LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.B.A. DEGREE EXAMINATION – BUSINESS ADMINISTRATION

MS 22

SIXTH SEMESTER – APRIL 2007

                                       BU 6600 – ADV. COST MANAGEMENT ACCOUNTS

 

 

 

Date & Time : 16-04-2007/9.00-12.00           Dept. No.                                                       Max. : 100 Marks

 

SECTION-A

(Answer all questions)                           (10×2=20)

1.What do you understand by memorandum reconciliation statement?

2.Identify any four industries in which batch costing is employed.

3.What do you mean by cost plus contracts?

4.Calculate the total Kms and passenger Kms from the following.

Number of buses           – 5

Trips made by each bus (round)-4

Distance of route – 20 kms (one way)

Days operated in a month –25

Capacity in each bus- 50 passengers

Normal passengers travelled- 90% of capacity.

5.Mention the cost units used under the following cases.

1. i) Goods transport ii) Hospitals.

6.State the various methods of preparing sales budget.

7.Define “Standard cost”

8.What is Capital Budgeting?

9.What are the advantages of N.P.V.?

10.Calculate the material usage variance from the following;

Standard             : 400 units at Rs.10 each.

Actual                 : 360 units at Rs.7 each.

 

SECTION-B

(Answer any five questions, choosing not less than TWO from each group)            (5×8=40)

GROUP-I

11.Write short notes on the following:

1. a) Abnormal loss b) Operating costing c) Job costing d) Valuation of work in progress

in contract  costing.                                                                                 .                          12.The following is the profit&loss a/c of “V”-Ltd

 

Particulars	Rs	Particulars	Rs
To Materials To Wages To Factory expenses To Administration        expense To Selling expenses To Depreciation To Net profit	30,000 14,000 10,000   8,000 6,000 2,000 45,000 1,15,000	By sales By Closing stock By Profit on sale of machinery By Discount received	1,00,000 8,000   2,000 5,000       1,15,000

 

Additional information;

• Profit as per cost accounts was Rs.37,000
• Factory overhead is absorbed in cost accounts at 100 % of wages.
• Administration and selling expenses were recovered at 5% and 7% on

Sales respectively.

• Depreciation was charged in costing at Rs.3,000.
• Closing stock was valued at Rs.10,000 in cost accounting.

You are required to prepare a reconciliation statement of cost and financial profits.

 

13.From the following particulars, calculate the cost of running a taxi per kilometer.

Number of Taxis          -10

Cost of each taxi          – Rs.2,00,000.

Salary of manager        – Rs.6,000 p.m.

Salary of accountant     – Rs.5,000 p.m.

Salary of cleaner           – Rs.2,000 p.m

Salary of mechanic       – Rs.4,000 p.m

Garage rent                   – Rs.6,000 p.m.

Insurance premium       –  5% p.a.

Annual tax                    – 6,000 per taxi

Drivers salary               – 2,000 per month per taxi.

Annual repair                – 10,000 per taxi.

Total life of a taxi is about 2,00,000 kms. A taxi  runs in all 3,000 kms in a month

Of which30% is empty. Petrol consumption is one litre for 10 k.m at Rs.18

Per litre. Oil and other  sundries are Rs.50 per 100 kms.

14.From the following particulars, prepare a cost sheet showing both production and

Setting up costs, total and per unit,When  the batch consists of 200 units;

Cost of materials 12-paise per unit.

Operator’s wages Rs.1.44 an hour.

Machine hour rate.Rs.3

Setting up time of machine 4 hours and 40 minutes .

Manufacturing time 20 minutes per unit.

GROUP-II

15.Write short notes on the following.

1. Key factor b) Budgetary control c) Pay-back period d) IRR.

16.From the following particulars given below, calculate the following labour variances

for the two departments.

1. a) Labour cost variance b) Labour rate variance c) Labour efficiency variance.

 

 

	Department-A	Department-B
Actual gross wages (direct) Standard hours produced Standard rate per hour Actual hours worked	Rs.20,000 8,000 Rs.3 8,200	Rs.18,000 6,000 Rs.3.50 5,800

 

 

17.The following particulars are taken from the records of the company engaged in

manufacturing two products X and Y from a certain raw material.

 

	Product-X (Rs.per unit)	Product-(Rs.per unit)
Sales                 Materials(Rs.2.5 per k.g)  Wages (Rs.15 per hour) Variable overhead	125.00 25.00 37.50 12.50	250.00 62.50 75.00 25.00

Total fixed overheads Rs.50,000

Comment on the profitability of each product when

1. Total availability of raw material is 20,000 kgs and maximum sales potential

Of each product is 1,000 units. Find out the product mix to yield maximum profit.

1. Total sales in value is limited
2. Labour time is limited.
3. Production capacity in units is a key factor.

 

18.A company sells two products A and B which are produced  in its special products

division. Sales for the year 2006 were planned as follows.

	1-st Qr(units)	2nd Qr(units)	3rd   Qr (units)	4th Qr(units)
Product-A Product-B	10,000 5,000	12,000 4,500	13,000 4,000	15,000 3,800

 

The selling prices were Rs.20 per unit and Rs.50 per unit respectively for A and B. Average sales returns are 5% of sales and the discount and bad debts amount to 4%

Of the total sales.

Prepare sales budget for the year 2006.

 

SECTION-C

(Answer any TWO Questions  )                          (2×20=40)

19.a) Three contracts X,Y and Z commenced on 1-stJanuary ,1stjuly and 1stOctober 2006,

respectively were undertaken by ELLORA Constructions Ltd, and their accounts on 31-st Dec.

showed the following position;

	X (Rs)	Y (Rs)	Z (Rs)
Contract price Expenditure; Raw material Wages General expenses   Plant purchased Materials in hand Wages accrued Work certified Work uncertified Cash received in respect of work certified	8,00,000   1,44,000 2,20,000 8,000   40,000 8,000 8,000 4,00,000 12,000 3,00,000	5,40,000   1,16,000 2,24,800 5,600   32,000 8,000 8,000 3,20,000 16,000 2,40,000	6,00,000   40,000 28,000 2,000   24,000 4,000 3,600 72,000 4,200 54,000

 

T he plant was installed on the date of commencement of each contract ,depreciation

is to be taken at 10% per annum.                                                                                        Prepare the contract accounts in Tabular form and show   how they would appear in the Balance sheet as on Dec.2006.

OR

19.b)A product passes through three processes. The following details are related to the

processes during-Dec-2006.

 

	Total	Process-I	Process-II	Process-III
Materials(Rs) Labour (Rs) Production overhead (Rs) Output (units) Normal loss (%-of input) Scrap value	5,625 7,330 7,330 — — —	2,600 2,250 — 450 10 2	2,000 3,680 — 340 20 4	1,025 1,400 — 270 25 5

 

500 units @Rs.4 per unit were introduced in process-I. Production overhead is absorbed in the ratio of labour.

Prepare process accounts and abnormal loss and abnormal gain accounts.

 

20.a) From the following particulars , prepare a cash budget for 6 months .

Months	Total sales Rs	Materials Rs	Wages Rs	Production over head Rs	Selling and Dist.overhead Rs
Jan Feb March April May June	20,000 22,000 24,000 26,000 28,000 30,000	20,000 14,000 14,000 12,000 12,000 16,000	4,000 4,400 4,600 4,600 4,800 4,800	3,200 3,300 3,300 3,400 3,500 3,600	800 900 800 900 900 1,000

Cash balance on 1-st jan. was Rs.10,000. A new machine is to be installed at Rs.30,000 On credit, the amount to be repaid by two equal instalments 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 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-1month.

Delay in payment of wages-1/2 month.

Assume cash sales to be 50% of the total sales.

(OR)

20.b) J& co is planning to invest in a project which requirea a capital outlay of

Rs.4,00,000. Forecast for annual income after depreciation but before tax is as

Follows.

 

 

Year	Rs
1 2 3 4 5	2,00,000 2,00,000 1,60,000 1,60,000 80,000

Depreciation may be taken as 20% on original cost and taxation at 50% of net income.

You are required to evaluate the projects according to each of the following methods.

1. Pay- back period b) Rate of return on original investment c)Rate of return on average investment d)Discounted flow method taking cost of capital at 10%.
2. Excess present value method.

 

Note;

The discount factor at 10% for the first 5-years are ; 0.909, 0.826,0.751,0.683 and

0.621.

 

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             LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.B.A. DEGREE EXAMINATION – BUSINESS ADMINISTRATION

MS 22

SIXTH SEMESTER – APRIL 2007

                                       BU 6600 – ADV. COST MANAGEMENT ACCOUNTS

 

 

 

Date & Time : 16-04-2007/9.00-12.00           Dept. No.                                                       Max. : 100 Marks

 

SECTION-A

(Answer all questions)                           (10×2=20)

1.What do you understand by memorandum reconciliation statement?

2.Identify any four industries in which batch costing is employed.

3.What do you mean by cost plus contracts?

4.Calculate the total Kms and passenger Kms from the following.

Number of buses           – 5

Trips made by each bus (round)-4

Distance of route – 20 kms (one way)

Days operated in a month –25

Capacity in each bus- 50 passengers

Normal passengers travelled- 90% of capacity.

5.Mention the cost units used under the following cases.

1. i) Goods transport ii) Hospitals.

6.State the various methods of preparing sales budget.

7.Define “Standard cost”

8.What is Capital Budgeting?

9.What are the advantages of N.P.V.?

10.Calculate the material usage variance from the following;

Standard             : 400 units at Rs.10 each.

Actual                 : 360 units at Rs.7 each.

 

SECTION-B

(Answer any five questions, choosing not less than TWO from each group)            (5×8=40)

GROUP-I

11.Write short notes on the following:

1. a) Abnormal loss b) Operating costing c) Job costing d) Valuation of work in progress

in contract  costing.                                                                                 .                          12.The following is the profit&loss a/c of “V”-Ltd

 

Particulars	Rs	Particulars	Rs
To Materials To Wages To Factory expenses To Administration        expense To Selling expenses To Depreciation To Net profit	30,000 14,000 10,000   8,000 6,000 2,000 45,000 1,15,000	By sales By Closing stock By Profit on sale of machinery By Discount received	1,00,000 8,000   2,000 5,000       1,15,000

 

Additional information;

• Profit as per cost accounts was Rs.37,000
• Factory overhead is absorbed in cost accounts at 100 % of wages.
• Administration and selling expenses were recovered at 5% and 7% on

Sales respectively.

• Depreciation was charged in costing at Rs.3,000.
• Closing stock was valued at Rs.10,000 in cost accounting.

You are required to prepare a reconciliation statement of cost and financial profits.

 

13.From the following particulars, calculate the cost of running a taxi per kilometer.

Number of Taxis          -10

Cost of each taxi          – Rs.2,00,000.

Salary of manager        – Rs.6,000 p.m.

Salary of accountant     – Rs.5,000 p.m.

Salary of cleaner           – Rs.2,000 p.m

Salary of mechanic       – Rs.4,000 p.m

Garage rent                   – Rs.6,000 p.m.

Insurance premium       –  5% p.a.

Annual tax                    – 6,000 per taxi

Drivers salary               – 2,000 per month per taxi.

Annual repair                – 10,000 per taxi.

Total life of a taxi is about 2,00,000 kms. A taxi  runs in all 3,000 kms in a month

Of which30% is empty. Petrol consumption is one litre for 10 k.m at Rs.18

Per litre. Oil and other  sundries are Rs.50 per 100 kms.

14.From the following particulars, prepare a cost sheet showing both production and

Setting up costs, total and per unit,When  the batch consists of 200 units;

Cost of materials 12-paise per unit.

Operator’s wages Rs.1.44 an hour.

Machine hour rate.Rs.3

Setting up time of machine 4 hours and 40 minutes .

Manufacturing time 20 minutes per unit.

GROUP-II

15.Write short notes on the following.

1. Key factor b) Budgetary control c) Pay-back period d) IRR.

16.From the following particulars given below, calculate the following labour variances

for the two departments.

1. a) Labour cost variance b) Labour rate variance c) Labour efficiency variance.

 

 

	Department-A	Department-B
Actual gross wages (direct) Standard hours produced Standard rate per hour Actual hours worked	Rs.20,000 8,000 Rs.3 8,200	Rs.18,000 6,000 Rs.3.50 5,800

 

 

17.The following particulars are taken from the records of the company engaged in

manufacturing two products X and Y from a certain raw material.

 

	Product-X (Rs.per unit)	Product-(Rs.per unit)
Sales                 Materials(Rs.2.5 per k.g)  Wages (Rs.15 per hour) Variable overhead	125.00 25.00 37.50 12.50	250.00 62.50 75.00 25.00

Total fixed overheads Rs.50,000

Comment on the profitability of each product when

1. Total availability of raw material is 20,000 kgs and maximum sales potential

Of each product is 1,000 units. Find out the product mix to yield maximum profit.

1. Total sales in value is limited
2. Labour time is limited.
3. Production capacity in units is a key factor.

 

18.A company sells two products A and B which are produced  in its special products

division. Sales for the year 2006 were planned as follows.

	1-st Qr(units)	2nd Qr(units)	3rd   Qr (units)	4th Qr(units)
Product-A Product-B	10,000 5,000	12,000 4,500	13,000 4,000	15,000 3,800

 

The selling prices were Rs.20 per unit and Rs.50 per unit respectively for A and B. Average sales returns are 5% of sales and the discount and bad debts amount to 4%

Of the total sales.

Prepare sales budget for the year 2006.

 

SECTION-C

(Answer any TWO Questions  )                          (2×20=40)

19.a) Three contracts X,Y and Z commenced on 1-stJanuary ,1stjuly and 1stOctober 2006,

respectively were undertaken by ELLORA Constructions Ltd, and their accounts on 31-st Dec.

showed the following position;

	X (Rs)	Y (Rs)	Z (Rs)
Contract price Expenditure; Raw material Wages General expenses   Plant purchased Materials in hand Wages accrued Work certified Work uncertified Cash received in respect of work certified	8,00,000   1,44,000 2,20,000 8,000   40,000 8,000 8,000 4,00,000 12,000 3,00,000	5,40,000   1,16,000 2,24,800 5,600   32,000 8,000 8,000 3,20,000 16,000 2,40,000	6,00,000   40,000 28,000 2,000   24,000 4,000 3,600 72,000 4,200 54,000

 

T he plant was installed on the date of commencement of each contract ,depreciation

is to be taken at 10% per annum.                                                                                        Prepare the contract accounts in Tabular form and show   how they would appear in the Balance sheet as on Dec.2006.

OR

19.b)A product passes through three processes. The following details are related to the

processes during-Dec-2006.

 

	Total	Process-I	Process-II	Process-III
Materials(Rs) Labour (Rs) Production overhead (Rs) Output (units) Normal loss (%-of input) Scrap value	5,625 7,330 7,330 — — —	2,600 2,250 — 450 10 2	2,000 3,680 — 340 20 4	1,025 1,400 — 270 25 5

 

500 units @Rs.4 per unit were introduced in process-I. Production overhead is absorbed in the ratio of labour.

Prepare process accounts and abnormal loss and abnormal gain accounts.

 

20.a) From the following particulars , prepare a cash budget for 6 months .

Months	Total sales Rs	Materials Rs	Wages Rs	Production over head Rs	Selling and Dist.overhead Rs
Jan Feb March April May June	20,000 22,000 24,000 26,000 28,000 30,000	20,000 14,000 14,000 12,000 12,000 16,000	4,000 4,400 4,600 4,600 4,800 4,800	3,200 3,300 3,300 3,400 3,500 3,600	800 900 800 900 900 1,000

Cash balance on 1-st jan. was Rs.10,000. A new machine is to be installed at Rs.30,000 On credit, the amount to be repaid by two equal instalments 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 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-1month.

Delay in payment of wages-1/2 month.

Assume cash sales to be 50% of the total sales.

(OR)

20.b) J& co is planning to invest in a project which requirea a capital outlay of

Rs.4,00,000. Forecast for annual income after depreciation but before tax is as

Follows.

 

 

Year	Rs
1 2 3 4 5	2,00,000 2,00,000 1,60,000 1,60,000 80,000

Depreciation may be taken as 20% on original cost and taxation at 50% of net income.

You are required to evaluate the projects according to each of the following methods.

1. Pay- back period b) Rate of return on original investment c)Rate of return on average investment d)Discounted flow method taking cost of capital at 10%.
2. Excess present value method.

 

Note;

The discount factor at 10% for the first 5-years are ; 0.909, 0.826,0.751,0.683 and

0.621.

 

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.B.A. DEGREE EXAMINATION – BUSINESS ADMINISTRATION

AP 16

SIXTH SEMESTER – APRIL 2008

BU 6600 – ADV. COST MANAGEMENT ACCOUNTS

 

 

 

Date : 16/04/2008             Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

 

SECTION     A

Answer ALL Questions                                                             10 x 2= 20

 

1. State any two reasons for the difference between the profit shown by cost accounts

and the profit shown by financial accounts.

2 What is meant by equivalent production?

3. Write any TWO distinctions between job costing and process costing.
4. What is meant by flexible budget?
5. What are the advantages of pay back period?
6. Distinguish between joint product and by-product.
7. Calculate the ton kilometers run by a truck from the following details.

Distance traveled 200 kms per day

Normal loading capacity 100 tons.

Wastage in loading 10%

Percentage of vehicles under repair 5%

Effective days in a month 25.

8.A project requires an investment of Rs. 50,000 and has a scrap value of Rs. 2,000

after five years. It is expected to yield profit after taxes and depreciation during the

five years amounting to Rs. 4,000, Rs. 6,000,Rs. 7,000, Rs. 5,000 and Rs. 5,000.

Calculate the average rate of return on investment.

9. Data relating to a job are thus;

Standard rate of wages per hour    Rs10

Standard hours                                  300

Actual rate of wages per hour        Rs 12

Actual hours                                     200

Calculate 1)Labour cost variance 2)Labour rate variance

10.Notional Profit on a contract is Rs.90,000 and 40% of the contract is completed. Cash received is 80%

of work certified. Calculate the amount of Profit to be reserved for contingencies.

 

                                               SECTION    B  

Answer any FIVE questions, choosing not less than TWO from each group   (5 x 8=40)

GROUP    I

 

11.Write short notes on the following: (1) Inter process profits, (2) Work certified

(3) Abnormal gain (4) Batch Costing.

 

12.Alpha Company has a contract to run a tourist car on a 20 Kms route (one way)

for the chief executive of a firm.  The company  buys a car for Rs. 1,50,000 which has

life of 5 years. The company  estimates the following expenses:

Insurance Rs. 4,500 p.a.; Taxes Rs. 900 p.a.; Garage rent Rs. 500 p.m.; Repairs Rs. 4,800 p.a.; Drivers wages Rs. 300 p.m.; In addition the driver has to be paid 10% of the collections as commission.  Petrol will cost Re. 1 per Km. The car will make 4 round trips each day and will operate for 25 days in a month. If Alpha Company wants a profit of 15% on collection how much must the company charge per round trip?

 

13. Profit disclosed by a company’s accounts for the year was Rs. 50,000 whereas

The net profit as disclosed by the financial accounts was Rs. 29,750.  Following

information is available:

• Overheads as per cost accounts were estimated at Rs. 8,500. The charge for

The year shown by the financial accounts was Rs. 7,000.

• Director’s fees shown in the financial accounts only for Rs. 2,000
• The company allowed Rs. 5,000 as provision for doubtful debts.
• Work was commenced during the year on a new factory and expenditure of

Rs. 30,000 was made.  Depreciation at 5% p.a. was provided for in the

financial accounts for 6 months.

• Share-transfer fees received during the year were Rs. 1,000
• Provision for income-tax was Rs. 15,000

 

From the above, prepare a statement reconciling the figures shown by cost and financial accounts.

 

14. A company manufactures three joint products A,B and C. The actual joint-expenses

Rs. 8,000.  Profit on each product as a percentage of sales would be 30%, 25% and

15% respectively.  Subsequent expenses were as follows:

A                           B                         C

Rs.                         Rs.                      Rs.

Materials                                   100                         75                       25

Labour                                       200                       125                       50

Overheads                                 150                       125                       75

Sales                                       6,000                    4,000                  2,500

Prepare a statement apportioning joint expenses on the basis of reverse cost method.

 

GROUP II

15. Write short notes on the following: (a) features of capital budgeting, (b) advantages

of budgetary control.

 

16.Following information has been made available from the cost records of United

Automobiles Ltd.

Direct Materials                                                                         Per Unit(Rs.)

X                                                                                             8

Y                                                                                             6

Direct Wages

X                                                                                            6

Y                                                                                            4

Variable Overheads-150% of direct wages

Fixed cost (total)                  Rs. 750

Selling Price

X                                                                                            25

Y                                                                                            20

The directors want to adopt anyone of the following alternative sales mixes in the

following period.

• 250 units of X and 250 units of Y, (b) 400 units of Y only, (c) 150 units of X and

350 units of Y. State which of the alternative sales mixes you would recommend to the management.?

 

 

 

 

 

 

17.Prepare a cash budget for the month of May, June and July 2004 on the basis of

following information.

Months              Sales                    Credit Purchases    Wages                 Overheads

March          Rs. 80,000                        Rs. 36,000    Rs. 9,000             Rs. 10,000

April                   82,000                              38,000          8,000                     9,000

May                    85,000                               33,000        10,000                   12,000

June                    78,000                               35,000          8,500                     9,000

July                     80,000                               39,000          9,500                   10,500

Additional information:

1. Cash balance on 1^st May 2004 is Rs. 8,000
2. Cash sales is 25% of sales
3. Period of credit allowed by suppliers, two months and to customers, one month
4. Lag in payment of wages, one month
5. Advance Tax is payable in June of Rs. 8,000.

18. From the following particulars, calculate all Material variances:

Material                       Standard                          Actual

Quantity    Price             Quantity    Price

Kg.          Rs.                 Kg.           Rs.

A                                 10             8                   10             7

B                                    8             6                    9             7

C                                    4            12                   5            11

22                                 24________

 

SECTION   C

Answer any TWO Questions                    2 x 20=40

1.  (a)   R commenced a contract on 1-4-2005.  The contact price was fixed at

Rs. 3,00,000  and the following expense were incurred on the contract upto

31-3-2006.

Materials issued Rs. 51,000 , plant issued Rs. 15,000, wages Rs. 81,000 and other

expense Rs. 5,000 , Cash received on the contract upto 31-3-2006 amounted to

Rs. 1,28,000, being 80% of the work certified.  Of the plant and materials charged to the contract, plant costing Rs. 3,000 and material costing Rs. 2,500 were lost.  Work uncertified on 31-3-2006 was Rs. 1,000 and materials at site on that date was Rs. 2,300, Depreciate plant at 15% p.a.

Prepare the contract account as on 31-3-2006 and show how the relevant items would appear in the  balance sheet as on that date.

 

 

(or)

 

 

19.(b)  Product ‘Z’ is obtained after it passes three distinct processes.  The following

Information is obtained from the accounts for the month ending March 2005:

Process

Items                                                           _________________________________

Total                       I                        II                      III

Rs.                      Rs.                    Rs.                     Rs.

Direct Material                       7,542                  2,600                 1,980                 2,962

Direct Wages                         9,000                  2,000                  3,000                4,000

Production Overheads           9,000                      –                         –                        –

%of Normal Loss to input                                   5%                      10%                  15%

Output(in units) during the month                      950                      840                   750

Value of Scrap per unit (Rs.)                                 2                         4                       5

 

1,000 units at Rs. 3 each were introduced to process I.  There was no stock of material

or work-in progress at the beginning or end of the period.  The output of each process passess direct to the next process and finally to finished stores.  Production overhead is recovered on 100 percent of direct wages.

Prepare process  cost accounts and other related accounts.

 

20.(a) Prepare a flexible budget for overheads on the basis of the following data.

Ascertain overheads at 50% 60% and 70% capacity.

Variable overheads                                           At 60% capacity

Rs.

Indirect material                                              6,000

Indirect labour                                               18,000

Semi-variable overheads

Electricity (40% fixed 60% variable)                30,000

Repairs (80% fixed 20% variable)                      3,000

Fixed overheads

Depreciation                                                    16,500

Insurance                                                          4,500

Salaries                                                           15,000

Total overheads                                                93,000

(or)

 

20.(b) A Co. plants to buy a machine for Rs. 80,000.  It is expected to have a life of 5

years and a scrap value of Rs. 10,000 at the end of its life.  The machine is expected to generate the following profits before depreciation and tax.

Year     Profit before Dep & tax (Rs.)     P.V. of Re 1 @ 10%

1                          20,000                                0.909

2                          40,000                                0.826

3                          30,000                                0.751

4                          25,000                                0.683

5                          16,000                                0.621

If the tax rate is 50% and the cost of capital is 10%, calculate

• Pay Back Period, (b)Net Present Value

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