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Practice questions for AFM Q1- An employee of Best Shoe Ltd embezzled Rs.

4, 50,000 during the year ended 31st Mar 2006. The company instead of treating this amount as al loss , showed it as recoverable from the employee in its balance sheet .The net profit of the company for the year was Rs . 654,78,506. Do you think this treatment makes any material impact on the assessment of the profitability of the company? Q2-Develop a proforma income statement for the months of July ,August and September , for a company from the following information 1. Sales are projected at Rs, 2,25,000 , 2,40,000 and 2,15,000 for July , August and September respectively 2. COGS is Rs. 50,000 plus 30% of selling price per month 3. Selling expenses are 3% of sales 4. Rent is Rs. 7,500 per month , administration expanses for July are expected to be Rs. 60,000 but are expected to rise 1% per month over the previous month expense 5. The company has 3,00,000 of 8% loan interest payable monthly 6. Corporate tax rate is 70% Q3-A factory manufacturing sewing machine has the capacity to produce 500 machines per annum. The marginal cost of each machine is Rs. 200 and each machine is sold for Rs. 250. Fixed overheads are Rs. 12000 p.a. Calculate BEP for output and sales, show what profit will result if output is 90% of the capacity. Q4-a factory is engaged in manufacturing plastic bags is working at 40% capacity and produces 10000 bags p.a. Following is the cost dataMaterial Rs. 10/Labour Rs. 3/Overheads Rs. 5 (60% fixed) The selling price is Rs. 20 per bag. If it is decided to work the factory at 50% capacity , the selling price falls by 3% . At 90% selling price fall by 5% accompanied by similar price fall in material. You are required to find out the profit at 50% and 90% capacity level and also calculate BEP. (Ans-BEP units At 50% -6818 At 90% -6667 Q5-Nandi Chemical ltd has two factories with similar plant and machinery for manufacturing of soda ash . The management has expressed the desire to merge them and run them as one integrated unit. Following are the date in respect of these two factories Capacity 60% 100%

Turnover 120 lakhs 300 lakhs Variable cost 90 lakhs 220 lakhs Fixed cost 25 lakhs 40 lakhs Find out What should be the capacity of the merged factory to be operated for break even? What is the profitability of working 80% of the integrated capacity? What turnover will give an overall profit of Rs. 60 lakhs? (Ans Turnover required -480.77) Q5-The sale turnover and profit detail for two quarters are as follows Quarter 1 Quarter 2 Sales Profit 30 lakhs 4 lakhs 40 lakhs 6 lakhs

Calculate P/V ratio Sales required to earn a profit of Rs.10 lakhs Profit when sales are Rs. 20 lakhs (Ans P/V ratio 80%) Q6-The budget manager of Jupiter Electricals Ltd is preparing a flexible budget for the accounting year starting from 1st July 2000 The company produces one product DETEX II. Direct material costs Rs. 7 p.u. Direct labour averages Rs. 2.50 per hour and requires 1.6 hrs to produce one unit of DETEX II. Salesmen are paid commission of Re. 1 p.u. sold. Fixed expenses are Rs. 85000 p.a. Manufacturing overhead is estimated in the following amounts under specified conditions of volume Production volume 120000 150000 Expenses Indirect material 264000 330000 Indirect labour 150000 187500 Inspection 90000 112500 Maintenance 84000 102000 Supervision 198000 234000 Depreciation-plant and machinery 90000 90000 Engineering services 94000 94000 Total manufacturing overheads 970000 1150000

Normal capacity is 125000 units Prepare a budget of a total cost at 140000 units of production (Ans-Total cost -28,55, 000) Q7-Even keel Ltd manufactures and sells a single product x whose selling price is Rs.40 and variable cost is Rs. 16 p.u.

a) If the fixed cost for this year are Rs. 480000 and the sales are at 50% margin of safety , calculate the net return on the sales assuming an income tax level of 40% b) For the next year, it is proposed to add another product line whose selling price will be Rs 50 p.u. and variable cost Rs. 10 p.u. The total fixed cost is estimated at 666600. The sales mix of x and y would be 7:3. At what level of sales next year , would Even keel ltd break even , Give separately for both x and y the BEP in rupee and units ( Ans -21.6%) Q8-A toy manufacturer earns an average net profit of Rs. 3 Per piece in the selling price of Rs. 15 by producing and selling 60000 pieces at 60% of the potential capacity. Following is the cost detail Material Rs 4/Wages Re 1/Works overhead Rs. 6 (50% fixed) Sales overhead Rs. 1 (25% variable) During the current year, he intends to produce the same number but anticipates that Fixed cost will go up by 10% Wages will go up by 20% Material will increase by 5% Selling price can not be increased Under these circumstances, he obtains an order for further 20% of his capacity. What minimum price will u recommend for accepting the order to ensure the manufacturer for profit of 180500? (Ans-Rs. 11 p.u.) Q9-State how the following must be dealt with in the final accounts of a firm for the year ended 31.12.2007 giving reasons in brief: i) Advertisement expenditure of Rs 20,000 paid on 31.12.2006, the advertisement in respect of which has appeared in the magazines only in January 2007 Cost of temporary pandal erected for an exhibition on 1.7.2006, the exhibition being expected to be over by June 2007, Rs 34,000 Cost of a second hand scooter purchased on 1.10.2006 for Rs 5000, which was totally destroyed in an accident on 31.12.2006, the insurance company paying Rs 2,000 in full settlement in January 2007 Petrol expenses of Rs 840 paid for the car of one of the partners for an official visit, the car not being an asset of the firm. Hire charges of Rs 2,000 for a compressor, when the firms own compressor was under breakdown

ii) iii)

iv) v)

Q10-The following is the trial balance of Shri Om as on March 31, 2004. You are requested to prepare the Trading and Profit and Loss Account for the year ended March 31, 2004 and Balance Sheet as on that date. Particulars Sundry debtors Sundry Creditors Outstanding Liability for expenses Wages Carriage Outwards Carriage Inwards General Expenses Cash discounts Bad debts Motor Car Printing and Stationery Furniture and fittings Advertisment Insurance salesmen's Commission Postage and Telephone Salaries Rates and Taxes Drawings Capital Account Purchases Sales Stock as on 1.04.2003 Cash at bank Cash in hand Particulars (Amt) 500,000 200,000 55,000 100,000 110,000 50,000 70,000 20,000 10,000 240,000 15,000 110,000 85,000 45,000 87,500 57,500 160,000 25,000 20,000 1,443,000 1,550,000 1,987,500 250,000 60,000 10,500 3,380,500

i) ii) iii)

Adjustments Stock as on March 31, 2204 was valued at Rs 7,25,000 A provision for Bad and Doubtful debts is to be created to the extent of 5 percent on sundry debtors Depreciate : a. Furniture and Fittings by 10% b. Motor car by 20%

iv) v)

vi) vii) viii)

ix)

Shri Om had withdrawn goods worth Rs 25,000 during the year Sales include goods worth Rs 75,000 sent out to Shanti and company on approval and remaining unsold on march 31, 2004. The cost of goods was Rs 50,000 The salesmen are entitled a commission of 5% of total sales Debtors include Rs 25,000 bad debts Printing and Stationery expenses of Rs 55,000 relating to 2002-03 had not been provided in that year but were paid in this year by debiting outstanding liabilities. Purchases include purchase of furniture worth Rs 50,000

Q11-The Balance Sheets of ABC Limited are given below for the years 2006 and 2007. 2006 Liabilities Share capital General Reserve Profit on sale of investments Profit and loss Account 7% debentures Creditors for expenses Trade Creditors Proposed Dividend Provision for taxation 1,200,00 0 400,000 200,000 600,000 20,000 320,000 60,000 140,000 2,940,00 0 2,000,00 0 400,000 1,600,00 0 360,000 400,000 450,000 80,000 20,000 30,000 2,940,00 0 1,400,00 0 500,000 20,000 400,000 400,000 24,000 500,000 70,000 150,000 3,464,00 0 2,400,00 0 500,000 1,900,00 0 360,000 540,000 490,000 130,000 24,000 20,000 3,464,00 0 2007

Assets Fixed assets at cost Accumulated Depreciation

Less:

Investments at cost Stock at cost Sundry debtors (less provisions Rs 40,000 and Rs 50,000) Bills Receivables Prepaid Expenses Miscellaneous Expenditure

Additional Information i) During the year 2007 fixed assets valued at Rs 20,000 (accumulated depreciation Rs 60,000) was sold for Rs 16,000 ii) The proposed dividend of last year was paid during 2007 iii) During the year 2007, investments costing Rs 1,60,000 were sold and later in the year investments of the same cost were purchased iv) Debentures were redeemed at a premium of 10% v) Liability for taxation for 2006 came to Rs 110000. vi) During the year 2007, bad debts written off were Rs 30,000 against the provision amount Prepare: Cash Flow Statement Q12-The directors of XYZ Ltd. Present you with the Balance sheet as on March 31, 2007 and 2008 and ask you to prepare statements which will show them what has happened to the money which came into the business during the year 2007-08 Liabilities Authorised capital 15,000 shares of Rs 100 each Paid up capital Debentures (2007) General reserves Profit and loss appropriation account Provision for purpose of final dividends Sundry Trade creditors bank Overdraft Bills payable Loans on mortgage Assets land and freehold buildings machinery and plant Fixtures and fittings cash in hand Sundry Trade debtors Bills Receivable Stock Prepayments Shares in other companies Goodwill Preliminary expenses 2007 2008

1,500,000 1,500,000 1,000,000 1,400,000 400,000 60,000 40,000 36,000 38,000 78,000 72,000 76,000 112,000 69,260 129,780 40,000 38,000 560,000 1,759,260 2,389,780 900,000 144,000 6,000 1,560 125,600 7,600 244,000 4,500 80,000 240,000 6,000 976,000 594,000 5,500 1,280 104,400 6,400 238,000 6,200 234,000 220,000 4,000

1,759,260 2,389,780 You have been given the following additional information a) Depreciation has been charged i) on Freehold Building @5% on written down value ii) on Machinery and plant Rs 32,000 iii) Fixtures and Fittings @10% on written down value basis. No depreciation has been written off on newly acquired buildings and plant and machinery b) A piece of land was sold on April 1, 2007 for Rs 250000 (WDV Rs 100000). The sale proceeds were all credited to Land and Buildings Accounts c) Shares in other companies were purchased and dividends amounting to Rs 6,000 declared out of profits made prior to purchase has been received and used to write down the investments in shares in other companies. d) Goodwill has been written down against Reserves e) The proposed dividend for the year March 31, 2007 was paid and in addition an interim dividend Rs 52000 was paid. Q13-Presented below is the comparative balance sheet for Jyoti ltd at March 31 2008 Assets Cash Accounts Receivable Inventory Prepaid Expenses Land Equipment Accumulated Depreciation Equipment Building Accumulated Depreciation Building Liabilities Accounts payable Bonds Payable Equity share capital (Rs 10 per share) Retained Earnings 20,000 38,500 66,000 6,070 62,500 100,000 (30,000) 125,000 (37,500) 350,570 16,500 117,500 140,000 76,570 350,570 2007 28,500 32,000 70,000 8,270 75,000 87,500 (21,000) 125,000 (25,000) 380,270 22,500 132,500 125,000 100,270 380,270

Additional Information a) Operating expenses include depreciation expense of Rs 35,000 and amortization expenses of Rs 2200. b) Land was sold for cash at book value c) Cash dividends of Rs 37,145 were paid

d) Net income for 2007 was Rs 13,445 e) Equipment was purchased for Rs 32500 cash. In addition, equipment costing Rs 20000 with a book value of Rs 6500 was sold for Rs 7500 cash f) Bonds were redeemed at face value by issuing 1500 equity shares of Rs 10 at par. Prepare Cash flow statement Q14-Following are the Balance Sheets of Red Ltd. Liabilities Share Capital General Reserve Profit & Loss A/c Debentures Provision for Taxation Proposed Dividend Trade Creditors Assets Goodwill Plant and Machinery Investment Sundry Debtors Stock Prepaid Expenses Cash and Bank balance Discount on Debentures 2008 400,000 100,000 50,000 100,000 40,000 40,000 70,000 800,000 90,000 429,250 60,000 110,000 80,000 5,750 20,000 5,000 800,000 2009 300,000 80,000 30,000 150,000 50,000 30,000 90,000 730,000 100,000 298,000 100,000 160,000 50,000 4,000 10,000 8,000 730,000

Additional information a) Depreciation on plant and machinery has been charged @15% b) A machine costing Rs 10,000 (WDV Rs 3,000) has been discarded. An old machine costing Rs 50,000 (WDV Rs 20,000) has been sold for Rs 35,000 c) A profit of Rs 10,000 has been earned by sale of investments d) Debentures have been redeemed at 5% premium e) Rs 45,000 income tax has been paid and adjusted against provision for taxation. Prepare Cash Flow Statement. Q16-The managing director of A Pvt. Ltd. asks you for assistance in arriving at a decision as to whether to continue manufacturing of a component x or buy it from outside

. Component x is used for manufacturing finished products of the company. The following data are supplied The annual requirement of component x is 10000 units. The lowest quotation from an outside supplier is Rs. 8 p.u. The component is manufactured in a machine shop. If it is bought out , certain machinery will be sold as its book value and the residual capacity of the machine shop will remain idle. The total expense of the machine shop for the year ending 31/03/1988 are as follows During the year machine shop manufacture 10000 units of x Material 135000 Direct Labour 100000 Indirect labour 40000 Power and fuel 6000 Repairs and maintenance 11000 Rates and insurance 16000 Depreciation 20000 Other expenses 29600

The following expense of the machine shop apply to manufacturing of component x Material 35000 Direct Labour 56000 Indirect labour 12000 Power and fuel 600 Repairs and maintenance 1000 The sales of the machinery used for the manufacturing of the component x would educe Depreciation by 4000 And insurance by 2000 If component x is bought out, the following addition expenditure would be incurred Freight Re.1 p.u. Inspection Rs.10000 p.u. You are required to prepare a report to the managing direct showing the comparison of expense when machine is bought out and when it is made. (Ans.-Cost p.u. 11.06 and 10.00 p.u.) Q17-- With the help of following ratios regarding Indus Films , draw the balance sheet of the company for the year 1988; Current ratio Liquidity ratio Net working capital Stock turnover ratio (COGS/Closing stock) Gross profit ratio Fixed asset turnover ratio (on COGS basis) 2.5 1.5 Rs. 300000 6 times 20% 2 times

Debt collection period Fixed asset to share holders net worth Reserves and surplus to capital

2 months .80 .50

Q18- Angamali is a town in Kerala, in the southern part of India, . Mr. Thakaran had basically established a small foundry for the manufacture of casting required by the automobile industry in 1995 . Mr. Thakaran achieved a fairly good success in the first decade of working and in 2005, added two presses for making stampings. He further introduced machining operations in the early 1996 so as to complete the spertrum of automobile parts manufacturers. He named the company Poplar Automobile Part Makers. The companys prestige increased and its reputation spread among the automobile manufactures in the country. The industry started appreciating its effort and also formed an idea that the company could be dependent upon for producing any component for them. The turnover the company rose sharply. All this was matter of great satisfaction for MR Thakaran, who had just turn 45 Poplar Automobile Part Makers Currently are producing single component (12000 units @ 60% capacity). The following particulars relating to cost structure are available Direct material Direct labour Manufacturing overheads ( 60% fixed ) 5/2/5/-

Administrative overheads (fixed) Selling and distribution overheads (40% variable) Total cost Profit Selling price Mr. Thakaran knows that

2/3/17/3/20/-

a) If activity exceeds 60% capacity , a 5% discount on raw material will be received because of increase in production b) The present fixed cost structure will remain constant up to 90% of capacity beyond which 20% increase in cost is expected

c) The current selling price of the unit will remain constant up to 75% of activity beyond which a 22% reduction in original price for increase in activity by every 5% is contemplated Recommend him the most profitable level of activity by preparing a flexible budget at 60%, 80% and 100% activity levels taking into account the above informations. Q19-From the following balances taken from the ledger of a merchant on 31st March 1999, you are required to prepare trading and profit and Loss account and balance sheet as on 31st March 1999.

Particulars Sundry creditors Building Income tax Loose tools Cash at bank Sundry expenses Bank interest (Cr.) Purchases Wages Carriage inwards Sales Motor van Cash in hand

Amount 19,000 15,000 1,025 1,000 16,200 1,990 75 1,57,000 10,000 1,120 1,85,000 12,500 335

Particulars Bad debts Loan from Ram Debtors Investments Bad debt reserve Rent and taxes Furniture Opening stock Capital Discount allowed Dividend received Drawings Bills payable

Amount 100 2,500 9,500 6,500 1,600 850 3,000 27,350 47,390 630 535 2,000 10,000

Additional information -1) Further bad debts Rs. 300 2) Create a reserve for bad debt @20% on debtors 3) Dividend accrued on investment is Rs. 135 4) Rates paid in advance Rs 100 and wages owing Rs 450 5) Closing stock valued at Rs. 15000 and loose tools were valued at Rs. 800 6) Depreciation on building @5% and on motor van@40% 7) Provide for interest on loan @12% p.a. taken on 01/06/1998 Income tax paid has to be treated as drawings Q 20- The following is the summarized balance sheet of Akshaya Ltd as on 31st December 1999 and 2000

Additional information Capital and liabilities Share capital General reserve Profit and loss Bank loan Creditors Provision for taxation Total Asset Land and building Machinery Stock Debtors Cash Bank Goodwill 1999 (Amt.) 2,00,000 50,000 30,500 70,000 1,50,000 30,000 5,30,500 2,00,000 1,50,000 1,00,000 80,000 500 --2000(Amt.) 2,50,000 60,000 30,600 --1,35,200 35,000 5,10,800 1,90,000 1,69,000 74,000 64,200 600 8,000 5,000

5,30,500 5,10,800 1) Dividend of Rs 23,000 was paid 2) Asset of another company were purchased for a consideration of Rs. 50,000 payable in shares The following assets were purchased stock Rs 20,000, Machinery Rs 25,000 3) Machinery was further purchased of Rs 8,000 4) Depreciation on machinery was Rs 12,000 5) Income tax provided during the year Rs 33,000 6) Loss on sale of Machinery Rs. 200 was written off to general reserves You are required to prepare cash flow statement Q 21-Following is a comprehensive balance sheet of three years of ABC ltd. Current asset Bank Debtors Stock Prepaid expense Total current asset 1978 20500 38000 60000 1500 120000 1977 7600 30000 40000 2400 80000 1976 17000 20000 30000 3000 70000

Plants and equipments Total asset Current liabilities Creditors Provision for income tax Total current liabilities Long term funds Debentures Equity share capital (Rs 100 each) P/L account Total liabilities

260000 380000 98000 2000 100000 50000 200000 30000 380000

150000 230000 78000 2000 80000 50000 80000 20000 230000

76000 146000 48500 1500 50000 80000 16000 146000

Comparative operating statement


Sales COGS 1978 210000 157500 1977 120000 80000 40000 36000 4000 1976 100000 55000 45000 37000 8000

GP 52500 General and selling expense 42500 NP 10000

Additional information The companys closing inventory on 31st Dec 1975 was Rs. 20000 Credit term are 60 days from the date on invoice Calculate for each year the following ratios and give your brief comment about companys financial position .

1. 2. 3. 4. 5. 6. 7. 8.

Current ration Acid test ratio Inventory turnover ratio Debt collection period Gross profit ratio Net profit ratio Earning per share Fixed asset to shareholders equity

(Ans current ratio-1.2 )

Q 22- Following is a comprehensive balance sheet of two years of A ltd.

Current asset Bank Debtors Stock Prepaid expense Total current asset Plants and equipments Total asset Current liabilities Creditors Provision for income tax Total current liabilities Long term funds Debentures Equity share capital (Rs 100 each) P/L account Total liabilities

1978 20500 38000 60000 1500 120000 260000 380000 98000 2000 100000 50000 200000 30000 380000

1977 7600 30000 40000 2400 80000 150000 230000 78000 2000 80000 50000 80000 20000 230000

Prepare common size statement and comparative balance sheet Q23- a) Benson Company had total assets of $300,000 and total stockholders equity of $100,000 at the beginning of the year. During the year assets increased by $ 50,000 and liabilities decreased by $ 40,000. Stockholders equity at the end of the year is b) During the year, Semper investments has $60,000 in revenues, $40,000 in expenses, $10,000 in issuance of stock, $3000 in dividend payments, and $15,000 in payments on accounts payable. Stockholders equity changed by.. Q24- In 2009, Lakeside Company borrowed $50,000 , paid dividends of $12,000, issued 2000 shares of stock for $ 30 per share, purchased land for $24000, and received dividends of $6,000. Net income was $85000. How much should be reported as net cash provided by financing activities. Q 25- From the following data of A Co. ltd, relating to budgeted and actual performance for the month of March 2008, compute the Direct material and Direct labour cost variances Budgeted data for March Units to be manufactured 1,50,000

Units of direct material required 4,95.000 (based on std. rates) Planned purchase of raw material (units) 5,40,000 Average unit cost of direct material Rs 8 Direct labour hours per unit of finished goods hrs Direct labour cost (Total) Rs 29,92,500 Actual data at the end of March Units actually manufactured 1,60,000 Direct material cost (purchase cost based on units actually issued) Rs 43,41,900 Direct material cost (purchase cost based on units actually purchased) Rs 45,10,000 Average unit cost of direct material Rs 8.20 Total direct labour hours for March 1,25,000 Total direct labour cost for March Rs 33,75,000 Q26- company manufacturing distempers operates a costing system. The standard cost of one of the products of the company shows the following standards Standard price per kg Materials Quantity (Rs) Total A 40kg 75 3000 B 10kg 50 500 C 50kg 20 1000 4500 The standard input mix is 100kg and the standard output of the finished product is 90 kg. the actual results for the period are: Material used A = 2,40,000 kg@ Rs 800/kg B = 40,000 kg @ Rs 52/kg C = 2,20,000 kg @ Rs 21/kg Actual output of the finished product = 4,20,000 kg You are required to calculate the material price variance, mix and yield variance. Q27-Future Ltd., a manufacturing company, having a capacity of 7 lakh units has prepared the following cost sheet: Per Unit (Rs) Direct material 30 Direct Wages 12 Factory overheads 30 (50% variable) Selling and administrative overheads 18 (Two-third fixed) Selling price 120 During the year 2006-07 the sales volume achieved by the company was 6 lakh units. The company has launched an expansion programme, the details of which are as under: The capacity will be increased to 12 lakh units

i)

ii) iii) iv)

The additional fixed overheads will amount to Rs 50 lakhs upto 10 lakh units and will increase by Rs 25 lakh more beyond 10 lakh units The cost of investment expansion is Rs 100 lakhs which is proposed to be financed through bank borrowings carrying interest at 15% per annum. The average depreciation rate on the new investment is 15% based on straight line method. After the expansion is put through, the company has two alternatives for operations Sales can be increased upto 10 lakh units by spending Rs 10,00,000 on special advertisement campaign to explore new market

i)

Or ii) Sales can be increased to 12 lakh units subject to the following: a) By an overall reduction of Rs 10 pr unit on all units sold b) By increasing the variable selling and distribution expenses by 8% c) The direct material costs would go down by 1.5% due to discount on bulk purchasing. i) ii) iii) Requirements: Contruct Flexible budget at the level of 6 lakhs, 10 lakhs, and 12 lakh units of production Calculate break even point before and after expansion Advise the optimum level of output for expansion

Q28-The budget manager of jaypee Electricals Ltd. Is preparing a flexible budget for the accounting year commencing from April 1, 2007. The company produces one product component peekay. Direct material costs Rs 7 per unit, direct labour average Rs 2.50 per hour and requires 1.60 hours to produce 1 unit of peekay. Salesmen are paid a commission of Re 1 per unit sold. Fixed selling and administration expenses amount to Rs 85,000 per year. Manufacturing overhead has been estimated in the following amounts under specified conditions of volume: volume of production (in units) 120000 150000 expenses Rs Rs indirect materials 264,000 330,000 Indirect labour 150,000 187,500 Inspection 90,000 112,500 maintenance 84,000 102,000 Supervision 198,000 234,000 depreciationPlant and Equipment 90,000 90,000 engineering services 94,000 94,000 Total manufacturing overhead 970,000 1,150,000

Normal capacity of production of the company is 1,25,000 units. Prepare a budget of total cost at 1,40,000 units Q29. State the effect of the following transactions on the P/L Account & Balance sheet. a. Purchase goods for cash for Rs 30,000 b. Sold goods to S ltd Rs 15,000 c. Salaries paid to the manager Rs 50,000 d. Paid for stationery Rs. 5000 e. Wages outstanding Rs 4000. f. Rent received in advance Rs.3000 Q30. From the following figures given below, calculate Economic order Quantity a. Total consumption of material 1800 units b. Ordering cost Rs.20 per order c. Carrying cost 10% on average inventory d. Price per unit Rs.40 Q31. From the following prepare a statement of inventory using Replacement Cost Method 1st July Purchase 400 units @ Rs.5 each. 6th July Issue 300 units 10th July Purchase 300 units @ Rs.6 each. 18th July Purchase 300 units @ Rs.6 each 25th July Issue 500 units 28th July Purchases 200 units @ Rs. 7 each. Assume that the replacement cost of material on July6th & 25 were Rs. 5.50 and Rs 7 respectively. Q32. From the following information and the assumption that the balance in hand on 1st April 2006 is Rs. 35000, prepare a cash budget for the three months ended 30th June, 2000. Dividend payable may 2006 Rs. 10,000 Salaries & wages estimated monthly Rs. 15,000 Estimated March April May June Sales 70,000 90,000 1, 20,000 1, 50,000 Purchases 48,000 50,000 54,000 40,000 Misc. Expenses 12,000 16,000 13,000 Assume that 50 per cent are cash sales. Credit sales are collected 50 per cent in the month sales are made and 50 percent in the month following. Collections from credit sales are subject to 5 per cent discount if payment is received during the month of purchase and 3 percent if payment is received in the month following. Income from investment Rs. 75,000 received quarterly, April, July, etc. Rent Rs. 3000 per month paid quarterly in advance due in April.

Q33-. MAS Co Ltd. operates two sales divisions by selling two quality cement products White & Black in them. For the purpose of submission of sales budget to the budget committee, the following information has been made available.

Budget sales for the current year were as follows: Product White Black Division I 800 @Rs. 100 400@ Rs.80 Division II 600 @ Rs. 100 500@ Rs.80

Actual Sales for the current year were as follows Product White Black Division I 1000 @Rs. 100 600@ Rs.80 Division II 700 @ Rs. 100 450@ Rs.80

The sales division of the company has taken the following decision at a meeting; i. The sales manager observed that product White is popular but under priced. Therefore, the price of product should be increased by Rs. 20. ii. The product Black has less market and the main reason responsible for it is the over price of the product. However, if the price of the product is reduced by Rs. 5, it is expected to generate more demand. On the basis, of these price changes and reports from the sales force, the following estimates have been prepared by divisional sales manager. Percentage increase in sales over current budget; Product Division I Division II White 5 20 Black 10 10 You are required to prepare a sales budget to be presented to the budget committee

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