The Institute of Chartered Financial Analysts of India University 2011 C.A Chartered Accountant Chartered Accountancy -Pcc - Mock Test Series 1 - Question Paper

adopted, would your advice still hold good?
(8 + eight = 16 Marks)
ques. 3
(a) The current credit terms of Shasha Limited are 1/10 net 30. Its annual sales are Rs. 80 lakhs, its
avg. collection period is 20 days. Its variable costs and avg. total costs to sales are 0.85
and 0.95 respectively and its cost of capital is 10 per cent. The proportion of sales on which
customers currently take discount is 0.5. Shasha Limited is considering relaxing its discount
terms to 2/10 net 30. Such relaxation is expected to increase sales by Rs. five lakhs, decrease the
avg. collection period to 14 days and increase the proportion of discount sales to 0.8. What
will be the effect of relaxing the discount policy on Shasha Limiteds profit? Take year as 360
days.
(b) Ganpati Limited is considering building an assembly plant and it has 2 options, out of which it
wishes to select the best plant. The projected output is 10,000 pieces per month. The subsequent
data are available:
Rs.
Plant A Plant B
Initial Cost 60,00,000 44,00,000
Direct Labour cost p.a. (1st Shift) 30,00,000 15,00,000
(Second Shift) - 19,00,000
Overhead (per year) 5,00,000 4,20,000
Both the plants have an expected life of 10 years after which there will be no salvage value. The
cost of capital is 10%. The current value of an ordinary annuity of Re. one for 10 years @ 10% is
6.1446. Ignore effect of taxation.
You are needed to determine:
(i) What would be the desirable choice?
(ii) What other important elements are to be considered before the final decision is taken?
(8 + seven = 15 Marks)
ques. 4
ans the following:
(a) Distinguish ranging from Financial Leverage and Operating Leverage.
(b) Suhasini Limited sells goods on cash as well as on credit (though not on deferred instalment
terms). The subsequent particulars are extracted from their books of accounts for the current yearend.
Total gross sales Rs. 1,00,000
Cash sales (included in above) 20,000
Sales returns 7,000
Total debtors at the end 9,000
Bills receivable 2,000
Provision for doubtful debts at the end of the year 1,000
Total creditors at the end 10,000
You are needed to compute the avg. collection period of Suhasini Limited.
(c) The subsequent data pertains to Aneja Limited:
Rs.
Sales 20,00,000
avg. invested capital (total assets) 50,00,000

Earning:   Approval pending.