Statement of Equivalent Production

MS-04
2003 / SEM I/ 1 / 1
Statement of Equivalent Production

Head of Expenses Direct Material Direct Labour Overhead
Units completed during the period 100% 7620 100% 7620 100% 7620
Add Opening Balance 100% 120 50% 60 50% 60
7740 7680 7680
Less Closing Balance 100% 100 50% 50 50% 50
Units Equivalent Output 7640 7630 7630
Hence actual cost of Production during the period
Direct Material = (19240 X Rs. 31-00) Rs. 5,96,440
Direct Labour = (46830 X Rs. 4.20) Rs. 1,96,686
Overhead (Given) Rs. 36,340
Total Actual Cost Rs. 8,29,466
Material Cost Variance = Material Usage Variance + Material Price Variance

= (Standard Cost of Actual Output) – (Actual Output at Actual Cost)
= (7640X 2.4Kg. Rs. 30) – (19240Kg. Rs. 31) = (5,50,080- 5,96,440) = 46,360 (A)
Material Usage Variance = Standard Rate (Standard Quantity - Actual Quantity)

= Rs. 30 X (18336 – 19240) = Rs. 30 X (-904) = Rs. (-27,120) (A)
Material Price Variance = Actual Quantity (Standard Rate - Actual Rate)

= 19240 X (Rs.30.00 - Rs.31-00) = 19240 X (Rs.1.00) = (Rs.19,240) (A)
Verification = Material Usage Variance + Material Price Variance

= Rs. (27,120) (A) + (Rs.19,240) (A) = 46,360 (A)
Labour Cost Variance = Labour Rate Variance + Labour Efficiency Variance

= (Standard Wage Rate X Standard Time for Standard Output) – (Actual Rate X Actual Quantity)
= (Rs.4 X6 Hours X 7630 Units) - (Rs.4,20 X 46830 Hours) = (183120 - 196686) = Rs. 13,566 (A)
Labour Rate Variance = Actual Hours (Standard Rate - Actual Rate)

= (46830 Hours X (Rs.4 - Rs.4,20) = (183120 - 196686) = (46830 Hours X (Rs.0.20) =Rs. 9,366 (A)
Labour Efficiency Variance = Standard Rate (Standard Time for Actual Output – Actual Time)
= Rs.4 X(6 Hours X 7630 Units) - (46830 Hours) = Rs.4 X( 45780- 46830 Hours) = Rs.4 X(1050 Hours)
=Rs. 4,200 (A)
Verification = Labour Rate Variance + Labour Efficiency Variance
= Rs. 9,366 (A) + Rs. 4,200 (A) = Rs. 13,566 (A)
Overhead Cost Variance = (Standard OH Rate X At actual Output) – (Actual OH)

(Rs.4 X 7630 Hours) - (Rs.36340) = (34,335 – 36,340) = Rs. 2,005 (A)
Overhead Expenditure Variance = (Budget Expenditure – Actual Expenditure) =

(Rs.4.5 X 7500 Hours) - (Rs.36340) = (33,750 – 36,340) = Rs. 2,590 (A)
Overhead Volume Variance = (Actual Quantity X Standard Rate) – (St. Quantity X Standard Rate)
(Rs.4,50 X 7630 Hours) - (Rs.4.5 X 7500 Hours) (Rs.34,335 – 33750) = (Rs. 585 (F)
Verification = Overhead Expenditure Variance + Overhead Volume Variance

Rs. 2,590 (A)+ (Rs. 585 (F) = Rs. 2,005 (A)
2003 / SEM I/ 1 / 2
Manufacturing A/c
Particulars Amount Particulars Amount
To Opening Stock 172058 By Sales 983,947
To Purchases 500,803 By Closing Stock 147,680
To Manufacturing Expenses 359,000
To Gross Profit 100,666
TOTAL 11,32,627 TOTAL 11,32,627
Profit & Loss Accounts of XYZ Ltd. as on 31st March, .XXXX
Establishment Expenses 26,814 Gross Profit b/d 1,00,666
Manager’s Remuneration 4,000 30,814 Interest Received 8,544
General Expenses 31,078 Interest accrued on Investments 2,750
Contribution to Staff PF 1,500
Directors Fee 1,800
Provisions for Disputed Workman’s
Compensation 2,500
Depreciation Reserve A/c 10,000
Profits & Loss Adjustment A/c 34,268
TOTAL 111960 TOTAL 111960
Profit & Loss (Adjustment) Accounts of XYZ Ltd. as on 31st March, .XXXX
Interim Dividend 15,000 Net Operating Profits b/d 16,848
Net Profits c/d 32,616 Profits & Loss A/c 34,268
TOTAL 53,616 TOTAL 53,616
Balance Sheet of XYZ Ltd. as on 31st March, .XXXX

LIABILITIES Amount ASSETS Amount
Share Capital 6,00,000 Cash in Hand & at Bank 72,240
P & L Accounts 32,616 Debtors 2,23,380
General Reserve 2,50,000 Inventories / Stock Closing 1,48,680
Trade Creditors 36,858
Staff Provident Fund 37,500 Investment 2,88,950
Add Provision 15,000 Interest accrued on Investments 2,750
Depreciation Reserve A/c 71,000 Plants & Machinery 2,00,000
Add Provision 10,000 Moter Vehicles 15,000
Manager’s Remuneration O/s 4,000 Furniture & fixture 5,000
Unclaimed Dividend 6,526 Building 1,00,000 3,20,000
10,56,00
TOTAL 0 TOTAL 10,56,000
2003 / SEM I/ 2 / 1

Share Capital 55,00,000
Debt Capital 45,00,000
1,00,00,00
TOTAL 0 Hence TOTAL Assets = 1,00,00,000
Sales 75,00,000
VC 42,00,000
Contribution 33,00,000
FC 6,00,000
Profit (before Interest & Taxation) (EBIT) 27,00,000
Less Interest & Tax (I,T) 4,05,000
Profit (After Tax) (PAT) 22,95,000
(a) Return on Investment = EBT X 100 =22,95,000 X 100 = 41.73%

Equity Share Capital 55,00,000
Note: When Interest on 9% Debts is already paid to the Debt instrument Holders, hence the Net Earning now
belongs to the Shareholders.
(b) Assets Turnover Ratio: Net Sales = 75,00,000 = 0.75

Net Assets of the company 1,00,00,000
Note: On the basis of Industry’s Assets Turnover Ratio, the sales of Manico & Co. should be Rs. 1,00,00,000 X 3
-= Rs. 3,00,00,000 whereas it is only Rs. 75,00,000 which is only 25% of the expected turnover based
upon Industry’s average. Hence it is much below to the the Industry’s Rate. Hence in conclusion, we can
say that the Manico & Co has low Asset’s leverage.
(C) 0perating Leverage = Contribution = 33,00,000 = 1.2222

EBIT 27,00,000
Finance Leverage = EBIT = 27,00,000 = 1.1764
EBT 22,95,000
Combined Leverage = Contribution x EBIT = 33,00,000 X 27,00,000 = 1.44
EBIT EBT = 27,00,000 22,95,000
(D) When sales dropped to Rs. 50,00,000, it appears that production has also been reduced to 2/3. Therefore
Contribution/ Sales = 33 L / 75L X 100 = 44% or 0.44 hence VC = 42L / 75L X 100 = 56% = O.56. Hence
when sales is 50L, Contribution = 50l X 44 X 100= 22L & VC = 50L X 56 /100 = Rs 28L. So (New) EBIT
= (New) Contribution – FC = 22L – 6L = 16L & Debt’s interest will remain same. Hence
Sales 50,00,000
VC 28,00,000
Contribution 22,00,000
FC 6,00,000
Profit (before Interest & Taxation) (EBIT) 16,00,000
Less Interest & Tax (I,T) 4,05,000
Profit (After Tax) (PAT) 11,95,000
(E) as per given data
VC / Sales = 42L / 75L X 100 = 56% = O.56
We have EBT= EBIT – I or Interest +0 = EBIT = Interest payable
Therefore Sales – (VC + FC) = EBIT
Therefore Sales = X – (0.56X + 6,00,000) = 4,05,000
Or 0.44X =6,00,000 + 4,05,000 = 10,05,000
Or 0.44X = 10,05,000= 22,84,091
0.44X
Thus at Sales of Rs. 22,84,091 the EBT = 0. Verification=
EBT = 0
Interest = 405000
EBIT = 405000
FC = 600000
Contribution =10,05,000
VC = 12,79,091
Sales= 22,84,091
2003 / SEM I/ 3 / 1
Working Capital = Current Assets – Current Liabilities = Rs. 60,000
Current Ratio = Current Assets / Current Liabilities = CA / CL =2.5

Or CA = 2.5 CL or 2.5CL-CL = 1.5 CL = Rs. 60,000
Hence Current Liabilities = Rs. 60,000 / 1.5 = Rs. 40,000 therefore CA = Rs. 40,000 X 2.5 = Rs. 1,00,000
Liquid Ratio = Current Assets – Stock = 1.5 = Rs. 1,00,000 – Value of Stock
Current Liabilities Rs. 40,000
= Rs. 1,00,000 – Value of Stock = Rs. 40,000 x 1.5 = Rs. 60,000 = Rs. 1,00,000 – Rs. 60,000 = SV
Rs. 40,000
= Rs. 40,000
Hence total Current Assets Rs. 1,00,000
Less Stock Rs. 40,000
= Liquid Assets Rs. 60,000
Fixed Assets = Proprietorship Ratio = Fixed Assets = Fixed Assets
Reserve & Surplus + (Proprietor’s Capital =x) [ 40,000 + x]
= 0.75 or 0.75 [ 40,000 + x] = [ 30,000 + 0.75x] = Fixed Assets
As we know (Fixed Assets + Current Assets) = Current Liabilities + Reserve + Capital
Or (Fixed Assets + Current Assets + Current Liabilities) = Reserve + Capital
Or = Fixed Assets + (Current Assets – 100,000) – (Current Liabilities) – (Reserve) = Capital
Or = (Fixed Assets + 100000) – (40000) = (40000) + Capital
Or = (Fixed Assets + 100000) – (40000) - (40000) = Capital
Or = (Fixed Assets + 100000) – (40000) - (40000) = Capital
Or = (Fixed Assets + 20000) = Capital
Or = Proprietor’s Fund + Current Liabilities = (Fixed Assets + Current Assets)
Or = Fixed Assets = 0.75 or Fixed Assets = 0.75 [ Net Worth] = 0.75 Net Worth
Proprietor’s Fund (or Net Worth)
Or Net Worth + Rs. 40,000 = 0.75 Net Worth + Rs. 1,00,000
Or Net Worth x 0.75 Net Worth = Rs. 1,00,000 - Rs. 40,000
Or 0.25 Net Worth = Rs. 1,00,000 - Rs. 40,000
Or 0.25 Net Worth = Rs. 60,000
Or Net Worth = Rs. 60,000 / 0.25 = Rs. 2,40,000
So Capital = Net Worth - Rs. 40,000 or Rs. 2,40,000 - Rs. 40,000 = Rs. 2,00,000
CLA RIFICATION:- Since Fixed Assets = 0.75 [ Net Worth],
Hence Fixed Assets = Rs. 2,40,000 x 0.75 = Rs. 1,80,000
By substituting above Calculated Value in Assets & Liabilities side of Balance Sheet, we get
Balance Sheet
Current Liabilities Current Assets
Bank Overdraft 10,000 Stock 40,000
Other Liabilities 30,000 40,000 Liquid Assets 60,000 1,00,000
Capital and Reserve & Surpluses Fixed Assets 1,80,000
Capital 2,00,000
Reserve & Surpluses 40,000 2,40,000
TOTAL 2,0,000 TOTAL 2,80,000
2003 / SEM I/ 3 / 2
Cost & Profit Statement under Marginal Costing
PRODUCTS A B C TOTAL
Sales 32,000 61,000 16,000 1,09,000
Less Variable Cost of Goods sold
Direct Material 75,000 30,000 3,000
Direct Wages 9,000 9,000 1,500
Variable Factory OH 3,900 9,000 4,500
Variable Selling OH 2,100 6,000 3,000
Total Variable Cost of Goods sold 22,500 54,000 12,000 88,500
CONTRIBUTION (or Marginal Cost) 9,500 7,000 4,000 20,500
Less Fixed Cost of Goods sold
Fixed Factory OH 3,000 1,900 1,500
Fixed Selling OH 1,500 500 600
Total Fixed Cost of Goods sold 4,500 2,400 2,100 9,000
Manufacturing Profit 5,000 4,600 1,900 11,500
Cost & Profit Statement under Absorption Costing

PRODUCTS A B C TOTAL
Direct Material 7,500 30,000 3,000 40,500
Direct Wages 9,000 9,000 1,500 19,500
PRIME COST 16,500 39,000 4,500 60,000
Applied Factory OH (60% of Prime Cost) 9,900 23,400 2,700 36,000
Works Cost 26,400 62,400 7,200 96,000
Over (or Under) Applied OH 3,000 12,900 (3,300) 12,600
Factory Cost of Goods Sold 23,400 49,500 10,500 83,400
Sales 32,000 61,000 16,000 1,09,000
Gross or Selling Profit ( ) 8,600 11,500 5,500 25,600
Less Selling Expenses 3,600 6,900 3,600 14,100
Net Operating Profit 5,000 4,600 1,900 11,500
Thus under Marginal Costing, Profit for the Products A, B & C is 9,500: 7,000: 4,000 respectively whereas
under Absorption Costing Profit for these Products is 8,600: 11,500: 3,600 respectively. However, Net
Profits from operations under both he system are same being there is no opening or closing stock. From
these figure per unit cost of manufacture = VC + FC = 14 +2 =16. Since Selling Price is 115% of cost of
manufacture therefore Total Sales will be Rs. 16 X 115% = Rs. 18.40 = Rs. 27,60,000 and other costs were
worked out accordingly.
2003 / SEM I/ 3 / 3a
PRODUCTS Price per unit (Rs.) For 15,000 units (Rs.)

Selling Price 18-40 27,60,000
Less Variable Cost 14-00 21,00,000
CONTRIBUTION (or Marginal Cost) 4.40 6,60,000
Less Fixed Cost of Goods sold 2-00 3,00,000
Earning Before Interest & Tax (or EBIT) 2-40 3,60,000
Hence, on the basis of above information, we will calculate:-

(I) BEP (of output) = Total Fixed Cost = Rs. 3,00,000 = 68,181.81 or 68,182 Units
Contribution per unit Rs. 4.40
BEP (of output)

= Fixed Cost X Selling Price per Unit = Rs. 3,00,000 x Rs. 18.40 = Rs. 12,54,545.45 or Rs. 12,54,546
or = Fixed Cost x Total Sales Rs. 9,00,000 x Rs. 35,00,000 = Rs. 30,00,000
Total Contribution Rs. 10,50,000
(II) P / V Ratio = Contribution per unit / Selling Price per Unit = Rs. 4.40 x 100 / Rs 18-40 = 23.913%
Or = Total Sales = Rs. 6,60,000 x 100 = 23.913%

Total Contribution Rs.27,60,000
(III) If Selling Price reduced by 5%, then new Selling Price = Rs. 18.40 x 95% = Rs. 17.48 for the
output of 1,50,000 then
New BEP (of output) = Total Fixed Cost = Rs. 30,00,000 = 86,206 Units
New BEP (of output)

= Fixed Cost X New Selling Price per Unit = Rs. 3,00,000 x Rs. 17.48 = Rs. 15,06,897
New Contribution per unit Rs. 3.48
(IV) P / V Ratio = New Contribution per unit x 100 / New Selling Price per Unit
= Rs. 3.48 x 100 / Rs 17-48 = 19.908% = or 19.91%
New Budgeted Profit = Budgeted Profit + 10% of Budgeted Profit = 3,60,000 + 36,000 = 3,96,000
New Contribution = New Budgeted Profit + Fixed Cost = 3,96,000 + 3,00,000 = 6,96,000
Revised Sales
= (New Budgeted Profit + Fixed Cost) x New Selling Price per Unit
P / V Ratio
= 6,96,000 x Rs. 17.48 = Rs. 34,96,000
19.908%
Revised Volume = New Contribution per unit = Rs. 6,96,000 = 20,000 Units
New Contribution per unit Rs. 3.48
2003 / SEM II/ 1 / 1
What kind of decision executives or managers have to make about their companies and their activities? How
do these differ from decisions, which investors, regulatory agencies & other make about those companies?
Do Groups from need the same kind of information within & outside the company? If so, what is that
information? If not, what are the essentials differences?
2003 / SEM II/ 1 / 2

The Trial Balance of XYZ Ltd. for the year ending 31st March, XXXX , as under:-
st
Trial Balance of XYZ Ltd. as on 31 March, .XXXX
PARTICULERS Rs.
Share Capital: 5,000 Equity Shares of Rs. 100 each 5,00,000 4L
6% Debenture secured on the mortgage of fixed assets 1,00,000 4L
Provisions for Taxation for the assessment year 2001-02, 2002-03 1,00,000 4L
Sundry Creditors 52,000 4L
Discount on issue of Debentures 4,000 4L
Profit & Loss A/c (Credit Balance) 10,000 4L
Gross Profit 5,00,000 2C
Dividend Received on Investment ( Gross Rs. 10,000) 7,000 2C
Director’s Fees 1,00,000 2D
Interest on Debentures 5,000 2D
Income Tax deducted on Interest on Debentures 1,500 2D
Audit Fee (including Rs. 1,000 for Tax Representation) 5,000 2D
Miscellaneous Trade Expenses 1,10,000 2D
Advance against Construction of Buildings 50,000 4A
Building (Cost Rs. 4,00,000) 3,00,000 4A
Furniture (Cost Rs.1,00,000) 5,000 4A
Moter Vehicles 30,000 4A
Equity Share of other Companies (Market Value Rs. 2,20,000) 2,00,000 4A
5,000 10% Preference Shares of Rs. 10 each of other companies (Rs. 6 paid up) 30,000 4A
Stock in Trade (at cost) 2,00,000 4A
Sundry Debtors (Consider for Unsecured Goods) 1,40,000 4A
Cash at Bank 57,500 4A
Preliminary Expenses 30,000 4A
You are required to prepare a Profit & Loss Account for the year ending 31st March, XXXX and the Balance
Sheet on that date after taken into Account following adjustments:
1. The method of valuation of Closing Stock has been charged & this resulted in
reduction of the value of the closing stock to Rs. 1,90,000. This has not been adjusted. 4A, 2D
2. Closing Stock also includes goods worth Rs. 20,000, which cannot be marketed. 4A,
2D
3. Provide Depreciation at @10% on the original cost of all fixed assets. 4A, 2D
4. Moter Vehicles account represents two old vehicles standing in the books at Rs.
5,000 each (original cost Rs. 15,000 each) & a new vehicle purchased on 1st January, XXXX for Rs.
20,000. One of the old vehicles was sold for Rs. 4,000 & amount was credited to Sales Account. 4A,
2D
5. The Company has contracted for the construction of a building at Rs. 1,50,000
which is still incomplete. 4A
6. Provide Rs. 1,00,000 towards taxation liability for the current year. 4A, 2D
7. Sundry Creditors include Rs. 2,000, which had already been paid. 4L
8. Dividend is proposed for the year at 20%.4L, 2C
9. Debtors outstanding for more than six months: Rs. 40,000. . 4A, 2D
10. Cash Balance includes a Cheque for Rs. 10,000 returned by the banker for want of
balance in the account. . 4A, 2D
P& L A/c for the year ended as on 31-03-2003
Particulars Amt. (Rs.) Amt. (Rs.) Particulars Amt. (Rs.) Amt. (Rs.)
Salaries & Wages 1,00,000 Gross Profit 5,00,000
Directors Fees 4,000 - Loss on value of Vehicle 4,000 4,96,000
Interest on Debenture 5,000 Dividend Received on Investment 10,000 7,000
+ Tax Deducted at Source 1,500 6,500 - Tax Deducted at Source 3,000
Audit Fee 4,000 Profit on sale of Vehicle 500
Tax Representation Fee 1,000
Misc. Expenses 1,10,000
DEPRECIATION ON
Building 40,000
Furniture 1,000
Moter Vehicle 1 1,500
Moter Vehicle sold 1,500 47,500
Loss on Valuation of stock 20,000
Loss on Absolution of stock 10,000
Balance c/f to P& L Adj.A/c 2,00,500
Total 5,03,500 Total 5,03,500
P& L Adj. A/c

Particulars Amt. (Rs.) Particulars Amt. (Rs.)
Provisions for Taxation 1,00,000 Balance b/d 10,000
Provisions for 1,00,000 P& L A/c 2,00,500
Balance c/d 10,500
Total 2,10,500 Total 2,10,500
BALANCE SHEET
LIABILITIES Amt. (Rs.) Amt. (Rs.) Assets Amt. (Rs.) Amt. (Rs.)
Share Capital : Fixed Assets Building at cost 4,00,000 2,60,000
authorized, issued & Subscribed: - Depreciation 1,00,000
5,000 shares of Rs. 100 each 5,00,000 3,00,000
fully paid - Depreciation 40,000
Secured Loan 6% Debentures 1,00,000 Furniture at cost 10,000
- Depreciation 5,000
5,000
- Depreciation 1,000 4,000
Unsecured Loan 52,000 Moter vehicle (1& 2) at cost 30,000
Sundry Creditors 2,000 50,000 - Depreciation 20,000
Less paid 10,000
-
- Depreciation 3,000 7,000
(3) at cost 20,000
Depreciation 2,000 18,000
Reserve & Surplus P& L A/c 10,500 INVESTMENTS
PROVISIONS Equity Shares (at Cost & Paid 2,00,000
up value)
Preference Shares (at Cost 3,00,000
& Paid up value)
Provisions for 2000-01 & 01-02 1,00,000 Current Assets
+ provisions for current year 1,00,000 2,00,000 Stock in Trade (at Cost ) 2,00,000
Less Devaluation 10,000
1,90,000
Less Obsolance 20,000 1,70,000
Provisions for Proposed Dividend 1,00,000 DEBENTURES
Within Six Month 1,00,000
Over Six Month 40,000 1,40,000
Cash & Bank Balance 57,500
_ Cheque Returns 10,000 47,500
Misc. Assets
Building Advance 50,000
Preliminary Expenses 30,000
Discounts on issue of 4,000
debentures 84,000
Total 9,60,500 Total 9,60,500
2003 / SEM II/ 1 / 3

Vivek Manufacturing Company manufactures bags that are sold to retailers at Rs. 10 per bag. The Cost
particulars are as follow:-
Direct Material Cost (one piece @ Rs.1.50 ) 2.50
Direct Wages (3 Hours @ Rs.1.00 ) 1.50
Variable Manufacturing Overheads 1.00
Variable Selling Overheads 1.50
Variable Administrative Overheads 0.50
TOTAL 7.00
Fixed Costs are

Manufacturing Overheads 4,00,000
Selling Overheads 3,00,000
Administrative Overheads 2.00.000
TOTAL 9,00,000
This year sakes were 3,50,000 units. The company desired to earn a net income of Rs. 6,00,000 before taxes.
The firm is evaluating a marketing program designed to achieve the firm’s desired Net Income. The program
would increase fixed cost by Rs. 1,45,000 & variable cost by Rs.0.25 per unit.
You are required to:-

(1) Calculate the Break Even Point in Units & Rs. Sales.
(2) Prepare a detailed Cost-Volume-Profit Chart, carefully labeled, and based on current situation.
(3) Compute the Margin of Safety Ratio for the current year.
(4) Ignoring the marketing program, compute the sales level that will satisfy Vivek’s net Income
Requirement.
(5) Compute the Break Even Point with the new marketing program.
(6) If the marketing Program is implemented & sales are precisely enough to achieve the firm’s
minimum net income requirement, what is the margin of safety ratio.
Units Sales 3,50,000 Present Proposed
:Per Units (Rs.) Amt. (Rs.) : Amt. (Rs.) Per Units (Rs.)
Sales 10-00 35,00,000 41,82,500 11-95
VC 7-00 24,50,000 25,37,500 7.25
Contribution 3-00 10,50,000 16,45,,000 4.70
FC 2-5714 9,00,000 10,45,000
Profit 1,50,000 6,00,000
Less Tax 57,750 2,31,000
Profit After Tax 92,250 3,69,000
Sales = Selling Price per Unit x Units Sold

Sales = Variable Cost + Fixed Cost + Profit
Variable Cost (or VC) = Marginal Cost
Contribution = Sales – VC
Contribution = Fixed Cost + Profit
Profit = Contribution – Fixed Cost (FC)
Fixed Cost = Contribution - Profit
Profit / Volume Ratio (or P / V Ratio) = CONTRIBUTION per unit or Total Contribution
Selling Price Per Unit Total Sales
In case P / V Ratio is to be expressed as % of Sales the figure can be derived from the formulae as
given above should be multiplied by 100. thus
BEP (of output) = Fixed Cost = Rs. 9,00,000 = 3,00,000 Units

CONTRIBUTION per unit Rs. 3
BEP (of output) = Fixed Cost X Selling Price per Unit = Rs. 9,00,000 x Rs. 3 = Rs. 30,00,000
CONTRIBUTION per unit Rs. 3
or = Fixed Cost x Total Sales Rs. 9,00,000 x Rs. 35,00,000 = Rs. 30,00,000
Total Contribution Rs. 10,50,000
or Fixed Cost = Rs. 9,00,000= Rs. 9,00,000 = Rs. 30,00,000 (Here P / V Ratio = Contribution / Sales = 3/10)
1 – Variable cost per Unit =1 – 7 (or 0.3)
Selling Price per Unit 10
At BEP, the desired profit is zero, in case of volume of output of sales is to be computed for a desired
profit, the amount of desired profit should be added to the fixed cost in the formula given above, hence
Unit sales for desired profit = Fixed Cost + desired profit = Rs. 16,45,000 = 2,13,637 Units
or Fixed Cost + desired profit = or Fixed Cost + desired profit =Rs. 16,45,000 = Rs. 25,52,960
1 – Variable cost per Unit P / V Ratio (0.6443) (Here P / V Ratio = Contribution / Sales = 7.70/11.95=0.6443)
Selling Price per Unit
TRADING ACCOUNTS AS ON 31-12-2004
70,200 Sales 4,34,400
Stock Opening - Sales Returns 12,500 4,21,500
Purchases 3,64,650 Stock closing 1,20,000
- Purchases Returns 8,700
3,55,950
- Gupta’s Capital A/c 700
3,55,250
- Furniture A/c 1,000
3,54,250
+Purchases A/c 1,800 3,56,050
Carriage A/c 27,900
+ Carriage outstanding 150 28,050
Balance c/f to P& L A/c 87,2,00
Total 5,41,500 Total 5,41,500
P & L A/C
Rates & Taxes 8,550 Gross Profit 87,200
Salaries 13,950 Interest received 400
+ outstanding 1,200 15,150 Interest outstanding 3,650
Bad & Doubtful Debts 1,650 Discount Received 6,300
Printing & Stationery 21,900
- prepaid 5,475 16,425
Prompt Payment Discount 627
Insurance 900
- Prepaid 120 780
Discount Paid 11,310
Depreciation on Furniture 370
Interest paid on bank loan 1,350
+ outstanding 450 1,800
General Expenses 6,000
Audit Fee 1,050
Traveling Expenses 3,500
Postage & telegram 4,070
Balance c/f 2,6,268
Total 97,550 Total 97,550
Mr. Gupta’s A/c
Particulars Amt. (Rs.) Particulars Amt. (Rs.)
Drawing 15,000 Balance b/d 165,000
Sundry Debtors 3,000 Sundry Creditors 4,000
purchases 700 purchases 1,800
Balance c/d 1,52,100
Total 1,70,800 Total 1,70,800
BALANCE SHEET
LIABILITIES Amt. (Rs.) Amt. (Rs.) Assets Amt. (Rs.) Amt. (Rs.)
Sundry Creditors 22,200 Cash in hand 570
Less Mr. Gupta’s A/c 4,000 18,200 Cash at Bank 12,000
Carriage outstanding 150 Stock 1,20,000
Salaries outstanding 1,200 Prepaid Insurance 120
Prepaid Printing & Advertisement 5,475
Bank Loan 6% 30,000 Sundry Debtors 36,000
Interest outstanding on Bank Loan 6% 450 - Mr. Gupta’s A/c 3,000
33,000
- Bad & Doubtful Debts 1,650
31,350
- Prompt payment 627
Discount 30,723
P&L A/c 26,268 Investment 7,500
9% Deposits with A.N. Sen 45,000
Interest Receivable on 9% Deposits
with A.N. Sen 3,650
Capital : (in Balancing figure) 1,52,100 Furniture at cost 2,700
+ Purchases 1,000
3,700
- Depreciation 370 3,330
Total 2,28,368 Total 2,28,368
2003 / SEM II/ 2 / 1

The following data are available with R. L. Kiran & Co. Ltd.,:-
(Rs. in Lakhs)
Cash & Marketable Securities 100.00
Fixed Assets 283.50
Sales 1000.00
Net Income 50.00
Quick Ratio 2.00
Current Ratio 3.00
Days sales outstanding 40 days
Return on Equity 12%
Kiran & Co has no Preference Capital- only Equity Capital, Current Liabilities & Long Term Debts.
(a) Find Kiran’s (i) Account Receivables (ii) Current Liabilities (iii) Current Assts (iv)
Total Assets (v) Return on Assets (ROA) (vi) Common Equity & (vii) Long Term Debts.
(b) If Kiran could reduced its days sales outstanding (DSO) from 40 days to 30 days
while holding other things constant, how much cash would it generate? If this cash were used to buy
back common stock (at Block Value), thus reducing the amount of common equity, how this would
affect:-
(i) the Return on Equity (ROE) (ii) the Return On Assets (ROA) & (iii) the Total Debt/ Total Assets
Ratio?
Current Ratio =Current Assets / Current Liabilities = 3,
hence Current Assets = 3 time of Current Liabilities = 3 x 105.56 L = 316.68L.
Quick Ratio= Liquid Assets / Current Liabilities = 2, hence Liquid Assets
= 2 time of Current Liabilities = 2 x 105.56 L = 211.12L
(I) Account Receivables:- Sales X No. of days Sales outstanding = 1,000 X 40 = 111.12 Lakh
360 360
(ii) Current Liabilities :- (Total of Quick Assets / Quick Ratio)
Quick Assets = Cash & Marketable Securities = 100 +111.12 = 105.56 L
2.0 2.00
(iii) Current Assts :- (Total of Stock + Debtors + Cash) X Current Ratio = Quick Assets X Current Ratio
= 105.56 X 3.00 = 316.68 L
(iv) Total Assets:- (Fixed Assets + Current Assets)
= 283.50 + 316.68 = 600.18 L
Share Capital = 50 / 0.12 = 416.66 L

(v) Return on Assets (ROA):- Net Profit X 100 / Total Assets = 50L x 100 / 618.18 L = 8.339%
(vi) Common Equity :- Shareholder’s Fund X 100 / Total Liabilities= 522.23L X 100 / 600.18= 87.0122%
(vii) Long Term Debts:- Long Term Debts X 100 / Total Liabilities = 77.95 X 100 / 600.18 = 12.987%
LIABILITIES ASSETS
Share Capital 416.67 Total Fixed Assets 283.50
Current Liabilities 105.56 Total Current Assets
Long Term Debts (in balancing figure) 77.95 Cash & Marketable Securities 100.00
Debtors 111.12
Stock 105.56
TOTAL 600.18 TOTAL 600.18
New Account Receivables:- Sales X No. of days Sales outstanding = 1,000 X 30 = 83.333 Lakh
360 360
Hence Cash that will go out = Rs. 111.12L – 83.33 = Rs. 27.79 L
New Balance Sheet after Buy Back of Shares
LIABILITIES ASSETS
Share Capital 416.67 Total Fixed Assets 283.50
- Buy Back 27.79 388.88 Total Current Assets
Cash & Marketable Securities 100.00
Current Liabilities 105.56 Debtors 83.33
Long Term Debts (in balancing figure) 77.95 Stock 105.56
TOTAL 572.39 TOTAL 572.39
Comparative Changes after Buy Back of Shares
Return on Equity
Before Buy Back = 12% i.e. 416.67 x 12 /100 = 50.0004L
After Buy Back =50.0004L X 100 / 388.88 = 12.8574 = 12.86%
Hence Return on Equity is increased by 12.86 – 12 = .86%
Return on Assets
Before Buy Back = 50 x 100 / 600.18 = 8.3333%
After Buy Back = 50 x 100 / 572.3918 = 8.74%
Hence Return on Assets is increased by 8.74 – 8.33 = 0.41%
Total Debt / Total Assets Ratio

Before Buy Back= 183.51 x 100 / 600.18 = 30.5758%
After Buy Back = 183.51 x 100 / 572.3918 =32.0603%
Hence Total Debt / Total Assets Ratio is changed by 32.0603 - 30.5758 = 1.4845%
2003 / SEM II/ 2 / 2

Gattu Corporation makes a driveway-sealing compound that it sells in 5-gallon cans for Rs. 50 per can.
Company’s sales personnel have estimated annual sales of 3,600 units divided among the quarter as
under:-
Quarter Sales (Units)
I 1,000
II 1,100
III 800
IV 700
Operating Capacity of the manufacturing facilities is 900 units per quarter. Production of more then 900
units requires additional costs. Production cost is Rs. 30 per unit & there would be a 20% increase in cost for
units in excess of 900 per quarter. The production manager is evaluated on the cost of production, whereas
the sales manager is evaluated based on sales revenue. The sales manger claims that if he had only 900 units
to sell in each of the first two quarter, the unsatisfied customers would switched to new products & sales in
each of the last two quarter would be 50 units less then estimated.
You are required to prepare Sales & Production Budgets to determine how production should be schedule &
to resolve the conflict between the sales & production managers.
As per Production Manager As per Sales Manager

Ist IInd IIIrd IVth Ist IInd IIIrd IVth
Qtr. Qtr. Qtr Qtr Total Qtr. Qtr. Qtr Qtr Total
No. of units Sales 1000 1100 800 700 3,600 900 900 750 6500 3200
Selling Price per Unit 50 50 50 50 50 50 50 50
Sales (Revenue) 50000 55000 40000 35000 180000 45000 45000 37500 32500 160000
Coat of Production
Including Addl. Cost) 30600 34200 24000 21000 109800 27000 27000 22500 19500 96000
Contribution 19400 20800 16000 14000 70200 18000 18000 15000 13000 64000
Fixed Cost 15000 15000 15000 15000 60000 15000 15000 15000 15000 60000
Profit 4400 5800 1000 -1000 10200 3000 3000 0 -2000 4000
It is seen that Marginal Profit generated even if Additional Cost incurred for manufacture the items & profits is maximum
besides keeping in its fold. Its order resolve this dispute & maintaining customers with the concern, projected Budget of the
Production Manager can be accepted being it is also helpful in maintaining customers with the undertaking consider the
Sales Managers view. However, with the objectives of maximization of TURNOVER, Revenue profit & Retaining customers.
2003 / SEM II/ 2 / 3

As a Finance Manager what is your role in matters of Dividend Policy, what will be the alternatives &
factors that you may consider before finalizing your views on dividend policy?
2003 / SEM II/ 3 / 1

You are required to calculate overheads variances when:-
(a) Standard Overhead rate Per Hour is used
(b) Standard Overhead rate Per Unit is used
BUDGETED ACTUAL
Production in units 12,500 11,000
Man Hours 6,250 5,750
OVERHEAD COST:
Fixed 12,500 13,000
Variables 50,000 45,000
Overhead Cost Variance
!
VOH Cost Variance FOH Cost Variance
! ! !
!
VOH VOH FOH FOH
Expenditure Variance Efficiency Variance Expenditure Variance Expenditure Variance
!
!
FOH Exp Variance FOH Capacity Variance
Variable Total OHCV (When Standard Overhead Rate per Hour is used):-
Standard Fixed OH Rate per hour =
Budgeted FOH = Rs. 12,500 = Rs. 2 per Hour
Budgeted Hours 6,250 hours
Standard Variable OH Rate per hour =

Budgeted VOH = Rs. 50,000 = Rs. 8 per Hour
Total Standard OH Rate per hour =

Variable Total OHCV (When Standard Overhead Rate per Unit is used = VOHCV + FOHCV
Standard Fixed OH Rate per hour =
Budgeted units 12,500 Units
Standard Variable OH Rate per hour =

Budgeted VOH = Rs. 50,000 = Rs. 4 per Units
Total Standard OH Rate per hour =

Budgeted FOH = Rs 62,500 = Rs. 5 per Units Hour
Total OHCV (When Standard Overhead Rate per Hour is used):- = Recovered OH - Actual OH
= (Actual Units X Actual Rate) – Actual OH
= ( 11,000 X 5) - 58,000 = 55,000 - 58,000 = (- 3,000)
Variable OHCV = Recovered VOH - Actual VOH = (Actual Units X Actual Rate) – Actual OH
= ( 11,000 X 4) - 45,000 = 44,000 - 45,000 = (- 1,000)
Fixed OHCV = Recovered FOH - Actual FOH = (Actual Units X Actual Rate) – Actual OH
= ( 11,000 X 1) - 13,000 = 11,000 - 13,000 = (- 2,000)
Verification:- Total OHCV = Variable OHCV - Fixed OHCV = (- 3,000) = (- 1,000) + (- 2,000)
Total OHCV (When Standard Overhead Rate per Unit is used): = Recovered OH - Actual OH
= (Actual Units X Actual Rate) – Actual OH
= (5,750 X 10) - 58,000 = 57,500 - 58,000 = (- 500)
Variable OHCV = Recovered VOH - Actual VOH = (Actual Units X Actual Rate) – Actual OH
= ( 5,750 X 8) - 45,000 = 46,000 - 45,000 = ( 1,000)
Fixed OHCV = Recovered FOH - Actual FOH = (Actual Units X Actual Rate) – Actual OH
= (5,750 X 2) - 13,000 - = 11,500 - 13,000 = (-1,500)
Verification:- Total OHCV = Variable OHCV - Fixed OHCV = (- 500) = ( 1,000) + (- 1,500)
2003 / SEM II/ 3 / 2a

XYZ Ltd. has a debt of Rs. 45,00,000 @9% & Equity of Rs. 55,00,000. This firm has sales of Rs. 75,00,000.
Variable Cost of Rs. 42,00,000 and Fixed Cost of Rs. 6,00.000.
(i) What is the firm Return on Investment (ROI)?
(ii) Does it have favourable Financial Leverage?
(iii) If the firm belongs to an industry whose assets turnover ratio is 3, does it have a high ore low
assts leverage?
(iv) What are the Operating Financial & Combined Leverage of the firm?
(v) If the sales drop to Rs. 50,00,000what will be the new EBIT?
LIABILITIES ASSETS
Equity Share Capital 55,00,000
Debt Capital (@ 9% Interest) 45,00,000
TOTAL 1,00,00,000 TOTAL 1,00,00,000
As per given data Statement of Cost & Profits and their distribution is as under:-
Sales Given If sales dropped to
RS. 50,00,000 RS. 50,00,000
Sales S 75,00,000 50,00,000
Less VC VC 42,00,000 28,00,000
Contribution Con. 33,00,000 22,00,000
Fixed Costs FC 6,00,000 6,00,000
Profit PBIT 27,00,000 16,00,000
Less Interest @ 9% I 2,43,000 2,43,000
Profit Before Tax PBT 24,57,00,000 13,57,00,000
Less Tax say @ 38.5% T 9,45,950 5,22,450
Profit after Tax PAT 15,11,650 8,34,450
Return on Equity = PAT/ Equity
Capital 61.50% 15.17%
FINANCIAL LEVERAGE & EQUITY RETURNS
CAPITAL DEBT Zero DEBT 45 Lakh DEBT 75Lakh

STRUCTURE Equity Rs. 1 crore Equity Rs. 55 Lakh Equity Rs.25 Lakh
Profit PBIT 27,00,000 27,00,000 27,00,000
Less Interest @ 9% I 0 2,43,000 6,75,000
Profit Before Tax PBT 27,00,000 24,57,000 21,25,,000
Less Tax say @ 38.5% T 10,39,500 9,45,950 8,18,125
Profit after Tax PAT 16,50,500 15,11,050
Return on Equity = PAT/ 21.607% 24.47% 23.761%
Equity Capital
Since under Debt Equity in 45:55 Ratio, Return on Equity is highest, we may continue with existing system
being favourable because in changed scenario to existing Debt Equity Ratio leads to reduction in Return on
Equity.
Based on Assets Turnover Ratio 3, the required sales should be Rs. 1 crore x 3 = Rs. 3 crore. Whereas it is
on Rs. 75 Lakh which will be only 25% of the industry’s average, hence is not acceptable being
unsatisfactory
FINANCIAL LEVERAGE = Operating Profit = EBIT = 27,00,000 = 1.0989
Profit before Tax EBT 24,57,000
OPERATING LEVERAGE= Contribution = C = 33,00,000 = 1.2222
Operating Profit = EBIT 27,00,000
COMBINED LEVERAGE= Operating Profit x Contribution = EBIT x C
Profit before Tax X Operating Profit EBT EBIT
= 27,00,000 X 33,00,000 = 33,00,000 = 1.34307 or1.3431
24,57,000 X 27,00,000 24,57,000
.2003 / SEM II/ 3 / 2b

You are a Financial Analyst for Susan Electronics Company. The Director of Capital Budgeting has asked
you to analyze two proposed capital investments Projects P & Q. Each project has a cost of Rs. 10,000 &
cost of the capital for each project is 12%. The projects expected net cash flow are as under:-
Expected Net Cash Flow (Rs.)
Year Project P Project Q
0 10,000 10,000
1 6,500 3,500
2 3,000 3,500
3 3,000 3,500
4 1,000 3,500
(i) Calculate each project’s Pay Back Period, Net Present Value (NPV) Internal Rate of Return (IRR).
(ii) Which project or projects should be accepted if they are independent?
(iii) Which project or projects should be accepted if they are mutually exclusive?
(i) How might a change in cost of capitals produce a conflict between the NPV &
IRR rankings of these two projects? Would this conflict exist if k were 5% (HINT:- plot the NPV
Profits ).
PAY BACK PERIOD
Project P Project Q
Year Cash Flow Cumulative Cash Flow Cash Flow Cumulative Cash Flow
0 10,000 (-10,000) 10,000 (-10,000)
1 6,500 -3,500 3,500 -3,500
2 3,000 -500 3,500 -3,000
3 3,000* 2,500 3,500* 500
4 1,000 3,500 3,500 4,000
For balanced Recovery period in third year, for both the project worked out as under:-
*Project P = 500/ 3000 = 1/6 year & *Project Q = 3000 / 3500 = 6/7 year
Hence, from the above calculations, the Pay Back Period for Project P is = 2 years + 1/6 year or 2 + 0.167
year = 2.167 year whereas for Project Q it is = 2 years + 6/7 year or 2 + 0.86 year = 2.86 year
NET PRESENT VALUE (@ 10% Rate of Interest):-
Project P Project Q
Year Cash Present Value of Present Cash Present Value of Present
Flow Cash Flow Value Flow Cash Flow Value
0 -10,000 0 0 -10,000 0 0.0
1 6,500 0.909 5,908.5 3,500 0.909 3,181.5
2 3,000 0.826 2478.0 3,500 0.826 2,891.0
3 3,000 0.751 2,253.0 3,500 0.751 2,685.5
4 1,000 0.683 683.0 3,500 0.683 2,390.5
Total of Present Value 11322.5 11091.5
Initial Outlays 10000 10000
Net present Vlue 1322.5 1091.5
Hence, from the above calculations, the Net Present Value for Project P is higher hence Project P is proffered.
Project P Project Q
discount discount Present Present Present Present
Factor Factor Cash Value Value Cash Value Value
Year @15% @16% Flow @15% @16% Flow @15% @16%
0 -1 -1 -10,000 -10000 -10000 -10,000 -10000 -10000
1 0.870 0.909 6,500 5655 5908.5 3,500 3045 5655
2 0.756 0.826 3,000 2268 2478.0 3,500 2646 2268
3 0.658 0.751 3,000 1974 2253.0 3,500 2303 1974
4 0.572 0.683 1,000 572 683.0 3,500 2002 572
Total of Present Value= 10,469 11322.5 9996 11,092
Initial Outlays= -10000 -10000 -10000 -10000
Net present Value = 469 1322.5 -4 1,092
Hence, from the above calculations, the Net Present Value for Project P is higher hence Project P is proffered.
NPV (@ 5% Rate of Interest)

Project P Project Q
Year Cash Present Value factor of Present Cash Present Value factor of Present
Flow Cash Flow @ 5% interest Value Flow Cash Flow@ 5% interest Value
0 -10,000 1.0000 -10000 -10,000 1.0000 -10000
1 6,500 0.952 6188 3,500 0.952 3332.0
2 3,000 0.907 2721 3,500 0.907 3174.5
3 3,000 0.864 2592 3,500 0.864 3024.0
4 1,000 0.823 823 3,500 0.823 2880.5
Total of Present Value 12324 12,4 11
Initial Outlays -10000 -10000
Net present Value 2324 2,411
Hence, from the above calculations, the Net Present Value for Project Q is higher hence Project Q is proffered.
2003 / SEM II/ 3 / 3

Select any organization of your own choice & examine how the organization is managing its working capital?
Discuss with the officials about how they plan to improve it further, then prepare a detailed Report.
2004 / SEM I / 1 / 2
Neeti started her own delivery service. The following transaction occurred during the month of June:-
June 1 Stockholders invested Rs. 25,000 cash in the business.

2 Purchased a used van for deliveries for Rs.13,000. Neeti paid Rs. 2,000 cash & signed a note
payable for the remaining amount
3 Paid Rs. 900 for office rent for the month.
5 Performed Rs. 3,000 of Services on account.
9 Paid Rs. 200 in cash dividends.
13 Purchased supplies for Rs. 400 on account.
16 Received a cash payment of Rs. 750 for services provided on June 5.
18 Purchased Gasoline for Rs. 350 on account.
21 Received a cash payment of Rs. 1,900 for services provided.
23 Made a cash payment of Rs. 500 on the note payable/
26 Paid Rs. 450 for utilities/
29 Paid Rs. 350 for gasoline purchased on account on June 17.
30 Paid Rs. 600 for employee salaries.
You are required to prepare-

(a) An Income Statement for the month of June.
(b) A Balance Sheet on June 30, 2003 (See Chapter 4&5)
2004 / SEM I / 1 / 3
The Top Management of Shakti Co. Ltd. has been puzzled by fluctuations in the income as reported by
their accountant. The results for February, March, April as reported are as follow:-
February (Rs.) March(Rs.) April(Rs.)
Sales 18,00,000 18,00,000 9,00,00
Less Manufacturing Cost of Sales 16,60,000 13,60,000 4,30,000
Selling & Administrative Expenses 4,40,000 4,40,000 4,40,000
TOTAL EXPENSES 21,00,000 17,00,000 8,70,000
Net Income (3,00,000) 0 30,000
There has been no change in sales price during the 3-month period. During the months of February &
March, the plant sold 30,000 units. In April, it sold 15,000 units.
The production & sales for the 3 months are as follows:-

Opening Inventory 18,00,000 18,00,000 9,00,00
Add Manufactured during the month 16,60,000 13,60,000 4,30,000
TOTAL 4,40,000 4,40,000 4,40,000
Units sold 21,00,000 17,00,000 8,70,000
Closing Inventory 100 100 45,100
The Standard cost for the type of the units sold discloses the following information’s:-
Per Unit Cost (Rs.)
Direct Material & Direct Labour 30
Overheads Variables 2
Fixed 10
TOTAL MANUFACTURING COST 42
The fixed Manufacturing Cost Budgeted for each of the months was Rs. 4,00,000. There were no spending or
efficiency variances during three months. All Selling & Administrative Expenses were of fixed nature.
You are required to prepare Comparative Income statement for the 3 month, using (i) absorption costing and
(ii) Variable (Marginal) costing.
Variable (Marginal) costing.

February (Rs.) March(Rs.) April(Rs.) total
Sales 18,00,000 18,00,000 9,00,00 45,00.000
Less Manufacturing Cost of Sales 16,60,000 13,60,000 4,30,000 34,50,000
Selling & Administrative Expenses 4,40,000 4,40,000 4,40,000 13,20,000
TOTAL EXPENSES 21,00,000 18,00,000 8,70,000 47,70,000
Net Income (3,00,000) 0 30,000 2,70,000

Opening Inventory 18,00,000 18,00,000 9,00,00
Add Manufactured during the month16,60,000 13,60,000 4,30,000
TOTAL 4,40,000 4,40,000 4,40,000
Units sold 21,00,000 17,00,000 8,70,000
Closing Inventory 100 100 45,100
February
Absorption Costing per unit
Direct Material & Direct Labour 30 16,60,000
Prime Cost 32
Fixed Overheads (Selling & Administrative Expenses) 10 . 4,00,000
March
Prime Cost 32
Fixed Overheads (Selling & Administrative Expenses) 10
April
Prime Cost 32
Fixed Overheads (Selling & Administrative Expenses) 10 . 4,00,000
2004 / SEM I / 2 / 1
Balance Sheet of Nagpur Distilleries Ltd. as on 31st March, 2002 & 2003 is as under:-
2002 2003
ASSETS
Cash 20,000 22,000
Inventories 40,000 42,000
Account Receivables 30,000 35,000
CURRENT ASSETS (Net) 90,000 99,000
FIXED ASSETS (at Cost) 2,20,000 2,43,000
Accumulated Depreciation (90,000) (1,05,000)
FIXED ASSETS (Net) 1,30,000 1,38,000
TOTAL ASSETS 2,20,000 2,37,000
LIABILITIES & EQUITIES

CURRENT LIABILITIES
Accounts Payable 36,000 17,600
Interest Payable 4,000 26,400
CURRENT LIABILITIES (Net) 40,000 44,000
Fixed liabilities
Notes Payable to Bank 1,10.000 1,18,000
Long Term Debts 40,000 32,040
Retained Earning 20,000 23,000
Equity Share Capital 10,000 19,960
Fixed liabilities (Net) 1,80,000 1,97,000
LIABILITIES (Net) 2,20,000 2,37,000
Income Statement for these years is as under:-
2002 2003
Sales 1,20,000 190,000
Cost of Goods sold 72,000 1,20,000
Depreciation Expense 12,000 15,000
Selling of Goods & Advertisement Expenses 7,000 10,000
Interest Expenses 13,000 12,000
NET EXPENCES 1,04,000 1,57,000
INCOME BEFORE TAXES 16,000 33,000
INCOME TAX Expenses 7,000 14,400
NET INCOME 9,000 18,600
Compute :- (1) Activity Ratio

(2) Liquidity Ratio
(3) Solvency Ratio
(4) Profitability Ratio.
(5) Estimated Company’s operating & total leverage effect for 2001 & 2002
2004 / SEM I / 2 / 2
Kamal, the owner of Patni Motors is considering the addition of a paint & body shop to his automobile
dealership. Construction of building & purchase of necessary equipments is estimated to cost Rs. 7,00,000 &
both the building & equipments will be depreciated over 10 years using the straight line method. The building
& equipments have zero estimated residual value at the end of 10 years. Kamal’s Required Rate of Return for
this project is 10%. Net Income related to each year of the investment is as follow:-
Sales 3,60,000
Less:- Cost of Goods sold 60,000
Labour 1,40,00
Depreciation Expense 70,000
Other Expenses 5,000
NET EXPENCES 2,75,000
INCOME BEFORE TAXES 85,000
INCOME TAX Expenses 34,000
NET INCOME 51,000
You are required to-
(a) Determine the Net Present Value of the investment in the paints and body shop. Should Kamal invest in
this shop?
(b) Calculate the Internal Rate of Return on the investment.
© Calculate the Internal Rate of Return on the investment.
(d) Calculate the Accounting Rate of Return on the investment.
2004 / SEM I / 2 / 3
Analyze the dividend policy of any firm and discuss the factors those have influenced the dividend decision of
the firm.
2004 / SEM I / 3 / 2
Visit an organization of your choice & find out the investment appraisal methods that the organization
follows. Write a note on your visit.
2004 / SEM I / 3 / 1
From the information as indicated in the records of Alpine Engineering Corporation produces Single
chemical, has Standard Cost Structure as follows;-
Standards Per Unit Cost (Rs.)

Direct Material 2.4 Kg. @ Rs. 30 per Kg. 72.00
Direct Labour 6 Hours @ Rs. 4.00 per Hour 24.00
Factory Overheads 6 Hours @ Rs. 0.75 per Hour 4.50
TOTAL MANUFACTURING COST 100.50
The Factory Overheads is based on the following Budget:-

80% 90% 100% 110%
Production (Units) 6000 6750 7500 8250
Rs. Rs. Rs. Rs.
Variable Overheads 18,000 20,250 22,500 24,750
Fixed Overheads 11,250 11,250 11,250 11,250
Total 29,250 31,500 33,750 36,000
Actual Data during the month of April 2004

Budget Production 7500 units
Direct Material 19,240 Kg. @ Rs. 31 per Kg.
Direct Labour 46830 Hours @ Rs. 4.20 per Hour
Factory Overheads Rs.36,340
Production completed 7,620 units
Work- in- Progress inventories.
Opening 120 units material fully supplied, 50% converted
Closing 100 units material fully supplied, 50% converted
You are required to determine & analyze:-
(i) Material cost Variance,
(ii) Labour Variance &
(iii) Overhead cost Variance.
2004 / SEM I / 3 / 3.
The Bhavana Sweets Co. Ltd. runs as chains of general merchandise departmental store in New Delhi. The
average market on merchandise inventory is 50%. Bhavana prepares quarterly Sales Budget & company
policy is to have an ending merchandise inventory equal to 11/4 time the next quarter’s budget sales. Bhavana’s
Budget Committee has the following data:-
(1) Budgeted Quarterly Sales for 2004:-
Quarter Sales (Rs.)
I 6,00,000
II 9,00,000
III 7,50,000
IV 12,00,000
(2) January 1, 2004, expected beginning merchandise inventory, at cost Rs. 5,00,000.
(3) Sales 40% for cash (2% cash discount) &60% on credit
60% collected in quarter of sales
30% collected in quarter of sales
6% collected in second quarter of sales
4% never collected
(4) Merchandise Inventory Purchased
70% paid in quarter of purchases
30% paid in quarter after purchases.
(5) Other Budget Expenses for 2004:-
Quarter Expenses (Rs.)
I 1,80,000
II 2,20,000
III 2,00,000
IV 2,60,000
Of the other expenses, 90% are paid in the quarter in which they are incurred, & the remaining 10% are
paid in the following quarter. The 2003 quarterly data are as under
Quarter Sales (Rs.) Other Expenses (Rs.)
I 5,40,000 1,70,000
II 8,20,000 2,05,000
III 7,00,000 1,90,000
IV 10,00,000 2,4 0,000.
(6) Bank Loan payment of Rs. 25,000 must be made at the end of Second & fourth quarter.
(7) Estimated First quarter sales for 2005 is Rs. 6,60,000.
(8) Expected Cash Balance on January 1, 2004 is Rs. 1,60,000.
(9) Fourth quarter merchandise purchased in 2003 are Rs. 5,00,000.
You are required to prepare a quarterly Cash Budget for Bhavana Co. Ltd.
2006 / SEM II / 1 / 2
XYZ Ltd. manufactures a product that it sells for Rs. 125. The variables cost to manufacture the product is Rs.
70 per unit & the variable cost to market & distribute the product is Rs. 15 per unit. The company has fixed
manufacturing cost of Rs. 1,200,000 and fixed selling & administration cost of Rs. 4,00,000. Management’s
current profit objectives are to earn Rs. 1, 20,000 of income. The new Finance Manager proposed a target
income of 15% on sales.
You are required to

(a) Calculate the Break Even Volume Activity both in units and in Rs.
(b) Calculate the required volume of sales both in units and in Rs. to earn the Manager’s proposed target income.
© Calculate the required volume of sales both in units and in Rs. to earn the Manager’s proposed target profit.
2006 / SEM II / 1 / 3
The Financial Statements of a Sugar Factory from the 2005’s Annual Report is as under:-
Sales Rs. 1,000

Cost of Goods sold 650
Depreciation Expenses 100
Sales & General Expenses 100
Interest Expenses 50
Income Tax Expenses 40
Net Income 60
Balance Sheet of XYZ Ltd. as on 31st March, 2004 & 2005 is as under:-
2004 2005
ASSETS
Inventories 750 770
Debtors 500 520
Cash 50 60
CURRENT ASSETS (Net) 1300 1350
FIXED ASSETS (Net) 500 550
TOTAL ASSETS 1800 1900
LIABILITIES & EQUITIES

Notes Payable to Bank 100 75
Accounts Payable 590 615
Interest Payable 10 20
CURRENT LIABILITIES (Net) 700 710
Long Term Debts 300 350
Deferred Income Tax 300 350
Retained Earning 100 130
Equity Share Capital 400 400
Fixed liabilities (Net) 1100 1190
LIABILITIES (Net) 1800 1900
Use the direct method to prepare a statement of cash flow for the year ended on 31st March, 2005.
2006 / SEM II / 2 / 3
There are two mutually exclusive investment projects under consideration at Anirudha Ltd. Both would
involve purchase of machinery with a life of 5 years.
Project 1 would generate annual cash flow (Receipt less Payments) of Rs. 2,00,000; the machinery would
cost Rs. 5,56,000.
Project 2 would generate annual cash flow of Rs. 5,00,000; the machinery would cost Rs. 16,16,000 and have
a scrap value of Rs. 4,31,000.
The company uses the straight-line method for providing depreciation. Its cost of capital is 15% per@. Assume
that annual cash flow arise on the anniversaries of the initial outlay, that there will be no price changes over the
projects life & that acceptance if one of the projects will not alter the required amount of working capital.
You are required to Calculate for the each project:-

(a) The Accounting Rate of Return (ratio, over project life, of average accounting Profit to average book value
of investments) to nearest 1%.
(b) The Net Present Value
© The Internal Rate of Return to nearest 1%.
(d) The Pay Back Period to one decimal place.
In addition, state which project you would select giving reasons for your choice. Ignore Taxation.
2006 / SEM II / 3 / 2
You are required to calculate Material Variance, Labour Variance & only Total Variance for Factory
Overhead from the information as indicated in the records if Alpine Engineering Corporation for the month of
April 2005:-
Standards Per Unit Cost (Rs.)

Direct Material 4 Gallons @ Rs. 1.20 4.80
Direct Labour 3 Hours @ Rs. 1.80 5.40
Factory Overheads Rs. 60 per labour hour 1.80
TOTAL MANUFACTURING COST 12.00
Activity during the month of April:-

(i) Production during the month of April 2005 has been 6500 units with no opening or closing Work- in-
Progress inventories.
(ii) Material: - Purchased 32,00Gallons @ Rs. 1.18 per gallon
Consumed in production 25,600 gallons
(iii) Labour Hours Worked 20,000 hours
Average Hourly Wage Rate @ Rs. 1.75
(iv) Factory Overheads Total Overhead cost incurred Rs. 12,500
2006 / SEM II / 3 / 3
From the following information, you are required to prepare a Cash Budget for the period from April to October
2005
Balance Sheet of XYZ Ltd. as on 31 March, .XXXX
LIABILITIES ASSETS
Outstanding Liabilities 1,00,000 Bank 20,500
Capital 17,000 Inventories 50,500
Sundry Debtors 26,000
Furniture : 25,000
Less Depreciation 5,000 20,000
TOTAL 1,17,000 TOTAL 1,17,000
Sales & Salaries for the different months are as under:

April May June July August September October.
Sales 80,000 52,000 50,000 75,000 90,000 35,000 25,000
Salaries 3,000 2,500 35,000 4,000 4,000 3,000 3,000
The other expenses per months are Rs. 1,000 Depreciation Rs. 1,000 Misc. Expenses Rs. 500 & Commission
1% on sales
Sales are 20% in cash and Balance on Credit. 70% of the Debtors are collected in one-month balance in two
months of sales.
Debtors on 31st March 2005 represent Rs. 6,000 in respect of sales of February and Rs. 20,000 in respect of
sales of March. There are no debt losses.
Gross Profit on Sales on an average is 30%.
Purchases equals to the next month’s are made every month & they are paid during the month in which they
are made.
The firm maintains a minimum cash balance of Rs. 10,000. Cash deficiencies are made up with bank loans,
which are repaid at the earliest available opportunity, & cash in excess of Rs. 15,000 is invested in securities
(The interest received as well as paid is to be ignored). Outstanding liabilities remain unchanged.
2007 / SEM I / 1
Explain the meaning of generally accepted accounting principles & discuss in brief the accounting concepts
that are being followed in your organization. Give your suggestions if any.
2007 / SEM I / 2
You are required to prepare a Profit & Loss Account for the year ending 31st March, XXXX and the
Balance Sheet on that date. The Trial Balance of XYZ Ltd. for the year ending 31st March, XXXX ,
as under:-
Trial Balance of XYZ Ltd. as on 31st March, .XXXX
PARTICULERS DEBIT Rs. CREDIT Rs
Capital 250,000
Opening Stock: Raw Material 60,000
Account Receivable 100,000
Accounts Payables 70,000
Sales 600,000
Sales Returns (Return Inwards) 20,000
Purchases 370,000
Return Outwards (Purchases Returns) 10,000
Discounts allowed by the creditors 10,000
Bills Payable 40,000
Rent Received 10,000
Insurance 10,000
Drawings 20,000
Land & Building 10,000
Free Hold Property 50,000
Office Equipments 50,000
Petty Cash 6,000
Cash at Bank 20,000
Furniture 30,000
Carriage on Sales 20,000
Wages 15,000
Salaries 15,000
Advertising 10,000
Postage & Telegraph 10,000
TOTAL 990,000 990,000
The following adjustments are also to be taken into Account:
1. Inventory of Raw Material on hand on 31st March, XXXX is Rs. 95,000,
2. Depreciate Office Equipments@15%, @10% & Furniture @15%.
3. Provide Interest on Capital @10% & Interest on Drawing @6%.
4. Provide for Salaries Outstanding for March XXXX is Rs. 7,000, Wages Outstanding Rs. 10,000
General Expenses Rs 5,000 for office.
5. Insurance was prepaid to the extent of Rs. 3,000.
6. A sum of Rs. 2,000 was allowed by way of discount on Purchases but not accounted for.
7. A sum of Rs. 3,000 represents Rent Received in Advance.
8. A provision of 2% is required on Debtors toward Bad & Doubtful Debts
9. A provision of 30% towards taxation on profit (before taxation) is required.
Trading Account of E Traders Ltd. as on 31st March, .XXXX

Stock Opening 60,000 SALES: 6,00,000
Less Sales Return 20,000 5,80,000
Purchases 3,70,000 Closing stock (1) 95,000
Less Purchases Return 10,000
3,60,000
Less Discount (6) 2,000 3,58,000
Carries Inwards 20,000
Wages : 15,000
+ outstanding (4) 10,000 25,000
Gross Profit c/d 2,12000
TOTAL 6,75,000 TOTAL 6,75,000
Profit & Loss Accounts of XYZ Ltd. as on 31st March, .XXXX

Interest on Capital (3) 25,000 Gross Profit b/d 2,12000
General Expenses 34,000 Rent Received 10,000
+ outstanding (4) 5,000 39,000 Less Advance (7) 3,000 7,000
Salaries :Clerical Staff 15,000
+ outstanding (4) 7,000 22,000
Petty Expenses. 6,000 Interest on Drawing (3) 1,200
Advertising 10,000
Postage & Telephone 10,000
Insurance 10,000
- paid in advance (5) 3,000 7,000
Provisions for Bad & Doubtful Debts (8) 2,000
Depreciation on Furniture (2) 3,000
Equipments 7,500 10,500
Net Operating Profits c/d 88,700
TOTAL 2,20,200 TOTAL 2,20,200
Profit & Loss (Adjustment) Accounts of XYZ Ltd. as on 31st March, .XXXX

Provisions for Taxes (9) 26,610 Net Operating Profits b/d 88,700
Balance C/D 59,090
TOTAL 85,700 TOTAL 85,700

Current Liabilities Cash at Bank 20,000
Provisions for Taxes (9) 26,610 Inventories / Stock Closing 95,000
*Accounts Payable 70,000 *Accounts Receivables (8) 1,00,000
Bill Payable 40,000 Less provisions for Bad Debts 2,000 98,000
Rent Received in Advance 3,000 Discount Receivables 2,000
Wages Outstanding (4) 10,000 Prepaid Insurance 3,000
Salaries Outstanding 7,000
General Expenses Outstanding 5,000 22,000
Capital A/c 2,50,000 Land & Building 1,50,000
+ interest on Capital 25,000 Freehold Property 50,000
+ P& L A/c 59,090 * Furniture (2) 30,000
3,34,990 - Depreciation on Furniture 3000 27,000
- Drawings 20,000 Equipments (2) 50,000
3,34,990 Depreciation on Equipments 7,500 42,500
- interest on Drawings 1,200 3,25,890
TOTAL 4,87,500 TOTAL 4,87,500
2007 / SEM I / 3
Ash Company’s normal capacity utilization is reckoned as 90%, it has a production capacity of 2,00,000 units
per year. Standard variable production costs & variable selling costs are Rs. 11 & Rs. 3 per unit respectively.
However the fixed cost and the fixed selling costs are Rs. 3,60,000 & Rs. 2,70,000 per year respectively. The
unit-selling price is Rs. 20. In the year just ended on March 31st, XXXX the production was 1,60,000 unit & sales
were 1,50,000 unit. The closing inventory on March 31st, XXXX was 20,000 units. The actual variable production
costs for the year were Rs. 35,000 higher then the Standard.
You are required to calculate the profit for the year, by the
(a) Marginal Costing Method & (b) Absorption Costing Method.
2007 / SEM I / 4
With the help of suitable example try to explain the relationship between Financial & Operational leverage.
2007 / SEM I / 5
In your organization or any other organization of your choice how would you judge the
efficiency of Management of Working Capital, in the organization under study.
2007/ SEM II / 1
Try to find out about the accounting concepts that are being followed in your organization & examine the
role that these concepts play in the preparation of Financial Statement. Give your views on the accounting
concepts that are being followed in your organization.
2007/ SEM II / 2
You are required to prepare a Profit & Loss Account for the year ending 31st March, XXXX and the
Balance Sheet on that date. The Trial Balance of XYZ Ltd. for the year ending 31st March, XXXX ,
as under:-
DEBIT Rs. CREDIT Rs
Cash in Hand 5.400
Cash at Bank 26,300 .
Account Receivable 145,000
Free Hold Land 100,000
Building 320,000
Plant & Machinery 163,000
Office Equipments 37,000
Patents 75,000
Accounts Payables 63,000
Capital 620,000
Drawings 52,450
Opening Stock: Raw Material 20,100
Work In Progress 10,400
Finished Good 27,100
Purchases: Raw Material 381,500
Consumables 25,250
Sales 987,800
Return Inwards 6,800
Return Outwards 5,000
Wages 84,800
Fuel & Power 47,300
Carriage on Sales 20,400
Carriage on Purchases 32,000
Salaries : Office 65,000
Salaries : Factory 85,000
Insurance : Office 4,000
Insurance : Factory 2,000
Rent 90,000
TOTAL 1765000 1765000
The following adjustments are also to be taken into Account:

1. Inventory of Raw Material on hand on 31st March, XXXX is Rs. 21,300, WIP is Rs. 14,300 &
FG Rs. 32,400.
2. Machinery is to be depreciated @10% & Office Equipments@15%, Patents are to be amortized
@20%.
3. Salaries Outstanding for March XXXX is Rs. 10,000 for factory & Rs 5,000 for office.
4. Insurance include a premium of Rs. 1,700 on policy expiring on 30TH Sept. XXXX, relating to
office.
5. Bad Debts to be Written Off are Rs. 7,250.
6. Rent Received in Advance Rs. 10,000.
2007 / SEM II / 3
A manufacturing Company operates a Costing System & showed the following data in respect of the month of
November
Actual No. of Working Days 22

Actual Man Hours worked during the month 4300
Number of Units produced 425
Actual Over Heads incurred (Rs.) 1,800
Relevant Information from Company’s Budget & Standard Cost data is as follows:-
Budgeted No. of Working Days per month 20
Budgeted Man Hours per month 4000
Standard Man Hours per Units produced 10
Standard Over Head Rate per Man Hour .50p
You are required to calculate the overhead variances & volume Variance for the month of November.
GIVEN BUDGETED Actual
No. of Working Days per month 20 22
Man Hours per month 4000 4300
Number of Units produced (4000 / 10) = 400 425
Actual Over Heads incurred (Rs.) 2000 1,800
Cost 5-000* 4.236**
*Budgeted OH per Unit = Budgeted OH = Rs. 2000 Rs. 5-00
Budgeted Output 4000 Units
**Actual Cost per Unit = Actual OH = Rs. 1800 Rs. 4.236

Actual Output 425 Units
Calculation of OH Cost Variance = Recovered OH – Actual OH

= Rs. 5-00 (425 Units) – Rs. 1,800 = Rs. 2,125 – Rs. 1,800 = 325(F)
Calculation of OH Volume Variance = Recovered OH – Budgeted OH

= Rs. 5-00 (425 Units) – Rs. 5-00 (400 Units) = Rs. 2,125 – Rs. 2,000 = 125(F)
Calculation of OH Value Variance = Budgeted OH per Unit - Actual Cost per Unit
Recovered OH – Budgeted OH
= (Rs. 5-000 - Rs. 4.236) x (425 Units) = Rs. 2,000 – Rs. 1,800 = 200(F)
Verification = OH Cost Variance + OH Volume Variance = OH Value Variance

= 325(F) - 125(F = 200(F)
2007 / SEM II / 4
The Accountant of Casino Ltd. has prepared the following summaries from the Balance Sheet of the company
as on March 31st, XXXX:-
LIABILITIES CY PY ASSETS CY PY
Equity shares of Rs 100 each 4,00,000 3,50,000 Fixed Assets (at cost) 4,70,000 3,71,100
Premium on Shares 20,000 20,000 Less: Depreciation 81,900 70,500
General Reserve 70,000 50,000 Fixed Assets (after Depreciation ) 3,88,100 3,00,600
P & L A/c 12,500 7,500 Stock in Trade 1,70,500 81,400
Trade Creditors 1,97,700 45,400 Sundry Debtors 1,42,700 85,600
Proposed Dividends 20,000 12,000 Cash & Bank Balance 45,900 27,300
Provision for Taxation 27,000 10,000
TOTAL 7,47,200 4,94,900 TOTAL 7,47,200 4,94,900
Following Additional Information is available from the book of the company

(i) The profit for the period was Rs. 46,000.
(ii) Income Tax Rs. 9,000 was paid during the year in respect of the previous year & the balance was transferred to
General Reserve Account. The proposed dividend for the previous year was duly paid.
You are requiring calculating the important ratios & commenting on the financial position of the Company.
2007 / SEM II / 5
Make a comparative assessment of different types of securities from the point of view of capital structuring.
Under what conditions different types of securities would be considered more suitable.
2008 / SEM I / 2
You are required to prepare Fund Flow Statement & Cash Flow Statement for the year ending 31st March,
XXXX based on the information given below:-
LIABILITIES PY CY ASSETS PY CY
Trade Creditors 100 40 Bank 100 65
Bills Receivable 50 60 Inventories 105 120
Outstanding Expenses 25 20 Bills Receivables 130 140
Bonds Payable 220 140 Accounts Receivables 110 40
Accumulated Depreciation- Machinery 30 35 Machinery 120 160
Accumulated Depreciation- Building 75 85 Building 300 310
Reserves 100 115 Land 60 130
Retained Earning 130 170 Patents 55 60
Share Capital 250 360
TOTAL 980 1025 TOTAL 980 1025
Profit from operations after providing Rs. 10,000 as depreciation on building & Rs. 10,000 on Machinery
& Rs. 5,000 as amortization on Patents for the year was Rs. 35,000. Other revenue for the year were Rs.
40,000. An old machine with original cost of Rs. 15,000 was sold at a loss of Rs. 5,000.
2008 / SEM I / 3
Amazon Ltd. operates a Standard Costing System. The company supplies following information.
Actual Material Consumed (3600 units @ Rs. 52.50 each) 189,000

Direct Wages 22,000
Fixed Expenses 188,000
Variable Expenses 62,000
Output during the period was 3500 units

For the above period, the standard production capacity was 4800 units & break-up of standard cost per unit
was as follow:-
Material Cost (one units @ Rs.50 each) 50

Direct Wages 6
Fixed Expenses 40
Variable Expenses 20
TOTAL 116
The standard wages per unit is based on 9600 hours for the above period at a rate of Rs. 3 per hour. 6400
hours were actually worked during the above period & in addition, wages for 400 hours were paid to
compensate for idle time due to breakdown of a machine & overall wages rate was Rs. 3.25 per hour.
You are required to calculate the following variances:-

(a) Direct Material Cost Variance
(b) Material Price Variance
(c) Material Usage Variance
(d) Direct Labour Cost Variance
(e) Labour Rate Variance
(f) Labour Efficiency Variance
(g) Variable Expenses Variance
(h) Fixed Expenses Expenditure Variance
(i) Fixed Expenses Volume Variance
(j) Fixed Expenses Efficiency Variance
2008/ SEM II / 1
Meet the Accounts / Finance personnel of any organization & find out about the activities carried by them.
Discuss about the accounting convention & standards that are being followed by them & reasons thereof.
Also try to find as to how the accounting information collected by them, helps in making different financial
decisions?
2008/ SEM II / 2
You are required to prepare a Profit & Loss Account for the year ending 31st March, XXXX and the Balance
Sheet on that date. The Trial Balance of XYZ Ltd. for the year ending 31st March, XXXX , as under:-

DEBIT BALANCE Rs. CREDIT BALANCE Rs.
Material used 350,000 Sales (including 2% sales tax) 918,000
Cost of Labour 150,000 sale of Scrap 100
stock, finished goods & WIP as on 31st Recovered against fire claims:
March 50,000 re :stock 5,000
Wages :Factory staff 15,000 Rent received 2,000
Director’s' Remuneration 50,000 Capital: Equity 25,000
Salaries :Clerical Staff 75,000 Capital: Preference 9% 8,000
Insurance : Workmen Compensation 1,500 Creditors 156,000
General, FIRE, Etc. 2,000 Provisions For Taxations 105,000
Directors Life Insurance 1,500 Profit & Loss Accounts 13,750
Maintenance: Building 1,000 Discount Received 2,750
Maintenance: Plant & Machinery 12,500
Rent& Rates of Premises & hire of Plant 20,000
Heat, Light & Power 15,000
Experimental & Laboratory Exp. 10,000
Canteen Expenses 5,000
Staff Welfare Expenses 2,500
Motor Expenses 12,500
Professional Charges 2,800
Postage & Telephone 3,500
Books, Printing & Stationery 11,000
Sundry Expenses 10,000
Carriage & Packing of Sales 3,300
Discounts 5,000
Debtors 178,000
Freehold Property 50,000
Plant & Machinery 12,500
Fixture & Fitting - Office 3,500
Office Machinery & EQUIPMENTS 3,000
Motor Cars & Vans 6,500
stock of materials on 31st March 120,000
Bank 38,000
Sales Tax Paid 15,000
TOTAL 1,235,000 TOTAL 1,235,000
Depreciation is to be provided at the following rates:

Plant & Machinery : 10%
Fixture & Fitting – Office :05%
Office Machinery & EQUIPMENTS : 10%
Motor Cars & Vans : 25%
The stock of finished goods &WIP as on 31st March, XXXX was Rs. 35,000.
Provide for Preference Dividend & Ordinary Dividend at 10%.
The total Taxation liability is estimated at Rs. 150,000 of which Rs. 75,000 relates to the current year.
Debtors include Rs. 10,000 deposited as security against Government contracts.
The Works Manager is paid partly by salary and partly by a commission; he is entitled to a commission of 5%
on the factory cost exceeds 20% of the sales for the period. Charge the commission if any in the Profit & Loss
Accounts.
2008 / SEM II / 3
As a Finance Manager what is your role in the matters of dividend policy? What will be the alternatives &
factors that you may consider before finalizing your dividend policy?
2008 / SEM II / 4
You are requiring showing the effect of each of the following changes on Profit and Break Even- Volume
from the information given below:-
Sales 50,000 units Rs. 5.00 per unit

Variable Cost Rs. 3.00 per unit
Fixed Cost Rs. 70,000
Changes:-
(i) Price Changes by 20%
(ii) Volume Decreases to 40,000 units
(iii) Variable Cost increase to Rs 3.50 per unit.
(iv) Fixed cost decreases by 10%.
2008 /SEM II / 5
From the following information, you are required to prepare a Cash Budget for the period from July to
December 2008.
(i) The estimated expenses are as follow:-
June July August Sept Octo. Nov Dec.

Sales 35000 40000 40000 50000 50000 60000 65000
Purchases 14000 16000 17000 20000 20000 25000 280000
Wages & Salaries 12000 14000 14000 18000 18000 20000 220000
Expenses 5000 6000 6000 6000 7000 7000 7000
Interest received 2000 0 0 2000 0 0 0
Sale of Fixed
Assets 0 0 20000 0 0 0 0
(ii) Sales are 20% in cash and Balance on Credit. 50% of the Debtors are collected in the month of
sales and remaining in the next month.
(iii) The time leg in payment of Purchase & expenses is 1 month. However, wages & salaries are
paid fortnightly with time leg of 15 days.
The company maintains a minimum cash balance of Rs. 5,000. The cash balance in excess of Rs. 7,000 is
invested in Government Securities in multiple of Rs. 1,000. Short falls in cash balance are made good by
borrowing from banks. The interest received as well as paid is to be ignored,
2009/ SEM I / 1“Accounting is an information system”. Do you agree? Substantiate your answer with
reasons. How an accountant does helps in planning & controlling a large commercial Organization?
Explain.
2009/ SEM I / 2
You are required to prepare Cash Flow Statement for the year ending 31st March, XXXX based on the
information given below:-
Balance Sheet of XYZ Ltd. as on 31st March, .XXXX (Rs. in 000)
LIABILITIES CY PY
Equity Share Capital 8500 7000
General Reserves 3800 4000
Profit & Loss A/c 0 250
Share Premium A/c 1500 750
Share Holder’s Fund 13800 12000
Secured Loans 4800 5000
Unsecured Loans 5350 4000
Loan Fund 10150 9000
TOTAL (Sources) 23950 21000
FIXED ASSETS
Gross Block 22400 21000
Accumulated Depreciation 3450 3200
Net Block 18950 17800
Capital Work-in-progress 1860 0
Investments
CURRENT ASSETS, LAONS & ADVANCES

Inventories 2510 2600
Debtors 1090 1200
Cash & Bank Balances 120 280
Loans 1700 200
Advance Tax 0 500
TOTAL CURRENT ASSETS, LAONS & ADVANCES 5420 4780
Creditors 1050 1200
Outstanding Expenses 30 0
Tax Payable 0 500
Proposed Dividend 3400 2800
TOTAL LIABILITIES 4480 4500
NET CURRENT ASSETS 940 280
Misc. Expenditure 550 600
TOTAL (Applications) 23950 21000
1) Fixed Assets costing Rs. 400000, accumulated depreciation Rs. 300000 were sole for Rs. 150000.
2) Actual Tax liability for the PY year was Rs. 500000.
3) Loans represent Long Term Loans given to Group Companies.
4) Interest on Loan Funds for the PY year was 14,21`,000 & dividend income were Rs. 402,000.
Investment costing Rs. 20, 00, 000 was sold for Rs. 25, 00,000.
2009 / SEM I / 3
Collect information about different types of Budgets prepared in your organization or any other organization
of your choice & discuss the relevance of these Budgets to the organization under consideration.
2009 / SEM I / 4
You are required to compute all the possible variances from the following information that is being provided
for XYZ LTD. The firm maintained its books of Cost Accounts under Standard Costing System in which WIP
is debited with actual costs & credited with Standard Cost.
The standard Cost Card for product P in Rs. per unit was as follow:-
Direct Material Cost (one piece @ Rs.1.50 ) 1.50
Direct Wages (3 Hours @ Rs.1.00 ) 3.00
Factory Overheads (3 Hours @ Rs.1.00 ) 7.50
TOTAL 12.00
Based on Budgeted Factory Overhead Rs. 7,500 and Budgeted Labour Hour3,000.
The following Cost & Production data are available for the month of March in respect of Product P.
Cost Data
Actual Material used in production (1100 piece @ Rs.1.60 )
Analysis of Pay Roll shows Direct Labour Hours (2700 Hours @ Rs.1.20 )
Factory Overheads as per Factory Overheads Control A/c Rs. 7425. (to be charged to Product P.).
Production Data
Units completed 950 units
Units in closing WIP 100 units (50% completed)
Cost of units remaining in WIP A/s
2009 / SEM I / 5
Yanky Ltd. is considering two mutually exclusive Projects A and B. Project A costs Rs. 30,000 & Project B Rs.
36,000. The NPV probability distribution for each project is as given below:-
Project A Project B
NPV Estimate ( Rs.) Probability NPV Estimate( Rs.) Probability
3,000 0.1 3,000 0.2
6,000 0.4 6,000 0.3
12,000 0.4 12,000 0.3
15,000 0.1 15,000 0.2
You are require to compute:-

(i) the expected NPV of Projects A and B
(ii) The Risk attached to each project i.e., Standard Deviation of each Probability Distribution.
(iii) The Profitability Index of each Product
Which project do you consider more risky & why?

2009/ SEM II / 1
What do you mean by “Accounting”? Explain the various Concepts of Accounting and the need for having
Accounting Standards?
2009/ SEM II / 2
The Balance Sheet of ABC Ltd. as on 31.01.2007 is given as below:
31.03.200
8 31.03.2007
Sources of Funds
Share Capital 5,000 4,000
Reserve & Surplus
General Reserve 1000
P & L Accounts 400
Capital Reserve 1000
Share Premium 1000 3400 1500
Secured Loans 4000 3000
Unsecured Loans 3000 1000
Total 15,400 9,500
Application of Funds
1200 1000
Fixed Assets 0 0
Accumulated Depreciations 3000 2000
Net Block 9,000 8,000
Capital Work in Progress 3000 0
Investments 2000 500
Current Assets, Loans & Advances
A Current Assets
Inventories – Raw Materials 700
Work in Progress 250
Finished Goods 150
Sundry Debtors 1200
Prepayments 200
Cash & Bank Balances 500 3,000 2,950
B – Loans & Advances
Advance Tax 1400 900
Loans to Employees (Long Term) 1000 500
Less Current Liabilities & Provisions 5,400 4350
Sundry Creditors 800 950
Outstanding Expenses 400 300 2,37,000
B _ Provisions
Provisions for Retirement Benefits of Employees 350 300
Provisions for Taxation 1450 1000
Proposed Dividends 1000 800
4,000 3,350
Net CURRENT Assets 1,400 1000
Total 15,400 9500
Additional Information
1. Actual Tax Liability for 2006-07 was Rs. 950 Lakhs;
2. A piece of Machinery costing Rs. 500 Lakhs, accumulated Depreciation Rs. 200 Lakhs was sold for
Rs. 250 Lakhs. The loss was charged to Profit & Loss A/c;
3. A portion of Secured Loans as on 31-03-07 amounting Rs. 400 Lakhs was converted into Equity at a
premium of Rs. 200 Lakhs. There was also fresh issue of Equity at 100% premium.
4. Out of Secured Loans as on 31-03-08 Rs. 500 Lakhs were Short Term Loans;
5. Out of Unsecured Loans, short Term Loan were to the extent of Rs. 400 Lakhs and 500 Lakhs were
current investments as on 31-03-08;
6. Out of Investments Rs. 200 Lakhs were current investments as on 31-03-07 and Rs. 500 Lakhs were
current investments as on 31-03-08;
7. There were Re- Valuation of Fixed Assets during 20007-08 and the Revaluation Profit Rs. 500
Lakhs were charged to Capital Reserve;
From the information Given above, you are required to prepare : (a) Statement Showing changes in Working
Capital & (b) Fund Flow Statement.
2009/ SEM II / 3
Explain briefly the technique of Marginal Costing. In what ways do you consider this technique useful in
management technique?
2009/ SEM II / 4
Ravi & Co. Ltd. is considering the following investment proposal of projects:
Cash Flow (Rs.)
Project Year 00 Year 01 Year 02 Year 03
A -10,000 +10,000 -------- --------
B -10,000 +7,500 +7,500 --------
C -10,000 +2,000 +4,000 +12,000
D -10,000 +10,000 +3,000 +3,000
(a) Rank the projects according to each of the following methods:

(i) Pay Back Method
(ii) (ii) ARR
(iii) IRR and
(iv) NPV-assuming discount Rates of 10% and 30%.
(b) Assuming that the projects are independent, which one should be accepted?
If the projects are mutually exclusive, which project is the best?
2009/ SEM II / 5
What role does a Financial Manager in matter of Dividend Policy play? Discuss the alternatives that he might
consider and the factors, which he should take into consideration before finalizing his views on the Dividend
Policy?
Chapter 1: Accounting & Its Function
Explain the purpose of preparing and analyzing Financial Statement and state the purpose for which these
Financial Statements are used by internal & external decision makes. (Chapter 1-4)
Describe the Role & Function of an account in an organization. (Chapter 1-5)
Chapter 2: Accounting Concepts & Standards

What are the accounting Concept & Conventions? Name them & explain any four accounting concepts in
details.
“The Cost Concept of Accounting meets all the three basic criteria of Relevance, Objectivity &
flexibility”. Explain.
Short Notes on these concepts: Cost / Business Entity / Accrual / Consistency / Money Measurement /
Going Concern.
Chapter 3: Accounting Information & Its Applications

What kinds of Decisions an Executive or Manager have to make about their Companies & their activities?
Chapter 4 & 5: Construction & Analysis of Profit & Loss Accounts, & of Balance Sheet
Explain briefly the items, which are included in the Balance Sheet of an organization.
Distinguish between P& L Account and Balance Sheet.
Discuss briefly the different methods of charging depreciation in an undertaking.
What is depreciation? What is the rationale behind making provisions for depreciation in the process of
matching the Income & Expenses?
Why Depreciation does needs to be provided on Fixed Assets and what are the method providing or
charging Depreciation
Amortization on Intangible Assets
Distinguish between
(i) Wages & Salaries
(ii) Right Share & Bonus Shares
(iii) Preference Share & Equity Shares
(iv)Cost of Retained Earnings & Cost of Equity
(v) Operating Profit & Net Profit
Chapter 6: Construction & Analysis of FUND FLOW STATEMENTS & Cash Flow Statement
What do you understand by the Capitalization of Earnings? How is the value of a undertaking ascertained.
Explain with examples with the help of its earnings.
“Fund Flow Statement shows Funds from Operations & not the Net Profit”. Comment.
“Where cash Flow is uncertain, the principal will be “Greater the variability, the higher te minimum cash
balance”. Comment.
Chapter 7: Understanding & Classifying Costs

How would you compare the Cost of Goods Sold? Explain the two methods of Inventory Valuation out of
these methods of Inventory Valuation:- LIFO, FIFO. HIFO, Just in Time.
Chapter 8: Distinguish between Absorption & Marginal Costing
Chapter 9: Cost, Volume & Profit Analysis

“The conventional Break Even Analysis is based on a number of Assumptions”. Explain & illustrate the
Concept of Break Even Analysis & justify the above Statement.
Chapter10: Variance Analysis

Explain the some of the possible causes separately & illustratively for
(i) Material Variance
(ii) Labour Variance
(iii) Expenditure Variance
(iv)Overheads Variance
(v) Sale Price Variance
(vi)Profit Variance
Chapter 7-10
Illustratively distinguish between-
(i) Direct Cost & Indirect Cost
(ii) Cost of Production & Cost of Goods Sold
(iii) Marginal Costing & Absorption Costing
(iv)Direct Material Usage Variance & Direct Material Price Variance
Chapter 12: Ratio Analysis

Explain the important Control Ratios to judge the actual performance with the Budgeted Performance.
Distinguish between Profitability Index & Profitability Ratios. (12-4)
‘Return on Investment is a Primary Ratio but is not free from ambiguity’. Discuss this statement & explain
the various versions of ROI as used in comparing one firm with another. (12-5)
‘Earning Before Tax – Earning per Share Analysis is an important tool for designing the Capital
Structure’. Comment with appropriate reasons.
Chapter 13: Leverage Analysis
Explain & Distinguish the Concept of Operating, Financial Leverages. Discuss their significance in
Business Decisions. What will be the effect of small changes in the sales on (I) Net Income, (ii) Return on
Equity and (iii) Earning per Share if the use of these leverages is considerable.
With the help of suitable examples try to explain the relationship between Operating & Financial
Leverages.
Chapter 14: Budgeting & Budgetary Controls

What is Budget? Explain the meaning, objectives & the process of Performance Budget. Distinguish
between Performance Budget & Traditional Budget.
What do you understand by Budgetary Control? Explain the objectives of Budgetary Control with special
reference to large manufacturing concern. What processes are involved in the Budgetary Control?
Budgetary Control? Discuss.
Describe & distinguish Fixed Budget & Flexible Budget. What purpose they served?
‘Flexible Budgeting is desirable over Fixed Budget’. Comment.
Discuss the factors, which are taken into considerations while preparing Sales Budget, Purchase Budget,
and Production Budget.
Why separate Budgets are prepared for each element (activities) of Production Budget (General Budget).
Explain.
Wrote note on Performance Budget.
How would you compare the actual Performance with Budgeted Performance? Discuss the important
ratios used for the purpose
What do you understand by the Working Capital & Net Working Capital, its cycle events, objectives,
factors, Problems with actual plan to overcome problems in Working Capital Management to actual
overcome these problems in manufacturing firm & trading firm?
Make comparative statement of different types of securities from the point of view of capital structure
with conditions suitable for them.
‘Companies with high profits generally have a low pay out ratio’. Comment.
Chapter 15: INVESTMENT APPRAISAL METHOD
What do you understand by various Discounting & non- Discounting methods (or techniques) of Capital
Budgeting? Briefly explain the NPV Method & IRR Method. Which of the two would you rank better &
why?
Compare & contras NPV Method & IRR Method of Capital Budgeting.
Distinguish between ARR & IRR. Do they suffer from any serious drawbacks? Explain fully.
What do you meant by NPV? Why Profitability Index considered useful? What are the limiting factors in
reliability of Capital Budgeting Techniques including the discounted Cash Flow Techniques?
Chapter 15 A: MANAGEMENT OF Working Capital

‘Operating Cycle plays a decisive role in influencing the Working Capital needs’. ‘Opportunity cost
should be taken into accounts while evaluating the profitability of a project’. Comment.
Chapter 16: MANAGING CASH NEEDS

In managing cash, the finance manager faces the problems of compromising especially the conflicting
goals of liquidity and flexibility. What strategy should the finance manager develops to solve (overcome)
these problems?
‘Company wants to choose suitable channel for investment of its idle cash’. What advice you give to the
company in this situation? Give reasons to justify your views.
Chapter 17: CAPITAL STRUCTURE

What is capital structure? What are the features of an appropriate capital structure? (17-2, 17-3)
‘Cost of Debt is always cheaper as compared to other sources of funds’. Comments.
What do you understand by the Composite Cost of Capital? How it is computed / calculated? What is its
role in determining the optimum Debt- Equity Mix? Explain with example. How would you support the
statement that ‘debt become more expensive after certain point is reached’? Explain.
Chapter18: DIVIDEND DECISION

As a Finance Manager, what is your role in the matter of Dividend Policy? What will be the factors &
alternatives that you may considered before finalizing your Dividend Policy? (18-6)
Explain the importance of Dividend Decisions to a firm. What has been the effect of imposition of tax the
distribution of Dividend by the companies in India? (18-6)
How does Depreciation act as a tax shield? Explain with examples.
Explain ‘Dividend, Investments & Financial Decisions are interrelated and interdependent’.
‘Dividend can be paid out of Profits’. Explain. Will a company be justified in paying dividend when it has
unwritten accumulated losses of the past.

Statement of Equivalent Production

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Statement of Equivalent Production

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MS-04

Statement of Equivalent Production

Material Cost Variance = Material Usage Variance + Material Price Variance

Material Usage Variance = Standard Rate (Standard Quantity - Actual Quantity)

Material Price Variance = Actual Quantity (Standard Rate - Actual Rate)

Verification = Material Usage Variance + Material Price Variance

Labour Cost Variance = Labour Rate Variance + Labour Efficiency Variance

Labour Rate Variance = Actual Hours (Standard Rate - Actual Rate)

Overhead Cost Variance = (Standard OH Rate X At actual Output) – (Actual OH)

Overhead Expenditure Variance = (Budget Expenditure – Actual Expenditure) =

Verification = Overhead Expenditure Variance + Overhead Volume Variance

Balance Sheet of XYZ Ltd. as on 31st March, .XXXX

Balance Sheet of XYZ Ltd. as on 31st March, .XXXX

(a) Return on Investment = EBT X 100 =22,95,000 X 100 = 41.73%

(b) Assets Turnover Ratio: Net Sales = 75,00,000 = 0.75

(C) 0perating Leverage = Contribution = 33,00,000 = 1.2222

Working Capital = Current Assets – Current Liabilities = Rs. 60,000

Current Ratio = Current Assets / Current Liabilities = CA / CL =2.5

Cost & Profit Statement under Absorption Costing

PRODUCTS Price per unit (Rs.) For 15,000 units (Rs.)

Hence, on the basis of above information, we will calculate:-

BEP (of output)

Or = Total Sales = Rs. 6,60,000 x 100 = 23.913%

New BEP (of output)

2003 / SEM II/ 1 / 2

P& L Adj. A/c

2003 / SEM II/ 1 / 3

Fixed Costs are

You are required to:-

Sales = Selling Price per Unit x Units Sold

BEP (of output) = Fixed Cost = Rs. 9,00,000 = 3,00,000 Units

2003 / SEM II/ 2 / 1

Share Capital = 50 / 0.12 = 416.66 L

Total Debt / Total Assets Ratio

2003 / SEM II/ 2 / 2

As per Production Manager As per Sales Manager

2003 / SEM II/ 2 / 3

2003 / SEM II/ 3 / 1

Standard Variable OH Rate per hour =

Total Standard OH Rate per hour =

Standard Variable OH Rate per hour =

Total Standard OH Rate per hour =

2003 / SEM II/ 3 / 2a

CAPITAL DEBT Zero DEBT 45 Lakh DEBT 75Lakh

.2003 / SEM II/ 3 / 2b

NPV (@ 5% Rate of Interest)

2003 / SEM II/ 3 / 3

June 1 Stockholders invested Rs. 25,000 cash in the business.

You are required to prepare-

The production & sales for the 3 months are as follows:-

February (Rs.) March(Rs.) April(Rs.)

Variable (Marginal) costing.

February (Rs.) March(Rs.) April(Rs.)

LIABILITIES & EQUITIES

Income Statement for these years is as under:-

Compute :- (1) Activity Ratio

Standards Per Unit Cost (Rs.)

The Factory Overheads is based on the following Budget:-

Actual Data during the month of April 2004

You are required to

Sales Rs. 1,000

LIABILITIES & EQUITIES

You are required to Calculate for the each project:-