LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

TH 24

SIXTH SEMESTER – APRIL 2007

CO 6605 – MANAGEMENT ACCOUNTS

Date & Time: 18/04/2007 / 9:00 – 12:00 Dept. No. Max. : 100 Marks

SECTION – A

Answer all the questions: 10 x 2 = 20 Marks

What are Financial Statements?
Bring out the significance of Turnover ratios.
Mention any four limitations of funds flow statement.
Define Marginal cost.
What is a Master Budget?
Find out the semi variable cost for 40,000 units. Semi variable cost for 30,000 units: Rs.15,000, which is 40% fixed and 60% variable?
Calculate funds from operation from the following particulars:

Net profit for the year ended 31.3.2007: Rs.6,50,000
Profit on sale of building: Rs.40,000
Goodwill written off during the year Rs.10,000
Old machinery worth Rs.8,000 has been sold for Rs.6,500
Depreciation has been provided on plant at 20% per year. The value of plant is Rs.5,00,000

The fixed cost per month in a factory is Rs.50,000. The contribution per unit is Rs.50 for product A and Rs.25 for B. Which of the following product mixes is most yielding?

(a) 800 A and 1000 B (b) 1,500 A only

Find out fixed assets and gross profit from the following information:

Sales Rs.10,00,000

Gross profit ratio – 25%

Fixed assets turnover ratio (on cost of sales) 5 times

From the following data, calculate labour cost and rate variances for the two departments:

Dept. A Dept. B

Actual direct wages Rs.80,000 Rs.72,000

Standard hours produced 10,000 8,000

Standard rate per hour Rs.8 Rs.10

Actual hours worked 12,000 7,000

SECTION – B

Answer any FIVE questions only: 5 x 8 = 40 Marks

“Marginal costing is a valuable aid for managerial decisions” – Discuss.
Highlight the advantages and limitations of Management accounting.
Distinguish between standard costing and budgetary control.
Following are the ratios relating to the trading activities of Neela Traders Ltd., Chennai.

Receivables turnover – 90 days (360 days year)

Inventory turnover – 3 times

Payables turnover – 3 months

Gross profit ratio – 25%

Gross profit for the year amounted to Rs.18,000. Closing inventory of the year is Rs.2,000 above the opening inventory. Bills receivable amount to Rs.2,500 and bills payable Rs.1,000. Ascertain the following:

Sales (b) Debtors (c) Closing inventory (d) Sundry creditors

15.Following are the comparative balance sheets of Cheran Company Limited

Liabilities 31.12.2005 31.12.2006 Assets 31.12.2005 31.12.06

Share capital 70,000 74,000 Bank 9,000 —

Debentures 12,000 6,000 A/cs. Receivable 14,900 17,700

A/cs. Payable 10,360 11,840 Stock in trade 49,200 42,700

Pro. Fr. Doubtful debts 700 800 Buildings 20,000 40,600

P & L A/c 10,040 10,560 Goodwill 10,000 5,000

Bank overdraft — 2,800

————————- ———————

1,03,100 1,06,000 1,03,100 1,06,000

Additional Information:

Buildings were acquired for Rs.20,600
Amount provided for amortization of goodwill totaled Rs.5,000
Dividend paid totaled Rs.3,500
Debenture loan repaid was Rs.6,000

Explain how the overdraft of Rs.2,800 as on 31^st Dec. 2006 has arisen.

16.The following are the operating details of two plants operating under the same management:

Particulars Plant A Plant B

Sales 10,00,000 8,00,000

Variable cost 6,00,000 5.00,000

Fixed cost 2,00,000 1,00,000

Capacity of operation 100% 50%

You are required to ascertain:

Break even sales and break even capacity of the merged plant
Profit and Profitability of operating the merged plant at 90% of the capacity
Capacity level of operation, if profit of Rs.4,00,000 (the profit made by both plants before merger) has to be made by the merged plant.

Fixed Expenses Rs. (lakhs) Rs. (lakhs)

Wages 16.8

Rent, taxes, etc. 11.2

Depreciation 14.0

Administration expenses 17.8

——- 59.8

Semi Variable expenses (50% capacity)

Repair and maintenance 5.0

Indirect labour 19.8

Sales Dept. salaries 5.8

Sundry administration expenses 5.2

——- 35.8

Variable expenses (at 50% capacity)

Material 48.0

Labour 51.2

Other expenses 7.6

——- 106.8

Assume that fixed expenses remain constant at all levels, semi variable expenses remain constant between 40% and 65%, 10% increase between 65% and 85% and 20% increase between 85% and 100%. Sales at various levels are as under:

Rs. (lakhs)

60% capacity 200

75% capacity 240

90% capacity 300

100% capacity 340

Prepare a flexible budget for the half-year and forecast profits at 60%, 75%, 90% and 100% capacity.

A company manufactures a particular product the standard material cost of which is Rs.10 per unit. The following information is obtained from the cost records.

Standard Mix

Material Quantity Rate Amount

Units Rs. Rs.

A 70 10 700

B 30 5 150

——- ——-

Loss 15% 15 —

——– ——-

——— ——–

(ii) Actual results for January 2007:

Material Quantity Rate Amount

Units Rs. Rs.

A 400 11 4,400

B 200 6 1,200

——- ——-

5,600

Loss 10% 60 —

——– ——–

5,600

——- ——–

Calculate: (1) Material price variance (2) Material mix variance (3) Material usage variance (4) Material yield variance (5) Material cost variance

SECTION – C

III. Answer any TWO questions only: 2 x 20 = 40 Marks

You are given the following information pertaining to the financial statements of Premsai Ltd., as on 31.12.2006. On the basis of the information supplied, you are required to prepare the Trading and Profit and Loss Account for the year and a Balance Sheet as on that date:

Net current assets Rs.2,00,000

Issued share capital Rs.6,00,000

Current ratio 1.8

Quick ratio 1.35

Fixed assets to shareholders equity 80%

Rate of gross profit 25%

Net profit to issued share capital 20%

Stock turnover ratio (cost of goods

Goods sold to closing stock) 5 times

Average age of outstanding debts

For the year 36 ½ days

Prepare a funds flow statement from the following Balance Sheets of PRR as at 31^st March 2006 and 2007

Liabilities 2006 2007 Asset 2006 2007

Share capital 4,50,000 4,50,000 Fixed Assets 4,00,000 3,20,000

General Reserve 3,00,000 3,10,000 Investments 50,000 60,000

P & L Account 56,000 68,000 Stock 2,40,000 2,10,000

Creditors 1,68,000 1,34,000 Sundry Debtors 2,10,000 4,55,000

Mortgage Loan — 2,70,000 Bank 1,49,000 1,97,000

Pro. For Taxation 75,000 10,000

———————– ————————

10,49,000 12,42,000 10,49,000 12,42,000

Additional Information:

Investments costing Rs.8,000 were sold during the year for Rs.8,500 and further investments were purchased during the year for Rs.18,000
The net profit for the year was Rs.62,000 after charging depreciation on fixed assets Rs.70,000 for the year and provision for taxation Rs.10,000
During the year part of fixed assets costing Rs.10,000 was disposed for Rs.12,000 and the profit was included in the P&L A/c.
Dividend paid during the year amounted to Rs.40,000

A newly started Pushpak Company wishes to prepare cash budget from January. Prepare a cash budget for the 6 months from the following estimated revenue and expenses:

Month

Total Sales

Materials

Wages

Production Overhead

Selling & Distribution

Overhead

January

February

March

April

May

June

20,000

22,000

24,000

26,000

28,000

30,000

20,000

14,000

12,000

16,000

4,000

4,400

4,600

4,800

3,200

3,300

3,400

3,500

3,600

800

900

800

900

1,000

Cash balance on 1^st January was Rs.10,000. A new machine is to be installed at Rs.30,000 on credit, to be repaid by two equal installments in March and April.

Sales commission at 5% on total sales is to be paid within the month following actual sales.

Rs.10,000 being the amount of 2^nd call may be received in March. Share premium amounting to Rs.2,000 is also obtained with 2^nd call.

Period of credit allowed by suppliers – 2 months

Period of credit allowed to customers – 1 month

Delay in payment of overheads – 1 month

Delay in payment of wages – ½ month

Assume cash sales to be 50% of the total sales

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