Management Analysis Ques. 1 Ques.2 a. b. c. d. e. Ques.3 a. b. c. d. e. Ques. 4 Ques. 5 Define Break even point of a project?

Payment received from debtor Decreases the total assets Increases the total assets Results in no change in the total assets Increases the total liabilities Decreases the total liabilities Cash Purchases Increases assets. Results in no change in the total assets Decreases assets Increases liability Decreases liability Explain the concept of margin of safety? Explain the concept of PV ratio?

Ques. 6 The total assets of the firm were Rs, 50,000 outside liabilities were Rs. 30,000. capital contributed by the owner is a. b. c. d. e. Ques. 7 a. b. c. d. e. Rs. Rs. Rs. Rs. Rs. 50,000 30,000 20,000 10,000 80,000

When fixed assets are sold The total assets will increase The total liabilities will increase The total assets will decrease There is no change in the total assets The liabilities will decrease.

Ques. 8 Outstanding salaries in shown as

a. b. c. d. e. Ques.9 a. b. c. d. e. Ques.10 a. b. c. d. e. Ques11. a. b. c. d. e.

An asset in the balance sheet A liability By adjusting it in the P&L a/c Both (a) and (c) above Both (b) and (c) above. Insurance prepaid is shown as Current asset Current liability Fixed asset Income Other liability. Which of the following is not a fixed asset? Building Bank Balance Plant Patents Goodwill. which of the following is /a re not a revenue reserve?

General reserve Investment allowance reserve Revaluation reserve Capital reserve Both and (d) above. Gross profit is the difference between a. b. c. d. e. Net sales and cost of goods sold PAT and dividends Net sales and cost of production Net sales and direct costs of production Net sales and net purchases. Part - B

Ques 12.

CASE STUDY

Ques. 1

Analyse the performance of the company on the basis of balance sheet & income statement taking into account the following ratios:i) Profitability ii) Solvency iii) Efficiency iv) Liquidity v) Market performance HISTORICAL FY09 24363.7 7807.6 16556.1 511.9 17068.0 5905.7 5567.4 580.9 12053.9 5014.1 29.3 4984.8 1625.4 3359.4 6.1 3365.6 40.9 3324.6

Income Statement (In Rs. Crore, Except per Share Data Sales Less: Sales Tax Net Sales Other Income Total Income EXPENDITURE : Cost of materials Manufacturing and other expenses Depreciation, amortisation & impairment Total Expense Profit Before Taxation & Interest Interest Profit Before Taxation & After Interest Provision for Taxation Profit after Taxation before Share of Results of Associates and Minority Interests Share of Net Profit/(Loss) of Associates Profit after Taxation before Minority Interests Less : Minority Interests Net Profit

FY07 20003.8 7335.0 12668.7 360.8 13029.5 5086.5 3490.6 393.8 8970.8 4058.7 9.6 4049.1 1274.7 2774.4 6.6 2781.0 25.7 2755.3

FY08 22308 .5 7649. 4 1465 9.1 586.2 1524 5.3 5943. 0 4135. 1 472.9 1055 0.9 4694. 4 19.2 4675. 2 1497. 0 3178. 2 7.9 3186. 0 28.3 3157.

FY10 FY11 27624 32078 .7 .2 8488. 9804. 8 6 1913 2227 5.9 3.7 630.3 776.5 1976 2305 6.1 0.2 6987. 0 5816. 0 643.9 1344 6.9 6319. 3 73.5 6245. 7 2034. 9 4210. 8 6.2 4217. 0 48.8 4168. 8118. 4 6737. 0 699.1 1555 4.5 7495. 7 60.8 7434. 9 2365. 5 5069. 4 9.6 5079. 0 61.1 5017.

ADD:Profit brought forward Preacquistion Profit/(Loss) Transfer to Capital Reserve on consolidation Minority Interest of Preacquisition (Profit)/Loss Profit brought forward (net of Rs. 0.04 Crore for opening Employee Benefit liability) Add : Adjustments on restructuring of Wimco Limited with effect from 01.04.2007 Add : Adjustments on amalgamation of Megatop Financial Services and Leasing Limited, Newdeal Finance and Investment Limited and Peninsular Investments Limited with Russell Credit Limited with effect from 01.04.2007 Available for appropriation APPROPRIATIONS General reserve Special Reserve under section 45-IC of RBI Act, 1934 Employees Housing Reserve Foreign Exchange Translation Reserve Proposed Dividend Special Centenary Dividend Special Dividend Income Tax on Dividend Proposed/Paid (current) Earlier years provision no longer required Share of Revenue Reserve of Joint Ventures carried forward Profit carried forward

0.0 1.1 (0.0) (1.1) 446.5 0.0

8 560.3 0.0 0.0 0.0 0.0 38.7

652.6 0.0 0.0 0.0 0.0 0.0

2 805.9 0.0 0.0 0.0 0.0 0.0

9 93.6 0.0 0.0 0.0 0.0 0.0

0.0 3201.7 1267.5 5.9 0.0 0.0 1166.3 0.0 0.0 201.7

1.7 3758. 5 1531. 6 17.1 0.0 0.0 1319. 0 0.0 0.0 237.8 0.0

0.0 3977.2 1511.0 5.3 6.5 10.2 1396.5 0.0 0.0 248.7 (4.0) 21.4 781.4

0.0 4974. 1 406.9 8.4 5.3 6.7 1718. 2 2100. 0 0.0 635.1 (0.6) 17.0 77.1

0.0 5111. 5 499.8 4.0 7.0 0.0 2166. 7 0.0 1276. 8 559.6 (0.6) 17.3 581.1

17.3 543.0

27.3 625.7

Shares O/S Basic Diluted EPS BASIC DILUTED 761.1 84 8.026 768.0 67 10.22 4

7.330 7.310

2.780 2.780

8.820 8.810

5.476 8.810

6.533 8.810

Ques. 2 Management accounting consider cost accounting and financial accounting for decision making process. You are required to analyse the relationship between the two theories of accounting in order to help management and decision making process. Part c Ques 1 Prepare a cash budget for the three months ending 30th June, 1986 from the information given below: Month February March April May June b) Sales 14000 15000 16000 17000 18000 Materials 9600 9000 9200 10000 10400 Wages 3000 3000 3200 3600 4000 Overhead s 1700 1900 2000 2200 2300

Credit items are: Sales /Debtors 10% sales are in cash, 50% of the credit sales are collected next month and the balance in the following month. Creditors - Materials - Wages -Overheads 2 months month month

c) d)

Cash and Bank balance on 1st April, 1986 is expected to be Rs. 6000. Other relevant information is:

i) ii) iii) iv) v)

Plant and Machery will be installed in February at a cost of Rs. 960200. The monthly installments of Rs. 2000 is payable from April onwards. Dividend @ 5% on preference Share Capital of Rs. 200000 will be paid on 1st June. Advance to be received for sale of vehicles Rs. 9000 in June. Dividends from investments amounting to Rs. 1000 are expected to be received in June. Income tax (advance) to be paid in June, is Rs. 2000.

Ques. 2 Define budgetary control? Differentiate between fixed budge and flexible budget? Ques. 3 A factory is currently working at 50 per cent capacity and produces 10000 units. Estimate the profits of the company when it works to 60 per cent and 80 per cent capacity assuming that the company can sell whatever it produces. At 60 per cent working, raw material cost increases by 2 per cent and selling price falls by 2 per cent. At 80 per cent, raw material cost increases by 5 per cent and selling price falls by 5 per cent. At 50 per cent working, the product costs Rs. 180 per unit and is sold at Rs. 200 per unit. The unit cost of Rs. 180 is made up as follows. Material Rs. 100 Labour Rs. 30 Factory Overhead Rs. 3 (40% fixed) Administration Overhead Rs. 20 (50% fixed) What comments can you offer? A limited manufactures three different product and the following information has been collected from the books of account:S 35% Rs. 30 Rs. 15 Products T 35% 40 20 Rs. 1,80,000 Rs. 6,00,000 Y 30% 20 12

Sales mix Selling price Variable cost Total fixed costs Total Sales

The company has currently under discussion, proposal to discontinue the manufacture of product Y and replace it with product M, when the following results are anticipated. Products T 25% 40 20 Rs. 1,80,000 Rs. 6,40,000

Sales mix Selling price Variable Total fixed costs Total Sales

S 50% Rs. 30 Rs. 15

Y 25% 30 30

Will you advice the company to changeover to production of M? Give reasons for your answer. Ques. 4 Explain the new format of income statement and balance sheet as per schedule VI A. Ques. 5 Define the concept of break even point? How it helps the management in decision making process? Ques. 6 Softflow ink companys statement for the preceding year is presented below. Except as noted, the cost revenue relationship for the company year is expected to follow the same pattern as in the preceding year. Income statement for the year ending 31st December, 19X1 is as follows: Sales (20,00,000) bottles) @ 25 5,00,000 paise Variable costs 3,00,000 Fixed cost 1,00,000 Total cost 4,00,000 Pre-tax profit 1,00,000 Income tax 50,000 Profit after income tax 50,000 Required: a) What is the break even point in sales and units. b) suppose that a plant expansion will add Rs. 50,000 to fixed costs and increase capacity by 60%, how many bottles would have to be sold after the addition to break even. c) The companys management feels that it should earn at least Rs. 10,000 (pre tax per annum) on the new investment. What sales

volume is required to enable the company to maintain the new investment. Ques.7 XYZ Co. Ltd. manufactures automobile accessories and parts. The following are the total costs as also the unit costs of processing a component SSB 1,000; Cost Element 1. 2. 3. 4. Total Cost for 100000 Unit cost units (Rs.) 500000 5 800000 8 factory 600000 6 500000 2400000 5 24

Direct material Direct Labour Variable overhead Fixed factory overhead

Another manufacturer has offered to sell the part to XYZ Ltd. for Rs. 22 each. The fixed overhead would continue to be incurred even when the component is bought out although there would be a reduction to the extent of Rs. 150000 following the savings in salaries of supervisory personnel that could be avoided if the company opts to Buy rather than Make. a) b) Should the part be made or bought considering that the present facility when released following a buying decision would remain idle. In case the release facility can be rented to another manufacturer for Rs. 50000 as there is a good demand for spare facilities. What will be the position. (10)

Ques.8 Prepare a cash budget for the three months ending 30th June 2006 from the information given below. a) Month Sales (Rs.) Materials Wages Overheads (Rs. ) (Rs.) (Rs.) February 14000 9600 3000 17000 March 15000 9000 3000 19000 April 16000 9200 3200 2000 May 17000 10000 3600 2200 June 18000 10400 4000 2300 b) Credit terms are:Sales / Debtor 10% sales are on cash, 50% of the credit sales are collected next month and the balance in the following month.

Creditors materials 2 months -Wages month -Overheads month c) d) i) ii) iii) iv) v) Cash and Bank balance on 1st April, 2006 is expected to be Rs. 6000. Other relevant information is : Plant and Machinery will be installed in February 2006 at a cost of Rs. 96000. the monthly installments of Rs. 2000 is payable from April onwards. Dividend @ 5% on preference share capital of Rs. 200000 will be paid on 1st June. Advance to be received for sale of vehicles Rs. 9000 in June. Dividends from investments amounting to Rs. 1000 are expected to received in June. Income tax (advance) to be paid in June, is Rs. 2000. (10)

Ques. 9 Soft flow ink companys statement for the preceding year is presented below. Except as noted, the cost revenue relationship for the company year is expected to follow the same pattern as in the preceding year. Income statement for the year ending 31st December, 19X1 is as follows: Sales (20,00,000) bottles) @ 25 5,00,000 paise Variable costs 3,00,000 Fixed cost 1,00,000 Total cost 4,00,000 Pre-tax profit 1,00,000 Income tax 50,000 Profit after income tax 50,000 Required: a) What is the break even point in sales and units. b) suppose that a plant expansion will add Rs. 50,000 to fixed costs and increase capacity by 60%, how many bottles would have to be sold after the addition to break even. c) The companys management feels that it should earn at least Rs. 10,000 (pre tax per annum) on the new investment. What sales volume is required to enable the company to maintain the new investment. MARKS 10 Ques. 10 For production of 10,000 electrical automatic irons the following are budgeted expenses: Rs per unit Direct materials 60 Direct labour 30 Variable overheads 25 Fixed overheads (Rs. 1,50,000) 15 Variable expenses (10% fixed) 5 Administration expenses (Rs. 50,000 rigid for all levels 15 of production Distribution expenses (20% fixed) 5

Total cost of sale per unit.

5 160

Prepare a budget for production of 6,000, 7,000 and 8,000 irons showing distinctly marginal cost and total cost. Ques. 11 Financial ratios are the tool to analyse the performance of the business. Explain different financial ratios with their significance? Ques. 12 Discuss the significance of key factor in management accounting on what parameter we decide the different key factors of the company?