| 1. | (a) | You are given two financial plans of a company which has two financial situations. The detailed information are as under: Installed capacity
Actual production and sales
Selling price per unit
Variable cost per unit
Fixed cost:
Situation ‘A’=Rs.20,000
Situation ‘B’=Rs.25,000
Capital structure of the company is as follows: | 10,000 units
60% of installed capacity
Rs.30
Rs.20 |
| | Financial Plans | | XY | XM | | Rs. | Rs. | Equity
Debt (cost of debt 12%) | 12,000
40,000
52,000 | 35,000
10,000
45,000 |
You are required to calculate operating leverage and financial leverage of both the plans | 4x5=20 | (0) |
| | (b) | You are given the following information of a worker: (i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x) | Name of worker
Ticket No.
Work started
Work finished
Work allotted
Work done and approved
Time and units allowed
Wage rate
Bonus
Worker X worked 9 hours a day. | :
:
:
:
:
:
:
:
: | ‘X’
002
1–4–11 at 8 a.m.
5–4–11 at 12 noon
Production of 2,160 units
2000 units
40 units per hour
Rs. 25 per hour
40% of time saved |
You are required to calculate the remuneration of the worker on the following basis: (i)
(ii) | Halsey plan and
Rowan plan |
| | (0) |
| | (c) | Prepare a Store Ledger Account from the following transactions of XY Company Ltd. April, 2011 1
5
8
10
15
20
21
22 | Opening balance 200 units @ Rs.10 per unit.
Receipt 250 units costing Rs. 2,000
Receipt 150 units costing Rs. 1,275
Issue 100 units
Receipt 50 units costing rs. 500
Shortage 10 units
Receipt 60 units costing Rs. 540
Issue 400 units |
The issues upto 10–4–11 will be priced at LIFO and from 11–4–11 issues will be priced at FIFO.
Shortage will be charged as overhead. | | (0) |
| | (d) | What is factoring? Enumerate the main advantages of factoring. | | (0) |
| 2. | (a) | You are given the following information of the three machines of a manufacturing department of X Ltd.: | | Preliminary estimates of expenses | | Total | (per annum) | | Machines | | | A | B | C | | (Rs.) | (Rs.) | (Rs.) | (Rs.) | Depreciation
Spare parts
Power
Consumable stores
Insurance of machinery
Indirect labour
Building maintenance expenses
Annual interest on capital outlay
Monthly charge for rent and rates
Salary of foreman (per month)
Salary of Attendant (per month) | 20,000
10,000
40,000
8,000
8,000
20,000
20,000
50,000
10,000
20,000
5,000 | 7,500
4,000
3,000
20,000
| 7,500
4,000
2,500
20,000
| 5,000
2,000
2,500
10,000
|
(The foreman and the attendant control all the three machines and spend equal time on them.)
The following additional information is also available: | | Machines | | A | B | C | Estimated Direct Labour Hours
Ratio of K.W. Rating
Floor space (sq. ft.) | 1,00,000
3
40,000 | 1,50,000
2
40,000 | 1,50,000
3
20,000 |
There are 12 holidays besides Sundays in the year, of which two were on Saturdays. The manufacturing department works 8 hours in a day but Saturdays are half days. All machines work at 90% capacity throughout the year and 2% is reasonable for breakdown.
You are required to
Calculate predetermined machine hour rates for the above machines after taking into consideration the following factors: | • | An increase of 15% in the price of spare parts. | | • | An increase of 25% in the consumption of spare parts for machine ‘B’ & ‘C’ only. | | • | 20% general increase in wages rates. |
| 8+8=16 | (0) |
| | (b) | The Marketing Manager of XY Ltd. is giving a proposal to the Board of Directors of the company that an increase in credit period allowed to customers from the present one month to two months will bring a 25% increase in sales volume in the next year.
The following operational data of the company for the current year are taken from the records of the company: | | Rs. | Selling price
Variable cost
Total cost
Sales value | 21 p.u.
14 p.u.
18 p.u.
18,90,000 |
The Board, by forwarding the above proposal and data requests you to give your expert opinion on the adoption of the new credit policy in next year subject to a condition that the company’s required rate of return on investments is 40%. | | (0) |
| 3. | The management of MNP Company Ltd. is planning to expand its business and consults you to prepare an estimated working capital statement. The records of the company reveal the following annual information: | | Rs. | Sales –Domestic at one month’s credit
Export at three month’s credit (sales price 10% below domestic price)
Materials used (suppliers extend two months credit)
Lag in payment of wages – ½ month
Lag in payment of manufacturing expenses (cash) – 1 month
Lag in payment of Adm. Expenses – 1 month
Sales promotion expenses payable quarterly in advance
Income tax payable in four instalments of which one falls in the next financial year | 24,00,000
10,80,000
9,00,000
7,20,000
10,80,000
2,40,000
1,50,000
2,25,000 |
Rate of gross profit is 20%.
Ignore work–in–progress and depreciation.
The company keeps one month’s stock of raw materials and finished goods (each) and believes in keeping Rs.2,50,000 available to it including the overdraft limit of Rs.75,000 not yet utilized by the company.
The management is also of the opinion to make 12% margin for contingencies on computed figure.
You are required to prepare the estimated working capital statement for the next year. | 16 | (0) |
| 4. | The summarized Balance Sheets of XYZ Limited as at 31st March, 2010 and 2011 are given below: | Liabilities | 2010 | 2011 | Assets | 2010 | 2011 | | | Rs. | Rs. | | Rs. | Rs. | Preference share capital
Equity share capital
Share premium A/c
Capital redemption reserve
General reserve
P & L A/c
Current liabilities
Proposed dividend
Provision for tax
| 4,00,000
4,00,000
40,000
–
2,00,000
1,30,000
6,40,000
1,60,000
1,50,000
21,20,000 | 2,00,000
6,66,000
30,000
1,00,000
1,20,000
1,75,000
9,00,000
2,10,000
1,80,000
25,75,000 | Plant and Machinery
Long term investment
Goodwill
Current Assets
Short term investment (less than 2 months)
Cash and Bank
Preliminary expenses
| 7,00,000
3,20,000
–
9,10,000
50,000
1,00,000
40,000
21,20,000 | 8,20,000
4,00,000
30,000
11,41,000
84,000
80,000
20,000
25,75,000 |
Additional information:
During the year 2011 the company: | (i) | Preference share capital was redeemed at a premium of 10% partly out of proceeds issue of 10,000 equity shares of Rs.10 each issued at 10% premium and partly out of profits otherwise available for dividends. | | (ii) | The company purchased plant and machinery for Rs.95,000. It also acquired another company stock Rs.25,000 and plant and machinery Rs.1,05,000 and paid Rs.1,60,000 in Equity share capital for the acquisition. | | (iii) | Foreign exchange loss of Rs.1,600 represents loss in value of short–term investment. | | (iv) | The company paid tax of Rs.1,40,000. |
You are required to prepare cash flow statement. | 16 | (0) |
|
| 5. | (a) | You are given the following information of the cost department of a manufacturing company: | | Rs. | Stores:
Opening Balance
Purchases
Transfer from work–in–progress
Issue to work–in–progress
Issue to repairs and maintenance
Shortage found in stock taking
Work–in–progress:
Opening Balance
Direct wages applied
Overhead applied
Closing Balance |
12,60,000
67,20,000
33,60,000
67,20,000
8,40,000
2,52,000
25,20,000
25,20,000
90,08,000
15,20,000 | Finished products:
Entire output is sold at a profit of 12% on actual cost from work–in–progress.
Other information: | | Rs. | Wages incurred
Overhead incurred
Income from Investment
Loss on sale of fixed assets | 29,40,000
95,50,000
4,00,000
8,40,000 |
Shortage in stock taking is treated as normal loss.
You are require to prepare: | (i) | Stores control account; | | (ii) | Work–in–progress control account; | | (iii) | Costing Profit and Loss account; | | (iv) | Profit and Loss account and | | (v) | Reconciliation statement |
12+4=16 | (0) | | | (b) | What is debt securitization? Explain the basic debt securitization process. | | (0) | | 6. | (a) | The management of Z Company Ltd. wants to raise its funds from market to meet out the financial demands of its long–term projects. The company has various combination of proposals to raise its funds. You are given the following proposals of the company: | (i) | | Proposals | % of Equity | % of Debts | % of Preference shares | | P | 100 | – | – | | Q | 50 | 50 | – | | R | 50 | – | 50 |
| | (ii) | Cost of debt – 10%
Cost of preference shares – 10% | | (iii) | Tax rate – 50% | | (iv) | Equity shares of the face value of Rs.10 each will be issued at a premium of Rs.10 per share. | | (v) | Total investment to be raised Rs.40,00,000. | | (vi) | Expected earnings before interest and tax Rs.18,00,000. |
From the above proposals the management wants to take advice from you for appropriate plan after computing the following: | • | Earnings per share | | • | Financial break–even–point | | • | Compute the EBIT range among the plans for indifference. Also indicate if any of the plans dominate. |
| 12+4=16 | (0) | | | (b) | Distinguish between cost units and cost centres. | | (0) | | 7. | Answer any four of the following: | 4x4=16 | | | | (a) | How do you deal with the following in cost account? | | (0) | | | (b) | Explain the following ratios: | (ii) | Price earnings ratio |
| | (0) | | | (c) | Enumerate the causes of labour turnover. | | (0) | | | (d) | Write short note on William J. Baumal Vs. Miller–Orr cash management model. | | (0) | | | (e) | Discuss the process of estimating profit/loss on incomplete contracts. | | (0) |
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