Loyola College M.Com April 2008 Accounting For Decision Making Question Paper PDF Download

LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

RO 43

M.Com. DEGREE EXAMINATION – COMMERCE

SECOND SEMESTER – APRIL 2008

    CO 2810 – ACCOUNTING FOR DECISION MAKING

 

 

 

Date : 29/04/2008            Dept. No.                                        Max. : 100 Marks

Time : 1:00 – 4:00

PART-A

I   Answer ALL questions.   `                                                                                     (10 x 2 = 20)

  1. What is cash flow statement?
  2. What do you mean by BEP?
  3. Explain the term transfer pricing.
  4. Write a formula of proprietary ratio.
  5. Spell out the need for cash budget.
  6. Discuss the advantages of standard costing.
  7. Current ratio 2.5 working capital Rs. 63,000 calculate current asset and current liabilities.
  8. A factory planned to produce 1,000 units of a product using 8000 labour hours costing Rs.40

each actually 900 units were produced by working 8,200 labour hours.  Calculate labour

efficiency variance.

  1. The volume and profit relationship of a company is described by equation y = Rs. 3,00,000 +

0.7 x in which x represents sales and y represents total cost.

Find out  ,     pv ratio   ,  BEP.

  1. From the following information relating ABC Ltd calculate fund from operation. Net loss

for the year Rs.90,000. Divident received Rs.7,000. Depreciation charged Rs.10,000. profit

on sale of assets Rs.5,000 refund of tax Rs.2,000

 

PART-B

Answer any FIVE questions.                                                                                       (5 x 8 = 40)

  1. Discuss the ABC in detail. Explain ABC in detail.
  2. i. What is zero-base budgeting (ZBB) ?
  3. Explain the process of 2BB and its advantages.
  4. From the following details, calculate funds from operations:
Rs. Rs.
Salaries

Rent

Refund of tax

Profit on sale of building

Depreciation on plant

Provision for tax

Loss on sale of plant

Closing balance of Profit & Loss a/c

Opening balance of Profit & Loss a/c

  5,000

3,000

3,000

5,000

5,000

4,000

2,000

60,000

25,000

Discount on issue of debentures

Provision for bad debts

Transfer to general reserve

Preliminary expenses written off

Goodwill written off

Proposed dividend

Dividend received

2,000

1,000

1,000

3,000

2,000

6,000

5,000

  1. The capital of Everest Co. Ltd. is as follows:

Rs.

9% Preferences shares of Rs. 10/- each                                3,00,000

Equity shares of  Rs. 10/- each                                             8,00,000

————

11,00,000

————–

 

The accountant has ascertained the following information:

Profit after tax at 60% Rs. 2,70,000, Depreciation Rs.60,000, Equity dividend paid 20%,

Reserves Rs. 77,000, Market price per equity share Rs. 40

Calculate:

Dividend yield on equity shares, Cover for preference and equity dividends, Earnings per share, The price earnings ratio, Dividend pay out-ratio, Net cash inflow, Book value per share.

 

  1. Draw up a flexible budget for overhead expenses on the basis of the following data and

determine the overhead rates at 70%, 80% and 90% plant capacity.

At 70%

Capacity

Rs.

At 80%

Capacity

Rs.

At 90%

Capacity

Rs.

Variable Overheads

Indirect labour

Stores including spares

Semi-Variable Overheads:

Power

(30% fixed, 70% variable)

Repairs and maintenance

(60% fixed, 40% variable)

Fixed Overheads :

Depreciation

Insurance

Salaries

 

Total Overheads

 

––

––

 

 

––

 

––

 

––

––

––

—————-

––

 

12,000

4,000

 

 

20,000

 

2,000

 

11,000

3,000

10,000

­­­————-

62,000

 

 

––

––

 

 

––

 

––

 

––

––

––

—————

­­__

Estimated direct labour hours:                        1,24,000 hrs.

 

  1. Two business P Ltd. and Q Ltd. sell the same type of product in the same type of market.

Their budgeted profit and loss accounts for the coming year are as under:

           P Ltd.   Q Ltd.
Sales

Less: Variable costs

Fixed costs

Budget Net Profit

 

1,20,000

15,000

 

 

1,50,000

 

1,35,000

––––––––

15,000

––––––––

 

1,00,000

35,000

 

1,50,000

 

1,35,000

–––––––

15,000

–––––––

You are required to:

  • Calculate the break-even point for each business
  • Calculate the sales volume at which each business will earn Rs. 5,000 profit.
  • State which business is likely to earn greater profit in conditions of:
    • heavy demand for the product
    • low demand for the product, and, briefly give your argument also.

 

  1. Budgeted hours for March 2000, 180 hours

Standard rate of article produced per hour 50 units

Budgeted fixed overheads Rs. 2,700

Actual production March 2000, 9,200 units

Actual hours for production 175 hours

Actual fixed overheads Rs.2,800

Calculate overhead cost variance, overhead budget variance, overhead volume

variance, overhead efficiency variance and overhead capacity variance.

 

  1. From the following information of product No. 888, calculate

(i)   Material cost variance  (ii) Material price variance

(iii) Material usage variance  (iv) Material mix variance

(v)   Material subusage variance

 

Material Standard

Quantity in kgs

Standard Price

Rs.

Actual quantity

in kgs

Rs.

 

Actual Price

Rs

X

Y

Z

20

16

12

48

5

4

3

24

14

10

48

4.00

4.50

3.25

 

 

 

 

 

PART-C

Answer any TWO questions.                                                                                      (2 x 20 = 40)           

 

  1. The following particulars are obtained from costing records of a factory:
Product A

(per unit)

Rs.

Product B

(per unit)

Rs.

Selling price 200 500
Material (Rs. 20 per kg.) 40 160
Labour (Rs. 10 per hour) 50 100
Variable overhead 20 40
Total fixed overheads Rs. 15,000

Comment on the profitability of each product when:

  • Raw material is in short supply; (b) Production capacity is limited; (c) Sales quantity is limited; (d) Sales value is limited; (e) Only 1,000 kgs. of raw material is available for both type of products in total and maximum sales quantity of each product is 300 units.

 

 

  1. From the following particulars, prepare Trading, Profit and Loss Account and Balance Sheet.

Current ratio-3; Liquid ratio-1.8, Bank overdraft-Rs. 20,000; Working capital-Rs. 2,40,000, Debtors velocity-1 month; Gross profit ratio-20%, Proprietary ratio (Fixed assets/Shareholder’s fund)-0.9, Reserves and surplus-0.25 of Share capital, Opening stock-Rs. 1,20,000; 8% Debentures-Rs.3,60,000, Long-term investments-Rs.2,00,000, Stock turnover ratio-10 times; Creditors velocity- ½ month, Net profit to Share capital-20%.

 

 

  1. The summarised balance sheets of Star Watches Ltd., as on 31st December 1998 and 1999

are as follows:

Liabilities 1998

Rs.

1999

Rs.

Assets 1998

Rs.

1999

Rs.

Share capital

Capital reserve

General reserve

Profit and

Loss a/c.

Debentures

Liabilities for

goods and

services

Provision for tax

Proposed

dividend

Unpaid dividend

 

3,00,000

1,70,000

 

60,000

2,00,000

 

 

1,20,000

90,000

 

30,000

———

9,70,000

4,00,000

10,000

2,00,000

 

75,000

1,40,000

 

 

1,30,000

85,000

 

36,000

4,000

———

10,80,000

Fixed assets

Less:

Depreciation

 

 

Trade

investments

Current assets

Preliminary

expenses

8,00,000

 

2,30,000

———

5,70,000

 

1,00,000

2,80,000

 

20,000

 

 

 

———

9,70,000

9,50,000

 

2,90,000

———

6,60,000

 

80,000

3,30,000

 

10,000

 

 

 

———

10,80,000

During 1999, the company:

  • sold one machine for Rs. 25,000; the cost of the machine was Rs. 50,000 and the depreciation provided on it amounted to Rs. 21,000.
  • provided Rs. 95,000 as depreciation.
  • redeemed 30% of the debentures at Rs. 103.
  • sold some trade investments and profit thereon was credited to capital reserve and
  • decided to value the stock at cost whereas previously the practice was to value stock at cost less 10%; the stock according to books 31-12-1998 was Rs. 54,000. The stock on 31-12-1999 was correctly valued at cost Rs. 75,000.

You are required to prepare the Cash Flow Statement as per A.S 3.

 

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