Accounting Management

SUBJECT: ACCOUNTING

N.B. : 1) All questions are compulsory

Q1) ABC Ltd. Produces room coolers. The company is considering whether it should continue to manufacture air circulating fans itself or purchase them from outside. Its annual requirement is 25000 units. An outsider vendor is prepared to supply fans for Rs 285 each. In addition, ABC Ltd will have to incur costs of Rs 1.50 per unit for freight and Rs 10,000 per year for quality inspection, storing etc of the product.

{25 Marks }

In the most recent year ABC Ltd. Produced 25000 fans at the following total cost :

Material

Rs.

50,00,000

Labour

Rs.

20,00,000

Supervision & other indirect labour

Rs.

2,00,000

Power and Light

Rs.

50,000

Depreciation

Rs.

20,000

Factory Rent

Rs.

5,000

Supplies

Rs.

75,000

Power and light includes Rs 20,000 for general heating and lighting, which is an allocation based on the light points. Indirect labour is attributed mainly to the manufacturing of fans. About 75% of it can be dispensed with along with direct labour if manufacturing is discontinued. However, the supervisor who receives annual salary of Rs 75,000 will have to be retained. The machines used for manufacturing fans which have a book value of Rs 3,00,000 can be sold for Rs 1,25,000 and the amount realized can be invested at 15% return. Factory rent is allocated on the basis of area, and the company is not able to see an alternative use for the space which would be released. Should ABC Ltd. Manufacture the fans or buy them?

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Q2) Usha Company produces three consumer products : P, Q and R. The management of the company wants to determine the most profitable mix. The cost accountant has supplied the following

data.

{30 Marks }

Usha Company : Sales and Cost Data

Description

Product

Total

P

Q

R

Material Cost per unit

Quantity (Kg)

1.0

1.2

1.4

Rate per Kg (Rs)

50

50

50

Cost per unit (Rs)

50

60

70

Labour Cost per unit

30

90

90

Variable Overheads per unit

15

10

25

Fixed Overheads (Rs .000)

9,175

Current Sales (Units ,000)

100

50

60

210

Projected Sales (Units ,000)

109

55

125

289

Selling Price per unit (Rs)

150

200

270

Raw material used by the firm is in short supply and the firm can expect a maximum supply of 350 lakh kg for next year. Is the company’s projected sales mix most profitable or can it be changed for the better?

Q3) DSQ Company Ltd, a diversified company, has three divisions, cement, fertilizers and

textiles. The summary of the company’s profit is given below :

{25 Marks }

(Rs/Crore)

Cement

Fertilizer

Textiles

Total

Sales

20.0

12.0

18.0

50.0

Less : Variable Cost

8.0

9.6

5.4

23.0

Contribution

12.0

2.4

12.6

27.0

Less : Fixed Cost (allocated to

8.0

4.8

7.2

20.0

divisions in proportion to

volumes of Sales)

Profit (Loss)

4.0

(2.4)

5.4

7.0

After allocating the company’s fixed overheads to products the Fertilizers, division incurs a loss of Rs 2.4 crore. Should the company drop this division?

SUB: Accounting

N. B.: 1) Attempt any Four Questions

2) All questions carries equal mark

1. X is the manufacture of Mumbai purchased three chemicals A, B and C from U.P.The bill gave the following information:

Chemical A:

6000 kgs @ Rs. 4.20 per kg

Rs

25,200

Chemical B:

10000 kgs @ Rs. 3.80 per kg

38,000

Chemical C:

4000 kgs @ Rs. 4.75 per kg

19,000

VAT

2,055

Railway Freight

1,000

Total Cost

85,255

A shortage of 100 kgs in chemical A, of 140 Kgs in chemical B and Of 50 kgs in chemical C was noticed due to breakages. At Mumbai, the manufacture paid octroi duty @ 0.20 kg. He also paid hamali, Rs 20 for the chemical a, Rs 58.12 for chemical B and Rs 35.75 for chemical C. Calculate the stock rate that you would suggest for pricing issue of chemicals assuming a provision of 4 % towards further deterioration and also show the quantity (kgs) of chemicals available for issue.

2. ABC Ltd has collected the following data for its two activities. It calculates activity cost rates based on cost driver capacity.

Activity

Cost driver

Capacity

Cost

Power

Kilowatt hours

50000 hrs

Kilowatt Rs 200000

Quality Inspection

Numbers of inspection

10000 inspection

Rs 300000

The Company makes three products, A, B and C.For the year ended March 31, 2004, the following consumption of cost drivers was reported:

Product

Kilowatt-hours

Quality Inspection

A

20000

7000

B

40000

5000

C

30000

6000

Compute the costs allocated to each product from each activity

Calculate the cost of unused capacity for each activity.

3. Reliable company wishes to discontinue the sale of one of the products in vew of unprofitable operations. Following details are available with regard to turnover, cost and activity for the current year ending 31st March.

Products

P

Q

R

S

Sales Turnover

Rs.600000

Rs.1000000

Rs.500000

Rs.900000

Cost of sales

350000

800000

370000

480000

Storage area (square meters)

40000

60000

70000

30000

Number of cartons sold

200000

300000

150000

350000

Number of bills raised

100000

120000

80000

100000

Overhead costs and basis of apportionatement are:

Fixed Expenses

Basis of Apportionatement

Administration wages & salaries

Rs.100000

Number of bill raised

Salesmen salaries a & expenses

120000

Sales turnover

Rent and insurance

60000

Storage area

Depreciation

20000

Number of cartons

Unfixed Expenses

Commission

3 % of sales

Packing material & wages

Re 1 per carton

Stationery

Re 0.50 per bill

You have to prepare

1. Staement showing summary of Selling & Distribution Costs to the products

2. Profit & Loss Statement showing contribution and profit or loss of each of the products to enable the Company take an appropriate decision on discontinuance of the sale of a product.

4. The Tata Infrastructure Co. is involved in two contracts Contract 69 & Contract 96 during the current year. The following information relates to these contracts, which were started on January 1 and July 1, respectively.

Contracts

A

B

Contract Price

Rs.300000

Rs.400000

Direct material issued

55000

40000

Material returned to store

1500

2500

Direct Labour

36000

22000

Wages accrued on Dec 31

2000

2500

Plant installed (at cost)

30000

40000

Establishment Charges

20000

15000

Direct Expenses

20000

30000

Direct expenses accrued, December 31

2000

3000

Work certified by architect

280000

140000

Cost not work not yet certified

10000

30000

Material on site, 31 December

11000

5500

Cash received from contractees

160000

50000

Depreciation of plant p.a

12 %

34%

Prepare Contract & Contractees Account for Contract 69 & Contract 96.

5. A company manufactures a product which involves two processes, namely, pressing and polishing. For the months of January, the following information is available:

Opening Stock

Pressing

Polishing

Inputs of unit in process

1200

1000

Units completed

1000

750

Unit under process

200

250

Material Cost

Rs.69000

Rs.17500

Conversion Cost

328500

82500

For incomplete unit in process, charge material costs at 100% and conversion costs at 60% in the pressing process and 50 % in the polishing process. Prepare a statement of cost and calculate the selling price per unit which will result in 25 % on the sale price.

6. M/s Modern Company Ltd furnishes the following summary of Trading & Profit and Loss account for the current year ending March 31.

To Raw Material

140000

By sales (12000 units)

510000

To direct wages

72000

By finished stock (200 units)

6000

To production overheads

45000

By work in Process

To selling & distribution overheads

43500

Material

26800

To administration overheads

41010

Wages

11786

To Preliminary Expenses w/off

3250

Production overheads

8000

46586

To Goodwill w/off

2541

By interest on securities

(gross) 5000

To dividend (net)

4000

To income-tax

5870

To net profit

210415

567586

567586

The Company manufactures a standard unit. The scrutiny of cost records for the same period shows that-

1. factory overheads have been allocated to production at 20 percent on prime cost

2. Administration overheads have been charged at Rs.3 per cent on units produced

3. Selling & distribution expenses have been charged at Rs.4 per unit on unit sold.

You are required to prepare a statement of cost, to work out profit as per cost accounts, and to reconcile the same with that shown in the financial accounts.

Accounting Management

1 Explain the process of Accounting.

2 What do you understand by the term Double Entry system ?

3 Explain the requirement of depreciation.

4 Discuss the different methods of calculating depreciation

5 Discuss the classification of Cash Flow Statement.

6 Differentiate between Cash Flows Statement and Fund Flow Statement ?

7 What are the techniques of cost control ?

8 Define cost sheet.

SUBJECT : ACCOUNTING MANAGEMENT

Total Marks: 80

Note : All Questions are Compulsory

Each Question Carries Equal Marks

2 Explain the functions of accounting.

3 What are the various Accounting Principles ?

4 What are the various kinds of subsidiary books maintained ?

5 Explain the various kinds of errors that take place while preparation of the Trial Balance.

6 What are the factors affecting computation of depreciation ?

7 Explain the causes of differences between the cash book and pass book.

8 Explain the methods of preparing the Cash Flow Statements.

9 How Materials Control is organised ?

Advance Accounting

10 What aspects does the statutory auditor verify with respect to investments held in the names of nominees? Can a company hold investments in names of nominees ? what should the auditor see in this regard?

11 Write short note on Audit Risk Assessment.

12 Explain the conclusion and Reporting Stage Of Management Audit.

13 What are the provisions of Companies Act, When it is desired to appoint an auditor other than the Retiring Auditor? RTP.

14 Write short note on Cash Reserve Ratio.

15 What are the conditions / obligations for a member of a stock exchange , both for becoming a member and on becoming a member?

16 Define Management Audit. Outline the scope of Management Audit.

17 What are the types of frauds possible in credit sales? How should the auditor proceed to investigate such frauds?

SUB : MANAGEMENT ACCOUNTANCY

Total Marks: 80

Note : All Questions are Compulsory

Each Question Carries Equal Marks ( 10 Marks)

18 What Is Meant By Accounting Or Average Rate Of Return? List Its Merits And Demerits.

19 A Small Iron Mine Purchased For Rs.10,00,000 And Expected Iron From The Mine During Its Life Is 5,00,000 Tones. If The Iron Is Taken Upto Four Years As 2,00,000 Tones, 1,50,000 Tones, 100,000tones 50,000 Tones; Calculate The Depreciation Of The Iron Mine.

20 Write Short Notes On Matching Concept & CURRENT ASSET RATIO

21 Define Marginal Cost And Marginal Costing & List Out The Advantages Of Marginal Costing

22 List Out The Merits And Demerits Of The Discounted Cash Flow Method. Define Cash Flow. Highlight The Steps Involved In The Process Of Cash Flow Statement Analysis

23 What Is Meant By Depreciation? What Are The Reasons For Depreciation & Explain Two Types Of Depreciation.

24 LIST OUT THE LIMITATIONS OF MANAGEMENT ACCOUNTING.

25 WRITE A BRIEF NOTE ON THE SCOPE OF MANAGAMENT

ACCOUNTING.