Institute of Chartered Financial Analysts of India (ICFAI) University 2008 C.A Accounts -PCC--08_ _ 4 COST ACCOUNTING AND FINANCIAL MANAGEMENT.doc - Question Paper

and Loss A/c by the end of years 1, two and 3.

(iv) UV Ltd. presents the subsequent info for November, 2008:
Budgeted production of product P = 200 units.
Standard consumption of Raw materials = two kg. per unit of P.
Standard price of material A = Rs. six per kg.
Actually, 250 units of P were produced and material A was purchased at Rs. eight per kg and
consumed at 1.8 kg per unit of P. compute the material cost variances (3 ? three = nine Marks)

ques. 5

ans any 5 of the following:

(i) Write a short note on “Deep Discount Bonds”.
(ii) What is meant by “Venture Capital Financing” ?
(iii) explain the concept of “Optimal Capital Structure”.
(iv) Name the different financial instruments dealt with in the international market.
(v) How is return on capital employed calculated? What is its significance?
(vi) What is quick ratio? What does it signify? (5 ? two = 10 Marks)

ques. 6

Balance Sheets of a company as on 31st March, 2007 and 2008 were as follows:
Liabilities 31.3.07 31.3.08 Assets 31.3.07 31.3.08
Rs. Rs. Rs. Rs.
Equity Share Capital 10,00,000 10,00,000 Goodwill 1,00,000 80,000
8% P.S. Capital 2,00,000 3,00,000 Land and
Building 7,00,000 6,50,000
General Reserve 1,20,000 1,45,000 Plant and
Machinery 6,00,000 6,60,000
Securities Premium ? 25,000
Profit and Loss A/c 2,10,000 3,00,000 Investments
11% Debentures 5,00,000 3,00,000 (non-trading) 2,40,000 2,20,000
Creditors 1,85,000 2,15,000 Stock 4,00,000 3,85,000
Provision for tax 80,000 1,05,000 Debtors 2,88,000 4,15,000
Proposed Dividend 1,36,000 1,44,000 Cash and Bank 88,000 93,000
Prepaid
Expenses
15,000 11,000
________ ________
Premium on
Redemption of
Debentures
?
________
20,000
________
24,31,000 25,34,000 24,31,000 25,34,000
Additional Information:
1. Investments were sold during the year at a profit of Rs. 15,000.
2. During the year an old machine costing Rs. 80,000 was sold for Rs. 36,000. Its written
down value was Rs. 45,000.
3. Depreciation charged on Plants and Machinery @ 20 per cent on the opening balance.
4. There was no purchase or sale of Land and Building.
5. Provision for tax made during the year was Rs. 96,000.
6. Preference shares were issued for consideration of cash during the year.
You are needed to prepare:
(i) Cash flow statement as per AS-3.
(ii) Schedule of modifications in Working Capital. (15 Marks)

ques. 7

(a) MN Ltd. is commencing a new project for manufacture of electric toys. The subsequent cost
info has been ascertained for annual production of 60,000 units at full capacity:
Amount per unit
Rs.
Raw materials 20
Direct labour 15
Manufacturing overheads:
Rs.
Variable 15
Fixed 10 25
Selling and Distribution overheads:
Rs.
Variable 3
Fixed one 4
Total cost 64
Profit 16
Selling price 80
In the 1st year of operations expected production and sales are 40,000 units and 35,000
units respectively. To assess the need of working capital, the subsequent additional
info is available:
(i) Stock of Raw materials…………………………………...3 months consumption.
(ii) Credit allowable for debtors…………………………..…1½ months.
(iii) Credit allowable by creditors……………………………4 months.
(iv) Lag in payment of wages………………………………..1 month.
(v) Lag in payment of overheads…………………………..½ month.
(vi) Cash in hand and Bank is expected to be Rs. 60,000.
(vii) Provision for contingencies is needed @ 10% of working capital requirement
including that provision.
You are needed to prepare a projected statement of working capital requirement for the
first year of operations. Debtors are taken at cost. (9 Marks)

(b) A company wants to invest in a machinery that would cost Rs. 50,000 at the beginning of
year 1. It is estimated that the net cash inflows from operations will be Rs. 18,000 per
annum for three years, if the company opts to service a part of the machine at the end of
year one at Rs. 10,000. In such a case, the scrap value at the end of year three will be Rs.
12,500. However, if the company decides not to service the part, then it will have to be
changed at the end of year two at Rs. 15,400. But in this case, the machine will work for
the fourth year also and get operational cash inflow of Rs. 18,000 for the fourth year. It will
have to be scrapped at the end of year four at Rs. 9,000. Assuming cost of capital at 10%
and ignoring taxes, will you recommend the purchase of this machine based on the net
current value of its cash flows?
If the supplier provide a discount of Rs. 5,000 for purchase, what would be your decision?
(The current value factors at the end of years 0, 1, 2, 3, 4, five and six are respectively 1,
0.9091, 0.8264, 0.7513, 0.6830, 0.6209 and 0.5644). (7 Marks)

ques. 8

ans any 3 of the following:

(i) A company offers a Fixed deposit scheme whereby Rs. 10,000 matures to Rs. 12,625
after two years, on a half-yearly compounding basis. If the company wishes to amend the
scheme by compounding interest every quarter, what will be the revised maturity value?

(ii) A company operates at a production level of 1,000 units. The contribution is Rs. 60 per
unit, operating leverage is 6, and combined leverage is 24. If tax rate is 30%, what would
be its earnings after tax?

(iii) What do you mean by Stock Turnover ratio and Gearing ratio?

(iv) discuss the concept of Multiple Internal Rate of Return. (3 ? three = nine Marks)

Earning:   Approval pending.