Financial Daily from THE HINDU group of publications
Monday, Oct 31, 2005
Financial Daily from THE HINDU group of publications Monday, Oct 31, 2005 |
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Mentor
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Accountancy Know where you can go wrong — II R. Sivakumar
PROBLEMS such as the Excel Academy one posed in these columns (Business Line, October 17) tend to elicit varied presentations of answers by the students, which are discussed in the following categories: Category 1, wrong formula/principle: Breakeven point = (Total Contribution / total fixed costs) x revenue per student = (25000/17500) x 250 = 360 students (rounded off) Category 2, computational / chain error: Break even point = Fixed costs / Contribution per student = Rs 16,000 / 80 = 200 students. Working 1, Fixed costs: Rental for workshop, Rs 3000 per day x 3 days = Rs 9,000 Honorarium to faculty, Rs 600 per speaker x six speakers = Rs 3,600 Administration costs, Rs 200 per person per day x three days x five person = Rs 3,000 Overheads = Rs 1,900 Total fixed costs = Rs 16,000 Working 2, Variable costs and contribution: Fee per student = Rs 250 Food = Rs 60 Workshop material = Rs l20 Accommodation (Rs 40 x 3) = Rs 120 Total variable costs = Rs 200 Contribution / student = Rs 80 Category 3, question partly answered/incomplete answer: Fixed costs: Rental for workshop, Rs 3,000 per day x three days = Rs 9,000 Honorarium to faculty, Rs 600 x Rs 6 = Rs 3,600 Administration costs, Rs 200 per person per day x three days x five person = Rs 3,000 Overheads = Rs 1,900 Total fixed costs = Rs 17,500 Category 4, vague answers: Breakeven point is a point where the profits and losses are equal. In the question, the maximum number of students is 500. Hence if there is a profit breakeven, students will be less. If there is a loss, more fee should be charged as the workshop is on accounting standards. Category 5, direct answer without any workings: Breakeven point = 17500/50 = 350 students Category 6, commission error (also leading to chain errors): Breakeven point = Fixed costs / Contribution per student = Rs 24,000 / 50 = 480 students. Working 1, fixed costs: Rental for workshop, Rs 3,000 per day x three days = Rs 9,000 Honorarium to faculty, Rs 500 x 6 = Rs 3,000 Administration costs, Rs 200 per person per day x three days x five person = Rs 3,000 Overheads = Rs 9,000 Total fixed costs = Rs 24,000 Working 2, variable costs and contribution: Fee per student, Rs 250; food, Rs 60; workshop material, Rs 20; accommodation (Rs 40x3) = Rs 120 Total variable costs = Rs 200 Contribution/student = Rs 50 In general, the causes of failures can be classified as those relating to: a) Attitude: Poor handwriting, vague answers, answering the question twice purposely, and so on. b) Alertness: Incomplete answer, computation error, chain error, wrong formulae, commission error, grammatical errors leading to wrong conclusions, not giving full working notes (missing steps), calculations done directly from the calculator, not reading the question fully, striking out the correct answer, overwriting, mixing up parts of various questions and wrong numbering. It may not be an exaggeration if the following statistics emerge out of every hundred students writing the exam for any question in any of the subject. Not attempting the question (10 per cent); vague answer (5), errors such as computation, chain, principle/formula, incomplete answers (30), answer partly correct but not fully attempted (15), right answer but without adequate working notes (25), and right answer with all working notes (15). Perhaps, the following observations of the examiners way back in the May 1952 exam continue to remain valid even today: "The question paper was neither difficult nor lengthy. It is however surprising that only a small percentage of the candidates attempted all the question, thus indicating that the students who appeared in this examination were not inclined to cover the whole course during their study. From the answer books one gets the feeling that the candidates have poor expression and some times it is difficult to find out what they actually mean." (Concluded)
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