| 1. | (a) | Match the following correctly. (i)
(ii)
(iii)
(iv)
(v) | Quick Assets
Gearing Ratio
Financial Leverage
Benefit Cost Ratio
Yield Method | (a)
(b)
(c)
(d)
(e) | discount rate at which the present value of
expected cash outflows are equal to the present
value of cash inflows.
tendency of the net residual income to vary
disproportionately with operating profit.
indicates relationship between fixed income
bearing capital and variable income bearing capital
comprises of cash, debtors and marketable securities
measures the present value of returns per rupee invested. |
| 1x5 | (0) |
| | (b) | Fill in the blanks: | 1x5 | |
| | | (i) | Under ______ system, excise duty paid on inputs can be used to pay excise duty on ______ finished products. | | (0) |
| | | (ii) | Cost of labour turnover can be grouped under two categories, that is, ______ costs and ______ costs. | | (0) |
| | | (iii) | Production made Batch Costing method involves two elements, viz, ______ cost and ______ cost. | | (0) |
| | | (iv) | Fixed cost tends to remain unchanged within a given ______ of activity and within a ______ time period. | | (0) |
| | | (v) | ______ control becomes more effective in a business with the use of ______ costing. | | (0) |
| | (c) | Choose the correct answer from the choice of answers given for each of the following. Indicate briefly your reasoning. | 2x5 | |
| | | (i) | A company maintains a Debt Equity Ratio of 1 i.e., 50% Debt and 50% Equity. Its cost of equity is 15% and cost of debt is 10%, It's Weighted average cost of capital is | (A) | 25% | (B) | 12.5% | (C) | 15% | (D) | None of the above |
| | (0) |
| | | (ii) | Gross Profit Turnover Ratio of a firm is 25% and the Gross Profit is Rs. 80,000. The Sales Turnover will be | (A) | Rs. 20,000 | (B) | Rs. 100,000 | (C) | Rs. 320,000 | (D) | None of the above |
| | (0) |
| | | (iii) | Present value of cash outflows and inflows of a project is Rs. 20,000 and Rs. 25,000 respectively. The net present value is Rs. 5,000. The profitability index would be | (A) | 0.80 | (B) | 1.25 | (C) | 4.00 | (D) | None of the above |
| | (0) |
| | | (iv) | For a particular item of store, the following information are available: Re–order quantity = 1200 units
Maximum consumption per week = 300 units
Normal consumption per week = 200 units
Re–order period=2 to 4 weeks
The Re–order level will be | (A) | 600 units | (B) | 400 units | (C) | 1200 units | (D) | None of the above |
| | (0) |
| | | (v) | If the aggregate estimated income from a new investment of Rs. 20,000 over a period of 5 years is Rs. 200,000, then the average rate of return would be | (A) | 10% | (B) | 200% | (C) | 40% | (D) | None of the above. |
| | (0) |
| 2. | (a) | Explain the importance of Equivalent production in process costing. | 4 | (0) |
| | (b) | In a manufacturing concern, 6000 kgs. of oil seeds were introduced @ Rs. 5 per kg in process–I. There was no opening work–in–process. The following information are available for the operation of a period: | (i) | Expenses debited to Process–I Direct Materials
Direct Labour
Overheads | –
–
– | Rs. 10,800
13,000
7,800 |
| | (ii) | Normal Loss – 5% of the Input | | (iii) | Closing work–in–process 700 kgs | Degree of completion | –
– | Material 100%
Labour and overheads 40% |
| | (iv) | Finished output transferred to Process – II, – 4,800 kgs. | | (v) | Degree of completion of abnormal loss
Material 100%, Labour & overheads 60% | | (vi) | Units scrapped as Normal Loss were sold @ Rs. 3 per kg, while units scrapped as abnormal loss were sold @ Rs. 6/– per kg. |
Prepare Statement of Equivalent production, Statement of Cost & Evaluation Process Account and Abnormal Loss Account. | 12 | (0) |
| 3. | (a) | Describe the scope and technique of Standard costing and Budgetary control. | 4 | (0) |
| | (b) | ABC Enterprise has normal monthly machine–hour capacity of 100 machines working 8 hours per day for 25 working days in a month. The standard time required to manufacture one unit of the product is 4 hours. The budgeted fixed overhead is Rs. 150,000. In a month just concluded, the company worked for 24 days for average 750 machine–hours per day. The production was 4500 units. The actual fixed overheads was Rs. 1,60,000.
You are required to complete (a)
(b)
(c)
(d)
(e)
(f) | Efficiency variance
Capacity variance
Calender variance
Expenses variance
Volume variance
Total fixed overhead variance |
| 12 | (0) |
| 4. | (a) | What are the implications of Economic Order Quantity in proper inventory management? | 4 | (0) |
| | (b) | A company has a present annual sales turnover of Rs. 60 lakhs and it is currently extending a credit of 30 days to its debtors. It has been observed that there will be an increase in sales if the credit term is extended as below: Revised Credit
term (days) | Revised Sales
(per annum)
(Rs. in lakh) | 45
60 | 70
75 |
The variable cost is 80% of sales and the fixed costs are Rs. 6 lakhs per annum. The company has a target of 20% pre–tax return in investment.
You are required to suggest the most beneficial credit policy for the company. | 12 | (0) |
|
| 5. | A manufacturing company, currently marketing 15,000 units of a product @ Rs. 120 per unit indicates the following cost structure: | Variable Cost: | Material
Labour
Expenses | —
—
— | Rs. 56 per unit
Rs. 10 per unit
Rs. 6 per unit |
Next year’s budget has been based on Material Price increase by 6% labour cost increase by 8% due to new wage settlement and variable expenses increase by 3%. Fixed expenses are expected to go up by 5%. You are required to present before the management for decision. | (a) | A statement showing the changes in the cost and profit in the next year's budget; | | (b) | The new selling price, if the current profit volume ratio is to be maintained; and | | (c) | The quantity to be sold during next year to achieve the same quantum of profit without price increase. |
| 16 | (0) |
| 6. | Summarised Balance Sheets of M/s A.K. Industries Ltd. as on 31.03.05 and 31.03.06 are reproduced below: | Liabilities | As on
31.03.05
Rs. | As on
31.03.06
Rs. | Assets | As on
31.03.05
Rs. | As on
31.03.06
Rs. | Equity Capital
General Reserve
Profit & Loss Balance
Bank Loan – Long term
Creditors
Provision for Taxation | 4,00,000
3,00,000
40,000
–
58,000
45,000 | 4,00,000
3,20,000
32,000
1,00,000
72,000
30,000 | Land and Building
Machineries
Other Assets (Fixed)
Investment
Stock
Debtors
Cash and Bank | 1,80,000
2,10,000
30,000
50,000
1,00,000
1,70,000
1,03,000 | 2,00,000
2,76,000
45,000
50,000
90,000
1,95,000
98,000 | | 8,43,000 | 9,54,000 | | 8,43,000 | 9,54,000 |
You are required to prepare a statement of Sources and Application of Funds after considering the following transaction for the year ending 31.03.06: | (a) | Machinery worth Rs. 15,000 was sold, Loss on this sale amounted to Rs. 3,000, and was written off to General Reserve. | | (b) | Investment costing Rs. 10,000 was sold for Rs. 12,000. | | (c) | Dividend of Rs. 25,000 was paid at the year ending 31.03.06. | | (d) | Provision for Taxation made during the year was Rs. 12,000. |
| 6+10 | (0) |
| 7. | (a) | Mention briefly the major factors that would influence the working capital requirement of a concern. | 4 | (0) |
| | (b) | From the following information in respect of a manufacturing company work out the Working Capital requirement for the year: Production for the year
Finished Goods in Stores
Raw materials in Stores
Production Process
Credit allowed by Creditors
Credit given to Debtors
Selling Price per unit
Raw Material
Direct Wages
Overheads | 69,000 units
3 months
2 months consumption
1 month
2 months
3 months
Rs. 50
50% of Selling Price
10% of Selling Price
20% of Selling Price |
There is a regular production and sales cycle. Wages and Overheads accrue evenly. Wages are paid in the following month of the accrual: Material is introduced at the beginning of a Production Cycle. | 12 | (0) |
| 8. | Write short notes on any four of the following: | 4x4 | |
| | (a) | Sensitivity Analysis; | | (0) |
| | (b) | Relevant Cost; | | (0) |
| | (c) | Cost plus Pricing; | | (0) |
| | (d) | Learning Curve; | | (0) |
| | (e) | Zero base Budgeting; | | (0) |
| | (f) | Earnings per share (EPS). | | (0) |
