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 31^st 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?

                              MANAGEMENT ACCOUNTANCY

  

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.