Proof: 15-3-2019

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(COL MBA/MPA Program)

ACCOUNTING AND FINANCE (5566)

CHECK LIST

SEMESTER: SPRING 2019

This packet comprises the following material: -

1. Textbooks
2. Assignment No. 1, 2
3. Assignment Forms (two sets)
4. Course outlines

In this packet, if you find anything missing out of the above mentioned material, please contact at the
address given below:

Mailing Officer
Services Block No. 28
Allama Iqbal Open University
H-8, Islamabad
Tel: (051) 9057611–12

Wishing you all the best

Salman A. Qureshi
(Course Coordinator)
 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(COL MBA/MPA Program)

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE
ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF
DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM OTHER(S) AS
ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM
POLICY”.

Course: Accounting and Finance (5566) Semester: Spring 2019

Level: COL MBA/MPA

Instructions
(a) All written assignment must be well organized, presented in an easy-to-read format and neat. Moreover,
pay particularly close attention to grammar, spelling, punctuation and understandability. Communication
is extremely important in this course.
(b) Documentation is likewise very important. Un-supported statements or opinions are worth less to
the reader, who desires to verify your finding. Complete and specific documentation is mandatory.
Also, your references should be to primary sources, except in rare unusual situation.
(c) Quoting should be kept to an absolute minimum.

Guidelines for Doing Assignments

We expect you to answer each question as per instructions in the assignment. You will find it useful to
keep the following points in mind:
1) Planning: Read the assignments carefully, go through the Units on which they are based. Make
some points regarding each question and then rearrange them in a logical order.

2) Organization: Be a little selective and analytical before drawing up a rough outline of your
answer. Give adequate attention to question’s introduction and conclusion.
Make sure that:
a) The answer is logical and coherent,
b) It has clear connections between sentences and paragraphs,
c) The presentation is correct in your own expression and style.

3) Presentation: Once you are satisfied with your answer, you can write down the final version for
submission. It is mandatory to write all assignments neatly. If you so desire, you may underlining
the points you wish to emphasize. Make sure that the answer is within the stipulated word limit.
 ASSIGNMENT No. 1
Total Marks: 100
Pass Marks: 40
Q.1 a. Explain how management accounting can add to corporate governance in (20)
service oriented organizations with suitable examples (at least two)?
b. Explain the principles of absorption costing and identify the differences
between absorption and variable costing.

Q.2 Lee Company, which has only one product, has provided the following data (20)
concerning its most recent month of operations:
Selling price $95
Units in beginning inventory 100
Units produced 6,200
Units sold 5,900
Units in ending inventory 400
Variable costs per unit:
Direct materials $42
Direct labour $28
Variable manufacturing overhead $1
Variable selling and administrative $5
Fixed costs:
Fixed manufacturing overhead $62,000
Fixed selling and administrative $35,400
The company produces the same number of units every month, although the sales
in units vary from month to month. The company’s variable costs per unit and
total fixed costs have been constant from month to month.
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the contribution format
and the variable costing method.
d. Prepare an income statement for the month using the absorption costing
method.
e. Reconcile the variable costing and absorption costing net incomes for the
month.

Q.3 VP manufactures CDs for music publishers, in units of 100 disks. VP’s variable (20)
labour cost is $20 per unit and its variable material cost is $40 per unit, while its
fixed costs are $800,000 per annum. VP’s selling price is $100 per unit.
a. Calculate VP’s break-even revenue.
b. Calculate VP’s break-even in units.
c. VP is considering replacing its press with a faster machine which will reduce
labour costs to $10 per unit and increase fixed costs to $1,000,000 per annum.
With the drop in music sales, sales are expected to drop to 25,000 units per
annum. Is this investment worthwhile? Show your calculations.

Q.4 The management of Mews Ltd. is considering dropping product E2. Data from (20)
the company’s accounting system appear below:
Sales----------------------------------------------- $480,000
Variable Expenses------------------------------- $202,000
Fixed Manufacturing Expenses--------------- $158,000
Fixed Selling and Administrative Expenses- $130,000
 All fixed expenses of the company are fully allocated to products in the
company’s accounting system. Further investigation has revealed that $86,000 of
the fixed manufacturing expenses and $67,000 of the fixed selling and
administrative expenses are avoidable if product E2 is discontinued.
a. What is the net operating income earned by product E2 according to the
company’s accounting system? Show your calculations.
b. What would be the effect on the company’s overall net operating income
of dropping product E3? Should the product be dropped? Show your
work!

Q.5 Different managers in Gates Limited require varying degrees of managerial (20)
accounting information. Because of the need to comply with the managers’
requests, four different variances for manufacturing overhead are calculated each
month. The information for the September overhead expenditure is as follows:
Budgeted output units ----- 3,200 units
Budgeted fixed manufacturing overhead ------ $20,000
Budgeted variable manufacturing overhead ----- $5 per direct labour hour
Budgeted direct manufacturing labour hours ------2 hours per unit
Actual fixed manufacturing costs incurred ----- $26,000
Actual direct manufacturing labour hours used ---- 7,200 direct labour hours
Actual variable manufacturing costs incurred ----- $35,600
Actual units manufactured ----- 3,400 units
Prepare a variance report for variable and fixed overhead costs explaining
the possible reasons for the variances.

ASSIGNMENT No. 2
Total Marks: 100
Instructions:
1. This assignment is a research-oriented activity. You are required to develop a term paper and submit
to the tutor for evaluation prior to the final examination. The last date of this assignment will be
notified separately by our directorate of regional services and the same will be communicated to you
directly as well as through approved study centers assigned to you.

2. You will have to participate in the activity fully, actively, and practically to be eligible to sit in the
final examination of the course.

3. For the preparation of this assignment, you should first thoroughly review the conceptual
framework of the topic and develop a scholarly material of the same giving references, quotations,
and extracts of various scholars and experts. Then visit any business/commercial organization and
study the relevant practical aspects there. Combining the theoretical and practical aspects, develop a
comprehensive paper consisting of at least 20 to 25 typed pages to be submitted to your tutor.
a) Introduction to the topic
b) Important sub-topics
c) Practical study of the organization with respect to the topic
d) Review of theoretical and practical situations, merits, de-merits deficiencies or strengths of the
organization with respect to the topic under study.
e) Conclusion and recommendation
f) Annex, if any

4. Prepare a copy of this assignment and submit to your tutor for your evaluation.
5. You should add any illustrative material/data/tables/analysis for effective submission.

6. If you fail to submit this assignment in the class, then you will not be able to sit in the final
examination conducted by AIOU.
A number of topics given below are the general aspects of the course and you are required to
select one of the topics according to the last digit of your roll number. For example, if the roll number is
N-9337241, you will select topic number 1, and if the roll number is O-3427185 then you will select
topic number 5 (the last digit).

List of Topics:
0. Agency theory and measures to reduce agency problems
1. Balanced scorecard
2. Bonds and shares valuation
3. Capital asset pricing model and its application in stock evaluation
4. Determinants of financial risk in textile sector of Pakistan
5. Effects of capital market structure change on the economy of Pakistan
6. Operational budget, income statement budget, and flexible budget
7. Segment reporting and decentralization
8. Shares and bonds markets in Pakistan
9. Working capital requirements of manufacturing organization
 ACCOUNTING AND FINANCE (5566)
Course Outline
Module 1
Unit 1
1.1 Managing the organization
1.2 Purpose and definition of management accounting
1.3 Management functions
1.4 Corporate governance and responsibility
1.5 Business ethics
Unit 2
2.1 Costing systems
2.2Costing concepts and terminology
2.3 Absorption costing
2.4 Variable costing
2.5 Comparison between absorption and variable costing
Unit 3
3.1 Activity-based costing
3.2 Conceptual overview of activity-based costing
3.3 The ABC terminology
3.4 Identifying activities
3.5 Identifying cost drivers
3.6 Advantages and disadvantages of activity-based costing
3.7 ABC example

Module 2
Unit 4
4.1 Cost-volume-profit analysis
Unit 5
5.1 Relevant costs for decision-making

Module 3
Unit 6
6.1 Budgeting
6.2 Purposes of budgets
6.3 Master budget
6.4 Sales budget
6.5 Operations budget
6.6 Cash budget
6.7 Income statement budget
6.8 Flexible budgets
Unit 7
7.1 Standard costs
7.2 Standard costs explained
7.3 Application of standard costs
7.4 Variance analysis

Module 4
Unit 8
8.1 Segment reporting and decentralization
Unit 9
9.1 Transfer pricing
Unit 10
 10.1 Balanced scorecard

Module 5
Unit 11
11.1 Finance, financial markets and managers
11.2 Finance and financial management
11.3 Types of financial institutions
11.4 How financial markets operate
11.5 Financial markets classes
11.6 The role of the financial manager
11.7 Agency theory — an overview
Unit 12
12.1 Regulation of Markets
12.2 Statutory regulation
12.3 Central or reserve banks
12.4 Stock exchanges
Unit 13
13.1 Financial mathematics
13.2 Time value of money
13.3 Simple interest
13.4 Compound interest
13.5 Present value and future value tables
13.6 Present values
13.7 Future values

Module 6
Unit 14
14.1 Understanding risk and return
Unit 15
15.1 Bonds and shares

Module 7
Unit 16
16.1 Cost of capital
Unit 17
17.1 Capital investment
Unit 18
18.1 Short-term and long-term finance

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AIOU–AS-664(19)/PPU–15-3-2019–