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.

9. 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.

10. 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)

11. Discuss the ABC in detail. Explain ABC in detail.
12. i. What is zero-base budgeting (ZBB) ?
13. Explain the process of 2BB and its advantages.
14. 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

14. 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.

 

15. 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.

 

16. 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.

 

17. 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.

 

18. 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)           

 

19. 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.

 

 

20. 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%.

 

 

21. The summarised balance sheets of Star Watches Ltd., as on 31^st 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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         LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

M.Com. DEGREE EXAMINATION – COMMERCE

KP 44

SECOND SEMESTER – April 2009

CO 2814 / 2810 – ACCOUNTING FOR DECISION MAKING

 

 

 

Date & Time: 27/04/2009 / 1:00 – 4:00  Dept. No.                                                   Max. : 100 Marks

 

 

SECTION – A                                               10 x 2 = 20

Answer ALL questions:

1. Discuss the types of standard in variance analysis
2. State the objectives of budgeting control.
3. What do you mean key factor in Marginal Costing.
4. Explain the term ‘Common size Statements’.
5. What do you understand by term “ABC”.
6. State methods of Transfer Pricing.
7. From the following particulars calculate the fixed cost

Capacity                  60%                  100%

Units produced        600 units          1000 units

Power and fuel         Rs.1,600          Rs.2,000

8. A factory produces 5 units of commodity in one standard hour. Actual production  during a

articulars year is 85,000 units and the budgeted production for the year  is fixed at 1,00,000 units.

Actual hours operated are 40,000. Calculate the efficiency  and activity ratios.

9. Standard Rate per Labour hour in a factory was Rs.20. However during a month payment was

made for 26,000 Labour hours at Rs.22 each.

Calculate Labour rate variance.

10. Find out Variable Cost. Sales Rs.4,00,000 & PV Ratio= 25%

 

                                                            SECTION – B                                               5 x 8 = 40

Answer any FIVE questions:

 

11. “Marginal costing is a valuable Aid for Managerial Decisions” Discuss.
12. Enumerate the characteristics of Relevant Costs.
13. How cash flow statements differs from fund flow statements.
14. Senthil Velvan Corporation made a profit of Rs.3,70,250 after considering the following:

Rs.

(a) Depreciation on fixed assets                  7,500

(b) Provision for tax                                  50,000

(c) Loss on sale of machine                           600

(d) Transfer to general reserve                  20,000

(e) Provision for doubtful debts                  1,200

(f) Profit on sale of fixed assets                  2,500

(g) Amortization of development cost        5,000

The following additional information is given to you:

	31-12-1992 Rs.	31-12-1993 Rs.
Creditors Bills payable Outstanding expenses Debtors Bills receivable Prepaid expenses	20,000 15,000 7,000 36,000 12,000 1,600	25,000 13,000 6,000 39,000 10,500 1,700

You are required to determine cash from operating activities.

 

15. Calculate funds from operations of X Ltd. from the following:

Profit & Loss A/c

	Rs.		Rs.
To Salaries To Rent To Commission To Discount allowed To Provision for Depreciation To Transfer to General Reserve To Loss on sale of Investments To Provision for tax To Discount on issue of Debentures To Preliminary Expenses To Selling Expenses To Net Profit	10,000 3,000 2,000 1,000   14,000   20,000   5,000 10,000   2,000 3,000 20,000 1,20,000	By Gross Profit By profit on Sale of Machines By Dividend received By Refund of tax	2,00,000   5,000 2,000               3,000
	2,10,000		2,10,000

 

16. Parker Ltd., manufactures two brands of per Hero & Zero. The sales department of the company has three departments in different areas of the country. The sales budget for the year ending 31^st December 1999 were: Hero -Department I 3,00,000; Department II5,62,500; Department III 1,80,000 and Zero – Department I 4,00,000; Department II 6,00,000; Department III 20,000. Sales prices are Rs.3 and Rs.1.20 in all departments. It is essential that by forced sales promotion the sale of ‘Zero’ in department I will increase by 1,75,000. It is also expected that by increasing production and extensive advertisement, Department III will be enabled to increase the sale of ‘Zero’ by 50,000.It is recognized that the estimated sales by department II represent an unsatisfactory target. It is agreed to increase both estimates by 20%.Prepare a Sales Budget for the year 2000.

 

17. The following data relate to a manufacturing company:

Plant capacity:           4,00,000 units per annum

Present utilisation :    40%

Actuals for the year 2000 were:

Selling Price :             Rs.50 per unit

Material cost :             Rs.20 per unit

Variable manufacturing costs :      Rs.15 per unit

Fixed costs :                                   Rs.27 lakhs

In order to improve capacity utilisation the following proposals are considered:

1. Reduce selling price by 10%.
2. Spend additionally Rs.3lakhs on sales promotion.

How many units should be sold t earn a profit of Rs.5 lakhs per year.

18. The standard material and standard cost per kg. of material required for the

production of one unit of product A is as follows:

Material – 5 kg.

Standard Price – Rs.5 per kg.

The actual production and related material data are as follows:

400 units of product A

Material used 2,200 kg.

Price of Material Rs.4.50 per kg.

Calculate (1) Material Cost Variance

(2) Material Usage Variance.

(3) Material Price Variance.

 

Section – C                                        

Answer any TWO questions:                                                                     2 x 20 = 40

 

19. 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%

Proprietory ratio (Fixed assets / Shareholders’ fund) – 0.9

Reserves and surplus – 0.25 of share capital.

Opening stock – Rs.1,20,000; 8%Debnetures – Rs.3,60,000

Long – term investments – Rs.2,00,000

Stock turnover ratio – 10 times; Creditors velocity – ½ month

Net profit Share Capital – 20%.

 

20. A Ltd. is formed to produce Product X, the demand for which is uncertain. Their estimated

costs are:

Materials p.u.                                    Rs.2

Labour cost p.u.                                Rs.6

Variance overheads                          Rs.4

Fixed manufacturing expenses         Rs.96,000

(a) If the selling price p.u. is Rs.20, how many units they have to sell to:

1. i) break even (ii) make a profit of Rs.32,000

iii) make a profit of 20% on sales

(b) If the demand for the product is 10,000 units, what selling price they must

charge in order to:

1. i) break even ii) make a profit of Rs.24,000

iii) make a profit of 20% on sales

21. The information regarding the composition and hourly wage rates of labour force

engaged on a job schedule to be completed in 30 hours are as follows:

 

Category of             Standard           Hourly               Actual               Hourly

Workers                   No. of          wage rate              No. of             wage rate

Workers          per workers         Workers           per worker

Skilled                       75                   Rs.6                       70                     Rs.7

Semi – skilled            45                        4                       30                          5

Unskilled                   60                       3                        80                         2

The work was completed in 32 hour. Calculate labour variances.

 

 

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

M.Com. DEGREE EXAMINATION – COMMERCE

SECOND SEMESTER – APRIL 2011

CO 2814/2810 – ACCOUNTING FOR DECISION MAKING

 

 

Date : 11-04-2011             Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

                                                                              Part – A

Answer ALL questions                                                                                                                           10 x 2 = 20      

1. Explain the concept of Fund Flow Statement.
2. Discuss the objectives of Financial Statement Analysis.
3. What is Contribution?
4. What is Zero-Base Budgeting?
5. Define Standard Costing.
6. Classify the types of Standards.
7. What is Transfer Pricing?
8. A factory produces 2 units of a commodity in one standard hour. Actual production during a particular year is       17,000 units and the budgeted production for the year is fixed at 20,000 units. Actual hours operated are                 8,000. Calculate the efficiency and activity ratios.
9. The cost, 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 (a) P.V. ratio (b) B.E. sales
10. Product X requires 20 kgs. of material at Rs.4per kg. The actual consumption of material for the manufacturing of product X came to 24 Kgs. of material at Rs.4-50 per kg. Calculate

(i) Material Cost Variance (ii) Material Price Variance

 

PART – B

Answer any Five Questions:                                                                              5 x 8 = 40

11. How cash flow statement differs from funds flow statement?
12. “Ratio analysis is a tool of management for measuring efficiency and guiding business       policies” – Discuss
13. Briefly discuss the steps in the installation of a system of budgetary control.
14. From the following information prepare a Balance Sheet. Show the workings.
15. Working Capital Rs.    75,000
16. Reserves and Surplus                              1,00,000
17. Bank Overdraft 60,000
18. Current ratio                                                                              1.75
19. Liquid ratio                                                           1.15
20. Fixed assets to proprietors funds                                       0.75
21. Long term liabilities                                           NIL

 

 

 

15. From the particulars given below prepare a Cash Budget for the month June 2008:
16. Expected sales:

April 2008 – Rs. 20,000; May – Rs. 2,20,000; June – Rs. 1,90,000

Credit allowed to customers is two months and 50% of the sales of every month is on cash basis.

1. Estimated purchases:

May 2008 – Rs. 1,20,000; June – 1,10,000

40% of the purchase of every month is on cash basis and the balance is payable next month.

1. Rs. 2,000 is payable as rent every month.
2. Time lag in payment of overhead is ½ month.

Overhead: For May Rs. 12,000; For June Rs. 11,000

1. Depreciation for the year is Rs. 12,000
2. Interest receivable on investment during June and December Rs. 3,000 each.
3. Estimated Cash Balance as on 1-6-2008 is Rs. 42,500.
4. From the following summarized balance sheets of Sri Krishna Ltd., prepare a schedule of changes in working capital and a statement of sources and application of funds.

 

Liabilities	1998 Rs.	1999 Rs.	Assets	1998 Rs.	1999 Rs.
Share capital Creditors Profit and Loss A/c	4,00,000 1,06,000 14,000	5,75,000 70,000 31,000	Plant Stock Debtors Cash	75,000 1,21,000 1,81,000 1,43,000	1,00,000 1,36,000 1,70,000 2,70,000
	5,20,000	6,76,000		5,20,000	6,76,000

 

17. The labour budget of a company for a week is as under.

20 skilled men at Rs.5 per hour for 40 hours

40 Unskilled men at Rs.3 per hour for 40 hours.

The actual employment was as under:

• killed men at Rs. 5 per hour for 40 hours.

30 nskilled men at Rs.4 per hour for 40 hours. Calculate labour variances.

 

18. A machine which originally cost Rs.1,20,000.00 has an estimated life of 10 years and is depreciated at the rate of Rs.12,000.00 per year. It has been unused for some time as expected production orders did not materialize. A special order has now been received which would require the use of the machine for two months. The current net realizable value of the machine is Rs.80,000.00. it is used for the job, its value is expected to fall to Rs.75,000.00. The net book value of the machine is Rs.84,000.00. Routine maintenance of the machine currently costs Rs.400 per month. With use, the cost of maintenance and repairs would increase to Rs.600 per month.

What would be the relevant cost of using the machine for the order so that the minimum price for the order cab be ascertained?

 

 

 

 

PART – C

Answer any Two Questions                                                                                                                               2 x 20 = 40

19. From the summarized balance sheets of Kissan Industries Ltd., prepare a cash flow statement for the year ended

31-3-2008

 

Liabilities	31.3.08 Rs.	31-3-08 Rs.	Assets	31-3-08 Rs.	31-3-08 Rs.
Share capital General reserve Profit and Loss A/c Sundry creditors Outstanding expenses Provision for taxation Provision for bad debts	10,000 1,400 1,600 800 120 1,600 80   15,600	10,000 1,800 1,300 600 100 1,800 100   15,700	Goodwill Land Building Investments Inventories Bills Receivable Bank	1,200 4,000 3,700 1,000 3,000 2,000 700   15,600	1,200 3,600 3,600 1,100 2,400 2,300 1,500   15,700

 

Additional Information:

1. A piece of land has been sold for Rs.400
2. Depreciation of Rs.700 has been charged on building
3. Provision for taxation2,000 has been made during the year

 

20. A Ltd. is formed to produce product X, the demand for which is uncertain. Their       estimated costs are:

Materials p.u.                                Rs. 2

Labour cost p.u.                            Rs. 6

Variable overheads                       Rs. 4

Fixed manufacturing expenses     Rs. 96,000

(a) If the selling price p. u. is Rs. 20, how many units they have to sell to :

(i)  break even

(ii) make a profit of Rs. 32,000

(iii) make a profit of 20% on sales

(b)  If the demand for the product is 10,000 units, what selling price they must charge in order to:

(i) break even

(ii) make a profit of Rs. 24,000

(iii) make a profit of 20%on sales

21. Calculate material variances from the following details.

Standard                                                       Actual

Material           Qty.                 Price                Total               Qty.               Price                Total

Kg.                   Rs.                   Rs.                   kg.                 Rs.                   Rs.

A                  500                 6.00                  3,000                400                6.00              2,400

B                  400                 3.75                  1,500                500                3.60              1,800

C                  300                 3.00                     900                400                2.80              1,120

 

1200                                                                 1300

Less 10%

Normal Loss      120                                                                    220

 

1,080                                          5,400             1,080                                      5,320

 

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