Problem-1 : Bely CVP –02( 2015)

The Paradise Company is the exclusive distributor for an automotive product.

The product sells for Tk.50 per unit and has a CM ratio 40%. The
company’s fixed expenses are Tk.3,00,000 per year.
Required:
i. What is the variable expenses per unit ?
ii. What is the break – even point in units and sales taka ?
iii. What sales level in units and in sales taka is required to earn annual
profit of Tk. 90,000 ?
iv. Assume that by using efficiency and technology, the company is able
to reduce its variable expenses by Tk. 5 per unit. What is the
company’s new break- even point in units and sales taka ?

Problem-2 - Kamini- CVP 03 (2015)

The following data are obtained from the records of a factory.

Selling price per unit Tk. 40

Variable Manufacturing cost per unit Tk. 22
Variable selling cost per unit Tk. 3
Fixed factory overhead Tk. 1,60,000
Fixed selling cost Tk. 20,000

Calculate :

i) Break-even- point expressed in units and taka.

ii) Number of units that must be sold to earn a profit of Tk .1,20,000.

iii). How many units are to be sold to earn a net income of 15% on
sales.
Iv . Number of units to be sold to earn a target profit of Tk.1,08,000
after tax , assume tax rate 50% .
 Formula for B/E Analisis
Contribution = Selling Price – Variable Cost

Contribution = Fixed cost + profit

Contribution = Sales x P/ V Ratio/ or C/M Ratio

Sales - Variable cost = Fixed cost + profit

Fixed Cost = Contribution – Profit

Profit / Volume Ratio = x 100

( P/V Ratio)
or P/V Ratio = x 100

0r P/V Ratio = Fixed costs ÷ Break-even point

or P/V Ratio = Change in Contribution Change

in sales

or P/V Ratio = Change in ProfitChange in sales

or P/V Ratio =ProfitMargin of safety ratio

Break – even Point (Units) = Fixed cost Controbution per

unit
Break-even point (Tk) = Fixed costs
P/ V Ratio

Variable cost = Fixed cost - profit

or Variable cost = Sales x ( 1 - P/V Ratio )

or Variable cost = Sales x ( 100 - P/V Ratio % )

Profit = Contribution – Fixed Cost

Profit = (Sales x P/V Ratio ) - Fixed cost

or Profit = P/V ratio x Margin of safety

Margin of safety = Total sales - B/E sales

or, Margin of safety = ProfitPV Ratio

Problem - Surma. CVP analysis ( October -2010 )

In a company, current sales, margin of safety and contribution margin

ratio are Tk. 1,20,000 , 40% and 30% respectively. The company expects
that next year’s fixed cost and sales price will increase. As a result, the
margin of safety and contribution ratio will changed to 35% and 40%
respectably.

You are required to determine the current break-even sales , the amount
of current profit, and the break-even sales of next year.

Problem -Atrai CVP analysis ( April- 2012)

Current sales revenue , margin of safety (M/S) ratio and contribution

margin(C/M) ratio of a company are Tk. 1,50,000 , 3313 % and 30%
respectively. The company expects that next year’s fixed cost and sales
price will increase. As a result, the margin of safety and contribution
ratio will changed to 50 % . You are required to determine

i. break-even sales for the current and next year.

ii. profit for the current and next years; and

iii. the amount of expected increase of fixed cost in next year.

Problem – Karatoa : CVP analysis (September 2014)

 From the following information of Muttaqui Ltd. , calculate:
i. P/V ratio
ii. Break- even - point in units and Taka
iii. Number of units that must be sold to earn a net income of 15% of
Break – even sales
Particulars Tk.
Selling price (per unit) 20.00
Variable cost per unit
i. Raw Materials 11.00
ii Others 1.50
Fixed Cost :
i. General and Admnistration. 80,000
ii. Selling and Distribution 10,000

Problem – Padma : The Reliance company furnishes you the following

information
First half Second half
Sales Tk 8,10,000 Tk.10,28,000
Profit earned Tk. 21,800 Tk. 64,800
From the above you are required to compute the following assuming that
the fixed cost remains the same in both the periods.
(1) P/V ratio
(2) Fixed Cost
(3) The amount of profit or loss where sales are Tk. 6,48,000
(4) The amount of sales required to earn a profit of Tk. 1,08,000.
Problem: – CVP Zmuna

The following data are obtained from the records of a

Manufacturing Company.

Tk Tk.
Sales 4,000 units@ Tk. 25 each - 1,00,000
Materials consumed 40,000 -
Variable overheads 10,000 -
Labour 20,000 -
Fixed overheads 18,000 -
Net profit - 88,000

Calculate :
i. The number of unite by selling which the company will neither
loss nor gain anything
 ii. The sales needed to earn a profit of 20% on sales.
iii. The extra units which should be sold to obtain the present profit if
it is proposed to reduce the selling price by 20%.
iv. The selling price to be fixed to bring down its break –even- point
to 500 units under present condition.

Problem : CVP - Meghna

The following data are obtained from the records of a factory.
Selling price per unit Tk. 40
Variable Manufacturing cost per Tk. 22
unit
Variable selling cost per unit Tk. 3
Fixed factory overhead Tk. 1,60,000
Fixed selling cost Tk. 20,000

Calculate :
i) Break-even- point expressed in units and taka.
ii) Number of units that must be sold to earn a profit of Tk.1,20,000.
iii. How many units are to be sold to earn a net income of 15% on
 sales.
iV. Number of units to be sold to earn a target profit of Tk.1,05,000
after tax , assume tax rate 50% .

Problem – CVP ( kazali )

From the following data , calculate
1. P/V Ratio
2. Profit when sales are Tk.20,000
3. New break-even- point if selling price is reduced by20%

Fixed Expenses Tk. 4,000

Break-even- point Tk. 10,000
Problem – Titas CVP
Shoel Trading Company furnishes you the following information
relating to the half year ended 30,June, 2014
Fixed cost Tk. 2,50,000
Sales volume Tk. 8,00,000
Profit Tk. 1,50,000
During the second half of the same year the company has projected a
loss of TK.50,000.
Calculate :
i. P/V ratio, BEP and Margin of Safety for six month ending June ,
2014
ii. Expected sales volume for the second half of the year assuming
that selling price and fixed costs remained unchanged in the second
half year also .
iii. The Break-Even-Point , Margin of Safety for the whole year 2014.
 COST VOLUME PROFIT ANALYSIS

Cost-volume-profit analysis is a managerial accounting technique

used to analyze how changes in cost and sales volume affect changes
in a company's profit. The technique is widely used in business and
has many advantages. Cost Volume Profit (CVP) Analysis is an important
tool of profit planning. Cost volume profit analysis helps the management in
profit planning.

The analytical technique used to study the behavior of profit in response to

the changes in volume , cost and prices is called the Cost – Volume –
profit(CVP) analysis.

Because CVP analysis helps managers understanding the interrelationship

among cost, volume and profit , it is a vital tool in many business decision.
These decisions include , for example , what products to manufacture or sell,
what pricing policy to follow, what marketing strategy to follow and what type
of productive facilities to acquire.

Advantages or objectives of cost volume profit analysis

a. Profit planning

b. Maintaining a desired level of profit

c. Preparing flexible sales and production cost budgets

d. Fixation of selling price

e. Selection of a profitable product Mix

f. Introduction of a new product

g. Closure of a department or discontinuing of a product

h. Choice of technique

i. Level of activity planning

j. Decision making

k. Evaluation of performance

Assumptions in CVP analysis

• The behavior of both costs and revenues is linear throughout the
relevant range of the activity index.
• All costs can be classified with reasonable accuracy as either
variable or fixed .
• Changes in the activity are the only factors that affect costs.
• All units produced are sold.
• Selling price remains the same at different level of activity
• There is no change in the product mix
• There is no change in the level of efficiency
• Policies of management do not change
• As the number of units produced and sold are the same , there is no
closing or opening stock

Break-Even Analysis
Break­even point is the level of sales at which profit is zero. At break even point 
total sales are equal to total cost (variable + fixed).

. It can be expressed either in sales units or Sales Taka amount.

 - The process of finding the break- even point is called break-
even analysis

Advantages of Break-even - analysis:

Following are some of the main advantages of break even analysis:
1. It explains the relationship between cost, production, volume and
returns.
2. It can be extended to show how changes in fixed cost, variable cost,
commodity prices, revenues will effect profit levels and break even
points. Break even analysis is most useful when used with partial
budgeting, capital budgeting techniques.
3. The major benefits to use break even analysis is that it indicates the
lowest amount of business activity necessary to prevent losses.
Limitations:
Break even analysis is best suited to the analysis of one product at a
time. It may be difficult to classify a cost as all variable or all fixed; and
there may be a tendency to continue to use a break even analysis after
the cost and income functions have changed.
Three appraoches to “break –even analysis”
1. Contribution Margin Approach ,
2. Equation technique
 3. Graphic presentation: Break-even chart
Contribution Margin: The excess of unit selling price over unit
variable cost is called Contribution Margin. Suppose, Unit selling price
Tk. 500 and Unit variable cost Tk300, now Contribution Margin pet unit
is –
Unit selling price – Unit Variable cost = Unit Contribution Margin

= Tk 500 - Tk 300 = Tk 200

Under this method total fixed cost is divided by unit contribution margin. The
resulting figure is number of units to be sold to break-even (no profit, no loss).

Example:
We can use the following data to calculate break-even point.

• Sales price per unit = TK.500

• variable cost per unit = Tk.300

• Total fixed expenses = TK.70,000

Required: Calculate break-even point using contribution margin method.

Solution: Break-even point in units = Fixed expenses / Unit contribution margin

Tk.70,000 / TK.200*

350 Units
*TK.500 (Sales) – Tk 300 (Variable exp.)

Break even point in sales:

350 Units × Tk.500 Per unit

= Tk.1,75,000
Equation method and contribution margin methods are equivalent.
Contribution margin method is actually a shortcut conversion of
equation method.
2 . Equation Method:

Profit = Sales - (Variable expenses + Fixed expenses)

or

Sales = Variable expenses + Fixed expenses + Profit

When break-even point is calculated using above equation profit is taken as zero
because break-even is that level of sales where sales are equal to total cost
(variable + fixed) and profit is zero.

Example:
We can use the following data to calculate break-even point.

• Sales price per unit = Tk. 500

• variable cost per unit = Tk. 300

• Total fixed expenses = Tk. 70,000

Required: Calculate break-even point using equation method.

Solution:

Sales = Variable expenses + Fixed expenses + Profit

Tk.500 Q* = Tk.300 Q* + Tk.70,000 + Tk.0**

Tk.200 Q = Tk.70,000

Q = Tk.70,000 ÷ Tk.200

Q = 350 Units
3. Break-Even- Chart . The technique of break-even-analysis can be
easy with the help of a graph. Graphical representation of break-even-
point (cost volume profit) is known as the break-even chart. The chart
shows the amount of fixed, variable costs and the sales revenue at
different volumes of operation. The chart is also used for determining
the break-even-point. The break-even-point indicates the volume of
activity where revenue exactly equals total costs, both fixed and
variable. Thus , it indicates the sales volume at which operations ‘break-
even’. At sales level below the break-even –point operations will result
in a loss and above the point they will contribute profits.
3. Margin of Safety: The excess of actual sales over the break
-even sales is called Margin of safety .The margin of safety is another
relationship that may be calculated from CVP analysis.CVP analysis also
help managers assess risk by providing a measure of the margin of
safety. It shows how far sales can fall below the planned level of sales
before loss occur. It compares the level of planned sales with the break-
even point. The larger the margin of safety, the less likely it is that the
company will have an operating loss, that is, operate below break-\even
point. A small margin of safety indicate a more risky situation.
- Margin of Safety Ratio = Actual sales - Break-even sales
Actual sales
- Symbolically, M/S ratio = (AS – BES) ÷ AS

Variable and Fixed cost

• Variable cost: Variable costs are costs that vary in total directly
and proportionately with changes in the activity level. If the level
increase by 5% , total variable costs will increase 5%. If the level
of activity decreases by 20% , variable costs will decrease 20%. A
variable cost may also be defined as a cost that remains the same
per unit at every level of activity.

• Fixed costs: Fixed costs are costs that remain the same in total
regardless of changes in the activity level. As total fixed costs
remain constant as activity changes, it follows that fixed costs per
unit vary inversely with activity. As volume increases, unit cost
declines and vice versa.
Questions:
1. a) What is break even point?
b) Discuss three approaches to break even analysis. (Sep- 2014)
2. Explain the term, Cost- Volume- Profit Analysis, Contribution

Margin and the Margin of safety (March -2014 )

3. a. What is Margin of safety?

b. What is Contribution Margin ? ( June- July 2013)

4 . What is cost volume profit (CVP) analysis ? Discuss how CVP

analysis helps in preparing a practical based profit plan in an

enterprise like a commercial bank. ( April -2012 ) ( Oct. -2010)

5. a) Identify two uses of CVP analysis and explain their significance

in management.

b) What are the assumptions that underline each CVP application?

( April – 2011 )

6. Explain the break- even- point with a graph. Discuss its utility in

Decision making phenomena of a bank.

 Management Accounting, Financial Accounting and Cost Accounting
(Definition, Objectives and Comparison)

Management accounting is a field of accounting that analyzes and provides cost information to
the internal management for the purposes of planning, controlling and decision making.
Management accounting refers to accounting information developed for managers within an
organization.
Management Accounting is the process of analysis, interpretation and presentation of accounting
information collected with the help of financial accounting and cost accounting, in order to assist
management in the process of decision making, creation of policy and day to day operation of an
organization. Thus, it is clear from the above that the management accounting is based on
financial accounting and cost accounting.
CIMA (Chartered Institute of Management Accountants) defines Management accounting as
“Management Accounting is the process of identification, measurement, accumulation, analysis,
preparation, interpretation, and communication of information that used by management to plan,
evaluate, and control within an entity and to assure appropriate use of an accountability for its
resources”. This is the phase of accounting concerned with providing information to managers
for use in planning and controlling operations and in decision making.
Objectives of Management Accounting:

1) Planning: The success of any business depends upon the proper planning. Planning also
involves foreseeing the problem of arranging adequate funds or resources to implement the
various plans. It can render valuable information as to what should be the cheapest source in
terms of cost involved.

2) Organizing: By following various techniques of it, each department of the organization can be
examined separately. It helps the management in performing this function by assigning specific
responsibilities to different people.

3) Controlling: Management Accounting helps the managements in controlling the performance

of the business. The actual results are compared to plan objectives. Budgetary control, cost
variance, and interpretation of financial statements are helpful in this direction.

4) Decision making: Decision-making is a very important function of management among all the
functions of the management, It can be very helpful in this regard. Under this function, to
management finds various alternatives, which should yield maximum profit. Marginal Costing,
Break-even analysis etc. can help to the managements in this regard.
5) Time saving: It is concerned with the analysis and interpretation of financial statements. It
selects only that information, which is useful to managements and hence save the time of the
managements.
6) Measuring performance: Management accounting measures two types of performance. First is
employee performance and the second is efficiency measurement. The actual performance is
measured with the standardized performance and a report of deviation from the standard
performance is reported to the management for the effective decision making and also to indicate
the effectiveness of the methods in use. Both types of performance management are used to
make corrective actions in order to improve performance.

7) Assess Risk: The aim of management accounting is to assess risk in order to minimize risk.

8) Allocation of Resources: is an important objective of Management Accounting.

9) Presentation of various financial statements to the Management.
Financial Accounting is the process of recording, summarizing and reporting the myriad (a
countless or extremely great number of people or things) of transactions from a business, so as to
provide an accurate picture of its financial position and performance. The primary objective of
financial accounting is the preparation of financial statements - including the balance sheet,
income statement and cash flow statement - that encapsulates the company's operating
performance over a particular period, and financial position at a specific point in time. These
statements - which are generally prepared quarterly and annually, and in accordance with
Generally Accepted Accounting Principles (GAAP) or International Financial Reporting
Standards (IFRS) - are aimed at external parties including investors, creditors, regulators and tax
authorities.
Objectives of Financial Accounting:
The purpose of accounting can be summarized in the following manner:
1. Ascertain the results of operations during a period
2. Ascertain the financial position.
3. Maintaining a control over assets
4. Planning in respect of cash
5. Providing information to tax authorities and other government agencies.
6. To properly match income with expenses.
7. To provide a reliable set of data with which to prepare financial reports for analysis purposes
(for owners, lenders, investors, etc).
8. To provide a reliable set of data with which to report income for tax purposes.
Difference Between Financial Accounting and Management
Accounting
Financial accounting is concerned with providing information to stockholders, creditors, and
others who are outside an organization. Managerial accounting provides the essential data with
which organizations are actually run. Financial accounting provides the scorecard by which a
company’s past performance is judged. In contrast, management accounting is concerned with
providing information to managers i.e. people inside an organization who direct and control its
operations.
The differences between Financial Accounting and Management Accounting are given below:

Financial Accounting
Management Accounting
External vs. Internal
A financial accounting system produces information that is used by parties external to the
organization, such as shareholders, bank and creditors.
A management accounting system produces information that is used within an organization, by
managers and employees.
Segment reporting
Pertains to the entire organization or materially significant business units.
May pertain to smaller business units or individual departments, in addition to the entire
organization.
Focus
Financial accounting focuses on history.
Management accounting focuses on future & present.
Format
Financial accounts are supposed to be in accordance with a specific format, so that financial
accounts of different organizations can be easily compared. (Formal recordkeeping)
No specific format is designed for management accounting systems. (Formal and informal
recordkeeping)
Planning and control
Financial accounting helps in making investment decisions, and in credit rating.
Management accounting helps management to record, plan and control activities to aid decision-
making process.
Information
Quantitative and monetary
Quantitative and qualitative; Monetary and non-monetary
Users
Financial accounting reports are primarily used by external users, such as shareholders, bank and
creditors.
Management accounting reports are exclusively used by internal users viz. managers and
employees.
Reporting frequency and duration
Well-defined - annually, semi-annually, quarterly. (Verifiable)
As needed - daily, weekly, monthly.
Optional
Preparing financial accounting reports are mandatory especially for limited companies.
There are no legal requirements to prepare reports on management accounting.
Objectives
The main objectives of financial accounting are :i) to disclose the end results of the business, and
ii) to depict the financial condition of the business on a particular date.
The main objectives of Management Accounting are to help management by providing
information that used by management to plan, evaluate, and control.
Objectives
The main objectives of financial accounting are :i) to disclose the end results of the business, and
ii) to depict the financial condition of the business on a particular date.
The main objectives of Management Accounting are to help management by providing
information that used by management to plan, evaluate, and control.
Legal/rules
Drafted according to GAAP - General Accepted Accounting Procedure or International Financial
Reporting Standards.
Drafted according to management suitability.
Accounting process
Follows a full process of recording, classifying, and summarizing for the purpose of analysis and
interpretation of the financial information.
Cost accounts are not preserved under Management Accounting. The necessary data from
financial statements and cost ledgers are analyzed.

Cost Accounting is a type of accounting process that aims to capture a

company's costs of production by assessing the input costs of each step
of production as well as fixed costs such as depreciation of capital
equipment. Cost accounting will first measure and record these costs
individually, then compare input results to output or actual results to aid
company management in measuring financial performance.

While cost accounting is often used within a company to aid in decision

making, financial accounting is what the outside investor community
typically sees. Financial accounting is a different representation of costs
and financial performance that includes a company's assets and
liabilities. Cost accounting can be most beneficial as a tool for
management in budgeting and in setting up cost control programs, which
can improve net margins for the company in the future.
Is Financial accounting cost accounting?

Cost accounting is usually involved with management accounting.

Financial accounting tends to deal with the past and presents information
like statements for public and private use. Management accountants are
involved with the budgeting and costing sides of things and present
information only for the sole users of the business, so only internal uses
like management, shareholders etc.
Financial accounting refers to the branch that prepared financial reports
(known as financial statements) that are for general use. Primarily
however, they are prepared for external users (owners, investors,
government, suppliers, creditors). The goal of financial accounting is to
provide financial statements that follow generally accepted accounting standards or
GAAP. Cost accounting is the branch that focuses on manufacturing costs,
i.e. direct materials, direct labor, and factory overhead. It is often
considered part of management accounting, the branch that provides
information for internal purposes and focuses on helping management
make decisions instead of strictly complying with GAAP. Cost
accounting deals with manufacturing concerns.

OBJECTIVES OF COST ACCOUNTING

The main objectives of cost accounting are:

1. To determine the cost of a product, process or service
2. To analyse, classify and record all expenditures with respect to the
cost of product, process or service in order to determine its cost
3. To provide necessary information to the management in time
4. To provide data needed for periodical preparation of profit and loss
account and balance sheets
 5. To serve as a guide by providing actual data for comparison
6. To facilitate price fixation and offering quotations
7. To assist budgetary control
8. To assist cost control and cost reduction
9. To record the relative production results in each unit of plant to
examine efficiency
10. To provide the basis for production planning and for avoiding
wastages of materials and stores
11. To provide data for different periods and various volumes of output
for effective planning and future expansion of business
12. To provide the basis for making decisions such as:
1. To shut down or operate
2. To make or buy
3. To continue with existing plant/machinery or to replace it
4. To determine cost–volume–profit relationship
!3.To assist the management in devising suitable policy decisions in
other key areas

Difference between Cost Accounting and Management Accounting:

Though Management accounting uses the tools of cost accounting like
standard costing, marginal costing etc. and many people think that both
cost and management accounting are same which is not the case because
there are many differences between the two, here are some of them –
 Cost Accounting
Management Accounting
Objectives
The main objectives of Cost accounting are the ascertainment of cost, cost control and cost
analysis.
The main objectives of Management Accounting are to help management at all level so that
productivity and efficiency can be improved through planning, improved decision making and
more effective control.
Recording Of Data
It records available cost data by operating a cost recording systems. When this information is
available it is ofter compared with an estimated, budgeted cost.
It uses both cost and financial information to advise management in planning and controlling the
organization.
Concern
Cost accounting focuses on current years activities.
Management accounting is concerned with short range and long range planning.
Approach
Cost accounting is mostly historical in its approach and it projects the past.
Management accounting is futuristic in its approach. It is more predictive in nature than cost
accounting.
Area of Operation
Cost accounting operates in restricted areas .
Management accounting has almost an unrestricted area operation since it is concern with the
system as a whole and the overall vitality of the organization.
Area of Operation
Cost accounting operates in restricted areas .
Management accounting has almost an unrestricted area operation since it is concern with the
system as a whole and the overall vitality of the organization.
Users
Cost accounting is done for internal parties like top management, owners as well as external
parties like creditors, employees, government
Management accounting is done for top management only
Scope
Cost accounting was evolved many years back and it is limited in its scope.
management accounting is still evolving but its scope is much wider than that of cost accounting
because it uses along with cost accounting other principals of subjects like statistics, economics
etc

Difference between financial accounting and cost accounting:

FINANCIAL ACCOUNTING COST ACCOUNTING
OBJECTIVE It provides information about It provides information of
 financial performance and financial ascertainments of costs to control
position of the business. costs and for decision making about
the costs.
NATURE It classifies records, presents and It classifies, records, presents and
interprets transactions in terms of interprets in a significant manner
money. materials, labour and overhead costs.
RECORDING OF DATA It records historical data. It records and presents estimated,
budgeted data. It makes use of both
historical costs and predetermined
costs.
USERS OF External users like shareholders, Used by Internal management at
INFORMATION creditors, financial analysts, different levels.
government and its agencies,etc.
ANALYSIS OF COSTS It shows profit/loss of the It provides details of costs and profit
AND PROFITS organization. of each product, process, job,etc.
TIME PERIOD They are prepared for a definite They are prepared as and when
period, usually a year. required.
PRESENTATION OF A set format is used for presenting There are no set formats for
INFORMATION financial information. presenting cost informations.
 TOOLSAND TECHNIQUESUSED IN MANAGEMENT ACCOUNTING

Management accountant supplies informa tion to the management so that l atter may be able to
discharge all its functions, i.e., planning, organisation, staffing, direction and control sincerely and
faithfully. For doing this, the management accountant uses the following tools and techniques:

i. Financial Planning. Financial Planning is the act of deciding in advance about the financial
activities necessary for the concern to achieve its primary objectives. It includes determining
both long term and short term financial objectives of the enterprise, formul ating financial
policies and developing the financial procedure to achieve the objectives. The role of financial
policies cannot be emphasized to achieve the max imum return o n the capital employed .
Financial policies may relate to the determination of the amount of capital required, sources of
funds, govern the determination and distribution of income, act, as a guide in the use of debt
and equity capital and determination of the optimum level of investment in various assets.

ii. Analysis of financial statements. The analysis is an attempt to determine the significance and
meaning of the financial statement data so that a forecast may be made of the prospects for
future earnings. ability to pay interest and debt maturities and profitability of a sound dividend
policy. The techniques of such analysis are comparative financial statements, trend analysis,
funds flow statement and ratio analysis. This analysis results in t he presentation of information
which will help the business executives, investors and creditors.

iii. Historical cost accounting. The historical cost accounting provides past data to the management
retating to the cost of each job, process and department so th at comparison may be made with
the standard cost. Such comparison may be helpful to the management for cost control and for
future planning.

iv. Standard costing. standard costing is the establishment of standard cost under most efficient
operating conditions , comparison of actual with the standard, calculation and analysis of
variance, in order to know the reasons and to pinpoint the responsibility and to take remedial
action so that adverse things may not happen again. This aspect is necessary to have cost
control.

v. Budgetary control. The management accountant uses the tool of budgetary control for planning
and control of the various activities of the business. Budgetary control is an important technique
of directing business operations in a desired directi on, i.e., achieve a satisfactory return on
investment.

vi. Marginal costing. The management accountant uses the technique of marginal costing ,
differential costing and break even analysis for cost control, decision-making and profit
maximization.

vii. Funds flow statement. The management accountant uses the technique of funds flow
statement in order to analyse the changes in the financial position of a business enterprise
between two dates. It tells wherefrom the funds are coming in the business an d how these are
being used in the business. It helps a lot in financial analysis and control, future guidance and
comparative studies.