2008 Adikavi Nannaya University B.B.M management Question paper
Management
March 2007
Time: 3 Hours
Marks: 100
NB:
1. Questions No. 1 is compulsory and carries 20 marks.
2. Attempt any five questions, each carrying 16 marks from remaining questions.
3. Working notes should form part of your answer.
4. Proper presentation and neatness is essential.
* Q.1 Amruta Enterprises (having Installed capacity of 2, 00,000 units p.a.) produced 1,00,000 units in the financial year2006-2007. The cost - structure in 2006 - 2007 was as under: 20
*
(a) Raw Materials 40%
(b) Wages 15%
(c) Factory Overheads 10%
(d) Administrative and Selling Overheads 15%
Total cost
80%
20%
(e) Profit 100
The selling price, which was Rs. 500 per unit in 2006-2007, is estimated to be fixed as at Rs. 600 per unit forthe year 2007-2008; and production and sale expected to increase by 40,000 units. It is, further, anticipated that raw materials cost per unit would increase by 10% due to price rise, whereas wage rate per unit would decrease by 20% due to automation, 56% of all the overheads are fixed and balance are variable.
* As a Management Accountant you are required to prepare:-
* (a) Cost statement for the year 2007-2008 and
* (b) Statement showing estimated working capital required for the year 2007-2008 after considering the following additional information:
* (a) Raw materials stock equivalent to two and half month’s consumption would be stored.
* (b) Production time is one month. Raw materials are introduced at the beginning of the process, whereas wages and factory overheads accrue evenly during the production period.
* (c) Two months stock of finished goods (valued at factory cost) would be carried in stock.
* (d) 20% of raw materials would be imported from China and advance payment of two months would be made there against. 15% of indigenous raw materials requirement would be procured locally against immediate cash payment. Suppliers of balance of indigenous raw materials, allow a credit of one month.
* (e) 50% of customers would enjoy a credit of one month, whereas balance 50% of customers would accept a bill of exchange payable after three months. These bills of exchange are immediately hypothecated with the bank against which overdraft facility would be available equal to 70% of amount of bills of exchange.
* (f) Time - lag in payment of wages would be one month and for all overheads, it would be half month.
* (g) The company would carry cash balance of Rs. 40,000 in its currency chest. Debtors are to be estimated at selling price.
* (h) The activities are spread evenly throughout the year. Degree of completion of work-in-progress is 50%.
* Q 2. The Mismanagement Ltd. always finds that it is hard pressed for funds. In spite of borrowing funds at a high rate from Banks, they are not able to make payments to suppliers in time. The financial position of the company as reflected from the Balance Sheet for the last two years is as under: 16
*
2005 2006
Rs. Lakhs Rs. Lakhs Rs. Lakhs Rs. Lakhs
Share Capital
(Rs. 10 each fully paid) 10.00 10.00
Profit and Loss A/c 1.65 11.65 0.45 10.45
Bank Overdraft 1.55 5.95
Sundry Creditors 1.00 6.00
14.20 22.40
Land and Buildings 3.00 5.00
Plant and Machinery 5.00 6.00
Less: Depreciation 1.20 3.80 1.80 4.20
Motor Cars 1.00 1.30
Less: Depreciation 0.40 0.60 0.60 0.70
Stock 2.20 7.20
Debtors 4.60 5.30
14.20 22.40
* The following further information is available:
* (a) Dividend was paid in 2006 at the rate of 10%.
* (b) The company sold a motor car during 2006 for Rs. 8,000. This was purchased for Rs. 10,000 and its written down value in the books on 1-1-2006 was Rs. 5,000.
* Prepare cash flow statement as per AS-3 by indirect method.
* Q 3. From the following particulars prepare a statement of sources and application of funds for the year ended 31-3-2006of M/s. Rimzim Ltd: 16
*
* (a) Rimzim Ltd. issued 1,000 shares of Rs. 120 each and all shares are subscribed and fully paid up.
* (b) The company has redeemed preference shares for Rs. 1,00,000 at 10% premium. Premium was adjusted against securities premium.
* (c) Investments are sold for Rs. 50,000 (resulting in profit of Rs. 10,000).
* (d) Sale of machinery during the year Rs. 30,000 (resulting in loss of 5,000).
* (e) Purchase of Fixed assets Rs. 1,20,000.
* (f) Dividend paid Rs. 40,000 and income tax paid Rs. 35,000.
* (g) Working capital of the company was Rs. 1,20,000 on 1-4-2005 and Rs. 1,80,000 on 31-3-2006.
* (i) Depreciation provided for the year was Rs. 50,000 and preliminary expenses written off was Rs. 10,000.
* Q 4. Following balances from the books of Account CHETAN Ltd. for the year ended 31-12-2006 you are required to prepare vertical income statement and vertical Balance sheet: 16
*
Particulars Amount
Rs. Particulars Amount
Rs.
Advertising 25,000 Sales Return 10,000
Interest Received 6,000 Bills Payable 43,000
Sales 12,00,000 10% Pref. Share Capital 1,50,000
Equity Share Capital 9,00,000 Debenture Interest 24,000
Salaries 1,80,000 Wages 1,85,000
Furniture and Fixture 2,00,000 Cash and Bank Balance 80,000
Outstanding Expenses 25,000 Debtors 2,00,000
P/L A/c (Credit. Balance) 1,30,000 Opening Stock 50,000
Bad Debts 5,000 General Reserve 75,000
Purchases 6,00,000 Creditors 1,00,000
Machinery 7,50,000 8% Debenture 4,00,000
Preliminary Expenses 10,000
Income Tax 10,000
Land and Building 7,00,000
* Closing Stock on 31-12-2006 is Rs. 1,50 000.
* Q. 5 Financial Position 16
*
Liabilities 2005
Rs. 2006
Rs.
Equity Share Capital 2,00,000 2,50,000
10% Pref. Share Capital 2,00,000 1,50,000
Reserve Fund 80,000 1,00,000
Profit and Loss Account 1,00,000 1,50,000
12% Debentures 2,00,000 3,00,000
Creditors 1,00,000 1,20,000
Bank Overdraft 50,000 20,000
Assets
Building 3,00,000 3,20,000
Machinery 1,50,000 1,80,000
Furniture 40,000 35,000
Investment 1,00,000 1,50,000
Stock 1,50,000 2,00,000
Debtors 1,00,000 1,20,000
Bank Balance 90,000 85,000
From the above information of Santhan Ltd. as at 31st March, 2005 and 2006 you are required to comment with the help of comparative statement, after rearranging in suitable form for analysis.
*
* Q.6 Following is the Profit and Loss A/c and Balance Sheet of Adhiraj Ltd. 16
*
Profit and Loss A/c for the Year ended 31st December, 2006
Particulars Rs. Particulars Rs.
To Opening Stock 20,000 By Sales 4,50,000
To Purchases 2,00,000 By Closing Stock 80,000
To Wages 50,000
To Factory Expenses 70,000
To G. P. c/d 1,90,000
5,30,000 5,30,000
To Administrative Expenses 60,000 By Gross Profit b/d 1,90,000
To Selling Expenses 40,000 By Interest Received 5,000
To Interest on Loan 5,000
To Debenture Interest 8,000
To Net Profit 82,000
1,95,000 1,95,000
To Tax Provision 20,000 By Net Profit 82,000
To Proposed Dividend 20,000
To Balance Profit 42,000
82,000 82,000
Balance Sheet as on 31st December, 2006
Liabilities Amount
Rs. Assets Amount
Rs.
Equity Share Capital (Rs. 10) 2,00,000 Land and Building 1,75,000
9% Preference Share Capital 1,50,000 Machinery 1,50,000
8% Debenture 1,00,000 Furniture 1,00,000
Reserve 50,000 Goodwill 50,000
P/L A/c 30,000 Patents 50,000
Short Term Loan 1,00,000 Vehicles 1,40,000
(Repaid within one year) Investment 50,000
Bank Overdraft 75,000 Stock 80,000
Sundry Creditors 1,40,000 Debtors 90,000
Bills Payable 30,000 Bills Receivable 30,000
Provision for Tax 20,000
Proposed Divided 20.000
9,15,000 9,15,000
* Market price of equity share is Rs 7. Calculate the following ratios:
* (a) Acid Test Ratio.
* (b) Capital Gearing Ratio.
* (c) Stock Turnover Ratio.
* (d) Debtors Turnover Ratio.
* (e) Creditors Turnover Ratio.
* (f) Return on Capital Employed Ratio.
* (g) Stock Working Capital Ratio.
* (h) Operating Ratio.
* Note: Vertical final accounts need not be prepared.
* Q.7 The following information are available for a firm for the year ended 31-12-2006: 16
(a) Gross Profit Ratio 25%
(b) Net Profit Ratio 20%
(c) Stock Turnover Ratio 10 times
(d) Net Profit/Capital 1/5
(e) Capital/Other Liabilities 1/2
(f) Fixed Assets/Capital 5/4
(g)Fixed Assets/Current Assets 5/7
(h)Fixed Assets Rs. 5, 00,000
* (i) Stock at the end Rs. 40,000 more than the stock, in the beginning.
* Find Out:
* (a) Cost of Goods Sold
* (b) Gross Profit
* (c) Net Profit
* (d) Current Assets
* (e) Capital
* (f) Total Liabilities
* (g) Closing Stock
* (h) Total Assets
* Q.8 Calculate trend percentage from the following information extracted from financial statements of Perfect Ltd. afterarranging in vertical form and give your comments: 16
* (RS. '000)
Particular 2003
Rs. 2004
Rs. 2005
Rs. 2006
Rs.
Sales 50,000 60,000 70,000 90,000
Cost of Goods Sold 30,000 36,000 42,000 54,000
Operating Expenses 10,00 11,000 12,000 13,000
Income Tax 50% 50% 50% 50%
Fixed Assets 10,000 ? 15,000 ?
Net Worth ? 12,000 ? 16,000
Working Capital 5,000 5,500 6,000 6,500
Long Term Loans 5,000 6,000 7,000 8,000
*
* Q.9(a) What is the impact of conversion of part of Debentures into equity shares on Debt-Equity Ratio which wasbefore conversion 1:1? (2)
* (b) State the impact of cash sales Rs. 40,000 (Cost Rs. 25,000) on Quick Ratio and Current Ratio. (2)
* (c) What is the impact of making adjustment of Interest Accrued on Debentures on Return on Capital Employed?(2)
* (d) Write short notes on any two: (10)
* (i) MIS Report.
* (ii) Manipulation of Accounts.
* (iii) Uses of Ratio Analysis.
* (iv) Flow of Funds.
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