
(E) Current Liabilities
(i) Creditors= (Purchase of RM*CP)/No. of week (ii) Deffered wages= Labor cost*CP)/ No. of week (iii) Deferred overheads	(52*70,000*4)          52 (19.5*70,000*1.5)          52 (39*70,000*4)          52	2,80,000 39,375 2,10,000
(E) Total Current Liabilities (i+ii+iii)		5,29,375
(F) Net working capital requirements (D-E)                           18,13,125

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